IN HIS NEW book Casey Mulligan offers an intriguing explanation for why President Donald Trump makes outlandish economic claims. Mr Trump knows he is hyberbolising when he says that America has enjoyed “the greatest economy in the history of the world” on his watch, suggests Mr Mulligan, who was until recently the chief economist on the president’s Council of Economic Advisers. It is a “strategy for getting the press to cover a new fact, which is to exaggerate it so that the press might enjoy correcting him and unwittingly disseminate the intended finding”. Journalists’ dislike for Mr Trump, according to Mr Mulligan, blinds them to many of the administration’s genuine economic successes. He may have a point.
Assessing leaders’ economic records is fraught with difficulty. Presidents typically get credit when the economy is doing well and blame when it does badly—but short-term economic outcomes are usually more influenced by central banks, demography and what is happening in the rest of the world, among other factors. Even today, political scientists continue to argue over whether the economy in the 20th century did better under Democratic or Republican administrations. All this is of little use to the American public, whose vote for a president must be based, in part, on a real-time assessment of economic competence.
Mr Trump came to power with unrealistic promises to create 25m jobs and supercharge economic growth, and to that end cut taxes and boosted spending, widening the fiscal deficit (see chart 1). Economists will continue to weigh up the specific costs and benefits of those policies. A true evaluation will take some time. At present, however, it is possible to assess whether the American economy overall did better or worse under Mr Trump. That involves comparing actual American economic performance, on the one hand, with what an impartial spectator could reasonably have expected, on the other. To that end The Economist has gathered a range of economic data, from business investment to wage growth, wherever possible comparing American economic performance to that of other rich countries.
The bulk of the analysis covers the period from 2017, when Mr Trump took office, to the end of 2019. We stop in 2019 in part because some data are released only annually, and in part because the pandemic has turned economies across the world upside down. Our conclusion is that, in 2017-19, the American economy performed marginally better than expected. (That conclusion remains if we follow the practice of some political economists, who argue that the influence of presidents on the economy can be discerned only after a year in office, and limit our analysis to 2018-19.)
Take gross domestic product (GDP), a measure of output which is the most common yardstick of economic performance. GDP growth was somewhat faster in 2017-19 than it was in either Barack Obama’s first or second term, according to official data. America also did well relative to other countries. The world economy peaked in 2017. In 2018 it slowed but America accelerated. In 2019 America slowed too, but stayed ahead of others.
Another way to look at this question is to assess whether America in 2017-19 exceeded or fell short of economists’ expectations (see chart 2). In October 2012 the IMF forecast that in the subsequent four years (those of Mr Obama’s second term), the American economy would grow by an annual average of 3%. In fact that proved to be too optimistic; it actually grew by closer to 2% a year. But the IMF was too pessimistic in its projections for 2017-19, released shortly before the election of 2016. In those years America outperformed the forecasts.
But if the American economy did better than expected in some respects, it disappointed in others. Take the corporate sector, which Mr Trump helped with lighter taxes. Corporation-tax cuts did increase post-tax earnings, one reason why the American stockmarket has done relatively well since Mr Trump came to power (see chart 3). America has also become a more favoured destination for foreign direct investment (see chart 4). But there is little evidence of the promised business-investment boom (see chart 5).
America’s labour-market performance is similarly nuanced. Though Mr Trump particularly likes to boast about monthly employment figures, it is hard to make the case that in 2017-19 the jobs machine was whirring. Jobs growth was slower than it had been during Mr Obama’s second term. In 2009-16 America’s unemployment rate fell relative to the average for other G7 economies (see chart 6). Under Mr Trump unemployment did fall to the lowest since the 1960s, but this was not internationally exceptional. America’s improvement relative to employment in other countries stopped under Mr Trump.
The lot of working-class Americans, however, definitely improved in 2017-19. Comparing household incomes between countries is difficult, certainly for recent years. But though there is some dispute about the reliability of the data for 2019, where the pandemic made it difficult for researchers to conduct surveys, there is clear evidence of an acceleration in the growth of America’s median household income from 2017 onwards (see chart 7). A tight labour market also helped raise the wage growth of the lowest-paid Americans, relative to others, to a degree not seen since Bill Clinton was president (see chart 8).
And what of the economy in 2020? Mr Trump’s loose fiscal policy before the pandemic left America with much higher debt going into the crisis. On top of that splurge, this year America has implemented the world’s largest fiscal package (see chart 9), posting stimulus cheques worth up to $1,200 per person and temporarily bumping up unemployment-insurance payments by $600 a week. It is possible, though unlikely, that Congress will pass even more stimulus before the election. Even without another package, however, and even though it is enduring a deep recession, America will probably be the best-performing G7 economy in 2020—perhaps by some margin. Just before the pandemic, the American economy looked slightly stronger than other rich countries. Before long, the gap may be more impressive.
Source:- The Economist
Big Tech Continues Its Surge Ahead of the Rest of the Economy – The New York Times
While the rest of the U.S. economy languished earlier this year, the tech industry’s biggest companies seemed immune to the downturn, surging as the country worked, learned and shopped from home.
On Thursday, as the economy is showing signs of improvement, Amazon, Apple, Alphabet and Facebook reported profits that highlighted how a recovery may provide another catalyst to help them generate a level of wealth that hasn’t been seen in a single industry in generations.
With an entrenched audience of users and the financial resources to press their leads in areas like cloud computing, e-commerce and digital advertising, the companies demonstrated again that economic malaise, upstart competitors and feisty antitrust regulators have had little impact on their bottom line.
Combined, the four companies reported a quarterly net profit of $38 billion.
Amazon reported record sales, and an almost 200 percent rise in profits, as the pandemic accelerated the transition to online shopping. Despite a boycott of its advertising over the summer, Facebook had another blockbuster quarter. Alphabet’s record quarterly net profit was up 59 percent, as marketers plowed money into advertisements for Google search and YouTube. And Apple’s sales rose even though the pandemic forced it to push back the iPhone 12’s release to October, in the current quarter.
On Tuesday, Microsoft, Amazon’s closest competitor in cloud computing, also reported its most profitable quarter, growing 30 percent from a year earlier.
“The scene that’s playing out fundamentally is that these tech stalwarts are gaining more market share by the day,” said Dan Ives, managing director of equity research at Wedbush Securities. “It’s ‘A Tale of Two Cities’ for this group of tech companies and everyone else.”
The results were strong despite increasing antitrust scrutiny from regulators. Last week, the Justice Department filed a lawsuit accusing Google of cementing the dominance of its search engine through anticompetitive agreements with device makers and mobile carriers. Facebook faces a possible antitrust case from the Federal Trade Commission.
The companies’ advantages are becoming more pronounced in an economy starting to dig out from the coronavirus pandemic. On Thursday, the Commerce Department said U.S. economic output grew 7.4 percent last quarter, the fastest pace on record, but remained below where it was in the last pre-pandemic quarter.
That slow return to health is also providing momentum to companies that suffered early in the pandemic, like Twitter, which reported on Thursday that revenue rose 14 percent in the third quarter as advertisers started to return. Twitter’s stock dropped about 14 percent in after-hours trading on Thursday, a reaction that analysts attributed to slow user growth.
Big Tech’s third-quarter boom could look modest when compared with the final quarter of the year. For Apple, it’s when consumers buy newly released iPhones. And the year-end shopping peak means lots of customers turning to Amazon for gifts, while advertisers rely on Google and Facebook for digital ads during the holidays.
The pandemic-fueled surge in online shopping pushed Amazon to a record for both sales and profits in the latest quarter.
Sales were $96.1 billion, up 37 percent from a year earlier, and profits rose to $6.3 billion.
The quarter did not include the usual boost from Prime Day, Amazon’s yearly deal bonanza, which was delayed to October. And the profit increased during a building boom, with Amazon expanding its fulfillment infrastructure by 50 percent this year. The company added almost 250,000 employees in the quarter, for the first time surpassing more than a million workers.
The lucrative Amazon Web Services division grew 29 percent as companies continued their shift to cloud computing.
Amazon said sales could reach $121 billion in the fourth quarter because of the confluence of Prime Day, the holiday shopping season and the turn to online spending.
The delay in the iPhone 12’s release meant Apple would face a tough comparison with the same quarter last year, which included sales of the iPhone 11. As a result, iPhone sales dropped more than 20 percent in the quarter.
Yet Apple’s overall sales still rose 1 percent to $64.7 billion, showing the increasing strength of other parts of the company’s business.
Apple’s services segment, which includes revenues from the App Store and offerings like Apple Music, increased 16 percent to $14.5 billion. Sales rose 46 percent for iPads, 29 percent for Mac computers and 21 percent for wearables.
Profits fell 7 percent to $12.7 billion, partly because the company spent more on research and development.
“There are lots going on here, and everything is going incredibly well,” Luca Maestri, Apple’s finance chief, said in an interview.
Facebook’s revenue for the third quarter rose 22 percent from a year earlier, to $21.2 billion, while profits jumped 29 percent to $7.84 billion. The results surpassed analysts’ estimates of $19.8 billion in revenue and profits of $5.53 billion, according to data provided by FactSet.
Facebook had strong results despite a wide-ranging boycott by advertisers this summer over issues of hate and toxic speech on the site. Though the grass-roots campaign, Stop Hate for Profit, rallied many of the top advertisers on Facebook to reduce their spending, the overall effects were brief.
The company continued gaining users as well. More than 1.82 billion people used the Facebook app every day, up 12 percent from a year earlier, it said. More than 2.54 billion people now use one or more of Facebook’s family of apps — Instagram, WhatsApp, Messenger or Facebook — daily, up 15 percent from a year earlier.
After its first-ever decline in quarterly revenue in the second quarter, Alphabet rebounded with its highest-ever profit. The strength came from across Google, with search advertising revenue growing 6 percent and YouTube ad spending rising 32 percent. Google’s cloud computing business grew 45 percent.
When advertisers slowed spending with Google this year as Covid-19 started to spread, Alphabet’s business took a significant hit. But as the economy has improved and businesses found their footing, advertisers have returned.
Alphabet posted a net profit of $11.25 billion in the third quarter as revenue rose 14 percent to $46.1 billion. Ruth Porat, Alphabet’s chief financial officer, said the improved profitability reflected efforts to cut costs during the economic downturn, including a hiring slowdown.
NEW: Economic Comeback Under President Trump Breaks 70-Year Record – Whitehouse.gov
News broke this morning that real GDP grew at an annualized rate of 33.1% in the third quarter of 2020—beating expectations and setting an all-time record.
This jump in GDP is nearly double the previous record set 70 years ago.
Thanks to President Trump’s policies, the American economy is weathering the global pandemic better than any other major Western country, including those of Europe. As the Council of Economic Advisers wrote this morning:
While the pandemic hit every major economy around the world, the United States experienced the least severe economic contraction of any major Western economy in the first half of 2020, with the Euro Area economy’s contraction being 1.5 times as severe as the contraction of the U.S. economy.
Since April, America has gained over 11.4 million jobs, recovering more than half of those lost because of lockdowns. Retail sales are already above pre-pandemic levels, many construction and manufacturing jobs have returned, business activity is at a 20-month high, and new jobless claims fell to their lowest level this week since the beginning of the pandemic.
This “V-shaped” recovery is beating economist predictions and outpacing the slow recovery under former President Obama. After the 2008-09 recession, it took the Obama Administration 4 times as long to regain the same share of lost economic output.
Two big reasons explain President Trump’s success. The first is that his pro-growth, pro-worker agenda made our economic fundamentals stronger. Before Coronavirus swept the globe, American incomes hit a record high in 2019 while poverty rates hit a record low. Median incomes saw their biggest one-year jump ever.
Second, President Trump took targeted action to help American workers and families after the Coronavirus hit. His Administration negotiated the CARES Act, implemented the Paycheck Protection Program to save jobs, extended supplemental unemployment benefits, paused student loan payments, and halted evictions.
Today, the left wants to emulate Europe, issue endless lockdowns, and use the pandemic as an excuse to grow government control of the economy and society. President Trump wants to keep working with the private sector, protect the most vulnerable among us, and safely reopen our economy and schools.
Today’s GDP report makes it clear: The data supports President Trump’s strategy.
The Great American Comeback is well underway—a testament to both President Trump’s policies and the strength and resilience of America’s workers and families.
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