If economic cycles were easy to understand, we wouldn’t have bubbles and recessions. It is true that leaders can destroy an economy. However, they also seem far too willing to take credit for a good economy that they did not earn.
So, the question really ought to be: Do Trump or Obama get any credit for the current economy? There are a few areas of consideration:
- Context
- What was predicted
- What actually happened
1. Context
To determine if Barack Obama’s response to the recession was successful, we have a very good comparison from Ronald Reagan’s presidency. The early 1980’s recession struck the very beginning of Reagan’s term and reached 10.8% unemployment. This was very similar to the 10% unemployment reached in 2009; early in Obama’s term.
In comparing the two recessions, the economy improved much more quickly under Reagan. In fact, despite record quantitative easing and record federal spending, Obama oversaw the worst recovery since 1945. Note: article is partisan, but does provide some facts. There may be perfectly reasonable excuse for the poor performance; but this shows the available economic measures.
The president that followed Obama was slated for a tough job. Historically, recessions occur every 4.7 years and the economy was overdue for another recession at the time of the 2016 election.
2. What Was Predicted
Donald’s plan has been analyzed to conclude it might lose 3.5 million jobs […] and possibly lead to another great recession.
— Hillary Clinton, Third Presidential Debate of 2016
Though she didn’t specify, those predictions originated from Moody’s Analytics and have been proven false.
By the end of [Trump’s] presidency, there [will be] close to 3.5 million fewer jobs […] The economy will suffer a recession that begins in early 2018 and extends into 2020
— Moody’s Analytics, page 1 & 4
Employment: Moody’s prediction for 2019 was 146.1M jobs for a Trump presidency and 151.0M jobs for a Clinton presidency. Now proven false — 2019 employment was 152.0M.
GDP: Moody’s prediction for 2019 was $17,122B GDP for a Trump presidency and $17,951B for a Clinton presidency. Now proven overwhelmingly false — 2019 GDP was $21,734B. Also, in 2018, the US had the first 3% growth in a decade.
S&P: Moody’s prediction for 2019 was $1,605 S&P for a Trump presidency and $2,012 for a Clinton presidency. Now proven overwhelmingly false — 2019 S&P was $3,230.
Not only was Moody’s wrong in its predictions, the results were almost the antithesis. Moody’s and others are exposed as as very low quality and highly biased. Otherwise known as “fake news.”
Among other examples, the predictions from large institutions were especially negative towards Trump’s election and the economy as a whole. Those predictions were repeated tirelessly by media outlets without scrutiny and generally without contrasting positive predictions. The negative predictions were so pervasive, we may have expected Americans to give up, simply as a result of learned helplessness.
3. What Actually Happened
The Council of Economic Advisors (CEA) produced the above two charts which detail many economic metrics before and after Donald Trump’s election. The CEA chair is appointed by president and has operated since 1946. Their reports show the many economic improvements that occurred since Trump’s election and are well worth the read. Curiously, the CEA did not highlight Federal Reserve (the Fed) monetary policy which inhibited growth after Trump’s election.
The Federal Reserve
During the 2008 recession, the Fed implemented a massive economic stimulus. In addition to stimulus spending, it lowered interest rates (see the red line in the chart) from 4.49% in November 2007 to 0.15% in January 2009 (when Obama took office.) The Fed kept the rates low throughout Obama’s presidency, with only a small increase at the end of Obama’s term. The day of Trump’s inauguration, in November 2016, rates were 0.41%. After Trump’s election, the Fed aggressively raised rates to a high of 2.42% in the first half of 2019. To make things worse, the Fed began anti-stimulus asset reductions in 2018. These factors, especially combined with the negative predictions of a recession, imposed a tremendous uphill struggle for the US economy. Yet GDP continued to succeed despite the Fed’s antagonism. Trump earns substantial credit in beating the odds.
It is also worth noting that Fed’s rate increases were not in alignment with global trends. While many central banks continued to lower interest rates, or even keep negative interest rates, the US was raising interest rates (see the red line in the chart.) This is not to endorse any particular monetary policy. It simply illustrates the unexpected new headwinds America faced upon Trump’s election. Considering the unique adversity, the US economy demonstrated incredible success during the Trump presidency.
Addressing the “Fact Checkers”
Watch the details here. Let’s consider a prominent and ostensibly neutral fact checker. NPR’s White House Correspondent (now Chief Economics Correspondent), Scott Horsley, “fact checked” the CEA report with a series of invalid arguments.
Significantly, [Basset, the CEA’s chair,] did not highlight GDP growth, perhaps because the measure has bounced up and down and would not show a clear difference between Trump and Obama.
— FACT CHECK: Who Gets Credit For The Booming U.S. Economy?
NPR was addressing the CEA’s report and press briefing from September 10, 2018. However, NPR failed to mention the CEA did highlight GDP as the first chart of its previous report and press briefing on June 5, 2018.
The CEA had already shown the first quarters under Trump resulted in substantially faster GDP growth in comparison to the last four quarters under Obama. Comparing GDP is nuanced, but NPR failed to provide any alternative methodology. It seems almost incomprehensible that NPR and its White House Correspondent missed this highly publicized press briefing; failing to fulfill basic job duties. The CEA had already presented an accurate and clear difference in GDP between Trump and Obama.
NPR’s author also failed to mention his earlier prediction of an economic recession under President Trump:
Trump’s threat of steep tariffs on imports from China and Mexico could unleash a trade war, costing 4 million jobs and driving the economy into recession.
— FACT CHECK: Clinton And Trump Debate For The 2nd Time
Unemployment is at an all time low and this alarming prediction has now been proven false. It seems NPR could have better served its readers by fact-checking itself. No such luck; instead the article continued with additional misleading statements:
It’s hard to see such a turning point in major economic yardsticks such as jobs, unemployment, or wages [under Trump].
If unemployment is 10%, a 1% improvement is mild. If unemployment is 2%, a 1% improvement is miraculous. Reducing unemployment below the “natural rate of unemployment” (see the red line in the chart) is extremely difficult. Yet again, NPR’s reporting is misleading. Unemployment leveled out under Obama as it reached the natural rate. However, upon Trump’s election, unemployment improved far below the expected limit. Especially given the expectations of rising unemployment, Trump earns substantial credit here.
NPR referenced hourly wages, but in a manner that obscured the rate of change. It is true that wages have been increasing since 2010. However, wages have been increasing at a substantially faster rate since Trump’s election. Americans’ earnings are increasing faster than any time since the 2008 recession. Trump earns credit here as well.
NPR’s criticism also failed to respond to other points raised by the CEA, such as the lowest racial gap in unemployment ever recorded. Contrary to hysterical media predictions, economic data shows improving racial equality throughout Trump’s presidency. Racial disparities worsened during the 2008 recession, but have improved since 2010 (through both Obama’s and Trump’s presidency.) This is compelling evidence against false accusations of racism.
Fact-checking NPR:
the period before Trump took office is virtually indistinguishable from the period since. [The improvements] began under Obama.
As described above, NPR’s reporting was false and misleading; not a genuine or credible fact check. Despite the embarrassingly poor fact-check article, NPR announced its author, Scott Horsley, as their new Chief Economics Correspondent just months later. The announcement did not cite any of Horsley’s qualifications on economics.
Risks
For the last several decades, each president has managed out outspend and out-borrow the previous administration. Both Barack Obama and Donald Trump have continued this negative pattern. Considering debt vs GDP, the trend appears to be slowing. Deficit spending and resulting debt crises can be catastrophic… just ask Venezuela, Greece, Detroit, Cyprus, etc. However, this criticism would apply to most every president, especially Ronald Reagan, George Bush, George W. Bush, and Barack Obama.
Summary
Given the available evidence, it seems very clear that Trump deserves substantial credit for the booming US economy. Available data shows that Trump’s election has resulted in a genuine life improvement for many of America’s most vulnerable people. In all fairness, there is no reasonable way to deny President Trump substantial credit for the current economy.
