Now Comes Trump’s Turn In The Economic Dunk Tank, Part 1

We have had two presidential terms in a row in which the praise and blame for economic results got stood on its head. To wit, the so-so expansion of the US economy during the Donald’s first term had virtually nothing to do with the claimed virtues of his policies and did not remotely signify the Greatest Economy Ever. Likewise, the defenestration of both “Joe Biden” and his last minute stand-in during the 2024 race mainly happened because Sleepy Joe and the California Cackler reaped the whirlwind from the Donald’s insanely inflationary pandemic policies.

So we are not going from good policies to bad policies and back to good again with the Donald’s Grover Cleveland-style return to the Oval Office. We have had terrible policies all along from all points of power in the Imperial City—the Fed, the Treasury, the White House, Capitol Hill and the Pentagon, among countless more. But now the cumulative damage is reaching the breaking point, raising the very real probability the the proverbial brown stuff from years of spend, borrow, print, regulate and inflate will be hitting the fan with full force during the Donald’s second time at bat.

Let’s start with the elementary point that the business cycle and the massive flow of economic currents on the free market from 160 million workers, 300 million consumers, tens of millions of businesses large and small and millions more of savers, investors and speculators are what drive the overwhelming share and direction of economic activity. Presidential “policies” and orations, by contrast, have but modest impacts which are in the nature of tweaks on the margin, and which only materialize with a time lag. Even then, there is scant ability to separate these presidential policy impacts from the underlying private sector forces.

Thus, prior to the pandemic Lockdown hammers which slammed the US economy in Q2 2020, Trump’s economic record consisted mainly of riding the business cycle uplift that had been set in motion by the natural forces of economic recovery—forces that reached self-sustaining lift-off during Obama’s second term. In this context, we can look at both the key flows and the key levels relative to economic performance and see that so-called Trump-O-Nomics generated nothing to write home about, and as a practical matter was indistinguishable from the trends of Obama’s second term.

Thus, economic growth as measured by real final sales of domestic product rose at a 2.43% rate during Obama’s second term and did not accelerate under Trump thru Q1 2020, rising at a 2.31% per annum rate. In both cases, the growth rate clocked in well below the prior 58-year average (1954 to 2012) of 3.12% per year.

In short, the “Trump economy” grew at only 75% of the modern historic average under the prior 11 presidents going back to Eisenhower, and that’s letting the Donald off the hook for the economic crash he caused in Q2 2020 by ordering the Covid Lockdowns. By all rights, the true measure of economic growth during his first term through the end of 2020 clocked in at 1.82% per year or just 58% of the modern historic average.

Nor is the real final sales growth number some kind of aberration among relevant performance measures, even as it actually has the virtue of eliminating short-run distortions from inventory swings. For instance, the best measure of the jobs/employment variable is the index of aggregate hours worked in the private sector, which removes any distortions owing to part-time employment in the normal “Jobs Friday” number ballyhooed on bubble-vision; and also it doesn’t count unproductive government jobs.

During Obama’s second term the employment hours index rose at a 1.78% per annum rate, which was slightly better than the 1.65% per year rate posted through February 2020 on the Donald’s watch. Again, neither figure was anything to write home about, given that the average between 1964 and the year 2000 had come in a 2.0% per year.