President Donald Trump claims full credit for the strong economy and stock market.
In his telling, everything was set to tank when he moved into the White House and took over from President Barack Obama.
Assessing that argument requires giving Trump’s current economy a sort of report card as well as comparing what he’s done with what Obama did. Let’s get started.
“When I took over this economy, this economy was ready to crash,” he said on Fox News in October. “We were at 1% GDP. Now we’re at 4.2%. It was ready to crash. It was the worst. If you look from Depression – from the Great Depression – it was the worst recovery in the history of our country.”
Trump deflates Obama’s numbers here: The gross domestic product grew at an annualized rate of 2.6% in the fourth quarter of 2018 and at 2.9% for the year. It did achieve a 4.2% growth rate for a single quarter earlier in 2018. But growth was 1.8% in the fourth quarter of Obama’s last year in office and 1.6% over his last year in office, not the 1% Trump said.
“We’ve probably had the greatest first two years of any President in our history in terms of what we’ve accomplished with employment, with GDP, with everything,” he told Laura Ingraham on Fox News in February.
More recently, at a convention for Republican activists, he said that if Hillary Clinton had won the presidential election, the stock market would be down 50%, and he inflated how much it’s up on his own watch.
“Instead of being up almost 50% with the stock market, you would have been down 50%,” he said. The market is actually up about 23% since he became President.
But despite some warning signs like surprisingly few jobs created last month, it’s clear that Trump will argue Obama was doing it wrong, he’s doing it right and he turned it all around.
Who gets credit?
The story of the current US economy is actually the Obama-Trump economic boom, according to Alan Blinder, an economist at Princeton and former vice chairman of the Federal Reserve. He noted that the current economic expansion, at 116 months, is among the longest in history (second only to Bill Clinton’s 120-month expansion).
And taking stock of the various ways that economists worry about expansions ending, Blinder doesn’t see any of them happening in the US, at least not in the next few months.
Don’t look for Democrats to suddenly embrace Trump’s tax cuts or his trade bravado, and don’t look for the President to suddenly embrace Obama’s gift of dropping unemployment and a growing stock market he was able to continue.
But the current boom needed both Obama’s extraordinary measures to end the Great Recession and, perhaps, Trump’s efforts to give American companies tax breaks. These two very different ideologies wove together to shepherd the country for the past 10 years.
Now for a general look at some of the economic indicators Trump can brag about and some signs of concern and unfulfilled promises he’ll have to answer for:
Jobs created under Trump, Obama
Trump will have to hope a record run of job creation continues. He won’t be helped by jobs reports like the one released Friday by the Bureau of Labor Statistics, which showed the US economy adding only 20,000 in February, the fewest since September of 2017.
When Obama took office, the US economy was shedding jobs at a frightening pace, more than 700,000 per month. The cuts eventually slowed and the US has added jobs every month since October of 2010, the second year of Obama’s first term. That started a record-breaking streak in March 2018 that continues to this day, even with February’s surprise drop-off. So the boom has come under both presidents.
It’s hard to compare Trump’s and Obama’s job creation, since Obama took office when the economy was in dire straits and Trump took office when the economy – despite his claim it was on a precipice – appeared to be doing well.
Trump promised to create 25 million jobs in 10 years, and his economy did see about 4.9 million created in his first 25 months in office. That’s just a smidge fewer than the 5.3 million jobs Obama saw created in the last 25 months he was in office, and also a touch below the pace of job growth promised by Trump.
The economy is growing, but not at the rate Trump promised
Republicans pledged sustained and remarkable economic growth as a result of Trump’s economic policies and in particular as a result of his tax cuts. The US gross domestic product – the total value of all US goods and services produced in a year – has grown between 1.6% and 2.9% every year since 2010. The 2.9% growth in 2018 was very good, the highest since 2015. But it is not the 4% Trump promised as a candidate or the 3.2% the White House predicted more recently with the President’s 2020 budget proposal.
Markets are up
Trump is right that the stock market has continued to build value. But it’s hard to argue it was on the verge of collapse when he took over the White House. There have been some ups and downs, but the market has been on a remarkable bull run for 10 years. It was in March of 2009, three months into Obama’s administration, that the S&P 500 hit its Great Recession low of 676. Today it is just under 2,750.
The Dow Jones Industrial Average, which Trump uses as his yardstick, is similarly up. It was less than 8,000 when Obama took office and is at more than 25,000 today.
Unemployment is way, way down
The unemployment rate has been generally falling since 2009, after Obama took office. The current rate is an incredibly low 3.8%. That’s even better than what economists generally consider “full employment.”
But like the rising stock market, this trend began well before Trump’s 2016 win.
Another way to look at employment suggests there’s work to do
Another way to look at it is to apply the employment rate for the prime working age population, 25 to 54. While this view of employment also shows sustained improvement since 2009, it does not yet reflect a complete return to pre-Great Recession levels. The general trend of this metric has been upward since just after the end of the Great Recession in June 2009 through the majority of the Obama administration and all of Trump’s.
American wages are growing, but maybe not by enough
The growth in American wages is up every year since 2010, but those gains have been focused recently on higher wage earners, exacerbating the real problem of income inequality in the US. That means, after accounting for inflation, that in real dollars Americans’ wages have barely budged in decades, as Pew recently noted. Economists would generally tell you that with unemployment as low as it is, wages should be growing by more. Trump accuses the Federal Reserve of trying to tank his economy by raising interest rates, but that ignores that the Fed kept the rates low for so long to help the economy recover from the Great Recession – not because Obama was President.
While wages generally have grown, the federal minimum wage has not risen since early in the Obama administration, almost 10 years ago, and there’s no indication Trump intends to increase it, although Democrats hoping to replace him want to. Now at $7.25 an hour, it would have to rise to $8.47 immediately just to keep pace with inflation. Many states have raised their minimum wages. House Democrats are moving toward a vote to ease the minimum wage up to more than $15 per hour by 2024, but that proposal faces an uncertain future in the Senate.
Manufacturing jobs have increased, but not where Trump said
Specifically, for some of the workers Trump promised to help – auto workers and coal miners in the Rust Belt, – wages have fallen. CNN’s Lydia DePillis and Jeremy Moorhead recently profiled the closure of a GM plant in Ohio and the inability of some workers there to take part in government programs to retrain them for new careers.
As DePillis wrote, “As recently as the early 2000s, a job in an auto plant could be a launchpad to the middle class, but those jobs are increasingly rare. During the Lordstown plant’s heyday in the 1970s, GM was one of the biggest private sector employers in the United States, with more than 618,000 employees. That number is now down to about 103,000. And the jobs that remain are not all what they once were. Since 1990, wages for US auto workers have declined 18%, adjusted for inflation. Retirement benefits have declined as well. As of 2017, only 8% of factories offered pensions.”
And the share of the US economy dedicated to manufacturing jobs has not risen and it likely won’t since the US economy has moved away from manufacturing, which used to be the largest portion of the US workforce, but now accounts for less than 10%.
The trade deficit has not shrunk
Part of Trump’s argument in favor of nixing some trade deals and reworking others is that the US should be making more things to export and buying fewer from other countries. Shrinking that trade deficit – the amount more that the US imports than exports – is what’s behind his off-again trade war with China and his promise to improve the North American Free Trade Agreement. It’s what’s behind the tariffs he’s threatened or levied on more than $250 billion in goods from China and other countries.
The jury is still out on the NAFTA replacement, the United States-Mexico-Canada Agreement he’s proposed; Congress still has to ratify it.
But the US trade deficit has continued to grow. In fact, it has spiked more than $100 billion since Trump took office, according to the Census Bureau, which tracks the trade gap. That’s the largest since 2008, before Obama was President.
Trump didn’t eliminate debt; he’s exploding it
During the 2016 campaign, Trump promised to eliminate the federal debt within eight years. With six years left to fulfill his promise, the debt is exploding, largely because of the tax cuts he signed into law. The federal budget deficit, the annual shortfall between what the government brings in with taxes and what it spends on services, is up 77% in the first four months of fiscal 2019 compared with the same period last year, according to new data released by the Treasury Department.
Taxes are down. Spending is up. The debt, as a result, is unlikely to be eliminated. The opposite will occur. If existing laws remain the same, the Congressional Budget Office projects the annual deficit could hit more than $1 trillion per year starting in 2022.