This is where alternative facts fail

There’s a vigorous debate underway in America about whether facts matter. Here’s why they do and always will.

You might be able to win a Twitter battle with alternative facts, as President Trump has arguably demonstrated. Trump’s latest dubious assertion is that President Obama ordered the phones tapped at the Trump campaign’s headquarters last year. People who ought to know say that didn’t happen, but Trump seems to have used the self-generated controversy to deflect attention from criticism of his attorney general and other controversies. Don’t expect him to back down.

These aren’t accidents or mistakes. Trump plainly believes he can say whatever he wants and his supporters won’t care. Trump defenders back that up, to some extent, saying it’s a mistake to interpret Trump literally. Instead, they praise Trump’s vow to dismantle the broken establishment and say his methods don’t really matter. Trump, for his part, seems to realize that every public lie he utters intensifies his conflict with the know-it-all fact-checkers in the media, which boosts his standing among core supporters who view the media as part of the problem.

Fact-defenders are tearing their hair out in the Trump era, but they will prevail, because there’s one part of our socioeconomic life where fake facts don’t cut it: the market. You can’t lie your way to prosperity, at least not legally, and you’ll actually harm your well-being if you make important decisions about your economic life based on bogus propaganda. This is happening now.

Experienced investors know that asset prices can, in fact, rise on hype, deception and wishful thinking. But the market always corrects for this, often in profound and disastrous ways. It even overcorrects sometimes. The housing bubble of the early 2000s ended in the devastating financial crash of 2008. Oil prices soared above $100 per barrel in 2014, before the market noticed all the new supply coming online from US shale, sending prices down by 75% and causing widespread hardship in the energy industry.

The stock market may even now be overestimating the eventual impact of tax cuts, deregulation and other business-friendly moves Trump has promised. Trump has clearly talked up stocks, highlighting investors’ susceptibility to a good story. But sugar highs are always temporary, and the story can change quickly once the storyteller loses credibility.

A lot of ordinary Americans will be on the losing side of Trump’s propaganda if they base important decisions based on what he’s promising. He says he’s going to “bring back our jobs,” as if steelworker and textile jobs from the 1980s or 1990s have just gone on vacation and will soon rematerialize in their original form. Many economists say this will never happen, because the jobs of yore barely exist in a world of robots, algorithms and thinking machines. But if you’re hurting for a job and believe Trump, you might wait for his magic to work instead of going back to school, learning new skills or moving someplace where there’s more opportunity.

The same goes for Trump’s pledge to rid the nation of undocumented immigrants so Americans can once again claim the jobs foreigners have supposedly stolen. Trump isn’t telling anybody fighting for a lower-paying job to find ways to add value to the labor they’re able to perform, which is what the market rewards. Instead, he’s promising an easy solution that requires nobody to do anything but wait for the deportation force to show up.

Trump’s entire mantra to “make America great again” requires nothing but voters giving him carte blanche to do what he thinks needs to be done. Let him rewrite trade deals and immigration laws. Build a border wall. Slash government. Cut taxes. Let his developer pals and new Wall Street brain trust spread prosperity far and wide, same as they’ve enriched themselves.

The market won’t buy any of this if the results aren’t real. There will be no new jobs for the “forgotten men and women” Trump vows to help unless they help themselves first. No company is going to hire workers with outdated skills unless there’s nobody else—including robots—available for must-fill jobs. Workers will never earn more unless they justify higher pay by accomplishing more. Trump can’t jawbone the market into doing what he wants any more than he can persuade water to flow uphill.

For the time being, Trump supporters are delighting at the torment the Prevaricator-in-Chief is causing the mainstream media and the usual defenders of small-t truth. But they’re unlikely to get more from Trump than a bit of passing satisfaction—and some of them are undoubtedly waiting for tangible help improving their living standards or access to opportunity. If you misdiagnose the problem, your “solution” probably won’t work.

Trump seems to be aware that he may be setting up his fans for disappointment in the event his fantastical promises don’t produce real results. One suspects this is why the world’s most powerful elected official regularly characterizes himself as a victim—of his predecessor, of the media, of the intelligence community, of bureaucratic leakers. This is a pre-emptive effort to blame somebody else if, or when, market discipline trumps Trump propaganda. If that happens, facts may still not matter to Trump, but they’ll matter to the rest of us, perhaps even more than usual.