Recently a friend of a friend on social media was commenting on the “cratered economy” that Trump left, implying that it was his fault for the pandemic results. When I challenged him on it with factual data, his comment to me started with accusing GOP for lacking new ideas for the last 40 years, and for me to go “look it up” – so, naturally, I did. Here is a roughly 45-year economic summary, covering all the way back to Jimmy Carter. At the very end is a summary of the impacts of the Trump cuts, where it was also implied that those only helped the rich – which has been shown again and again to not be the case at all:
In answer to your request for me to “look it up” – as Tom will probably tell you, I do. A lot. What I won’t do is participate in throwing around useless and emotionally driven anecdotes; I’ll go look at facts and data. If they bolster my point of view, great .. if they don’t, then that also gets equal air time. So buckle up – here we go. This is long… apologies in advance. I’ll talk about tax impacts a bit at the end, but feel free to actually pay attention to themes in the data.
Your timeline appears to be the last 40 years. Okay – let’s actually take that back a little further, to ensure we pick up Mr. Carter. Let’s also look at standard economic indicators, GDP, Deficits, unemployment rates, and certain watershed moments in legislation that impacted policy down the road – mostly these are “time bombs” that would go off later in the next guy’s term in office.
Carter: Under Jimmy, inflation totally skyrocketed at an average of 10.9%. The Fed fund rate tried to compensate, averaging 13%. Both of these were almost double that of Ford/Nixon. The term “stagflation” was applied for multiple years, and we entered a recession in his last year. Carter also oversaw one of the largest expansions of the Fed – in 4 years the government IRS revenues went up 73%! For comparison, the prior 4 years increased by 54% overall. In Jimmy’s 4 years, defense was sequestered and equipment post-Vietnam was not replaced; defense spending increased by $39B – barely keeping up with inflation and cost of living. Carter came into office with an unemployment rate of 7.5%, a low of 5.9%, and he left with 7.5% (and climbing amid the recession).
Reagan: When Ronnie came in, during the recession, he immediately cut taxes in 1981 and again in 1986. Inflation during his first 18 months dropped from a prior year 12.5% to a whopping 3.8%. He averaged 4.2%, but that was skewed with the first year 8.9% during the recovery. The Fed fund rate dropped to 8.5% (8% if you exclude the first year of recovery and legislation changes). Reagan also focused on spending controls and taxation controls that saw the government revenues expand by 29% in the first term and 24% in his second term. Reagan needed to recover the military (I was in during those years – I can provide more direct experience context if you like). He increased spending by over $133B over his terms. This resulted in much-needed modernization of ships, planes, and other equipment, and contributed to an end to the Cold War. Reagan came in with an unemployment rate of 7.5%, peaking at the top of the recession at 10.5%, and then halved it as he left office at 5.4%.
Bush: H.W. averaged 4.2% inflation, skewed by a small recession in 1990 (rate hit 6%) that was quickly brought under control by a well-managed Fed that dropped fund rates each year, ending at 3% (averaging 5.5% overall). H.W. also kept Federal revenue under control, growing only 16% in his term. H.W. also managed to maintain reasonable defense spending, keeping spending increases at an astounding $4B, but recall he had a modernized force (thanks to Ronnie) and he also had a war in Iraq, but also recall he was reimbursed billions by the Arab countries. H.W. came into office with unemployment at 5.4%, and left at 7.3%, after a steady climb.
Clinton: Bill is an interesting story since many supporters are quick to tout his balancing of the budget. But what also must be looked at is “at what expense?” The argument is solidly – and I emphasize solidly – that he was possibly the most damaging president in the last fifty+ years. But first let’s look at the numbers: Under Bill, inflation averaged a very modest 2.6%. The Fed Fund rate averaged 5.2%. Important to note: The last year of his term saw the tech bubble burst, and the inflation rate rose to 3.4% and the Fed rate soared to 6.5% to try to control it. Bill also expanded Fed revenues, up 37% in his first term, and 26% in his second. The tech crash caused a substantial drop in Fed revenues (roughly $200B/yr) that W was able to reverse within his first 15 months. Bill’s defense performance looks great on the surface, only increasing spending by $3B over 2 terms. But the devil is in the details: He actually slashed 9% out of defense for most of his years, drew down troop levels to dangerously low levels to get there, killed a lot of new systems and modernizations, and decreased operational readiness factors (according to the DOD), etc. Bill came in at 7.3% unemployment, saw a low of 4.0%, and he left office at 4.2% number that was quickly rising with the tech crash.
Time bombs: This is where Bill gets destructive. Bomb #1: The accounting standards that allowed for tech over-valuation … those came from Bill’s administration executive actions, and culminated with Enron, Qwest, and countless others that caused the tech crash. By the way – the Feds tried to hang out Arthur Anderson for that, and drove them into bankruptcy. What wasn’t reported is that AA was later acquitted of ANY wrong-doing. Bomb #2: Paraphrasing from past research – The catalyst that economists all seem to agree on was the reformation of the Community ReInvestment Act, signed by Bill Clinton in 1995. The Act was actually from the 70s. But the regs associated with it were basically re-written and fully replaced by Bill C and Congress in 1995. Originally it was designed to increase affordable housing. This “modernized” form started to put enormous pressure on banks (mortgage lenders) to provide loans to all communities, and specifically lower income groups. This led to really, really creative sub-prime lending (2-1 buy down loans, etc.), so banks could meet regulatory “quotas” of lending. It also DOUBLED sub-prime, high-risk lending from 10% of portfolios to over 20% of mortgage portfolios. Fannie and Freddie were instructed to increase loan scoring, and a bunch of other things, to make this a reality. This wouldn’t blow up in a mountain of foreclosures until after 2000, by most predictions. Guess when it did? Right on schedule during Bush’s term. This was confounded by the GLB (Gramm-Leach-Bliley) Act. Signed by Bill Clinton along about the same time. I posted that detail about 3 years ago and can provide that if you like.
Bush: W had some of the better inflationary performance of most of them. His rate averaged 2.4% with a Fed fund rate of 2.5%. But W got the effect of the time bombs that Bill planted. W still managed to get the government back on track (not to get too far ahead, but EVERY program Bush put in place to deal with the banking crisis, Obama campaigned against, and then not only kept every one – yes, EVERY one, he also expanded them). Bush’s Fed revenue growth was a modest and recovery-driven 8% in his first term, and a -2% in his second term; this was almost entirely driven by the sub-prime mortgage time bomb response and recovery impacts. W on defense is a significant story of increases in defense: He started an immediate rebuilding of the military (noticing a theme and pattern yet?). After the 9/11 attacks in his first year, the resulting wars in Afghanistan and Iraq increased our defense budget by almost double: 98%. W came into office with a 4.2% unemployment number that went to 5.8% within his first few months as they implemented recovery actions, and although the rate hovered around 5% for a while the subprime mortgage crash spiked the rate to 7.8% (and rising) when he left office.
Obama: Barack picked up where Bush left off, having to manage through the sub-prime recovery. As I mentioned above, he kept every program in place that Bush put in. He also planted another time bomb: The Affordable Care Act. I’ll get back to that one. But he did manage some good inflationary numbers: Only an average of 1.8%. He inherited a Bush Fed rate of 0.25%, and he kept it, raising it only in his last 2 years to 0.75%, but averaging 0.34%. Anything below at least 1% is unhealthy and still signals a struggling recovery – which is why he is also credited with the slowest post-recession recovery in history. The unemployment rate he inherited was 7.8%; it stayed over 8% all the way into his second term, but he did leave office with a rate dropped to a very good 4.7%.
The ACA time bomb deserves mention here: The program was fiscally unachievable from the start. I won’t get into all the details here (I do have far more detailed analysis on past posts if you’d like the links), but every state exchange went insolvent, insurance rates doubled, tripled, and in many cases, people lost coverage all together, etc. It was telling when one of my FB friends challenged those findings that one of the Exchange CFOs (a direct friend of mine) relayed… all I had to do was watch other FB friends that had, in fact, lost coverage or seen rates skyrocket to where they could no longer afford coverage, even through the exchange, light up all over him on the thread. I also actually ran a health care operation, billing millions of dollars annually, and know the impacts ACA had on those organizations after I left. But the ACA did serious economic damage, and the impacts drove much of our slowed recovery.
Barack on defense is another story of sequestration: While still involved in conflicts, he drew down force levels while also increasing our commitment in theatres around the world. The defense budget was dropped 9% over his terms, weapons system upgrades were largely canceled, etc.
Trump: Donald came in, picking up where Obama left off, and his numbers are also quite modest: Inflation averaged 1.93%, and the Fed fund rate returned to a more healthy average of 1.5%. Fed revenues increased by 16% – increasing every year, including after the tax cuts. In fact, here are a few nuggets about Trump’s “cratered” economy: After his tax cuts, the CBO projected annual individual income taxes would rise (not fall) to $1.9T by 2021… But they rose 8% higher than that! The CBO also projected corporate taxes would rise (again, not fall) to $327B by 2021; they rose 13% higher than projected, again! Defense was put back on a rebuilding track, rising 13% in overall budget across his term. Trump inherited a stable unemployment rate of 4.7%, but saw that rate drop even further to a pre-pandemic low of 3.5%. Just to put that into context: Nixon in 1969: 3.4%. Truman/Ike in 1952: 3.2%. Truman in 1948: 3.4%. Prior to Trump’s low in Jan 2020 of 3.5%, the average over the last 40 years was 6.2%.
And here’s more direct info for you to consider while we were supposedly cratering: Total federal tax revenues were $3.32 trillion in 2017, $3.33 trillion in 2018, $3.46 trillion in 2019, $3.42 trillion in 2020, and $4.05 trillion in 2021. Revenues in 2021 were 22 percent higher than prior to the tax cut in 2017.”
Now – during the end of the Trump term the pandemic did cause economies globally to tank. But to blame that on Trump as his being responsible for the cratering, well that’s just extremely short-sighted and frankly wrong. The fact that the US economy started recovering faster that any other global economy should be telling as proof – and that was before Joe took office. Important to note in the “cratering” conversation that Donald saw unemployment go from 3.5% (Feb ’20) to 14.3% (April ’20) – which then motivates you to latch onto “he cratered it”. Okay … then he left office with a quickly recovering rate of 6.2% and falling.
Biden thus far: Current inflation rate: 6.8%. Highest since the post-recession in 1982. It was at 1.4% pre-pandemic, and 3.4% during the pandemic, and now here we are. He inherited a recovering 6.2% unemployment rate (from a high of 14.3% just a few months earlier), saw a low of 3.6%, and now he’s at 3.9% and holding relatively steady. Now – the devil is totally in those details as well: Right now we have 6.3M people out of work, and 11M jobs open and available. That is totally unprecedented.
Let’s also talk debt increases: The biggest have been from Bush (W), Obama, and Trump (soon to be topped by Joe). Bush increased debt by $4.3T in 8 years, averaging $544B per year. He was heavily skewed in his last 2 years as he was fighting the subprime mortgage crisis, not to mention 2 wars. Obama increased debt by almost $10T; $1.2T/yr average. His first 4 years averaged higher, as we were in recovery and Fed spending abounded: $1.5T/yr. Trump increased debt by $4.5T, averaging $1.1T/yr. But his numbers were again heavily skewed – more than any others before him – by the Covid spending that tripled (yes – tripled) annual deficit spending for 2020 and 2021 (recall we started shutting things down in Feb 2020). This added an extra $4T to the deficit. Biden is now spending at just as an alarming rate.
Other important notes: Under Obama wages grew at 2%/yr. Under Trump they grew at 3.4%/yr. Under Biden they are poised to grow even faster, driven by inflation, which is bad. Currently wages are growing by over 4% – but inflation is growing at over 6%, so workers are losing ground.
And to specifically address the Trump tax cuts “benefitting the rich” – some data to contemplate from the IRS: Filers with an AGI of $15,000-$50,000 saw a cut of 16%-26%; filers in the $50,000-$100,000 range saw a cut of 15%-17%; those filers between $100,000-$500,000 saw a cut of 11%-13%; those filers over $500,000 saw a cut of 6%-9%. This is based on the first year of the cuts – 2018 – which is the only year available at this point (taken from Dec 2021 report). And it gets better: Those filing between $1-$25,000 surprisingly decreased by 2 million people in a single year – demonstrating a strong effect on economic upward mobility. 1 million more people arrived in the $100,000-$200,000 bracket as well. And here’s one to dwell on: Prior to the Trump tax cuts, filers over $500,000 made up 38.9% of all personal income tax revenue; the year after the tax act they now paid more that 41.5% of that same revenue category. So … doing the math, the government cut their taxes, yet they paid more of their (what’s the phrase??) – oh yeah: “fair share.”
Take what you want from the actual, real, data. And again – if you don’t believe the numbers, feel free to “look that up”. But if instead you’d rather settle on “GOP is evil” – then fine; just wait for the next time bomb a GOP president is left to fix. Rinse and repeat.
