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Jan 22, 2020

Analysis | The Finance 202: Have Trump's economic promises been fulfilled?

By Tory Newmyer



THE TICKER

President Donald Trump. (Kevin Lamarque/Reuters)
Just over three years ago, President Trump gazed beyond the west front of the Capitol and pronounced a nation in a state of “carnage.” It struck many both then and now as odd. At the time, the United States was in the middle of an economic recovery that was leading to steady job growth, lower unemployment and slightly smaller annual budget deficits.
Trump has often boasted that his economic record is a result of his actions alone. In his address to the World Economic Forum in Davos on Tuesday, the president contrasted the dismal state of his predecessor with “an economic boom the likes of which the world has never seen before.”
The president is correct that as of this point in his tenure, some economic indicators are at or near record highs, or improving for some people after remaining stagnant. The Dow Jones has posted record numbers, unemployment has continued its downward trajectory to a half-century low, and wages are starting to increase for the middle class. (Though as our colleagues and others have noted, Trump often exaggerates the unemployment rate for African Americans and Latinos).
But that’s not the full story. The upward trajectory of many economic metrics -- ranging from unemployment to the stock market --began under President Barack Obama. As our colleague Heather Long wrote last year, the “data shows a mixed picture in terms of whether the [Trump] economy is any better than it was in Obama’s final years.”
Trump will head into his reelection effort with a modernized North American Free Trade Agreement and an introductory deal with China. But to get there, “Tariff Mantook Wall Street on a dizzying ride, imposing tariffs on multiple U.S. allies and asking Congress, and therefore the American people, to foot the bill for a bailout of American farmers larger than the amount provided to save the auto industry. Even some of the president’s allies admit the trade wars smothered some of the gains from the Republican-led rewrite of the tax code, which as Tory has pointed out also failed to live up to its hype.
So on the heels of his Davos address and at the start of his fourth year in office, we decided to see how the Trump economy stacks up to the 2016 candidate’s promises, such as that he “alone could fix it.” (For our purposes, we are squarely focused on Trump’s economic record — though our colleague Glenn Kessler found that overall Trump has broken more key promises than he's kept).
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JOBS:
Promise: Create 25 million new jobs over the next decade. (This was this core of candidate Trump’s economic plan unveiled in September 2016).
Status: In progress, but unlikely to happen over the next decade based on the current trajectory. There have been almost 6.7 million jobs created since Trump took office, according to the Bureau of Labor Statistics (we used the agency’s preliminary numbers for December 2019 as the endpoint). That puts Trump off pace to create 25 million jobs by 2026, but also, as FactCheck.org pointed out, trailing the average monthly jobs gain from Obama’s second term.
The good news is experts say job gains, as Heather noted, remain surprisingly robust given the large number of baby boomers retiring and the difficulty business owners have in filling new jobs.

TRADE: 
Promise: Pull out of the Trans-Pacific Partnership on Day 1. Renegotiate the North American Free Trade Agreement (NAFTA) or leave the accord. As part of his “America First” approach, Trump also vowed to get a better deal for American consumers by toeing a tougher line with major world markets he says are routinely ripping off the United States, including China. Trump initially promised to impose a 45 percent tariff on Chinese imports.
Status: The president withdrew from the TPP on Day 3 of his presidency. He threatened repeatedly to end U.S. participation in NAFTA, but instead renegotiated what he said was a better deal with Mexico and Canada. The Senate passed the U.S.-Mexico-Canada Agreement last week in a sweeping bipartisan vote, which could help the president’s reelection chances.
On China: Trump never imposed a 45 percent tariff on imports, but he has repeatedly used, and imposed, tariffs against Chinese imports in a bid to stop what he views as discriminatory trade practices.
For now, the administration’s goal of a sweeping trade accord with China has remained elusive. Instead, both sides signed a limited phase one deal maintaining many tariffs as high as 25 percent. Some of Beijing's retaliatory tariffs remain in place, but the phase 1 deal does include a Chinese pledge to purchase tens of billions in U.S. agricultural products over the next two years.
GROWTH:
Promise: “Over the next 10 years, our economic team estimates that under our plan the economy will average 3.5 percent growth,” Trump told the New York Economic Club in September 2016, before adding the 25 million new jobs line that we already addressed.
Status: Very unlikely given that current average yearly economic growth is nowhere close. The GDP has failed to increase at an average of even 3 percent in any of Trump’s first three years in office. The latest estimate for 2019 calls for 2.2 percent growth, which would be the lowest so far during his administration. When Trump originally made the promise, economists, journalists, commentators and pretty much everyone pointed out the United States hadn’t reached 3.5 percent annual growth since 2004. Bill Clinton was the last president to post more than one year above that threshold.
In a press conference from Davos Wednesday morning, Trump economic adviser Larry Kudlow said trade deals like the USMCA and phase one China deal would inspire "a half point growth in GDP" in the year ahead.

DEBT
Promise: Reduce the federal debt by $19 trillion over eight years.
Status: Extremely unlikely as the debt is actually increasing. Trump has done the exact opposite of what he promised in this category, as the gross federal debt has risen about 16 percent since he’s taken office, according to PolitiFact. Under Trump’s watch, the annual increase in the national debt has continued to surpass the growth in the nation’s GDP. A big reason for the growing gap is the $1.5 trillion in tax cuts spread out across the next decade as part of the president’s tax overhaul, and the president's continued endorsement of huge spending plans for the government.
Not surprisingly, Trump has reportedly scoffed at torching the nation’s balance sheet. “Yeah, but I won’t be here, Trump said during a meeting last year, according to the Daily Beast’s Asawin Suebsaen and Lachlan Markay, referring to a spike he was shown in the debt following a possible second term in office.

MARKET MOVERS

— Trump hit a lot of economic notes in an impromptu news conference this morning from the WEF in Davos. Here are some of the highlights.
  • Trump said he would be negotiating a "whole new structure" for the WTO, and the trade organization head would soon be coming to Washington. "The WTO has been very, very unfair to the United States for many years," Trump complained, adding China wouldn't have certain economic advantages without it.
  • Trump said he has a date in mind as to when he would place heavy new tariffs on European cars, but didn't share it. "They are actually more difficult to do business with than China, just ask [UK leader] Boris Johnson," the president said, referring to the European Union.
  • When asked about whether human rights and Hong Kong protests would factor into dealings with China, Trump said this: "We would like to see if we can do something, but again we're doing a trade deal."
  • The president also said his administration would soon announce additional countries to be added to the U.S. travel ban.

Nokia CEO Rajeev Suri at the World Economic Forum. (Jonathan Ernst/Reuters)
— CEOs remain optimistic at Davos: “Chief executives converged here hopeful that easing trade tensions around the world could give the economy a boost, despite some early dismal forecasts for global growth and business sentiment,” the Wall Street Journal’s Chip Cummins and Marie Beaudette report.
“A closely followed survey of CEO sentiment kicked off this year’s World Economic Forum on a somber note. Consulting firm PwC found that 53 percent of those it surveyed predict a slowdown in economic growth in 2020, up sharply from 29 percent in 2019 and 5 percent in 2018. It was the highest level of pessimism since 2012, the first year of the survey, PwC said. The OECD predicts global growth of 3 percent this year, up only slightly from its 2.9 percent forecast for 2019 — the weakest growth rate since the financial crisis.”
— Netflix shares rise despite some weak performance: “Shares of Netflix climbed as much as 2.3% in after-hours trading … after the company reported fourth-quarter results. The company beat on the top and bottom lines for the quarter, but gave disappointing guidance for the first quarter,” CNBC’s Annie Palmer reports.
“For the first quarter of 2020, Netflix expects to report earnings of $1.66 per share on revenue of $5.73 billion. That’s compared to analyst expectations for earnings of $1.20 per share and $5.76 billion in revenue. The company also expects to add 7 million paid customers in the first quarter, which fell short of analysts expectations for 7.86 million subscribers.”

TRUMP TRACKER

TRADE FLY-AROUND:

European Commission President Ursula von der Leyen and President Trump at the World Economic Forum on Tuesday in Davos. (Evan Vucci/AP)
— New year, new trade wars?: “Trump renewed his threat to put hefty tariffs on European cars Tuesday at the World Economic Forum, promising hardball tactics if trade negotiations do not go his way,” our colleague Heather Long reports from Davos.
“Just days after Trump scored wins with China, Mexico and Canada, the move highlighted how Trump is quickly pivoting to make Europe the next front in his protectionist trade war. As part of this push Tuesday, Treasury Secretary Steven Mnuchin warned Italy and Britain could face U.S. tariffs if they pursue taxes on large technology companies such as Facebook and Alphabet’s Google. French President Emmanuel Macron agreed in recent days to delay a similar tax to avoid Trump’s tariffs.”
  • An ocean apart: “After 70 years of being largely hand in hand in promoting democracy and capitalism around the world, the United States and Europe are now at odds over trade, climate change, taxation, privacy, Iran and defense funding,” Heather writes.
TRUMP WATCH:

Jared Kushner, left, Ivanka Trump, in green, and President Trump at the World Economic Forum. (Michael Probst/AP)
— Trump brags about himself at Davos: “Trump’s speech Tuesday at one of the financial world’s biggest events focused on his presidential accomplishments, in stark contrast with pretty much every other world leader at Davos who emphasized global cooperation and an urgent need to address climate change,” our colleague Heather reports.
“The president’s remarks were a noticeable break from key European leaders who spoke on the main stage minutes before Trump. They all urged global cooperation to tackle the world’s biggest challenges, especially climate change.”
IMPEACHMENT MINUTE: A speed read on the latest from the congressional impeachment process.
"Senate adopts ground rules for impeachment trial, delaying a decision on witnesses until after much of the proceedings." By The Post's Seung Min Kim, Felicia Sonmez and Mike DeBonis
"Chief Justice Roberts admonishes impeachment lawyers, telling them to ‘remember where they are.'" By The Post's Paul Kane and Elise Viebeck
"Collins and Romney hold the keys in the impeachment trial. Here’s what they signaled on Day One." By The Post's Aaron Blake

POCKET CHANGE


The Boeing logo. (Richard Drew/AP)
— 737 Max’s return delayed again: “In another setback in its effort to get its best-selling jet back in the air, Boeing on Tuesday said it does not expect U.S. regulators to begin ungrounding the 737 Max until mid-2020,” our colleague Lori Aratani reports.
“Company officials, however, said they remain confident the plane will fly again. … Boeing is scheduled to report its quarterly earnings Jan. 29. Trading of the company’s stock was briefly halted Tuesday for the company’s announcement. The company declined to be more specific about when it expected the Federal Aviation Administration to recertify the jets. Boeing had originally expected the Max to be cleared by U.S. regulators in December.”
— Apple dropped encryption plan: “Apple Inc dropped plans to let iPhone users fully encrypt backups of their devices in the company’s iCloud service after the FBI complained that the move would harm investigations, six sources familiar with the matter told Reuters,” Reuters’s Joseph Menn reports.
“The tech giant’s reversal, about two years ago, has not previously been reported. It shows how much Apple has been willing to help U.S. law enforcement and intelligence agencies, despite taking a harder line in high-profile legal disputes with the government and casting itself as a defender of its customers’ information.”
— Delta workers to receive payouts: “Delta Air Lines’ banner year — propelled by lower fuel prices, higher travel demand and no sidelined Boeing 737 Max planes in its fleet — led the carrier to beat earnings estimates and notch its 10th consecutive profitable year,” our colleague Jena McGregor reports.
“But those results won’t just pay off for shareholders: The carrier said last week that employees are set to receive $1.6 billion in cash payouts, its largest employee profit-sharing pool on record and one that handily tops what many other companies offer their employees.”

Former Nissan chairman Carlos Ghosn and his wife Carole Ghosn. (Mohamed Azakir/Reuters)
— Carole Ghosn against Japan’s legal system: “Carlos Ghosn’s arrest in November 2018 thrust his wife, Carole Ghosn, into battles she wasn’t expecting to fight: against Nissan Motor Co., the company her husband ran, and the Japanese justice system,” the Wall Street Journal’s Nick Kostov and Sean McLain report.
“It was Mrs. Ghosn, 53 years old, who visited the auto executive in a Tokyo jail, bringing him tangerines and reporting back on Japan’s spartan prison conditions. She lobbied world leaders, from President Trump to Emmanuel Macron of France, to demand her husband’s release. And when Mr. Ghosn made his daring escape from Japan last month, Mrs. Ghosn was there for his arrival in Beirut, ignoring an order from a Japanese court to have no contact with her husband.”
— Will people still call London after Brexit?: “Britain’s hulking financial sector presents a serious dilemma for both sides in the U.K.’s coming trade negotiations with the European Union. Whatever the outcome, British-based financial institutions are preparing to see their access to the trade bloc heavily curtailed after Brexit,” the Wall Street Journal’s Anna Isaac and Max Colchester report.
“EU governments have sought to lure financial business from London almost from the moment the U.K. voted to leave the bloc in 2016. But some worry that if they cut off London too abruptly, they may lose access to services that only London can currently provide, while increasing their vulnerability to financial shock.”

DAYBOOK

Today:
  • Johnson & Johnson, Fifth Third Bancorp, Kinder Morgan and Las Vegas Sands are among the notable companies reporting their earnings.
Thursday:
  • Procter & Gamble, Comcast, American Airlines, Discover Financial Services, JetBlue Airways, Southwest Airlines and Union Pacific are among the notable companies reporting their earnings.
Friday:



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