President Trump’s 2020 State of the Union address was organized around one main lie: “If we hadn’t reversed failed economic policies of the previous administration, the world would not be witnessing this great economic success.” Almost everything the president said flowed from that premise. And yet it is obviously, almost indisputably false.
Trump inherited from his predecessor a healthy economic recovery. He shrewdly reversed his rhetorical posture, having previously disparaged it as a wasteland of hopelessness, and immediately boasted of the prosperity his election had ushered in. Public confidence in the current state of the economy surged within days of the election, driven entirely by Republicans, who now had permission to admit Barack Obama’s socialist debt spree had not, in fact, turned the United States into a basket case. The rapidity of the turnaround shows how little relationship it had to any policy accomplishment.
Under Trump, economic growth has continued at virtually the same rate. Below is the ten-year growth trend. Do you see what happened when Trump took office? Right: Nothing.
Job growth has, in fact, slightly decelerated. During Obama’s last three years, the economy created an average of 227,000 jobs a month. During Trump’s first three years, it created an average of 191,000 jobs a month. In Trump’s defense, a more mature economy that has come closer to full employment will naturally have trouble creating as many jobs. On the other hand, Trump has doubled the budget deficit, which now exceeds a trillion dollars a year. That extra Keynesian stimulus should have purchased far more growth than it did.
Instead, the proceeds of the debt surge have gone mainly to the affluent. The primary lever Trump has supposedly used to “fix” the broken economy is his vast package of tax cuts, which accrued primarily to the rich. The alleged purpose of these cuts was to give business owners incentive to increase their investment, thereby boosting the economy’s long-term potential. It has clearly failed to do so. Business investment has actually fallen since the tax cuts that were supposed to increase it.
One of the more amusing moments of the speech came when Trump touted “opportunity zones.” As Trump boasted, “Jobs and investment are pouring into 9,000 previously neglected neighborhoods thanks to opportunity zones … In other words, wealthy people and companies are pouring money into poor neighborhoods or areas that have not seen investment in many decades, creating jobs, energy, and excitement.”
How many jobs and investments? Trump did not say. For that matter, he did not even explain how the opportunity zones work. It is a special tax cut for people who invest in “poor” urban areas. In theory, it was supposed to encourage businesses to pour money into low-income areas. In practice, the New York Times found in a devastating exposé, they are a scam. The “poor” neighborhoods turn out to be gentrifying urban areas people already want to develop, and the projects are swank hotels and apartments. “Capital is going to flow to the lowest-risk, highest-return environment,” Aaron T. Seybert, the social-investment officer at the Kresge Foundation, which supported the opportunity-zone plan, told the Times. “Perhaps 95 percent of this is doing no good for people we care about.”
Who is it doing good for? The list of beneficiaries is a roster of Republican cronies, including the Kushner family. The whole “opportunity zone” scam is primarily a tax shelter for politically connected businessmen, who can lobby or donate to their elected officials to get their chosen investment qualified as a noble, tax-advantaged project.
Democrats have sometimes tried to carry off a rhetorical reversal of their own, dismissing Trump’s economy for leaving the middle class behind. (Joe Biden is especially guilty here.) The truth is Trump’s economy is about as good overall as the one Obama left him. The main difference is that he has borrowed a lot more money, and he and his wealthy friends are skimming a lot more off the top.