How well is the so-called “Trump Economy” doing? Considered to be one of the major strengths of this administration, taking a deeper dive into how successful the economy really is reveals that there are, in fact, serious caveats to consider.
The stock market is at a relatively high place, and unemployment is at historical lows. But taking a look at these numbers alone lacks historical context. To understand more, we need a brief refresher course on how we got here.
Obama inherited a mess; Trump didn’t
President Donald Trump assumed office at a time of relative economic prosperity. There were improvements that could be made, to be sure, but things were much better for Trump coming into office than they were for when his predecessor, former President Barack Obama, took control of the presidency.
Back in 2009, we were in the midst of the Great Recession. Things were bleak. Close to one out of every ten workers was out of a job, and the stock markets were collapsing. It was not a good time to become president.
Trump Inherited Obama’s Strong Economy
Trump’s Economy On ‘Recession Watch’ https://t.co/dd6jfLwanx
— Shannon Jewell-Taft (@jewell_taft) May 29, 2019
Somehow, things turned around drastically during the Obama administration. The economic stimulus package that his White House put together, though imperfect, helped Americans in the long run. The automobile industry was saved. People got back to work. By the time 2017 rolled around, unemployment dropped to pre-recession levels.
Whether we give credit for that turnaround to Obama or not is up for debate. But the same debate should be applied to Trump, who constantly takes credit for a positive economy. If we’re to give credit to Trump, then credit ought to be given to Obama, too. To say otherwise is to behave hypocritically.
Market increases were better under Obama
So let’s compare how well the country’s economy has done during the two’s tenures, starting first with the stock market.
It is true that huge gains have been made during Trump’s presidency. In fact, the Dow Jones Industrial Average (DJIA) grew at a faster pace during the first year that Trump was president (a 31.6 percent increase) compared to when Obama first assumed office (a 25.8 percent growth rate), according to data obtained from MacroTrends.net.
Looking at those numbers alone would imply that the economy is “better” when Trump is in control. But remember: context matters. Obama inherited a mess and still saw a market turnaround in his first year. Trump inherited a great economy, and saw continued gains during that first year.
What did Trump do in order to facilitate those gains? Not much. Recall that in his first year, the president did not pass any major domestic policy until the very end of December, when he was able to get both houses of Congress to pass his tax cuts that primarily benefited the uber-rich and corporate elite.
But didn’t that tax break do a lot to help the economy? Didn’t it “trickle down” to help workers? Not really on the first question, and not at all on the second.
While $1.5 trillion in tax cuts came from the changes Trump imposed in 2018, the Congressional Research Service compiled data on how much it affected the economy, and found there were minimal benefits, if any at all, that came about, according to a report from WBUR.org.
One of the main reasons why nothing good came from the tax cuts is that most of them went to corporations. The Trump administration sold the tax cuts on the belief that the money would be reinvested — companies would produce more products and sell more goods, or hire more people or pay their workers more, the White House claimed.
“Corporate investment did bump up a little bit, but not very much,” said Here & Now’s Jeremy Hobson. “Companies didn’t give employees raises, not right away. So what do the companies do with all that money? They bought back stock and they gave shareholders dividends. And essentially what that says is that the companies couldn’t think of anything productive to do with the money.”
The effect — or rather, lack thereof — of Trump’s tax cuts can be seen in how well the economy has improved since they were implemented. Remember when we examined the DJIA in the first year of both Trump and Obama? Let’s take a look at those improvements in their first 28 months in office instead.
From the start of Obama’s tenure to the end of April in the beginning of his third year in office, the Dow Jones went up by 57.1 percent. For Trump during that same time period, it increased by 24.9 percent.
Presidents don't control stock markets, market is not the economy, etc. Still, once upon a time, Trump used to brag that market gains were a good metric of his success.
Updated chart on how S&P 500 has fared under Trump vs Obama, through comparable periods in their presidencies: pic.twitter.com/ydf6Sz0IK9
— Catherine Rampell (@crampell) June 2, 2019
In other words, after that first year of good improvements, things tapered off for Trump, whereas the good economic improvements that had started in Obama’s first term in office continued growing.
So where markets are continuously touted by the current president as being better than ever, in reality, when we compare the rate of increase between the two presidents, Obama fared better.
Unemployment is low — but improvements were bigger before Trump took office
Another talking point from the Trump administration is that unemployment is incredibly low — and that the president has everything to do with it. The commander-in-chief has said the rate is one of the best we have seen “in the history of our country,” according to reporting from CNBC last year.
That’s not an inaccurate statement. But again, it lacks context.
Trump took control of the White House with a low unemployment rate to begin with. When he entered the Oval Office for the first time, the Bureau of Labor Statistics recorded an unemployment rate of about 4.7 percent. Over the next 28 months, that number has fallen even lower, to an unemployment rate of 3.6 percent — effectively, a 0.0393 point drop per month.
Not too shabby — but again, not remarkable, either. Compare it to Obama’s tenure. At the height of the Great Recession, the unemployment rate in America was 10.0 percent, in October of 2009. Gradually, that rate descended to that 4.7 percent number at the end of Obama’s time as president — a 5.3 percentage drop overall, which amounts to a 0.0616 point drop per month.
In other words, unemployment fell under Obama’s tenure at a rate that was 1.5 times faster than it has under Trump’s watch.
Some may say that’s an unfair comparison to make — we’re looking at nearly the entirety of Obama’s tenure, versus just a snippet of Trump’s.
It’s a fair point to make, but even if we look at the last 28 months of Obama’s presidency and compare it to Trump’s, we still see the economy has performed better under the former president versus the current one.
From August 2014 to the end of Obama’s tenure, the unemployment rate dropped by 2.1 percentage points. Divide that number by 28 months, and you get an average point drop per month of 0.075 points — a rate that’s almost twice better than Trump’s first 28 months in office.
The Trump economy — is it a success, or not?
What can we gather from these data? While the economy under Trump has been mostly positive, it isn’t likely because of any big policy he put forward. The tax cuts he implemented didn’t do much good, for example, except to fill the pockets of those who were already wealthy.
Especially troubling is the new “Trump Doctrine” — the use of tariffs against foreign nations to “negotiate” trade deals that end up hurting American consumers. Much of the volatility of the markets in the past year can probably be attributed to that “strategy,” if you can call it that.
With regards to figuring out whether this president has been “successful” in terms of producing a good economy or not, it’s truly in the eyes of the beholder. Some will look at this economy and say it’s doing great, while others will point out, as I have above, that a lot of it isn’t much of Trump’s doing.
Does Trump deserve credit then? Probably not. At best, we can probably say with confidence that Trump inherited a good economy, and that his biggest achievement so far is not messing it up too badly.
That being said, the addition of tariffs on Mexico, announced last week, could be the straw on the back of the camel that makes everything fall apart, particularly since those economic penalties could hit the car industry in an especially bad way.
Featured image credit: Gage Skidmore/Flickr