March 11th, 2018

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What have the modern medium of Twitter, the quaint Swiss mountain village of Davos and Washington’s grand Capitol building got in common?

At first sight, not a lot; but that’s the point. President Donald Trump’s ubiquitous economic cheerleading is so constant that these three disparate items have all been used as backdrops to his hard sell.

Make America … wait
The message is simple: America is back economically; growth is up, the stock market up and unemployment is down; and the credit should go to the president. It is clear that Trump, and Republicans in general, think this is their strongest card and will repeat it relentlessly as the mid-terms approach.

That the American economy is performing strongly is not in doubt. However, it is a stretch to say all credit should go to the new administration. Most economic experts believe changes in policy take years to fully work their way through.

With this lag time, if the economy is in such rude health at the moment, the Trump administration is implicitly admitting they were handed a strong position by Obama’s team.

Obliged to Obama
A closer examination of the numbers shows this to be the case. The increase in employment in 2017 was undoubtedly good news, but actually far fewer jobs were created last year than in most years under Obama. And, whereas the unemployment rate has fallen from 4.8 to 4.1 percent, the big fall came from its peak of around 10 percent in 2010.

An Analysis of the stock market shows a similar picture – it is impressive that the Dow has risen by 30 percent since the election, but less so compared to the trebling in value under the Obama administration. Additionally, the 2017 appreciation should be seen in an international context, where other major indices, notably Tokyo’s Nikkei and Hong Kong’s Hang Seng, have shot up.

This comparison is also useful for the GDP figures. Whilst growth of around 2.5 percent for 2017 is solid, this is the same level as the supposedly sclerotic Eurozone – and significantly under other comparable developed economies like Australia and Canada.

Sold a fast one
This is not to say Trump’s policies have had no effect – his constant cheerleading may have boosted confidence, and the Republican tax cuts may provide a short-term hit (although they fail to address the major, structural issues).

Overall, though, his impact is being oversold. The administration inherited a solid economic base and has ridden mostly benign winds in the global economy since the financial crash.