AJISS-Commentary
The Association of Japanese Institutes of Strategic Studies
NPIRIPS

Nakasone Yasuhiro

The Japan Institute ofResearch Institute for

Peace InstituteInternational Affairs

Peace and Security

Editorial Advisory Board:

No. 267

Akio Watanabe (Chair)
Masashi Nishihara
Kenichiro Sasae
Taizo Yakushiji

09 April 2019

Editorial Committee:
Taizo Yakushiji
Tsutomu Kikuchi
Tsuyoshi Sunohara
Shujiro Urata andYasunori Nakayama

US ECONOMIC POLICY UNDER THE
TRUMP ADMINISTRATION:
AN UNMISTAKABLE DIRECTION
TRANSCENDING PARTISANDIFFERENCES

Editor & Online Publisher:
Kenichiro Sasae
President, JIIA

Akihiko Yasui・ When considering future US economic policy,
careful attention must be paid to trends thattranscend partisan differences.
・ There has been a conspicuous decline in any
sense of vigilance about fiscal deficits and, in
trade policy, there seems to be a distinct
resonance between the two major politicalparties on protectionism.
・ The resolve of the younger generations holds
the key to the future, making evidence-based
policy making all the more important.

The views expressed in this piece are the author’s own and should
not be attributed to The Association of Japanese Institutes ofStrategic Studies.

AJISS-Commentary
The Association of Japanese Institutes of Strategic Studies

The emergence of a “split Congress” from the 2018 midterm elections
foreshadowed developments that would lead to a still greater intensification ofpartisan conflict in the US under the Trump administration. However, allowing
these partisan disputes to distract from a closer look at economic policy could
lead to misinterpretations of the US’ future course, as it is in the areas of fiscal
and trade policy that Republicans and Democrats have been moving in similardirections.
In fiscal policy, alarm over the fiscal deficit has been fading in bothparties. The Republicans have traditionally been the party of “small government”
but, under the Trump administration, they have played a role in expanding fiscal
deficits. The tax reforms of 2017 and the raising of the spending caps in 2018
were both expansionary fiscal policies passed by a Congress in which theRepublican Party held a majority in both houses.
At the same time, many of the candidates seeking the Democratic
Party’s nomination for the 2020 presidential election support policies such as the“Green New Deal” and “Medicare for All” that seem likely to produce an evenwider fiscal deficit. With interest rates remaining low, not only the liberal wing of
the Democratic Party that has long favored “big government” but even moderate
Democrats who previously advocated for fiscal soundness are insisting that therisk posed by government debt is small.
In trade policy, there are indications that protectionism is resonating
between President Trump and the Democratic Party. Having again become themajority party in the House of Representatives, the Democratic Party is more
likely to criticize the laxity rather than the nature of the Trump administration’sprotectionist policies.
Republican members of Congress who are supporters of free trade havenot been able to constrain President Trump’s protectionism and, indeed, a senseof crisis regarding China as a rival for future technological hegemony is sharedacross party lines.
In both of these areas, it will be the resolve of the younger generations
that will determine the country’s direction. The generations born in or after 1981
already outnumber the baby-boomer generation, and the starring roles in
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AJISS-CommentaryThe Association of Japanese Institutes of Strategic Studies

deciding the future course of US policy are steadily shifting from one generation
to the next.
The decisions facing the younger generations are not easy ones. The
lack of serious concern about the fiscal deficit has made it easier to shoulder
younger generations with the burden of repaying the national debt. On the other
hand, excessive alarm over the fiscal deficit has blocked investment needed for
improving productivity, and the younger generations will be the principal victimsof any deleterious effects this will have on future living standards.
Public opinion polls on trade policy generally show the younger
generations favorably disposed toward globalization. However, the youngergenerations have a keen awareness of inequality, strongly object to big
corporations, and take great interest in “social justice”. No matter how positive
the younger generations may be toward globalization, an overriding interest insocial justice could ultimately bring them to tolerate protectionist policies.
Presenting facts on which to base conclusions would be very useful foryounger generations as they confront decisions. In trade policy, for instance,
does the aspiration for social justice constitute a sufficient reason for the
younger generations to accept protectionism? Is there really no way of tying thepursuit of free trade into the pursuit of social justice? Offering robust analyses onthese questions would undoubtedly help the younger generations arrive atpersuasive conclusions.
International cooperation must also not be overlooked. Japan and othercountries face their own difficulties with regard to fiscal and trade policy. In fiscal
policy, for instance, Japan’s national debt level exceeds that of the US, and datafrom both Japan and the US as well as analyses of that data could prove usefulreferences for both countries.
In the interest of more firmly establishing “evidence-based policymaking”, the US has been working to create an environment to facilitate
data-sharing. By broadening the scope of these efforts and putting in place anenvironment conducive to sharing data and research findings internationally,measures could then be considered to reinforce the foundations of“evidence-based policy making”.
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AJISS-Commentary
The Association of Japanese Institutes of Strategic Studies

AKIHIKO YASUI is Head of Research Department - Europe and the Americas, Asia andChina Unit, Mizuho Research Institute.

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