The Economy is Doing...Fine, and Trump has Nothing to do With it.
Throughout the State of the Union address, and for a good while afterward, President Trump and his supporters were touting the performance of the economy. The phrase “record breaking” was thrown around quite a bit, almost always with more than a splash of hyperbole.
But is it true? Is the economy really so good it covers a multitude of sins?
These two graphs will help you decide for yourself.
First, a small primer. Gross Domestic Product (GDP) is the bottom line number—more or less how much “stuff” the economy produces. It is not always the best way to measure economic performance because sometimes a lot of “stuff” isn't passed around evenly.
Suppose two gilded barons dominate the economy. Each has a mammoth corporation with tentacles reaching into every industry, and, because of their dominance they capture hefty profits. In this case the size of the pie might be the same, but most of it is eaten by just two individuals. In this case a record breaking pie could still leave hundreds of millions hungry.
So, measuring economic performance takes more than just the bottom line number. As a side note, even the GDP has merely been doing...fine. Consistent growth, but still well short of the four percent annual growth President Trump promised as a candidate, and no where near the five to six percent he publically mused about.
That's where these two graphs come in. They are designed to give a more complete picture of how people are doing right now. The emphasis is added because these are not meant to be predictive measures. Though some of these indicators can be useful in predicting future growth or recession, there are many more metrics that need to be analyzed to do that with any credibility. So please, don't go shorting any markets based on this. Instead, judge for yourself if the economy is really as robust as Senator McConnell and President Trump keep advertising.
Each graph consists of seven measures that create a more comprehensive assessment. They are GDP, Median Household Income, Personal Disposable Income, Debt Service Share of Disposable Income, New Nonfarm Jobs, and Unemployment; all adjusted for inflation, and all in terms of percentage growth. The dashed line is a reference for the Tax Cuts and Jobs Act, which took effect in 2018. This cut taxes by over a trillion dollars, with most of the cuts going to the most well off Americans.
The first graph shows the year over year performance of the seven indicators—how much better or worse things are compared to one year earlier. The farther away from zero a line is, the faster that metric is growing or shrinking.
If the economy were running on jet fuel, as we have been told, the data would reflect that by getting farther away from zero in the most recent years (after the 2016 elections, if Republicans are to be believed). Even after the huge tax cuts, that largely benefitted the wealthiest, the lines appear to be hovering at about where they have been for most of the decade. Advanced analytics say the performance is not significantly different.
This second graph pins the percent change to 2010, when the economy started to get the wheels rolling after the recession. Rather than showing how quickly things are changing, this graph gives a better picture of how fast things have been growing.
These numbers do look fairly encouraging. Economic booms in this graph would be indicated by a changing slope in the line. Though solid, there is again no significant shift, even after the TCJA.
So, the economy is doing just fine. The days where we could expect four plus percent economic growth are likely gone, at least in the near to intermediate future. Things are humming along at a moderate but consistent and sturdy pace. Though good, nothing about the economic indicators suggest, as being advertised by the powers that be, an economy that is “the best it has ever been.” In fact, as these graphs show, it isn't accelerating over the previous administration.
The caution as old as economics itself is of course due here; Presidents get too much credit when the economy is good, and too much blame when it goes wrong. Economies are massive beasts with a million heads, often trying to move in different directions. For one person to dictate those movements the policy effect would need to be enormous.
Even if we drew another vertical line in 2012. Where the Affordable Care Act began full implementation, there still is no large change in economic trajectory, Despite his lofty gloating, even President Trump’s trillion dollar tax cuts in 2017 were not enough to change the trajectory of the economy.
So, yes, the economy is doing just fine.
Perhaps the more important question is this: with the massive tax cuts, deregulation, excellent trade negotiations, trillion dollar deficits, and everything we were told would save us from the Obama economy, why is it that Trump and McConnell can't do any better than Obama did? Weren't these policies supposed to fix all our problems?