From "zero GDP" to "42 percent unemployment," Trump's economic claims suggest profound and dangerous ignorance
(Credit: AP/John Locher/Getty/Salon)Donald Trump lies or talks loosely all the time about virtually everything, for a wide range of reasons. Sometimes, though, he might not be lying — at least not to us. He might only be lying to himself. Or he might actually be utterly clueless. We might expect this on any number of subjects, but there’s one thing Trump is really supposed to know something about: money — i.e., economics. After all, he’s a billionaire, right? Well, at least he says he is.
So when the Wall Street Journal editorial board asked him during the GOP primary race whose advice he took on economics, Trump said he didn’t need any. “Honestly, I feel that I have such a vast feeling for it that I really — you know, Milton Friedman was good — but I don’t really listen to anybody,” he told them. Makes sense. Economists’ knowledge of facts would only cramp his style. But his utter disregard for them could ultimately be his undoing, especially with voters who mistakenly believe he knows things about the economy that can and will restore their dreams.
On some issues, Trump’s limited knowledge has justifiably scared people — nuclear weapons, for example. Last August, Think Progress published a list of “9 terrifying things Donald Trump has publicly said about nuclear weapons,” which betrayed his ignorance across a wide range of basic nuclear issues. But his equally ignorant bluster on economics hasn’t been noticed as much — even though it could also prove catastrophically destructive. Here are seven striking examples that should make his ignorance clear to all.
Trump claimed the GDP was “below zero.”
Last quarter, it was just announced our gross domestic product— a sign of strength, right? But not for us. It was below zero. Whoever heard of this? It’s never below zero.
– Donald Trump, presidential announcement speech, June 16, 2015
Although less headline-grabbing than Trump’s over-the-top racist and nativist lies, this kick-off speech lie was probably the most telling, because it revealed such a deep ignorance about the core of his campaign — his supposed economic competence, in the name of which millions of people ignored all the other stuff. This wasn’t just a simple lie, but a layered expression of profound ignorance. PolitiFact called Trump’s claim “doubly wrong” and rated it “pants on fire,” but without conveying how profoundly wrong Trump was.
First, this suggests that Trump doesn’t even know what the gross domestic product (GDP) is. It’s the total market value of all final goods and services produced by an economy in a period (quarterly or yearly). It can’t be less than zero, by definition. It’s like saying someone’s weight is less than zero. It’s a sign that whoever said it doesn’t know what they’re talking about. According to the U.N. and the World Bank, the world’s smallest national economy is Tuvalu, with a GDP of $38 million. That’s a lot more than zero.
Trump’s claim was so absurd and embarrassing on its face that people simply corrected it to mean the GDP rate of change. But the two are very different things, like your weight versus your weekly weight-loss, or the size of your home or car loan versus your monthly payment. It’s the kind of mistake a person makes when he has no idea what he’s talking about.
Even after correcting Trump’s homework for him, his claim still reveals unfathomable ignorance. “Negative GDP growth — in other words, GDP shrinkage — from quarter to quarter is one of the hallmarks of a recession. And there have been lots of recessions over the years — 11 since World War II,” PolitiFact noted. Since the government started calculating quarterly GDP change in 1947, we have had 42 quarters of negative GDP growth, “roughly 15 percent of the time.” But that skips over the even more fundamental point: Negative GDP growth is a key characteristic of economic recession. Donald Trump does not know what a recession is. That’s about as bad as it gets in terms of economic ignorance.
Trump claimed that the U.S. never “beats” China in a trade deal: “They kill us.”
In that same announcement speech, Trump made another compound claim that was also doubly false — as well as being key to his campaign. He said:
We don’t have victories anymore. We used to have victories, but we don’t have them. When was the last time anybody saw us beating, let’s say, China in a trade deal? They kill us. I beat China all the time. All the time.
The first thing false about this claim is that we don’t have any trade deals with China. Our trade relations with China aren’t based upon “deals.” They are based on our membership in the World Trade Organization, which China joined in 2001, long after the rules were established. China doesn’t “kill us” in trade deals, because there are no such deals.
The second false thing is that we do kill China on trade, anyway. The WTO has a dispute resolution process and, as pointed out on the U.S. Trade Representative’s Enforcement page, the Obama administration’s record was remarkable. The U.S. has launched 23 enforcement actions at the WTO since 2009, which is more than any other country. Fourteen of those, or 60 percent, were directed at China, and the U.S. has won every one of its trade enforcement challenges decided so far, “worth billions of dollars in trade opportunities for U.S. exporters.”
As recently reported in the Financial Times, before leaving office, Obama “fired a parting shot at Beijing” with one last WTO case targeting the Chinese aluminum industry, specifically “challenging how Beijing’s financial sector subsidizes China’s industry via artificially cheap financing.”
So Trump was utterly and totally wrong about the U.S., China and trade under Obama. That’s not to say everything’s hunky-dory in our trade relations, but it’s not for the simplistic reasons that Trump offers. Either he knows those are false or he knows much less about trade and economics than he pretends. Or both.
Trump claimed that the Trans-Pacific Partnership (TPP) “was designed for China to come in, as they always do, through the back door and totally take advantage of everyone.”
Let’s consider something else Trump has said about China. In a November 2015 GOP primary debate, Trump ludicrously claimed that the TPP was designed to benefit China, when its guiding rationale was precisely the opposite — to create a Pacific Ocean trade agreement that excluded China. As PolitiFact noted, on the way to rating it a “pants on fire” lie:
There’s just one problem with Trump’s rant on China, as Sen. Rand Paul emphatically pointed out at the debate: China isn’t actually a part of the Trans-Pacific Partnership.
To give Trump the benefit of the doubt, we asked some experts if there is any way China could benefit “through the back door” from the TPP. The short answer: no.
As MarketWatch reported in May 2015, “In Beijing, the TPP is frequently seen as an ‘anyone but China’ trade club that threatens the Chinese economy as a whole and even the country’s very future.” China had nothing to do with designing the TPP, and wasn’t happy about it at all.
Trump sowed massive confusion over the possibility of defaulting on the federal debt.
Trump sent shockwaves through the financial world with his May 5, 2016, interview with CNBC’s Andrew Ross Sorkin and Becky Quick. (Recapped by PolitiFact here.) When asked whether he thought the United States should “pay 100 cents on the dollar” or whether the U.S. debt could be renegotiated, he began his reply by saying, “Yeah, I think — look, I have borrowed, knowing that you can pay back with discounts. And I have done very well with debt. Now, of course, I was swashbuckling, and it did well for me and it was good for me and all that.”
Then he said, “Now we’re in a different situation with the country,” seeming for a fleeting moment to acknowledge a significant difference, and then not doing so: “But I would borrow, knowing that if the economy crashed, you could make a deal. And if the economy was good, it was good. So, therefore, you can’t lose.”
In a follow-up interview, Trump argued he had never threatened to default. But his explanations in both interviews were so garbled that even experts didn’t know what to make of them — a huge problem, given how easily a president’s words can impact world events.
To simplify the tangled explanations Trump offered, he claimed he was only saying that government could buy back bonds at lower prices if interest rates rise, and that “you [the U.S. government] never have to default because you print the money, I hate to tell you.” But this explanation is hardly comforting, as Jim Paulsen, chief investment officer at Wells Capital, explained to Politico:
“We’ve basically renegotiated existing debt in the past and we certainly do print money,” Paulsen said. “These concepts are far from odd. But to say them as a presidential candidate is what is so striking to me and frightening. For a president to say these kinds of things publicly would have the opposite effect you would want in that they would put the economy into recession.”
When PolitiFact examined the matter shortly afterwards, more experts weighed in:
“Neither interview makes sense,” said Neil Buchanan, a George Washington University law professor and author of “The Debt Ceiling Disasters.”
“The statements are neither clear nor coherent,” agreed Paolo Mauro, a senior fellow at the Peterson Institute for International Economics. …
Charles W. Mooney Jr., a law professor at the University of Pennsylvania, said Trump “seems to confound concepts of ‘discount,’ ‘refinance,’ and ‘renegotiate’ just as he does with every other concept he has ever addressed.”
And Brad W. Setser, a senior fellow at the Council of Foreign Relations and the deputy assistant secretary for international economic analysis at the U.S. Treasury from 2011 to 2015, called Trump’s comments “lots of very loose talk on a subject where there shouldn’t be loose talk.”
In short, Trump was just as profoundly ignorant about public debt as he was about nuclear policy. It’s time to stop pretending otherwise.
Trump called Michael Flynn at 3 a.m. to ask whether a strong or a weak dollar was good for the U.S.
On Feb. 7, Huffington Post broke a story about Trump placing a 3 a.m. call to his now-departed national security adviser, Michael Flynn, asking what was best for the U.S. economy, a strong dollar or a weak one. But the content of the question — which deserved far more attention — was only a minor detail in the story, “Leaks Suggest Trump’s Own Team Is Alarmed By His Conduct,” or in most of the commentary and follow-up stories it generated, with a few notable exceptions. As Huffington Post reported:
Flynn has a long record in counterintelligence but not in macroeconomics. And he told Trump he didn’t know, that it wasn’t his area of expertise, that, perhaps, Trump should ask an economist instead.
As Derek Thompson noted in the Atlantic, it was “actually a reasonable question without a simple answer,” since a strong dollar favors American buyers while a weak one empowers American exporters. But the problem was that Trump called the wrong sort of expert, and that he has a paucity of trusted advisers.
But there’s a deeper problem: Trump campaigned almost entirely on the weak-dollar, export side of the question and criticized the strong dollar accordingly. “It sounds good to say we have a strong dollar. But that’s where it stops,” he said in one Fox Business interview. If that view actually had been deeply informed, he might have asked a very different sort of question to someone more qualified than Flynn. Something like this: “I am in favor of moving away from the strong-dollar policy, because it has hurt the U.S. on trade. But I realize I need to be president for all the people. So I want a thorough briefing on the pluses and minuses of strong vs. weak dollar policies, in terms of who will be helped or hurt, both in the short run and long term.”
It’s not just about asking the right expert, but of about having a clue what to ask. Of course, that would mean asking an economist. And as Trump already said, “I don’t really listen to anybody.” So why would he start now, just because he’s president?
Trump has claimed that the “true” unemployment rate is 42 percent.
Exaggerating the unemployment rate is nothing new when Republicans talk about the economy under Obam, but Trump took it considerably farther than most, did so at a much higher level and sold it to people based on his supposed superior grasp of economics. As FactCheck.org explained:
Trump is referring to the number of working-age Americans who are not in the labor force. As we pointed out when then Texas Gov. Rick Perry in 2014 said he was “worried” about those not in the labor force, they include everyone age 16 and over who isn’t working or looking for work: teenagers, college students, folks who are well into their retirement years, stay-at-home parents, the independently wealthy and more.
In fact, the current figure — 95 million as of January — includes only 6 million who say they want to work.
It’s true that there are more people not in the labor force and not looking for work than there were before the Great Recession — and the main reason for that is the GOP’s insistence on austerity economics, which greatly weakened the economic recovery. But they’re only a tiny sliver of Trump’s fictitious 42 percent figure.
Trump has claimed he will produce sustained 4 percent growth.
In September 2016, Trump’s economic team claimed that his economic plan wouldraise annual economic growth to 3.5 percent, while Trump himself claimed it could be 4 percent or better. Trump had even said, earlier, that it would be “easily attainable.”
Trump isn’t the only Republican to have promised 4 percent growth — Ted Cruz and Jeb Bush did too. But Trump claims special genius on economic matters. It’s understandable why Republicans would want to promise 4 percent growth — growth is what Republicans promise, but Democrats deliver. Since World War II, economic growth has averaged 4.4 percent under Democratic presidents, compared to just 2.5 percent under Republicans. Which leads to the obvious conclusion: The best plan Trump could have for 4 percent growth would be to switch parties again!
Seriously, there are good reasons why this goal is unreasonable, as explained by Chad Stone, chief economist at the Center on Budget and Policy Priorities. Except for brief spurts during a recovery, the actual GDP — current demand for goods and services — can, at best, only grow as fast as potential GDP, meaning the goods and services the economy could supply with enough demand to fully utilize the nation’s capital and labor. But the Great Recession had a devastating impact on potential GDP, compared to other recessions, as reflected in projections from the Congressional Budget Office.
From 1950 to 1973, productivity grew at 2.4 percent annually, and the labor force grew at 1.6 percent — for a total of 4 percent — compared to the measly growth of 1.4 percent and 0.5 percent, respectively, projected by the CBO over the next decade.
For Trump to have any chance of meeting his target, the CBO projections would have to be wrong by a lot. On top of that, Trump’s mass deportation plan would shrink the labor force, taking us in exactly the wrong direction. Comprehensive immigration reform, including a path to citizenship for many undocumented workers, would almost certainly lead to higher productivity, because citizens and documented immigrants generally have higher job skills and can take on jobs that produce more valuable goods.
I could go on, but by now you get the point: Both as candidate and president, Trump has repeatedly demonstrated an appalling ignorance on economic affairs that’s wildly at odds with the image he projects — and that many voters, even those who rejected him, seem to have believed. Not only does Trump not have more insight into the economy than other politicians have, his comprehension of economic issues is exceptionally weak. That could be a source of serious trouble for the course of his presidency, and the future of America.
No comments:
Post a Comment