Already Great The US economy is flying, but the credit does not go to Trump
The president gloats at the World Economic Forum in Davos and assures that "America is back to winning again". But from employment to growth The Donald inherited a perfect situation. It only had the merit (if any) of not ruining it
Donald Trump gloats at the World Economic Forum in Davos and assures that "America is back to winning again". According to the president of the United States, his country is in the midst of an economic boom, but the public of economists, financiers, intellectuals and journalists who have come to listen to him do not seem so convinced. For him only ten seconds flat of applause, the bare minimum. The usual picky elite towards sovereignists? Perhaps, but even outside the Swiss town that hosts the elite of world finance every year, few believe that the excellent numbers of the American economy are all thanks to Trump.
"" It's the economy, stupid, "except when it comes to Trump. The fake news media hate talking about the economy and how incredible it is! " the president of the United States tweeted with some resentment, citing the slogan devised by political strategist James Carville for Bill Clinton's 1992 election campaign. If the economy is the only thing that matters to voters, Trump should win nimbly the November elections. The numbers are excellent in many fields: in three years of mandate there are 6.7 million more jobs, unemployment has fallen to the lowest rate in the last fifty years: only 3.5%. Average household income increased by 2.3%, as did wages by 2.5%, while the poverty rate decreased by 0.9% to 11.8%, the lowest since 2001. And the stock market is skyrocketing.
But how much of all this is due to the choices made by Trump? And above all: did it fulfill the promises made during the election campaign? On closer inspection, not all that glitters is gold: in 2019 the economy grew by 2.1%, but more slowly than promised by the president of the United States during the election campaign. According to Larry Kudlow, the White House's chief economic adviser, US GDP is expected to reach at least 3% in 2020. But according to the Congressional Budget Office's forecast, real domestic product (i.e. after inflation) will only grow 1.9% in 2020. Too little to speak of a boom. Yet in December 2017 with the excellent GDP figure growing by more than 3%, Trump promised in front of the cameras: "Nobody thought we could get to 3%. I think we will reach 4.5 and maybe even 6% ». It didn't happen. Only in the first quarter of 2019 did it return to + 3.1%, very far from the peaks reached by Barack Obama which in the second quarter of 2014 had led the country to grow by 5.5%.
Despite good growth, Trump's three-year federal deficit increased by 2.8 trillion, +1.2 trillion in 2019 alone, the highest level reached in 12 months since 2012. How is that possible in a country close to full employment reach over a trillion deficit in just one year? Perhaps some money was needed to finance his fiscal shock that increased the federal deficit held by the government, + 19.3%. As well as the number of people without health insurance has increased by nearly 2 million in just three years. Not only that, the Tax Cuts and Jobs Act of November 2017 privileged large multinationals rather than individual citizens. The tax cuts were supposed to spur a new wave of investment. Instead, according to Nobel Prize-winning economist Joseph Stiglitz, "they only triggered a historic record of share purchases ($ 800 billion) in 2018". Translated: the money remained in the market and not in the real economy. This explains the reason for the skyrocketing markets.
In fact, the numbers have to be looked at in context. By the time the US president took office, the economy was in its eighth consecutive year of growth. How bad can you get from such a good starting position? To say that the poverty rate has fallen by 0.9% in three years seems like a good figure. But compared to previous years it is not so positive, given that in 2015 and 2016 it fell by 1.3% and 0.8% respectively against + 0.4% and + 0.5% in the first two years of mandate by Trump.
The same goes for employment: 6.7 million more workers are a lot. But the trend has lasted since 2010 and started thanks to Barack Obama. How much credit can Trump take for two-year and 11-month growth when workers increased continuously for nine years prior to his arrival? And also looking at the average made by the debunking site FactChek.org, under the Trump presidency the jobs increased by 191 thousand units per month, while in the second term of Obama (2012-2016) they were 217 thousand. And the African American president inherited a country in which 800,000 jobs were lost per month in 2009.
Trump's real success has to do with the average wage increase, which has never risen this much since 2001. Neither George W. Bush nor Obama had succeeded. But "if we take the average wage of a full-time male worker it is 3% lower than in the 1980s," explained Stigliz. Perhaps as an analysis by Bloomberg well explains: "The US economy is in a better position than at any other time since 2001, but this comparison masks the stagnation that has been in the past 20 years." And then, according to some economic analysts, the fastest wage increase was among low-wage workers. It would be a direct effect of the increase in the minimum wage envisaged in many states of the Union. And for the first time after three years of steady growth, 2018 was the first year in which there has not been a significant increase in American household income. The fourth year in office, from this point of view, does not look positive for the president.
In 2016, Trump won by promising voters to revive factories and manufacturing. And in fact, in 2017 and 2018 workers in the sector increased by 458 thousand units (+ 3.7%), much more than in the Obama era where jobs had dropped considerably (-193 thousand). But in 2019 there was a sharp slowdown also due to the tariffs policy pursued by The Donald: only 46 thousand more units. A collapse. The president of the United States has failed to make up for the gap of nearly 900,000 jobs lost in the manufacturing sector since the economic crisis of thirteen years ago. And much of its constituency comes from those disappointed voters.
Trump is not the worst president in US history, but not the best either. His administration numbers are good, but not as good as in the past. At least not such as to be able to say that it is "the best economy we have had in our country", as Trump did. The president had a great merit: not totally damaging the excellent legacy he was given, and important help from the Federal Reserve, the US central bank, which reduced interest rates. It's the economy, stupid.
