US President Donald Trump. Picture: REUTERS/KEVIN LAMARQUE
US President Donald Trump. Picture: REUTERS/KEVIN LAMARQUE

Economies have a stubborn habit of not co-operating with political narratives.

At the start of the year, the gaggle of Democrats running for president wanted very badly for “President Trump’s economy” to be failing most Americans. The economic data, and most Americans themselves, said otherwise.

Now that the coronavirus has ended the boom, it is the Republicans who have been reduced to torturing the data. Nikki Haley, the former UN ambassador, made the argument succinctly on the first night of the party’s convention: “President Trump brought our economy back before, and he will bring it back again.” Donald Trump naturally gave himself the same credit in his speech on Thursday: “Within three short years, we built the strongest economy in the history of the world.”

The Democrats have countered that the president’s mishandling of the pandemic has brought the economy to its weakened state. But even if we just compare Trump’s first three years to president Barack Obama’s last three — and thus exclude the effects of the coronavirus — there is no sharp change in economic trends.

Trade deficit

Employment increased by 8.2-million in the late Obama years, and by 6.6-million in Trump’s first years. The economy grew, in real terms, slightly faster in Obama’s last 11 quarters than in Trump’s first 11. The trade deficit, which Trump promised would plunge if he were elected, stayed at about the same level. Some trends improved under Trump, to be sure, but generally not dramatically. Real wages grew 4% in his first three years, as opposed to 3.8% in Obama’s last ones. We did not go from a weak economy to a strong one after Trump took office. Unless you are expertly cherry-picking statistics, the truth is pretty clear: we went through an economic expansion that included parts of two presidencies.

Advocates of Republican economic policies slice the data differently. Writing for the Manhattan Institute, a conservative think-tank, Noah Williams says that former vice-president Joe Biden would “return the country to economic policies responsible for the slowest economic recovery since World War 2.”

The editors of the Wall Street Journal say the same thing. They are right that it was a slow recovery. But again, there was no sharp break between Obama’s economy and Trump’s. And most of the policies they indict — such as Obama’s tax increases and the Affordable Care Act — were not in place for all of his time in office, and were in place for part or all of Trump’s. None of this is to deny that Trump’s policies affected the pre-Covid economy. But the effects have not been as large as advertised, and some of them worked at cross purposes with each other. Reduced taxes on investment may have modestly increased how much investment is taking place, for example, and over time that increase may yield higher wages.

Everyone who has attempted to study the effects of Trump’s tariffs, on the other hand, has found that they have raised prices and reduced American output. Opinions differ on whether we have got concessions from other countries that will make up for those costs.

There is no compelling evidence that the tax cuts or the tariffs, or Trump’s other policies, had much to do with the relatively good economic times we were having until the start of the year. They are not responsible, either, for the difficulties we are now experiencing. It is not a convenient truth for conservative policies, but it is a conservative truth. “How small, of all that human hearts endure, that part which laws or kings can cause or cure.” Samuel Johnson’s words are true of economies too.

Bloomberg

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