With the election just more than three weeks away, it is time to compare the economic proposals of the two presidential candidates. What do they believe needs to be done over the next four years? Do they match your ideas of what should be accomplished?
The comparison will draw from the candidates’ own websites, not political ads that stretch the limits of imagination. (Joseph Biden: joebiden.com/joes-vision; Donald Trump: promiseskept.com/achievement/overview/economy-and-jobs.
As this is 2020, nothing is normal. While Biden’s is a traditional candidate website, with proposals on a wide range of economic issues, Trump’s is largely a review of his last four years. No new policies are presented. A discussion of the Trump “economic plan” is limited to an evaluation of his first term’s highlights.
Also, the Trump economic data appear to end in 2019 and haven’t been updated. Given recent revisions, some numbers are incorrect or incomplete.
So, how has the economy done during Mr. Trump’s watch?
His website points out that “U.S. Gross Domestic Product (GDP) growth has soared under President Trump, topping 3% in 4 quarters under his administration, and in 2018 annual GDP growth was 2.9%.” Actually, it topped 3% in only two quarters, but it was 3% in 2018.
Since Trump’s site doesn’t discuss 2019 growth, which decelerated to 2.2%, or this year’s performance, I will.
For the first three years of Trump’s term, annual GDP growth averaged 2.5%. In comparison, it averaged 2.4% during the last three years of the Obama administration. With rounding, the difference is insignificant. Also, Barrack Obama had two quarters of 5% or more during that period.
The Trump website includes only pre-pandemic data when discussing employment and unemployment rates. Although it is correct in noting that more than six million (actually 6.6 million) new jobs were added in the first three years, in the last three years of the Obama administration, payrolls grew by 8.1 million.
Trump’s website is correct in boasting that the unemployment rate was the lowest in 50 years, with particularly low jobless figures for minorities. The overall decline during Trump’s first three years was 1.2 percentage points. In comparison, the drop in the unemployment rate during Obama’s last three years was 1.9 percentage points. (The September rate is 3.2 percentage points above where it was when Trump was inaugurated.)
As for other economic policies, the most important one the Trump website cites is the Tax Cuts and Jobs Act, his big tax bill from 2017. The jury is still out on that.
For example, after the bill was passed, job gains accelerated from 1.48% year-over-year in the fourth quarter of 2017 to 1.61% in the third quarter of 2018. But the rise was short-lived. By the fourth quarter of 2019, the growth rate had receded to 1.39%.
During the first three years of the Trump administration, before the pandemic hit, job gains averaged a 1.49% annual increase. In comparison, during the last three years of the Obama administration, payrolls expanded at an average 1.91% annual pace.
Conclusion: Despite the massive tax cut, payroll increases remained at or below past rates of increases.
The website says that after the tax cuts, “businesses invested $482 billion into new American projects.” I am not sure where that number came from. Investment did surge the year after the bill passed. But it faded sharply in 2019. Nevertheless, investment growth during the two years after the bill passed exceeded the last two years in the Obama administration. It just wasn’t great.
Trump inherited an economy that had expanded for 7½ years and extended that expansion until the pandemic hit. Unfortunately, all the gains were wiped out this spring. It could take two or more years before GDP and payrolls return to their late 2019 levels.
Which brings up the question whether the Trump economy should be evaluated using the pre-pandemic data, which I did, or the entire term.
Presidents are generally evaluated on the basis of what happened during their entire watch, not just the good parts.
Over the last half-century, every president except Clinton faced a major economic crisis. All were evaluated on their whole time in office.
Nevertheless, even using the pre-pandemic numbers, the Trump economic expansion was average. Including the pandemic, there would be almost no economic growth and a sharp decline in jobs.
The Biden website is a traditional one: There are proposals for everything. Here are a few.
Let’s start with taxes. Biden proposes reforming the Trump tax cuts. He “will require corporations and the wealthiest Americans to finally pay their fair share.” The proposal suggests raising the top personal tax rate for those making more than $400,000 back to its 39.6% rate and increasing the corporate tax rate to 28%, up from 21% now and halfway back to where it had been.
These proposals have good optics for the public, though it is not clear how much revenue they will raise. Given the estimated $3.3 trillion federal budget deficit, something needs to be done.
Biden also has tax breaks for child care, elder care, health care and retirement. Those will add both to growth and the deficit, though it is hard to argue that anyone in Washington cares about deficits anymore.
Biden intends to rebuild U.S. manufacturing, in part through a rebuild America plan that would include added spending on research and development. These are popular, traditional proposals. Even so, implementation in this politically divisive time could be difficult.
But the most important proposal, to me, is his so-called “Economic Recovery Plan for Working Families.” In it, he sets forth a detailed multi-part plan to revitalize sectors of the economy ranging from manufacturing to education to child care. While it might be dismissed as pie in the sky, it starts with its feet on the ground. Biden echoes what most economists, including Fed Chair Jay Powell, have been saying: “We can’t solve the jobs crisis until we solve the public health crisis.”
Returning to whatever the new normal is will happen only when an effective, universally accepted vaccine is delivered. Therefore, any economic plan must recognize the need to contain the virus until vaccinations are widespread. Not surprisingly, Biden has a plan to do that, as well.
In summary, candidate Trump’s future economic plans are unstated. Candidate Biden has multiple plans, some of which could be difficult to implement unless the politics change.