EDITORIAL: Plucking fruit of Obama’s rule
Former US president Barack Obama inherited an economy in deep recession and gradually stabilised the ship
The inauguration of Donald Trump as the president of the US is a moment of some potential — and of great danger.
There is the potential for economic upliftment, and for a more functional government. By virtue of its position as the world’s largest, the vitality of the US economy is transparently in the interests of the globe as a whole. Perhaps the greatest and least acknowledged achievement of former president Barack Obama is that he inherited an economy in deep recession and gradually stabilised the ship.
Trump’s supporters tend to downplay this but the facts stand against them. The seven-and-a-half-year US recovery is one of the longest on record. Obama’s critics claim it has been one of the weakest postwar recoveries, but the 2008-09 economic crisis was no normal recession. It was a recession caused by a financial crisis, and those take longer to fix — if they ever are fixed. Europe still has not recovered to nearly the extent the US has, and Japan has not recovered at all almost two decades after its financial crisis. What is more, unemployment in the US is back to under 5%, the level of the superboom years prior to 2008, and the rate of recovery on this measure was faster.
Indisputably, Trump inherits an economy in pretty good shape, and he has the opportunity now to consummate that success. In addition, by virtue of the Republican majorities in both the Senate and the House of Representatives, he inherits a rare thing in US politics, a unified government. One of Obama’s biggest problems was that both houses had Republican majorities that made a point of withholding co-operation on anything for which Obama might take credit.
It’s worth noting that the government is not as united as it seems, with the Republican Party establishment itself humiliated by the victory of Trump, an outsider. There are many areas where they will disagree. But fighting with your own party is likely to be less difficult than formal, predesignated gridlock.
So what of the dangers? These are almost too obvious to need restating. Trump famously doesn’t sweat the small stuff, and the results are obvious. In his inauguration speech, he went out of his way to bemoan the "American carnage" unfolding in gangland Chicago, even though the crime rate in the US nationally is at its lowest in decades. He decries outsourcing and economic decay, even though the economy is practically in full employment and the American stock markets are at record highs.
Most outrageously, Trump’s crusade for 'those left out' and 'those left behind' will start with slashing the top income tax rate from 43.4% — only a little higher than in SA — to 33%, cutting dividend and capital gains taxes and abolishing inheritance tax
Most outrageously, Trump’s crusade for "those left out" and "those left behind" will start with slashing the top income tax rate from 43.4% — only a little higher than in SA — to 33%, cutting dividend and capital gains taxes and abolishing inheritance tax. Commentators note his appointments consist mainly of ideologues hostile to social security, Medicare, public schools, regulation, labour unions, affirmative action, and any other efforts to tame the free market. Such policies are a repudiation of Obama’s social-democratic notion of government. And they are counterproductive for those in whose name they are offered.
Trump has promised to "make America great again", the most overtly nationalist slogan of a US president in recent history. As Simon Schama writes in the Financial Times, the rest of the world might feel inclined to greet this swerve into isolationism with a shrug. But while Trump wants to decree away global interconnectedness, it is an unavoidable fact of life in the 21st century. "A contracting America can leave a black hole of peril for the rest of the world, whether by a drift into trade wars; the abandonment of climate control agreement or most dangerously of all, the disintegration of Nato and the Pacific alliances," Schama writes.