Did Donald Trump really turn around the US economy?
We now have the most flourishing economy in the world. "It was with these words that Donald Trump praised his economic record in November 2018, in front of his supporters. It is true that the American economy has not been doing so well The unemployment rate fell to 3.5% and growth, although it turned out to be slightly below expectations, remained very solid in 2019 at 2.3%.
Despite his excesses, his slippages, the virulent opposition that he arouses, Donald Trump has always presented himself as a manager and a good "business leader". There is no doubt that the very good results of the American economy will serve as a campaign argument against the Democrats. But is he really responsible for this improvement?
In fact, Donald Trump inherited an already very prosperous situation from his predecessor. The US economy has been on a positive growth cycle for a decade. The same goes for unemployment, which has steadily declined each year since 2010, a black year when it reached 9.6%. However, these figures should be qualified because they do not take into account the millions of Americans who have left the labor market and therefore statistics.
The Trump presidency, economic miracle or sham figures? To answer this question we asked Christophe Blot, economist at the French Observatory of Economic Conjunctures (OFCE) and associate professor at Paris Nanterre University.
Has Trump really turned the US economy around?
Christophe Blot: "The economic performance we are seeing today in the United States is not only the result of Donald Trump's economic policy, it is also that of his predecessor, it is also that of the Bank US central. US growth picked up at the start of 2009. Finally, we have about 10 years of favorable economic cycles and positive growth. "
However, growth for 2019 is below expectations ...
Christophe Blot: "Indeed, there is a small decline in this activity, since we had 2.9% growth in 2018. It is a little lower today, it is not surprising because the growth in 2018 was boosted by fiscal policy, by the tax reform put forward by the Republicans and by Donald Trump, whose effects were significant in 2018 and which are gradually fading.
We remain on a growth path that is relatively dynamic and favorable, but there is a bit of a slowdown in this activity and a gradual landing of the US economy, which nevertheless remains very healthy. "
What steps did the Trump administration take that made this possible?
Christophe Blot: "Overall, if we look at all the measures taken by Trump, there is about 1 point of additional growth that could be linked to Trump's economic policy. Today we have about 3, 5% unemployment.
If we had not had this economic policy, the unemployment rate would perhaps be closer to 4% so we would still have had this downward trend in unemployment but a little less marked than with Trump's economic policy. . Over the past three years, Trump has contributed through his economic policies to supporting the purchasing power of households through tax reform, especially of the wealthier households.
It has helped to affect the profitability of companies, which can encourage investment and therefore increase demand and therefore economic activity throughout the United States. "
But during this time, the public debt exploded to reach more than 100% of the GDP ...
Christophe Blot: "Indeed, Trump's economic policy was marked by an increase in the budget deficit, whereas it had tended to be reduced in previous years, and therefore by an increase in the debt, in an already relatively favorable situation .
Economists will advocate having an expansionary fiscal economic policy when the situation is worsening, that is, when unemployment is high, but trying, on the other hand, to reduce the budget deficit when unemployment falls.
When Trump comes to power, unemployment was already relatively low, admittedly not as low as it is today, and so expansionary economic policy is not necessarily the correct one given economic fundamentals.
But that’s the choice Trump made. It was the choice made during his presidential campaign and it was the mandate given to him by the citizens of the United States to continue to improve the American situation; provide relatively beneficial tax reform for a number of individuals to lower unemployment, but with potentially a cost in terms of financing and increasing public debt in the United States. "
The unemployment rate fell to 3.5%, the lowest in 50 years ...
Christophe Blot: "It is undeniable that the unemployment rate is at its lowest. This unemployment rate will mark changes in the labor market, in employment and therefore employment has also improved. On the other hand, in the United States, there remains the problem of the participation rate, which is today 4 points lower than it was at the start of the 2000s.
This is linked to the fact that ultimately this activity rate will represent, among the population, people who will declare themselves able to work, in search of employment. Some will be employed, others will be unemployed. This participation rate fell sharply during the 2000s, which means that a growing proportion of the American population has exited the workforce. "
Has inequality really increased since Trump has been president?
Christophe Blot: "Indeed, there are quite contrasting effects. On the one hand, today it is a little masked since unemployment is decreasing, there is an“ employment ”effect which will make it possible to reduce inequalities a little. and poverty, because a certain number of individuals have been put back into the labor market. However, the tax reform and the budgetary choices made by the American president will rather increase inequalities. This is not necessarily visible. today, but indeed, the system is less redistributive than it was before.
This will contribute to increasing income inequalities probably in the future, but also wealth inequalities because behind this economic record, we also see that there is a surge in asset prices and stock market prices in the United States. , which benefits the more affluent rides rather than the poorest households, which have little financial wealth. "
These good results also come at the expense of the environment ...
Christophe Blot: "It is clear that the environment has not been Trump's priority. In particular by the pursuit of a certain number of activities which consume a lot of fossil fuels, by the continuation of the policy of extraction of shale oil, American growth has continued to come at the expense of the environment, with a concern that is not this today. "
Will this record secure him a second term?
Christophe Blot: "From a political point of view, it makes perfect sense for him to put forward a record with very low unemployment and growth which remains high.
But it will also be in the role of his competitors to be accountable for Trump's previous record, saying that it is not only Trump's economic policies that have helped that have contributed to the economic recovery of the United States, there also has a set of measures that had been taken before. The six years leading up to Trump's tenure have also been years of growing and reducing unemployment, let's not forget. "
