The Trump Wirtschaftswunder? Hardly.

Trump and his true believers make outrageous claims that he has created the best economy in history.  Let’s do a little analysis of those claims.

Let’s take a look at some of the trends.  First, job growth.  The job growth under Trump has been impressive and continuous, but it is continuing a trend that started under Obama and has continued now for 106 months straight.  Here is a graph that depicts that continuous growth:

Looking at the average change, the part of 2019 in this report saw the slowest increase in employment — an increase of 167,000 jobs each month — since the 86,000 added each month on average in 2010. Trump’s overall monthly average is higher than Obama’s, but the average monthly job increase under Trump has been slower than it was in Obama’s second term.  So job growth under Trump is fine, but not worthy of superlatives.

The second, and related, area to analyze is unemployment.  Here is the Bureau of Labor Statistics chart for unemployment since 2010:

Unemployment is at historically low levels, but it is clear from this chart that the decline is a continuation of a steady decline since the start of the recovery in 2010.  Nothing extraordinary here.

The third area to look at is general economic growth – generally considered to be characterized by real GDP.  Here is a chart of real GDP growth from 1990 to 2018. 

The statistics for 2019 are similar, with 3.1% in Q1, 2.0% in Q2 and 2.1% in Q3 and Q4 for an average growth rate of 2.3% in 2019.  The overall for 2018 was 2.9%, powered primarily by a sugar high from the 2017 tax break.  These results indicate a stable growing economy, but they are hardly indicative of the astronomical growth that Trump predicted both before his election and after his tax breaks were initiated – predictions from 4% to 6%.  And they are certainly not evidence, as Trump claims, of the best economy in history!

The last category that I will look at is the stock market and corporate earnings.  This is an area where Trump can truly claim to have made a big impact.  The Dow Jones Industrial Average (DJIA) has increased about 60% from 17,900 in early November 2016 to approximately 28,800 today.  Corporate profits also soared after the Trump tax break, though not in the same proportion as the stock market increases. 

There is no doubt that people who benefit from equities are much better off (on paper!) today than in 2016.  However, only a small percentage of Americans invest in the stock market.  A greater percentage will benefit because their 401k’s are in the stock market, but a majority of Americans have NO benefit from stock market increases.

So the economy is doing well under Trump, but certainly not as well as he and others claim.  And there are some disturbing statistics underlying these economic gains that could foretell trouble ahead.

Trump has repealed numerous regulations to stimulate the economy.  It is impossible to evaluate the effect of those regulatory changes on the numbers, and it is also impossible to predict the environmental and financial consequences of those regulations no longer being in place.  Suffice it to say that in the past the relaxation of regulations has generally resulted in bad behavior that has serious repercussions for our society.  There is a balance in maintaining a ‘free market’ and protecting the society from bad actors with regulations.  I would guess that Trump has caused the pendulum to swing too far in the laissez faire direction and there will be a price to pay in the near future.

Trump also pushed through major tax breaks, both for corporations and for individuals.  These tax breaks are the mirror side of the stimulus spending that Obama attempted throughout his presidency.  Obama was stymied because of deficit hawk opposition.  Those same hawks remained astonishingly silent as Trump increased our annual deficit to over a trillion dollars (expected deficit for 2020).  Here is a graph of the budget deficit growth as a % of GDP from 2015 to 2019:

  

The deficit was $585 billion in 2016 and was $984 billion in 2019.  That is a 68% increase in the deficit!  The tax break was sold to the public as a break-even deal because the increased revenue from growth would offset the expenses, but that simply did not occur and there is no indication that it will occur in the future.  Trump has traded potential long-term economic ills for short-term economic gains.  The sugar pill that the tax break gave to the economy may wear off very soon.

I will not address in detail the other major Trump initiative of using tariff wars to stimulate the economy and bring industry back to the U.S.  However, it is interesting to note that our trade deficit has actually increased by 30% since Trump took office.  

And manufacturing production has been on a steady decline - hardly the promised ‘made in America’ revival that Trump promised! 

And one last point – the revival of the coal industry, a major platform plank for Trump in 2016, has not occurred.  Coal consumption has dropped about 22% since Trump took office.  It will not return – you can take that to the bank!

So the Trump Wirtschaftswunder is not quite so wonderful or miraculous after all.  The economy is in good shape, unemployment is at record low levels and the stock market is booming.  But these are not entirely attributable to Trump (except perhaps the stock market), and the budget deficit, stock market bubble and manufacturing languor seem to me to be dark clouds on the horizon.

Admittedly, I am not a Trump fan, in fact I detest the man and feel that he is the very antithesis of a good leader.  I believe he has built a house of cards in the last 3 years and I fervently hope that it comes crashing down on him before the election later this year.  Otherwise it is quite possible that a Democratic president will once again inherit (a la Obama) the wreckage of a Republican president’s tenure.  We shall see.