“And I’ve turned West Virginia around, because of what I’ve done environmentally with coal. And I don’t know if you saw, but West Virginia is second to Texas in percentage increase of GDP.”
— President Trump, remarks during an interview on Fox News Radio, Oct. 17
“One thing that I am very proud of, the state of West Virginia. Last month, it was one of the highest percentage increases in GDP, the state of Texas beat it. And people are saying, wait a minute, West Virginia just came in second. Do you know what that is about? That is about cutting regulations and letting the people go and mine.”
— President Trump, remarks during an interview with Sean Hannity, Oct. 11
President Trump has repeatedly taken credit for economic improvements and business deals that have little to do with his policies. Regular readers may recall that we gave him Two Pinocchios for his claim that he personally added 1 million jobs, and Four Pinocchios for taking credit for Foxconn’s proposed plant in Wisconsin. Now Trump is at it again. He claims he has “turned West Virginia around” by cutting regulations and “letting people go mine.”
Since taking office, Trump has cut several Obama-era regulations on mining and energy production. And in the first quarter of 2017, West Virginia, a major energy-producing state, saw a 3 percent increase in gross domestic product, the broadest measure of the economy.
So, is there a connection between Trump’s actions and West Virginia’s economy? Let’s take a look.
Trump’s energy regulations
Trump claims he has cut more regulations than any other president in history, which we’ve pointed out is difficult to verify, but when it comes to the environment he seems to be hard at work toward this goal. Here are a few of the regulations he has attempted to undo:
- In February, Congress voted to repeal the “stream protection rule,” which restricts mining companies from dumping wastewater and debris into nearby waterways. On Feb. 16, Trump signed the bill, officially ending the protections.
- In March 2017, the Interior Department planned to rescind a 2015 rule regulating fracking on public lands. On July 25, the Bureau of Land Management submitted its new proposal to the Federal Register.
- On March 28, Trump signed an executive order promoting energy independence and economic growth, instructing the Environmental Protection Agency to pursue repealing the Clean Power Plan, the Obama administration’s signature policy to reduce greenhouse-gas emissions from domestic electricity production. On Oct. 9, Scott Pruitt announced the EPA’s intention to repeal the plan, and on Oct. 16, the EPA published the full proposal for the repeal in the Federal Register.
- On April 28, Trump signed an executive order expanding offshore drilling for oil and gas in the Arctic and Atlantic oceans.
In August 2017, the Bureau of Economic Analysis released a report on states’ GDP growth in the first quarter of 2017. Across the country, mining grew 21.6 percent, spurring growth in 48 of the 50 states. The BEA notes that the growth in mining was the leading contributor to growth in the three fastest-growing states — Texas, West Virginia, and New Mexico, which grew 3.9 percent, 3.0 percent, and 2.7 percent, respectively.
The fact that West Virginia saw a 3 percent increase after years of limited growth was not lost on Trump. In two interviews on Fox News programs, he touted the state’s economic growth, adding that it was a result of his elimination of regulatory policies on mining and coal. Is the credit deserved?
The short answer is, no.
For starters, the first quarter ended on March 31, 2017, just two months after Trump took office. And even though he wasted no time rolling back Obama-era protections, many of his newly loosened regulations on mining and coal haven’t gone into effect. The comment period on the administration’s proposal to open fracking on public lands closed Sept. 25, and the BLM now has to review the 459 public comments on the proposal as it drafts the final rule. Once the final rule is published in the register, it typically goes into effect within 30 days of publication.
Likewise, the administration’s repeal of the Clean Power Plan has yet to take effect. Pruitt claimed in October that he was ending the “war on coal,” by rescinding the Clean Power Plan, but the agency’s proposal is up for public comment until December. More importantly, the regulations proposed by the Obama administration have been on pause since February 2016, when the Supreme Court voted to stay the plan while it considers whether the administration exceeded its authority to regulate air pollution under the Clean Air Act.
When Trump signed the law repealing the “stream protection rule,” the provision had been in effect only since Jan. 19, 2017 — a mere 28 days. In a January 2017 impact analysis of the Obama-era rule, the Congressional Research Service estimated it would take up to 42 months for states to implement the federal rules. Repealing a law that wasn’t widely implemented would do little in the short term to increase growth in the industry.
And, finally, increased drilling in the Arctic and the Atlantic Oceans has no bearing on West Virginia.
How West Virginia got to 3 percent
West Virginia is the second-largest coal producer in the country, and in 2016 it accounted for 11 percent of the total coal production in the United States. The state is also the ninth-largest producer of natural gas in the country, with an estimated 1.4 trillion cubic feet of natural gas extracted in 2016, according to the Energy Information Administration. While most of the economic growth in West Virginia is due to growth in these two industries, the boost can be attributed to rising productivity and prices.
According to the BEA, in West Virginia, mining grew 26.4 percent in the first quarter of 2017, and “data from EIA shows gains in the extraction of coal, natural gas, and petroleum bolstered mining in the state.” The primary driver of the state’s increased coal production is a surge in Asia-Pacific metallurgical coal demand as well as a temporary boost in demand from Australia after Cyclone Debbie damaged the country’s rail infrastructure, according to a report on the state’s economic outlook by West Virginia University.
The increase in extraction coincided with an increase in the price of metallurgical coal and natural gas. In the first quarter of 2017, the price of metallurgical coal exports was $153 per short ton, up from $76 in the third quarter of 2016. For the first nine months of 2017, the price of natural gas was $3 per million British thermal units on average, up from a 2016 average of just under $2.50 per million BTUs.
Another factor boosting West Virginia’s GDP is the state’s declining unemployment rate. From 2015 to 2017, the unemployment rate declined by 1.7 percent. Whether increased employment leads to economic growth is debated by economists, but historically, GDP has fallen as unemployment rises and vice versa.
Unfortunately, the falling unemployment rate in West Virginia reflects the fact that thousands of people left the labor force altogether. Over the two-year period, the state’s unemployed population declined by roughly 13,500 people, but nearly 5,500 of those people simply stopped looking for work. Still, nearly 8,000 people went back to work in the state.
Even though Trump claims he has “turned West Virginia around,” the trends aren’t expected to last. The Bureau of Business and Economic Research at West Virginia University estimated the state’s GDP growth to average 1.0 percent per year over the next five years and employment to grow 0.7 percent — well below national projections.
Additionally, the coal industry still has a way to go to recover from its losses. In 2008, the state produced nearly 158 million short tons of coal, and by 2016, that number had plummeted to 80 million, according to a report by the Bureau of Business and Economic Research.
John Deskins, co-author of the report and director of the bureau, cautioned that while increased coal production is projected to remain stable, the state still has a long road to economic recovery.
“West Virginia has no short-term solution for its economic problems,” Deskins said. “We need industrial diversification and investment in human capital. But with the state’s poor education system and really bad drug epidemic, the human capital gains are a major challenge.”
The Fact Checker documented these findings to the White House, seeking a response. But the White House declined to comment.
The Pinocchio Test
Trump takes credit for West Virginia’s economic gains, but it’s undeserved. For one, when the first quarter ended on March 31, 2017, Trump was just two months into his presidency. While he was quick to do away with several regulations on energy production, many of the new policies have yet to take effect. The state’s recent growth is due to increased mining production and a rise in prices for coal and natural gas.
Taking credit for economic advances where no credit is due seems to be a habit for Trump. He should be more careful not to overstate the effect of his administration’s policies when praising economic gains across the country. For trying to capitalize on the hard work of West Virginians, Trump earns Four Pinocchios.
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