Following up on my last essay A Look at Four Economic Metrics. How did Biden-Harris Do? Not Good. I want to revisit average quarterly GDP growth under Trump and Biden respectively, as well as real wage growth and unemployment, and make a note about how to understand the relative performance of each regime. I make the note first.
The economic performance during the first year of a president’s administration is significantly influenced by the conditions and policies established by the previous administration. Economic policies take time to formulate, implement, and have an effect.
There is a significant lag in effect. Economic policies, such as fiscal stimulus, regulatory adjustments, and tax changes take months or sometimes years to show their full impact. The economy’s performance in the first year of a new administration reflects the continuation of policies and trends set by the previous administration. The new administration operates under a budget set by the previous administration. Major fiscal policies (spending programs and tax codes), are typically established in advance. It takes time for a new regime to appoint key economic advisors and policymakers and to enact new policies. The process of writing and passing legislation and enacting regulatory changes is time-consuming. Economic performance is influenced by domestic and global economic conditions—business cycles, consumer confidence, and international trade. These are are not easily or quickly altered by the new regime.
In the BBC article “Is US economy better or worse now than under Trump?” Jake Horton reports: “Between January 2017 and January 2021, average annual growth rate was 2.3%. This period includes the slowdown and recovery of the economy as a result of the Covid pandemic. Under the Biden administration so far, this figure is 2.2%—so almost the same.”
Excluding the conjunctural effects of the pandemic for the two quarters of negative growth, the average GDP growth under Trump would be somewhere around 5%. If the rebound quarter is also removed, then the average is approximately 2.7%. Any fair analysis would factor in the effects of the lockdown. Moreover, the performance of at least the first couple of quarters of the Biden regime is attributable to Trump’s economic policies. Note that by the time Biden’s economic policies really kick in late 2021, the economy enters a brief recession.
We can also see the benefit to workers under Trump with respect to wage growth (adjusted for inflation). Real wages, which took a hit during the pandemic, otherwise soared under Trump. Unemployment rate soared during the pandemic, but trend-wise, unemployment was steadily going down under Trump, while steadily rising under Biden. Standing back, it is clear that the economy under Trump outperformed the economy under Biden.
freedom and reason 