It's rare that President Trump's frequent delineations of the successes of his administration don't include mention of the economy. He has insisted repeatedly that the economy is perhaps the greatest in American history (three Pinocchios) and often includes the tax-cut package signed in December as one of the drivers of that greatness.
"They want to raise your taxes,” Trump said of Democrats during an event last month. “They want to actually end these massive tax cuts that everybody in this room has gotten, that have been so popular, that have really made our economy the strongest it's ever been in the history of our nation.”
The thing about this claim, though, is that we can evaluate it. We can look at how the economy was doing before the tax cuts and compare that with how the economy is doing now. And when we do that, it's not clear exactly how much of a role the tax cuts have played — with at least one significant exception.
On Friday, the country got very good economic news. The country added more than 200,000 new jobs in August, and wages have grown 2.9 percent over the past 12 months — the fastest growth in nearly a decade. But let's look at those figures in the broader context of the past two years.
The increase in the number of employed people has been fairly steady since September 2016. Since then, the number of people working in the country has increased about 3 percent. Among different groups, those increases have varied (often because of volatility within subgroups as a result of smaller sample sizes). The rise in the number of Hispanic Americans working now, relative to two years ago, is much greater than the increase for white Americans, for example.
All of the graphs in this article show data relative to December, when the tax cuts were passed. And if we're looking at what the tax cuts did to affect employment, it's not really clear. About a month before the cuts were passed, Trump declared that they would be “rocket fuel for the American economy.” That doesn't appear on the graph above.
When it comes to wages — hourly earnings, as the government terms it — the picture is similar in broad strokes. A consistent upward trend in earnings (after a hiccup in the middle of 2017). The increase in August, as noted above, was sharper than in any other recent month.
The government, though, also looks at earnings as a function of spending power. Adjusting earnings for inflation, what's called “real hourly earnings” have generally been flat under Trump's tenure. We don't have consumer price index data for August (the measure of inflation used to calculate real earnings), but if the change in the CPI matches the average over the past year, real earnings will tick upward significantly, hitting the highest point in years. (That data will be out later this month.)
Again, though, we come back to our question: What role did the tax cuts play? Is this month's earnings surge a function of the tax cuts, while the more-modest increases from December to July weren't?
One metric that's similarly murky is the performance of the S&P 500 and the Dow Jones industrial average. Stocks have been pushing higher pretty consistently since 2009 — but hit a period of volatility shortly after the tax cuts were passed.
At the time, to Trump's chagrin, the drop in stock prices was credited to worries about increasing inflation. That was linked to strong wage-growth increases in January.
"Today, when good news is reported, the Stock Market goes down,” Trump complained on Twitter.
Stocks did surge faster in the immediate aftermath of the tax cuts, though. This was probably to be expected, given how one of the projected effects of the tax cuts was that corporations would take money that otherwise would have gone to paying higher taxes and use it for stock buybacks or bigger dividends for shareholders. (That indeed happened.)
One of the more interesting metrics to consider in light of that is corporate profits. That data is released quarterly, and we have only two quarters of data since the tax cuts were passed. But those two quarters have seen big increases in corporate profits relative to the fourth quarter of 2017.
It's important to note that this is a volatile metric, and the gains may be a function of a bad fourth quarter.
Let's compare all of the shifts shown in the charts above, looking at the period from the tax cuts to now vs. the same length of time before the cuts.
Employment numbers increased slightly faster in the period after the cuts than in the period before. So did earnings, actual and adjusted. Stocks, because of the downturn earlier this year, have fared worse. Corporate profits have gone gangbusters.
Economic strength is an umbrella concept including hundreds of components, most of which exist outside any ability of the government to exercise much control. Trump's excoriations of job growth under President Barack Obama have become a celebration of similar gains under his own leadership. It's how politics works.
Setting aside the question of how the economy compares with those of years past, though, it's safe to say that the demonstrable effect of the tax cuts on jobs and earnings numbers is subtle.