Donald Trump has again embraced the idea of a stimulus spending bill to help jumpstart the economy. In his interview with Time Magazine for the Person of the Year issue, Trump said that it was necessary to “prime the pump” to increase economic growth.
During the campaign, Trump had advocated an economic stimulus plan that was larger than that proposed by Hillary Clinton. Last August, Trump discussed his ideas on stimulus on Fox Business (quoted in Bloomberg), saying, “Well, I would say at least double her [Hillary Clinton’s] numbers, and you’re going to really need more than that. We have bridges that are falling down. I don’t know if you’ve seen the warning charts, but we have many, many bridges that are in danger of falling.” Clinton’s plan had an estimated price tag of $275 billion.
To pay for his plan, Trump said, “We’ll get a fund. We’ll make a phenomenal deal with the low interest rates…. People would put money into the fund. The citizens would put money into the fund,” he said, adding that he’d use “infrastructure bonds from the country, from the United States.”
Trump’s comments in the Time interview, which was conducted on Nov. 28, appear to indicate that he is not moving away from his plans to spend large amounts of money on an infrastructure stimulus. Trump’s full comment on the stimulus during the interview was vague on details.
“Well sometimes you have to prime the pump. So sometimes in order to get the jobs going and the country going, because look, we’re at 1% growth,” Trump said. “I was taking to the head of a major country, because most of them have called me and I’ve talked to all of them. ‘Yes, we are doing not well, not well. Our GDP is only 4.5%.’ I said wow, if our GDP was 4.5% we’d be the happy – I mean our GDP is probably less than 1% if you think about it. And going in the wrong direction.” GDP growth in the third quarter was reported at 3.2 percent.
Other members of the incoming Trump Administration have signaled their support for government intervention in the economy as well. In a post-election interview with the Hollywood Reporter, Steven Bannon, who will be a Senior Advisor to President Trump, said, I’m the guy pushing a trillion-dollar infrastructure plan. With negative interest rates throughout the world, it’s the greatest opportunity to rebuild everything. Shipyards, ironworks, get them all jacked up. We’re just going to throw it up against the wall and see if it sticks. It will be as exciting as the 1930s, greater than the Reagan revolution — conservatives, plus populists, in an economic nationalist movement.”
Wilbur Ross, the incoming Secretary of Commerce, and Peter Navarro, an economist and advisor to Trump criticized Obama’s stimulus in a policy paper during the campaign. “All we have gotten from tilting at Keynesian windmills,” they wrote, “is a doubling of our national debt from $10 trillion to $20 trillion under Obama-Clinton and the weakest economic recovery since World War II – combined with depleted infrastructure and a shrunken military.” Still, they don’t seem to have a problem with the idea of stimulus spending on infrastructure, just that the Obama spending was poorly targeted.
Steven Mnuchin, who will be President Trump’s Secretary of the Treasury, has said that “taxes, regulatory, trade, [and] infrastructure” will be among the new administration’s top priorities. According to Reuters, Mnuchin said that the Trump team is considering creation of an “infrastructure bank” to fund projects. Mnuchin is also considering issuing Treasury bonds with terms as long as 50 or 100 years, far beyond the 30-year term of current federal debt.
Infrastructure stimulus spending is not typically a strategy supported by conservative Republicans. When President Obama passed the American Recovery and Reinvestment Act of 2009, a $787 billion stimulus package, he did so with no Republican votes.
The support of stimulus spending by the Trump Administration may set up an early confrontation with Republicans in Congress. Many Republican congressmen are deficit hawks who campaigned on cutting federal spending and shrinking the government. Trump’s plans for more government spending will put these Republicans in a crossfire between Trump supporters and debt-conscious voters in their districts.
The conflict will provide a window into the character of the new Republican Party. Will conservative Republicans stand for the traditional Republican platform of less spending and smaller government or will they listen to the siren song of borrowing and spending from the incoming president?