Setting The Record Straight On The Trump vs Obama Economy
Businessman and former Trump Secretary of Labor nominee Andy Puzder got into a Twitter spat yesterday with Harvard Business School’s Gautam Mukunda over Donald Trump’s economic record.
Puzder posted to defend the Trump tax cuts, touting the undeniable benefits that followed.
Yes, Trump cut indiv. income & corp taxes — unemployment plunged to 50 year lows, real income soared, family income hit an historic high, poverty rate hit an historic low (generally and for minorities). As a result, income inequality declined 2 years in a row. Best of times!! https://t.co/wPyLDUJP20
— Andy Puzder (@AndyPuzder) September 26, 2021
Mukunda then pointed to a chart of private sector employment, arguing that the economic expansion under Trump was merely a continuing of the recovery from the financial crisis (which was the slowest economic recovery from WWII) that began under Obama’s tenure. The chart only extends until the end of 2018, so the Trump tax cuts had only been in effect for less than a year, but at least he didn’t torture the data by including pandemic-era data.
That’s private sector job growth under Obama and Trump. Point out to me the change in the slope of the line you attribute to Trump’s tax cuts. pic.twitter.com/nYYkehh7jS
— Gautam Mukunda (@gmukunda) September 26, 2021
There is some truth here in that the economy tends to grow over time, and that presidents inherit trends. So the debate here is how much more the economy grew because Trump was in office as opposed to keeping all of Obama’s policies in effect. The economy did grow under Obama after all – just slowly.
In 2016 the CBO released economic growth projections that estimated what it would look like if the economy continued with Obama’s policies in effect unchanged. Those estimates projected real economic growth of 2.1% in 2018 and 1.8% in 2019, but in reality there ended up being real growth of 2.5% in 2018 and 2.3% in 2019. While that may seem like a small difference, it means growth in 2018 and 2019 was 17% and 24% higher than the CBO’s respective estimates.
For some perspective, an economy that grows at 2.3% will double about every 30 years, while one growing at 1.8% will double every 39 years. These kind of changes add up and compound massively over time.
It also should be mentioned that all jobs are not equal in terms of pay – and the jobs being added under Trump’s watch were higher paying than Obama’s.
Over the past four decades, inflation-adjusted weekly wage growth by quarter was $4.05, and only $3.20 under Obama per-paycheck. If you factor out the effects of the financial crisis and only look at Obama’s last, and best three years in office economically, wages grew $5.90 per paycheck per quarter. Under Trump they grew $6.90.
Wage growth was higher under Trump for workers in every decile of the income distribution.
The Trump-era data here on wages does not include the year 2020, where median weekly pay actually increased from $436 to $1,002 due to low skilled workers disproportionately dropping out of the work force.
Obama oversaw the addition of 2.1 million African American wage earners during eight years in office, about 250,000 per year. Table 2 reveals the tepid results in terms of wage growth. Trump oversaw the addition of 1.3 million African American wage earners in his first three years, more than 400,000 per year. Excellent wage growth occurred across the spectrum. The results for the 10th and 25th percentiles were remarkable.
The 10th percentile U.S. weekly wage grew by $3.25 per quarter for African Americans during Trump’s first three years, nearly double the historic rate of $1.65. The best Obama growth rate was only $1.68.
While none of the data here has included 2020 thus far, it’s also worth noting that despite the COVID-19 economic crisis being far sharper than the financial crisis that Obama inherited, Trump’s economic recovery from COVID was three times faster than Obama’s from the Great Recession. The U.S. also suffered a smaller economic contraction than our peers. While the U.S. economy shrunk 3.5% in 2020, the average European country shrunk 6.6%, nearly twice as much, while the average high-income country shrunk 4.7%.
Author: Matt Palumbo
Source: Bongino: Setting the Record Straight on the Trump vs. Obama Economy