(Bloomberg Opinion) -- The public gives President Donald Trump very low marks for his handling of the coronavirus pandemic and race relations. But as recently as the end of June, the public was still giving him slightly positive marks for his handling of the economy. That edge may now be eroding, but Trump’s numbers on economic policy are still much better than on other important issues:
It’s obvious why Trump gets decent ratings on the economy -- before the coronavirus outbreak in March, he had presided over the late stages of the longest economic expansion in postwar U.S. history. But the key phrase here is “presided over,” because Trump didn’t really do much more than that. If anything, those economic policies that he did manage to enact probably did more harm than good.
The expansion that began in 2009 was one for the history books, narrowly outlasting the booms of the 1990s and 1960s. But duration isn’t everything. Much of the reason that recovery lasted so long is that there was such a big shock to recover from. In terms of growth in real gross domestic product per capita, that expansion was actually slower than most:
The one place where Trump’s recovery shone was in terms of delivering economic gains to lower wage earners. Wages for the median full-time worker began rising strongly during President Barack Obama’s second term, and the rise continued under Trump
But this likely wasn't a function of anything Trump did; instead, it probably reflected the length of the expansion. Lower-wage workers with less education tend to be the first to get fired in a recession and the last to get hired when the economy recovers, meaning that their income gains tend to come only at the end of long periods of growth. Trump simply came into office at an opportune time.
But to what extent should Trump get credit for keeping the expansion going? His diehard supporters will point to Trump’s trade war, which was supposed to result in the reshoring of manufacturing jobs from China and elsewhere. The truth is that it did nothing of the sort. This recovery was unusually weak for factory jobs:
Trump’s tariffs almost certainly made things harder for U.S. manufacturers by raising the price of imported components; steel tariffs, for example, increased costs for U.S. automakers. On top of that, the tariffs hurt consumption; multiple economic studies found that U.S. consumers were forced to pay almost all of the cost of Trump’s import taxes.
What about Trump’s tax cuts? The impact of these is harder to gauge. Corporate tax cuts are supposed to fuel growth by stimulating business investment; if there’s no rise in investment, the policy probably isn’t having much of an effect. A 2019 analysis by the International Monetary Fund and a 2019 study by the Congressional Research Service found that investment growth barely accelerated in response to Trump’s 2017 reforms. The longer-term impacts will be harder to gauge amid all the other factors affecting businesses’ investment decisions since then. But the length of the economic expansion probably wasn’t because of the tax cuts.
So if Trump’s trade war hurt the economy slightly and his tax cuts had little immediate effect, how could Trump get credit for keeping the expansion going? The only possible way is through human psychology -- what economists call animal spirits. If business people -- who tend to lean Republican -- felt greater confidence from having a Republican in the White House, that might have made them more willing to invest. And indeed, measures of business confidence rose during the first two years of Trump’s presidency, though they began trending down in late 2018:
But even if Trump did give rise to a brief surge of economic optimism in 2017 and 2018, that’s not a trick that can be repeated. Trump’s trade war was already sending business confidence lower, and now his disastrous coronavirus response promises to chill the economy for years to come.
Even this probably is giving Trump too much credit. The likeliest scenario is simply that he inherited a recovery from his predecessor, that this recovery lasted a long time because the economy was digging itself out of an unusually deep hole, and that Trump mildly hurt that recovery through bad trade policy. The private sector continued healing itself, assisted by low interest rates from the Federal Reserve. That many Americans still give him good marks on the economy is an unfortunate result of our tendency to give presidents too much credit for the actions of the others.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.
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