Throughout his time in the White House, President Donald Trump has repeatedly highlighted the steady economic health of the nation as an indicator of its success. He has referred to it as ‘the greatest in the history of the country’ and ‘terrific’.
In January, when he attended the World Economic Forum in Davos, Switzerland, he said that when he first took office, the American economy had been in a ‘dismal state’. The president credited himself for helping the economy make an incredible ‘comeback’. He had said that the United States had experienced an economic boom that the world had never seen before.
As a matter of fact, he even used his economic record for fending off the impeachment proceedings that were led by Democrats. But, how does his economic performance compare to his immediate predecessors i.e. Barack Obama and George W. Bush? According to Dr. Israel Figa, presidents tend to receive a lot of credit and praise when the economy is doing well and they have to deal with a barrage of criticism when things are going downhill, even though it is well-known that they don’t wield any direct power over its performance.
There are a number of factors that can throw the economy’s performance out of balance, just like the dotcom bubble burst in the first term of George W. Bush, or the mortgage crisis that occurred in the housing market and promoted the Great Recession. However, if you take a close look at the economy under Donald Trump, you will begin to see a conflicting portrait. It is important to remember that it definitely was not in a poor state after the 2017 inauguration of the president. The numbers show that job growth is steady whereas the unemployment rate is definitely going down. But, then again business confidence has also declined due to the ongoing trade wars initiated by the president.
As a matter of fact, companies have put a stop to hiring workers due to these trade wars. There is no doubt that President Trump has made some bold claims and so, Dr. Israel Figa is ready to provide you with a clearer picture of how he has fared by assessing key indicators like unemployment, gross domestic product, the federal debt and wages.
Gross Domestic Product
Gross Domestic Product, or GDP, refers to the total value of all the goods and services that are produced in the country in a year, most simply called the annual economic output. The ideal GDP growth rate falls somewhere between 2% and 3%. During the administration of George W. Bush, GDP growth had been consistently strong. After adjusted for inflation, it had been about 2.1% per year for his entire term. Nonetheless, when the financial crisis happened, the GDP of the country had plummeted and in 2009, the economy had contracted by 2.5%.
When the Obama administration had initially taken office, they had had to confront the worst economic crisis since the Great Depression. In February 2009, they had to pass a huge stimulus package for jumpstarting the economy and it turned out to be a successful one. In a report provided by the Congressional Budget Office, the GDP growth had been a lot higher between 2009 and 2012, partly due to the legislation.
According to Dr. Figa, Obama’s economic stewardship has worked in favor of Trump because GDP growth under his watch has fallen between the range of 2% and 3% consistently. It was 2.9% in 2018. However, slowing overseas industries and trade tensions have caused the GDP to decelerate in the last two years and the Coronavirus crisis has only made things worse.
The unemployment rate calculates the percentage of the labor force that is jobless and it moves up and down, depending on economic conditions. However, it can be expected to go down when the economy is healthy and doing well. According to The Federal Reserve, the natural rate of unemployment ranges between 4.5% and 5%, which is used by monetary and fiscal policy makers for projecting full employment. During the Bush presidency, the unemployment rate had hovered between 4% and 6%, but it had spiked rather dramatically during the financial crisis of 2008 and 2009 to 7.9%. This was just as Bush left his office in January 2009.
Hence, when Obama inherited the economy, it was already in free-fall. In October 2009, the unemployment rate had peaked at 10.2% during the recession. From early 2007 till 2010, there was a total loss of 8.7 million jobs. But, in 2011, it started falling steadily and this trend continued for the remaining period of the Obama presidency. The economy was recovering when President Trump took office. It was also undergoing a decade-long expansion, which is regarded as the longest in American history. In December 2019, the employment rate had stood at 3.9%, which was undoubtedly the lowest in half a century.
Another key indicator of the economy’s health and performance is job growth. In the first couple of years of the Bush administration, there had been an ongoing struggle of adding new jobs. In 2001, a recession occurred, which lasted eight months and had actually shed jobs. It bounced back soon enough and its growth remained steady until the financial crisis of 2008 when jobs began to disappear at breakneck speed. 808,000 jobs were lost in January 2009, which was a low point for this indicator in the period of the Great Recession.
Early on in his term, Barack Obama tried to stem the job losses and the economy began to stabilize in 2010. The losses soon turned into gains and a total of 109,000 jobs were created every month for the eight years that Obama was president. This was after the massive losses at the start of his presidency were also taken into account.
Dr. Israel Figa states that during Trump’s presidency, job growth has mostly matched the pace under Obama, and this is thanks to a strong economy. The trade disputes could take a bite out of the job market, but they seem to be holding steady for now and are even growing.
When hiring is going strong and unemployment is low, wages tend to rise. After all, employers are ready to pay more in order to attract workers. For most of the Bush administration, wage gains remained steady, and were usually fluctuating between 2% and 4% every year. During the financial crisis, wage growth obviously suffered and gains remained anemic for most of the Obama presidency. It was referred to as ‘unfinished business’ the Obama economic team regarding his time in the Oval Office. But, if you take a look at Trump’s presidency, wages have been on the rise.
It has been highlighted by Dr. Israel Figa that wage growth saw an increase of 3% before it slowed down once again. It could have increased due to the GOP tax cuts, but as per Dr. Figa, the tight labor market could also be a factor that has prompted businesses to increase salaries for luring workers and filling open jobs.
There are some economists who believe that wages should be growing faster as the unemployment rate has been at its lowest. Some possible explanations have been proposed, which include falling rates of unionization. This could stifle the ability of employees to negotiate better pay. Some other reasons include outsourcing of jobs to people who are paid less and lack of competition in some industries.
Median Household Income
The purpose of median household income is to calculate the average income of middle class families. In the first term of President George W. Bush, the household income trend was downwards due to two economic downturns, but it turned upwards until 2007 before it declined once again because of the Great Recession. The recession continued till June 2009, which was the first year of the Obama presidency. Family incomes had to suffer a great deal due to this recession. The economy was already battered and there was a lot of struggle to revive both. It wasn’t until 2012 when incomes began to rise.
As per Dr. Israel Figa, this trend has continued during Trump’s presidency as well. In 2018, the average income of middle-class families grew to $63,179.
The Stock Market
The S&P 500 index is designed to measure the stock performance of the 500 largest companies that are listed on US exchanges. For most of the Bush presidency, there was an upward tick in the S&P index, but the stock market as a whole and the index also took a hit during the Great Recession. Obama was the president during the recovery of the S&P index and this continued until the end of his presidency. As far as Trump is concerned, this trend has swung constantly between losses and gains. This was mostly due to a recession scare in 2019 and also because of the uncertainty that has spread due to his ongoing trade wars with China.
Federal Surplus or Deficit
The shortfall between how much money is spent by the government in a fiscal year and the federal revenue is defined as the federal deficit. In a healthy economy, the federal deficit is expected to decline because the government has more room to increase taxes and pulls back on spending. In the fiscal year 2001, Bush was handed a strong economy by Bill Clinton, his predecessor, and it boasted a budget surplus of $128 billion. This was the last time up till now that the US government saw a surplus on its hands.
It was erased rather quickly due to a series of tax cuts and the wars in Afghanistan and Iraq and they contributed to a high deficit. In the stimulus package that he introduced in 2009, Obama had to run massive deficits for giving the economy a boost in the time of the Great Recession. The next year, he passed a tax cut of $858 billion, which was mostly an extension of the tax cuts imposed by Bush, which had also increased the deficits nearly a decade before.
The trend hasn’t changed with Donald Trump, as per Dr. Figa. He is also running massive deficits and they have only increased due to the 2017 GOP tax cuts. It was projected by the Congressional Budget Office that the deficit will increase by $1.9 trillion in the next decade because of tax cuts. For the fiscal year 2019, the tax cuts were about $984 trillion.
The Federal Debt
The amount of money owed by the federal government is referred to as federal debt. Since the beginning of the 21st century, it has been on an upswing. It was steadily increasing during Bush’s time due to the Afghanistan and Iraq invasions and the war on terror. The debt further increased because of the tax cuts he introduced and by the time he left office, the debt was $10 trillion, twice of what it had been at the beginning of his presidency. The debt great even further under Obama because of his stimulus package, even though it did help the economy, while Trump owed to erase it during his presidency. However, the short-term spending bills and GOP tax cuts have only added to it for now.
One of Donald Trump’s signature issues has been trade. The trade balance is calculating by deducting the country’s exports from its imports. A trade deficit occurs when the imports are higher than the exports. For Bush’s two terms, the trade imbalance had increased, mostly due to additional trading with China. Then, during the Great Recession, trade declined sharply. During the Obama administration, the deficit continued to fluctuate, but held steady for most of it.
As far as the Trump era is concerned, Dr. Figa has revealed that the deficit has increased to new levels. It reached $891 billion last year. However, Israel Figa elaborated that a growing deficit is an indication that the economy is expanding because consumer spending increases and this leads to more import of goods.