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.

Born on third base

There is an old saying about people with inherited wealth who seem to forget that leg up. The baseball themed saying is “He was born on third base and thinks he hit a triple.”

Last week, I wrote a post that was searching for the ideal metaphor for the incumbent president. But. If we go back to the beginning, we can focus on the more lasting metaphor.

Donald Trump tells the story that he started out with a $1 million loan from his father. That is not true. Per an investigative report by the financial reporters of The New York Times, Trump’s father transferred over $400 million dollars tax free to his son before he died. That story did not even make a ripple, because it of course was deemed fake news and was a complex read.

But, it leads me to the metaphor that Trump created the economy that grew until the COVID-19 gave us all a bitter pill. This economy which was the longest growth economy in US history at over 126 consecutive months, has interesting arithmetic. Trump has only been president for just over three years. So, subtracting his tenure, his presidency inherited an economy that was 90 consecutive months strong.

Further, the stock market more than doubled under Trump’s predecessor and the unemployment rate was less than 5% when Trump took over.

Trump said just last night that the US economy he created was the best ever. He added that it was the best ever in the world. Neither of those statements is true.

While the length of the growth period is record breaking in the US, the rate of growth is very average and has declined to even the same level and below what Republicans complained about during the Obama years. In fact, more jobs were created in 2016, Obama’s last year than in 2017, Trump’s first year.

Yet, people believe the Trump false bravado. I applaud that the economic growth continued on his watch. But, presidents get too much credit and blame for the economy. They provide some headwinds and tailwinds, of which Trump has done both, but the economy is a far bigger animal than the president’s influence. So, for those who laud Trump’s success before the downturn, they must also laud Obama’s.