Matthew Lynn is a financial columnist and author. He writes for the Daily Telegraph and the Spectator in London.
There are plenty of things we all probably feel nostalgic for. Vinyl records, even for people too young to have ever actually owned one. Or getting letters through the mail. And right now, it is starting to look as if we can add one more to the list: the first Trump term.
Although few of us could have imagined it in 2020, in retrospect Trump I is starting to look a lot better. Compared to Trump II, the administration was pro-market and pro-enterprise, neither of which can be claimed for the president’s second term.
The Trump presidency of 2017 to 2021 certainly had plenty of flaws. But it was arguably the most business friendly administration Washington D.C. had seen since President Ronald Reagan’s in the 1980s. It may have been characteristically chaotic at times, but there was a serious drive to liberalize the economy, cut regulations, control spending and encourage investment and entrepreneurship. The corporate tax rate was slashed from 35 percent to 21 percent, taking it from one of the highest in the world to one more in line with the global average. The president launched Opportunity Zones, designed to attract investment into low-income communities. A “one-in-two-out” rule mandated that regulators had to scrap two rules for every new one they introduced, while also assessing the costs of every ban, license or target they imposed. A tax reduction for “pass-through businesses” helped family businesses stay intact instead of encouraging them to sell out to larger rivals or private equity houses.
Sure, the results were mixed. The White House claimed the Opportunity Zones created $100 billion in extra investment, but much of that might have been simply shifting cash from one place to another. Likewise, many of the scrapped regulations may have been irrelevant, anyway. Even so, the direction of travel was clear.
Trump II has been very different. The signature economic policy has been the steepest tariffs imposed by an American government since the 1930s. You can make a case that the levies will help domestic manufacturers compete with foreign rivals by raising the price of imports. But it would take some heroic intellectual gymnastics to describe tariffs as pro-business; indeed, most businesses have been lobbying against them, even going to court to ask for a refund.
Likewise, you can make a case for reducing immigration, the second-most important policy. But there is no point in pretending it won’t make your Uber more expensive and double the cost of a software engineer. Focusing on foreign affairs does nothing for the economy— unless you happen to be in the oil business — and drains time and energy from domestic issues.
On the positive side, there have been some attempts to free up crypto trading. But it is hardly clear that a few more meme coins will ever make much difference to the real economy. The “no tax on tips” legislation may help the incomes of restaurant staff but will, overall, only worsen the United States’s out-of-control tipping culture. Oil and gas has been deregulated, and “one-in-two-out” has been multiplied to 10 out.
Yet you need a very large magnifying glass to detect any signs of liberalizing reforms. Corporate tax cuts, the rollback of cumbersome regulations and the creation of programs to help entrepreneurs are nowhere to be seen.
Trump I focused on micro-economics, and figured that if he got that right, the macro stuff would take care of itself. It is what you might hope from a businessman-turned-politician: a relentless focus on the kind of annoying red tape that a virtue-signaling political class loves to enact but which any small company owner will tell you makes their life a lot harder. By contrast, Trump II has focused on the macro picture, assuming the micro stuff will take care of itself. The results have been dismal.
If you strip out the artificial intelligence boom, the economy has stagnated. Inflation remains a huge issue for voters. And, predictably, the administration’s popularity has crashed. According to the latest Economist/YouGov poll, the president has a 39 percent approval rating, and 52 percent of respondents said the economy was getting worse. That is a terrible result for a leader elected on a platform of raising living standards, improving affordability and creating more well-paid blue-collar jobs.
Trump’s second term was meant to be far better organized than the first. Project 2025 promised sweeping, well-planned reforms of the machinery of government. Unfortunately, it has not worked out that way. Ironically, the supposedly shambolic Trump I had a far surer touch and did far more to help business. The president needs to recover some of the free market drive of his first term. He needs to remind himself of all the things that frustrated him when he was a business guy and start doing something about them. If he doesn’t, his second term will continue to flounder.
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