Trump’s “Greatest Economy in History”
At best it was Obama 2.0, at worst Hoover 2.0
A few years ago one of the senior acquisition officials in the Pentagon had a wonderful sign hanging outside his office. It read: “In God we trust — All others must bring data.” It was a humorous, yet useful, reminder that decisions about programs and other elements of public policy should (and would) be made based on accepted performance metrics and facts.
Of course, in the White House of President Donald Trump such a sign would have never been seen as Trump had little understanding of data and little interest in facts. But as John Adams famously observed, “Facts are stubborn things.” And they are also routinely captured in various places from government to academia so that they may guide policymakers’ actions and (hopefully) public perceptions.
Without question, Trump’s most famous embrace of fabrication and dismissal of fact would be his claim that the 2020 election was “stolen” from him. Numerous courts have rejected his accusations, and even orchestrated recounts, such as the ones in Georgia and Arizona, have produced nothing to suggest electoral theft. Since November 2020, Trump’s continued assertions about the “rigged election” have become widely known as “The Big Lie.”
But there is another “Big Lie” that Trump continues to perpetuate, namely that during his time as president he “built the greatest economy in the history of the world.” Trump’s constant resort to hyperbole and exaggeration drive such statements, but it remains difficult to understand why he would assert something that is routinely measured and widely reported. Moreover, despite Trump’s imagination, the over-riding truth is that American presidents can somewhat influence the national economy — with regulations, tax policy, and fiscal policy — but no US president or his administration “builds” an economy. Still, this continued assertion of historic, unmatched economic triumph is Trump’s “Big Lie Number 2.”
The basic warehouse of national economic data is collected by the Bureau of Economic Analysis (BEA) in the Department of Commerce, a key organization in the overall federal statistical system. The BEA’s data is widely used by governmental policymakers, businesses, and the academic community. It has been continuously evaluated for its methodology and veracity. It is considered authoritative. So, what does the BEA’s data tell us about the performance of the economy during the Trump administration? Well, it tells us something quite interesting.
The key metric I’ll focus on for this discussion is Real Gross Domestic Product (RGDP), which measures macroeconomic growth adjusted for inflation (that has been uncommonly low for several years). The RGDP measures the total monetary value of all economic activity (goods and services) generated by the US economy. The BEA measures RGDP and puts out routine reports detailing how much the economy grew (or shrank) from one quarter to the next, and from one year to the next. So, what does the BEA data show regarding economic performance during the Trump years? Did the nation really thrive under the “greatest economy in history?”
The easiest way to show economic performance is simply the degree to which RGDP changed over a specific period. That is the most straight-forward approach, and credible data exists back as far as the Hoover administration in 1929. So, let’s look at that first.
When Trump took office, the US RGDP was $17.9 trillion; when he left office it was $18.8 trillion, a solid 5.1% increase. But that translates to an average year-over-year (YoY) change of 1.27%. By contrast, President Barack Obama’s second term, the one just prior to Trump, saw an increase of 10.1% and YoY average growth of 1.95%. Even in Obama’s first term, one starting a quarter after the beginning of what we now call the “great recession,” the results were total RGDP growth of 5.9% and a YoY average growth of 1.46%.
In other words, under the simplest measures of RGDP and annual growth rates, Obama’s economic record was better than Trump’s. Indeed, looking at the RGDP trend line between 2013 and 2021, it is clear that the economy during Trump’s tenure was essentially a nearly straight-line extension of the Obama record — simply stated, it was basically Obama “2.0,” that is until the severe downturn of 2020 that largely resulted from Trump’s poor handling of the COVID crisis. In the third quarter of 2020 (3Q20), RGDP fell by over 30%, a number not seen since the Great Depression of 1929.
In fact, if one goes back to the Great Depression and looks at YoY RGDP growth, one finds that the lowest growth rate ever recorded was President Herbert Hoover’s -9.2%. The next lowest recorded by any subsequent president is the 1.27% by… Donald Trump. Over that lengthy period, Obama’s average YoY growth rate is near the average; Trump’s is well below it.
But a more normal way of measuring RGDP is by quarter, and that is how it is normally reported by the media when the BEA releases its latest reports. The quarterly record is, therefore, worth considering. But even here, Trump’s economic record is less than spectacular and essentially on par with that of Obama — further evidence that Trump’s economy was merely an extension of Obama’s.
During Obama’s thirty-two quarters in office, quarterly RGDP growth averaged 1.64%; for Trump it was 1%. Obama’s best quarterly result was in the 1Q15 when RGDP growth was scored at 4.15%. Trump’s best was 3Q18 at 3.33%. Both presidents, however, dealt with severe economic trauma, Obama at the beginning of his administration and Trump at the end of his. To create greater normalization from “externalities,” let us, therefore, use an Olympic scoring technique and throw out the three highest and three lowest quarterly results for the two chief executives. Using this approach and comparing the Trump administration to Obama’s first term in office (2009–2013), Trump comes out ahead at 2.1% to 1.8%. If one instead compares Trump’s term to Obama’s second term, then Obama comes out on top 2.2% to 2.1%.
Trump entered office decrying a low economic growth rate as evidence of an “American carnage,” but if that was truly the case (which it was not), then the normal economic metrics suggest his chaotic policies and pronouncements merely added to the on-going destruction.
President Trump, however, seemingly believed that the economy was best measured by the stock market, primarily the Dow Jones Industrial Average. When the Dow hit 30,000 he rushed to the briefing room to announce it, declared no one ever imagined such a thing, and then immediately departed without taking questions. Of course, this happened on November 24, 2020, nearly three weeks after the election, so that might have indicated the market was relaxing after his electoral loss. But in any event, the Dow is, at best, a secondary and reflective measure of economic health. Nonetheless, should we accept the Trumpian view and use the Dow as a surrogate economic metric, what do we see?
In its most basic measure, the Dow during Obama’s two terms increased 148%, or roughly 5% annually (when compounded) over his eight years in office. For Trump, the Dow increased 56% during his four-year term, or roughly 12% when compounded annually. But 31% of the gain in the Dow occurred in Trump’s first year, likely driven by the expectation of the major tax cut that was enacted in late December 2017 lowering the corporate tax rate from 35% to 21%. However, during Trump’s second year in office, after the tax cuts, the Dow lost 5% and never returned to the heady gains of 2017. Indeed, in March 2020, when the scale of the COVID pandemic was becoming apparent, the Dow lost 10,000 points, among its largest loss ever. In fact, two of the five largest daily percentage losses for the Dow in history occurred in March of 2020 as the extent of the COVID challenge set in. But, somewhat ironically, March 2020 also saw two of the Dow’s greatest gains.
In general, the behavior of the Dow during the Trump administration shows it to be the relatively reactive, short-term creature we have always known it to be. But once it had recovered from the initial shock and then the recovery from COVID (a recovery that has been spottier and briefer than hoped), the Dow revealed itself to be what it is: a reflection of economic expectations rather than a measure of actual macroeconomic activity.
And of some note, to date under President Joe Biden the Dow is up nearly 15%, which is slightly greater than the average annual percentage increase under Trump. On numerous occasions during the 2020 campaign Trump stated that if Biden were elected the stock market would “crash.” So far, at least, there are no signs of that.
So, what to make of this? In early December 2017 with his tax cuts close to passage, Trump declared that with that legislation he expected economic growth of up to 6%. Such growth had not been seen since 1984, and then only briefly. Overall RGDP in 1984 checked in at 5.6% headed to averaging 3.9% during the term of President Ronald Reagan. Trump’s projection was, therefore, both ahistorical and unrealistic. Indeed, on an annualized basis Trump never even reached 3%. Evidently, he believes, or has been told, that his economic record matches his own 6% aspirations. Certainly, finding space on the wall of fake Trump trophies is no easy task.
The economic data is quite clear. The US economy during the Trump administration was, by any measure, not the greatest in US history, much less world history, as Trump often preferred to describe it. Since 1929, average US economic growth has been slightly above the 2% level that Trump decried. Excluding President Franklin Roosevelt, whose economic growth was greatly affected by huge federal stimulus spending after the depression and then enormous war spending, the RGDP growth record goes to President Lyndon Johnson at 5.2%; the worst, as previously noted, to Herbert Hoover. But just ahead of Hoover, at 1.27% is Donald Trump. That’s notable, but in the opposite way Trump depicts it.
As stated at the beginning, “In God we trust — All others must bring data.” So, there’s your data. As in so many other areas, Donald Trump’s economic record was dismal, unless one wants to conclude that the Bureau of Economic Analysis is part of the “Deep State” with the avowed mission of diminishing Trump’s achievements. But the BEA has no need for any such diminishment, Trump is perfectly capable of doing that himself.