The Trump Economy Is Not Working For Average Americans
At his State of the Union address this evening, Trump is likely to make grandiose claims about the state of the American economy. In just the past few months, he has claimed that the economy today is better than it has ever been, and that he has accomplished more in his first two years than any President ever. However, these claims are transparently false, and indeed, the economic performance of the US economy over Trump’s first two years has not even been better than that of Obama’s last two years, much less all of American history.
First, jobs growth. Although January’s payrolls report showing 304,000 new jobs was undoubtedly strong, we can’t let this cloud the fact that jobs growth has slowed under Trump (and indeed, monthly job growth was 300k or higher 4 separate times in 2015-16, compared to only twice in 2017-19). During the last 25 months of Obama’s second term, monthly jobs growth averaged 213,000. In the first 25 months of Trump’s term, meanwhile, it has slowed to 205,000 jobs per month.
Second, real wage growth. During the first 24 months of Trump’s term, real hourly wages have increased at a monthly average (annualized) of 0.9%. By contrast, real wages increased at a monthly average (annualized) of 1.35% during the last 24 months of Obama’s term.
Furthermore, median household income (which includes both private income and government taxes/transfers) grew by 1.76% in Trump’s first year, compared to growth of 5.15% and 3.13% in 2015 and 2016 under Obama.
Third, the deficit. When the economy is near full employment, traditional Keynesian economics would prescribe a reduction in the deficit, to provide the fiscal room for stimulus in the future. As a result, the deficit as a % of GDP fell under Obama from 9.8% of GDP in 2009 to 3.1% in 2016. Trump has reversed this trend, increasing the deficit from 3.1% of GDP in 2016 to 3.9% in 2018, and a projected 4.2% in 2019. Deficits this large while the economy is strong are unprecedented in US history. Trump’s budget deficits of 3.4%, 3.9%, and 4.2% in 2017, 2018, and 2019 will be the largest deficits while the unemployment rate is under 6% since 1950.
Fourth, the trade deficit. Perhaps Trump’s most signature promise was to end the so-called “foreign theft of American wealth” that he thought the trade deficit represented. Regardless of the lunacy of such thoughts, how successful has the President been in reducing the trade deficit? In fact, Trump’s policies have led to a surge in the trade deficit, as growth in imports has increased significantly while US exports have struggled. In June-October 2018, the average monthly trade deficit was 28% larger than during Obama’s second term.
Finally, access to health insurance. Trump promised expanded access to healthcare coverage during the 2016 campaign and argued that Obamacare was stopping people from accessing quality insurance. In office, however, Trump has down the opposite, eliminating the individual mandate, reducing federal government subsidies to individuals on the exchanges, and encouraging work requirements for Medicaid that have kicked tens of thousands off of the program. As a result, 2017 was the first year that the uninsured rate didn’t fall since 2009, and the uninsured rate actually rose by 0.3% for households earning less than $100k/year. By contrast, the uninsured rate fell by an annual average of 1.6% in Obama’s second term, and by 1.7% annually for households making under $100k/year.
After two years of the Trump administration, then, how has the US economy performed? Jobs and wage growth have fallen, even in the face of a surging fiscal deficit. The trade deficit has increased significantly thanks to Trump’s own trade policies. And the most vulnerable Americans have seen their access to healthcare worsen for the first time in a decade.