The following article by Benjamin P. Edwards and Sarah C. Haan was posted on the U.S. News and World Report website September 22, 2017:
Trump’s tumultuous presidency is damaging the U.S. economy.
Despite President Donald Trump’s asserted focus on job growth and the business environment, his administration is damaging the fundamentals undergirding U.S. economic growth. A slowdown seems likely because Trump’s fractious months in office have already degraded the nation’s business and investment environment.
Contrary to Trump’s belief, controversy-generating reality television strategies do not generate good governance and growth. While the president promised Guam’s governor that tourism would go up “tenfold” because of media attention from his Twitter tirades about North Korea, the numbers tell a different tale. The war of words cost Guam’s tourism industry $9.5 million last month. It appears vacationers would prefer to avoid possibly atomic attractions.
Sustained economic growth and investment require stability, predictability, public integrity and a strong commitment to the rule of law. These fundamentals matter when investors examine opportunities. They must consider political risk – the odds that a changing political climate introduces new risks without additional returns. Without predictability and reliable law, investors and business leaders may hesitate to risk capital here. Many investment decisions require parties to trust that a “so-called judge,” as Trump has said, will apply settled law in predictable ways. Stable immigration laws also enable businesses to recruit and compete for global talent. Shocks create dangers and force investors and businesses to slow down to assess risk. As dangers escalate, investment shifts overseas to more predictable jurisdictions.
Consider the investments imperiled by the Trump administration’s announcement that it would end the Deferred Action for Childhood Arrival program. The decision threatens to waste America’s investment in educating hundreds of thousands of Dreamers. It also hurts American citizens doing business with them. Will deported Dreamers repay car loans, student loans, and credit cards if displaced to foreign nations? Their employers’ investments in training may also be squandered. The decision may even drive up insurance premiums for Americans that do not interact directly with Dreamers by removing their insurance premiums from the pool.
Significant damage has already been done. Recall the Trump administration’s prior showdown with the judicial branch over its controversial ban on travel from Muslim-majority nations. That tempest, with the president still tweeting about wanting a broader travel ban, may still affect international investments in the United States. Trump’s first, hastily-written executive order surprised businesses and workers and generated significant costs. Fortunately, federal courts diminished the disruption and allowed business to resume. While it may be too costly for transnational businesses to suddenly withdraw from the United States, these moves may tip the strategic balance toward investing elsewhere when considering new long-term projects.
This uncertainty creates costs. Consider the costs generated by demonizing the Muslim community alone. Muslim individuals, institutions, and governments control approximately $11.5 trillion in wealth. They continually consider whether to buy or sell American assets. To put it in terms that this administration might understand – these investors may now balk at buying luxury real estate that they might not be able to visit.
The roiling uncertainty reverberates through the economy. Trump’s immigration malice may even cause food prices to climb. Increased immigration raids and deportations may thrill Trump’s base, but they hurt the business environment. Many farmers already feel the pain. California crops now rot in the fields without the labor supply to bring the food to market. As produce withers on the vine, prices increases may soon hit grocery stores nationwide.
To be sure, the administration’s remaining supporters gesture limply toward stock market returns. But the stock market is not the only measure of the economy. If the market’s history teaches us anything, it is that markets go up and down. A market correction may wait just over the horizon. Trump has promised to blame the judiciary if we experience another terrorist attack; who will he scapegoat when stock markets fall, the real estate market slows, or inflation takes off?
Trump’s public tantrums and reckless governance style set fire to the foundations needed for sustained national economic growth. If the Trump administration continues to stoke fear, it may soon do exponential damage to the fundamental legal and cultural infrastructure that made America a great place to invest and do business.
View the post here.