By Paul Krugman – New York Times.
In general, you shouldn’t pay much attention to polls at this point, especially with Republicans unifying around Donald Trump while Bernie Sanders hasn’t conceded the inevitable. Still, I was struck by several recent polls showing Mr. Trump favored over Hillary Clinton on the question of who can best manage the economy.
This is pretty remarkable given the incoherence and wild irresponsibility of Mr. Trump’s policy pronouncements. Granted, most voters probably don’t know anything about that, in part thanks to substance-free news coverage. But if voters don’t know anything about Mr. Trump’s policies, why their favorable impression of his economic management skills?
The answer, I suspect, is that voters see Mr. Trump as a hugely successful businessman, and they believe that business success translates into economic expertise. They are, however, probably wrong about the first, and definitely wrong about the second: Even genuinely brilliant businesspeople are often clueless about economic policy.
An aside: In part this is surely a partisan thing. Over the years, polls have generally, although not universally, shown Republicans trusted over Democrats to manage the economy, even though the economy has consistently performed better under Democratic presidents. But Republicans are much better at promoting legends — for example, by constantly hyping economic and jobs growth under Ronald Reagan, even though the Reagan record was easily surpassed under Bill Clinton.
Back to Mr. Trump: One of the many peculiar things about his run for the White House is that it rests heavily on his claims of being a masterful businessman, yet it’s far from clear how good he really is at the “art of the deal.” Independent estimates suggest that he’s much less wealthy than he says he is, and probably has much lower income than he claims to have, too. But since he has broken with all precedents by refusing to release his tax returns, it’s impossible to resolve such disputes. (And maybe that’s why he won’t release those returns.)
Remember, too, that Mr. Trump is a clear case of someone born on third base who imagines that he hit a triple: He inherited a fortune, and it’s far from clear that he has expanded that fortune any more than he would have if he had simply parked the money in an index fund.
But leave questions about whether Mr. Trump is the business genius he claims to be on one side. Does business success carry with it the knowledge and instincts needed to make good economic policy? No, it doesn’t.
True, the historical record isn’t much of a guide, since only one modern president had a previous successful career in business. And maybe Herbert Hoover was an outlier.
But while we haven’t had many business leaders in the White House, we do know what kind of advice prominent businessmen give on economic policy. And it’s often startlingly bad, for two reasons. One is that wealthy, powerful people sometimes don’t know what they don’t know — and who’s going to tell them? The other is that a country is nothing like a corporation, and running a national economy is nothing like running a business.
Here’s a specific, and relevant, example of the difference. Last fall, the now-presumed Republican nominee declared: “Our wages are too high. We have to compete with other countries.” Then, as has happened often in this campaign, Mr. Trump denied that he had said what he had, in fact, said — straight talker, my toupee. But never mind.
The truth is that wage cuts are the last thing America needs right now: We sell most of what we produce to ourselves, and wage cuts would hurt domestic sales by reducing purchasing power and increasing the burden of private-sector debt. Lower wages probably wouldn’t even help the fraction of the U.S. economy that competes internationally, since they would normally lead to a stronger dollar, negating any competitive advantage.
The point, however, is that these feedback effects from wage cuts aren’t the sort of things even very smart business leaders need to take into account to run their companies. Businesses sell stuff to other people; they don’t need to worry about the effect of their cost-cutting measures on demand for their products. Managing national economic policy, on the other hand, is all about the feedback.
I’m not saying that business success is inherently disqualifying when it comes to policy making. A tycoon who has enough humility to realize that he doesn’t already know all the answers, and is willing to listen to other people even when they contradict him, could do fine as an economic manager. But does this describe anyone currently running for president?
The truth is that the idea that Donald Trump, of all people, knows how to run the U.S. economy is ludicrous. But will voters ever recognize that truth?