Presidents get credit or blame for the performance of the economy under their watch, whether they deserve it or not. So President Trump is within his rights to crow about tax cuts, job growth and new investment, as he did in an April 17 op-ed in USA Today.
“Paychecks are climbing,” Trump wrote. “Tax rates are going down. Businesses are investing in our great country. And most important, Americans are winning.”
All true, depending on how you define “winning.” And in our own Trumponomics Report Card, we give Trump a B for his handling of the economy so far, with strong marks for growth in both overall employment and manufacturing employment.
But three things are missing from Trump’s analysis. First, much of what’s going right in the economy is the result of long-term trends that have nothing to do with Trump. Second, we haven’t yet felt the consequences of some Trump policies that seem sure to generate lasting change. And third, there are a few profound problems in the US economy Trump has done nothing to address.
Job growth has, in fact, been strong under Trump, with employers adding 188,000 new jobs per month, on average, since Trump took office. But job growth averaged 195,000 per month the year before Trump took office, as employers slowly but steadily recovered from the recession that ended in 2009. So the trend hasn’t materially changed under Trump, and some economists worry that job growth is slowing, in part because companies are having trouble finding workers for all the jobs that are open.
As the labor market tightens up, pay normally goes up. Yet wage growth is tepid, at just 2.7%, which is barely better than inflation. Some economists think this is a long-term structural problem, with many workers stuck with outdated skills for which there’s weak demand. Aggressive retraining programs, relocation assistance or new types of apprenticeships might help, but Trump hasn’t said much about those kinds of initiatives.
Tax cuts and workforce problems
The big tax cuts Trump signed at the end of 2017 are supposed to put more money in people’s pockets. About two-thirds of households will get a tax cut, averaging about $1,300, according to the Tax Policy Center. But most of the bounty will go to wealthy taxpayers who don’t really need a tax cut, and will probably save it rather than spend it. Less than half the public approves of the tax-cut bill, largely because people think it benefits the wealthy too much and the middle class too little.
The big reduction in the corporate tax rate, from 35% to 21%, brought business taxes in the United States in line with those in other developed countries. There’s a strong argument that was necessary. But that doesn’t mean the cuts will benefit the economy in ways most Americans feel. Corporate profits are soaring, but companies are using much of the windfall to buy back shares. That pushes stock prices up, benefiting the 52% of Americans who own stocks. But it doesn’t create new jobs or boost pay for workers.
Roughly 200 companies did offer workers one-time bonuses of around $1,000, which Trump bragged about in his op-ed. But that’s not the same as a raise that permanently boosts pay, and a cynic might suspect companies of offering the rank-and-file a few crumbs as a way to defuse possible criticism of the boon about to flow to shareholders.
Meanwhile, some chronic problems weigh heavily on middle- and working-class families. Health care costs strangle many family budgets, with no solution in sight. Trump and his fellow Republicans are obsessed with the supposed evils of the Affordable Care Act, but that has almost nothing to do with soaring costs that have been a growing problem since the 1980s. Repealing the ACA, as Republicans tried to do last year, would have done nothing to lower costs. And Republicans have no plan to tackle costs, leaving a juicy issue for Democrats to seize on in this year’s midterm elections, and beyond.
There are also simmering problems throughout the workforce. The percentage of working age adults who have a job or want one is near historic lows, which should not be the case when companies have jobs they can’t fill. This is a complex problem with several causes, including opioid addiction, disability, government benefits that create a disincentive to work, and other factors. Yet these limitations stand in the way of the 3% annual economic growth rates President Trump insists are possible.
We’ll be better able to measure the Trump economy—the one that truly reflects Trump’s policies—in the third and fourth year of his presidency. By then, the short-term stimulus of the tax cuts will have worn off. We may start to see signs that the $1.8 trillion in new debt required by the cuts is crowding out private-sector investment and impeding growth. We may see worsening income inequality, as the wealthy cash in on rising stock prices while middle-class incomes remain stagnant. We’ll know whether his trade protectionism generates any net benefits, or merely hurts some to help others. We may even get a recession by 2019 or 2020, as borrowing costs rise and consumer and business spending slows.
But all of that is tomorrow. Today, things look good enough to brag about.
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Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman
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