For all the problems that President Donald Trump’s disdain of elite expertise has caused over the past four years, his willingness to ignore economic orthodoxy in one crucial area has been vindicated, offering a lesson for the Biden years and beyond.
During Trump’s time in office, it has become clear that the U.S. economy can surpass what technocrats once thought were its limits: Specifically, the jobless rate can fall lower and government budget deficits can run higher than was once widely believed without setting off an inflationary spiral.
Some leading liberal economists warned that Trump’s deficit-financed tax cuts would create a mere “sugar high” of a short-lived boost to growth. The Congressional Budget Office forecast that economic benefits of the president’s signature tax law would be partly offset by higher interest rates that would discourage private investment.
And the Federal Reserve in 2017 and 2018 took action to prevent the economy from getting too hot – driven by models suggesting that an improving labor market would eventually cause excessive inflation.
These warnings did not come true.