Scott Sumner  

The economic news is not good

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Friedman, Galbraith, and Wrigh... Macron, economic nationalist...

Ramesh Ponnuru has a characteristically excellent piece on recent controversies within the Trump Administration. But I'd quibble slightly with this observation:


There was also an opportunity cost to Scaramucci's remarks. Trump administration officials sometimes complain that all the good news about their work, from decent economic numbers to legislation to reform of veterans' health care, is getting lost. Those stories aren't going to get more attention when the communications director chooses to dish about his co-workers rather than discuss them.

Whether the economic numbers are "decent" is obviously in the eye of the beholder. But there is one point that should be completely beyond dispute; the economic numbers are no better than under President Obama:

1. Real GDP growth was 1.9% in the first half of 2017.

2. Job growth has been averaging 172,600/month since Trump took office in January.

3. Stocks have done well since the election.

Note that these are the indicators most often cited by people who claim the economy is doing well, and yet all three data points are similar to or slightly worse than what occurred under the final 7 years of President Obama. And the Obama record was almost universally described as "terrible" by Republicans, including Donald Trump. (Of course Obama's first year was poor, but he can plausibly claim to have inherited a mess.)

Now it's debatable as to whether the Obama economy was actually "terrible" (I'd give it a C-), but you can't have it both ways. If Republicans are going to insist that the economy was terrible under President Obama, then they should make the same claim for the current economy---recent data is no different from what we saw under Obama.

And yet I see one GOP pundit after another go on TV and insist that the economy is doing well under Trump. What is the basis for that claim?


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COMMENTS (15 to date)
E. Harding writes:

It's later in the recovery, so more credit is deserved for the same amount of growth as earlier in the recovery, as there are fewer unemployed resources now. Simple enough.

Scott Sumner writes:

E. Harding. But it isn't the same amount of growth, it's less. And it's no more growth than was forecast (by the consensus) when Hillary was expected to win.

In the past several recoveries, growth was not much different early as compared to late. Sorry, but I just don't see much change this year.

Mark writes:

If one believes we are approaching secular stagnation, one could argue that it's apples and oranges: we should expect growth to decline over time regardless.

Alternatively, (and I think this is fairly true) one could argue Obama's principal failure was mishandling the recovery; that it was too slow; not that there's much wrong with where we finally ended up.

It is worth noting that popular political discourse on the economy is basically just rain making:in reality though presidential policy often has no immediately observable effect, and what is observed oft n has nothing to do with presidential decisions. Imo, one of Obama's worst errors was increasing the regulatory burden and Trump's biggest fear so far is (in as much as it has been done) undoing Obama era regulations. But the effects of these actions are not likely clearly visible in statistics we see in the short run; it doesn't produce a number going up or down to brag about to the press.

Thaomas writes:

Judgments about an administration's effect on growth, just like predictions about it, ought to be made conditional on monetary policy policy policy being perused at the time (except as in the case of FDR going off gold when the monetary policy was a result of administration policy). This makes most comparisons totally senseless.

A more useful (but obviously difficult) comparison would be, assuming optimal monetary policy (or some given non-optimal policy), what was the effect of administration policy. This still leaves changes in expectations (of changes in policy) on the side of administration effects. This is still tricky if the non-optimal monetary rule incorporates administration action or inaction.

Ray writes:

How's labor force participation (this really tanked under Obama for reasons well beyond just an aging workforce)?

It's far too early to be judging the new administration's economic performance. Nothing significant has really changed policy-wise yet, save for perhaps some optimism that he'll continue pulling back on regulations.

Tom West writes:

Given the range of realistic political options available in the last 30 years (which, admittedly, may have opened up considerably in the last 6 months), just how much do you think the Federal government can affect GDP 6 months after entering office? 2 years?

My answers would be +/- 0.1% after 6 months and +/- 0.3% after 2 years, but I'm curious as to what those schooled in economics think.

Gordon writes:

I agree it's very hypocritical. But you're probably tilting at windmills, Scott. Partisanship on both the left and the right causes people to engage in all sorts of cognitive dissonance so that they never recognize their hypocrisy. I wish most people would treat all politicians and all political statements with a healthy dose of skepticism and avoid drinking the partisan kool-aid. But I suspect that I'm more likely to end up building a snowman with Lucifer before seeing that happen.

Garrett M writes:

If Obama's full term economy was a C-, could you give some examples of what you'd consider A's, B's, C's, F's, etc. through the last ~50 years? Doesn't have to just be US regimes.

Steve F writes:

Do you think that the Fed's brand new dovishness on consistent interest rate increases plays a part?

Brian writes:

Scott,

I agree that Trump and his supporters have nothing to crow about, except perhaps whatever role he has played in the vigorous stock market rally. But that's because presidents have little impact on the economy in general (in my opinion). That said, giving the president credit is part of the political game, and here I think Trumpsters have a point. During the Obama presidency the media wasted no time in accepting the administration claim that the bad economy was "Bush's fault" and was quick to credit Obama for the recovery. Not surprisingly, the media now either ignores the good(?) news to focus on Russia, or it pretends to debunk Trump's claims about the economy.

I guess the bottom line is that we shouldn't expect partisans to be unbiased, but the media have a professional responsibility to at least try to be unbiased. I haven't seen much evidence of that.

Mike Rulle writes:

I often wonder whether extended slow growth may not be so bad, as long as it continues at longer time frames than normal cycles.Maybe Obama was not so bad.

As far as Trump causing good in the economic sphere, since nothing has changed, he has not caused it to be worse. The big failure in GOP was not changing Obamacare. While, perhaps, a more engaged president (Obama was not engaged in ACA) might have accomplished more, look how hard it was for Reid to pass the bill with a 59 vote majority. Reversing major "give aways" is really hard as is rather obvious in this and other spheres.

One of your commenters above suggested doing some historical analysis. One of the things that seem to be true is that neither party on average is better than the other for either GDP growth or stock market growth

DH and John Cochrane had a common sense piece in WSJ, repeated by many, on climate change policy. It would interesting if such writers would also comment on who benefits by these policies, given they are merely de facto wealth transfers. I am mildly encouraged the US electorate has yet to fall for this Trap.

Trump looked crazy with the Scaramuchi (sp?) apointment but good with the Kelly appointment. Could be deck chairs. He has been in office 6 months and has at least made some deregulation noise. But given the intelligentsia's unprecedented attacks on him, we don't know what the counterfactual would have been. His style is kooky, but not sure his substance is that off center from most of his predecessors.

Thaomas writes:

@ Mark Rulle

What was the replacement of ACA that you prefer and how does it affect long run economic performance.

rtd writes:

"And yet I see one GOP pundit after another go on TV and insist that the economy is doing well under Trump. What is the basis for that claim?"
Precisely the same basis that democrat pundits gave in pushing the ridiculous "Obama Recovery" narrative. The true basis for such claims is that Bernanke & Yellen do not have lobbyists...

MikeW writes:

What about this?

https://www.wsj.com/articles/as-washington-stalls-company-profits-keep-trucking-1501423201

(This is not an assertion on my part. I'm wondering whether you would count this as the kind of good news you're talking about.)

Maximum Liberty writes:

The late Obama economy was and the current Trump economy is excellent, by comparison to the nightmare that the economy would have been if either of those Presidents had been able to implement their desires by decree. Three cheers for Congressional obstructionism! Yay, deadlock!

Max

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