The Washington PostDemocracy Dies in Darkness

Trump has not made the economy great again

(Susan Walsh/AP)
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The economy, according to initial estimates, has grown 2.9 percent the past year, but that doesn't mean that President Trump has made it great again. Not even close.

The first reason is right there in front of you: the words “according to initial estimates.” The fact is that these numbers tend to be particularly noisy, and they end up getting revised. Why is that? Well, it turns out that isn't so easy to get a down-to-the-decimal-point picture of how much our nearly $20 trillion economy is (or isn't) growing in real time.

That's clear enough if you look at the difference between gross domestic product and gross domestic income. The first one tells us how much money is being spent in the economy, and the second how much is being earned. In theory, these two should be the same, because my spending is your income, and vice versa, but, in practice, they aren't because of measurement error.

But more than that, these numbers are telling us that we shouldn't really believe them right now. See, whenever you have two imperfect measures of something — say, GDP and GDI — the best thing you can do is average them so you're incorporating all the relevant information. That, as Jason Furman, who was an adviser to President Barack Obama, points out, gives you a better idea of what the final GDP numbers will end up being revised to than the initial ones do themselves. And it's why you should be pretty skeptical of all the headlines saying that the economy is expanding at a pace of almost 3 percent.

Although we still don't know what GDI will be for the first quarter of 2018 — it won't be released for a few more weeks — we do know that it has been a lot lower than GDP in the preceding ones. All of that slower growth last year, then, means that the economy is probably chugging along at the same 2 to 2.5 percent annual pace that it has been for most of the recovery. That makes sense when you consider that job growth hasn't sped up since Trump took office but has slowed a little.

What about the next year or two, though? That's where there might be room for optimism. The parts of today's growth that, because they're the least volatile, do the best job of predicting tomorrow's — consumer spending and private fixed investment — have, adjusted for inflation, grown a respectable 3 percent over the past year. (Together these are known by the catchy name of real final sales to private domestic purchasers.) That may not be enough to get overall growth up to that level, but it could get it close in the coming months, especially with the Trump tax cuts kicking in (although there's little evidence that that's happening).

It's really about the least Republicans could hope for after they pushed a $1.5 trillion tax plan — mostly into the pockets of rich people — without paying for a penny of it.

But even if the Trump tax cuts do increase growth in the short term, they won't after that. Long-term growth, after all, is really about how many more people are working and how much more work they can do every day. In other words, how much the workforce and productivity are growing. Recently, neither has grown much. Labor force growth has slowed considerably for the very predictable reason that the baby boomers are now retiring en masse, which won't get better anytime soon when Trump is demanding that we reduce our easiest source of new workers: legal immigrants. Productivity, meanwhile, has tanked for much more mysterious reasons that are harder to do anything about. Now, insofar as the Trump tax cuts do get companies to start investing more in the kind of machines that let workers do more with less, this might improve somewhat. Mainstream forecasters, though, don't think it will be enough to make a meaningful difference down the line.

Trump steaks, Trump casinos, Trump TV shows. They all started out with big promises, got early results (well, maybe not the steaks), and then fizzled out fast. Why would the Trump tax cuts be any different?