Trump economic report is revisionist history

Trump economic report is revisionist history
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Earlier this week the Trump administration released the annual Economic Report of the President, complete with accusations that President Obama’s economic policies constrained growth over the past decade. Americans who lived through the recession — and economists who studied it — know better.

Unlike the stable and growing economy inherited by President TrumpDonald John TrumpAl Gore: Trump has had 'less of an impact on environment so far than I feared' Trump claims tapes of him saying the 'n-word' don't exist Trump wanted to require staffers to get permission before writing books: report MORE, let’s not forget that President Obama was inaugurated in the midst of an economic freefall. The economy was losing 800,000 jobs a month. The stock market had plummeted by nearly one-third in just four months, with trillions in wealth erased in short order.

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The housing market was in an unprecedented crisis; lending markets had seized, foreclosures were rampant and millions had lost their homes. All told, a severe recession was well-underway with the threat of a lasting depression not seen since the 1930s.

 

Armed with a cooperative Congress, President Obama speedily passed the Recovery Act to stop the bleeding and jumpstart the economy. Trump’s Economic Report of the President faults Obama for not spending enough on transportation infrastructure, but the Recovery Act was so much more than that.

There was crucial support to state and local governments to stabilize school funding and maintain Medicaid; huge upticks for retraining and clean energy investments; and billions in tax cuts to working families and businesses around the country.

It wasn’t just the Recovery Act. Building on financial stability measures implemented by the Bush administration and the Federal Reserve, President Obama passed the Dodd-Frank Act to reform the banking sector and prevent a future crisis.

The following year, with the recession’s impact still lingering, he also passed a two-year, tax-cut complete with a payroll tax break — raising the take-home pay of every worker in America — and extended unemployment support for those workers still trying to find a job.

Let’s not forget his support for the automakers, enabling one of the most remarkable industry turnarounds in our country’s history.

Despite what you read in this year’s Economic Report of the President, there is no doubt this strategy worked. Between the heart of the recession and his last day in office, President Obama oversaw the creation of 16 million private-sector jobs. Real wages grew faster than in any recovery since the 1970s.

The stock market roughly tripled from its trough, and household wealth was up by about one-sixth. The housing market recovered nationwide, lifting millions out from being underwater on their mortgages. And unlike Europe, which took a more conservative approach to the recovery, the United States’ economy was the envy of the world.

The danger in the Trump administration’s revisionist history is not that the Obama administration does not get its due credit, but rather that we fail to acknowledge a highly effective recovery strategy.

The Economic Report of the President attributes the Obama recovery to the natural course of the business cycle, but the trajectory of the rebound was far from a foregone conclusion. Economists, for example, have shown that the extent of the Great Depression was magnified by short-sighted policies to choke off public support, rather than aid in the economic turnaround.

Today, as was the case for the final seven years of the Obama administration, there is no recession in sight. President Trump is fortunate to step into office under an economy that was already humming, complete with an exceptionally tight labor market, moderate wage growth and a buoyant stock market. But recessions inevitably rear their ugly head.

Maybe it will be a recession sparked by concerns over soaring U.S. debt, already projected to rise by well-over $1 trillion under President Trump. Perhaps it will be a recession fueled by short-sighted trade policies which cut off U.S. exports and push consumer prices steeply upwards.

Whatever the cause, whenever a downturn comes, hopefully the current administration will have the wherewithal to dust of the playbook authored by President Obama rather than clinging to revisionist history.

Benjamin Harris is a visiting associate professor at the Kellogg School of Management at Northwestern University and was formerly the chief economist to Vice President Biden.