[VIDEO] Clearing up the Trump mystery

Spain – United States

To solve the Trump mystery, we could use the comparative method. And the most recent and striking comparison would be with Ronald Reagan's presidency, from 1981 to 1989.

In broad terms, Reagan's economic policy consisted of favoring public spending and reducing the tax burden, which produced a large domestic demand and, therefore, a very considerable increase in GDP, at the cost of large fiscal and external deficits, placing the dollar at its highest point.

The United States went from being a net creditor in 1980 to a net debtor five years later, something that hadn't happened since 1914. However, President Reagan had room to maneuver, since US debt in 1980 was only 23% of GDP. By 1989, it had reached 41%.

President Trump begins his term with a debt of 110% of GDP, making the United States the world's largest debtor. Even so, he has announced that public spending will increase and that corporate taxes will decrease. If this happens, the short-term consequences are expected to be similar to those seen during the Reagan era: significant GDP growth at the cost of larger fiscal and external deficits, coupled with a rising dollar.

In the medium term, things don't look the same. The difference between Ronald and Donald is that "deficit." Reagan had plenty of leeway; Trump doesn't. In a global crisis caused by excessive global debt, wallowing in the mud doesn't seem like the best way to clean things up.

Xavier Puig, Professor of Economics at the UPF Barcelona School of Management