Assessing The “Success” Of The Trump Economy On Debt, Taxation, and Employment
By David Metcalfe
December 11, 2019
A huge aspect of Trump’s campaign for president was based on the idea that he could improve the economy. I want to go over a brief review of how some of these things have turned out. Trump repeatedly brags about the current success of the economy under his leadership (mostly via Twitter). The Trump administration adamantly makes claim of its economic successes, especially regarding job creation. In a “Fox and Friends” interview in the summer of 2018, he said,
“It’s said now that our economy is the strongest it’s ever been in the history of our country, and you just have to take a look at the numbers.”
So, I will take his advice to “look at the numbers” on a few of the things that seem to come up the most often in media discourse lately: national debt, lowering taxes, and unemployment rate.
“Eliminate The Deficit”?
One promise Trump repeatedly made during his campaign and entry into office was to eliminate the deficit, claiming that Obama was overspending during his term, and he would simply reduce spending and stop the deficit. But the reality has proven differently, and the deficit has actually increased since Trump took office, as shown here:
The numbers in 2009 were the highest, at the beginning of Obama’s term. But this was during the Great Recession, which began at the end of 2007 during Bush’s term, and Obama had not enacted any policy yet when the recession came in full swing. In order to alleviate the effects of the recession, the Obama administration enacted stimulus spending- a common idea in Keynesian Economic Theory. It temporarily drove up the deficit, but nevertheless, the deficit returned to a normal level once the recession came to an end.
The increases in deficit under Trump, however, have nothing to do with a recession. The economy, as typically occurs after a recession, is now on the upswing. And yet, somehow Trump is managing to increase the deficit every year anyway. Does an economy running an increasing deficit during an economic boom sound like the “best economy of all time”, as Trump so often claims?
How Has Trump Increased The Deficit During An Economic Boom?
Here is a graph showing revenue (inner circle) and expenditure (outer circle) of the United States last year:
Revenue is through taxes, so decreasing taxes will decrease revenue. Trump cut taxes for corporations from 35% to 21% in the beginning of 2018, and gave a variety of universal tax cuts and exemption changes to regular income earners (see Trump Tax Plan). The plan cuts taxes for the richest the most, both in crude numbers and percentage. As a result, tax revenues are down, contributing nearly 2 trillion dollars to the deficit over the next 10 years, according to the Congressional Budget Office. As that article in the previous link goes on to say, the Trump administration actually added to spending by 300 billion dollars per year.
With continued tax cuts and increased spending, the Trump administration is on course to run the highest deficit in US history, in the midst of an economic boom, no less. If the economy starts to turn, the effects could be disastrous.
Is Trump “Creating Jobs”?
Republicans often say that while lowering taxes does temporarily increase the deficit, they create jobs, because companies are able to hire more employees with the extra money they keep. One important limiting factor in why this does not happen much is because companies will merely buy back their own stocks, which increases money going to wealthy shareholders, exasperates wealth inequality, and creates essentially no jobs.
But the crude numbers for unemployment look favourable. They were at about 4.2% when Trump took office at the start of 2017, and are now around 3.6%, for an approximate reduction of 0.6%. However, when we look at the graph for unemployment rate:
It shows that the unemployment rate was at around 8% when Obama took office at the start of 2009, then it rose to 10% at the height of the recession, and then it decreased to 4.2% by the time Obama finished. This means that Obama decreased unemployment about 10x as much as Trump. In addition, the trajectory of unemployment was already set to continue decreasing, and it already was before Trump’s tax cuts took effect.
Although America is currently enjoying the upswing of the economic cycle, and is seeing healthy unemployment rates, the Trump administration is managing to run a massive deficit, due to decreasing tax revenue and increasing spending. In addition to increasing the deficit, their tax cuts have significantly favoured wealthy individuals and corporations over the lower and middle class.
It is possible that Trump’s insistence that the economy is doing “the best in history” is not only due to his desire to be considered the best president of all time, but also because he really does believe that an economy that benefits wealthy people, like himself, is what makes the best economy. It is true that the extremely wealthy are benefiting from Trump’s economic reforms, but in a constitutional democracy, national policy is supposed to be in the best interests of all people as a whole. It is up to the American people to see through the half-truths and warped data being presented by the Trump administration, and to vote in their own best interest going forward.