Proof that President Donald Trump did not inherit booming economy

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 that 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 in most cases by the way the estimates of the trends that we present to you here are very statistically significant as are the deviations from the trend and so not going to as I always do show you a few slides can I have the next slide please that's the first slide again there we go so the first slide that we're looking at is small business optimism and this is basically for parallel construction you're going to see that each of the slides we go through is going to look a lot like this and so the blue part to the left of the slide is what happened from the 2012 election through the 2016 election and the dotted blue line is the trend that President Trump inherited from the previous president and the red line is what actually happened with the data and so I think that if you look at this chart you could see that the first thing is small business optimism the middle chart is the percent reporting now is 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 geez that doesn't really look like the continuation of a recent trend gonna have the next slide please the next chart is something that in my first pressing here wait way back last fall we talked a lot about its business investment which is more than three hundred billion dollars over the trend again if you look at the blue line on the left the first chart is non-residential fixed investment and the dotted line is the trend and the growth rate of that that President Trump inherited for the middle chart is structures or buildings and that as you can see the dotted line is something that's headed straight down and then the final chart is equipment investment and that went straight down before President Trump was elected 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 the president Trump inherited then well you know they wouldn't get a high grade in graduate school for that assertion the next chart please 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 the good paying jobs the jobs that effects normal Americans blue-collar Americans 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 just simply be factually incorrect the next slide please here we're looking at the is M purchasing managers index which is a survey of people who are purchasing managers for manufacturing firms and so they're the folks that you know as the title suggests manage the purchases and and so it's a really great indicator of the economy because you could survey them and say hey have you been buying lots of stuff this month or have you not and the index shows what their responses look like and you could see that the trend on the purchasing managers index was pretty much flat when President Trump took office and the red line shows you what happened since that it's there's a clear inflection right at the election and a clear break let's turn to the next one peace 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 tax ID number for your business and so in this chart we've plotted the ein applications for new businesses if you look at the blue line they were handing up heading up because we were in a recovery but there's a clear upward trajectory way above the trend at the end and you know Sarah light like like John Roberts is a calculus geek and so she looked at that one and said geez that looks like a very strong second derivative to me and then I said I didn't know you did calculus and she said I like calculus better than talking to these guys the next check 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 three percent growth as we said that president Trump's policies are gonna bring factories back to the US 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 once again you can see that there's a clear break of the trend and so if you see a break of the trend in the capital spending the new plant formation that gives blue-collar workers their jobs they go to the next slide please then maybe we see a break of the trend and blue-collar workers employment as well and so this is employment for people in goods producing industries if you look again at the blue part on the left you could see that there's a clear downward trend going on in the growth rate of that for President Obama and then a clear inflection time to almost precisely once again at the election and the notion again that some what he might defensively attempt to assert that this is a continuation of a trend is almost laughable if you look at this chart and look at the rest of them now somebody might say if you're showing a bunch of charts well geez maybe it depends on when you estimate the trend and I'm sure that if you went back and began your estimate the trend at the Civil War and then thought about well what's render we get then well then maybe we're not you know you get a different answer from what we see but another way to sort of test whether the data that I just showed you is a fair representation of what a trend looked like when President Tripp was elected is just to compare it to nonpartisan bodies were saying so I could I'd look at my final chart here I know when I said gosh I heard the sigh of relief when I said final charity so so so if you look at the final chart you'll see that the black line is in tune of 2017 what the CBO Congressional Budget Office a nonpartisan agency that has a job really of looking at recent trends and projecting it what they said would happen to capital spending back in 2017 the blue line is what they said in April 2018 and the red line is what's actually happened and so I would assert that if you look at the the collective body of evidence the notion that what we're seeing right now is just a continuation of recent trends it's not super defensible and I think that I know that that we're in a political time and passions are high but as geeky economist one of the things we have to do is think ahead to you know what historians will think when they look back at this time and I can promise you that economic historians will 100% accept the fact that there was an inflection at the election of Donald Trump and that a whole bunch of data items started headed north they will of course argue for a long time about why that happened but my final final thought for you is just this that when they do that and when you watch people do that in the media going forward with op-eds and so on that you should watch out for ex-post theorizing as an economist one of the things I most care about is an ex ante theory something that happens before and then let's watch the data and then see if it agrees with a theory that's how you test a theory you might recall that I came back here last fall and I told you that if we had the tax cuts the president Trump advised that week that we have that he pursued if we pass them then there'd be a boom in capital spending this year in fact we provided estimates at the time last fall this said the 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% and so you don't have to really reach far for a theory of what half of 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 US factories back to the US and created jobs for ordinary Americans it's clear the data that there's been a trend break