CARBONDALE — The economy has been on a upswing.
That fact can’t be disputed, but what can be disputed is whether or not President Donald Trump is the cause of the nation’s good financial fortunes or if his administration has so far been at the right place at the right time.
Kevin Sylwester, a Southern Illinois University Carbondale professor in the economics department, said it depends on what side of the filter a person is looking at it. He said those who support the president will point to 2.1 million jobs created and an unemployment rate that went from 4.9 percent at the beginning of Trump’s term to about 4.1 percent currently.
“Most people didn’t predict that was going to happen,” he said.
On the other side of the coin, Sylwester said those who aren’t supportive of Trump will say 2.1 million jobs were created under Trump, but 2.2 million jobs were created in 2016. Additionally, employment is lower today than it was at the beginning of 2017, but the same could be said at the end of 2016 than at the beginning, he said.
The fact is the country has seen two straight quarters of more than 3 percent gross domestic product growth, Sylwester said. GDP is the total value of everything produced by all the people and companies in the country. It doesn't matter if they are citizens or foreign-owned companies. If they are located within the country, the government counts their production as GDP.
Since the Great Recession, the country has seen two consecutive quarters of 3 percent GDP growth but never three, he said. “Even though the fourth-quarter numbers are not out yet — that won’t be out until February — but they look good.”
Sylwester said those in favor of the president might cite factors such as the rollback of several regulations to businesses, creating less hoops to jump through.
“You might say that if it wasn’t the regulations themselves hampering the economy, businesses were always scared of more regulations coming down the road,” he said. “And it's that uncertainty that prevents businesses from expanding.”
“One thing that President Trump did was roll back some of these regulations and make it harder for new regulations to come into effect. A Trump supporter would say that is taking the shackles off the businesses.”
Sylwester said the alternative theory to GDP growth is that the economy was already improving before Trump entered the White House. He said those opposing Trump could say that even though the recovery after the Great Recession ended was disappointing, and people were expecting a more robust recovery, perhaps it was just delayed. Trump didn’t cause it, but could be benefiting from it now.
Sylwester said what economists would love to be able to do, to study the effects of any economic policy, is to go back in time and somehow prevent the policy from going into effect and see what the outcome would be.
“But we can’t do that,” he said. “The key question is what would the economy look like today if Hillary Clinton was president? We will never know.”
He said that is what makes it difficult to determine the president’s impact on the economy — the data on whether or not somebody else could do it better under the exact conditions is unavailable.
“Fairly or unfairly, presidents get too much blame or credit for what is happening in the economy. In terms of correlation, when the economy is good, presidents will get credit for it and when the economy is bad, presidents will get blamed,” Sylwester said. “It is hard to imagine the economy doing better than it has done.”
He said many economists would argue that the Federal Reserve is more important in terms of guiding the economy than the president and Congress, because it can more actively engage in policy.
According to the U.S. Department of Labor, the Southern Illinois unemployment rate jumped up and down over the past two years. In January 2016, the rate was at 6.8 percent and continued to decline to 5.9 percent until July, where it remained stagnant for a month and then dropped to 5.2 percent in November. In January 2017, the month of Trump’s inauguration, unemployment stood at 7.1 percent in Southern Illinois and dropped to 4.3 percent in April, according to labor statistics. There was a slight uptick in June to 5.2 percent, and then they fell again to 4.3 percent in September. The most recent numbers available through the Department of Labor are preliminary November numbers, which show the unemployment rate at 4.5 percent in Southern Illinois.
Leon McClerren, Frankin County president of the Illinois Farm Bureau, told The Southern Illinoisan that production has been increasing, but overseas sales are down from what they once were.
He said he didn't think just one thing is contributing to the issue and trading should be addressed.
“I think we are still up in the air. I think (the North American Free Trade Agreement) being renegotiated and possibly being let go, that’s a concern for farmers, of course,” McClerren said in an interview this past week.
As for the strides made in the stock market, David O. England, a financial expert, said all the top eight global economies in the world are up since Nov. 9, 2016.
“They said the market would be in economic shambles and be in a bear market, but that did not happen,” England said. “After the election, buying came into that market from all over the world. A large part of that had to do with value of the U.S. dollar dropping, which meant it was a better buy internationally to bring your money into the United States.”
He said the most recent corporate tax bill passed in December is a large part of why the stock market is still doing well.
“We are getting money that is held overseas brought back into the U.S. to be put to work,” England said. “The jury is still out to see what is going to be the true effect of that. We are having lower tax rates so many companies as of Jan. 4 are giving bonuses or increased wages back to their employees.”
So, in England’s mind, the economy is doing better at the current state, but will it continue?
“That’s the $64 million question,” he said. “The big gamble is that the increased business that will be generated … will more than surpass and raise more revenues in taxes than what they are losing by dropping the tax rates. It’ll take a while for that jury to be out.”