Monday, July 13, 2020

The big lie Donald Trump is depending on to pull him through


In the wake of this week’s jobs report, Donald Trump is back on offense. “We’re going to make America great again… doing things that nobody could have done,” he boasted in the comfortable confines of an interview with the Sinclair Broadcast Group. He had planned all along to run on the economy, and he is not going to let the coronavirus — or the facts — get in his way.

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It is hard to imagine that the American electorate is going to overlook Trump’s myriad failures across a broad spectrum of issues — at home and abroad — but the simple truth is that, as of now, at least 40% of the country seem to be fine with his performance. That means that all that has transpired — including the abject failure of the United States to deal with the coronavirus pandemic, as summed up by the graph here — has only moved the needle by five points or so, from his general approval rating in the mid-40s over the course of his presidency to where it stands today.

Back in 1992, Bill Clinton’s political consigliere James Carville famously pointed out that while other issues may come and go, on Election Day, It’s the economy, stupid. Carville’s words remain a political mantra that politicians ignore at their peril, and a wild card for the Joe Biden in November. For all the positive polling news that has come Biden’s way over the past several weeks, the dirty little secret remains that the electorate continues to give Donald Trump the edge when it comes to handling the economy.

If anyone doubted that the Trump campaign plans to put the economy front and center over the coming months — even in the face of pandemic-induced economic turmoil –White House Press Secretary Kayleigh McEnany cast those doubts aside. “The President will always point to the difference between his record and that of President Obama,” McEnany commented on Tuesday. “You had, on the one hand, the Obama-Biden presidency, the weakest economic recovery since World War Two. With President Trump, we got to the hottest economy in modern history.”

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‘I created the greatest economy in history,’ the President likes to say these days. ‘I did it once, and I can do it again.’ For those who have drunk the Kool-Aid, Trump is a businessman extraordinaire, an economic mastermind who took over an economy that was dead in its tracks, cast his magic spell, brought manufacturing jobs back home, and produced the lowest unemployment rates in history.

This is a myth, however, just part of his continuing con man act. As the graphs here illustrate, rather than representing a transformation from the American Carnage that he announced in his inaugural address, the “Trump economy” was a linear extension of the steady economic expansion that followed the 2008 global financial collapse. Restoring manufacturing jobs — perhaps the sine qua non of Trump’s promises to his white working class supporters — is a case in point. While Trump boasted this week that “We’ve got to bring back our manufacturing, and I’ve brought it back very big,” as this graph illustrates, manufacturing employment bottomed out in the wake of the 2008 global financial collapse and has grown on a consistent trajectory since 2010.




The highpoint of the President’s hubris surrounding manufacturing jobs came with the 2018 announcement that Foxconn — the Taiwan electronics manufacturing giant that makes iPhones in China — would build a new manufacturing plant in Wisconsin creating 13,000 high tech manufacturing jobs. Since the Foxconn investment was announced — which the President attributed to his personal relationship with Foxconn CEO Terry Gou — the cost in public subsidies per job created has skyrocketed, from an initial estimate of $231,000 per job to over one million dollars per per job, as the number of anticipated new jobs created declined by 90%.

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The myth of Trump-as-economic-wizard extends as well to his claims to having created the lowest unemployment rates in U.S. history. During his 2016 presidential campaign, Trump repeatedly claimed that the unemployment rate across the country was 20% or higher, despite what official figures might suggest. It was a central element to the American Carnage theme. Having convinced his followers that he inherited a moribund economy, the swift recovery was all the more spectacular.

Macomb County, Michigan provides a case in point. Macomb County’s white working class voters — labeled “Reagan Democrats” by Democrat pollster Stan Greenberg — were successfully targeted by Bill Clinton in his 1992 victory over George H.W. Bush, while Donald Trump won the county by 12 points in 2016.

The county is emblematic of communities in the Midwest that saw an economic turnaround under Barack Obama, but who to this day credit their good fortune to Donald Trump. As shown in this graph, the unemployment rate in Macomb County peaked at 18.3%, five months into Barack Obama’s first term, and then began a steep decline to 4.6% on the day that Donald Trump beat Hillary Clinton.

Then, as illustrated here, from Election Day 2016 to February 2020, the period of the widely trumpeted “Trump economic miracle,” the unemployment rate in Macomb County declined at a more modest pace, from 4.6% to 3.6%. The economic transformation of Macomb County, like much of the Midwest, took place under Barack Obama, yet through Trump’s consistency in driving the narrative, many to this day will point to those results as a product of the Trump economic miracle.

Macomb County is a microcosm of the nation economy. This next graph shows the trends over the course of the past four presidencies of the national unemployment rate, along with the unemployment rates of African American and Hispanic or Latino workers, as well as the “U-6” rate for what are referred to as “Marginally Attached” who may be working part time but prefer full time. The data here across categories mirrors those of Macomb County.

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During the Trump years, from Election Day 2016 to February 2020, the unemployment rate nationally declined from 4.7% to 3.5%. In contrast, over the course of the Obama presidency, the rate declined from a peak of 9.9% in November 2009 to 4.7% on Election Day 2016. The unemployment rate for Blacks and Hispanics or Latinos — a particular Trump talking point — shows similar trends, with most of the post-2008 decline taking place before Donald Trump took office.

As in the case of manufacturing employment, the improving trends over the course of the Trump presidency were the last stage of a long economic expansion. If anything, the downward trend in unemployment abated somewhat during the the Trump presidency — though this slowing pace could be accounted for by a plateauing of the long decline in workforce participation rates, a logical trend toward the end of an economic cycle.

If there is anything particularly unique about the Trump economy, it was the decision to cut taxes during the highpoint of an economic cycle.

In a normal world, tax cuts are a tool for stimulating an economy as it is slowing down or in recession — the tax cuts early in the presidential terms of JFK and Ronald Reagan are classic examples. In contrast, the Trump tax cuts were from the outset about politics rather than economic policy. Republicans had continued to deride the economic performance of the Obama years — despite the fact that unemployment rates and federal deficits were each steadily declining from peak levels in the wake of the 2008 crisis — and Donald Trump promised the huge tax cuts as a campaign pledge.

As illustrated in the graph here, the Trump years have been unique, as for the first time in a half-century, deficits have been increasing even as unemployment rates were continuing to fall, in contrast to every other economy cycle over the past half-century, where deficits decline as unemployment rates fall during periods of economic growth.

The Trump tax cuts did, however, provide a Keynesian crack hit of sorts during the end of the long period of economic expansion, driving unemployment rates to historically low levels, despite being grossly irresponsible fiscal policy.

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At the end of the day, the hallmark of Trump’s claim to economic wizardry is about economic growth. Yet again, his claims are not backed up by historical data. As shown in the last graph here, the pace of economic growth over the course of the Trump presidency has not been extraordinary, certainly no different than during other recent presidencies. As in so many things Trump, his claims to economic wizardry is all spin and self-promotion, with little regard for the evidence. Donald Trump was in the right place at the right time. He delivered his promised tax cuts, cut regulation for those who gave him money, and took credit as the economic expansion that began in the wake of the Great Recession continued to roll on.

This week, relishing economic data that showed a sharp bounce off the lowest floor of economic statistics in history, the President complained to anyone who would listen that he was not being given enough credit for the second economic miracle transpiring on his watch. As bad as things might seem out in the real world, this is a refrain we will hear from now until November, for the simple reason that it is all he’s got.

The Biden campaign and others hoping to see a new president in the White House next January ignore Trump’s claims at their peril. While the economic data may not back up Trump’s claims, polling data continues to suggest that this is the single area where voter give the President higher marks than Joe Biden. If that remains the case on Election Day — as James Carville observed long ago — that single factor could end up determining who wins the election.

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