Over the past few months, President Trump has painted a portrait of a resurgence: After tanking under President Barack Obama, the economy has finally been Made Great Again.
Based on recent polls and my own reader email, much of the public believes this narrative. The word “booming” gets thrown around a lot.
But how has the economy actually performed under Trump? There is plenty of data to help us answer this question. So I bring you: Six questions about Trump and the economy you may have been too embarrassed to ask.
1. What’s the big picture? Have we seen a change under Trump?
Generally speaking, the economy today is virtually indistinguishable from the economy in the several years before Trump took office, as measured by economic growth.
Gross domestic product continues to increase at a modest but steady rate, according to the Bureau of Economic Analysis. In the first quarter of this year, it grew at an annual rate of 2.3 percent ; last year it also grew at 2.3 percent . That’s roughly what growth averaged during Obama’s second term.
2. What about hiring? Haven’t we seen a big boom there?
Nope. The pace of hiring has been decent, but again, not better than it was under Obama.
Since Trump took office, non-farm payrolls have expanded by an average of 186,000 jobs per month, according to the Bureau of Labor Statistics. Over Obama’s second term, it averaged nearly 216,000 per month. In Obama’s final year, it was 195,000.
The unemployment rate has been falling, but that decline also began early in Obama’s presidency and has more recently leveled off. Which makes sense, given that we’re nine years into one of the longest recoveries on record. At some point, there isn’t much further it can fall.
3. Wages have been going up though, right?
Wage growth has disappointed under Trump, as it did under Obama. Adjusted for inflation, hourly earnings grew little over the past year, up just 0.4 percent in March compared to a year earlier. Obama oversaw a few stretches of year-over-year real wage growth above 2 percent, but mostly his record was lousy too.
After the GOP tax cut passed, a bunch of companies announced plans to use some of their windfall to boost worker pay. So far, we haven’t seen that in the overall data. Many of these firms were probably planning to raise pay anyway — just as they had in years past — and credited Trump’s tax cut to curry favor with the White House.
4. What about federal deficits and debt? Surely Trump compares favorably to red-ink-guzzling Obama.
Federal deficits as a share of the economy did grow a lot under Obama, at first. That was largely because we had a major financial crisis. Tax revenue fell dramatically. Meanwhile, federal spending rose, thanks both to automatic outlays (e.g., more people became eligible for unemployment benefits) and deliberate stimulus measures. Additionally, boomers began aging into entitlement eligibility, and Obama extended the Bush tax cuts.
As the economy improved, those deficits shrank but did not go away. In fiscal 2016 (so still under Obama) they began expanding again, and now under Trump, they have exploded, despite there being neither a recession nor a major war. That is thanks to both tax cuts and spending increases.
The Congressional Budget Office projects that, in a few years, our debt-to-GDP ratio will be at its highest level since 1946.
5. Tax cuts just passed. Isn’t it unfair to judge Trump’s economic track record until those have been factored into the economy?
That’s true: We haven’t seen the impact of the tax cuts yet. But their salutary effects are likely to be modest and short-lived, for a few reasons.
So far, consumers mostly haven’t noticed them. The biggest beneficiaries are also the wealthiest Americans, who are less likely to spend their tax savings. The best hope for GDP, jobs and wage growth comes from the corporate-side cuts, which could increase investment over time.
Even so, the effects are expected to be small. The respected Penn Wharton Budget Model, for instance, projects that the tax cuts will raise annual GDP growth by 0.06 to 0.12 percentage points over the next decade. Meanwhile, an aging population, rising federal debt and Trump’s threats of a trade war present significant head winds.
All of which is to say: Don’t hold your breath for that 4 percent to 6 percent GDP growth that Trump promised.
6. So, uhh, how much influence do presidents have over the economy, anyway? It sounds like not very much.
Bingo. Presidents get too much blame when the economy sours and too much credit when it improves. Not that you’d know this from Trump’s boasts whenever some good news — even news that’s not actually that good — rolls in.
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