"I created the greatest economy in the history of our country.”- Donald Trump, Sept. 29th, 2020 during the first Presidential Debate
"Reality has a way of asserting itself." - Barack Obama, Nov. 24th, 2016 at a White House press conference.
"Nice try."
Thinking back to the 2008 election, I believed Obama would make a better president than John McCain. But I also deeply believed there would be no major difference in governance between the two of them. In my early 20s I had the blasé attitude that both parties were pretty much the same, and that no matter who entered the oval office after the election, my life would go on as usual. I felt that the Republican attitude of "everything is fine and nothing needs to change except for less government" was childish and unhelpful (and still do). Conversely, I remember feeling Obama's platform was vague and his slogans "Change" and "Hope" could have meant anything or nothing at all, when it came down to it.
What I didn't know at the time was that the background activities of George W. Bush's administration in regards to de-regulating markets (and the financial sector in particular) were about to have huge consequences for all of us. This "hands off" approach to domestic governing came back to bite us all in the ass in a major way during the 2008 housing crisis, which was a financial disaster on a level not seen since the Great Depression.
At the time, the economic crash (coming on the heels of two on-going wars) just felt like another reason not to have faith in our system. I was in danger of becoming more apathetic and jaded. But then something interesting happened.
The Wonders of Deficit Spending
We got lucky with the 2008 election. Barack Obama won, and immediately set to work on economic recovery using the Keynesian deficit spending approach, the same one that pulled us out of the aforementioned Great Depression. His administration regulated the off-the-rails systems that had destroyed our economy through sheer greed, and delivered monetary stimuli to businesses and individuals. Within months of Obama taking office, we were not only well on our way to a speedy recovery, but we'd kickstarted the longest bull run of American markets in our country's history. Check out these graphs to see what I mean.
You can see that it didn't take the policies of the Obama administration long to do their job. America pulled out of its rut and soared to new heights. Considering how bad things were, it's nearly a miracle that a few tweaks to the way we view government and its role in markets was all it took to straighten things out.
To me, this was a wake-up call. I hadn't previously considered just how much small differences in dry, boring economic policy could affect people's daily lives. If John McCain had won the 2008 election, we would almost certainly have been subjected to the fiscal austerity measures so favored by conservatives - cutting government spending, reducing the deficit, limiting debt, etc. We would have been in a markedly different place; more families would have lost their homes, the banks would continue to fail, and the government would be doing the opposite of providing direct economic relief to its citizens - they'd be cutting social programs altogether.
We know those would be the results because austerity was the approach taken by Europe during the 2008 financial crisis. It did not work well for them. While the European economy eventually did recover, it did so at a much slower rate than the US, and caused unnecessary misery to its citizens. Before the recession, the GDPs of both the United States and the Eurozone were growing at roughly 2% per year. After the economic crisis, the US outgrew Europe by 10% over several years, meaning we recovered faster and by a larger margin. The only difference between us was how we handled the crisis - deficit spending vs. austerity. Here's a great article if you're interested in learning the details.
These years were truly my journey into politically giving a shit. It started with something as boring yet consequential as economics. How could one side of the spectrum be so right and one side be so stubbornly wrong? I already knew that I didn't side with Republicans on social issues - endless wars, civil rights, gun worship, religion, all the usual suspects. But now I saw that there was real, concrete proof that their claim of being the "financially smart party" didn't hold water either.
This only continued when Obama left office and Trump stepped in. Here was a man I have never found palatable on a personal level, but I confess I wanted to give him a chance when he won the 2016 presidential election. I did not vote for him, but as an American I wanted the country to succeed and hoped that he would be capable of being a good leader. Maybe, I thought, the gravity of the office will tame this immature clown of a man, and if not, perhaps his advisers could steady his hand.
Pipe dreams. What I saw instead was an incredible display of statistical manipulation and bald-faced lying that, for what it's worth, basically ensured I would never see Republicans the same way again. Within months, they were claiming that Trump was the most incredible economic force this country had ever seen; that despite his awful leadership skills in the social and geo-political sphere, his genius with business and markets was worth all of the baggage he came with.
But that wasn't true, and I knew it. It wasn't true when conservatives started saying it in his first year, and it wasn't true when he claimed he "built the greatest economy this country has ever seen", even as he steered it straight into another financial crisis due to his inept handling of COVID-19.
What's amazing is that, despite all evidence to the contrary, Trump's magical ability to tell obvious lies and have people believe them has worked to his advantage here. Ask a conservative friend - they'll tell you that yes, Trump did build the greatest economy the country has ever seen. This is an insane thing to suggest when you consider that at no point in Trump's tenure was this even remotely true.
I'm going to show you what I mean.
Trump's Record Unemployment
When Trump fans talk about Trump's presidency and don't want to admit they just loved his racism, these are two things they typically point to - jobs and the economy. "Trump had the lowest unemployment on record". "Wall street did great under Trump". Let's take a look.
When it comes to the falling unemployment rate, it's easy to see that all Trump had to do was nothing at all. The Obama administration had been driving unemployment down for eight solid years before Trump took office, and that momentum simply continued because Trump sat on his ass and did nothing - one of the only things he is truly adept at. Contrary to popular myth, he didn't invent some clever policy that turned around a failing jobs economy, Obama did that. Go look at the graph again.
In Obama's last three years, 8.1 million jobs were added to the economy. In Trump's first three years, that growth slowed to 6.6 million jobs. If anything, he cooled the momentum.
When it comes to jobs, Trump essentially let another man drive him all the way across the country and then got in the driver's seat to park in a driveway. There is nothing special about him sitting in the oval office while a long-running trend continued on its path. Yet his fans bizarrely like to point out low unemployment as one of his biggest accomplishments.
Wall Street Under Trump
This next graph compares the percentage gain of the S&P 500 during President Obama and President Trump's first four years in office.
With one easy graph, there goes Trump myth number two: that he presided over the best trading economy and "most epic bull run" of any president. Pretty much no matter how you play with the numbers, this claim is not true. The Obama years gave us much higher percentage gains in the market, and, notably, Trump left the country in a recession - just like the last Republican president. And the one before that, too. It's almost like there's a trend.
An interesting stock market tidbit concerning Trump is that he presided over 18 of the 20 highest percentage point gains in a single day. This might sound good for his record, until you remember that he also presided over all of the top 20 biggest intra-day losses. And the percentages of those intra-day losses were larger than the gains.
What this means is that Trump, if he can be held responsible at all for what happened on Wall Street (which he liked to be when it was going well and disowned when it wasn't) was simply "volatile". His tweets were often linked to significant and unexpected drops on several occasions, for example in August of 2019, when he tweeted about slapping 10% tariffs on $300 billion of Chinese imports. The Dow Jones sank 281 points in response. Smooth moves.
Interestingly, researchers have correlated market drops to days when Trump tweeted more, and market gains to when Trump tweeted less. Now correlation is not always causation, but it's hard to disconnect the leader of the free world recklessly tweeting about tariffs and trade wars from market activity. All in all, the market did better when Trump kept his mouth shut.
Of course, Trump famously left office with the country in crisis and the economy in shambles. It's agreed across the board that the pandemic undoubtedly played a role in Trump's final, miserable year. But he did himself no favors by bungling the federal government's response to COVID-19 (if golfing, calling it a hoax, and promising it will go away by next weekend can be called a "response"). This only made things worse for the markets and his economic record. While Trump was not responsible for COVID-19 happening, he was largely responsible for the utter lack of leadership or policy to combat it. He must therefore own some of the economic damage.
One final graph to put Trump's Wall Street performance in perspective with other recent presidents.
You can see that there's really nothing "the best" or even particularly special about Trump's Wall Street record. It was fine, but certainly nothing superlative. It was pretty much what you'd expect from an average president. One final thing that's worth pointing out is that anyone who says "Democrats are bad for business / Wall Street / profits" will notice that the last two Democratic presidents absolutely crush the competition when it comes to a good stock market record. So, essentially, that person is either lying or ignorant.
The Trump GDP
During his first presidential campaign, Trump promised that he would deliver "real GDP growth of 4%", claiming that Obama's growth was too slow (his famous line was "Obama had the slowest recovery ever!") At the end of the day, Trump never topped Obama's GDP growth record for a year - 3.1% to 3.0%. Inflation adjusted GDP per capita only increased 1.9% under Trump's four year term. Really nothing special. Let's also not forget that he left office with a GDP loss of -6.5%.
Trump never achieving GDP growth of 4% is definitely a good thing. It was reckless and stupid to aim for that in the first place. Economists agree that growth of 2-3% per year is healthy and sustainable over long period of time. Anything above that hastens the boom and bust cycle, and is all but guaranteed to bring on a recession. Yet Trump aimed for 4% anyways, because, well, that's just the kind of guy he is. We have only his laziness and ineptitude to thank for us never getting there.
Cognitive Dissonance
If one points out the stark difference between Obama's economy and that of Trump to a Republican, there is a sort of schism that occurs in their brain. It usually goes something like this:
"Obama's economy only looks so good because he dug us out of our lowest economic low, and so the graph is distorted to make him look stellar, when all he was doing was recovering lost territory."
Where to begin. First of all, the point about the "lowest economic low" is actually admitting that Bush's Republican policies failed and took us there to begin with. Additionally, Obama didn't just "recover lost territory", he took the markets to record highs. Look at the numbers, it's not up for debate.
Perhaps even more amusing is that this whole line of thinking flies in the face of the other famous Republican talking point about Obama's economy:
"Barack Obama had the slowest economic recovery EVER!"
It seems the Trump crowd can't make up their minds about how to spin Obama's economy. Was his economy "only so stellar" because his administration had the unique opportunity to pull it out of the grave the Republicans sunk it into to begin with? Or was it "the slowest recovery ever"? No matter how you cut it, this doesn't hold up. We've already seen how the Obama administration actually had the best recovery in the Western World from the 2008 financial crisis. Europe, if you recall from earlier, attempted the strategy Republicans advocated, and did much worse. Case closed.
One is reminded of a sniveling adolescent watching from the bench as his school's star quarterback scores touchdown after touchdown to much applause from the stands. "I could do better than him," says the teen, scuffing a shoe in the dirt. "Only I don't wanna play football."
Watching the back-and-forth of how Americans handle the economy has been politically illuminating for me, and I hope that it has been for you too. I can say with certainty that if John McCain had won in 2008, or Donald Trump was reelected in 2020, everything in our lives would be different, and not in a good way. The numbers all but guarantee it.
So next time somebody fondly remembers Trump's economy, or tries to complain about Obama's, you know better. Misinformation only succeeds if nobody shuts it down. You now have the power to do so. Don't be afraid to use it.
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