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The Economy Trump Will Inherit

LINDA WERTHEIMER, HOST:

This is WEEKEND EDITION from NPR News I'm Linda Wertheimer. During his presidential campaign, Donald Trump hammered away at the troubles of the American economy. But if you look at the numbers, the economy doesn't seem to be doing so badly. The unemployment rate is now 4.6 percent - half what it was when Obama first took office. Home sales are up. Energy prices are stable. The stock market is soaring. To talk more about what kind of economy Trump is inheriting and what happens next, we invited Bloomberg View columnist Megan McArdle into our studios. Thank you very much.

MEGAN MCARDLE: Thanks for having me.

WERTHEIMER: So many of the numbers we look for as indicators of our economy's health are positive. I want to ask you for your take on them. Do you - let's start with unemployment - 4.6. Is that - that is a good number, isn't it?

MCARDLE: It is a pretty good number, but you have to qualify that because one thing that we have seen since this recession is that, unlike earlier recessions, we haven't seen employment recover the way we would normally expect to. So the unemployment rate is low. What we haven't seen is labor force participation is about three percentage points lower than it was in 2007. And if you have fewer people looking for work, you can get a low unemployment rate, but that doesn't necessarily mean that things are healthy because people may have dropped out because they can't find a job, and they just say, you know what? I'm not even looking anymore.

WERTHEIMER: President-elect Trump also talked a lot about international trade agreements, and it was his view that some of these agreements have hurt the sort of American workers you were just talking about. Do you think he'll be able to renegotiate trade agreements, and if he does, will it help those people?

MCARDLE: The president does actually have extraordinary latitude on trade agreements and on foreign policy more generally much more than he does on domestic policy. So he could throw any number of monkey wrenches into the operation of our international trade agreements. But you have to ask, first of all, whether he will because it's easy to talk about those things in abstract. But then when you start actually doing it, you know, there's lots of interest groups that are going to be descending on Washington saying, please, please, please, don't do this. He may want to get re-elected.

And then the more complicated question is does that help American workers? Because I think that, you know, 10 years ago when I was working for The Economist, I would have said, look, trade's great for everyone. It's win-win. It, you know, rising tide lifts all boats. And I think that we've actually decided there was an emerging consensus among economists that that actually hasn't been the case. First of all, because some of the trade adjustment things we wanted to do, like retraining, haven't worked out that well but also because China itself, such a huge economy, so many people, was such a shock to the system that normally over the course of a decade we would lose some jobs to trade. And some people would be hurt by it, but then other things would compensate.

The dislocations were too big for the economy to absorb as readily. That doesn't, though, mean that undoing it is actually going to fix the problem. You know, there are things - you can't - if you break a jar of mustard, you can't put it back together and put the mustard back into the jar, right? It's broken. And that I think is similar with a lot of these things that have happened. And those factories went and they're not coming back no matter what we do.

WERTHEIMER: Mr. Trump is promising 4 percent GDP growth, which is up from the current 2 or so. Is that possible?

MCARDLE: It is theoretically possible, certainly for a few quarters anyway. But, you know, the president just doesn't have that much control over the economy. And I think that actually, you know, all presidents promise that they're going to make it grow. They're going to do all these things. The good news is that they don't have that much control over our economy.

WERTHEIMER: Which is also the bad news.

MCARDLE: It is somewhat the bad news, but if you think about it, if a president could come in and make the economy grow at 4 or 5 percent because he wanted to, that would also mean that a bad president could come in and give you a recession of negative 5 or negative 10 percent. You know, you can really screw up an economy if you want to. I think Venezuela is a good example of that right now. But in general, within the limits of the U.S. political system, the president has maybe a few tenths of a percentage point impact on our GDP growth. Most of it is Americans deciding to do things more efficiently, to create jobs, to invent things. President Trump can't make that happen. No one else can either.

WERTHEIMER: Megan McArdle is a columnist with Bloomberg View. Thank you very much for coming in.

MCARDLE: Thanks for having me. Transcript provided by NPR, Copyright NPR.