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Richard Harris

I often have lunch with the great and good. Admittedly, this is generally by reading the “Lunch with the FT” column. The Financial Times’ latest guest is Reverend Franklin Graham, the son of the famous evangelist Billy, who is unashamedly pro-Donald Trump.
Supporting a presidential candidate who has been convicted by a jury of paying off an adult film actress for her silence might be said by some to be an unusual choice for a Christian leader. His reasoning is that the previous US president strengthened the economy, facilitated low inflation and was in office during a time of relative world peace.
Graham is either naive or a Republican: these so-called achievements were either down to luck or plain wrong, and his view is a result of the effective spinning of a narrative.
The more intriguing point is whether Trump, or any other policymaker, can actually do very much to improve an economy. Are policy successes a matter of luck?
Hostages to fortune rely on global events that do not blow the ship of state off course. Do we need grand economic policies, or does the average person just want good healthcare, public infrastructure, the rubbish collected and a peaceful coexistence?
Policymakers naturally play up any achievement they can while blaming their failures on the latest financial crisis, foreign influences, war, the plague or some other excuse. Yet surely when a new administration comes into office, they merely inherit the last administration’s joys, fears, problems and blame.


How do we cut through the fog of spin? It can take years for any policy to come into effect. Economic statistics used by candidates standing for office and their supporters should therefore be lagged by two years, as that is how long it often takes to move the economic needle.
US leaders over the last four administrations have had bad luck as well as good. Significant world events such as the 2008 global financial crisis and Covid-19 pandemic can skew the figures but also provide an excuse for the underperformance. A two-year lag would minimise these major effects and make the figures comparable.
I reviewed Trump’s economic policies by lagging by two years the key US economic statistics. Results show that economic growth under Trump was unspectacular: he presided over an average gross domestic product growth of 4.2 per cent. Not bad, but also not far off the 3.9 per cent of Barack Obama’s second term and well behind President Joe Biden’s 5.7 per cent growth in the two years for which we have data.
Trump has accused Biden of causing increased inflation and high interest rates. It is true that the US Federal Reserve increased rates to curb inflation after Russia’s invasion of Ukraine. The average interest rate on 10-year government bonds and inflation were lower during the Trump administration than under Biden: 2 per cent vs 3.1 per cent and 2.5 per cent vs 5.1 per cent, respectively.
Were Trump’s figures a result of good policy or good luck? The average interest rate under Obama was slightly higher than under Trump (2.3 per cent), but the inflation rate was much lower (1.3 per cent).

Of course, growth rates are highly influenced by the debt created as a percentage of the size of the economy. On that measure, Trump is way out in front as debt rose 11.2 per cent on his watch compared with Biden’s two-year figure of 4.8 per cent. Over four years, I assume this would double to about 9.6 per cent. Once the debt bubbles after the global financial crisis had eased, Obama’s second term raised debt by just 9 per cent.
According to the logic of “voodoo economics”, Trump’s tax cuts to his rich friends were supposed to spur growth and tax receipts. They did nothing of the kind. Tax receipts under Trump were up by only 6.1 per cent, but are already 8.1 per cent higher under Biden.
Money created by the government eventually ends up on Wall Street. On Trump’s watch, his stock-owning friends benefited from a massive 76.3 per cent rise in the S&P 500 compared to a 27 per cent rise in Biden’s first two years. Ordinary people are more interested in job creation, on which Biden wins handsomely with non-farm employment rising by 3.3 per cent vs a fall of 0.4 per cent under Trump.


Trump, whose big re-election campaign issue is immigration, saw applications for naturalisation rise by 0.5 per cent during his administration, but under Biden, there has been a fall of 4.7 per cent. Indeed, the Pew Research Centre’s figures show that annual numbers of undocumented migrants slightly increased under Trump.
Statistics-based narratives about a policymaker’s record can often be spun out of lies and promises. There is much luck and legacy involved in the short-term outcome of economic policy measures, which take time and require stability to succeed.
It is rare that the right assumptions are even made in the first place, such as applying a two-year lag to policy records. The evidence shows otherwise, but Trump supporters like Graham are religious in their belief that their man improved the US economy. For now, his people believe what they want to believe. There are none so blind as those who will not see.
Dr Richard Harris is chief executive of Port Shelter and is a veteran investment specialist, writer and broadcaster and financial expert witness


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Opinion

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Examining US economic figures while allowing for the effects of global events suggest luck and legacy matter as much as good policy


Examining US economic figures while allowing for the effects of global events suggest luck and legacy matter as much as good policy.


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How much do policymakers affect the economy? Maybe less than you think

.css-1mniedq{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;}Examining US economic figures while allowing for the effects of global events suggest luck and legacy matter as much as good policy

Examining US economic figures while allowing for the effects of global events suggest luck and legacy matter as much as good policy