By Bob Leipold

​Voters seem wistful for the “Trump economy”, but that wistfulness is based on unfounded claims and unreasonable comparisons.  The pre-pandemic Trump economy largely maintained, but did not dramatically improve upon, the performance of the economy Trump inherited from Obama.  As for comparisons to the current economy, claims that Biden is responsible for the recent inflation surge and that Trump would have prevented it are unsupportable.  Let’s look at each of those comparisons in turn.

After spending the first couple years of his presidency cleaning up the economic mess left by the Bush administration, Obama presided over a steadily improving, if unspectacular economy.  To give Trump every advantage, we’ll look at only the first three years of his presidency.  Those first three years were all pre-covid, so Trump is not penalized for the economic effects of the pandemic, even though his bungled response likely made the economic consequences worse.  (But that’s a subject for another post.)

Let’s start with GDP growth.  In December 2017, Trump opined that, “The economy now has hit 3%. Nobody thought it would be anywhere close.  I think it could go to 4, 5, and maybe even 6%, ultimately.” [1]  In fact, GDP growth during Trump’s first three years in office averaged well below 3% per year, only slightly higher than the annual GDP growth rate during Obama’s second term in office (2.7% vs. 2.5%). [2]  These numbers also call into question the claim that the Trump tax cuts would be “rocket fuel for our economy”. [3]

How about job creation?  Trump claimed he would be the “greatest jobs producer that God ever created” [4], yet during his first three years in office, only 6.4 million new jobs were created, 1.6 million fewer than the 8.0 million new jobs created during the last three years of the Obama administration.  And the jobs creation advantage under Obama was durable.  Job creation averaged 223,000/month for the last six years of the Obama administration compared to an average of 177,000/month during Trump’s first three years. [5]  If that record makes Trump the greatest jobs producer God ever created, what are we to call Obama?

I’ll bet the stock market will show the superiority of the Trump economy.  The stock market certainly had a good year in 2019, the last pre-pandemic year of Trump’s presidency – up 22% for the Dow Jones Industrial Average, 29% for the S&P 500, and 35% for the NASDAQ.  To find a better year, we’d have to go way, way back – to 2013, during Obama’s second term.  Returns for that year were 26% for the DJIA, 30% for the S&P 500, and 38% for the NASDAQ.  When comparing the first three years of the Trump administration to Obama’s second term, average annual returns were higher under Trump, but only slightly – 13% vs. 11% for the DJIA, 13% vs. 12% for the S&P 500, and 19% vs. 16% for the NASDAQ. [6]  If that is the stuff of economic miracles, it is a minor miracle indeed.

I’ve got it – international trade!  After all, Trump asserted that “trade wars are good, and easy to win” [7], which makes it hard to understand why the annual trade deficit with China over the first three years of the Trump presidency was more than 5% higher than it was during the last three years of the Obama administration. [8]  (The difference is even bigger if we compare to all eight years of the Obama presidency.)  Furthermore, studies by Federal Reserve and academic economists concluded that US consumers and businesses, not China, bore almost the full cost of Trump’s tariffs. [9]  When Trump continued to insist that China was paying the cost of the tariffs [10], he either didn’t understand how tariffs work or he did understand and lied to obscure the economic impact of tariffs.  And it wasn’t just China.  The average annual US trade deficit was 14% higher in the first three years of the Trump administration than it was during the eight years of the Obama administration. [11]

This time for sure – the unemployment rate!  In the years before Trump took office, the unemployment rate under Obama declined steadily from a high of 10% to 4.7% when Trump took office.  It continued to fall to a low of 3.5% before covid, although the rate of decline was slower than it had been under Obama. [12]  But then again, who knows if you can believe the numbers? [13]  Trump said they were fake before he was elected, trumpeted the numbers (when they were good) when he was president, and decided they were fake again when the unemployment rate fell to 3.4% under Biden.

Now let’s turn to the current economy.  By any objective measure, it is in good shape.  Stock market indices have reached record highs, even after adjusting for inflation [14]; the unemployment rate has been below 4% for the past two years [12]; inflation-adjusted earnings are higher than they were under Trump (ignoring the pandemic spike) [15]; and it appears the economy will avoid slipping into a recession.  The biggest problem of the past few years has been inflation, but Trump and Republicans trying to pin the blame on Biden have two problems.  First, if inflation was caused by Biden, why was it such a widespread problem?  The Pew Research Center reported that 37 of 44 advanced economies saw at least a doubling of their average annual inflation rate from the first quarter of 2020 to the first quarter of 2022. [16]  Second, if Republicans believe they’d have done a better job of controlling inflation than Biden did, how do they explain that the UK, which had been led by conservatives since 2010, had higher inflation rates than we did in the US? [17]
 
Claims that there was inflation under Biden but not under Trump are self-evidently true, but meaningless.  Circumstances were not the same during the two administrations.  The only meaningful claim Trump could make is that he’d have dealt with inflationary pressures better than Biden did, but as described above, there is nothing in the record to suggest that Trump is an economic miracle worker.  The best that can be said is that he didn’t profoundly screw up the solid, steadily improving economy he inherited from the Obama administration.

REFERENCES

[1]  Trump forecast of GDP growth

[2]  GDP growth figures from Federal Reserve Economic Data; analysis by the author​ 

[3]  Trump claim that tax cuts will boost the economy

[4]  Trump claim regarding job creation

[5]  Job creation statistics from the Bureau of Labor Statistics; analysis by the author​

[6]  Dow Jones Industrial Average, S&P 500, NASDAQ; analysis by the author​

[7]  Trump claim on trade wars

[8]  Trade deficit with China figures from the Bureau of Economic Analysis; analysis by the author​

[9]  Studies by Federal Reserve and academic economists showing consumers pay the cost of tariffs

[10]  Trump claim that China pays the cost of tariffs

[11]  US trade deficit figures from the Bureau of Economic Analysis; analysis by the author​

[12]  Unemployment figures from Federal Reserve Economic Data; analysis by the author​

[13]  Trump questions official unemployment statistics

[14]  Dow Jones Industrial Average, S&P 500, NASDAQ

[15]  Median usual weekly real earnings from Federal Reserve Economic Data

[16]  Pew Research Center report on widespread inflation

[17]  US inflation figures from Federal Reserve Economic Data; UK inflation figures from UK Office for National Statistics; analysis by the author

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