The Myth of the MAGA Economy

This is an excerpt from David Stockmans book: Trump’s War on Capitalism.

The GOP primary season has come  alive, and  the state  of play is abysmal. Front and  center there is Donald Trump,  while everyone else,  including a few real  Republicans and  several  neo-con fakers, stumble along far in the rear.

And that’s  a terrible shame. America desperately needs a return to  old-fashioned GOP  governance, yet  Donald Trump  is  not remotely a conservative, let  alone even  a half-assed Republican. As it is, he fluked into  the Oval  Office in November 2016 and  pro- ceeded to wantonly abandon Republican economic doctrine and badly tarnish the  brand. But  rather than showing him  the  door, the  floundering remnants of the Republican Party have  rallied to  the  banner of one  of the  most  bombastic, egomaniacal, unfit mountebanks ever to appear on the American political scene.

So, what  are the good people of the GOP thinking? Trump’s War on C... Stockman, David Best Price: $13.39 Buy New $17.39 (as of 01:31 UTC - Details)

To  be  clear,  we  have  no  objection to  The  Donald’s relent- less  and   frequently unhinged  attacks on  the   ruling elites   of Washington, Wall Street, the mainstream media and  the Fortune 500. Indeed, his one abiding virtue is that he  has  all  the  right enemies. That  is, the  Washington political class and  the  likes of the  New York Times,  CNN, the  broadcast networks, the  foreign policy think tanks, and  the  liberal Silicon Valley  billionair.

These are the  very people, in fact,  whose  policies and  ideologies threaten the  future of America.

But while Trump has the right enemies, he has been  hopelessly wrong on the  substance of policy. Indeed, when  it comes  to what the  GOP’s core  mission should be  amidst the  ongoing tussle  of democratic governance—standing up  for  free  markets, fiscal  rec- titude, sound money, personal liberty, and  small  government at home and   non-intervention abroad—Donald Trump  has   over- whelmingly come  down on the wrong side of the issues.

Yet the  situation is now  so far gone that the  election of a true conservative leader in 2024 is the  only  hope remaining. The very future of  constitutional  democracy and  capitalist prosperity in America is  literally at  stake. These  foundational threats simply cannot endure another four  years  of Donald Trump in the  White House. Nor  can  it tolerate another election where  a woebegone Democrat like Joe Biden wins by default, owing to the simple fact that they  are not  Donald Trump.

Indeed, the calamity of Joe Biden’s wars, inflation, corruption, and  relentless assaults on  liberty and  constitutional rights is so blatant that the  American people will surely  be looking to drum the Dems out  of office in 2024. So, the chance must not  be wasted. It is  imperative that  well-meaning Republicans and   conserva- tives understand Trump’s miserable record as a big  spender, easy money-man, hard-core protectionist, immigrant-basher, militarist, and  all-around Big Government statist, and  look  elsewhere for a standard-bearer.

The Donald’s abysmal policy  failings are documented in detail and  at length in the  pages that follow; but  first,  the  myth of the great MAGA  Economy should be debunked. A lot of Republican voters, though misguided, are willing to overlook all his egregious egotism, petty bombast, and  endless departures from  conserva- tive economic principles based on the  claim  that he delivered the Greatest Economy Ever.

In a word, he  didn’t. Not  remotely. On  the  bread-and-butter matters of growth, jobs, inflation, productivity, savings and invest- ment, in fact, his record is among the worst  of modern presidents, not  the  best. Indeed, the  US  economy’s faltering  performance during The  Donald’s tenure was worse  than that of every  one  of his  modern Democratic predecessors going all  the  way  back  to Truman.

To  be  sure,  the  very  idea  that America’s  infinitely complex, deeply  cyclical,  and   globalized  $26  trillion  economy  can   be assessed by statistical outcomes realized during the  arbitrary for- ty-eight calendar months of a presidential term  is deeply faulty. That’s  because economic cycles and  trends begin and  end  on cal- endars wholly unrelated to presidential terms. So the overwhelm- ing  bulk of economic policy claims  by  all presidents amount to partisan talking points, not  credible economic analysis.

For instance, years of bad  Fed policy  brought the US economy into  a thundering tailspin in 2008.  So  any  statistical measure of results for George W. Bush’s  tenure has a dismal endpoint, which was largely not his doing.

By the same token, Barack Obama was sworn in at the very bot- tom  of the  worst  recession in post-war history and  subsequently benefited from  the  natural regenerative forces  of market capital- ism.  His economic growth and  jobs  numbers, therefore, couldn’t help  but  be  brighter. Yet Obama’s policies had  precious little  to do  with  these  outcomes—well, except to thwart what  might have been  a far stronger recovery.

In fact,  the overwhelming bulk of economic outcomes during these  four-year presidential intervals reflect  the  combined action of  tens  of  millions of  workers, entrepreneurs,  managers, inves- tors,  consumers, savers,  and  speculators operating on the (quasi) free market. And that’s  even as compromised as the private econ- omy  has  become owing to  government intervention and  central bank manipulation.

Indeed, when  it comes  to  the  big  picture, presidential policy is, by and  large, overrated. And  in the  particular period of 2017 through 2020, The Donald inherited the  positive momentum of a ripening business cycle that was overwhelmingly not his doing.

Nevertheless, even  if you  give  Trump credit owed  to  broader cyclical  and  historical trends, the  facts  still  leave  little  room for doubt. Real   economic growth  averaged  just   1.52  percent per annum during Trump’s forty-eight months in  the  Oval   Office. Literally, you  can’t find  anything that weak  over  the  course of a presidential term  since  the Korean War!

Of   course,  circumstances,  cycles,   and   even   demographics change so much over long  periods of time that reaching way back for comparisons has its limits. Still, real growth over the sixty-two- years  between 1954 and  2016 averaged 3.04 percent per  annum. That’s  exactly twice—to the  second decimal point—what material- ized  during The Donald’s term.

As it happened,  that extended sixty-two-year interval encom- passed nine  recessions, eleven  presidents, numerous wars,  and  a goodly number of domestic and  international crises.  So it’s a fair representation of modern history, not  distorted by short-run fluc- tuations owing to  cyclical  timing factors or  aberrations like  the Great Financial Crisis  (GFC). And yet, and  yet. The Donald’s bal- lyhooed MAGA  economy grew  at just  half the  rate  of what  might fairly be called the modern growth norm.

Moreover, when  dialed in  closer  to  the  present time  during which  both demographics and  long-term policy  constraints weak- ened the  underlying growth trend, the  most  apt  comparison of the  Trump years is  with  Obama’s second term. Both of  which were  all part of the  extended post-financial crisis  recovery cycle, and  occurred under a monetary and  regulatory regime that was broadly continuous over the eight years in question.

The economic growth rate during Obama’s second term  wasn’t anything to write home about, either. But it still computed to 2.18 percent per  annum—a rate  40 percent higher than that on  The Donald’s watch.

It should be noted here  that real  final sales of domestic prod- uct  are  used  as a proxy for  economic growth for  the  purpose of consistent comparisons. That’s because it has the analytical virtue of removing from  the  data short-term inventory fluctuations that are irrelevant to growth over any reasonable period but  can badly distort beginning and  end  points when  measuring growth rates via the conventional real GDP series.

With   the  economic growth data  smoothed in  this  manner, there is no  room for  doubt. If you  want  to brag about outcomes during the  artificial interval of  a presidential term, The  Donald and  his MAGA  partisans should remain as quiet as church mice. They have  the worst  record ever compiled!

Per Annum Change in Real Final Sales Since 1954:

  • Kennedy/Johnson 1960–1968:  4.97 percent.
  • Clinton 1992–2000:  3.75 percent.
  • Reagan 1980–1988:  3.44 percent.
  • Carter 1976–1980:  3.37 percent.
  • Eisenhower 1954–1960:  2.92 percent.
  • Nixon/Ford 1968–1976:  2.73 percent.
  • George H.  W. Bush  1988–1992:  2.22 percent.
  • George W. Bush  2000–2008:  2.00 percent.
  • Obama 2008–2016:  1.74 percent.
  • Trump  2016–2020: 1.52  percent.
  • All Presidents, 1954–2016:  3.04 percent.

Trump’s defenders, of course, will claim  that the great Covid pan- demic knocked his record into  a cocked hat,  and  that he shouldn’t be  tagged with  the  economic plunge of  2020 that originated in China. You  can  get  that argument from  The Donald’s own  tweet of August 2020 after  the economy had  been  flushed into  the ditch by the lockdowns and  White House–fueled Covid hysteria:

. . . My Administration and  I built the  greatest economy in his- tory,  of any  country, turned  it off,  saved  millions of lives,  and now  am  building an  even  greater economy than it was before. Jobs  are  flowing, NASDAQ is already at a record high, the  rest to follow. Sit back  & watch!

We will refute that bit of nonsense below, but  suffice it to note here that the  economic contractions of 2020 were due  to the  sweeping Washington-imposed  lockdowns, not  the  virus  itself.  And  as  it happened, Trump was the very author of those lockdowns and the related self-quarantining of a frightened population. All this  dis- ruptive Washington interference with  normal economic function was  announced and promoted  week-after-week from   the  bully pulpit at the Trump White House.

Measured through Q1 2020, thereby discarding the  big  April- June GDP plunge, brings the  average economic growth rate  to just 2.10 percent, a figure  still near  the  bottom of the  above rank- ings.  So even when  you set the lockdown mayhem aside,  you still can’t make  an economic silk purse out  of the  sow’s ear which  was the MAGA  economy.

Jobs The Donald Didn’t Create

Nor  does the claim that The Donald was a great jobs creator wash, either. For  crying out  loud, presidents don’t create jobs—capital- ists and  businessmen do. And while most  presidents are unwilling to give the free market its due,  the  egomaniacal poseur otherwise known as Donald Trump was especially eager  to hog  the credit.

Except, there was actually no credit to boast about. There were 145,400,000  NFP (nonfarm payroll) jobs  in  December 2016 and just  142,475,000  in  December 2020.  The  Donald’s tenure, there- fore,  was the only presidential term  in which  private payrolls in the  US  economy actually shrank—and by  three million jobs  to boot. Well, at least  since  Herbert Hoover!

Again, defenders will  blame it  on  the   pandemic, but   that doesn’t hold up  either. Even  if  you  assume that Trump’s term ended at  the  pre-pandemic peak  in  February 2020,  the  contrast with  Obama’s comparable second term  is not  flattering. Trump’s adjusted monthly jobs  growth number was  33  percent smaller than Barry’s.

NFP Job Change  Per Month:

  • Obama: December 2012 to December 2016: +215,300
  • Trump: December 2016 to February 2020: +145,000

When you  translate these  jobs  numbers to  annual growth rates, the  story  is much the  same  as it  was  for  real  economic growth.

During Obama’s second term  the  annualized growth rate  of NFP jobs  was +1.86 percent, which  compares to an annualized gain  of, well, -0.51 percent during The Donald’s term.

And, yes, we can again pretend that the Trump lockdowns and shutdown carnage never  happened and  stop  the  calculation in February 2020, but  a jobs  growth rate  of 1.47 percent is still noth- ing to write home about.

In fact,  the  rebound of the  jobs  growth rate  from  the  Great Recession peaked in  early  2015 and  slid  downhill continuously from  there—with no discernible reversal during The Donald’s pre- Covid tenure.

The  chart below with  its downward trending jobs growth rate, of course, won’t be found at a MAGA literature stand.

It takes  the air right out of The Donald’s bloated jobs  claims.

Y/Y  Change in Nonfarm Payroll Jobs, Jan. 2015 to Feb. 2020.

In the broader context of the last half century the job story  on The Donald’s watch is not  much better. During the  twelve  presi- dencies between 1945 and  2016, the  annualized jobs  growth rate computes to  2.14 percent per  annum, a figure  nearly 44 percent higher than the above cited  gain  (1.47 percent) under Trump sans the lockdowns.

The MAGA  economy thus ended up  in the  bottom half  of the jobs  league tables, even  when  you  excise  from  the  record the  ten million jobs lost during The Donald’s final ten months in the Oval Office. So the truth of the matter is that when  it comes  to jobs and economic growth, Trump was  the  Greatest Boaster Ever,  not  a superlative generator of economic prosperity.

Annualized Rate of Nonfarm Jobs Growth:

  • Kennedy/Johnson 1960–1968:  3.22 percent.
  • Carter 1976–1980:  3.11 percent.
  • Clinton 1992–2000:  2.43 percent.
  • Truman/Eisenhower 1945–1960:  2.14 percent.
  • Reagan 1980–1988:  2.04 percent.
  • Nixon/Ford 1968–1976:  1.89 percent.
  • Obama 2nd  Term 2012–2016:  1.86 percent.
  • Trump  Dec. 2016 Thru February  2020: 1.47  percent.
  • George H.  W. Bush  1988–1992:  0.60 percent.
  • George W. Bush/Obama 1st Term 2000–2012: 0.15 percent.
  • Trump  Dec. 2016 through Dec. 2020: -0.51 percent.
  • All Presidents 1945–2016:  2.14  percent.

Moreover, even  the  job  gains  that did  occur on the  Trump watch through February 2020 were  disproportionately in the  low-wage or low-productivity sectors of the  economy. Thus,  of the  6.96 mil- lion  increase of  nonfarm jobs  reported by  the  Bureau of  Labor Statistics during that thirty-eight-month period, 3.7  million or 53  percent were  accounted for  by  government, education and health  services, leisure and  hospitality industries, personal ser- vices,  and  business administrative support. By contrast, the  high value-added manufacturing,  construction,  mining, and   energy industries generated only  18 percent of the gains  in payroll jobs.

One of the  reasons for  these  tepid GDP and  jobs  growth fig- ures  was  the  fact  that the  core  of  the  US  economy represented by the  industrial production index stalled out  completely during Trump’s tenure. In fact,  in December 2020 it was actually 1 per- cent  below the level he inherited in January 2017.

Ironically, the  industrial production index encompasses man- ufacturing, mining, energy and  gas  and  electric utility output— the  very ailing sectors of the  US  economy that Trump claimed to champion and  fix. As it happened, however, with  a -0.21 percent per annum figure, he stood far in the  dust compared to the  aver- age +2.9 percent per  annum gain  under the  previous twelve  presidents after  WWII.

Industrial  Production Index,  January 2017 to December 2020.

Then  there is the  double-fiction that the  MAGA  economy was not  only  booming, but  it was inflation-free as well.  The  facts,  of course, say otherwise.

The  best  measure of medium-term inflation is the  16 percent trimmed mean Consumer Price  Index (CPI) because it strains out the  high and  low  monthly outliers which  can  distort short-term readings. Accordingly, during Obama’s second term, the inflation reading on  this  measure averaged 1.84 percent per  annum, while the  figure  during The  Donald’s four  years  computes to  2.18 per- cent  per  year.

Again,  inflation is cyclical  and  a  function of  Fed  and  other central bank monetary policies, which  rarely  aligns with  the fixed forty-eight-month term  of a US president. Still, not  only was inflation accelerating during The  Donald’s term, but  he  was actually fanning the flames via constant demands on the Fed for even lower interest rates  and  even more  inflationary policies.

Thus,  in  September 2019, when  inflation was  clearly  acceler- ating, The  Donald relieved himself of  one  of  the  most  incoher- ent,  ignorant statements on monetary policy  ever uttered by a US president. And  it was merely more  of the  same  crackpottery that he had  been  espousing for years: The Origins of Money Menger, Carl Buy New $5.95 (as of 09:07 UTC - Details)

The USA should  always be paying the lowest rate. No  Inflation! It is only  the  naïveté of Jay Powell and  the  Federal Reserve that doesn’t allow  us  to  do  what  other countries are  already doing. A once  in a lifetime opportunity that we are missing because of ‘Boneheads’. . .

The Federal  Reserve  should  get our interest  rates down  to ZERO, or less,  and  we should then start to refinance our  debt. INTEREST  COST COULD BE  BROUGHT WAY  DOWN, while at the same  time  substantially lengthening the term. . .

This statement is not  just  a case of The Donald off on a monetary tangent. It’s downright offensive to  the  very  notion of coherent thought. That  the  US  interest rate  should always  be “the  lowest” on the planet, for instance, betrays The Donald’s primitive mantra that winning is all  that matters and  that what  is right is always what  is first.

Self-evidently, The  Donald is here  confusing the  Fed’s  policy rate target with the rates across the yield curve that the US Treasury pays  on  its  own  mountainous debt. So  doing, the  above comes dangerously close  to saying that the  key mechanism of capitalist prosperity—the price  of  money and  capital markets securities— should be set by the  Fed  at ultra-low levels in order to relieve  the US Treasury of debt service costs.

Indeed, the  level  of  wild-eyed irresponsibility  in  the  above statement would make  historic American monetary quacks like William Jennings Bryan, Huey Long, Wright Patman, and  John Connally turn green with  envy.  In fact,  this  Trumpian monetary humbug—and it’s only  a sample—is so over  the  top  that you  sim- ply cannot talk  about Trump’s allegedly superior economic stew- ardship with  a straight face.

You  also  can’t limit  the  MAGA  claims  strictly to the  calendar months of The Donald’s term. That’s  because the  Fed’s  monetary inflation machine was already running in high gear  when  he took the oath and  had  been  running red hot for years after  the so-called emergency of the Great Financial Crisis  had  fully abated.

So any  good steward of American prosperity who  chanced to land in the  Oval  Office  in January 2017 should have  been  doing the  opposite of the  Trumpian calls  for  still  easier  money. That  is to say, the vaunted “independence” of the Fed to the contrary not- withstanding, under the  circumstances a sound money president would have  urged them to stop  the printing presses forthwith.

But  The Donald doesn’t have  the  slightest affinity  for  sound money, owing to  reasons we  develop below. He therefore has no  right on  that count alone to  claim  that he  brought the  Best Economy Ever  to  main  street America. The  crucial truth of the matter is that the  Trumpian fiscal  bacchanalia of 2020 and  the massive   money-printing  by  the   Fed   which   accompanied  it  is what   fueled the  outbreak of  forty-year high  inflation directly thereafter.

For  crying out  loud, sound money and  fiscal  rectitude is the sine qua non of sustainable prosperity—so the stagflationary disas- ter which  hit the US economy subsequent to The Donald’s term  is very much his legacy. It is the  product of his noisy  insistence on the  most  profligate Fed  money-printing policies in modern times (Chapter 2),  slathered with  the  most  reckless outbreak  of  fiscal responsibility in all of American history (Chapter 4).

As it happened, the Fed’s balance sheet  grew at the staggering rate  of 13 percent per  annum during The  Donald’s term. Milton Friedman would have  been  rolling in  his  grave  and  would not have  hesitated to  say that owing to  the  lags  in  monetary policy effect, the virulent inflation that busted out  in 2021 was very much gestated by the  Fed  during The Donald’s watch and  pursuant to his endless demands for still easier  money.

But  here’s  the  thing. Any historic GOP president—including Bush  the  Younger and  Bush  the  Elder, as RINO-tending as they were—would never  have  tolerated the  Fed’s  print-a-thon, which actually started in  September 2019  during the  utterly unnecessary bailout of the “repo” market. Yet all the time  he was roaming around the White House tweeting economic dumbassery and boasting about the  bubble-ridden stock  market, The Donald had no clue  that the  fundamental basis  for sustainable prosperity was being savaged by America’s  rogue central bank.

Y/Y  Change in the 16 Percent Trimmed Mean CPI, 2013 to 2020.

The Lame Foundation of the MAGA Economy

Back  in the  day,  another part of the  GOP gospel focused on  the crucial significance of  productivity growth, which  was  properly understood to  be  the  true  foundation of rising living  standards. Low  taxes,  minimal regulatory intervention, the  slimmest possi- ble claim  on GDP by government spending and  sound monetary policy  were the  means to this  crucial outcome. And over the  long stretch from  1954 to 2007, productivity growth did  average nearly 2.1 percent per  annum.

During The Donald’s four  years,  however, there definitely was no  MAGA  magic  on  the  productivity front. The growth rate  was only  1.2  percent per  annum or  barely half  of  the  fifty-six-year average.

Moreover, the reason is not  hard to find. Historical US produc- tivity  growth has  gone AWOL  because the  main  street economy has become freighted down with public and private debt and strip- mined by corporate financial engineering enabled by the Fed.

The Donald’s big spending and  easy money policies did  noth- ing to reverse these  adverse trends. But  suffice it here  to note that what might be termed the national leverage ratio—total public and private debt as a percentage of GDP—rebounded to  record lev- els on The Donald’s watch. Compared to the  solid  1.5x ratio that accompanied the  nation’s prosperity prior to  1970,  the  national leverage ratio peaked at 3.82x in 2020.

That  meant, in practical terms, that the  US  economy was lug- ging  around $50 trillion of incremental debt compared to  what would have  prevailed at the  historic 1.5x  leverage ratio. There  is no  wonder, therefore, that productivity growth during Trump’s term  slid into  the sub-basement of modern history.

Total Public and Private Debt as Percent of GDP, 1947 to 2020.

Another cornerstone of long-term growth and  wealth creation is net  savings from  current economic output. This  metric mea- sures  true  economic savings, or  the  amount of resources left  for new investment in productivity and  growth after  government bor- rowings have  been  subtracted from  private household and  busi- ness savings.

As depicted in the chart, that ratio averaged 7.5 percent to 10 percent of GDP in  the  economic heyday before 1980. But  espe- cially  after  the  money-pumping era  of  Greenspan and  his  heirs and assigns commenced in the early 1990s, the net national savings ratio headed relentlessly south.

The Donald’s tenure did  not  reverse that baleful trend, either. Indeed, it might be well and  truly  said that the runaway spending and borrowing of the Trump years delivered the coup de grace. By 2022 the  ratio was an anemic 1.0 percent of GDP—a  sheer  round- ing error in the sweep  of post-war history.

For want  of doubt, consider the absolute dollar figures embed- ded  in  the  ratio chart below. The  actual net  national savings in 2022 at 1.0 percent of GDP was just  $260 billion, but  that figure would have computed to $1.960 trillion at the 7.5 percent net sav- ings  rate  of the pre-1980  period.

In a word, $1.7 trillion of national savings has  gone missing on an annual basis.  Gross savings in the private sector have fallen sharply, even  as governments have  scarfed up  most  of the  avail- able  new  private savings to  fund massive, serial  budget deficits. And,  yes, the  Trump years  comprised the  very apotheosis of that darkening trend.

Net National Savings Rate, 1955 to 2022.

As it  has  happened, real  economic growth dropped  from  a trend rate  of 3.5 percent per year before the turn of the century to barely 1.5 percent per annum since then. At the end of the day, the reason for this  severe  deterioration is that real private investment has stopped growing due  to savings being channeled into  private speculation and  massive  public debts—the latter having become far worse  on The Donald’s watch than ever before.

Indeed, since the year 2000, real net investment—which strains out   the   inflation and   the   annual  depreciation from   the   gross investment figures—had dropped  from  $953 billion to  $721 bil- lion in 2020. Stated differently, main  street experienced a deep cut in the motor fuel of growth and  rising prosperity, and  the MAGA economy did  absolutely nothing to reverse that trend.

Real Net Private Investment, 2000 to 2020.

Of course, the  ultimate purpose of growth, jobs,  savings, pro- ductivity, and  investment is to generate rising societal wealth and living  standards. Yet when  it comes  to the key metric for that cru- cial objective, the  MAGA  economy ranks damn near  the  bottom of that league table, as well.

In fact, the proxy for American living standards—real GDP per capita—during Trump’s term  rose  by only  two-fifths of the  aver- age  level posted over  the  half  century after  the  US  economy got back  on a peacetime footing in 1947.

So,  when  it comes  to  The  Donald’s MAGA  boasting, there is absolutely nothing to brag about.

Per Annum Growth in Per Capita Real GDP, 1947–2023

  • Kennedy-Johnson, 1960–1968:  +3.93 percent.
  • Truman, 1947–1952:  +3.43 percent.
  • Reagan, 1980–1988:  +2.62 percent.
  • Clinton, 1992–2000:  +2.60 percent.
  • Carter, 1976–1980:  +2.07 percent.
  • Nixon-Ford, 1968–1976:  +1.67 percent.
  • Obama, 2008–2016:  +1.06 percent.
  • Trump,  2016–2020: +1.03 percent.
  • Bush  the Elder, 1988–1992:  +0.97 percent.
  • Bush  the Younger: +0.91 percent.
  • Eisenhower: +0.72 percent.
  • All presidents, 1947–2000: +2.45 percent.