In his State of the Union address Tuesday evening, President Trump called this “our new American moment” and stated “there has never been a better time to start living the American Dream.”
He cited rising wages after years of stagnation, noted that the stock market is smashing “one record after another” and highlighted Apple’s recent plan to “invest a total of $350 billion in America,” hiring 20,000 workers.
While the newness of this moment in American history is debatable, nearly every economic indicator over the past year has followed a well-worn path set by the previous administration. And that’s fairly good news.
The question is: Can President Trump claim credit for any of it?
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For instance, it is true we are finally seeing a rise wages, but these gains go back well into the Obama administration. In fact, the past year has seen small, or possibly negative, real wage growth depending on the specific measure.
Similarly, the stock market record over the past year is impressive – though, again, the trend began under Obama.
The key point is that these economic trends are largely beyond the control of any administration, for better or worse.
So, while it’s true that over the past 60 years the economy has done significantly better when the president is a Democrat rather than a Republican, recent research by Alan Blinder and Mark Watson of Princeton University suggests this relationship is mostly spurious. Democrats have, by and large, inherited a better economic environment.
In Trump’s case, real wage growth was unimpressive over his first year in office in large part due to rising inflation, which reduces consumers’ buying power. There’s not a lot a president can do about inflation, either.
What about increased investment by U.S. companies such as Apple?
Here the president is on surer footing in claiming the tax cuts he signed into law last year are having an impact.
But again, he oversteps. Apple is not investing $350 billion – at least not yet. It is simply repatriating money it has always had, and its plans to add 20,000 jobs appear largely unrelated to tax cuts or other government policies.
Which isn’t to say the tax cuts won’t spur new capital investments. They undoubtedly will. And some of this investment might eventually lead to modest pay raises for U.S. workers, credit for which should go to Trump and Congressional Republicans.
As a case in point, Trump also highlighted Exxon Mobil’s recent announcement that it will invest billions in the U.S. as a response to the tax bill. Once again, Trump’s actual words turned out to be too good to be true. He claimed $50 billion in investment, but $15 billion of that was announced well before the tax bill. Still, some portion of $35 billion as a result of the tax cuts is serious money.
On the economic front, there is good news. Good enough, in fact, that Trump should feel free to be honest with the American people about the state of the union.
Gregory Wright teaches economics at the University of California, Merced. He wrote this for the Merced Sun-Star.