By Udheesh Gaddipati
In Part 1, we discussed President Donald J. Trump’s effect on the competitiveness of the American Economy; in this piece, we will be looking at how Trump’s policies fared in regards to economic sustainability.
So why is economic sustainability important? Economic Sustainability is about promoting longer periods of stable growth by improving the market’s receptiveness toward innovation, environmental change, structural unemployment, and resource shocks. These policies not only ensure an economy can successfully – and quickly – recover from recessionary contractions but also boost productivity by sustaining a highly educated workforce, cheap and plentiful energy, and robust levels of investment spending.
So did President Donald J. Trump make the American economy more sustainable?
Infrastructure investment spending is an economic multiplier; better railways, ports, utilities, and public transportation networks support businesses and consumers. Josh Bivens – an EPI economist – corroborates that for every $100 billion spent on infrastructure, roughly 1 million “full-time equivalent” jobs are created. Additionally, for every $100 spent on infrastructure projects, long-term private-sector output increases by an average of $17.
Despite promising to improve American infrastructure (and having bipartisan support to do so) President Trump dropped pursuing direct spending after Democrats refused to stop the Mueller investigations. However, his initiative was slowing down much before the investigations started, as a mere 200 days into the presidency Trump disbanded The White House Infrastructure Council reducing his proposed plan from over $1 trillion to around $200 billion. Even worse so, Trump’s initiative towards fostering private partnerships failed as limitations emerged on the monetization of public infrastructure projects. In a last ditch effort to keep his promise, President Trump signed several executive orders deregulating environmental and quality standards arguing it would streamline project approval. However, these standards backfired by not only helping polluters arguably make American public infrastructure worse but as Sharon Buccino – director at the Natural Resources Defense Council – also explains, “the controversy and the confusion around [the approval process] … increase[d], rather than decrease[d]” as projects opened themselves up to litigation.
While a 2019 federal spending package was signed into effect, it only increased infrastructure spending by $20 billion across ALL federal projects increasing funding no more than 2% per project. Controversially, the two year anticipation of Trump’s “massive” infrastructure stimulus bill was worse than the bill itself, as Joel Moser – CEO of Aquamarine Investment Partners – notes “infrastructure spending … decreased [in] state and local governments [as they] … awaited the big federal program.”
Even before President Trump took office, renewable energy and natural gas costs were outcompeting coal. A 2016 Lazard Bank Analysis projected that by 2025, almost every existing coal plant in the United States would cost more to operate than building entirely new wind and solar plants nearby. This trend has largely benefited consumers and businesses; Americans spent less than 4% of their average annual household income on energy in 2016, the lowest ever recorded. Simultaneously, real retail electricity prices fell 2.2% from 2015 attracting energy intensive industries to the United States.
President Trump’s job going into 2017 was rather simple: provide relief to coal towns and continue modernizing American energy infrastructure. The U.S still needed massive upgrades to its energy grids to better handle a renewable transition. A Federally backed NREL study even concluded that by 2038, proposed smart-grid upgrades would, “eliminate up to 35 megatons of CO2 emissions a year” while returning about $2.50+ for every $1 invested. The study concluded, at minimum, upgrades would save consumers $3.6 billion a year.
Unfortunately, President Trump’s promise to revive “clean, beautiful coal” caused his economic policy to rest on the fossil fuel industry. However, in his effort to revive coal, President Trump failed to stimulate Green Job growth in coal districts – which empirically pay higher wages, and have more growth potential – while his cabinet squashed the very NREL study mentioned above. While towns continued to suffer as coal’s decline accelerated under Trump, the administration’s panel import tariffs cut into the solar industry as jobs fell 3% nationally in 2017 – a policy failure on both ends.
Fortunately, state sustainability goals and private smart grid development kept energy prices competitive across the nation nullifying potential damages caused by the administration. In 2019, the solar industry saw employment increase 7% and smart grid and energy storage jobs surged 235% as sustainable energy jobs began to outnumber coal and oil employment combined.
While regulatory rollbacks (from the EPA and withdrawal from the Paris Accords) caused a temperate boom in crude oil infrastructure development and production, it represented a mere continuum of growth levels established by the Bush administration.
However, in a recent effort, the Trump Administration announced that the United States Department of Agriculture would be investing $371 million to build and improve critical electric infrastructure benefiting more than 222,000 rural residents and commercial customers. Unfortunately, it is still far from the billions needed to push America forward.
President Trump’s decision to pass the Tax Cuts And Jobs Act (TCJA) in 2017 was a bold one as economists doubted whether or not more tax-cuts were needed during an expansionary phase of the economy. To warrant this tax reduction for large corporations, Trump promised it would boost business investment and spur job creation as companies were encouraged to bring foreign profits back into the United States.
Instead, the dominant company response to the TCJA was engaging in stock buybacks (a practice that famously allows executives, bankers, and hedge funds managers to gain wealth). The first three quarters of 2018 saw a 52.6% increase in corporate stock buybacks while aggregate capital investment increased only 8.8% and R&D investment growth in US public companies increased a mere 12.5%. To make matters worse, in 2019 business investment took a sharp turn downward.
While one cannot completely fault President Trump in regards to unexpected business investment practices, his tax cuts surely did not boost investment spending like he’d promised.
While the Global Sustainable Competitiveness Index – which quantitatively tracks improvements in a country’s Intellectual Capital, Governance, Resource Capital and Social Capital – recorded a 2 percentage-point increase in the U.S’s Economic Sustainability score between 2016 and 2019, drastic decreases in governmental efficiency and resource allocation dropped America’s global ranking 2 positions as the rest of the developed world outpaced U.S growth levels.
This, much like many of the administration’s actions, seems to be another great metaphor for Trump’s Presidency. While the United States did not drastically decline, innovate, or improve, America moved laterally while the rest of the world moved forward. □
- Cover image by Udheesh Gaddipati
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