The "expert" predictions of economic disaster should Donald Trump win the 2016 election did not occur. Under Trump, the Dow Jones Industrial Average and Nasdaq composite have reached historical highs while unemployment for blacks and Hispanics have hit historical lows. In the wake of Trump's undeniable economic success, what is the 2020 Democratic Party argument for why voters should back their candidate over Trump?
The morning after Trump's election, Paul Krugman, economics professor and columnist for The New York Times, wrote: "Now comes the mother of all adverse effects – and what it brings with it is a regime that will be ignorant of economic policy and hostile to any effort to make it work. Effective fiscal support for the Fed? Not a chance. In fact, you can bet that the Fed will lose its independence, and be bullied by cranks. So we are very probably looking at a global recession, with no end in sight. I suppose we could get lucky somehow. But on economics, as on everything else, a terrible thing has just happened."
During the 2016 campaign, Mark Cuban, billionaire owner of the NBA Dallas Mavericks, predicted that a Trump victory could cause not just a minor stock market decline, but one as high as 20% or more: "When you're flip-flopping, when you're not sure what the candidate's going to say from one thing to another, that uncertainty potentially as the president of the United States – that's the last thing Wall Street wants to hear. I can say with 100% certainty that there is a really good chance we could see a huge, huge correction. … It could be 20%. You know, now, with high-frequency trading, accelerating, strong moves in any direction – it could be worse than that."
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So, Democrats and their media sympathizers now resort to a new talking point: Trump merely continued the economic growth that began under the Barack Obama administration.
Former Vice President Joe Biden, in a theme echoed by his Democratic rivals, said: "Donald Trump inherited a strong economy from Barack and me. Things were beginning to really move. And just like everything else he's inherited, he's in the midst of squandering it."
Are Biden and the Democrats right about the Obama economy?
To examine the Obama economy, one must compare apples to apples, similar economic conditions to similar economic conditions. Obama dealt with a severe economic downturn, as did President Ronald Reagan. Historically, the bigger the downturn, the bigger the economic bounce back. During the recession Obama faced, unemployment reached a high of 10%, while inflation and interest rates remained low. During the recession Reagan faced, unemployment reached 10.8%, prime interest rates rose to 20.5% and inflation hit 13.5%.
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Obama raised taxes, spent nearly $1 trillion on a so-called stimulus plan, increased regulations and signed a new entitlement program known as "Obamacare." Reagan did the opposite. He decreased taxes and continued deregulation. Differences in results were stark. Obama's recovery, according to the Joint Economic Committee, averaged an inflation-adjusted GDP growth of 2.2% over the next 25 quarters. The average recovery following post-1960 economic slowdowns, which lasted more than 12 months, is 3.9%. Under President Ronald Reagan it was 4.8%. Obama was the first president ever to preside over an economic recovery in which not a single year did growth surpassed 3%.
Obama's own economic team anticipated much higher growth. In February 2009, the Obama administration published its "Analytical Perspectives: Budget of the U. S. Government: Fiscal Year 2010." It said: "The Administration projects an economic recovery will begin in the second half of the year sparked by the American Recovery and Reinvestment Act. By the end of the year, real growth is expected to have reached 3-1/2 percent at an annual rate, a pace that is maintained through 2010. In 2011-2013, the rate of growth in real GDP is projected to accelerate to around 4-1/2 percent annually for several quarters."
The economy under Obama did not come close to meeting his team's projections. Trump boasts about "historic lows" in unemployment for blacks. But in January 2016, black liberal commentator Tavis Smiley admitted: "Sadly, and it pains me to say this, over the last decade, black folk in the era of Obama have lost ground in every major economic category. Not one, two or three, but every major economic category, black Americans have lost ground."
Again, the big economic downturns historically produce big economic upturns. The media insist on calling the economic conditions Obama dealt with the "Great Recession," even though by many metrics, Reagan faced a more serious "Great Recession." But, unlike the economy under Obama, Reagan oversaw what should be called The Great Recovery.