If you’re beating inflation by 1%, is that a “boom”?
President Trump thinks so. In a speech at the annual gathering of the ultra-rich in Davos, Switzerland on Jan. 21, Trump declared that his presidency has generated a “blue-collar boom” and a “roaring geyser of opportunity.” “The American Dream is back,” Trump said. “No one is benefitting more than America’s middle class.”
As with many of Trump’s scripted speeches, select facts provided by White House economists are mostly correct. But Trump’s overall characterization is not, and as usual, Trump falls back on the bogus conceit that everything was terrible before he arrived in Washington, while everything is fine now.
Trump has presided over an economy that has generally improved at about the same pace since 2013 or so. The pace of job growth and stock-market gains—frequent Trump bragging points—are about the same as they were during President Obama’s second term. And Trump’s focus on short-term comparisons obscures pernicious problems that no president has figured out how to solve, such as exorbitant health care costs and worsening wealth and income inequality.
Providing context for some of Trump’s claims in Davos highlights the extent to which he’s overstating prosperity. Examples:
The “blue-collar boom.” Here’s the trend in manufacturing employment since 1980:
Does this look like a boom? The U.S. economy hemorrhaged manufacturing jobs from 2001 to 2010, with a modest recovery since then. The pace of job creation in manufacturing accelerated slightly in 2018, but it slowed again this year and declined in December. Trump’s tariffs on imports have raised costs on manufacturers and depressed output, the opposite of what he promised as a candidate in 2016.
“Wages at the bottom of the income ladder are enjoying the largest gains.” Average hourly earnings for production and nonsupervisory workers—generally considered lower-income blue-collar laborers – grew 3% in 2019. Inflation in 2019 was 2.3%. So those workers are gaining on inflation by less than 1 percentage point per year. But that’s only true for families not exposed to out-of-pocket health care costs, which are rising at least twice as fast as overall inflation.
“Since my election, the net worth of the bottom half of wage earners has increased three times faster than the increase for the top 1%.” This is true, according to Federal Reserve data. Lower-income Americans have mostly benefited from the rebound in home values that began in 2012. Yet the bottom 50% controls just 1.5% of the wealth in the United States, while the top 1% controls nearly one-third. Wealth inequality in the United States is nearly the worst among advanced nations, an insidious problem nobody has come close to solving.
“Real median household income is at the highest level ever recorded.” True, but so what? In a growing economy this should always be true, as it has been many times before under many prior presidents. Superlatives based strictly on population and economic growth can mask important weaknesses. What matters more are per-capita measures. On the Yahoo Finance Trumponomics Report Card, for instance, Trump ranks third out of the last 7 presidents on GDP per capita, one reason his overall grade is a respectable B rather than the A+ Trump would probably give himself.
Trump is hardly the only politician to exaggerate his accomplishments and take credit for salutary developments that would have happened anyway. But he does have to justify an unpopular tax cut, a war on regulation, a confounding trade policy and a disruptive style of governing. Voters will have their say in November, letting Trump know whether they see the same boom he does.
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: email@example.com. Encrypted communication available. Click here to get Rick’s stories by email.