“President Trump would need a magic wand to get to 4% GDP,” stated President Obama. I guess I have a magic wand, 4.2%, and we will do MUCH better than this! We have just begun.
— Donald J. Trump (@realDonaldTrump) September 10, 2018
I don’t think President Trump has a magic wand with which he controls the economy, but the debate between the president and his predecessor over who should get the most credit for today’s strong economic performance suggests some people might. It highlights the extent to which the public debate overstates the effect a president can have over the state of the economy.
Of course, that effect is not zero. So how much credit does President Trump deserve? I offer an answer to that question in my latest Bloomberg column.
Mostly, the Trump economy is a continuation of previous trends. The unemployment rate began to decline during President Obama’s first term in office. GDP grew at an annual rate above 4 percent during several quarters while Obama was president. Over President Trump’s 19 months in office, the economy added an average of 189,000 jobs per month. During the final 19 months of the Obama presidency, the economy added 208,000 on average each month.
Having said that, President Trump likely does deserve credit for a spike in small-business optimism. Currently, small-business owners are more optimistic than they have been in nearly half a century.
And the president has increased GDP growth through fiscal stimulus. Given the strong economy, stimulus is ill-advised, but it has juiced the growth rate.
But the president’s overall effect on the economy remains to be seen. On the plus side of the ledger is the new tax law, which — despite what you’ve heard from critics — should increase investment, productivity, and wages. On the minus side are a host of threats to prosperity, including racking up debt, refusing to tackle middle-class entitlements, harmful trade policy, crony capitalism, and attacks on international institutions.
Check out my full argument over at Bloomberg. Your comments, as always, are very welcome.