As a candidate, Donald Trump appealed to voters by promising to fix the plight of the average American: He’d create jobs, keep businesses in the U.S., and cut taxes, especially for the middle class.
“Under a Trump presidency, the American worker will finally have a president who will protect them and fight for them,” Trump said during a June 2016 campaign rally in Monessen, Pennsylvania, in which he laid out his administration’s economic plans.
Last month, Trump passed a once-in-a-generation tax overhaul. But aside from that, he’s landed few hard economic policies in his first year. While it’s not unusual for presidents to exaggerate their accomplishments early on, Trump’s Twitter habits have taken the showboating to a new level. He’s now given himself credit for everything from record unemployment to the stock market boom.
We tried to separate fact from fiction.
The U.S. saw an average of 167,000 new jobs a month for a total of 1.84 million from February to December last year. (Trump hadn’t taken office yet when the Bureau of Labor Statistics’ first report of 2017 came out.) That’s perfectly respectable. Good, even. It’s just not as good as after 2010, when the economy finally started to recover from the recession. Last year saw the lowest job creation in the past six years, although economies tend to speed up after downturns and slow eventually.
Trump, however, couldn’t help but turn his speech to the United Nations General Assembly away from foreign policy toward what he’s done for the American worker.
“Fortunately, the United States has done very well since Election Day last Nov. 8,” Trump said at the event in mid-September. “Unemployment is at its lowest level in 16 years, and because of our regulatory and other reforms, we have more people working in the United States today than ever before. Companies are moving back, creating job growth the likes of which our country has not seen in a very long time.”
Trump’s right about the unemployment rate: It hit a 16-year low of 4.3 percent in August and now hovers around 4.1 percent, a 17-year low. That’s great news for the U.S. But despite his claims about rolling back regulation, Trump didn’t have much, if anything, to do with it, according to economists.
It’s not just that Trump inherited a solid economy from President Obama. Presidents largely don’t control economic policies, especially those that help or incentivize businesses to hire. The Federal Reserve, Congress, and sometimes even dumb luck do.
On top of that, the surest way to be wrong about the economy is to look at recent data, rather than long-term trends. Since 2010, unemployment has been tipping downward and hasn’t picked up speed under Trump. Portions of the tax bill, however, went into effect this month, and people could see effects as early as February.
“My grandmother used to tell me this story,” said Mark Blyth, a political economist at Brown University’s Watson Institute of International and Political Affairs, who predicted Trump’s rise (and Brexit). “There was a woman who lived close to her. She always had headaches, and someone told her to pick up her cat and rub the cat against the side of her head. And she did. The next day, the headache was gone. That’s supposed to be evidence that the cat cured the headaches. That’s what Trump is doing.”
Despite the record unemployment, wage growth also continues to lag, which creates inequality. Republicans, however, said their tax overhaul, which dropped the corporate tax rate from 35 to 21 percent in 2018, would fix that. It’s too early to tell if that’s true on a large scale, but companies like Wal-Mart and Humana have already credited the cuts for allowing them to raise wages and offer new benefits for their employees.
Still, economists are skeptical about better wages for the same reason they don’t think the tax cuts will allow businesses to hire more people: More money hasn’t pushed business to invest more in the past.
Aside from cutting corporate taxes, the GOP’s overhaul raised the ceiling on most individual tax brackets and increased the standard deduction, moves the GOP said would save the average American household $1,182 a year on their taxes.
Contrary to Trump and Republicans' claims that the changes would be great for the middle class, the top 1 percent of earners (annual salary of $730,000 or higher) will receive 20 percent of the benefits, according to the nonpartisan Tax Policy Center. The Congressional Budget Office also found that most Americans — those earning under $75,000 a year — would end up handing more money over to the IRS over the next decade.
But Trump still pushed the tax bill as a “Christmas present” to the middle class because of the jobs it would create. If companies have more money, they’ll hire more people, the logic goes. It’s certainly plausible business owners will do that — but highly unlikely, according to economists.
“Across the board, labor markets are full,” Blyth said. “There’s very little unemployment for people who want jobs.” The record unemployment makes that clear.
Alongside hiring, companies are also sitting on almost $2 trillion in cash. They just don’t invest like they used to, despite profits near all-time-high levels. If they'd wanted to hire more, they likely already had the money to do it, with or without tax cuts.
“You’re encouraging companies to hire workers based on incentives that they already have,” said Heidi Shierholz, the Department of Labor’s chief economist under President Obama, who now leads the nonpartisan Economic Policy Institute’s Perkins Project on Worker Rights and Wages. “It’s an extraordinarily inefficient way to create jobs.”
For example, Treasury Secretary Steve Mnuchin estimated that 70 percent of the corporate cuts will flow back to workers — either through more jobs or directly into their pockets. That’s true if he’s only talking about the top fifth of workers by income, according to the Center for Budget and Priority Policies, a progressive think tank that relied on analyses from several centrist or nonpartisan groups, such as the Congressional Budget Office, Joint Committee on Taxation, and the Treasury’s Office of Tax Analysis. Only a quarter of the money businesses get back will go to workers across the board, the group found.
Trump campaigned hard in Rust Belt cities, where he promised to bring back jobs, especially in manufacturing. He also blamed China for taking those jobs.
That’s one reason he made labeling China a currency manipulator and renegotiating NAFTA such a priority. (Trump hasn’t delivered on those promises, although three days into his presidency he did pull the U.S. out of the Trans Pacific Partnership, an agreement among 12 nations that defined President Obama’s Asia policy.)
In 2017, the U.S. had its highest global trade deficit in six years, at $50.5 billion. Despite Trump’s promises to fix “unfair” trade, the trade deficit with China and Mexico is up 7 percent and 11 percent in the past year year, respectively. It’s unclear a trade war with either country would help, though. Technological innovation is a much bigger threat to manufacturing and jobs, according to economists.
Yes, a higher trade deficit means the U.S. is importing more than it's exporting, which could cost American jobs. But cheap goods put money back into household coffers, which boosts the economy and potentially leads to more jobs down the road.
The manufacturing job market also thrived last year. The U.S. created 196,000 manufacturing jobs in 2017, a marked increase from last year, when 16,000 were lost. But again, Trump didn’t do much, especially considering the improving health of the global and U.S. economies.
“The president’s impact so far on manufacturing and employment has been extremely limited. Even in some situations where he’s targeted specific companies, it’s not clear they’re responding the way the president wanted them to,” said Michael Strain, director of economic policy studies at the non-partisan American Enterprise Institute.
Strain’s referring to Trump’s celebrated Carrier deal, which offered $7 million in incentives to the Indiana factory in exchange for keeping 800 jobs (that Trump touted as over 1,000). While the money saved some people from losing their jobs, local unions and workers are disappointed. Over the past seven months, Carrier has laid off hundreds of workers.
As much as these jobs matter to the surrounding communities, they’re also a drop in the bucket for the economy overall. Still, the Trump administration has moved in another area conservatives hold dear as a means to stimulate the economy: deregulation.
So far, Trump has rescinded nine major federal regulations, many of them environmental rules passed by the previous administration. Some of those, however, are now tied up in court. The GOP has also eliminated regulations through the Congressional Review Act, which allows Congress to pass joint resolutions to overrule federal agencies’ rules.
Trump and Congress can also delay new regulations from going into effect and not enforce the old ones as stringently. And they haven’t passed nearly as many regulations as the Obama administration did — 527 compared in Obama's last year in office compared to just 118 in Trump's first, according to the Economist.
Fewer regulations are in keeping with the Republicans' “less is more” economic philosophy. “This ‘Trump gets no credit’ approach says a lot about how poorly progressive Democrats understand what drives economic growth. It isn’t more government; it's less,” Andy Puzder, once Trump’s nominee for secretary of labor, wrote in November.
But economists said it’s not so much whether Trump deserves credit but more that it’s too early to tell. The argument is fairly easy to follow: Fewer rules allow businesses to conduct themselves more freely, make more money, and then invest that cash back into the economy — much like how conservatives hope the tax cuts will create jobs and growth.
So far though, businesses haven’t used their mountains of cash to do much investing. And although Trump has slashed regulations and created them at a far slower rate than the previous administration, it’s still just a small portion of what would be necessary to kickstart the economy, especially in the space of a year.
Different regulations also have different effects on the economy — rolling back some environmental rules, for example, could end up costing the government more than it would save.