Lessons For The Next Administration
The people who will shape economic policy in the new administration seem eager to push for a post-pandemic economic surge reflecting the lessons of the last four years.
Ms. Yellen has a background as a labor economist, and in the 1990s, as a Fed official, she urged Mr. Greenspan to raise rates pre-emptively based on the inflation risks that the Phillips Curve predicted. At that fateful meeting to increase rates in 2015, she raised an intriguing possibility. If inflation were to remain persistently low, she said, a more radical rethinking of the economys productive potential would surely be in order.
That radical rethinking is now very much underway including by Ms. Yellen.
Allowing the labor market to run hot could bring substantial benefits, Ms. Yellen said in a speech at the Brookings Institution in 2019. She said that a high-pressure economy one where unemployment is low and employers have to compete for workers improves upward mobility. She added: Were seeing that in the current expansion. Those who are least advantaged in the labor market those with less education and minorities are experiencing the largest gains in wages and declines in unemployment.
Mr. Powell, who will lead the Fed for roughly the first year of Mr. Bidens term and then will be either reappointed or replaced in February 2022, has also become a vocal enthusiast for avoiding these mistakes of the past.
Workers Yet To Return To The Jobs Market
One possible explanation for stagnant wages is that the number of workers who left the US workforce following the 2007-2009 recession was higher than first thought.
The labour force participation rate refers to the number of people who are either employed or are actively looking for work.
Following the global economic crash, the labour force participation rate in the US fell dramatically and now stands at 63%. It has remained stable since Mr Trump was elected.
Overall Economic Growth As Measured By Quarterly Gdp Growth Rates Has Been Steady
Gross domestic product measures the total value of all goods and services provided by the country in a year, essentially the economic output. The ideal GDP growth rate is between 2% and 3%.
GDP growth was consistently strong during the George W. Bush administration, averaging out to 2.1% per year when adjusted for inflation, according to the Hudson Institute. But during the financial crisis, the US GDP plummeted and the economy contracted 2.5% in 2009.
The Obama administration confronted the worst economic crisis since the Great Depression when it initially took office. It passed a massive stimulus package in February 2009 to jumpstart the economy – and it was successful. The Congressional Budget Office said in a report that GDP growth was higher from 2009-2012 in part due to the legislation.
Trump has benefited from Obama’s economic stewardship, as GDP growth under his watch has consistently been between 2% to 3%. In 2018, GDP growth stood at 2.9%, but the economy expanded only 2.3% last year, the weakest pace of his presidency yet.
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The Most Important Thing Biden Can Learn From The Trump Economy
A hot economy with high deficits didnt cause runaway inflation.
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By Neil Irwin
For all the problems that President Trumps disdain of elite expertise has caused over the last four years, his willingness to ignore economic orthodoxy in one crucial area has been vindicated, offering a lesson for the Biden years and beyond.
During Mr. Trumps time in office, it has become clear that the United States economy can surpass what technocrats once thought were its limits: Specifically, the jobless rate can fall lower and government budget deficits can run higher than was once widely believed without setting off an inflationary spiral.
Some leading liberal economists warned that Mr. Trumps deficit-financed tax cuts would create a mere sugar high of a short-lived boost to growth. The Congressional Budget Office forecast that economic benefits of the presidents signature tax law would be partly offset by higher interest rates that would discourage private investment.
And the Federal Reserve in 2017 and 2018 took action to prevent the economy from getting too hot driven by models suggesting that an improving labor market would eventually cause excessive inflation.
These warnings did not come true.
Just maybe, does the success of Trumponomics tell us that weve been doing something wrong for decades?
The Economy Just Isnt That Different
The American economy as of last fall certainly had its share of problems problems that Trump wasnt shy about pointing out. The trouble is that, as Michael Grunwald wrote recently, none of the dark linings in the silver cloud of the Obama economy have changed under Trump:
In fact, by the standards Trump used to trash the Obama era in his speech to Congress, the Trump era has been another economic nightmare. Ninety-four million Americans are out of the labor force! he complained last year. That was true at the time, if you included students, retirees and the disabled, but today, 95.5 million Americans are out of the labor force. Over 43 million Americans are on food stamps, Trump said last year. This year, its still over 42 million. Our trade deficit in goods last year was nearly $800 billion! Trump marveled. Under Trump, the trade deficit is increasing.
Trump has addressed this largely by changing the criteria by which he evaluates the economy. No longer does a healthy America require closing the trade deficit, drastically increasing the labor force participation rate despite an aging population, or making the labor market so robust nobody needs social assistance. Instead, Trump points to record-low black unemployment and a record-high stock market.
Perhaps the clearest indication that were looking at a continuity recovery is a glance at annual job growth, which was decent under Trump but reflected an ongoing slowdown rather than an acceleration.
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Even Before The Pandemic Trump Failed To Unleash An Economic Miracle
President Trumps failure to save the economy from the coronavirus is consistent with his record of failure before the pandemic. Upon inheriting a growing economy with low and falling unemployment from the Obama Administration, President Trumps first order of business was to squander $2 trillion on a taxgiveaway that showered unnecessary benefits on corporations and the wealthy with little to show for it. Like his tax scam, progress on the Presidents other major promises to eliminate the trade deficit that China would pay for the costs of his tariffs that manufacturing would boom everyone would have health insurance not only failed to materialize, but in many cases moved in the wrong direction. The share of Americans uninsured has grown every yearhe has been in office, for instance, reversing six consecutive years of insurance gains prior to his presidency. Rather than put his economic inheritance to good use, President Trump failed to meaningfully change the economys trajectory or achieve his major economic goals before running the economy further into the ground with his mismanagement of COVID-19.
Trumps Economic Scorecard: 3 Years In Office
President Trump’s Economic Scorecard
President Trump has been in office for three years, which is enough time to analyze how the economy is doing vs. his statements on how it would perform. The U.S. Bureau of Economic Analysis released its first estimate for 2019s fourth quarter GDP growth and for the full year. For the fourth quarter GDP growth came in at 2.1%, which was the same as the September quarter and for the full year it fell from 2.9% in 2018 to 2.3% last year.
It appears that the tax cuts that started in 2018 helped for one year but dont have much of a carryover effect. The promise that they would pay for themselves has not materialized as the Federal budget deficit has ballooned to $1 trillion levels not seen in a non-recessionary environment.
The outlook for a slower economy caused the Fed to lower interest rates and increase its balance sheet, which led to the stock markets rallying in 2019 even when corporate profits were essentially flat. While the Phase One trade deal has been signed with China, its outlook was murky even before the Wuhan coronavirus hit. Its goals looked to be overly ambitious and didnt tackle the really tough items on the agenda.
Yearly GDP growth
GDP growth hasnt reached Trumps 3% or higher goal
Unemployment rate is about as low as it can go
Yearly job growth
Job growth has plateaued
Manufacturing job growth
Dow 30 Industrials
S& P 500
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Trump Claims The Economy Is The Best Everthese 11 Facts Tell A Different Story
There has been a great deal of political and media attention paid to the rate of economic growth under the Trump administration during 2017 and 2018. President Trump has often called the results under his administration unprecedented. His statements are unfounded: while wage growth has been strong, most other measures of economic growth under the current administration are less impressive than they were during the tail end of the previous administration, Barack Obamas second term.
As Election Day nears, weve dug into the last four years, spanning the end and the beginning of two different sets of executive leadership, and now let the facts speak for themselves. By comparing the rate of growth of key economic variables in the last years of the Barack Obama administration to the record thus far in the Trump administration, we present a report card on results under the two presidents.
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President Trump Has Failed The American Economy
President Trumps unwillingness to contain the COVID-19 pandemic constitutes one of the most catastrophic failures of leadership in our nations history. His brazenlies about the virus lethality and spread, shamefulefforts to hide critical information from the American people andslander public health experts, and his reprehensible convenings of his very own superspreaderevents across the country collectively illustrate the degree to which he has abdicated responsibility for our nations safety and security. President Trumps refusal to develop a national strategy to defeat let alone contain the virus has resulted in thousands of avoidabledeaths and the most severe economic crisis in a generation.
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Economic Growth Was Lackluster
Annual economic growth failed to accelerate under President Trump, denying him of his goal of 3 percent let alone 4, 5, and maybe even 6 percent growth each year. Annual economic growth averaged 2.5 percent across President Trumps first three years in office, in line with the average growth rate during President Obamas last three years. And while the economy grew by 3 percent in 2018, the best year of President Trumps term, the last time annual growth actually exceeded 3 percent was in 2015, under President Obama.
President Trumps failure to supercharge the economy is even clearer when narrowing in on his signature policy, the 2017 tax law. Economic growth in the eight quarters after the law was enacted averaged 2.4 percent, the same growth rate as in the eight quarters before the law. Notably, this growth was driven by government spending rather than by business investment or consumption, both of which slowed after enactment.
The Stock Boom Is Real And Great For Globalist Elites
The biggest exception to the case for continuity here is probably the stock market.
Its true that shares soared on Obamas watch, but thats in part because he took over in the aftermath of a gigantic crash. Trump won the election at a time when stock market valuations were already high, and watched markets soar during the lame-duck months theyve only gone up since then. This market euphoria really is different from what we saw prior to 2017, and it may suggest something significant.
Exactly what that might be isnt entirely clear. The 2017 stock market boom was a fully global phenomenon. It was actually Argentina whose exchange posted the highest gains, and the US stock market has slightly underperformed Japans Nikkei 225 index since Trumps inauguration. The Hong Kong stock exchange is at an all-time high, as are the major indexes of India, South Korea, Germany, and a range of other countries.
Meanwhile, Robert Shiller, the Yale economist whos spent a lifetime studying asset price bubbles, reports that American shares are the most expensive in the world relative to underlying corporate earnings. That could mean our stock market is massively overvalued, or it could reflect expectations that a pro-business regime in Washington is going to find a way to tilt the playing field even more strongly in favor of shareholders over workers and consumers.
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Infrastructure Inflation And Energy
Within days of taking office, Trump signed presidential memoranda to revive both the Keystone XL and Dakota Access oil pipelines although Trump touted the projects as job-creating measures, the proposed projects were projected to have only a tiny impact on the U.S. economy.
A Failure To Help Small Businesses
Even before shelter-in-place orders were commonplace across states, businesses were noticing sharp declines in consumer activity. By the beginning of April, 24 percent of small businesses had reported temporarily shutting down. By mid-May, more than 100,000 small businesses had closed permanently, representing 2 percent of the nations total. The Paycheck Protection Programa provision in the CARES Act intended to help employers keep operations running despite revenue shortfallswas plagued by reports of large, publicly traded companies receiving massive sums while small businesses were left without help. A May report released by the Small Business Administrations inspector general found that the Trump administrations implementation left out minority-owned, woman-owned, and rural businesses. Despite a second round of funding through the program, small businesses are still suffering immensely: Some projections estimate that small business closures could approach 7.5 million if businesses are forced to weather the economic impacts of the outbreak on their own. Though the HEROES Act would strengthen the PPP and provide other assistance to small businesses, much of the economic damage could have been avoided entirely had the Trump administration acted more quickly to contain the outbreak.
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