The White House hopes to boost President Donald Trump’s low approval ratings by using the economy as a centerpiece of its political message in 2018, according to three White House officials, even if many of the president’s successes so far are squarely built on the legacy of former President Barack Obama.
The trends of declining unemployment, coupled with healthy gains in the stock market, began during Obama’s first term, a welcome uptick following the global economic downturn Obama inherited in 2009.
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The Trump administration has built on those gains, particularly in recent months. Business confidence has soared on the expectation of sweeping tax cuts as well as the administration’s push to roll back regulations on everything from energy to housing to health care to labor rules.
But hard economic data on growth, job creation and wages look very similar to the last several years under Obama. The pace of job growth actually slowed slightly to 174,000 per month in 2017 through November, compared with 187,000 per month in Obama’s final year.
Even Trump’s stock market performance is similar to or trails Obama’s. In the first 11 months of Obama’s presidency, the Standard & Poor’s 500 rose 37 percent. It rose 18 percent under Trump. The Dow rose 30 percent in Obama’s first 11 months to Trump’s 24 percent.
Despite the underlying similarities to Obama, the White House plans to brand the economy as Trump’s doing in 2018 and sell a message that the nation is actually performing much better now, even before any impact from the tax cut bill. A key piece of the Trump argument will be that economic prospects are even stronger now after a wave of deregulation across federal agencies in 2017.
“We took a big, big beautiful ship that we’re turning around, and a lot of good things are happening,” the president said Wednesday while meeting with first responders in West Palm Beach, Florida.
In a series of recent tweets and speeches, Trump has touted the booming stock market, pace of home sales, high consumer confidence, and the lower unemployment rate in manufacturing as evidence of a healthy economy over which he now presides.
“The Stock Market is setting record after record and unemployment is at a 17 year low. So many things accomplished by the Trump Administration, perhaps more than any other President in first year. Sadly, will never be reported correctly by the Fake News Media!,” Trump tweeted two days before Christmas, citing a trend in employment gains that began in 2009 when joblessness peaked at 10 percent.
The trend has been remarkably consistent for the past eight years. And just one year ago, Trump called the jobless rate “totally fiction.” In February 2016 he suggested the real unemployment rate was as high as 42 percent.
The White House’s economic argument for the new year — and the midterm elections — centers on the idea that the real estate developer-turned-president knows how to boost the economy better than any politician with more traditional government experience.
Leading with an economic argument has an added benefit: appeal to both Trump’s base and the donor class. The donors appreciate the goodies associated with tax reform, including the slashing of business tax rates, reductions in the estate tax and the alternative minimum tax and immediate expensing for new investments.
And the White House is betting Trump’s base will embrace the tax bill once Americans start to see differences in their paycheck in February.
“Today we stand on the verge of a new economic miracle. Our economy has already surged to 3 percent growth — far ahead of schedule, by the way — far, far ahead — in each of the last two quarters,” the president said in a speech billed as his closing argument for tax reform, given on Dec. 13.
“And if we didn’t have the hurricanes, we could have hit 4 last quarter. Four — a number that was unthinkable two years ago when I started the campaign, and even my first month in office — that was an unthinkable number. And I’ll tell you what, it’s going to go higher than that.”
Despite the “unthinkable” claim, economic growth rose over 4 percent in both the second and third quarters of 2014 under Obama. The economy actually grew 5 percent in the third quarter of that year, the highest level since 2003, before settling back into a trend of between 2 and 3 percent.
Beyond selling what the economy is already doing as Trump’s success and not Obama’s, the question for the White House in 2018 is whether financial gains from higher stock prices and lower tax rates trickle down to average workers, as the president’s top economic advisers have promised in selling tax cuts for corporations and individuals.
Trump’s top economic advisers are confident that will happen. “When businesses are looking to invest, and we know they are looking to invest, the U.S. will now be as competitive or more competitive than any other place in the world,” Gary Cohn, director of the National Economic Council, said in an interview. “We have cheap energy and we have very effective tax rates, and when you think of the world we live in, energy and taxes are two of the biggest components” to business investment.
Whether that investment boom materializes remains an open question. “I don’t see much evidence that companies are dying to invest,” said Megan Greene, chief economist at Manulife. “When you look at surveys of what companies plan to do with cash from tax cuts, reducing borrowing, buying back stock, and mergers and acquisitions are high on the list.”
Still, the White House hopes a boom in corporate investment driven by tax cuts and deregulation will lead to higher wages and productivity and draw discouraged workers back into a shrunken labor force. That would let them point to hard data that the economy really is doing better than it was under Obama.
But if they don’t, many economists suggest it’s a stretch for Trump to take credit for the current economy.
“If it were me, I would certainly claim the credit,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “But looking at it coldly and rationally, there is very little the administration can say at this point is really down to them in terms of the economy.”
And there is also a significant risk that the tax cut bill creates a few quarters of faster growth that eventually recede as bigger deficits create higher interest rates that slow down private investment. “You are essentially paying for this growth with over $1 trillion of borrowed money,” said Shepherdson. “Had the other guys done this, you’d have claims that they were going to bring on the end of the world by tea time.”
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