There are few parallels between Franklin Roosevelt and Donald Trump, beyond their wealthy upbringings in the Empire State. FDR’s first inaugural address famously proposed that “the only thing we have to fear is fear itself,” while Trump’s was a seminar in fear itself.
But early in both men’s presidencies, they offered insistent claims that things are getting better, even when there was little hard evidence (or little hard evidence yet) to back it up. For Roosevelt, that worked: The fake-it-till-you-make-it approach instilled real confidence in the country, which in turn instilled confidence in markets and helped foster an economic turnaround. And for Trump, there are signs that by repeatedly claiming he is doing things, he is managing to make people believe he is doing them, and to act accordingly.
Take border enforcement. No one has broken ground on the fabled wall; no huge infusions of Border Patrol officers have been deployed; Congress has appropriated no money to strengthen controls. And yet, the Associated Press reports:
The first months of the new administration have seen a huge drop in the number of people being caught by agents on the U.S.-Mexico border, raising the possibility that a "Trump effect" is keeping migrants away.
Despite Trump’s false claims during the campaign of accelerating crossings, the flow over the border was already in a years-long downward trend. And yet, as the AP notes, March’s tally of 12,500 people stopped at the border was “the lowest monthly figure in at least 17 years and the second straight month that border arrests dropped sharply.” In effect, it’s a rhetorical victory. Partly, fewer people may be crossing because Trump’s bellicose rhetoric makes them feel unwelcome, but they may also assume crossing is more challenging. After all, crossings increased somewhat between the election and inauguration.
The Trump effect is even clearer on the economy. Despite predictions of doom, the stock market has prospered since Trump entered office. The boom seems not to be correlated with any real change in fundamentals, such that the Federal Reserve expressed concern in Federal Open Market Committee minutes released Wednesday. Consumer confidence is also at its highest point since 2000. Hiring is up, too.
Why? The economy was already on a positive trajectory under President Obama, but that doesn’t explain the Trump stock boom. Nor has the new president done anything major to affect the economy. He has promised serious reductions in regulations, a large stimulus in the form of infrastructure spending, and tax reform, but none of these have happened yet. The stock market, though, seems to be pricing in the effects of some of those promises being fulfilled, despite skepticism among political observers that he can actually pull any of this, much less all of it, off. And the president keeps claiming credit for improvement—whether that’s job numbers that follow Obama-era trends, or corporate expansions that predate his election.
The economy is an interesting case where Trump may benefit from deep polarization. Democrats and other anti-Trump voters came into his administration with a more positive view of the economy, and developments since then—from employment stats to the stock market—continue to validate that. Trump voters, however, were much bleaker coming in, but turned more optimistic with their candidate in the Oval Office. As a result, Americans on average are feeling much better about their economic prospects—and may be investing in hiring, or opening their wallets at the store, in response. That may stimulate demand, leading to further gains.
Trump’s ability to bend reality to his will, at least in the short term, also manifests itself in the media sphere. For days, the White House has tried to shift the press narrative away from his aides’ alleged collusion with Russia, a matter actually under FBI investigation, to whether Obama National Security Adviser Susan Rice acted improperly in seeking names of Trump team members intelligence reports. Press Secretary Sean Spicer’s heckling didn’t do much to get reporters to cover it. But on Wednesday, when Trump called New York Times reporters into the Oval Office for an interview focused on infrastructure, he complained about the paper’s lack of attention to the story—and, when questioned, affirmed that he thought Rice had committed a crime. The paper ran a suitably measured headline—“Trump, Citing No Evidence, Suggests Susan Rice Committed Crime”—but Trump had succeeded getting the nation’s leading paper to assign new prominence to the Rice story.
A central element of each of these examples is that Trump can act alone. They don’t require him to convince any recalcitrant congressmen, spend any money, or implement any complicated overhauls. All he has to do is open his mouth or log onto Twitter. This makes for an agile, flexible strategy, but it also has the limitation that it cannot directly change underlying realities. He can only seek to improve confidence, and then hope that stimulates economic spending, or deters illegal immigration, or furthers whatever other goal.
Eventually, however, this approach is likely to exhaust its power. Unfortunately, there’s not reliable public-opinion data on Franklin Roosevelt’s early term, though he seldom dipped below 70 percent in his final term in office, which is nearly double Trump’s approval now. Something will have to give: Either Trump’s claims will turn into reality and his approval will rise with it, or his low approval ratings will weigh on his ability to instill confidence that his claims will translate to reality.
Presidents love to take credit for an economy that’s performing well, even though they have very limited influence over it. There are exceptions where policy really does matter. One common theory for the stock market’s optimism is the prospect of tax reform—yet despite the eagerness of equity traders in New York, the consensus in Washington is that tax reform is dead on arrival and getting stiffer on the cooling board by the day. Trump seems to have little understanding of this, and no clear strategy on how to resuscitate it. Perhaps the traders know policy better than the Beltway hoards, but if not, they’re going to be in for a nasty realization that could drag stocks down with it.
Regardless of what Trump does, many economists believe the nation is likely to experience a recession at some point during Trump’s term in office. If it does, the aftermath will either prove that Trump’s calming powers are real, or else it will reveal his claims of having saved the economy as nothing totally fantastic, built on nothing but bluster. In the short term, however, bluster can be a winning strategy.