The economy is complex: however, if there’s one thing that’s certain about it, it’s that politics often lead to people oversimplifying it. Gallup polls show that when Trump was inaugurated, Republican’s confidence in the economy skyrocketed, while Democrat’s faltered. This is despite there not being a huge difference between the economy under Obama’s last few months, and Trump’s inauguration day. It seems clear that both parties generally aren’t doing much thinking when it comes to analyzing the economy.
The economy is complicated, and sometimes wacky, and there’s many different aspects to consider when talking about it. Some of them Trump had nothing to do with, and other things Trump had everything to do with. To try to make the discussion surrounding the economy under the Trump administration a little easier, here’s a list of what Donald Trump does, doesn’t, and partially deserves credit for.
What Trump does deserve credit for
I give Donald Trump credit for the stock market for a multitude of reasons.
Many argue the US stock market is increasing because other stocks worldwide have also been increasing in value shockingly fast. Some markets such as Hong Kong’s stock market and Japan’s stock market grew at an even faster rate than American stocks. But although stocks have been going up since 2009, their growth rate sped up dramatically under Trump and business confidence is the only explanation for a random increase in stocks, which brings me to my next point.
On average, the Republican Party is viewed as the more capitalist and business friendly party of America. This alone likely added to consumer confidence in America, especially since the economy was improving regardless. On top of that, many Trump voters cited his business experience as a reason they voted for him.
Many people don’t realize how disproportionately distributed stock ownership is. A lot of people own some stock, but 84 percent of stocks are owned by only 10 percent of the total population. This means that if Trump wants to do anything to deliberately make stocks continue to rise, theoretically he’d only need to worry about what the top 10 percent of earners are thinking and feeling.
There’s not really much to say here. From an individual, microeconomic perspective, tax cuts are good for you. There are other aspects of the Trump tax cuts that I’ve criticized. But for the people who have no control over policy, a tax cut means a lot, especially if you’re low income.
Whether this is a good thing or a bad thing, Donald Trump’s administration has removed 67 regulations from the economy. And consumers seem to like this, or not care, as consumer confidence continues to rise.
What Trump partially deserves credit for
It always helps to be a Republican (at least at first) when becoming president. Lower taxes, especially for corporations as well as promises to deregulate the economy are traditionally on a Republican candidate’s platform. The reason I give Trump only partial credit for economic confidence is because the economy has been steadily improving since 2010.
GDP growth for the United States was 3.2 percent in the third business quarter of 2017, Trump’s highest growth rate so far. That growth rate was matched under the Obama administration in the first business quarter of 2015, and many times before. And the United States hasn’t experienced a net decrease in jobs created since 2010.
What Trump doesn’t deserve credit for
Unemployment rate/black unemployment rate:
Its technically true that the black unemployment rate and unemployment rate are lower under Trump than under Obama. But a five second glance at a chart from 2010 to 2017 will show you that Trump is clearly riding an economic wave at the moment, and is taking credit for things that started a long time ago.
For example, the black unemployment rate was at its highest point in 2011 at 16.8 percent. Since then, every month of the Obama administration saw that rate decline until Obama left office at a rate of 7.8 percent. Under the Trump administration, that number continued to fall to 6.8 percent, but shot up nearly a full percentage point to 7.7 percent in January.
Bringing jobs back to the U.S:
Remember the heroic Carrier deal that only Trump could pull off? And remember how Trump said he saved jobs? Yea, no.
Sorry. But here’s the thing, it’s not Trump’s fault either. It turns out that capitalism is quite the system, and can often times throw curveballs to businesses and individuals, forcing them to make tough business decisions like the one Carrier chose to make.
It was reported that AT&T raised wages and cited tax reform as a reason. Once again, turns out capitalism can throw curveballs because a couple of days after the wage increases were announced, AT&T laid off thousands of workers.
Again, this isn’t Trump’s fault. Businesses invest and hire because there’s sufficient demand that calls for a business to make that decision, not because of tax cuts. So while Trump shouldn’t be blamed for AT&T layoffs, he shouldn’t be given credit for AT&T wage increases.
Many might argue that businesses cited tax reform as a direct reason for increased investment. My response? That doesn’t mean anything. People of all political stripes work in the corporate world. Liberals will say they won’t invest because of tax reform, but conservatives say they will.
To prove my point here’s a video of a room full of CEO’s admitting that tax reform won’t affect business decisions.
It would be in people’s best interest to keep all of these factors in mind when discussing the economy with their peers. Four years is a long time, we’re barely past the first one. But a lot is going to happen in the economy, and hopefully people will be ready to address it.
Image credit Gage Skidmore