Many Americans who dislike Trump’s personality and policies still give him credit for having created a thriving economy. For many, it is the sole point which they can name in his favour. Trump himself boasts that his presidency brought an unprecedented “comeback” for the American economy which had been in a “dismal state” when he first took office and was now “the greatest in the history of the country,” Juozas A. Kazlas wrote in Draugas.
President Trump is like a man who is enjoying the beautiful view from the third floor of a house, but mocks the contributions of the men who built the foundations of the house, the first two floors, and the steps which he used to reach the third floor.
Since economic statistics are publicly available to everyone, it is easy to compare the economic achievements of President Trump to those of the Obama-Biden administration.
Starting point: Obama took office in the middle of a huge financial crisis, which had started at the end of the Bush administration. Both Republicans and Democrats agreed that the American economy was in real danger of collapse. In January 2009, the month when Obama took office, the country had already lost 2.6 million jobs. Obama led a historic recovery from this crisis despite Republican obstructionism. Biden personally convinced the three Republican senators needed to vote to pass the recovery program, and then Obama gave him the task of managing its implementation: an $800 billion government program involving 100,000 projects – 275 programs within 28 federal agencies. It is now seen as an effective response to the crisis, although it could have been even more effective if Republicans had not refused to raise stimulus spending to the needed level. After declining for another year, the economy recovered and grew steadily for the remaining years of the Obama administration.
Trump took office after 7 years of steady economic growth, which then continued under his administration for 3 more years.
Economic growth: During the last three years of the Obama administration, the average annual rate of GDP growth was 2.4%, and even rose more than 5% during two quarters of that period. During the first three years of the Trump presidency, average annual GDP growth was 2.5%, and only approached 4% in one quarter. The Obama and Trump years were basically the same in terms of economic growth, not “the greatest in history”.
Budget deficit: Republicans promised that their $1.5 trillion tax cut, which benefited wealthy individuals and large corporations the most, would stimulate economic growth. In reality, business investment did not grow significantly, but government revenues fell by huge amounts. This led to an unprecedented growth in federal budget deficits, an increase in government debt which Republicans always warned against before the Trump years.
The year before Obama took office, the U.S. federal budget deficit was $459 billion. It rose to $1.4 trillion in 2009 due to the financial crisis, after which it steadily declined until it reached $438 billion in 2015. When Trump took office in 2017, the deficit had been $585 billion the previous year. During the next three years of his administration, until the end of 2019, the deficit rose to $984 billion, or 1.7 times more than it had been at the end of the Obama years. The “deficit hawk” Republicans who had continually expressed concern about federal government debt previously stayed silent.
During Obama’s last three years in office, the federal budget deficits totalled $1.5 trillion, an average annual deficit of 2.8%. Trump’s first three years in office raised the deficit by $2.4 trillion, an average annual deficit of 3.9%.
Stock Market: At the beginning of February 2009, when Obama took office, the Dow Jones Industrials Average was 7,002. When Obama left office, the DJIA was 19,678; during the eight Obama years, it had risen 281%. According to Trading Economics Market Data, from the beginning of the Trump administration to the end of 2019, the DJIA rose to 28,445.
In other words, in the three years before the pandemic, it rose 145%, about the same “curve” as during the Obama years. There had been fluctuations during both administrations, but no significant change in growth rate during the entire period taken as a whole.
Employment: The unemployment rate peaked at 10.2% due to the economic crisis during Obama’s first year in office, then started falling steadily. During the last three years of the Obama presidency, 8.1 million jobs were created. During the first three years of the Trump presidency, 6.5 million jobs were created, 1.6 million fewer than during the three Obama years.
Conclusion: Before the pandemic, the Trump economic record showed no remarkable changes other than a sudden increase in deficit spending. The economy simply continued the favorable trends started and continued by the Obama administration.
The pandemic caused the loss of 22.2 million jobs, of which less than half have been recovered. A third wave of Covid-19 would endanger more economic activity and jobs. It is estimated that this year’s budget deficit will be about $3.7 trillion, or 6 times higher than at the end of the Obama years.
The US economy has now been hit by the biggest economic contraction ever recorded and the highest unemployment rate in more than 80 years. When Biden takes office next January, it will be good to know that he faced a similar challenge in 2009 and is familiar with the political and economic tools needed to lead the country to a recovery.