The Economist - USA (2020-10-17)

TheEconomistOctober 17th 2020 21

1

I

n his newbook Casey Mulligan offers an

intriguing explanation for why President

Donald Trump makes outlandish eco-

nomic claims. Mr Trump knows he is hy-

perbolising when he says that America has

enjoyed “the greatest economy in the his-

tory of the world” on his watch, suggests

Mr Mulligan, who was until recently the

chief economist on the president’s Council

of Economic Advisers. It is a “strategy for

getting the press to cover a new fact, which

is to exaggerate it so that the press might

enjoy correcting him and unwittingly dis-

seminate the intended finding”. Journal-

ists’ dislike for Mr Trump, according to Mr

Mulligan, blinds them to many of the ad-

ministration’s genuine economic success-

es. He may have a point.

Assessing leaders’ economic records is

fraught with difficulty. Presidents typically

get credit when the economy is doing well

and blame when it does badly—but short-

term economic outcomes are usually more

influenced by central banks, demography

and what is happening in the rest of the

world, among other factors. Even today,

political scientists continue to argue over

whether the economy in the 20th century

did better under Democratic or Republican

administrations. All this is of little use to

the American public, whose vote for a pres-

ident must be based, in part, on a real-time

assessment of economic competence.

Mr Trump came to power with unrealis-

tic promises to create 25m jobs and super-

charge economic growth, and to that end

cut taxes and boosted spending, widening

the fiscal deficit (see chart 1). Economists

will continue to weigh up the specific costs

and benefits of those policies. A true evalu-

ation will take some time. At present, how-

ever, it is possible to assess whether the

American economy overall did better or

worse under Mr Trump. That involves com-

paring actual American economic perfor-

mance, on the one hand, with what an im-

partial spectator could reasonably have

expected, on the other. To that end The

Economist has gathered a range of eco-

nomic data, from business investment to

wage growth, wherever possible compar-

ing American economic performance to

that of other rich countries.

The bulk of the analysis covers the per-

iod from 2017, when Mr Trump took office,

to the end of 2019. We stop in 2019 in part

because some data are released only annu-

ally, and in part because the pandemic has

turned economies across the world upside

down. Our conclusion is that, in 2017-19,

the American economy performed margin-

ally better than expected. (That conclusion

remains if we follow the practice of some

political economists, who argue that the

influence of presidents on the economy

can be discerned only after a year in office,

and limit our analysis to 2018-19.)

Take gross domestic product (gdp), a

measure of output which is the most com-

mon yardstick of economic performance.

gdpgrowth was somewhat faster in 2017-19

than it was in either Barack Obama’s first or

second term, according to official data.

America also did well relative to other

countries. The world economy peaked in

2017. In 2018 it slowed but America acceler-
      ated. In 2019 America slowed too, but
      stayed ahead of others.
      Another way to look at this question is
      to assess whether America in 2017-19 ex-
      ceeded or fell short of economists’ expecta-
      tions (see chart 2). In October 2012 the imf
      forecast that in the subsequent four years
      (those of Mr Obama’s second term), the
      American economy would grow by an an-
      nual average of 3%. In fact that proved to be
      too optimistic; it actually grew by closer to
      2% a year. But the imfwas too pessimistic
      in its projections for 2017-19, released
      shortly before the election of 2016. In those
      years America outperformed the forecasts.
      But if the American economy did better
      than expected in some respects, it disap-
      pointed in others. Take the corporate sec-

Trumponomics

Watered with liberal tears

How the American economy did under Donald Trump

United States

22 AmyConeyBarrett

23 NewYorkandcovid-19

24 ElectionsinMaine

25 Far-rightextremism

26 Lexington: Jaime Harrison

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