The way things look ...
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www.websitesammy.com (estab. 1999)

Presidential Job Approval
Gallup Wkly: 37% - 1/27/19)
US Economic Confidence Index (-6.4)
Conference Board - 1/29/19
Civilian Labor Force Participation Rate: 63.1%
Bureau of Labor Statistics -Dec. 2018


Tax Reform
Scorecard
IV Q 17
(baseline)
I Q 18 II Q 18 III Q 18* IV Q 18
Priv Sect Emp
(000)
125,294
125,904
126,571
127,094
127,858
+2,564 (2.05%)!
Priv Sect Wages
($, wkly avg.)
919.08 924.60 930.81 939.78
$948.06
+28.98 (3.15%)!
GDP
(% un-annualized)**
18,223.8 18,324.0 18,511.6
18,671.5
447.7 (2.46%)
Non-Res Fixed Inv
(% un-annualized)**
2,582.7 2,654.0 2,708.9
2,715.7
+133.0 (5.15%)
Fed Receipts
$ (bil.)
770 732 1,046†
787
771
+1 (0.2%)
Deficit
$ (bil.)
-225 -373
-9
-288
-317
895 worse!
* % is +/(-) baseline
! $ (bil) bet/worse than baseline
** chained 2012 $ (bil)
† Apr inc. tax receipts


 2/6/19 -- One and a Half Robins 

In his second (and only slightly belated) State of the Union message to Congress, President Trump delivered, as is his wont, several whoppers. To no one's surprise.

But what may have been the biggest whopper of all passed like a ship in the night, possibly because the TV commentators reporting on the event don't really know much more about GDP than the Donald does.

Stretchers on subjects ranging from "The Wall" to criminal aliens, women in the work force, wage growth, public safety in El Paso, minority employment rates and creeping socialism, in turn, showcased the president's penchant for nonsense, non-sequiturs, misstatements, half-truths, flights of fancy and wild, in-your-face mendacities.

But the Fourth Estate was prepared. They'd assembled armies of fact-checkers to red-flag and review, in almost real time, the president's expected stream of suspicious claims and exaggerations. When Trump claimed that economic growth had doubled on his watch, however, he pretty much got a pass all around.

A few anchors turned to their economic experts, but those too punted on the claim. It could be they weren't sure how to do the math, GDP being such a recondite matter (quarter-by-quarter percentage differences multiplied by four (to annualize the difference) and then multiplied by a deflator in order to adjust for inflation. Plus, the numbers are in the trillions.

“   The United States economy is growing almost twice as fast today as when I took office, and we are considered far and away the hottest economy anywhere in the world.   ”

But it looks like that's what Trump did, and it gave him a figure nearly (still not quite) twice as large in his favor, e.g., 3.4 vs. 1.8. (Admittedly, using the 3Q '18 GDP figure put him three months out of date. Fourth quarter numbers were delayed, a casualty of the shutdown, but the Atlanta Fed predicts it will be more like 2.7%, less flattering still to the President's case.)

Even an undergrad with just a minor in economics could have told the president that this was not a valid way to measure GDP growth in his brief term in office. It's more like choosing a high number for me and a low number for you and seeing how they compare. Oh goody, I win!

This is Donald Trump, so it could have been just an uninformed misjudgment. He truly wouldn't know. But this is the State of the Union address, and he has advisors who are real economists.

Peter Navarro, Director of Trade and Industrial Policy and the numbers man with Trump's ear these days, may be a little loony, but he's got a PhD in economics from Harvard and taught at UC Irvine. He knows how GDP works.

"These guys believe that a 350 billion dollar tax cut will stimulate the economy, and they're full of s**t. Because they don't know what stimulates the economy. The economy goes up, it goes down, it goes up, it goes down, it goes up, it goes down, nobody knows why the f**k it happens." (Lewis Black, "Black on Broadway," 2004l)

It's hard to look smart dealing with such abstrusities unless you're truly ready to appear both brilliant and plain-speaking at the same time. Where's Charles Krugman when you need him?

The boldest could do little more than acknowledge, yes, GDP had indeed grown more fastly on his watch, adding meekly that maybe Trump shouldn't get all the credit. Then they clasped their hands on the desk in front of them and waited for the next question (which hopefully wouldn't involve long division).

Trump's GDP numbers are pretty good numbers, no question, but not wildly out of line with what you'd expect from an economy in the later stages of a long-term economic growth spurt.

Since the second quarter of June 2014 the US has enjoyed 20 straight quarters of uninterrupted GDP growth. (This is the second longest recovery on record, someone said.) Numbers even Tom Brady could admire.

Trump characterized his "GDP accomplishment" as an "economic miracle," but even an increase of 100% would at best be only near-miraculous. It happens. More to the point, skeptics might ask, what, or more specifically, where was he actually measuring?

Ignoring for the moment that quarter-to-quarter GDP can be a volatile number and even two years of a presidential term might not be enough time for a legitimate assessment, let's just try to figure out what point of comparison the President had in mind.

GDP growth for 2018 will come in at about 3%, an improvement over any part of Obama's tenure no matter how measured. (2015 GDP grew 2.9%.) But for it to have really doubled, there would need to be some Obama GDP metric of 1.5% or less to compare it to. What would fit that bill and still make for a sensible comparison? What could the President have been thinking?

GDP growth in Obama's last year in office was 1.9%. Hmm, close. Almost 60% better for Trump. But not nearly double. Given GDP's quarter-to-quarter volatility, maybe Trump felt such a narrow-term comparison might smack of cherry-picking anyway.

So perhaps Obama's last two years compared to Trump's first two. That would produce average annual GDP growth of 2.6% for Trump versus 1.96% for Obama. Ooh, that's worse: only 32% better.

Similarly unsatisfactory results come from comparing Trump's two years to Obama's two full terms together or just the whole second term alone. And again, there's the problem of asymmetric comparisons

The thought occurs, given that the Donald probably doesn't know much about GDP beyond how to spell it, maybe he simply took his most recent reported quarterly GDP growth figure (Q3 '18) on hand versus Obama's last quarter in office (4Q '16).

This, of course, is an apples-to-oranges comparison, looking more at quarter-to-quarter volatility than actual growth. (Which is what GDP is designed to do, by the way: spot and annualize current versus historical growth trends.)

So do Trump's Chief of Staff, Mick Mulvaney (Georgetown, major in international economics) and Larry Kudlow, Director of Trump's National Economic Council (studied politics and economics in a Master's program at Princeton University's Woodrow Wilson School of Public and International Affairs, did not graduate).

So, speaking for the group, this was a knowing lie intended to deceive a gullible audience.

But for Donald it may actually have been an improvement on past performance. Last August he made a similar brag about GDP growth under his guiding hand. He claimed then that he had tripled it. So at least he got a little closer to the truth this time.

(For the record, the country with the "hottest" GDP in 2018 was Ghana (8.3%) according to the World Bank. In 2017, the title went to Ethiopia at 8.5%. So close.)

Some Are Born Great ...

One of Sammy's favorite dictums, used on these pages before, is that presidents don't ruin economies, economies ruin presidents. (Although it could be argued Donald Trump is giving this theorem a serious bench test.)

But by and large the economy is impacted, positively and negatively, by a broad range of forces over which a president can exert little direct control.

What's more, consequential decisions that actually could move the economy might very well not show their effects until after—sometimes, years after—he's left office.

George H.W. Bush comes to mind. He may have lost his reelection bid to a tax increase he put in place that may have ushered in years of growth during his successor's term in office.

Late last summer Justin Fox penned a piece for Bloomberg that examined this same subject and reached some thought-provoking conclusions. His proposal for how to most accurately calibrate GDP performance during a president's term(s) in office was applied to calculations in this posting (although it proved of negligable numerical signifigance dealing with short timeframes).

Maybe more significant, Fox provides a different way of approaching the entire impact of GDP growth and its importance in assessing a president's accomplishments as the country's national leader.

Fox's piece can be found here: Guess Which Presidents Really Oversaw Economic Booms. The chart below is taken from his story.

This is a highly worthwhile article for anyone looking to develop a deeper understanding of GDP and how economic growth plays out over time in our country's progress. In fact, it would be a very good article for the president.

posted 2/10/19


Quotable

In all very numerous assemblies, of whatever characters composed, passion never fails to wrest the sceptre from reason. Had every Athenian citizen been a Socrates, every Athenian assembly would still have been a mob.
Illustration by Zohar Lazar
James Madison foresees the dangers social networking poses to the body politic in "The Federalist No. 55" (1788). Jeffrey Rosen explains in "Madison vs The Mob" in The Atlantic.
posted 10/13/18