Trump’s re-election argument rests on the Economy, but does he have a case?


First published in September 2020.


The 2020 U.S. Presidential election presents itself as a crucial crossroads, in which no less than democracy itself is at stake, as former President Obama put it at the Democratic National Convention. President Trump offers, meanwhile, a picture of a hellscape of socialist ruin and criminal disorder should his opponent, former V.P. Joseph Biden, win. Considering the main issues identified in the election, the coronavirus, race relations, and the Economy, Trump’s only real policy argument on his performance is the Economy, which is the one issue on which he has a polling lead on Biden.[1]

In fact, the Economy has arguably consistently been the most important issue in any U.S. election for decades, absent a severe security crisis or scandal. Consider the inflationary crisis inherited but not solved by President Carter in 1976, which led to the pivot to Reagan in 1980 when he blamed big government for economic issues. A strong economy led to his re-election followed by a continuation under his former V.P. George H.W. Bush. Bill Clinton’s mantra, “It’s the economy, stupid,” highlighted the feature of his campaign to spur flagging growth and increase opportunity for the middle class. Clinton’s moral failings related to the Lewinsky scandal led to his impeachment and skewed the election towards the George W. Bush, in the famous “hanging chad” disputed election of 2000. 9/11 and the war on terror helped to secure his re-election, but the meltdown of the American and global Economy in 2008 doomed respected Republican candidate John McCain in favor of neophyte Barack Obama. Under Obama, a strong economic recovery accompanied his re-election in 2012; however, the recovery was perceived as slow and uneven.

Avoiding disaster doesn’t really earn you credit. Obama’s ability to help the U.S. avoid an economic depression has not been appreciated, not surprisingly. Moreover, the personal scandals of Hillary Rodham Clinton’s husband arguably created a negative effect on her candidacy, and, her campaign slogan, “Stronger Together,” ignored the huge loss in middle-class mobility that has taken place over the last decade, which I have traced in good part to the loss of manufacturing jobs. In fact, her shocking loss of states such as Pennsylvania, Michigan, and Wisconsin, albeit by thin margins, were at the heart of rust belt job losses, states she famously did not visit in the campaign, though her support of the get tough on crime legislation which punitively affected minorities may well have played a role.

Trump’s campaign, meanwhile, pushed for a nostalgic view of America (“Make America Great Again”), one in which he promised to bring back millions of jobs in manufacturing and coal mining, for which he blamed Washington elites and unfair deals (“rip-offs”) by foreign powers.[2] While his campaign has been viewed as race-baiting, I argue that the race issue was effective because it tapped into the economic pain of the less educated skilled worker white middle class, by scapegoating immigrants and foreign powers.[3] Trump promised improvements for African Americans as well, again pointing to immigrants, insecurity, and a lack of performance by the Democratic party for their subordinate position.

Which brings us to the main point here, to examine Trump’s economic record in historical perspective, using a few basic indicators after first setting up the question in a way not discussed by most experts who analyze the issue. With the wealth of economic indicators at our disposal, we should not just leave it up to experts who argue on impression or with bias either that Obama’s record was just as good or better than Trump’s or that Trump created rocket growth for the Economy, overcoming the “bad policies” of the previous Administration.

Trump’s 2016 campaign pushed for a nostalgic view of America. | Flickr – The White House

First, a corrective about who “runs” the Economy

In most election campaigns, we are told something patently false, that the President is “responsible” for the economic record under his watch. Why this myth continues to be perpetuated is vexing, as anyone with basic economics training knows it does not make any sense. Consider that the U.S. is a market economy of 328.2 million some individuals, who act as owners, workers, and consumers. Within that Economy are millions of businesses who also make decisions without consulting the government. So, a market economy is the outcome of the interaction of all these decisions. Can we say that the President sets the economic conditions for the country? Even here, the President’s power is severely limited to setting a tone for markets. He does not control monetary policy; rather, the independent Central Bank sets the interest rate for borrowing. He does not control fiscal policy, as the Congress has to pass all taxing and spending plans. He can set a legislative agenda for the Economy, but he can only get his way if his party controls both houses of Congress, as was the case in Trump’s tax bill or Obama’s Affordable Care Act legislation, but such conditions tend to be fleeting.

Perhaps the greatest power of the President is his ability to make appointments to the executive branch and the ministries of government. In this regard, there is a potential to affect how markets function through regulation. For example, Republicans, including Trump, all tout their ability to reduce “wasteful” regulation and free up businesses, while Democrats tend to stand for more “responsibility” by business, as reflected in the platform of Elizabeth Warren. If a party is in power over long periods of time and has a strategy, this effort could affect the Economy. For example, the deregulation of the financial sector began under the leadership of Fed Chair Alan Greenspan, first appointed in 1987, and supported by both Republican and Democratic Presidents. As I explore in my 2019 co-edited volume on the topic, the movement towards deregulation helped to set up the 2008 financial crash.[4] In the same way, Trump’s dismantling of climate change policies and support of coal are affecting the energy sector.

Even with the potential to shape markets through regulation, the fact is that there is a lot of luck involved in any President’s economic record. Experts and politicians ignore the existence of a “business cycle,” the evolutionary upward and downward swings of business activity that have occurred from the 19th century to the present. There is a great deal of ink spilt in the economics literature about economic cycles, but as yet we don’t really have any good explanations for them. What we know is that at certain times, markets tend to boom, to the point of “irrational exuberance” leading to an asset bubble of high share and real estate prices that reflect “herd behavior,” such as flipping assets on the speculation that they will keep going up, regardless of their true value. At some point, the bubble pricks, the music stops, and the Economy crashes. Think of the roaring twenties and the crash of 1929 or the housing market bubble before the crash of the financial sector in 2008. The upshot is that these cycles can last for a decade or more, and essentially leaders who are elected on upswings take credit for propitious cycle conditions while those elected during crashes take the blame for pre-conditions that played out during their tenure. In this sense, President Ford was no more responsible for the OPEC oil price increases, which led to stagflation (high unemployment and inflation) than Clinton was for the upswing in the 1990s, which accompanied the emergence of the internet economy. Thus, Trump is not responsible for the economic downturn accompanying the onset of COVID, though he clearly has mishandled it.

Even with the potential to shape markets through regulation, the fact is that there is a lot of luck involved in any President’s economic record. | Flickr – The White House

To be sure, voters can and should vote for certain policy packages. Republicans offer lower taxes and promise balanced budgets, though in practice they borrow to pay for the taxes. Democrats offer more spending, asking to pay for it through higher taxes on corporations or the wealthy, though in practice they also run up deficits.

In the next sections, we turn to analyzing the key indicators under President Trump, recognizing first that he is lucky in terms of entering office during an upswing in the business cycle. We do this through a series of graphs that summarize the U.S. economy under Trump in long-term comparative perspective. We do not include stock market prices, though they have been up under Trump. Most Americans do not have large stock portfolios. More importantly, like business cycles, we do not have any rational explanations for stock market behavior. Stock prices such as those for tech companies are often so much higher than earnings that financial statements can not explain prices. Markets swing in part based on economic news, but more generally on any kinds of news, from 9/11 to the Syrian refugee crisis. Are prices up in spite of or because of anticipated recovery after COVID? No one can really answer. In our graphs, we do not include 2020 since it’s incomplete and COVID turned the economy upside down; arguably, we should give the same leeway to Obama’s performance in 2008.

GDP growth

As we can see in the first figure, both Obama and Trump’s annual economic growth records, when seen in historical perspective, are decidedly average. It’s clear that there was a sharp recovery under Obama’s watch, but then growth evened out. We really only have three years of Trump’s presidency (2017-19), but he does have a higher economic growth rate (2.5%) than Obama’s eight years in office (1.4%).

Source: Author from US BEA, Accessed Sept. 14, 2020.

Our graph underscores the cyclical nature of economic growth. We were in a recovery period from the 2008 crash, and we should see Trump’s period as a continuation of this part of the business cycle, not any break based on policies.

Budget and trade deficits

What about the federal government budget deficit, the touchstone of Republican campaigns since Reagan’s in 1980? Does partisan leadership matter in regard to responsible fiscal policy? As discussed earlier, in almost every period, we have divided government, and so we should see most budgets as compromises between the two parties.

Source: Author from U.S. Federal Reserve in St. Louis, accessed Sept. 14, 2020.

As we can see plainly from the graph, U.S. budget management has been disastrous from the time Reagan took office, with a brief exception under President Clinton when a short-term surplus was generated. In this case, the average deficit under Trump (2017-19) is slightly lower at 3.9% than under Obama (2008-16) at 5.4%. However, such a comparison would be unfair, given the stimulus required to get the Economy moving again after the 2008 crash. If we instead look at the trajectory, deficits were steadily declining under Obama, while they have been increasing under Trump. Trump’s one major domestic achievement was his passage of tax reform, which, as has been shown elsewhere, disproportionately helped wealthy Americans while doing little for the middle class, and helping to increase the deficit further, reinforcing the lesson going back to Reagan, that tax cuts do not pay for themselves.[5] More egregious still is the passage of fiscal stimulus at a time when the Economy was already growing, and the government should have been saving.

It is also worth noting that inflation, or the increase in prices, and the scourge of growth during the 1970s, was cut to 3% by 1983, and has remained in check ever since. While President Reagan’s team is often credited with wiping out inflation through creating high interest rates, these in turn also created a debt crisis throughout the South. More importantly, if economic policies alone were responsible for wiping out inflation, how can we explain the persistently low inflation since then, including fears of excess deflation since the 2008 crash? Economists don’t have ready answers.

What about the trade deficit, which Trump promised to turn around, through renegotiating “bad” trade deals and unfair practices of partners from China to the European Union? As he correctly noted, the trade deficit is more important in political terms than the capital account, where the U.S. has had a steady surplus (of net foreign investment coming in), as it reflects the net amount of goods and services we export. Those export industries are much more likely to support a larger number of high paying local jobs, such as auto exports. As with our examination of budget spending, what we see is Trump did next to nothing to improve the trade deficit. Only Clinton in the last three decades achieved a balance, albeit briefly. The average under him is 2.33% as compared to Obama’s average of 2.7%. In fact, under Obama, the trade deficit initially declined from the 4-6% range of his predecessor to around 2-3% where it remains now.

Source: Author from World Bank World Tables, accessed Sept. 14, 2020.

Unemployment and manufacturing jobs

If, despite Trump’s multiple renegotiations and sanctions, trade did not turn around, what about unemployment in general? In the next figure, we see continued improvement from the peak of 9.6% in 2010. Under Trump, the average has been 4% up to 2019, before the COVID crisis vs. 7.3% for Obama, though it was down to 4.9% in the year Obama left office. This number alone may help to explain Hilary Clinton’s loss, and the attraction of many to Trump’s campaign, as well as the challenges the Democrats have in overcoming the perceived advantage the Republicans have in economic management. When seen from a longer-term perspective, we observe considerably more volatility in rates from the 1970s, and unemployment appears as of 2019 to be towards the low end of the historical range. (We would never expect 0% unemployment since some are unable to work or in transition).

Source: Author from US BLS, accessed Sept. 14, 2020.

If we zero in on manufacturing, we see in the figure below that while the number of manufacturing jobs continued to rebound from its nadir in 2010, it is still far below historical ranges in the 1970s. In fact, what we see in historical perspective is a steady decline in the number of U.S. manufacturing jobs over time. There is no evidence that Trump has so far arrested that trend. In fact, the total number of manufacturing jobs in 2019 is estimated at 15.7 million, far below the figure of 19.6 million as recently as 2000 and part of a steady downward trend since then. Considering the annual percentage change in the number of jobs, it was just 0% in 2016, rising to 1% in 2018, and 1.2% in 2019. The highest increase in the past decade was 2.4% in 2012, part of the recovery from 2008.

Source: Author from OECD, accessed Sept. 14, 2020.

Wages in manufacturing similarly are in a dismal state. As a report by the U.S. Bureau of Labor Statistics (BLS) which studies wages in manufacturing from 1990-2018 concludes,

“Since 1990, average hourly earnings trends in the various manufacturing industries have been disparate, with a few industries showing strong growth but many others showing growth rates that are lower than those of the total private sector. In fact, average hourly earnings of production and nonsupervisory workers in the total private sector have recently surpassed those of their counterparts in the relatively high-paying durable goods portion of manufacturing.”

Their analysis indicates that in 1990, average hourly earnings in manufacturing of $10.78 were about 6% greater than other production workers in the private sector, whereas, by 2018, they were earning ($21.54/hour) 5% less than their counterparts. This is the data we need to illustrate the growing sense of inequality and being “left behind” that Trump tapped into. In the automobile sector alone, real hourly earnings dropped by 20.1% from 1990-2018, while they increased by 17.1% for the private sector as a whole! Indeed, the report also notes that the share of manufacturing workers in the private sector went from 17.2% to 8.5% over the same period.[6]

Donald Trump tapped into a growing sense of inequality and being “left behind”. | Flickr – The White House

What about immigration, Trump’s vaunted platform, to save the country from “rapists” and “criminals” as he stated in his 2015 candidacy announcement speech? It would take a full paper to really analyze this issue; however, a brief perusal of the data shows no real difference between Trump and recent administrations in terms of immigration. The average annual numbers of permanent residents granted in 2016-2018 were approximately 1.136 million, slightly higher than Obama’s average of 1.05 million per year. The 1-million mark was reached and roughly maintained from 1989 across administrations, while the previous year (1988) it was just approximately 641 thousand, a high mark at the time.

If we examine nonimmigrant admission, such as temporary workers, there is actually a slight increase in the numbers from the previous Administration. The only discernible decline in general categories is the number of refugee arrivals, whose average from 2016-18 is 53,695, down from an annual average of 66,548 under Obama. However, the number of refugees had declined over time from the previous high of approximately 207 thousand for 1980, which is when the dataset starts. Here again, we would want to consider such numbers carefully, as crises around the world might affect the numbers of refugees in any given year.

Conclusion- Trump’s economic performance is average

What we have seen from this brief data-driven exercise is that Donald Trump tapped into some very real economic discontent, reflected in long-term declines in manufacturing employment and income, centered in huge parts of the midwestern and Pennsylvania economies which tipped the election. Yet, there is no evidence of the economic turnaround that he claims in his campaign. The bottom line is that nothing much has changed in economic terms under Trump to arrest or reverse the long-term declines that led to his election.

The Democrats have emphasized the parallel trends of long-term increases in inequality and declining middle-class mobility that I discuss in my 2019 book, but they have not offered a palpable and convincing plan to get blue-collar workers back into good-paying jobs. More challenging still is that Biden is running on the mediocre economic track record in the Obama Administration that did little to address such long-term issues. Biden’s Green New Deal offers some potential as such, but it has not been presented in any convincing fashion as a plan that will address these issues. Until he does so, Trump will continue to have the upper hand by virtue of his more truthful diagnosis. The slow pitch is hanging in the air, waiting to be hit by Biden.🔷



[1] Jim Tankersley, Why Trump’s Approval Ratings on the Economy Remain Durable, The New York Times, Aug. 24, 2020, found at: https://www.nytimes.com/2020/08/24/us/politics/trump-economy.html, Accessed Sept. 14, 2020.

[2] Alexander Burns, Binyamin Applebaum, and Neil Irwin, Donald Trump Vows to Create 25 Million Jobs Over Next Decade, The New York Times, Sept. 15, 2016, found at: https://www.nytimes.com/2016/09/16/us/politics/donald-trump-economy-speech.html, accessed Sept. 14, 2020.

[3] Anil Hira, The Great Disruption: Understanding the Populist Forces Behind Trump, Brexit, and LePen, NY: Peter Lang, 2019.

[4] Hira, Norbert Gaillard and Theodore H. Cohn, eds. The Failure of Financial Regulation: Why a Major Crisis Could Happen Again, NY: PalgraveMacMillan, 2019.

[5] Distributional Analysis of the Conference Agreement for the Tax Cuts and Jobs Act, Tax Policy Center report, Dec. 18, 2017, found at https://www.taxpolicycenter.org/publications/distributional-analysis-conference-agreement-tax-cuts-and-jobs-act, accessed Sept. 14, 2020, and US Congressional Budget Office, 2019, The Budget and Economic Outlook: 2019 to 2029, Washington: CBO.

[6] Katelynn Harris and Michael D. McCall, The relative weakness in earnings of production workers in manufacturing, 1990–2018, Monthly Labor Review, Dec. 2019, Washington: Bureau of Labor Statistics, accessed Sept. 14, 2020.



Professor Andy Hira, Professor of Political Science, Simon Fraser University.


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[This piece was first published in PMP Magazine on 18 September 2020. | The author writes in a personal capacity.]

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