Boom or bust: demystifying Trump’s deplorable economics

• Date: 14 February 2018
• Published date: 14 February 2018
• DOI: https://doi.org/10.1108/EDI-11-2017-0240
• Pages: 63-87
• Author: dt ogilvie

Boom or bust: demystifying

Trump’s deplorable economics

dt ogilvie

Saunders College of Business, Rochester Institute of Technology,

Rochester, New York, USA

Abstract

Purpose –Two questions broadly drove this research: Donald Trump promised to fix the economy and

create jobs, and he is ending or renegotiating trade treaties. Is he creating more jobs? How can Trump create a

more inclusive economy? The paper aims to discuss these issues.

Design/methodology/approach –This paper closely examines Trump’s economic policies and draws from

past Democratic and Republication track records to explain how Trump’s policies will contribute to greater

income inequality.

Findings –By all measures, President Trump fails on measures of equality, diversity, and inclusion.

Originality/value –This original paper examines the implications of the Trump administration’s policies in

the areas of tax cuts ( for small- and medium-sized enterprises rather than large corporations), incentives to

support small business growth, entrepreneurship training, education and skills training (to retool Americans),

and infrastructure spending.

Keywords Jobs, Donald Trump, Fixing the economy, NAFTA and TPP, US 2018 tax bill

Paper type Viewpoint

Donald Trump promised to fix the economy and create jobs by ending trade agreements like

NAFTA and TPP, charging US companies producing goods overseas huge tariffs, and

forcing them to create jobs in the USA instead of outsourcing them abroad. His rhetoric has

an easy appeal, especially to those who have lost jobs or income over the past ten years or so

and those who want to work, but cannot find a job, because it sounds true and the solutions

seem easy to implement.

When I became a PhD student, I began to see problems with a lot of the business books

and articles I used to consume. My new training led me to see that a lot of what was written,

much like today’s news shows, while sounding good, was very superficial; often just based

on opinion, not fact; it did not reflect the complexity of reality. Further, we Americans seem

to have moved away from critical analysis of the news. We gobble up the latest Facebook,

Twitter, LinkedIn, or other posts, often ignoring the facts or arguments we do not like;

we look for or interpret data that confirms our beliefs (Nickerson, 1998). Even experts do this

(Mendel et al., 2011; Parmley, 2001; Strjohmer and Shivy, 1994) including those who evaluate

market data (Fisher and Statman, 2000). It is a natural tendency in assessing information

about our beliefs that is difficult to overcome ( Jones and Sugden, 2001).

While a student at The University of Texas at Austin, I learned a startling fact from my

professors. Research showed that the US economy did better under Democratic presidents

than under Republican presidents! Why was this startling? I, like many others, thought that

Republican administrations were best for business. That is what they told us so often, and I,

like many Americans, believed them. However, it turns out the facts are entirely different.

It turns out that Republican administrations are good for business –if your firm is one of the

largest businesses –but not if you are a small- or medium-sized business and that fact has

held up for 29 years.

What Donald Trump’s base, the white poor and working class, do not know is, “The fact

that income inequality has grown in Republican administrations and fallen under

Democrats”(Thompson, 2014). Democrats raise all boats, while the Republicans raise the

Equality, Diversity and Inclusion:

An International Journal

Vol. 37 No. 1, 2018

pp. 63-87

© Emerald PublishingLimited

2040-7149

DOI 10.1108/EDI-11-2017-0240

Received 4 November 2017

Revised 4 January 2018

Accepted 4 January 2018

The current issue and full text archive of this journal is available on Emerald Insight at:

www.emeraldinsight.com/2040-7149.htm

63

Demystifying

Trump’s

deplorable

economics

top 1 percent. As Princeton researchers Blinder and Watson (2013, 2014, 2016) inform us,

“while hardly a secret, [this fact] is not nearly as widely known as it should be. The US

economy performs much better when a Democrat is president than when a Republican is”

(Blinder and Watson, 2016, p. 1015).

They go on to say that “The superiority of economic performance under Democrats

rather than Republicans is nearly ubiquitous: it holds almost regardless of how you define

success. By many measures, the performance gap is startlingly large –so large, in fact, that

it strains credulity”(Blinder and Watson, 2016, p. 1016). They found that:

[…] over a typical four-year presidency the US economy grew by 18.5 percent when the president

was a Democrat, but only by 10.6 percent when he was a Republican. And since the standard

deviations of quarterly growth rates are roughly equal (3.8 percent for Democrats, 3.9 percent for

Republicans, annualized), Democratic presidents have presided over growth that was faster but not

more volatile (Blinder and Watson, 2016, p. 1017).

The bottom line of their research is that “The U.S. economy not only grows faster, according

to real GDP and other measures, during Democratic versus Republican presidencies, it also

produces more jobs, lowers the unemployment rate, generates higher corporate profits and

investment, and turns in higher stock market returns”(Blinder and Watson, 2014, p. 1, 2016;

see also Alesina and Sachs, 1988; Bartels, 2008; Comiskey and Marsh, 2012; Hibbs, 1977;

Alesina and Roubini, 1997; Faust and Irons, 1999). This means that those at the lower end of

the economic ladder as well as women and minorities benefit, not just the superrich.

Amazing! It looks like my family members were voting for the wrong party!

It may be that Democratic presidents have presided over a better economy, but Donald

Trump is a Businessperson, so many people thought (and think) things would be different

under him. He certainly has a lot of rhetoric about what the problems are, what caused them,

and how to solve them, that sounds compelling. So, in this op-ed, I will look at Mr Trump’s

record, his approach to business, and his success in business. I will look at his proposals that

affect our economy and businesses. I will also discuss how his business practices and

proposals have impacted and will impact different socioeconomic strata. I think we all want

to know whether Mr Trump’s presidency will be good for those of us who are ordinary

Americans who are not the superrich.

Mr Trump’s record, approach to business, and success in business

Mr Trump’s business practices

Mr Trump often markets himself as the Head of Business but he refuses to accept any

liability if the business or product that has his name on it fails, based on the argument that

he merely licensed his brand, his name, to the product or business. What seems to

characterize his business strategy are two practices, leveraging his company’s debts into

bankruptcy and not paying the people who work for him (Berzon, 2016; Carroll and

Youngman, 2015; Dolan and Schneider, 2016; Eichenwald, 2016; Isidore, 2015; Tully, 2016;

Tully and Parloff, 2016; Wright, 2016).

Donald Trump has had four Chapter 11 bankruptcies, which he characterized as smart

business moves (Carroll and Youngman, 2015). These bankruptcies involved the Trump Taj

Mahal Casino in 1991; Trump Plaza Hotel in 1992; Trump Hotels and Casinos Resorts in

2004; and Trump Entertainment Resorts in 2009. The Taj Mahal, having been financed with

junk bonds (although Mr Trump had claimed he would not need to use junk bonds to build

it; Graham, 2017), was $3 billion in debt and Mr Trump was $900 million in debt. As a result,

he sold half his ownership in the Taj Mahal, his airline, and his yacht. To pay off the Trump

Plaza Hotel $550 million debt, Mr Trump gave up 49 percent of his ownership and retained

his CEO title, although he no longer took a salary or ran the enterprise (Carroll

and Youngman, 2015; Graham, 2017). With Trump Hotels and Casino Resorts $1.8 billion

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