When President Trump delivers his State of the Union speech Tuesday night, he’s sure to brag about alleged accomplishments. On economic issues, his boasting will be on firm ground.
Since Trump became president two years ago, the economy has broadly improved:
Businesses have created 4.9 million new jobs since January 2017, or 203,000 per month, on average. That’s terrific job growth.
Median household income, which is now around $64,000, is about 4.3% higher than when Trump took office, according to Sentier Research. Since those numbers are adjusted for inflation, they indicate a modest but real improvement in living standards.
Small-business optimism jumped when Trump won election in 2016, and has remained elevated.
Consumer confidence is stronger, with the latest Conference Board index coming in at 120.8, compared with 111.8 the month Trump took office. Confidence fell during the recent government shutdown, so it will probably bounce back up in the next set of numbers, now that the shutdown is over.
And on the Yahoo Finance Trumponomics Report Card, which measures Trump’s performance on the economy compared with other presidents at the same point in their tenures, Trump earns a solid B.
But whether Trump deserves credit for a stronger economy is another question altogether.
Business leaders say Trump’s tax cuts and deregulatory efforts have made the United States an easier place to do business in. The tax cuts clearly boosted profits in 2018, and helped GDP growth reach a sizzling 4.2% in the second quarter of 2018.
But businesses generally dislike the tariffs Trump has slapped on steel and aluminum imports from most countries, and a broad range of imports from China. The tariffs aren’t steep enough, yet, to trigger a recession. But Trump has threatened worse, such as a 25% tax on imported autos and higher tariffs on Chinese imports, if there’s no trade deal with China by March 1.
On the whole, Trump has most likely benefited from a recovery that picked up steam during President Obama’s later years, with Trump’s business-friendly policies juicing it a bit. Job growth during Obama’s last four years averaged 217,000 new jobs per month, for instance—a slightly better pace than during Trump’s first two years. Wage growth was weaker under Obama, but that may be on account of slack in the labor market that took years to tighten following the sharp recession that ended in 2009.
The risk for Trump is that the best is over and the economy slows—perhaps sharply—during the second half of his first term. Moody’s Analytics thinks the economy grew by 2.9% in 2018, and forecasts growth will slow to 2.7% this year. But by 2020, it predicts growth of just 0.9%. Some economists think a recession could be brewing, as the tax-cut stimulus wears off. It doesn’t help that the tax cuts will push annual federal deficits close to $1 trillion for the foreseeable future, forcing the Treasury to borrow increasingly more.
Americans sense trouble ahead. Roughly two-thirds of Americans are dissatisfied with the direction of the country, according to polls by Gallup and others. The tax cuts Trump will crow about in his speech to Congress on Tuesday turned out to be unpopular with voters, who feel they favor businesses and the wealthy and do little for lower earners. That’s one reason voters turned control of the House of Representatives over to Democrats in the 2018 midterms.
Democrats seem to be getting traction with new proposals for raising taxes on the wealthy, perhaps by a lot. Polls show a sizable majority of Americans favor higher taxes on the wealthy, which indicates a sense of unfairness among the middle class. Trump won in 2016 by appealing to aggrieved voters who feel left behind. But now he has to convince them he’s doing something about it. And speeches alone aren’t enough.
Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman