I know he used this analogy more than once but in April of 2009 Obama remarked "moving the ship of state is a slow process. States are like big tankers, they're not like speedboats. You can't just whip them around and go in a new direction. Instead you've got to slowly move it and then eventually you end up in a very different place." I think the same is true of the economy. Administrations boast how they will make huge changes on day one but really changes take several years before they really show up in the economy - though, like a huge tanker, economies can hit an iceberg and take sudden dramatic plunges.
When Trump came to office, the economy under two Obama terms had gone from severely underwater, due to the financial crisis that took place before the 2008 election, to being steady, prosperous and even-keeled. The price of gas was at its lowest in years - $2.15/gallon in 2016. Inflation had settled to less than 2% for most of Obama's second term and unemployment had gradually subsided from a high of nearly 10% during Obama's first term, after the great recession, to 4.7% when his second term ended. During the last 35 months of the Obama administration, non-farm job growth averaged 227,000 per month. The economy was sailing smoothly when Trump came to the White House.
Trump’s main economic policies were his major tax cuts, tariffs, and deregulation. It’s generally acknowledged that his tax cuts primarily benefited the wealthy. His tariffs charted a new direction, especially with China, and many folks on both sides of the aisle welcomed the change in direction, though many criticized it for being too extreme, too bombastic. Farmers, in particular, were hurt by the trade wars with China. Biden has continued many of the tariffs if on a somewhat softer scale. Deregulation, of course, can allow business to expand more quickly but often with damaging effects to health, safety and the environment.
The economy under Trump largely continued, at a slower pace, the growth and stability that Obama’s administration had brought about, although in 2019, when Trump’s policies were beginning to take full effect, the economy slowed somewhat, inflation started to creep up from below 2% to 2.5% in January 2020. Job creation was slowing, gas prices by the end 2019 were $2.60/gallon.
Then Covid hit – an iceberg bigger than the financial meltdown of 2008. Trump can’t be blamed for the economic hit that Covid brought, but neither can Biden. Biden started his presidency with the boat sinking and the world economic situation in chaos. As major sectors shut down, supply chains were disrupted, inflation and unemployment soared, economies around the world collapsed in many cases. Biden’s administration, with the help of the Federal Reserve, was able slowly and steadily to right the boat, bring inflation down, and spur economic growth. Today gas prices have been steadily dropping, inflation is back to just under 3%, job growth, wages and the stock market are all robust. Overall, the price of goods hasn’t come back down and probably won’t, nor are they increasing. Wages have risen steadily, though only slight above inflation rates.
Trump is one to say that the sun shines because of him. When storms hit it's always someone else’s fault. In reality the world is so much bigger than one man, whatever his boasts. The economy takes more than bluster to wend its way forward in a way that serves us all. I’m grateful to Obama and Biden for steering us through such perilous economic times.
(formerly BDSWorks)
