Perhaps it shouldn’t be surprising that President Trump was wrong when he tweeted recently that the U.S. economic growth rate is higher than the unemployment rate «for the first time in over 100 years!» This has actually happened many times during the past century, even as recently as 2006. Statements like these from Trump are full of hyperbole at best, and easily disprovable factoids at worst. It’s almost like the American president cares little about the accuracy of his words, on Twitter or elsewhere. Indeed, no one should view Trump’s tweets as a reliable source of economic data.
But it’s not just the country’s top Republican who has trouble giving the straight story. President Obama recently suggested that Trump’s «economic miracle» is happening courtesy of Obamanomics. Conservatives countered by blaming Obama’s policies for the weak recovery and crediting Trump’s election for its acceleration. As longtime conservative policy analyst Peter Ferrara wrote in a Wall Street Journal op-ed, «The recovery took off on Election Day 2016, as the stock market communicated. Mr. Trump’s tax cuts and sweeping deregulation — especially regarding energy — fundamentally changed course from Mr. Obama.»
While that hot take may be consensus opinion on the right, there are lots of problems with it. First, there’s mixed evidence the strong economy has broken decisively from its Obama-era trends. For instance: Trump’s election seems to have given a boost to business and consumer confidence numbers — though the second-longest expansion in U.S. history is probably helping, too. Then again, monthly job growth during the Trump presidency has been a bit lower than during Obama’s final two years in office. And while GDP growth has accelerated, that’s just what pretty much every Wall Street economist has been predicting given all the federal spending and tax cut stimulus feeding into the economy. We won’t know for at least a year or two whether the Trump growth spurt is anything more than that.
Second, the best measure of whether there’s been a fundamental change in the economy’s pace and course is productivity growth, which is the key to higher living standards over the long term. Productivity growth downshifted hard in 2005 — pre-Obama, pre-financial crisis — and then barely grew over the course of the recovery. Only since summer 2016 has it perked up somewhat. It’s going to have to do a whole lot better if the economy is going to grow anywhere near as fast in the future as it has in the past given slower workforce growth. No record-setting productivity growth, no miracle economy.
Third, blaming Obama as the main cause for a historically weak recovery is a problematic narrative, though handy for «owning the libs.» Lehman Brothers declared bankruptcy a decade ago this week, shocking the global economy. Now generally the worse a downturn, the stronger the subsequent upturn — like plucking down on a guitar string, as Milton Friedman famously analogized. This perfectly describes the bad 1980s recession and subsequent «Reagan recovery.» But research suggests recessions accompanied by systemic shocks to the banking system and housing market are different: Recoveries are painfully slow, just like the one the American economy went through. As Goldman Sachs sees it, «The post-2008 U.S. recovery has not been unusually weak or prolonged relative to other financial crisis episodes.»
So should Trump offer an unironic «Thanks, Obama»? Well, a 2017 research review by the Philadelphia Fed found it likely that «the economy did indeed grow more than it would have without the [2009 Obama] stimulus but likely not as much as it might have with a different type of stimulus.» So that’s something.
But both presidents number 44 and number 45 should definitely give a shout-out to the Bernanke (and later Yellen) Federal Reserve. The Fed’s creative response helped avoid a full-on second Great Recession and reduced unemployment faster than otherwise. And there might have been a double-dip recession in 2013 were it not for a third round of Fed bond buying, known as quantitative easing. Republicans don’t talk about any of this, since they’ve continually blamed the Fed for risky «easy money» policies that would surely lead to dangerously high inflation — which, you know, never happened.
This is about more than fact checking. There surely will be another bad recession in the future, maybe even another global financial crisis. And government might have to respond in controversial ways. It would be helpful if both politicians and voters clearly understood what happened the last time the economy tanked and how the worst was prevented — even if it undermines your party’s favorite talking point today.