Ooh, fighting words.
Former President Barack Obama posted a bellicose tweet recently, claiming that a law he signed in 2009 set the stage “for more than a decade of economic growth and the longest streak of job creation in American history.” Uh-oh. That would extend to, like, 2020, three years into the Trump presidency. Obama was basically saying Trump should thank him.
Trump, uh, didn’t. He called Obama’s claim a “con job” and said his predecessor “is now trying to take credit for the Economic Boom taking place under the Trump administration.” Trump said the Obama recovery from the recession that ended in 2009 was the weakest since the 1930s, continuing his ongoing narrative that everything Obama did was bad and only Trump could have saved America from certain doom.
Before wading into this argument, it’s important to point out that this a stupid, childish food fight. Economies don’t respond to this or that president getting elected by turning on or off like a light switch. Presidential policies rarely move the gargantuan US economy one way or another, and when they do, it typically takes months or years to show up in the real economy.
Yet the question of whether Trump deserves credit for low unemployment, high stock prices and strong consumer confidence is crucial in this year’s presidential election. Trump will try to convince voters to stick with him to keep the good times going, while his Democratic opponent is sure to argue the economy can stay strong with Trump on the sidelines.
So here’s the verdict: Trump and Obama are both wrong. Obama did nothing no other president would have done, and Trump has essentially lucked into an economy that has progressed at the same pace through the last four years of the Obama presidency and the first three of Trump’s. The Federal Reserve has influenced the economy far more through aggressive interest rate cuts and quantitative easing. Robust, greedy capitalism also keeps the US economy strong, which can harm workers who have minimal protections during a downturn but creates irresistible opportunities to make money and get back to business even during bleak times.
Trump vs. Obama
But for sport, let’s briefly examine the record of each combatant in this fight. Obama inherited a reeling economy, but like Trump, he did benefit from actions taken by his predecessor: most importantly, the 2008 “TARP” bailouts that kept the banking system functioning and probably prevented a far worse depression. Those bailouts were unpopular, but most economists think they saved millions of jobs.
Less than a month after Obama took office, Congress passed the American Recovery and Reinvestment Act (ARRA), a huge, $787 billion stimulus program that cut taxes, invested in infrastructure, expanded safety-net benefits and did many other things to get the economy back on track. The law passed with most Democrats in Congress voting for it, and most Republicans voting against it, leading some to claim it was a partisan bill a Republican Congress never would have passed. That’s garbage. A Republican president and/or Congress would have had no choice but to pass something similar, because politicians can’t do nothing when the worst recession in 80 years is underway. Members of Congress who voted against the ARRA had the luxury of doing so because they knew it would pass anyway, and there’d be no penalty for opposing it.
Economists widely believe the ARRA helped end the recession sooner and make it less painful. But Obama made a rookie mistake. While making the case for the ARRA, he predicted the unemployment rate would max out at 8% if Congress passed the law, and be headed back down by the end of 2009. Instead, even with the stimulus, unemployment leapt all the way to 10% and stayed far above the Obama White House projections for years. The stimulus didn’t fail, but by overpromising, Obama gave critics an easy mark for claiming that it did. On top of that, the recovery that began in 2009 was a weak, “jobless” recovery—a trend that began in 1991 and probably has a lot to do with globalization and the digital revolution.
The recovery was picking up steam when Obama left office in 2017, with unemployment at 4.7% and the stock market in the eighth year of a bull-market rally. Since then, the unemployment rate has fallen an additional 1.1 points and the stock market has continued to hit new highs. Job growth under Trump has averaged 177,00 new jobs per month, compared with 216,000 new jobs per month during Obama’s second term. Obama’s number is higher, but Trump can credibly claim it’s harder to add jobs late in the business cycle, when there are fewer unemployed people to hire. Fair to call it a draw.
Trump claims his 2017 tax cuts and deregulatory agenda have unleashed an economic boom, or will soon. But there’s no evidence of this. Business spending was strong in 2017, before the tax cuts, but it has wavered since then. Most of the savings from the corporate tax cut went to share buybacks and dividend hikes, not to investments in new plants, equipment, worker training or new hires. GDP growth was 2.3% in 2019. Growth during Obama’s second term averaged 2.2% per year. So Trump has improved on Obama’s record by one-tenth of a point. Woohoo.
Trump, like Obama, overpromised. Trump said he’d boost GDP growth to at least 3% and maybe 4%. Not gonna happen. Trump’s trade war with China and new tariffs on imports from elsewhere are depressing growth that’s chronically weaker than historical averages. And Trump is adding to the national debt instead of paying it down, which normally happens during periods of prosperity. The Trump tax cuts and other factors will produce budget deficits well over $1 trillion for the next decade, which in itself could begin to drag on growth.
Most presidents try to claim credit for the good things that happen on their watch, and deflect blame for the bad things that happen. Trump and Obama are no different, one of the few commonalities between them. If you support one or the other, you want to believe your man is the one, true economic savior. It’s safe not to.
Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. Confidential tip line: firstname.lastname@example.org. Encrypted communication available. Click here to get Rick’s stories by email.