Lies, Damned Lies, and Steve Rattner’s Statistics

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If liberal economists could win the economic debate with honest arguments, they would make them.


s President Reagan once joked, “Well, the trouble with our liberal friends is not that they’re ignorant; it’s just that they know so much that isn’t so.” In his New York Times op-ed, Steve Rattner adds his name to the list of people willing to compromise their reputation to mislead the American people.

No serious economist would measure a president’s performance blindly from the day they stepped into office until the day they left. The Trump administration should be evaluated for its response to the pandemic, but not for the pandemic itself. With eight years to shepherd the economy, President Obama should be measured by how his policies left the economy relative to the economy prior to the financial crisis, rather than by the economy’s growth from a temporary recession as if the recession were permanent.

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By that measure, the Obama administration’s polices grew employment by 7 million workers over employment prior to the financial crisis at end of 2007. His policies did so at a time when the population of 25 to 64 year-olds grew by 8.6 million people. So, after eight years at the helm, the Obama administration created 1.6 million fewer jobs than the growth in working-age adults — the supposed “new normal.”

In contrast, the Trump administration’s policies grew employment by 6.6 million workers at a time when the population of 25- to 64 year-olds grew by 1.4 million people. In three years, President Trump’s policies created 5.2 million more jobs than the growth in working age adults. Unemployment consequently fell and workforce participation rose. No honest person could compare the two administrations and conclude the Trump administration’s economic performance was inferior.

Using a similar time frame, President Obama’s policies grew the economy 1.4 percent per year from its prior peak in 2007 until the end of 2016 when he left office. Until the pandemic, President Trump’s policies grew the economy 2.5 percent per year from its prior peak at the end of 2016.

Over his eight years, President Obama’s policies cumulatively increased real private investment 14 percent over the capital stock in place in 2007. In three years, President Trump’s policies increased cumulative real investment 11 percent. Using a misleading statistic, Rattner points at only the growth rate of investment and not the cumulative benefits of a permanent increase in the capital base, which produces lasting benefits. By most every measure, the Obama administration’s policies produced anemic investment and economic growth relative to the Trump administration.

A more persuasive argument would acknowledge the superior economic performance of the Trump administration and then endeavor to take credit for it. That argument has two problems. The Trump administration produced unusually strong growth late in the business cycle, the point at which the economy reaches full employment and growth generally slows. And after flatlining for two years prior to the 2016 election, the stock market began to rise rapidly — an indication of market expectations — soon after Democrats were defeated. Since President Trump was elected, the stock market has grown nearly 60 percent even in the midst of the pandemic and at a time when the European stock market (MSCI Europe) has risen 15 percent over the same period. Excluding the highflying FANGMA stocks (Facebook, Apple, NVIDA, Google, Microsoft and Amazon), the S&P is still up nearly 35 percent (author’s calculations).

Rattner admonishes the Trump administration for its tax cut benefiting rich investors. But that is true of any legislation that doesn’t increase income redistribution from its already high and continually growing level. Rattner misses the forest for the trees. Prior to the pandemic, inequality and poverty declined during the Trump administration.

Rattner claims the Trump administration’s tax cut failed to pay for itself. When the legislation passed, the Congressional Budget Office forecast the tax cut would eventually cover its interest expense after the middle-class tax cut expired (a tax cut I opposed because it created deficits without offsetting growth) and the business tax cuts had enough time to grow the economy more than would have been the case without it. As a former private-equity investor, Rattner knows full well that investments which cover their cost of financing leave future generations better off. It’s not just investments that pay back all their cost in the first several years that achieve this. Only legislation that increases investment and grows the economy can eventually pay for itself; namely, tax cuts for corporations and private business owners (and, yes, the latter will, relatively speaking, tend to include more wealthy people) — the very thing Rattner condemns.

Even Rattner’s claim that President Trump lied when he said the U.S. economy was the strongest it has ever been when median family income reached record highs is specious.

It is appropriate to criticize the Trump administration’s handling of the pandemic. It’s silly to blame an administration for the recession the pandemic has caused. America’s estimated 660 pandemic-related excess deaths per million people (i.e., over what would have occurred anyway) is currently on par with the five largest countries in Europe, but substantially less excluding Germany. America’s 11 percent economic contraction from the pandemic is well below the 18 percent contraction of the five largest countries in Europe. Perhaps America’s population is younger and healthier, but the differences are large.

The world has given us natural experiments: President Obama’s heavy-handed economic policies relative to President Trump’s, and Europe’s heavy-handed policies relative to America’s. In each case, lower taxes and lighter regulation have produced faster growth and higher middle-class incomes.

Rattner’s use of misleading statistics is a repugnant way to try to convince the country. If liberal economists could win the economic debate with honest arguments, they would make them.

Ed ConardMr. Conard is an American Enterprise Institute adjunct fellow, a former Bain Capital partner, and the author of The Upside of Inequality: How Good Intentions Undermine the Middle Class.

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