(CNSNews.com) - Kevin Hassett, chair of the White House Council of Economic Advisers, dispelled the notion that former President Barack Obama can claim credit for the recent U.S. economic boom that has occurred during the Trump administration.
“One of the hypotheses that’s been floating around about the economy lately is that the strong economy that we’re seeing is just a continuation of recent trends. And, you know, since we're the nerds at the White House, we decided that this is a testable hypothesis. And so what we can do is we can go out and we can estimate recent trends -- that is, trends that ran in the economy up to the point of the last election -- and then compare the latest data to the recent trends,” he said.
Hassett showed several slides illustrating economic factors like small business optimism, business investment, structures, and equipment investment. Small business optimism, he illustrated, is at near record high, second only to July 1983.
“And so, I think that if you look at this chart, you can see that the first thing is small-business optimism. The middle chart is the percent reporting now as a good time to expand. The last one is the percent expecting higher real sales in six months. I think if you look at any of those, you'd say, ‘Gee, that doesn't really look like the continuation of a recent trend,’” he said.
Business investment is up more than $300 billion over the trend, Hassett noted.
“And I think that if anyone were to assert that the capital spending boom that we're seeing right now was a continuation of the trend that President Trump inherited, then, well, you know, they wouldn't get a high grade in graduate school for that assertion.
Capital goods orders and shipments are up sharply, Hassett illustrated.
“Durable goods orders, capital goods orders -- it's a key part of the economy, and it's one of the factors that we look at most closely because it characterizes, basically, the good-paying jobs, the jobs that affects normal Americans -- blue-collar Americans,” he said.
“And the first chart is core capital goods orders, and the second chart is core capital goods shipments, and if you look at it, the blue again shows a clear downward trajectory and billions of dollars, and then that trajectory reversed itself completely when President Trump was elected. If you were going to assert that the current good news is just the extension of a recent trend, then you'd just simply be factually incorrect,” Hassett said.
Business conditions have also improved sharply, Hassett noted in his chart presentation. Furthermore, new business applications have surged.
“Now, one of the things that I can remember at the American Enterprise Institute talking a lot about before I came in here was the fact that entrepreneurship in America was falling off, and one of the ways we can measure entrepreneurship is that, if you start a new business, that you have to apply for an ID number -- a tax ID number -- for your business,” he said.
“And so, in this chart, we've plotted the EIN applications for new businesses, and if you look at the blue line, they were heading up because we were at a recovery, but there's clear upward trajectory way above the trend at the end,” Hassett said.
Furthermore, he said, prime-age workers are re-entering the labor force and finding jobs, as illustrated by his chart presentation. There’s also improvement in blue collar jobs, Hassett noted. Additionally, blue collar jobs grew 3.3 percent in the year through July, the fastest pace since 1984.
“The next chart is prime-age workers re-entering the labor force, and again, if you look at the trend, one of the things people said when we put out our growth forecast that said that we'd have 3 percent growth was we said that President Trump's policies are going to bring factories back to the U.S., give you the capital spending boom that you saw in the previous chart, and that was going to bring people back into the labor force at precisely the right time,” Hassett said.
“Once again, you can see that there's clear break in the trend, and so, if you see a break in the trend in the capital spending, the new plant formation that gives blue-collar workers their jobs ... then maybe we see a break in the trend in blue-collar workers employment as well, and so this is employment for people in goods-producing industries,” he said.
“If you look, again, at the blue part on the left, you can see that there's a clear downward trend going on in the growth rate of that for President Obama, and then a clear inflection timed almost precisely, once again, at the election. And the notion, again, that somebody might defensively attempt to assert that this is a continuation of the trend is almost laughable if you look at this chart and, you know, look at the rest of them,” Hassett said.
His final chart showed that the growth of private nonresidential fixed investment Is well above projections. It illustrated what the Congressional Budget Office predicted would happen with capital spending back in 2017, what the CBO said in April 2018, and then what actually happened.
“And so, I would assert that if you look at the collective body of evidence, the notion that what we're seeing right now is just a continuation of recent trends is not super defensible,” Hassett said.
“And I think that -- I know that we're in a political time and passions are high, but, as geeky economists, one of the things we have to do is think ahead to what historians will think when they look back at this time,” he said.
“And I can promise you that economic historians will 100 percent accept the fact that there was an inflection at the election of Donald Trump, and that a whole bunch of data items started heading north. They will, of course, argue for a long time about why that happened,” Hassett said.
“In fact, we provided estimates at the time last fall that said that capital spending this year would go up about 11 percent because of the tax cuts. So far, in the first half of the year, capital spending is up 10 percent, and so you don't have to really reach far for a theory of what happened,” he said.
“President Trump deregulated the economy; we've talked about how that affects growth. The tax cuts have had exactly the predicted effect on the economy that's brought businesses back to the U.S., factories back to the U.S., and created jobs for ordinary Americans. It’s clear in the data that there's been a trend break,” Hassett added.
In a speech on the state of the American economy delivered Friday at the University of Illinois at Urbana-Champaign, Obama claimed credit for the current economic recovery.
“And by the time I left office, household income was near its all-time high and the uninsured rate had hit an all-time low and wages were rising and poverty rates were falling. I mention all this just so when you hear how great the economy's doing right now, let's just remember when this recovery started,” the former president said.
“I mean, I'm glad it's continued, but when you hear about this economic miracle that's been going on, when the job numbers come out, monthly job numbers, suddenly Republicans are saying it's a miracle. I have to kind of remind them, actually, those job numbers are the same as they were in 2015 and 2016,” Obama said.