GDP Growth under Trump - Average Results at a Cost

Donald Trump raves about the strong economy he created - so lets look at how it performed under his presidency compared with Obama's.  To be fair, data for 2020 isn't included since even the first quarter's performance was impacted by the pandemic.  So lets use data for 2014 thru 2019.  That's the last three year's of Obama's presidency and the first three of Trumps (ok, a few weeks in 2016 were Obama's, but that should be close enough).

The data we'll look at is non-seasonally adjusted GDP for a given quarter compared with the same quarter the previous year.  For more info on this measure and why I like it, scroll to the bottom of this post and read "Data Technical Details".

So here is the chart:

For each president's 3 years, there are ups and downs.  But their average performance was pretty similar!  So any boasting of one having done better than the other appears unfounded.

But - and here is a big but, under Trump during this period, the budget deficit surged relative to when he took office.  It's like looking at a neighbor who takes lavish trips, buys expensive cars, and thinking wow, that person is doing great providing for their family.  But if all that spending was accomplished by digging into a personal credit line, then you'd think well maybe, they're actually not doing such a great job.  It's the same with the economy.  

So let's see what happens if we try something rather unorthodox in economic circles - let's adjust the GDP growth number by the budget deficit (see "Data Technical Details" for more details).  

Here is the chart for this "Adjusted GDP  Data":

Again, there are ups and downs under each president.  But on average, the adjusted GDP growth was notably better under Obama than under Trump.  The adjusted growth under Obama early on was higher than the "actual" because the GDP growth as typically measured was accompanied by a reduction in the budget deficit.  The growing deficit under Trump started bringing down adjusted GDP growth during 2018.  

The adjusted GDP growth under Obama was falling towards the end of his term.  One reason for this was an increase in the budget deficit later in Obama's term.  But a significant cause of this deficit growth was due to Republican pressure to pass spending and taxing measures that were not fiscally prudent. 

While it is very easy to get lost in the nuances of the analysis, this is certain.  

The economy, with respect to GDP growth, did not perform better under Trump compared with Obama. 

In fact, one can argue that according to this analysis,it really performed better under Obama than Trump.  And of course, we're not considering the toll of Trump's rollback of emission regulations and worker's rights.  

Data Technical Details

The most commonly used measure of GDP change uses seasonally adjusted data comparing changes from one quarter to the next.  But then it annualizes the data.  This can amplify a small change in economic output in an unrealistic way.  So if output falls in in a quarter by two percent, that gets reported as an eight percent decline on an annualized basis.  But there can be a lot of error in measurement and seasonal adjustments make it worse.  So that's why I like using seasonally unadjusted quarterly data compared with the same quarter the year before.  Of course, the data used is in "real" dollars so inflation doesn't factor in.

Presenting GDP data adjusted for the deficit is rather uncommon.  I found only one other use of this technique (on the Seeking Alpha website).  To make the adjustment, I found data for the deficit as a percentage of GDP for a given year on the U.S. Bureau of Economic Analysis website.  Then I reduced GDP for each quarter of a year by that year's deficit to GDP percentage.  

I think there are theoretical weaknesses to this approach due to timing and the perennial question of "do deficits matter".  But as a tool for comparison, I think it could be argued that using the "adjusted GDP" growth number adds valuable information and is at its worst, at list somewhat better than it's unadjusted counterpart.