How much credit should President Trump get for a U.S. economy that's generating lots of jobs and for a stock market that keeps setting record highs?
Trump, of course, thinks MAGAnomics is doing the trick, as do his most ardent supporters. After the July jobs numbers came out last week, Fox News and other members of Team Trump were touting the more than 1 million private-sector jobs created since Inauguration Day. Over on Trump TV, former CNN pundit Kayleigh McEnany was even crediting the president with personally creating them. That Obama created the same number of jobs during his final six months was considered less newsworthy, apparently.
Presidents are always given too much credit or blame for economic performance on their watch. So many factors are outside their control. But beyond that, the idea that this is already "Trump's economy" is ridiculous. None of Trump's big agenda items — at least the ones corporate America and Wall Street really care about — have become law. No ObamaCare repeal. No massive tax cuts. No trillion-dollar infrastructure. Nothing.
To the extent that any president "owns" an economy's performance, we're still in the Obama era. Indeed, we really ought to credit the economic performance during the first year of any president's term to his predecessor — after all, it's mostly that other guy's budgets and policies directly influencing the economy. So for instance, George W. Bush's economy wasn't from 2001 through the end of 2008 — it was 2002 through the end of 2009. And so on.
This change would make a big difference. During George W. Bush's two terms, GDP growth averaged 2.1 percent as 1.4 million new jobs were added. Pretty unimpressive. But recalculated — Bush gets Obama's first year and loses his first year to Bill Clinton — and the 43rd president's record looks even worse: just 1.5 percent growth and a loss of 1.1 million jobs.
This isn't to say Trump should get zero credit for anything good that's happened this year. It's certainly reasonable that the stock market's 10 percent rise since Trump took the oath of office at least partially reflects investor expectations about his growth plan. But how much? It's always tough to parse these things. Believe it or not, there's more going on in the world than Trump, such as a synchronized upswing in the global economy for the first time since the Great Recession.
There are more complications that don't easily fit the GOP's pro-Trump narrative: First, even when new policies or the expectations of policy changes matter, too much weight shouldn't be given to short-term performance. The very large Reagan tax cuts in the early 1980s were supposed to improve U.S. productivity growth. But there was no upturn until the mid-1990s. This time around, tax cuts might boost growth, but probably not too much if they are temporary and greatly worsen the deficit.
Second, don't forget the Federal Reserve. The Obama recovery is as much if not more the Bernanke-Yellen recovery, just as easing by the Volcker Fed helped ignite the Reagan boom. With the Yellen Fed thinking the economy is near or at full employment, the central bank could offset further fiscal stimulus with more rapid and continued tightening of monetary policy. Or monetary policy could stay loose and continue as a tailwind to growth.
Third, Washington isn't the whole ballgame. While one might partially credit the 1990s boom to Reaganomics' tax and regulatory changes, one should also credit Moore's Law, the PC revolution, and the emergence of the internet. Whatever Trump does might pale compared to what's happening in Silicon Valley. As I wrote last week, the IT revolution is far from over and might still have a huge impact on productivity and growth.
This isn't the Trump economy. If anything, it's the Obama economy — or the AmazonAppleFacebookGoogle economy.