For almost four years, one constant has made so much of President Trump's tenure beyond reproach: the economy. Neither his tweets nor the behavior of some members of his team could touch him because a rock solid economy and soaring stock market shielded him, time and time again. Now, for the first time, that rug has been pulled out from underneath him, or so it would seem.
Seeing the stock market gains of the last three years evaporate in a matter of days has called into question the entire basis of the Trump recovery. Many have compared it to past crises, most notably the 2008 financial meltdown, but any true scholar would know this is a poor reference.
By 2008, our economy was built on sand and it was shifting quickly.
It was unstable.
It wouldn't last, but the people in power wanted to squeeze every inch of profit before the bottom fell out. It was a fundamentally unsound economy and TARP — the bailout of crooked banks and unprincipled brokers — was a multi-trillion dollar mistake by the George W. Bush administration.
The same isn't true today with regard to the underlying economy.
Bush panicked, doing the bidding of Wall Street and the crooks and criminals who carried briefcases to work each day in the financial district; the same gang who created the financial mess in the first place and walked away unscathed by prosecution.
Twelve years later, from jobs reports to GDP, we’ve seen consistent economic progress and growth. Until coronavirus (COVID-19). Now, the biggest detriment to the economy is that people are unable to experience much of it, from behind closed doors.
As legislators and stockholders panic, calls are growing louder and louder for massive bailouts and loan guarantees, many of which prioritize corporations over citizens.
Donald Trump, facing this uncertainty for the first time in his presidency, might be inclined to agree with that. Yet, history demonstrates that those who maintain their calm and wait out the storm fare all the better. As the old adage goes, "Don’t just do something, stand there."
On Oct. 19, 1987, following years of economic growth and prosperity, the stock market had its largest single drop in history; 22% of the stock market’s value vanished almost instantly. Immediately the bearish proclaimed that the end was nigh; all the growth and positive change of the last seven years was simply a preamble to that moment.
Panicky bureaucrats called for comprehensive and overreaching (and frankly unconstitutional) parentheses stimulus packages for corporations.
Some proclaimed that capitalism itself had just been proven a farce.
Ronald Reagan was unmoved.
While many publications and pundits blasted him for lack of leadership or for ambivalence in the face of economic bedlam, he had faith in the markets.
Reagan had faith in America.
He was leading. His diary entries that day in October said, "By day’s end the news was a 508 fall in the Dow Jones. Some people are talking panic."
But Reagan wasn’t panicked.
The next day, a meeting took place in the Oval Office to discuss the troubled stock market and Reagan was unruffled, unlike Bush 43, some years later. Reagan calmly entered in his diary, "Chairman of Stock Exchange is acting very upset."
They badgered Reagan to do this and that, fiddle here, tinker there, bail out this, create this new bureaucracy, regulate that. Reagan simply said "No."
Reagan knew his history. He knew Hoover and FDR had created bureaucracies that made the Great Depression even worse.
Of course Reagan was vindicated and in only a few months, the stock market recovered. Reagan and Adam Smith were right. The "invisible hand" will meet the needs of the citizenry.
The future is somewhat more vague for Trump.
While there is uncertainty and calls for massive bailouts, he shouldn’t discount the gains made over the past three years. The economy is both strong and resilient. The market created the highest standard of living globally and it will save us once again, provided it's left alone.
Eighteen of the 20 largest single-day drops of the Dow Jones Industrial Average have occurred during the Trump presidency. The declines in terms of percentage are on a par with the crash of 1929. The 1929 crash occurred early in Hoover's single term. This crisis coming so late in Trump's term will be a test of the market's resilience as well as the president's ability to inspire confidence.
He will have to work with the manufacturing sector, the healthcare sector and other vital components of the economy to guide the country through the coronavirus pandemic, ensuring that the country does not fall into recession.
Furthermore, he should remember that the genesis of the Tea Party, despite liberal claims to the contrary, was a rejection of the 700 billion dollar bailouts championed by President Bush and 2008 GOP presidential candidate John McCain.
So far, Trump has already spent more than double that to alleviate the financial industry.
He should think hard about what to do next.
As lobbyists come out of the woodwork to seek help for every industry, the test for President Trump will be whether or not he gives in and says "Yes" to everyone, or allows the marketplace to work.
Ronald Reagan was no "sunshine capitalist." Reagan knew his philosophy worked in good times but especially in bad times. President Trump now needs to embrace the same.
Craig Shirley is a Ronald Reagan biographer and presidential historian. His books include, “Reagan’s Revolution, The Untold Story of the Campaign That Started it All,” “Rendezvous with Destiny, Ronald Reagan and the Campaign that Changed America,” "Reagan Rising: The Decisive Years," and “ Last Act: The Final Years and Emerging Legacy of Ronald Reagan." He is also the author of the New York Times bestseller, “December, 1941” and his new 2019 book, “Mary Ball Washington,” a definitive biography of George Washington’s mother. Shirley lectures frequently at the Reagan Library and the Reagan Ranch. He has been named the First Reagan Scholar at Eureka College, Ronald Reagan’s alma mater and will teach a class this fall at the University of Virginia on Reagan. He appears regularly on Newsmax TV, Fox News, MSNBC, and CNN. For more of his reports, Go Here Now.
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