Tedious Man at Bar (TMAB) #1: Hey, how about that president of yours? Starting trade wars. Tanking the stock market.
TMAB #2: Oh come on, that’ll blow over. The stock market keeps breaking new records under Trump. You own stock, you should thank him.
TMAB #1: Yeah, right. I’ll do it when you thank Barack Obama for the last ten years. The stock market started booming almost as soon as he got in. He’s the one who saved the economy. Trump’s just riding on his coattails.
Bartender, who majored in economics but is oddly not incentivized by tips: Um, guys, the stock market isn’t the economy.
TMAB #1: But didn’t the stock market rise even faster under Obama than under Trump? And doesn’t it normally do better under Democratic presidents?
Bartender: Yeah, but do you really think the stock market cares who’s president? Maybe it’s just coincidence?
TMAB #2: You’re right, the stock market isn’t the economy. But the Trump economy is the best ever. Lowest unemployment rate in decades – 3.6 percent!
Bartender: You’re assuming that’s because of Trump.
TMAB #2: What else would it be?
Bartender: The continuation of a trend that’s been going on for seven years? The unemployment rate has been falling at about the same rate since 2012. Anyway, the prime-age employment-to-population ratio is a better measure.
TMAB #1: The what?
Bartender: Not all of the people who aren’t working and would like to be working count as unemployed. Remember when Trump said during the campaign the real unemployment rate might be 40 percent?
TMAB #1: Yeah, that was the stupid.
Bartender: He was wrong about the unemployment rate, but it was true that only about 60 percent of the adult population was working.
TMAB #2: I bet it’s better now.
Bartender: It’s all the way up to 61 percent. But don’t feel bad – it’s always been below 65 percent. And “adult population” includes everyone over the age of fifteen – full-time students, retirees, homemakers, people on disability, etc.
TMAB #1: Didn’t you just say it was a better measure than the unemployment rate?
Bartender: The prime-age employment-to-population ratio is what’s better. It only includes people aged 25-54. So it omits most students and retirees. That ratio was over 80 percent before the Great Recession of 2007-2010, when it fell to 75 percent. Since 2012, it’s been steadily creeping up, but it’s still just shy of 80 percent.
TMAB #1: So the Trump economy...
TMAB #2: You’re just cherry picking.
Bartender: Okay, what if the employment-to-population ratio was 82 percent? And unemployment was 3.8 percent. And the federal budget was in surplus. And inflation was 2 percent (the same as now). Real GDP growing at 4 percent (a point better than now). Real median income at an all-time high. Would you say the president was doing a great job with the economy?
TMAB #2: Of course.
Bartender: Well, that was the economy in the spring of 2000, in the last year of Bill Clinton’s presidency. Do you think it was all because of him?
TMAB #2: No.
TMAB #1: Surely he had something to do with it.
Bartender: Not much except the surplus. Clinton got a tax increase through Congress in his first year, and Congress held the line on spending. Combine that strong economic growth, and you’ve got a surplus.
TMAB #1: Didn’t Clinton do things that helped poor people?
Bartender: Yeah. He and Congress raised the minimum wage. And they expanded the Earned Income Tax Credit. The poverty rate fell a lot in those years, and it’s fair to say government policies helped with that.
TMAB #2: But not overall?
Bartender: Basically, no. The most important thing is productivity – how much we can produce in an hour of work – and presidents don’t seem to affect that at all. Productivity growth shifted into a lower gear in 1973, and it’s been about the same regardless of what party the president belongs to. The exception was the nineties, when productivity grew faster than it had in decades, but economists would tell you that was because of computers and the Internet, not Clinton.
TMAB #1: Can we at least agree that the economy was lousy under George W. Bush?
Bartender: His presidency started with a recession and ended with the Great Recession. And real median household income ended up lower than it started. So, yeah, lousy economy. But not really his fault.
TMAB #1: Seriously?
Bartender: Presidents don’t control the economy. Both of the recessions came when big financial bubbles burst. The financial markets are a lot bigger than the president.
TMAB #2: So Bush didn’t cause the Great Recession, and Obama didn’t end it, right?
Bartender: A few things ended it. The stimulus package that Obama got through Congress helped, but the economy got a lot more help from bank bailouts and the Federal Reserve’s dramatic measures. They weren’t popular, but they ended the crisis and got the economy moving again.
TMAB #2: Didn’t that Democrat stimulus add a trillion dollars to the deficit?
Bartender: No. The deficit had already gone up by a trillion dollars because of the recession. The stimulus itself was only $800 billion, spread out over three years. It was too small to make a huge impact on the deficit, let alone turn the economy around all by itself.
TMAB #2: Unlike the great Trump tax cut.
Bartender: Actually, they’re about the same size. The Republican tax cut is about $200 billion per year. The difference is that it continues for ten years, so over $2 trillion total.
TMAB #1: Remember when Republicans cared about the deficit?
TMAB #2: Reagan proved that deficits don’t matter. Anyway, why should we care when the U.S. Treasury can still borrow at some of the lowest interest rates on the planet?
Bartender: I almost agree with you. But members of your party have a way of cutting taxes for wealthy people and corporations and then saying we need to cut Social Security and Medicare. Not a good trade.
TMAB #2: Oh, yeah, it’s always “the wealthy and corporations.” Everybody got a tax cut.
Bartender: Not quite everybody. And Trump’s new China tariffs are a pretty big tax increase. I saw a study today that said the tariffs will wipe out the benefits of whatever tax cuts went to middle- and lower-income people.
TMAB #2: Still, a damn good economy.
Bartender: I agree. It’s been getting better every year since 2010. But it’s not Trump’s economy. Or Obama’s.
TMAB #2: Then whose is it?
Bartender: Nobody’s. And everybody’s. The Fed matters the most — keeping short-term interest rates low and banks flush with cash to loan out but even the they’re not all powerful. Most of the economy is private businesses and households, and their decisions are what really drives it. They’re generally not thinking about the president when deciding to buy something or invest.
TMAB #2: You can spout the facts and figures you want, I’m still voting for Trump.
TMAB #1: Anyone but Trump!
Bartender: Vote for whoever you want. Just don’t say the economy made you do it.
Ranjit Dighe has been living and working in Oswego since 1997. As Professor of Economics at SUNY Oswego, he teaches and does research in economics and history. He appears in this space monthly exclusive to The Palladium-Times.