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President Trump has tweeted or stated multiple times that he inherited a mess from President Obama. Since a large number of citizens don’t realize that his rhetoric doesn’t match reality, it is worthwhile to analyze the data and see how they match up to his statements . When you look at the employment numbers, unemployment rate, GDP growth, the federal deficit, the stock market and trade it is apparent that Trump did not inherit a mess from Obama.
Employment numbers continue a positive trend since 2011
It took a couple years after Obama took office for job growth to get back on track after the Great Recession. Starting in 2011 and through 2016 there were over 2 million jobs created per year with over 3 million in 2014. Including January 2017 when Trump was inaugurated there had been 76 months (6 years and 4 months) of positive employment growth. As can be seen in the chart below the additional 24 months of job growth are essentially a continuation from Obama’s last six years.
Unemployment rate also showed a steady improvement
In January 2009, the month that Obama was inaugurated, the unemployment rate was 7.8% and it climbed to 8.3% in February. It peaked at 10.0% in October, nine months after Obama took office and in the midst of the Great Recession.
Starting in November 2009 the rate fell every year and was 4.8% in January 2017 when he left office. It has continued what is essentially a trend that had been in place before Trump took office, as it fell to a low of 3.7% late last year but has increased a bit to 4.0% last month.
Trump best GDP growth hasn’t surpassed Obama’s
When Obama entered office the year over year GDP growth rate for the first three quarters were a negative 3.3%, 3.9% and 3.0%, respectively. The economy then embarked on 29 quarters of positive growth under Obama and has added on an additional 7 quarters, through September 2018 (and probably another one with December last year).
While the rates under Obama were not spectacular, this can be partially attributed to consumers being hesitant to spend freely coming out of the Great Recession, other consumers declaring bankruptcy with many losing their houses, businesses taking a cautious investment approach and international economies experiencing slow or negative growth.
Even Trump’s highest year over year growth rate of 3.0% in the September 2018 quarter does not exceed Obama’s high point of 3.8% in the March 2015 quarter. The first estimate for the December 2018’s growth rate, which is now scheduled to be released in just over a week on Thursday, February 21, appears to be around 3%.
It seems that 2018’s increase in GDP has been helped by the Trump tax cut, which should wear off next year, and it comes with a large increase in the federal deficit.
Trump’s deficits could be double Obama’s
When Obama took office the deficit increased due to the Great Recession causing tax revenue to fall and an increase in spending on items such as unemployment. After peaking at $1.4 trillion in fiscal 2009 (September 2009 or eight months after taking office) it fell to a low of $438 billion in fiscal 2015 and rose to $585 billion in fiscal 2016.
Multiple organizations ranging from the Congressional Budget Office, or CBO, to the Committee for a Responsible Federal Budget are projecting that the Federal deficit will increase even as the economy grows. After increasing to $779 billion in fiscal 2018 it appears that it could cross $900 billion this year and over $1 trillion in fiscal 2022 and beyond. The scary thing is if the economy stumbles and growth slows more than expected or enters a recession, the deficit will increase even more than what this chart shows.
U.S. Federal deficit as a percentage of GDP
Congressional Budget OfficeS&P 500 doubled under Obama
From the day after Obama’s election in November 2008 until Trump’s election eight years later the S&P 500 rose 113%. So far since Trump’s election, the Index has increased 28%. From the graph below it appears that the stock market has essentially carried on the momentum from Obama’s tenure.
Trade deficit shows the economy improved under Obama
Lowering the trade deficit has been a rallying cry of candidate and now President Trump. He seems to view trade as a zero-sum game and if a country is running a deficit that is “losing.” What he doesn’t appreciate is that consumers and businesses benefit by having products available at a lower price than if they were built in the U.S. (and many products wouldn’t be built at all).
One critical aspect of the trade deficit is that it is highly dependent on how the U.S. economy is performing. In 2008 when Obama was elected the deficit was over $708 billion and had been at least $705 billion for four years as the economy had been doing well.
In 2009, Obama’s first year in office, the deficit fell to $384 billion, dropping over 45%. As the economy recovered the deficit grew to $495 billion in 2010 and finished 2016 at $502 billion.
In Trump’s first year in office, the trade deficit increased $50 billion, or 10%, and it looks like it will have increased another $50 billion to about $600 billion in 2018. The recovery from the low coming out of the Great Recession is another indication that the economy was doing well under Obama.
The following articles provide information about:
Fact-checking Trump’s 8 economic statements in the State of the Union,
Is China playing Trump by promising to buy soybeans,
Why Trump and Republican’s have gone radio silent on GDP growth,
How much Trump’s tariffs are impacting consumers and corporations and
That his budget deficits are about to become the largest in history.
