Trump’s Economy: The Reagan Story or the Biden Story? 

James Carville’s political instincts remain sharp, though he is not as in tune with the current political moment as he was 33 years ago. Still, you could do worse as a political maxim than “It’s the economy, stupid!”

The economy has long been a top issue, though far from the only issue, for Donald Trump. Trump’s business acumen, entrenched in the voters’ minds through a decades-long public relations blitz culminating in a star reality TV turn, was a major reason the electorate was willing to entrust the presidency to a political neophyte. 

If the economy of Trump’s first term, with low unemployment, low inflation, and solid GDP growth, had continued through election day, in retrospect it is clear that he would have been reelected. Not by a landslide, but probably by a margin similar to what he achieved last November. Alas, the pandemic—and Anthony Fauci—intervened and aborted the Trump boom.

But as the Joe Biden interregnum wore on, voters developed a nostalgia for the economy of circa 2019. Inflation began spiking, soon reaching 9.1 percent, a 41-year high. The economy still grew most quarters and unemployment remained low by historical standards, even if the jobs market was often less rosy than it initially appeared as the numbers were revised downward. But the high cost of living eroded whatever advantages accrued from other, more positive economic metrics.

At least some voters came to understand that the economic downturn of 2020 was caused mainly by the lockdowns, of which Trump was at best a reluctant adopter. They wanted their pre-pandemic economy back. Polls consistently showed Trump was trusted to do a better job handling the economy than Biden or Kamala Harris. 

That sentiment prevailed on election day, according to the exit polls, with Trump winning 81 percent of voters who listed the economy as their top issue, 70 percent among those who rated the economy as poor or not so good, and 88 percent of voters who said it was just poor.

Trump has always had other issues besides the economy, such as immigration, anti-wokeness, and general resistance to the left on the culture war. On those, he still retains an upper hand. But for the first time since the height of the pandemic, people are feeling anxious about a Trump-led economy. The stock market and other indexes of economic confidence are down.

The tariffs are less targeted than during the first term, and their status is changing frequently. This time the tariffs, rather than tax cuts (which Congress still needs to extend) or deregulation, is dominating the coverage of the Trump agenda. And Elon Musk actually wants to cut spending.

While Trump wants to be associated with general prosperity, a “golden age” even, his ambitions were always greater than restoring the economy of 2019. He wants to reindustrialize vast swathes of the country and reshore American jobs. Many, perhaps most, economists believe that Trump has bitten off more than he can chew.

That was said of Ronald Reagan, too. Passing a big tax cut in a period of inflation worse than under Biden was viewed as pouring gasoline on an already roaring fire. Most economists believed there was an inherent tradeoff between cutting inflation and unemployment, which Reagan rejected. And there was an attempt to cut federal spending and personnel, beginning with the firing of striking air traffic controllers.

As the Federal Reserve tightened the money supply to put the screws to inflation, largely with Reagan’s support despite the chairman having been appointed by Jimmy Carter, the economy did initially get worse. There was a recession in 1982, during which unemployment reached 10.8 percent, the highest since the Great Depression. Republicans lost seats in the midterm elections that year.

But after that, the economy began to recover and then boom. Inflation and unemployment both fell. By 1984, the annual growth rate was the highest in 34 years. Between 1983 and 1989, the U.S. added the equivalent of Japan’s whole economy to its GDP. Reagan was reelected in a 49-state landslide. He was fewer than one vote per precinct in Minnesota, his Democratic challenger’s home state, away from sweeping all 50.

The Reagan economic legacy, and especially its relevance to public policy in subsequent times, remains hotly debated today. But the bottom line is that a lot of dire predictions either failed to come to fruition or were short-lived and stagflation ended.

Unfortunately for Trump, that is not the only possible historical analogy. There is a more recent one. Biden was warned that continuing to increase federal spending, especially as the pandemic was ending and people were already returning to work, would pour gasoline on a then just smoldering inflationary fire. That is exactly what happened, and the problem was far from “transitory.” His presidency was basically ruined in its first months, and Trump was later returned to office.

Of course, it is possible that none of the historical analogies favored by those of us who write about politics for a living will describe what happens under Trump. But he surely prefers the story of the man whose picture he hung in the Oval Office to that of the man he ousted from the premises. 

That’s the story Carville would rather tell about his candidate, anyway.