Ed Koch, mayor of New York City from 1978-1989 and a man of the people, was known for asking constituents — on street corners, on the subway — “How am I doing?” (Technically, he said “How’m I doin’?”)
President Donald Trump doesn’t ask the public to assess his accomplishments. He tells us what they are in no uncertain terms, be they accurate, exaggerated or incorrect. The Washington Post’s Fact Checker catalogued 4,229 false or misleading claims during his 1 1/2 years in office.
Following the release of strong economic news, Trump has touted the data — 24 times in all, according to the Post — as evidence of “the best economy in the history of our country.”
Best ever? Good isn’t good enough?
Given that the U.S. economy just registered its strongest quarter of growth (4.1%) in four years, it seemed like an appropriate time to issue a report card for Trump’s time in office.
1. Economic Growth
Most studies of how the economy performs under various presidents come with the caveat that the policies put in place by one administration often bear fruit — sometimes, rotten apples — in the next. So it is unfair to assign credit or blame to a president, especially when monetary, not fiscal, policy is the more potent driver of the business cycle.
That said, we can look at average real gross domestic product growth rates by decades, a comparison that makes no allowances for booms, busts, elections or extenuating circumstances.
Average real GDP growth 1950s 4.3% 1960s 4.4% 1970s 3.3% 1980s 3.1% 1990s 3.4% 2000s 1.8% 2010-16 2.2% 2017-18 (Trump era) 2.7%If the second quarter’s 4.1% growth is a taste of things to come, it would be impressive. Given the slow rate of growth in the labor force and in productivity, both the Federal Reserve and Congressional Budget Office estimate potential GDP at just under 2%.
The Tax Cut and Jobs Act, enacted in December 2017, is having a positive effect, most notably on corporate profits. Whether the reduction in the corporate tax rate from 35% to 21% will yield the desired long-run supply-side effects — an increase in productivity-enhancing investment — instead of short-term repatriation of overseas profits and share buybacks, remains to be seen.
The acceleration in business fixed investment following a 2015-2016 lull is a positive sign. But like robust second-quarter growth, it will need validation over time.
Grade: Incomplete
2. EmploymentJob growth remains strong in the 10th year of the economic expansion and the 3.9% unemployment rate is the lowest since 2000. (Prior to 2000, the last time the unemployment rate was below 4% on a sustained basis was 1969.)
For the first seven months of 2018, the average increase in nonfarm payrolls was 215,000, better than 2016 (195,000) and 2017 (182,000) but slightly below 2014 (250,000) and 2015 (226,000).
Which is not to downplay the hiring pace. It’s just not accurate to declare each number an historical best.
The economy’s momentum is strong enough that employers have been forced to offer positions, and a leg up, to the least-educated Americans, including those without a high-school education.
Manufacturing employment, which peaked in the 1970s, rose by 327,000 in the past year. That’s the biggest 12-month increase since the mid-1990s. Whether the increase reflects all those manufacturing jobs Trump says are coming back to the U.S. or, more likely, new jobs created in response to strong demand, is unclear. Tariff-related plant closings and job cuts have yet to reach critical mass.
The one downside to labor-market strength: While employee compensation reached a 10-year high of 2.8% in the second quarter, the recent acceleration in inflation to 2.9% means workers aren’t seeing any real wage and salary increase.
Grade: A-
3. TradeThere is no area of the economy where the president sows as much confusion as trade.
“We lost $800 billion a year on trade,” Trump has said many times over the last year.
For starters, when he talks trade deficits, he’s talking goods only, not services. The U.S. ran a goods deficit of $807 billion in 2017, partially offset by a services surplus, bringing the total trade deficit to $552 billion.
Second, neither a country nor a business nor an individual “loses” when it buys something from someone else. Assuming the exchange is voluntary, it’s a net plus for buyer and seller alike.
Trump cheered the narrowing in the second-quarter trade deficit, in part a function of foreign buyers front-running China’s 25% tariff on U.S. soybean imports.
Alas, Trump can’t have it both ways. In the U.S., a strong economy begets a wider trade deficit as the U.S. consumes more than it produces. The president may think a smaller trade deficit correlates with stronger growth, but he should be careful what he wishes for.
Grade: F
Teacher comment: Student would benefit from after-school tutoring.
4. Debt and DeficitsTrump’s serious lack of understanding on trade spills over to his misconceptions about deficits and debt. Last weekend, the president made the bizarre claim that the tariffs on imported goods would go a long way towards reducing U.S. debt. (Hint: Americans pay the tax on imports.) His pledge on the campaign trail to pay down the $19+ trillion of debt in eight years was largely premised on stronger economic growth as a result of renegotiating trade deals.
Total U.S. public debt stands at $21.3 trillion, an increase of $1.4 trillion since Trump took office. Last month, the White House Office of Management and Budget updated its mid-session review to reflect a widening of the federal deficit to $1 trillion in fiscal years 2019 through 2021 before it starts to recede.
The CBO, which uses less rosy economic assumptions in its Budget and Economic Outlook for 2018-2018, estimates that the annual deficit will exceed $1 trillion in 2020, rising to $1.5 trillion by 2028, at which time publicly held debt will approach 100% of GDP. The bump to GDP from the tax cuts will be insufficient to prevent the deficit from increasing, according to CBO.
Supply-siders like Larry Kudlow, chairman of the National Economic Council, and Kevin Hassett, chairman of the Council of Economic Advisers, tell us the feedback effect of tax cuts will take time, but eventually those cuts will pay for themselves with stronger economic growth and higher revenue — along with spending cuts that never seem to materialize.
Wishful thinking is not a substitute for a positive outcome.
Grade: D
5. Social InteractionDonald Trump thinks he knows more about (fill-in-the-blank) than anyone else. So who needs a chief of staff, a cabinet, a bevy of advisers when you are a committee of one?
Trump lacks any sense of humility, has no impulse control and requires constant affirmation. In other words, he doesn’t play well — or even play — with others (family excepted). He demeans staff members who displease him and banishes them from the realm via Twitter. He is his lawyers’ worst nightmare, tweeting statements that contradict earlier ones and put him in legal jeopardy.
There is no “I” in team, as the saying goes, and there is no “we” in Trump. One suspects that many of his advisers don’t quit because they have a sense of duty to the country, not the chief executive. It’s hard to imagine that they would elect him class president, no less president of the United States.
Grade: C-
