GOOD THINGS are happening in the U.S. economy. The unemployment rate in August was only 3.9 percent, and the inflation rate is hovering at or near the Federal Reserve’s target of 2 percent. The latest Census Bureau data show that median household income was about $61,400 in 2017, meaning middle-class incomes have roughly returned to pre-Great Recession levels. The poverty rate fell from 12.7 percent in 2016 to 12.3 percent in 2017. Surveys of both business and consumer sentiment indicate that “animal spirits” are robust.
Any president would be inclined to boast about this much good news on his or her watch. Characteristically, President Trump over-boasted, falsely claiming in a tweet Monday that the most recent quarterly rate of economic growth, 4.2. percent, exceeded the unemployment rate “for the first time in over 100 years!” In fact, that’s happened numerous times in the past century, as the White House Council of Economic Advisers subsequently admitted. Meanwhile, his predecessor, Barack Obama, staked his own claim: “When you hear how great the economy is doing right now, let’s just remember when this recovery started,” he told supporters .
At the risk of making ourselves unpopular with both sides, we’re going to say each has a point. The growing economy represents the acceleration of a trend that began in Mr. Obama’s first presidential term, when he was trying to pull the country out of an epic recession (with an assist from a bailout fund that President George W. Bush pushed through Congress in late 2008). The most controversial measure of his term, Obamacare, was said by the GOP to be a job killer, which it wasn’t, to put it mildly. The second-most controversial, roughly $763 billion in tax cuts and spending increases — “the stimulus” — probably added 2 percent to annual growth, according to a 2017 paper by Gerald A. Carlino of the Philadelphia Federal Reserve Bank.
Mr. Trump, therefore, inherited a tightening labor market, good for workers. However, it stands to reason that the massive new tax cuts and spending increases he signed into law reheated the already warmed-up economy. So give Mr. Trump that much credit.
If he and the Republicans can take responsibility for the benefits of his policies, however, they must also own the potential costs. Despite GOP promises that lower taxes would pay for themselves in higher growth, federal revenue has gone up only 1 percent so far this year, according to the Congressional Budget Office, not nearly enough to offset higher spending, especially for rising interest payments. The budget deficit is up $222 billion. Debt represents a long-term threat to growth; the costs of Mr. Trump’s deregulation, of which he also boasts, may ultimately be measured in the coin of decreased public health and safety. Trade wars, too, remain a risk factor.
The Federal Reserve’s policies probably deserve more credit for the recovery than politicians of either party. Yet Mr. Trump has recently bashed the Fed for raising rates, a challenge to the central bank’s independence, which, if the president pursues it, could turn into a historic mistake.