President-elect Donald Trump has made bold promises to improve the economy. On the campaign trail, he said that his economic plan would be “the most pro-growth, pro-jobs, pro-family plan … perhaps in the history of our country.” He promised to be “the greatest jobs president God ever created.” And he pledged to achieve economic growth of as high as 5 or 6 percent — a rate that would be unprecedented in modern times.
Although Trump’s hyperbole is easily dismissed as campaign messaging, research suggests that presidential rhetoric can influence economic growth. So could Trump’s penchant for bold optimism about the economy turn his economic vision into reality?
Although much research, including my own, suggests that presidential rhetoric has limited effects on public opinion, the economy may be an exception. That’s the conclusion of a book by political scientist B. Dan Wood.
In “The Politics of Economic Leadership,” Wood notes that the state of the economy is ultimately grounded in psychology. How people feel about economic conditions influences their willingness to spend money. When Americans think things are going well, they are more likely to spend. And because two-thirds of U.S. economic activity is driven by consumer spending and the remaining third is strongly affected by consumer spending decisions, public sentiment about the economy can affect growth.
As a result, presidents may have an incentive to convey optimism about the economy, even in situations where underlying economic conditions are not as promising as they project. Boosting consumer confidence could help boost the economy.
In a study of presidential rhetoric by 12 presidents between 1945 and 2004, Wood finds that when presidents spoke optimistically about the economy, consumer confidence improved and business investment increased, ultimately improving U.S. economic performance. It also boosted the president’s approval ratings, which, according to the late political scientist Richard Neustadt, helps the chief executive achieve other goals. This is because members of Congress and others take into account of the level of public support the president has when assessing the consequences of disagreeing with him.
Wood’s findings imply that Trump’s optimistic rhetoric could improve the economy and his approval ratings, the latter of which are historically low for a president-elect.
But Trump faces strong head winds. For one, much of the economy is beyond the reach of the president. Wood finds that the indirect effect of presidential rhetoric on interest rates and business investment is modest, relative to other factors that drive the economy. Presidential rhetoric alone can’t prevent a recession.
In addition, presidential optimism tends to have only short-term effects on consumers. Wood writes that “consumer memory of presidential remarks about the economy must be very fleeting when making personal consumption decisions.” Business investment appears to respond over a longer time frame. But that means Trump would have to engage in a consistent campaign of rhetorical optimism about the economy, potentially diverting his attention from other priorities, such as immigration, health care or foreign policy.
There also are economic realities that aren’t susceptible to presidential influence. Northwestern economist Robert Gordon and others argue that increasing inequality, the aging of the U.S. population and high levels of college debt will prevent the economy from growing much faster than its current rate. Consumer sentiment is already near a record high. The U.S. unemployment rate is at 4.6 percent, the lowest since August 2007.
Finally, Trump faces a polarized public. Americans’ perceptions of the economy are strongly influenced by their political loyalties. Republicans are far more likely than Democrats to accept an optimistic interpretation of the economy while Trump is in office. Indeed, the increase in consumer confidence following Trump’s victory came entirely from Republicans; Democrats grew more pessimistic.
Trump has demonstrated that he plans to speak his mind to the American public. Whether he can boost the economy through his unique rhetorical style, however, is less certain.
Kara Alaimo is an assistant professor of public relations at Hofstra University and the author of “Pitch, Tweet, or Engage on the Street: How to Practice Global Public Relations and Strategic Communication.” Find her on Twitter @karaalaimo.