Donald Trump declared Friday morning on Twitter, “We have accomplished an economic turnaround of HISTORIC proportions!” Will the press and the pundits claim that the president is simply trying to change the subject again?
That’s what most of them said earlier in the week when Trump sent an all-caps, instant-classic tweet addressed to Iranian president Hassan Rouhani. Conveniently missing from many of their missives was the fact that Rouhani had himself addressed Trump earlier that day. “Mr. Trump, don’t play with the lion’s tail, this would only lead to regret,” Rouhani had warned, adding that “war with Iran is the mother of all wars.”
At least a couple of commentators today noted that Trump would certainly like to use the new numbers from the Commerce Department’s Bureau of Economic Analysis to change the subject—from his disastrous Helsinki press conference alongside Russian president Vladimir Putin and the women- and Russia-related leaks emanating from his former lawyer (and, it seems, former friend) Michael Cohen. But no one can deny that the best quarter the American economy has seen in nearly four years is news. Exactly what the numbers mean, though, is open to debate.
“I am thrilled to announce that in the second quarter of this year, the United States economy grew at the amazing rate of 4.1 percent,” Trump said today in remarks from the south lawn of the White House. Gross domestic product had grown by just 2.2 percent in the first quarter. Trump had hinted at the good news earlier, saying he expected “terrific” numbers to be released by week’s end. The growth rate was indeed high—but not the earth-shattering surprise of “HISTORIC proportions” Trump suggested. Reuters surveyed economists earlier in the week, and they predicted an April to June growth rate of… 4.1 percent.
Trump, of course, took full credit for the country’s economic gains. One suspects he would have just as easily found someone or something to blame — Barack Obama, the Chinese, the “fake news media,” Robert Mueller’s “witch hunt” — had the numbers been lower. He does deserve some kudos, of course. As he pointed out in his remarks, “The year before I came into office, private business investment grew at only 1.8 per cent. Last year, it jumped to 6.3 per cent. That was my first full year; we had to do a lot of things to get it to grow. And this year, it’s growing at 9.4 per cent. So that’s a very tremendous increase.” Part of that growth in investment has to be due to the executive-branch rollback of regulations and the lower corporate income-tax rate the Republican-led Congress passed.
He and his party can also take credit — and they have — for the swell of funds repatriated into the United States since Congress ended the tax on foreign earnings. “In the first three months after tax cuts, over $300 billion poured back into the United States from overseas. We think it’s going to be, in the end, when completed, over $4 trillion will be back into our country,” Trump said.
But, as usual, Trump went a little too far. He declared that “these numbers are very, very sustainable. This isn’t a one-time shot.” Speaking after his boss, Kevin Hassett, chair of the Council of Economic Advisers, urged a bit of caution: “You know, as an economist, it’s my duty, sir, to remind that we should not make too much of one number, right?”
The numbers Trump cited in his speech had to come from some economist, though. “If economic growth continues at this pace, the United States economy will double in size more than 10 years faster than it would have under either President Bush or President Obama,” Trump said. “By increasing growth to 3 percent over the next 10 years, that would mean 12 million new American jobs and $10 trillion of new American wealth, at least.”
If economists could successfully make such predictions, well, they wouldn’t have to work for government salaries. Recall how few of them saw the 2008 recession coming.
Many factors contributed to the GDP growth announced today — and Donald Trump didn’t mention many of them. Yes, consumer spending increased by 4 per cent, and some of that is likely due to the Republican-passed tax cuts. But other numbers are just as striking. Supply-siders don’t spend as much time arguing for smaller government as they do for smaller tax bills. The same quarter that saw 4.1 per cent GDP growth also saw a 3.5 per cent rise in federal spending. That’s part of the American economy, too.
Perhaps more important, exports saw a 9.3 per cent gain in this period, accounting for about a quarter of the total GDP growth. And that’s not because President Trump has been trying to browbeat the rest of the world into buying American. Foreigners worried about a brewing trade war and retaliatory tariffs decided to stock up on things like soybeans—that product, one of the American exports China has targeted, saw sales go up more than 50 percent from the same period last year.
Lots of things drive the economy, and human behavior isn’t as easy to predict as social scientists would like to believe. But maybe we should say that Donald Trump and the Republican party deserve full credit for three months of impressive GDP growth. The fact that a big chunk of it probably came from fear that Trump’s anti-free-trade twittering will reverse many of the gains his administration has made should temper future expectations, though—and change future economic policy, too.