In an interview with Time magazine for its Person Of The Year issue, President-elect Donald Trump said something... true?
“Well sometimes you have to prime the pump,” Trump told the Time editors, referring to the government’s role in helping the economy. “So sometimes in order to get the jobs going and the country going, because look, we’re at 1% growth.”
“I was talking to the head of a major country, because most of them have called me and I’ve talked to all of them,” he went on. “[They said,] ‘Yes, we are doing not well, not well. Our GDP is only 4.5%.’ I said wow, if our GDP was 4.5% we’d be the happy ― I mean our GDP is probably less than 1% if you think about it. And going in the wrong direction.”
OK, well, that last part is wrong. The United States’ real GDP grew 3.2 percent in the third quarter of this year, which was better than the 1.4 percent growth the country experienced in the second quarter. But whatever. The point is that with his talk of “priming the pump,” Trump appears to be embracing the version of Keynesian economic theory that has dominated American policymaking since World War II.
The idea is pretty simple: When the economy gets into a rut, the government can get it out by spending money. Hiring workers to fix bridges and paint schoolhouses puts money in their pockets, which they can, in turn, go out and spend on other goods. Retailers can thus afford to employ workers to sell those goods, who in turn can spend their pay on other things, and off we go. The economy grows.
Republicans have made a show of rejecting this idea since President Barack Obama took office in 2009. House Speaker Paul Ryan (R-Wis.), Senate Majority Leader Mitch McConnell (R-Ky.) and others have insisted that government spending is economic poison, and that a responsible government can somehow cut its way to growth. This is what much of Europe has been trying to do since the financial crisis, with lousy economic (and political) results.
Trump has talked like a Keynesian before. During the campaign, he vowed to implement a $550 billion infrastructure project, and basically said he would borrow money to pay for it. That’s what Obama did with his 2009 stimulus package, but Republicans voted against it, denounced it and insisted the country was headed for a “debt crisis” that never actually materialized.
Conservatives condemn big budget deficits and government spending when Democrats are in power, but they tend to govern as militarist Keynesians, slashing taxes and spending big on defense. “Reagan proved that deficits don’t matter,” Vice President Dick Cheney once said, while pursuing exactly those policies, which Ryan voted for.
Maybe conservatives actually believe their rhetoric this time and we’ll have a government of Republicans divided against themselves that can’t pass legislation. Or maybe not. Things are crazy right now.