- If the economy comes up at Thanksgiving, it’s best to be prepared with a few facts because any Trump supporters in your family are going to have their own alternative set.
- For example, for all the talk of 3% growth in the economy, remind that cousin of yours that when Barack Obama was President, the economy grew faster than 3% in 8 separate quarters.
- Also, there are no national economies in the world growing as fast as Trump recently claimed.
- Trump’s pitch to his base shines through in his interviews with right-wing radio hosts “Rick and Bubba,” a duo from Alabama who recently visited the White House.
- Here are some of the issues that might come up as you pass the stuffing around the table – and a brief guide on how to navigate the conversation if it takes a wild turn.
It’s that time of the year when so many Americans come together, and then instantly descend into wine-fuelled disagreements that make us realise how deep our divisions are.
With tax cuts at the forefront of Trump’s agenda, it’s important to come to this year’s Thanksgiving celebration, not just with homemade cranberry sauce but also a few basic economic facts.
And, it’s important to know what you’re up against.
Rick and Bubba, a religious-right radio duo from Birmingham, Alabama offer a good place to learn about Trump’s economic pitch to his hardcore base.
A pair of ultra-conservative Christian fundamentalists, they have been friendly to Trump and he’s gone on their air to endorse his candidacy for the Alabama Senate seat that’s up for grabs. (He endorsed Luther Strange who lost to Roy Moore, who has since been accused of being a serial sexual predator but refused to step out of the race.)
Trump doesn’t just talk Alabama politics with Rick and Bubba. Earlier this month he invited them into the White House, where they had lunch and then sat down in the East Wing for a conversation about the economy, tax cuts, deregulation, and Obamacare.
It’s startling, because of the kind of just-plain-wrong information Trump shared, and, perhaps less surprisingly, how credulous his interviewers were about it all. Among other things, Trump’s discussion about economic growth revealed, not for the first time, a lack of basic understanding of economics.
Credit for everything
Here’s a partial transcript of the intrepid interview, along with running commentary on everything that’s wrong with what Trump is saying:
Donald Trump: “Pretty fancy place right? Not so bad right? You’ve come a long way.”
Rick and Bubba: “Thank you for lunch, lunch was fantastic. […]
“Let’s talk about it the tax plan, we’ve been talking to a lot of members of your administration and there seems to be a lot of optimism about it. Of course, the economy is doing great even before this. The corporate tax cut could only make things better.”
DT: “Well we’re doing great as an economy. We’re having tremendous numbers. Tremendous stock market numbers, every day we’re hitting new highs. But the tax cuts are really needed. To really make this country take off like it should. And I think they’re going to happen. There’s tremendous energy in the Republican Party.”
R&B: “Can you get it through? That’s the key.”
DT: “I think so. Yeah, I think so. For instance, we were really there on healthcare and we got a surprise vote and we’re going to come back to healthcare right after this is over and we’re going to get that done. But I will say that I think that, well you guys see as much as I do, there’s a tremendous sprint to get tax cuts done.”
OK, so let’s unpack that short exchange. First of all, there is no way Republicans are coming back to healthcare after tax cuts. The repeal and replace effort was a disaster for some very good reasons, and Republicans are trying to bring it up again in the tax plan which could very well sink that.
Second, yes stocks are at a record but no Trump doesn’t get credit. They have been rallying for nine years and, as my colleague, Joe Ciolli has explained (over and over), that has to do with one thing: zero interest rate policies around the world that have been in place since the financial crisis a decade ago, and more recently, a strong run of corporate earnings that also don’t have anything to do with tax cuts.
Let’s talk about Obama’s numbers
R&B: “Yes, yes, there’s a lot of energy out there. And during the campaign when you said you could produce 3% growth you were scoffed at. And there it was, we had this week, I think it was revised up, what 3.1?”
DT: “So we’ve already hit it, we had 3.2 and now we have 3 and the 3 is in a tough season, I mean we had really five hurricanes and bad ones, that’s supposed to be a point … So we had a GDP of 3.2 and 3 in the last two quarters and most people didn’t think we were going to be there for three years.”
“So a lot of it is the fact that I cut the regulations and the companies are starting to really get back to work, but the regulations have been very seriously cut.”
Is it that simple? Of course not.
It’s true that the US economy has reached Trump’s 3% growth target in the last two quarterly reports. But Trump clearly misreads these recent figures as a permanent transition to a higher growth rate – disagreeing with any economist who is not actively part of his staff.
The US economy is growing, over the long term, at a rate closer to 2% – which is where it has come in steadily since the end of the Great Recession in the summer of 2009. Quarterly estimates are often revised and fluctuate due to seasonal and other factors. First quarter economic growth was just 1.2%, and economists expect gross domestic product will level off again at just above 2% in 2018.
Just to drive this home: When Barack Obama was President, the economy grew faster than 3% in eight separate quarters. In a few of these, it was above 4%, and once it was over 5%. But growth struggled to remain consistently above 2% during the Obama years, a fact highlighted by the need for deep monetary easing from the Federal Reserve and, early on, a sizable fiscal stimulus.
Not a single real example
Of course, you know what’ll happen once you bring up Obama. But by then maybe you won’t care. Neither will whoever you’re speaking with and that’s when they will pull out this gem.
R&B: “There’s a lot of small business that want to reinvest, they want to move forward, but they have been scared because they didn’t know what was coming their way.”
DT: “They’re ready to go, they’re ready to rock and America is ready to rock. And, don’t forget other countries have GDP at 11, 12, 13, 6, 7, we were at 1.2 when I came in and it’s just not acceptable. And now we’re up to 3. And each point in GDP is 2.5 trillion dollars, that’s actually more money than we’re talking about for tax cuts. And nobody can tell me we’re not going to get a point. And we just left the Rose Garden, you saw we have Jay Powell going in at the Fed and he’s a very very talented guy, I think he’s going to do a great job.”
That’s a lot to take apart. There has been some optimism about tax cuts in the business community – it turns out corporate chieftains like having their taxes slashed. But this has not yet translated into a boost in investment or economic activity and has little prospect of doing so given how much cash companies are already sitting on.
Now to Trump’s panoply of numbers: 11, 12, 13(%) – to be clear: there are no countries growing that quickly.None.
Moreover, it is widely understood that emerging market economies can and should grow a lot faster than rich ones because they have a lot of catching up to do in terms of development.
If it things get heated, you could even pull out this chart over some tender turkey breast.
Finally, Rick and Bubba returned to discussion of Trump’s tax plan. When he suggested there might be a “phase two” of tax cuts following the proposal currently struggling through Congress, Rick and Bubba had a suggestion of their own:
“If you get another shot at it, the Rick and Bubba plan would be zero deductions and 10% across the board. We figure God was for it…”
To which Trump replied: “Well that sounds interesting. That’s a very fine plan. Great economists.”