Trump’s economy — Continuation of Obama years or all Trump?

Is Trump’s economy a continuation of recent trends established under Obama or is it a jump-start-turn-around of previous trends from the Obama years? Obama has recently claimed the good economy that we’ve enjoyed since Trump’s election is a continuation of trends from his 8-year presidency. The statement at the end of the  video just below of Chairman Kevin Hassett of Trump’s Council of Economic Advisers addresses Obama claims and finds them wanting.

The video below if from the White House press briefing where Hassett presents several easy to read charts that go through the Institute for Supply Management (ISM) Purchasing Managers’ index, durable goods, employment and other statistics to show the break in previous trends since Trump assumed office.

Hassett’s charts show the actual performance in each category during the Obama years, the trend line thus established for those years, and then the performance line since Trump was elected. In every case the graph since Trump took office shows a clear upward break from the trend lines established under Obama.

Kevin Hassett has an interesting statement at the end of the video which I have reproduced below the video so you can read it over and remember it. It’s that good, you will want to read it again after hearing it, I believe.


Kevin Hassett conclusion, restated:

And so, I would assert that if you look at the collective body of evidence, the notion that what we’re seeing right now is just a continuation of recent trends is not super defensible. And I think that — I know that we’re in a political time and passions are high. But, as geeky economists, one of the things we have to do is think ahead to what historians will think when they look back at this time. And I can promise you that economic historians will 100 percent accept the fact that there was an inflection at the election of Donald Trump, and that a whole bunch of data items started heading north. They will, of course, argue for a long time about why that happened.

But my final thought for you is just this: That when they do that, and when you watch people do that in the media going forward, with op-eds and so on, that you should watch out for ex-post theorizing. As an economist, one of the things I most care about is an ex-ante theory — something that happens before, and then let’s watch the data, and then see if it agrees with a theory. That’s how you test a theory.

You might recall that I came back here last fall, and I told you that if we had the tax cuts that President Trump advised that we have, that he pursued — if we passed them, then there would be a boom in capital spending this year.

In fact, we provided estimates at the time last fall that said that capital spending this year would go up about 11 percent because of the tax cuts. So far, in the first half of the year, capital spending is up 10 percent.

And so you don’t have to really reach far for a theory of what happened. President Trump deregulated the economy; we’ve talked about how that affects growth. The tax cuts have had exactly the predicted effect on the economy that’s brought businesses back to the U.S., factories back to the U.S., and created jobs for ordinary Americans. It clear in the data that there’s been a trend break.

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