Has Trump Saved the U.S. from Obama’s Economic Disaster?

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“Did you hear the latest con job? President Obama is now trying to take credit for the Economic Boom taking place under the Trump Administration. He had the WEAKEST recovery since the Great Depression, despite Zero Fed Rate & MASSIVE quantitative easing. NOW, best jobs numbers ever. Had to rebuild our military, which was totally depleted. Fed Rate UP, taxes and regulations WAY DOWN.”

@realDonaldTrump, Feb 17 2020

President Trump has bragged incessantly about how he saved the economy, like the Phoenix rising from the ashes of President Obama’s scorched earth. Well, never mind the military, whose budget has been slightly increased under Trump – which may not be such a good thing, after all. Let’s briefly look at those other four much more important aspects of the economy: stock market performance, GDP—including unemployment rates—and the national debt. Then we can come to a conclusion.

Stock Market Performance

Actually, let’s start with a little history. The GOP has for decades trumpeted their positive effect on the economy, especially as exemplified by the stock market. Has the market performed significantly better under Republicans? Let’s go back to 1929, the middle of the Great Depression, for some perspective.

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According to this chart, no, not at all. In fact, the market seems to have fared far better under Democratic presidents than under the regimes of Republicans. Therefore, yet another Republican myth bites the dust. Mind you, the caveat is still to come.

But, back to Trump’s boast, the stock market’s performance has been one key way in which he views his success as a President. After well over a hundred tweets on the topic, on February 19, 2020, he tweeted about the stock market hitting a record. This is one of the few times he has been correct. However, it has since that time radically tanked. As to the caveat, when the economy is undergoing tremendous disruption, such as during this pandemic (and also such as when Obama was trying to help the U.S. recover from the Great Recession of 2008), no president can keep the stock markets from declining on a short-term basis.

So how did Obama, and recently Trump, impact the market during their relative presidencies?

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As we can see, their growth rates on the overall market look pretty similar. However, if one looks at the trough that Obama started in compared with the robust economy Trump inherited from him, the health of the market looks much more impressive during the Democrat’s tenure. If we actually viewed a chart that shows where the market was when Obama left office and where it has gone since, the graph is actually pretty much a simple continuation of the previous trend.

But let’s look at even more important figures in relation to the overall economy, those that impact the average person far more than the stock market.

GDP and Overall Economic Growth

After it bottomed out early in 2009, growth was understandably lackluster, but it significantly picked up in 2014 and has continued growing for a decade. The GDP experienced 2.4% average growth rate during Obama’s last three years in office, while annualized growth averaged about 2% for his entire term. Trump promised he would return the country to the boom of 4% and more a year that we enjoyed many times since World War II. Under Trump, annualized growth has risen slightly to 2.5% during his first three years. That’s far below his promise, but his number is still a trifle better than the best years of Obama.

More to the point, Trump was handed a healthy economy that was growing, while Obama had to recover from a disaster under George W. Bush. From nearly 10% when he took office, Obama dropped the unemployment rate to just over 4% by the end of his term. As you can see from the chart, that number has continued to decline very slightly under Trump. Once again, however, it is on the same curve, not the dramatic drop instigated by Obama. Of course, there was no need for drama after Obama’s presidency; he had the economy well in hand.

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Again, Trump was correct in his tweet: The Federal Reserve kept the federal funds rate near zero during Obama’s two terms and purchased trillions of dollars in bonds in order to help boost the economy from 2009 through 2014. Then, in December of 2015 and again in December of 2016, they started to raise the interest rate. It also continued to raise the rate after Trump took office, increasing it until July of 2019. While his tax cut and deregulatory push boosted growth in 2018, Trump’s initiatives began to fade as business owners grow concerned about his escalating trade war. Since then, the Fed has cut the rate three separate times. Currently, it’s at about 1.55%. Therefore, Trump used the same tool to enhance his own flagging economic growth. What is his complaint in this regard?

National Debt

President Obama entered office in early 2009, during the depths of the Great Recession. The national deficit ballooned from $459 billion in calendar year 2008 to over $1.4 trillion in calendar year 2009. In total, President Obama added $4.3 trillion to the national debt from January of 2009 to November 1, 2011. However, as the economy recovered, the deficits shrank to a low of $442 billion in 2015, but then rose again to $585 billion his last year in office.

Despite his pledge to wipe out the deficit out in eight years and his claim to being “the king of debt”, from January 20, 2017, to November 1, 2019, Trump piled $3.1 trillion onto the debt. In his first year in office the deficit grew to $666 billion, was $984 billion in 2018, and was over $1.1 trillion in 2019. Even before the pandemic disaster, he was on course to set a 74% increase in just four years, a staggering accomplishment for anyone. However, by July of 2020, the national debt had actually increased by $5.2 trillion. The Congressional Budget Office predicted that the FY 2020 deficit will be $3.7 trillion, and that the FY 2021 deficit will ‘shrink’ to $2.1 trillion. Unfortunately, this figure will probably be higher once the impact of the COVID-19 pandemic is fully realized.

This is the key distinction separating the circumstances behind Obama’s and Trump’s debt figures. Obama entered the White House as the nation was in the trough of a recession that sparked massive stimulus spending, including a bailout of the auto industry. Trump, on the other hand, inherited an economy undergoing its longest sustained expansion in history. One helped the nation recover from the depths of the second worst financial crisis in American history, while the other has added a massive amount of debt while the US economy was extremely strong. Although Obama inherited his terrible situation, at best it must be said that Trump has heavily contributed to his own disaster.

Should Trump’s current tax policies stay in place, minimizing the burden to corporations and the 2% of the most wealthy Americans, the debt burden will get even worse. The main culprit of public debt is budget deficits, which have surged under Trump even though the Trump administration, echoing the mantra of the Republican Party, has said economic growth will pay for the added debt and deficit burden. So far—as has been historically true— that hasn’t been the case despite the longest GDP gain in American history.

The Bottom Line

In the most realistic terms, the overall U.S. economy under both President Obama and President Trump has been remarkably similar. However, the circumstances are shockingly different.

President Obama promised to bring the U.S. out of its financial morass. He did exactly as he promised.

President Trump promised to eliminate the national debt and to enhance the financial situation of every American. While the ultra-wealthy have indeed benefitted tremendously from his policies, the national debt and the financial plight of the average American have both gone into the abyss.

Contrary to having ‘saved us’ from the Obama era, Trump has led us to the depths of a disaster that will last for generations. Once more, the promises and boasts of President Trump have proven to be that thing he claims to hate the most: A blatant hoax.

Sources:

https://www.forbes.com/sites/chuckjones/2020/02/29/four-charts-comparing-trumps-vs-obamas-stock-market-returns/#6343eff73552

https://www.businessinsider.com/national-debt-deficit-trump-how-it-compares-obama-bush-clinton-2019-11

https://www.cnn.com/2020/02/18/politics/trump-v-obama-economy-fact-check/index.html

https://www.bbc.com/news/world-45827430

https://www.cnbc.com/2019/02/13/that-22-trillion-national-debt-number-is-huge-but-heres-what-it-really-means.html

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