The Great Extrapolator

Ronald Reagan was known as “The Great Communicator.” Based on last night’s State of the Union address, some might be tempted to brand our current president “The Great Exaggerator.” But complaining that a politician exaggerates is like protesting that car commercials don’t list customer complaints. In both cases, it’s up to the listener to supply his or her own grain of salt.

So, what’s the right way to season the claims President Trump served us Tuesday night on how his tax and trade policy has benefited the economy?

“In just over two years since the election, we have launched an unprecedented economic boom” the president said, adding that “a boom that has rarely been seen before. There’s been nothing like it.”

Not quite.

For the most part, economic performance during the Trump administration has just been a continuation of President Obama’s second term. “The Great Extrapolator” might be a more apt moniker for the current president.

Two things about economic statistics make them rhetorically pliable. First, their graphs tend to bounce around a lot over time. That means you can often show increase or decrease, as you wish, by cherry-picking endpoints. (“The economy is growing almost twice as fast today as when I took office,” said the president during his address.)

Second, statistics about the economy tend to have a lot of zeros. That makes them prey to the Dr. Evil fallacy. (“We have created 5.3 million new jobs.”) Not every -illion is tremendously huge in the context of the point its proponent wants to make with it: 5.3 million is roughly the number of Hydrogen atoms that fit in the head of pin.

But zooming out, viewing each graph as a whole, looking for broad trends, one gets a more reliable picture of what has been going on. And almost every key graph tells the same basic story:

Put your pencil down on the curve several years before the end of the Obama administration. Start tracing out the graph. As you pass into the Trump administration, close your eyes, and just keep your pencil going in the same general direction. Open your eyes and look down at the continuation you’ve just drawn. That’s pretty much what’s happened since President Trump took office.

The growth rate in real gross domestic product, which measures the dollar value of goods and services produced in the economy corrected for inflation, has been bouncing around the 2.5 percent mark since the start of President Obama’s second term up to the present. Over roughly that same period, the unemployment rate has been steadily decreasing, and the economy has been adding about 200,000 jobs a month. Among the employed, inflation-adjusted average hourly earnings have been growing at around 1.5 percent since 2015 — except for a slow-down during the first 18 months of the Trump administration. Real median household income has been generally increasing since 2012.

But there is one important thing that is not just more of the same. To understand what this is we need to simultaneously step backward in time to the early Obama years and forward in time into the projected future.

What we see, of course, in the early Obama years is the Great Recession, already underway at the time of the inauguration, in which large numbers of people lost their homes, their jobs and their savings. We also see a dramatic fiscal policy response — an emergency jolt of government spending and tax cuts designed to stave off a potentially even more vicious cycle of declining economic activity and financial instability. The side effect: A (truly) unprecedented peacetime increase in government debt.

Over the ensuing decade, the economy rebounded. By the start of President Obama’s second term, it was already on its current upward trend. You might think that, now that the recovery is secure, this would be a good time to recharge the fiscal defibrillator.

But that’s hardly what’s been happening. Tax revenue has been declining — a trend that actually began in the last year of Obama’s presidency but accelerated after the Tax Cuts and Jobs Act of 2017. At the same time, spending has fallen only slightly. The result going forward: The CBO projects that under current law “relative to the size of the economy, federal debt in 2019 is projected to be nearly twice its average over the past 50 years. At the end of 2029, debt is projected to reach a higher level than it has at any point since just after World War II.”

So what’s really different about the Trump economy versus the Obama economy is not the positive trend along any particular graph. Rather it’s how long that trend has been going on, and how overdue it has become to start thinking about setting something aside for the uncertain future.

Chris William Sanchirico is the Samuel A. Blank Professor of Law, Business, and Public Policy at the University of Pennsylvania Carey Law School.