There is hardly a subject that generates as much criticism as the contribution of Donald Trump to the U. S. economy. His proponents claim that his presidency brought in historic growth, job creation and better American industries. The critics respond that much of the economic success was inherited under the Obama era or that trade wars and the pandemic recession were overshadowing the success.
So, which is it? Did Trump achieve economic boom legitimately or was it more a political story? We can deconstruct it with actual data and historical events.
The Trump Economic Landscape Trump Inherited.
By January 2017, when Donald Trump assumed office, the U.S. already was on a long-term recovery after a Great Recession in 20082009:
The rate of unemployment had decreased down to 4.7% (2011).
The stock market was stable and increasing.
The rate of GDP growth was coming out of recession at a medium rate.
The confidence of the consumers was on the rise.
Interest rates remained low
This is important since Trump economy did not begin with crisis as Obama did or even Biden, the Trump economy began half way through growth. Part of the problem is to distinguish continuation and acceleration.
The major Economic Policies of Trump.
The agenda of Trump was based on:
✅ 1. Tax Cuts
The 2017 Tax Cuts and Jobs Act:
Lower corporate taxation rate of 21 instead of 35.
Offered temporary tax cuts on individuals.
Businesses were encouraged to get profits within the U.S. back.
This increased investment and wages according to the proponents. Critics hold that it increased the national deficit massively, and favoring corporations and high-income households disproportionately.
✅ 2. Deregulation
Repealing or scaling back hundreds of federal regulations, especially in the energy and finance sectors, was supposed to:
Lower business costs
Spur growth and recruiting.
Consumer and environmental activists had cautioned of long term risks against short term benefits.
✅ 3. “America First” Trade Policy
China, steel and aluminum tariffs were aimed at:
Reduce foreign imports
Revive U.S. manufacturing
However, this gave birth to retaliation of the other countries and increased prices among farmers, manufacturers and consumers.
The Economic Growth under Trump: The Numbers.
Prior to the onset of COVID-19, which occurred at the beginning of 2020, the economy experienced:
GDP growth averaging ~2.5%
Lowest unemployment (3.5) in 50 years.
Highest performance in the stock market.
They are hard-earned successes. But context is key:
Measure Obama Final 3 Years Trump First 3 Years.
Annual GDP Growth Average 2.3% 2.5%
Unemployment Decrease 6.6 percentage to 4.7 percentage 4.7 percentage to 3.5 percentage
Stock Market Growth (S&P 500) +46% +42%
(℁) Data conclusion: More of a growth than a transformation.
Although still impressive, not dramatically different to the trendline of the past.
Wages and Employment: One-sided Story.
✅ Gains
The rate of wage increase increased, particularly among the workers with low income.
The blue-collar jobs such as construction became available.
The low unemployment rates among black, Hispanic and Asian Americans were all time low.
❌ Limitations
By late 2019 the manufacturing employment leveled off.
There were numerous new jobs in service industries which were low paying.
Income inequality widened
Employees received higher wages- not all equally.
The Trade War: Help or Harm?
China was termed by the Trump administration as a significant economic threat.
Some outcomes were positive:
Increased pressure on China on intellectual property theft.
There were those companies that have moved supply chains out of China.
But repercussions were expensive:
The farmers of U.S. lost major export markets.
Companies experienced increased prices of inputs.
The uncertainty retarded investment.
The federal subsidies on the failing agricultural industries were billions, a concession in itself that tariffs hurt American producers.
Business Investment and Federal Deficit.
Corporate investment was supposed to be stimulated by tax cuts but the returns were poor.
Business Investment Trends:
Brief surge in 2018
Considerable losses later because of trade conflicts.
Meanwhile…
Federal Deficit Spiked:
Since 2016, when it was at least 585 billion, to more than 1 trillion by 2019.
Mostly from lost tax revenue
Economists were divided:
Others claimed that deficit spending contributed to economic growth.
Others cautioned that it would be placed on the future generation.
COVID-19: A Pivot that No one wanted.
The pandemic altered the world:
Measurement Pre-Pandemic 2020 Post-Shock Pandemic.
Unemployment 3.5% 14.7%
GDP Continuous gradual increase -3.4 percent decline.
Stock Market Historical highs Big volatility.
Even the critics admit that this collapse was not made by Trump…
However, this did not prevent the economy to go into recession in his last year.
Stimulus measures by the government were used to bail out families and business, and they further increased the national debt.
Did Trump bring Economic Boom?
It has to do with whom you ask–and what measure you take.
✅ Arguments Saying Yes
Pre-COVID-19 record low unemployment.
High GDP growth in comparison with other developed countries.
More optimism among most business owners.
Historic highs in stock market.
The advocates point out that Trump boosted economic confidence and inclined himself to business expansion.
❌ Not Exactly Arguments.
The growth was more of a continuation of already-improving economy.
Trade wars hurt the industries in the U.S.
The number of deficits increased without long-term revenue fixes.
The wage inequality was still high.
Opponents claim that the policies by Trump gave a temporary increase that had long-term debts.
The Decision: Myth and Reality Can Coexist.
Therefore, was the economic boom of Trump a myth or a reality?
📌 Reality:
Even prior to the pandemic, there were objective and quantifiable improvements particularly on jobs and market performance.
📌 Myth:
The assertions of the greatest economy in history are hard to prove by numbers. The growth was not an unprecedented one.
The Trump economy in reality can be explained as:
An extension of the long-term recovery wave – temporarily boosted by tax relief and deregulation – shaken by trade war and a once in a century pandemic.
As new information will be revealed, history will continue to evaluate the economic legacy of Trump. As far as I can reasonably conclude, both parties are right.
