As he does almost daily, President Trump sent out a number of tweets recently. Two of them contain assertions about the economy that need fact-checking and being put in context, similar to fact-checking his State of the Union address. The statements include the tax cuts, the overall economy, unemployment and how many people are working in the U.S. Fortunately there are facts that can help determine the actual state of the economy and how his descriptions of them match up.
Trump’s “Biggest tax cut” doesn’t even make the top 10
Trump has said multiple times that the tax cut was the largest in history. As usual he is overstating the impact of his policy. The Center for a Responsible Federal Budget or CRFB does some very good analytical work about the Federal government’s spending and revenue.
Its February 2 blog posting analyzed Trump’s statements and wrote the following, “The President made his oft-repeated assertion that the Tax Cuts and Jobs Act (TCJA) constitutes the largest tax cut in U.S. history. However, this is not true by any measure. The tax cuts are among the largest in nominal terms, but even then they are still smaller than tax cuts passed at the beginning of 2013. And this is largely due to inflation and because the economy grows over time, leaving more tax revenue to cut.” The CRFB calculated that the tax cut was the 12th largest in history as a percentage of GDP with Trump’s being 0.6% of GDP.
The CRFB added, “Adjusted for inflation, the TCJA is the fourth largest tax cut in history, behind the tax cuts in 2013, 2010, and 1981. It is the fourth largest whether looking at the official $1.5 trillion cost of the legislation, or our $2.2 trillion estimate excluding the gimmicky use of expirations and delays that artificially reduced the bill’s cost.”
The best economy only applies to developed countries
Trump’s comment that the U.S. has the best economy is very similar to a previous one that we have the hottest economy in the world. This is a subjective statement but there are metrics that can be used to measure which country has the “hottest economy.”
The U.S. is growing faster than other advanced economies but is expanding slower than a number of others such as China and India. While China’s growth rate is slowing, it is still substantially higher than the U.S. From the International Monetary Fund here are various countries estimated growth rates in 2018 and 2019.
- U.S.: 2.9% and 2.5%
- Germany: 1.5% and 1.3%
- United Kingdom: 1.4% and 1.5%
- Japan: 0.9% and 1.1%
- Russia: 1.7% and 1.6%
- China: 6.6% and 6.2%
- India: 7.3% and 7.5%
The unemployment rate has actually been lower
Trump is correct in one sense since the U.S. has the lowest unemployment in the past two decades. At 3.8% it matches the 3.8% in April 2000 when George W. Bush was President, and during 2000 the unemployment rate ranged from 3.8% to 4.1%. However, you can see from the graph below the rate was lower in 1953 and 1969.
Another aspect of the unemployment rate is how it has trended down since it peaked in October 2009 during the Great Recession in President Obama’s first year. While the following graph is through September last year, the rate has essentially flat-lined through February.
More people working now is caused by population growth
Trump is taking credit for the 158 million people in the workforce being the biggest number ever. Note that the 158 million is probably a combination of 156.9 million people in the civilian workforce and about 1.3 million in the military.
While the 158 million is technically correct, the workforce grows as the population increases . This is similar to saying the economy is the largest ever compared to a few years or decades ago. It will increase due to inflation. The graph shows how employment tends to move up except in times of recession.