Trump’s policies after 2.5 years
The second quarter RGDP growth came in at 2.1%, slightly above estimates. But there’s also some bad news in the report:
But the GDP data released on Friday included revisions to earlier years that showed the US economy was not as strong as previously thought. Last year, the US economy grew at a pace of 2.5 per cent, rather than the 3 per cent rate that the commerce department had previously reported.
Don’t look for any Trump tweets correcting his previous claims.
Over the past 2 1/2 years, RGDP growth has averaged 2.64%, slightly above the 2.2% of the previous 7 1/2 years. Thus you might argue that Trump’s supply-side policies boosted annual growth by 0.44%, adding roughly an extra 1.1% to RGDP over 2.5 years.
There are two other factors to consider:
1. Growth might normally be expected to be faster in the early years of an expansion, as there are lots of unemployed workers to draw on. (Recall 1983-84) That makes recent growth look better.
2. Monetary policy has become more stimulative over the past 2.5 years, as NGDP growth accelerated from 3.8% to 4.77%. That makes recent growth look worse.
In my view, these two factors roughly offset, so I’ll stick with the claim that Trump’s policies boosted the current level of RGDP by a total of roughly 1.1%.
I am on record claiming the tax cuts would boost growth by a total of about 2% over 10 years, with most of the increase front-loaded. Thus the outcome so far is consistent with my forecast. It’s fun to be right!!
I’ve also been claiming that 1.5% is the new normal for trend RGDP. Growth in RGDP has averaged 1.68% over the past 12 years, but I believe the trend rate is now lower due to the ongoing retirement of boomers.
PS. At a recent cabinet meeting, Trump officials discussed Peter Navarro’s proposal to weaken the dollar via capital controls. Fortunately, calmer heads prevailed. But what if Trump is re-elected? How will he be restrained when advisors can no longer use the argument that rash actions risk his re-election prospects? Here’s Politico:
Trump’s ‘don’t screw it up’ caucus keeps winning
The president, for now, is listening to advisers telling him to keep his cool on trade, spending and the Fed — at least through November 2020.
Meanwhile the Dems seem intent on committing suicide. Polls show that Biden is the only one who can beat Trump in key Rust Belt states like Ohio, and yet the party seems to be moving toward candidates who want to eliminate private health insurance policies. Easy pickings for a demagogue. I predict that Biden will win if nominated, but I also predict he won’t be nominated and that Trump will be re-elected. The betting markets are swinging this way.
Then we get to see what Trump will do when the shackles are taken off. And you think the recent tweets are racist!
PPS. Even a loser Democrat will beat Trump by about 4 million in the popular vote, so the Dems can at least have the consolation of a moral victory. They would have won in 2020 if we were a democracy. And it could be worse. Boris Johnson was just elected leader of the UK with fewer than 100,000 total votes in a country of 66 million. Not a margin of 100,000, I’m taking about total votes. I don’t speak Greek, so I’ll call the UK a “grouchy old white guy-ocracy”
PPPS. This is the only good article I’ve seen on the Mueller hearings:
Actually, Robert Mueller Was Awesome
History will show that he had one big goal, and nailed it.
Tags:
26. July 2019 at 11:35
Re: Mueller
https://www.emptywheel.net/2019/07/24/failing-to-damage-mueller-gop-now-claiming-mueller-not-sufficiently-vigorous-to-oversee-trump-investigation/
26. July 2019 at 14:36
Scott,
I think that you are underestimating the slowdown in growth in the late stage. Two trends are hitting the US economy at the same time, the slowdown in employment growth, and the rapid rise in the percent of GDP going to health care as the population ages.
The economy is becoming more inefficient more rapidly than supply side reforms, like tax cuts and deregulation are boosting it.
I suspect that if not for the Federal Government reforms, the economy would be having the same problems as Europe now.
Anyways, most people pegged the economy to grow only 1.4%~ ish back before the election. Growth of 2.64%, in comparison, is much better.
For growth to deviate strongly in a positive from trend growth, without a massive jump in inflation, is what the Trump team projected, and by and large what they got.
26. July 2019 at 14:46
Saying that you can nearly double what the trend growth projected while inflation rising only about 30% seems pretty good…
In other news, Trump got an agreement with Guatemala, which is a positive. Although, I think it won’t matter in the long run, since he damaged the long run credibility on immigration with his nonsensical statements on Hispanic crime(they have very little crime rates in reality).
26. July 2019 at 14:50
Sorry, the point about Boris Johnson is just silly. PM’s used to be elected by lot fewer votes–those of sitting MPs of the government party. However the Party in government in Parliament gets to select its leader, that is who become PM until they lose their majority in Parliament (which, in this case, includes their alliance with the DUP).
26. July 2019 at 14:53
Scott Morrison originally became PM of Australia with 45 votes. In total.
https://www.abc.net.au/news/2018-08-24/scott-morrison-wins-liberal-leadership/10160168
That’s how Parliamentary systems work. Broadening it out to the Party membership as a whole massively increases the number voting, but it still all revolves around having a Parliamentary majority (at least for confidence motions).
26. July 2019 at 15:06
https://www.nber.org/papers/w24788
OT but worth pondering
26. July 2019 at 16:00
If the economy is good, then perhaps Trump will be re-elected. There are other imponderables, such as perhaps a terrorist attack shortly before the elections.
I read there is even a reasonable prospect that Trump could lose the popular vote by as much as 4 or 5 percent and still win in the Electoral College. Egads.
The Democrats enter the 2020 presidential footrace with a 50 lb backpack strapped on.
26. July 2019 at 16:43
Trump will not be re-elected, despite the Dems trying to not look electable.
The article on Mueller is dumb. We found out Mueller didn’t even read his own report. He was deeply evasive, confused, and non-transparent.
26. July 2019 at 17:53
Scott,
Your whining is extremely amusing. The democratic system of the US is well known to everybody, I think both parties are quite familiar with it, they had a few years to understand it. Using it as an excuse for defeat is ridiculous.
Mueller has repeatedly told the Democrats clearly that he does not want to play the partisan hackery game and that he does not want to testify before Congress. Nevertheless, they summoned him. The Democrats have once again raised false expectations and embarrassed themselves. Again their own mistake.
It’s a parliamentary system. Look it up. Your partisanship is extreme. The British have been doing this for decades. Where were your articles all the years before? You belong to those people who attack any democratic system as soon as the result doesn’t suit you. That’s so shameful.
So the US isn’t even a democracy anymore. How twisted you are. I bet we’ll read articles soon about how great and progressive China is, and how backward and anti-democratic the US. You will manage it. Wait a second, it happens already, in every third blog entry you write.
I’m not as optimistic as you about Trump’s chances of winning. It even scares me that you think he will win because your political predictions are often far off. But maybe you’re right for once. Even a blind hen sometimes finds a grain of corn, right?
26. July 2019 at 20:27
Allow me to skip lightly over your (hopefully) therapeutic rant to suggest that 2.0% is a more realistic target for GDP growth.
Over the past 72 years, per capita GDP growth has averaged 2.0% and population growth has kicked in 1.1%, for 3.1% total.
Over the past 22 years (which includes one small and one huge recession) per capita GDP growth has averaged 1.5%. This is realistic going forward. Population growth adds 0.5%, for 2.0% total. QED.
We are more than halfway through the boomer retirement phase. My boomer cousins all worked for the government (fun fact: between 1947 and 1975, 28% of all new jobs were gubmint jobs) and retired years ago.
26. July 2019 at 20:39
Maybe the system with only parliamentary party deciding on a leader/PM is a bit more democratic. After all, MPs represent their constituencies, not only their local party associations. And if a change of course has to be made, they can decide on it. In this instance, majority of MPs voted for Johnson, so no difference.
27. July 2019 at 02:37
Did anyone save a screenshot of that market page from the day before the 2016 election?
27. July 2019 at 04:03
If Barro’s revision of the calculation of GDP (and labor share and capital share) becomes widely accepted, will it affect monetary policy? https://voxeu.org/article/double-counting-investment
27. July 2019 at 04:55
bill,
Wayback Machine saved it many times. 7 screenshots alone from the day before the election. Pick your favorite. Here is an example:
https://web.archive.org/web/20161107082919/https://www.electionbettingodds.com/
27. July 2019 at 05:56
I thought Presidents had virtually zero impact on economy—-you have said that before at least. But that’s not really true, is it?
The present always seems GIGANTIC——the past non-existent——and the future a disaster to be visited upon us by policies of those in charge TODAY.
Agree with those who commented on your silly points re: Boris election and the popular vote.
Re:Mueller. I have gone back and forth on him as mentally frail as a tactic versus him actually being mentally frail. In either scenario, he never wanted to say more than what has already been written—-he told us that, and that is what he did. What I don’t get is the point of the report to begin with.
You have never addressed why the FBI and CIA and Hillary and Schiff and Nadler and the Dems seem/seemed so desperate to unload Mr. Clockwork O. before his time. Yet they readily and with zero fanfare create a 2 year+ budget agreement. What is that about?
27. July 2019 at 06:09
Scott,
The real GDP revisions certainly seem to support your perspective on real potential output, but I’m not yet convinced.
Objectively, you and most other economists were most likely correct before the revision, so you’re even more likely correct now. This is not only based on the balance of evidence on the surface, but also the fact that you are experts and I’m not.
However, I still think you guys are wrong. The evidence is scant either way, and just looking at the suddeness of the changes in productivity, associated with the Great Recession, gives me pause. It’s impossible to know the non-recession counterfactual, but I just doubt we’d see such a steep decline in real growth, even smoothed.
I also see what appears to be lots of technological disruption underway, and productivity still muted. That is, too muted to be explained by real factors. I think there’s been an undeployed innovation stock that’s been building for more than ten years that is ready to help real growth temporarily explode, with sufficient demand-side stimulus to investment. I think real growth could reach about 5% in the short run.
And, once again, I think the long-run real growth rate will be in the 3.5% range under that scenario, and that we’d be on a slow ramp up, at the beginning of an s-curve, thanks to technology.
I think the effects of hyper-automation will swamp demographics.
27. July 2019 at 06:48
Scott: you are suffering from mission creep compared to where you were when you started this blog. stick to economics and monetary theory.
27. July 2019 at 07:38
Lorenzo, I favor a parliamentary system where millions of voters select the MPs who then select their leader. Not where a tiny number of voters select the leader. Would a parliamentary system have picked Trump in 2016?
Pranav, You said:
“Anyways, most people pegged the economy to grow only 1.4%~ ish back before the election. Growth of 2.64%, in comparison, is much better.”
Actually, when I said the new trend RGDP growth rate was 1.5%, I was laughed at. Most people said it’s closer to 2%.
And you completely ignored my point about the acceleration in NGDP growth, so it’s you who are engaged in wishful thinking. Don’t just look at evidence that cuts one way. Look at both sides, as I do.
You said:
“In other news, Trump got an agreement with Guatemala, which is a positive.”
Given that Trump doesn’t live up to the agreements he signs, why would you expect Guatemala to do so?
Ben, No, he could not win with a 5% loss in the popular vote; ignore articles spouting that sort of nonsense.
Christian, One of your stupidest comments ever. I have no time to point out all the inaccuracies.
Brian, I think you underestimate the extent to which trend growth is slowing. I hope I am wrong.
D.O. Good point.
Rayward, No.
Michael Rulle, You said:
“I thought Presidents had virtually zero impact on economy—-you have said that before at least. But that’s not really true, is it?”
I said about 3% of how the country is doing reflects the president, and 97% reflects other factors. Even the tax cut was mostly a Congressional initiative; Trump played little role beyond signing it. Hillary also would have cut corporate taxes, albeit not as much.
Michael Sandifer, I don’t agree. That seems like wishful thinking.
Agrippa, Good advice, but I won’t follow it. BTW, why leave this comment after a post on economics?
27. July 2019 at 09:43
Scott: I was referring to your wading into the Russigate/Mueller issue. You are an economist. You are not qualified to really understand the issue in the obstruction issue, which turns on the legal maxim in the law of “ejusdem jeneris” see USSC herehttps://supreme.justia.com/cases/federal/us/532/105/.
The bottom line is the federal obstruction statute provision relied on for the Mueller investigation into obstruction involves interpreting a statute with the general following the specific, and thus the controversy if what Trump did was “legally culpable obstruction”. Great minds differ on this and I’m sure it will be resolved after Trump is out of office as it applies to his actions involving Russian interference, which is a fact. What is still undecided by any court in this land, but resolved by many without legal training (much like a mob), is whether ejusdem generis exonerates or not his actions. So leave the legal interpretation to the courts, as we all should want a legal resolution and not a mob resolution; thereafter we can approach the result legally through the legislative process to change the statute or not. Process is much more important than passion.
27. July 2019 at 09:45
p.s. the politico article is well written, but not helpful for a resolution of the issue as the author is as infirm as are you in understanding the fine legal points.
27. July 2019 at 10:57
Thanks Christian!
27. July 2019 at 11:26
Scott,
I agree with your point on NGDP acceleration. I’m not contending that.
My point was not that Trump is an economic genius, but that it is very difficult for developed countries to boost their growth rates, especially if their most productive workers are mass retiring.
Let’s say that you are a 100% right about the long run impact being 1.1%, that is still alot of additional growth given the headwinds.
Could their be better reforms done? Yes, things like zoning reform and health care reform could dramatically better help the economy.
No one is engaging in “wishful thinking” here. Trump got a good hand, Fed increasing NGDP growth, and pushed further supply side reforms.
Also your point on Guatemala, why wouldn’t they follow the agreement? Many of the Asylum Seekers will be rejected, and many will choose to stay in Mexico or Guatemala, especially if they are from other more deprived parts of the world. Both of these countries will need the US’s help on this issue, and access to the US’s resources and economy. Working with Trump on this issue is a no-brainer, it is better to have a coherent, multi-national approach to asylum, especially in a time of global migration.
27. July 2019 at 11:34
I will concede one point, more immigration is good, especially East Asian and Hispanic immigration, which I believe has been working out very well. This is why Trump has been struggling so much on immigration, because he does not understand this reality, and the public does. This is probably going to give him huge defeats in states like California, and maybe make Texas a close race, but will give him huge victories in states important to the Electoral Colleges, where Whites are more cautious about immigration. So your analysis, may very well be correct.
27. July 2019 at 12:19
Also Scott, this may be a stupid question, but why do you think the Tax Cut’s benefits are “front-loaded”? Is it because business and the markets believe the tax-cuts are temporary, and are making their investments now and not later?
27. July 2019 at 14:25
PRC, You said:
“Let’s say that you are a 100% right about the long run impact being 1.1%, that is still a lot of additional growth given the headwinds.”
I’ve predicted 2% extra growth, and I’ve said that’s “a lot”. So you are missing my actual argument. I’ve also said progressives were too pessimistic and supply siders were too optimistic.
Long run growth depends on the pace of global tech change. Countries are near or far from the growth frontier based on their policy regime, human capital, etc. Reforms mostly move countries closer to the frontier (as in China), that’s why the effect is front loaded. It’s a one-time gain.
I don’t know a lot about Guatemalan immigration, it just seems like Trump is not sincere on the issue. Illegal immigration is increasing, and he doesn’t seem to care. It’s hard for me to take any of his claims seriously. Let’s see what happens.
27. July 2019 at 14:28
agrippa, You said:
The bottom line is the federal obstruction statute provision relied on for the Mueller investigation into obstruction involves interpreting a statute with the general following the specific, and thus the controversy if what Trump did was “legally culpable obstruction”. Great minds differ on this and I’m sure it will be resolved after Trump is out of office as it applies to his actions involving Russian interference, which is a fact. What is still undecided by any court in this land, but resolved by many without legal training (much like a mob), is whether ejusdem generis exonerates or not his actions. So leave the legal interpretation to the courts, as we all should want a legal resolution and not a mob resolution; thereafter we can approach the result legally through the legislative process to change the statute or not. Process is much more important than passion.”
I understand all of that. What did I say that you (wrongly) thought conflicted with that?
27. July 2019 at 16:44
scott: you praised the article. but the article assumes the conclusion of the resolution of ejusdem generis. if the court decides the general following the specific controls, then the obstruction statute won’t cover any of the acts mueller found “substantial evidence to support counts of obstruction”, which is the rationale barr relied on for making a decision to not charge. granted, bias can be leveled fairly against barr. but the legal principal is still there. if the acts are not obstruction under the statute, regardless of the passions, it won’t be a basis for a charge. impeachment, the real political question, then remains. but it won’t be based on obstruction under the obstruction statutes. why praise an article that misses the real point: it’s first a fine issue of legal analysis, likely to not lead to a charge based on USSC precedent, in which case it really is just a political question.
27. July 2019 at 16:50
Scott –
You say,
“Long run growth depends on the pace of global tech change.”
And I agree. I’d be very interested in a post on what policies would increase the pace of global tech change.
27. July 2019 at 18:44
So far, The Donald is more a de regulatory than Reagan.
http://caseymulligan.blogspot.com/2019/07/comparing-presidents-reagan-and-trump.html
27. July 2019 at 18:49
“I favor a parliamentary system where millions of voters select the MPs who then select their leader. Not where a tiny number of voters select the leader. Would a parliamentary system have picked Trump in 2016?”
Since the Republicans got a majority in Congress in 2016, presumably their Parliamentary Leader would have been elected President. But that would change who was President for most Presidential elections in US history.
Also, 100,000 votes is a lot less tiny than Tory MPs. And even Parliamentary majorities can rest on very small margins.
Since both the Tories and British Labour elect their leaders by membership ballot, clearly they are responding to some pressures within British politics.
27. July 2019 at 21:15
Scott,
My guesses about future productivity growth potential may be wishful thinking, but the intuition is that productivity growth relies on innovation for frontier economies, and artificial intelligence will increasingly augment that innovation/labor hour.
As far as current growth potential is concerned, it’s partially based on my hypothesis that the neutral interest rate shhould be roughly equal to, if not a bit above, NGDP growth expectations in an economy in monetary equlilibrium, sans excessive government debt.
Notice this was the case in the US during the Great Moderation, in Australia during much of their recent golden age of monetary policy, and in the UK the last time the economy really hummed.
While the evidence is far from conclusive, at least there is some evidence consistent with the hypothesis.
28. July 2019 at 06:57
agrippa, First of all, I don’t think the article was advocating a “mob resolution”. Can you cite a specific passage? And second, when I praise an article it doesn’t mean I agree with every single point. I certainly don’t favor a mob resolution. When in office, impeachment is the appropriate resolution. After leaving office, prosecution may be appropriate, if Trump violated the law.
Negation, There’s very little the US government can do to affect the pace of technological change.
28. July 2019 at 08:31
Scott: you cited the article as good. in fact, though well written, it is misinformation. the real issue is as i’ve stated repeatedly. whatever Trump did or did not do, it’s unlikely the obstruction statute applies under USSC precedent or legal maxim: Mueller and Barr disagree, but it’s likely Barr is correct. What the press should focus on is not unlikely legal charges, but rather whether the action or inaction of Trump is consistent with what we expect of a president regardless of the criminal law and that is, most appropriately, a purely political question resolved through our Congress which is weighted ever so slightly towards state power. That’s the system. We change the system, or we follow it. That’s why its solely a political question in all practicality. High crimes and misdemeanors is left vague to embrace the politics of the time, as voiced through the Congress and adjudicated by the courts, which here would be unlikely to overturn a successful impeachment charge in the House and conviction in the Senate. You do a disservice to al readers when you stray from your abiding skill set: monetary economics, especially if its the intersection of law and politics.
Recall this from “A man for All Seasons”:Roper: So now you’d give the Devil benefit of law!
More: Yes. What would you do? Cut a great road through the law to get after the Devil?
Roper: I’d cut down every law in England to do that!
More: Oh? And when the last law was down, and the Devil turned round on you — where would you hide, Roper, the laws all being flat? This country’s planted thick with laws from coast to coast — man’s laws, not God’s — and if you cut them down — and you’re just the man to do it — d’you really think you could stand upright in the winds that would blow then? Yes, I’d give the Devil benefit of law, for my own safety’s sake.
28. July 2019 at 11:50
Agrippa, I notice that you are unable to cite a single sentence in the article that is inaccurate.
You said:
“Mueller and Barr disagree, but it’s likely Barr is correct. What the press should focus on is not unlikely legal charges, but rather whether the action or inaction of Trump is consistent with what we expect of a president regardless of the criminal law and that is, most appropriately, a purely political question resolved through our Congress which is weighted ever so slightly towards state power. That’s the system. We change the system, or we follow it. That’s why its solely a political question in all practicality. High crimes and misdemeanors is left vague to embrace the politics of the time, as voiced through the Congress and adjudicated by the courts, which here would be unlikely to overturn a successful impeachment charge in the House and conviction in the Senate.”
That’s what the article said. Mueller understood that decisions on impeachment were up to Congress, not him. He took no position on the issue. How is that different from what you are saying?
One can argue about exactly what constitutes “obstruction”, but there can be no debate that for decades federal prosecutors have taken an increasingly aggressive position in prosecuting white collar criminals for these sorts of vague violations. That may be right or wrong, but it’s not implausible. In any case, Mueller took no position on whether Trump should be prosecuted after he left office.
I honestly don’t understand what you object to in the article—your points seem to support the author. The author praised Mueller for not overstepping his authority.
The reference to A Man for All Seasons is silly. You’d have a hard time finding a single blogger more supportive of the rule of law than I am.
28. July 2019 at 16:26
You’ve become cranky in your time blogging.
Here’s the point: the obstruction statute is extremely unlikely to be the source of any judgment on Trump’s acts or omissions. This follows from ejusdem generis and USSC precedent. Barr is most likely correct on interpretation of the statute and Mueller is not. What’s wrong with the article: the author’s ignorance of this issue and focusing on “obstruction” and Mueller’s report and “deference” to Congress over same. He’s wrong about the statute and neither you nor the author are aware of it or understand why. What’s the real point of Russiagate: whether we as a people through the Congress will charge and convict, and thereby remove, Trump of “high crimes and misdemeanors”. You don’t know what you are talking about, so i get your frustration.
I quoted “A Man for All Seasons” because even though it may be repugnant that Trump can’t be charged under the obstruction statute, that’s the law. Silly really is only your crankiness. Sometimes, you are just wrong or out of your baliwick.
29. July 2019 at 08:11
Agrippa, Mueller did not charge Trump with obstruction. He did not take any position on the question of whether Trump should be charged. That’s why the Dems were so disappointed.
You say it’s unclear whether Trump should be charged with obstruction. That’s also Mueller’s view. You declined to quote a single false claim in the article, even after I asked you to name one. I’ll draw the obvious conclusion for your silence.
Barr is a corrupt government hack who is clearly in Trump’s pocket. He misrepresented the Mueller report, forcing Mueller to complain. Even Jeff Sessions looks honest compared to Barr. I put zero weight on his views. All these GOP hacks had exactly the opposite view of the law when Bill Clinton was in trouble in the late 1990s. Look at how Brett Kavanaugh’s views have “evolved” since 1998. I may be an idiot, but at least my views don’t depend on which party is in office.
29. July 2019 at 08:51
Obama post-recession y/y (Q4/Q4) growth:
2010 2.56%
2011 1.6%
2012 1.45%
2013 2.6%
2014 2.88%
2015 1.9%
2016 2%
Trump:
2017 2.8%
2018 2.52%
t-test P-value: 0.25
The difference between means is not statistically significant. (adding the 2009 data to the t-test does not affect the conclusion)
29. July 2019 at 08:59
Follow-up of my previous comment:
A t-test comparing the Obama-era quarterly gdp data to the Trump-era quarterly gdp data leads to a ~0.35 P-value.
29. July 2019 at 20:43
“Barr is a corrupt government hack who is clearly in Trump’s pocket. He misrepresented the Mueller report, forcing Mueller to complain.”
I fail to see how Barr misrepresented Mueller’s report. I do not remember Mueller saying this when he testified.
I thought Mueller was supposed to investigate Russian interference with the 2016 election. It appears he hired Democratic leaning lawyers to go after Trump but did not look into the very obvious Russian connections to Steel etc. Why was that????
The only conclusion I can make is that the Mueller investigaton was an anti-Trump fishing expedition pure and simple.