Trump vs Obama: The economic tale of the tape

As we approach the November elections, President Trump has been touting the strong economy as one of his major accomplishments. In a recent speech at a steel plant in Illinois, the president said, “We’re having the best economy we’ve ever had in the history of our country.” 

Just how good is the U.S. economy compared to what the president inherited in January 2017, and how much credit do he and the GOP Congress deserve for it? The answer is mixed: The economy has indeed improved under the president’s watch, but not spectacularly so, and the credit due to Washington is modest.

{mosads}On the most basic measure of economic performance, real gross domestic product, the economy has perked up since President Trump assumed office.

According to the U.S. Bureau of Economic Analysis, real GDP has grown at an annual rate of 2.7 percent. That compares to a rate of 2.3 percent during President Obama’s second term in office.

Growth accelerated to 4.2 percent in the second quarter of this year, but time will tell if that rate is sustainable. It exceeded that rate in four different quarters during Obama’s time in office, only to fall back to its 2-percent rut. 

Job growth has been healthy and unemployment at near record lows on President Trump’s watch. According to the Bureau of Labor Statistics, the economy has gained an average of 193,500 jobs per month since January 2017.

The unemployment rate dropped to 3.7 percent in September, a rate matched only twice in the past 50 years (in 1969 and 2000). But those healthy job numbers mark a continuation of a trend rather than a notable turn from the recent past.

Monthly job growth during President Obama’s second term averaged an even higher 215,900, and by the time he left office the jobless rate had already fallen to 4.8 percent, a steep fall from the 10 percent he inherited from the Great Recession. 

Nominal wage growth has ticked up under President Trump, but so too has inflation. During Obama’s second term, according to the Bureau of Labor Statistics, the annual growth in real hourly wages averaged 1.3 percent.

During President Trump’s time in office, annual growth has decelerated to 0.4 percent. Higher energy prices have eroded the purchasing power of our paychecks, but so too have President Trump’s tariffs, which, for example, have boosted the price of washing machines by 16 percent. More price hikes for consumers are coming as the president expands his trade war with China. 

One of President Trump’s favorite indicators, the stock market, has performed well during most of his time in office, but this too has been a continuation of a trend, starting with the bull market that began in March 2009.

Using the S&P 500 index as a benchmark, the stock market under President Trump has appreciated by an annual rate of 12.9 percent through mid-October. Under President Obama’s watch, the stock market rose by an annual rate of 11.2 percent in his second term and 13.8 percent over the full eight years of his tenure. 

Under President Trump, the economy has continued to hum along, but there has been no economic “turnaround.” As for credit, he and Republican leaders in Congress deserve a share for enacting tax reform in December 2017 that lowered America’s damagingly high corporate tax.

They also deserve credit for easing business regulations that had been acting as a drag on economic activity in the United States.

One area where the president deserves no credit is trade policy. His reckless tariff wars have driven up domestic prices for consumers and industry while provoking retaliation from our trading partners against U.S. exports.

Members of the Trump trade team have argued that reducing the trade deficit and its alleged “drag” on the economy is the key to promoting faster growth.

Yet, under President Trump, U.S. imports of goods and services year-to-date have jumped by 15 percent since Obama’s last year in office, and the overall trade deficit has risen by 18 percent. In the real world, rising imports are a result of strong growth. The economy is growing despite the president’s tariffs, not because of them. 

Whatever credit is due for the strong economy belongs mostly to the American people — the workers, the entrepreneurs, the business leaders, the investors who put in the hours and make the decisions that create the unprecedented wealth that Americans enjoy today.

Our government and our president do not “run the economy.” That has wisely been left in large part to free people cooperating in a free and open market.

Daniel Griswold is a senior research fellow and co-director of the Trade an Immigration Project at the Mercatus Center at George Mason University. He can be followed on Twitter @danielgriswold.