Last week, Barack Obama delivered a lacerating and widely covered speech about our current president. In it, he suggested that Donald Trump didn’t necessarily deserve much credit for the healthy economy he tends to crow about.
“When you hear how great the economy’s doing right now, let’s just remember when this recovery started,” Obama said. “I’m glad it’s continued, but when you hear about this economic miracle that’s been going on, when the job numbers come out, monthly job numbers, suddenly Republicans are saying it’s a miracle. I have to kind of remind them, actually, those job numbers are the same as they were in 2015 and 2016.”
In other words, Obama was saying Trump was born on third base economically and thinks he hit a triple.
Monday, the White House tried to present a counterargument, without exactly admitting it. Council of Economic Advisers Chair Kevin Hassett stopped by the daily White House press briefing to present a series of charts that supposedly demonstrate how the economy improved after Trump was elected. “We were prepared to do this briefing a few weeks ago and there’s not in any way a timing that’s related to president Obama’s Friday remarks,” Hassett told reporters.
This was not particularly convincing. Nor was the case Hassett laid out, in which he used some oddly misleading charts to try to prove that several economic trends improved sharply after Trump was elected.
Take Hassett’s chart of business investment. This is an especially important metric for Republicans because they argued that tax cuts and deregulation and a general boost to confidence from having Trump in the White House would lead companies to spend more on things like plants and equipment. That’s what these graphs (the main one is to the left) seem to show. Investment growth generally slows after Obama’s re-election in 2012 and hovers at about just 1 percent when Trump wins the White House. After then, it suddenly shoots up.
This graph is a bit deceptive though, because it doesn’t show actual quarterly growth data. Instead, it uses the average growth rate over the most recent six quarters—that is, over the past year and a half. Economists will sometimes average together a few months of economic data when the numbers are extremely noisy in order to show a smoother, more easily understandable trend. But reaching back six quarters is extreme and distorts the story of what actually happened in the economy by making it look as if any changes in growth trends start much later than they actually did.
Here’s what business investment has actually looked like over the past few years. The growth rate initially rose during Obama’s first term, then declined, before starting to recover in the middle of 2016, before Trump’s election. The pace of of investment has continued to pick up under Trump, but the timing and shape of the previous trend are entirely different.
That’s important, because much of the investment crash under Obama was driven by a collapse in oil prices, which ground drilling to a halt in places like Texas and North Dakota. After crude began to recover in 2016 and 2017, so did the number of oil rigs, which helped prop up business investment. Oil hasn’t been the only factor driving investment figures—but it’s an important one that has little to do with Obama’s or Trump’s policies.
Not to belabor the point, but you see the same pattern play out with capital goods orders. The White House tries to take credit.
Meanwhile, they largely seem to have moved in tandem with oil.
One of the most baffling parts of Hassett’s presentation was his attempt to show that the job market had vastly improved, using the employment rate among 25- to 54-year-olds. Here’s the CEA’s chart, which again is based on a six-quarter average of the data. It shows the employment rate growing slightly faster under Trump than during Obama’s second term.
If you take a longer view, and use the actual employment rate rather than a rolling average, it’s hard to see any noticeable change in the trend after November 2016.
The point of all this isn’t that Trump deserves zero credit for the state of the economy. The man signed a massive tax cut and a large increase in government spending; even if you don’t believe slashing rates on corporations or the wealthy will yield the long-term benefits Republicans have promised, all the extra money floating around has almost certainly had some sort of short-term stimulative effect. As Hassett noted today, small-business confidence soared after the election—which makes sense, since a lot of small-business owners are Republicans—which may make some difference around the edges. But the economic expansion we’re enjoying today was set in motion under Obama; the ups and downs in business investment seemingly have as much to do with factors outside our politicians’ control, like the oil market, as they do any public policy decisions. As much as the White House would like to prove otherwise, it can’t.