Sunday, March 19, 2017

Perceptions are that Trump's policies are working

Perceptions matter. People make decisions, even life-altering decisions, based on what they perceive as likely to happen. To the extent that public policy affects such decisions, the perception of likely policy change can affect behavior even before the change happens — even if it ends up never happening.
Something like that seems to be happening in America — and around the world — in the two months since Donald Trump was inaugurated as president. People are making decisions based on perceptions of how he might change the country's direction.
Take the economy. The numbers in the jobs report for February, Trump's first full month in office, showing an increase of 235,000 jobs, are not wildly out of line with some monthly reports in recent years.
In contrast to the years of the Obama stimulus program, when the bulk of new jobs came in the public sector, it appears that the increase here is in the private sector. Moody's Analytics says there were 298,000 new private sector jobs in February, far more than the 189,000 it expected.
Construction jobs were up 58,000, private educational services jobs up 29,000, manufacturing jobs up 28,000. This suggests that lots of employers, small as well as large, are taking the plunge and creating new jobs.
Can I prove that they're doing so because of perceptions that regulations and taxes will be decreased by the Trump administration? No, and I'm not sure any economist's statistical model could either. But that sure looks like what's happening.
Big players in the financial markets seem to think so. Federal Reserve Chairman Janet Yellen suggested the Fed will raise interest rates twice after doing so this month. That's a significant shift from her longstanding reluctance to increase rates at all for fear of dampening the economy.
JPMorgan Chase CEO Jamie Dimon said Friday that Trump's program of cutting corporate taxes, building infrastructure and rolling back regulations has unleashed the "animal spirits" — economist John Maynard Keynes' phrase — of businessmen. "Even if he gets part of it done," Dimon, a Democrat and Hillary Clinton contributor, told Bloomberg News, "it'll be good for growth."
Does the unusual speed with which Paul Ryan is leading the House to vote on the first of three promised initiatives to repeal and replace Obamacare suggest that he — and Trump — are trying to strengthen the perception that the private sector economy will boom? Given the significant risk of political damage and policy bollix, it certainly looks like the answer is yes.
People at the high end of the income spectrum — a category that obviously includes the bulk of job creators — are not the only ones making decisions in response to perceptions. So, it appears, are illegal immigrants already in the United States and prospective illegals deciding whether to cross the border.
Customs and Border Protection reported that apprehensions of illegal crossings of the southern border in February were down 39 percent from January and down 36 from February 2016. They were down also from border crossings in December — traditionally by far the lowest month — in calendar years 2016, 2015, 2014, 2013 and 2012.
That's a startling drop. And it's one that seems likely to reverberate far beyond Mexico, since most illegal border crossers in the years since the 2007-09 economic crisis have come from Central America.
Under the Obama administration policy, Central American children (or 18+ adults claiming to be children) seeking asylum were mostly allowed to remain in the United States, effectively free of border enforcement.
Donald Trump's executive orders on immigration law enforcement have created the perception, probably accurately, that that things are different now. That message has apparently traveled to people hundreds or even thousands of miles south of the Rio Grande and changed their decision-making process.
Of course, perceptions can change. Perceptions of an incoming president's likely policies can shape the behavior of many; perceptions of an outgoing president's policies, not so much.
As a president's term goes on, perceptions of a president's policies will be superseded by the realities of actual policies, and perceptions of likely effects will be modified by conditions on the ground. The wisdom of crowds is not always spot-on.
But it's sometimes superior to the wisdom of experts. Most experts predicted that Britain's vote for Brexit and America's for Trump would crater the economy. That hasn't happened yet here or there — and most people seem to perceive that it won't.

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