December 31, 2018
Steven Rattner used his NYT column to present a number of charts to show Donald Trump’s failures as president. While some, like the drop in enrollments in the health care exchanges, do in fact show failure, others do not really make his case.
For example, he has a chart with a headline “paltry raise for the middle class.” What his chart actually shows is that middle class wages, adjusted for inflation, fell sharply in the recession, but have been rising roughly 1.0 percent a year since 2014. They recovered their pre-recession levels in 2017 and now are almost a percentage point above the 2008 level. This is not a great story, but the picture under Trump is certainly better than under Obama. (This wasn’t entirely Obama’s fault, since he inherited an economy in the toilet.)
The chart shows more rapid growth at the bottom of the pay latter and a modest downturn under Trump for those at the top. By recent standards, this is not a bad picture, even if Trump does not especially deserve credit for it. (He came in with an unemployment rate that was low and falling.)
Rattner also presents as a bad sign projections for fewer Fed rate hikes. While one basis for projecting fewer rate hikes is that the economy now looks weaker for 2019 than had been thought earlier in the year (but still stronger than had been projected in 2016), another reason is that inflation is lower than expected. Economists have consistently over-estimated the impact that low unemployment would have on the inflation rate. With inflation coming in lower than projected, there is less reason for the Fed to raise rates.
Contrary to what Rattner is implying, this is a good development. It means that the unemployment rate can continue to fall and workers at the middle and the bottom of the pay ladder can continue to see real wage gains.
Rattner also shows us how growth projections for the US and the world have been lowered since June of 2018. It’s not clear how much Trump can be held responsible for growth in the EU (trying blaming the European Commission’s austerity drive) and the rest of the world, but his argument about the US is pretty weak. The 2.4 percent growth projection from December 2018 is actually up 0.1 percentage point from the June projection. More importantly, it is up from a projection of 1.7 percent from January of 2017, the month Trump took office.
Then we have the chart showing the rise in the debt relative to GDP. While Rattner is right that the tax cuts to the rich were a waste of resources, the higher debt-to-GDP ratio is basically meaningless. (Japan’s debt-to-GDP ratio is almost 250 percent and the current interest rate on its long-term bonds is 0.00 percent.)
If anyone is seriously concerned about the debt that the government is passing on to future generations then it is also necessary to include the rents associated with patent and copyright monopolies. These monopolies are alternative mechanisms to direct funding that the government uses to pay for services (i.e. research and creative work).
To take the most important case, suppose the government were to replace the $70 billion (0.35 percent of GDP) in patent monopoly supported research that the pharmaceutical industry conducts each year with direct funding of $70 billion. All research findings could then be placed in the public domain and new drugs would sell at generic prices.
Rattner and his crew would count the $70 billion as additional spending and as an addition to the debt and deficit. However, when the industry is able to charge the public an extra $360 billion (1.8 percent of GDP) a year in higher drug prices due to patent monopolies and related protections, Rattner and company choose to ignore the burden. This sort of groundless debt fear mongering deserves only ridicule; it is not serious economic analysis.
Trump has done many awful things as president and threatens to do many more. But this is not a reason to adopt Trumpian tactics, the data provide plenty of grounds to attack his performance without playing games with it.
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