Donald Trump Flat Out Lied About the Economy In His State of the Union

Robert E. Scott February 5, 2020

In his SOTU, Trump said the economy is booming. The facts don’t back him up. (Photo by Yasin Ozturk/Anadolu Agency via Getty Images)

In his State of the Union address Tues­day night, Pres­i­dent Trump extolled the blue-col­lar boom” in the econ­o­my along with his pur­port­ed great Amer­i­can come­back.” He made this claim based in part on two recent sig­na­ture trade deals — the Unit­ed States-Mex­i­co-Cana­da Agree­ment (USM­CA) and a phase one” deal with Chi­na. Unfor­tu­nate­ly, both agree­ments will like­ly to lead to more out­sourc­ing and job loss for U.S. work­ers, and the facts just don’t sup­port Trump’s claims about the broad­er economy.

Trump comes from a world that has ardent­ly cham­pi­oned glob­al­iza­tion, like many of his pre­de­ces­sors. How­ev­er, that approach has dec­i­mat­ed U.S. man­u­fac­tur­ing over the past 20 years, elim­i­nat­ing near­ly 5 mil­lion good fac­to­ry jobs as shown in Fig­ure A, below. Near­ly 90,000 U.S. fac­to­ries have been lost as well.

Trump has not brought these jobs back, nor will his present poli­cies change the sta­tus quo. Glob­al­iza­tion, and Chi­na trade in par­tic­u­lar, have also hurt count­less com­mu­ni­ties through­out the coun­try, espe­cial­ly in the upper Mid­west, mid-Atlantic, and North­east regions. The nation has lost a gen­er­a­tion of skilled man­u­fac­tur­ing work­ers, many of whom have dropped out of the labor force and nev­er returned. All of this glob­al­ized trade has reduced the wages of rough­ly 100 mil­lion Amer­i­cans, all non-col­lege edu­cat­ed work­ers, by rough­ly $2,000 per year.

In addi­tion, more than half of the U.S. man­u­fac­tur­ing jobs lost in the past two decades were due to the grow­ing trade deficit with Chi­na, which elim­i­nat­ed 3.7 mil­lion U.S. jobs, includ­ing 2.8 mil­lion man­u­fac­tur­ing jobs, between 2001 and 2018. In fact, the Unit­ed States lost 700,000 jobs to Chi­na in the first two years of the Trump admin­is­tra­tion, as shown in our recent report. The phase one trade deal will not bring those jobs back, either.

In the State of the Union, Trump claimed that he’s cre­at­ed a great Amer­i­can come­back” and gen­er­at­ed a blue-col­lar boom” with strong wage gains for low­er-income work­ers. As shown in Fig­ure B, below, glob­al­iza­tion has gen­er­at­ed huge wage gains for those in the top 20% and espe­cial­ly those in the top 10%, top 1%, and top 0.1% of the income dis­tri­b­u­tion. Aver­age wages for the top 20% increased $15 per hour (33.4%) over the past two decades. Wage gains for the bot­tom 80% ranged from $1.39 to $2.46 per hour (13.5% to 16.4%).

Don­ald Trump has failed to reverse these trends, and in many ways, has made them worse. In the past three years, the vast major­i­ty of wage gains have gone to work­ers in the top 20%, con­tin­u­ing the inequal­i­ty that has been well-estab­lished in the era of glob­al­iza­tion as shown in Fig­ure C, below. Over the past three years, work­ers in the top 20% enjoyed aver­age real wage gains of $2.61 per hour, five times the gains of work­ers in the bot­tom quin­tile and near­ly 3.5 times the gains enjoyed in the mid­dle 60%.

Wage gains were sig­nif­i­cant­ly larg­er for work­ers in the bot­tom 20% than they were for mid­dle-class work­ers, due large­ly to mea­sures such as high­er min­i­mum wages that took effect in 13 states and the Dis­trict of Colum­bia in 2018 and 19 states in Jan­u­ary 2019. These are poli­cies that were imple­ment­ed by state leg­is­la­tures and local gov­ern­ments around the coun­try to help off­set the effects of a decline in the real val­ue of the fed­er­al min­i­mum wage. They also helped off­set the neg­a­tive effects of dozens of efforts by the Trump Labor Depart­ment to weak­en labor stan­dards, attack work­er rights, and roll back wages.

Glob­al­iza­tion has reduced wages for work­ing Amer­i­cans by putting non-col­lege edu­cat­ed work­ers into a com­pet­i­tive race to the bot­tom in wages, ben­e­fits, and work­ing con­di­tions with low-wage work­ers in Mex­i­co, Chi­na, and oth­er low-pay, rapid­ly indus­tri­al­iz­ing coun­tries. The Trump administration’s two trade deals don’t change that real­i­ty. Work­ers count­ing on Trump to deliv­er a great Amer­i­can come­back” have been left wait­ing at the station.

This piece was first pub­lished at the Eco­nom­ic Pol­i­cy Insti­tute.

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