The biggest lie – “I created this economy”

The incumbent president likes to take credit for all things good and blame others for all things bad. This is true regardless of the extent of his role in the outcome. He boasts that he created this great economy before the pandemic and will help us get back to it. Although the economy continued to do well, to say he created it is not truthful. Given his loud chest beating on this one issue, it qualifies as his biggest lie, although other lies are further afield from the truth.

When he took the oath to his office in January, 2017, the US was on its third longest economic growth period in its history at 91 consecutive months of GDP growth. That translates into just longer than 7 1/2 years. It should also be noted for the six previous years, we had 2 million plus in annual job growth and the stock market more than doubled under his predecessor. To Donald Trump’s credit, the economy continued to grow for 36 more months, the stock market continued to climb and job growth continued until it fell with the pandemic. The recession officially started in February of this year.

Now, I wrote during Barack Obama’s presidency that presidents get too much credit and too much blame for the economy. They can provide headwinds and tailwinds, but that is about it. The “headwinds and tailwinds” remark is courtesy of conservative pundit David Brooks. The same goes with the current president. But, if people want to lay wreaths at Trump’s feet for the economy before the pandemic, they must also do the same for Obama. Obama actually inherited an economy in recession due to the housing crisis in late 2007 through mid 2009. He was sworn in January, 2009.

The incumbent president has provided some headwinds and tailwinds to help keep it going, sometimes at the same time. Here is a look at a few of these wind currents:

Tailwinds

The economy got a temporary boost from the December, 2017 tax cut that increased the debt by $1.5 trillion over the next ten years. At a time when we should have been decreasing the deficit, we increased it. So, in essence, we borrowed from our future to make our economy a little better for a little while. One economist referred to it as a sugar rush. Before the pandemic, we fell back to growth at the same level as before the election. Overall, this growth period has been the longest, but the rate of growth under both presidents has lagged other periods. It has been a slow and steady climb, again before the recession caused by the pandemic.

Cutting through some regulations also provided some stimulus for businesses, but as noted below, these will cause future headwinds. People often mix bureaucracy with regulations. We need to constantly review regulations to see if they are working and how they can be improved or rescinded, if need be. So, regulations are not necessarily bad. Bloating bureaucracy is what we must guard against. I recall a story of Erskine Bowles, who eventually became Bill Clinton’s Chief of Staff. When Bowles headed the Small Business Administration, he reduced the application from 42 pages to one.

Headwinds

We must guard against debt. Dipping into debt to stimulate the economy dragging from COVID-19 is one thing, but the 2017 tax cut needed not be so severe that it increased debt. Note, many said this before it was passed, not just now. By the end of this decade, we should be beyond $40 trillion in debt on an annual revenue budget (during 10/18 – 9/19 FY) that is currently just less than $3.5 trillion, with expenses around $4.5 trillion. With the pandemic stimulus, the annual 2019-20 deficit will be around $3.7 trillion. Eventually, interest cost will rival the biggest budget items if we do not remedy this growing problem. Some poor president and congress will have to make some hard decisions as revenue is too low and costs are too high.

Letting polluting industries skate on fewer regulations will come back to haunt us. Chemical spills, polluted water and nuclear waste causes major environment concerns to people, animals, carbon eating trees/ plants and food crops. Even the best of developers and manufacturers would like someone else to pay for their shortcuts. Industries go to great pains to hide their dirty laundry. The laundry is there, it just needs to be more cleaned up. Relying on a company’s altruism is not an effective means of controlling pollution.

Tariffs on all partners cause echo tariffs from our trading partners. And, no one wins a tariff war, regardless of what the president might say. As we have become harder to deal with, buyers and sellers find other markets. The increase in farmer bankruptcies has been significant since the tariff wars started, increasing dramatically over previous levels. One farmer said, other countries sought out other sources of farm goods, so we lost a future pipeline for sales. And, just today, I read in conservative George Will’s editorial that trust in America to do the right thing has fallen to 24% and preference to America as a trading partner has fallen.

One of the business lessons I learned over the years, is if you become difficult to work with, your customers and clients will be forced to find other providers of services and products. It does not get any plainer than that. One of the best things a president can do is create new markets – Reagan, Clinton, Nixon, and Obama all were good at creating new avenues for trade. It is not surprising that Clinton had the most jobs created on his watch, with Reagan having the most jobs as a Republican president. And, Nixon for all his corruption, should be remembered well for opening up relationships with China. Trump should get credit for renewing a refined NAFTA agreement, but he hindered his efforts to compete with China when he pulled the US out of the Trans Pacific Partnership which went on without us and backtracking on deals with Cuba, Iran and the Paris Climate Change Accord, has placed the US at odds with others.

Global trade builds revenue. A country cannot shrink to greatness. And, what we are seeing today is other countries not wanting the hassles of dealing with the US as much as before. And, this is before the mishandling of the pandemic that has left the world aghast.

15 thoughts on “The biggest lie – “I created this economy”

  1. I was unable to continue watching the RNC though I wanted to hear their ideas. The constant ass kissing and lies was more than I could endure. Even the fact checkers gave up after awhile.

  2. Keith – your description of the US becoming difficult to deal with is the best I’ve heard. It applies also, I think, to the relations within the country. Sad, but accurate. Thanks for your posts – Susan

  3. Trump himself is a danger, a nightmare, but what concerns me most is that some 40% of the adults in this nation blindly believe that he has created the economy, that he has done a great job, and they will believe whatever he tells them. Why? I think that even if Trump loses this year, those elements of ignorance will find another with essentially the same views, only perhaps more polish, to run in 2024. Until we address the real problems that are causing such disunity and foolhardiness in this nation, we will not be safe from the wanna-be dictators like Trump. And frankly, I don’t understand the 40% who support him well enough to know what the solutions to the problems are. I’m trying, but … it boggles the mind. Excellent post.

    • Jill, this is a key reason he needs to lose big. If he does and the GOP loses the Senate, the leadership will have to self-reflect. I think it is up to saner minds to raise questions and ask why people think they way they do. This is a key reason I write these posts, as the Trump marketing schtick paints a picture from an alternate reality. His followers will not believe what I write, but I try to get it right. Keith

  4. An excellent post, nicely balanced Keith. From afar it’s difficult to assess the shifting economic tides buffeting your voters. From afar though no-one can doubt the chaos you suffer from the ” mishandling of the pandemic that has left the world aghast. ” We pray for y’all.

    • David, thanks. What boggles the mind is farmers who are hurting because of the tariffs, still support the president. He is the one putting a nail in their business coffin, but they still support him.

      He talks tough on China, but he has enabled their ascendency by hamstringing our efforts to hold them accountable. I reference the TPP as Trump does not like agreements made by other people, but the other ten countries, including Australia, went on without us.

      Keith

      • Keith, The test with China will come re Taiwan/Formosa, it’s aggression in the seas bordered by The Philippines, Malaysia, Vietnam, Indonesia and reaction to it’s belt and road initiative debt enslaving mendicant nations. Any or all of these matters will challenge the next president’s foreign policy chops.

      • David, they will indeed. But, we won’t be arguing from a position of strength. I cited George Will’s column. He cited that in Germany, the fourth largest economy, a survey noted that 37% of Germans prefer dealing with America, which is down from the year before. 36% prefer dealing with China. In Italy, people prefer dealing with China more than America.

        I have shared this before, but at every global conference, China sends many people to work the rooms looking for business. I shared a couple of years ago, there was a huge investment in South America, which China won out, but what is interesting the US was not invited to bid.

        China will assert themselves (this was predicted twenty years ago) as they ascend as the dominant economy. A weakened US under Trump will have a harder time influencing them. Keith

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