The economy is the #1 issue for Republicans. It’s also where the public generally supports the President. In the beginning of the year consumer confidence was high. People felt good about the economy before the pandemic.
So I took out the pandemic. I’m comparing Trump’s first 3 years to Obama’s last three. I have some charts and a few notes on what I’m seeing in the data. A lot of people have chosen to judge the President as if it’s 2019 and the economic impact of the pandemic didn’t happen. I’ll oblige them.
I want to start with two HUGE caveats.
1. Presidents get too much credit when the economy is good and too much blame when the economy is bad. The worst economy many of us can remember happened, in part, because of complex mortgage lending that barely involved George W Bush.
2. Countries seeing economic stability right now are those who controlled the spread of the virus. China locked everything down and saw a 3.2% Gross Domestic Product increase in Q2. The US was -30% in Q2. Any serious economist says the current economic collapse is due to the handling of the pandemic.
The President says his economy is based on historic:
1. GDP growth
2. Low unemployment
3. Stock market gains
4. Reduced trade deficit
5. Return of American manufacturing
Leave 2020 out of it. How did Donald Trump’s 1st three years compare to the three years before it?
Claim 1: The GDP rose because of Donald Trump!
Obama drove GDP 2.5% over his last three years.
Trump drove GDP 2.4% over his first three years.
The economy was already doing well during Obama’s 2nd term. Trump continued the trajectory until the end of 2019 when growth was 0.3%. This is well before the pandemic.
Verdict: Trump drove GDP slower than Obama because GDP growth slowed dramatically in late 2019
Claim 2: Trump created jobs. He got people back to work!
Obama added 7.3 million jobs during his last three years.
Trump added 5.6 million jobs during his first three years.
The blue line reflects the actual number. The red line shows the trend. Much like the earlier GDP decline in late 2019, US employment growth stopped at the end of 2019. We were at 151 million workers and should have been closer to 153 million.
Verdict: Trump created jobs slower than Obama because job growth stopped dramatically in late 2019.
Obama dropped unemployment 24% during his last three years.
Trump dropped unemployment 18% during his first three years.
The blue line reflects the actual number. The red line shows the trend. In a clear pattern, we see that unemployment flattened at the end of 2019. We were at 3.6% unemployment when, based on the trend line, we should have been closer to 3.2%.
Verdict: Trump dropped unemployment more slowly than Obama because unemployment flattened during the 2nd half of 2019.
Claim 3: Donald Trump made the stock market increase!
Obama drove the stock market down an average of 1% during his last three years.
Trump drove the stock market up an average of 15% during his first three years.
The great stock market sell-off of 2015–2016 drives down the overall market performance for Obama. The market has responded well to Trump’s policies and have seen stock prices rise. Despite his improved performance vs Obama, please note again the sharp decline in late 2019.
Verdict: Trump drove stock prices higher than Obama in part because of the market sell-off of 2015/2016 but mostly because the market likes his policies.
Claim 4: America’s getting rid of its trade deficit under Trump!
Obama’s trade deficit was $1.2 billion per month during his last three years.
Trump’s trade deficit was $1.4 billion per month during his first three years.
An important note. I don’t think this is an important metric. The President does and he’s mentioned it as one of his key economic pillars, which is why it’s included here. The trade deficit is the difference between what we sell to other countries and what we buy from them. It matters to the President because he wants to drive American manufacturing so that this deficit will decline.
Verdict: Trump increased the trade deficit rather than decrease it.
Claim 5: Trump brought back manufacturing!
Obama’s manufacturing output was 102 on an index to 100.
Trump’s manufacturing output was 104 on an index to 100.
This index is the way the US government reports this information. How much production was there this year vs 2012 using an index? Both Obama and Trump saw manufacturing levels above 2012, but Trump indexed higher than Obama did.
Verdict: Trump increased manufacturing output more than Barack Obama
Claim: Well, this isn’t a claim the President is making. But I think this is important. And it means looking forward
This is the forecasted Debt-to-GDP ratio for the United States. It shows that this year will be the 1st since World War I where our total debt is more than our economic output. Next year will be worse.
Verdict: The $1.5 Trillion dollar tax cuts drove the manufacturing gains we saw. They also drove the stock market gains. However, the reduced tax revenue is causing a crisis for the future economic outlook.
To summarize, the President has a mixed economic message. Manufacturing grew faster than under Obama, but overall jobs didn’t. The stock market rose significantly but the unemployment rate didn’t follow.
The Debt-to-GDP ratio is in red flag territory due to the size and scope of the Trump tax cuts.
Verdict: The Trump economy was really, really good for someone with a heavy stock portfolio who is old enough not to worry about the decade of program cuts that are likely necessary to control the budget. For the rest of us, the Trump economy works about as well as the Obama economy but with much, much more long-term damage.