President Trump won the White House talking about the ills of the economy and how he would fix them. But to fix what’s broken, first you need to measure where things stand. So far, it appears that the Trump administration is manipulating official data to paint the picture it wants, rather than the way things actually are.
All presidents release their own economic growth forecasts as part of the budget process. That process is currently underway in the Trump administration, and the forecasts are expected to be released in the coming weeks.
Many presidents seek to make the numbers look as positive as possible. But according to sources who spoke with the Wall Street Journal and the Washington Post, the Trump administration is going much further. It told White House economic advisers to start with a GDP growth target of between 3 and 3.5 percent a year for the next decade and then backfill numbers in their models to make that prediction work.
What usually happens is quite different. Most presidential teams start with a baseline forecast and then calculate how their policies would either increase or decrease the growth rate. Trump is instead starting with the outcome he wants, and then having officials make the numbers work to get the economy there.
When other administrations have come up with rosier pictures than the baseline estimates, it has usually been by a difference of a fraction of a percentage point. But the Trump team is calling for 3–3.5 percent annual GDP growth. That’s at least a whole percentage point above the consensus projection. The economy has grown about 2 percent a year, on average, for the last decade, and the Federal Reserve and Congressional Budget Office both forecast growth of under 2 percent over the long term.
One person the Journal spoke to who had participated in past budget processes said he had never seen a request to make such aggressive assumptions about growth.
The economy’s rate of growth is not the only place where the Trump team is reportedly thinking of fudging the numbers. The Journal also reports that the administration has asked career economists to make a change in the way the trade deficit is calculated. The new method means no longer counting as exports anything that’s imported to the country and then sold to another country. For example, a car that was sold to a company in the U.S. from Mexico and then re-sold by that company to one in Canada would only be counted as an import and not as an export when it left, thus inflating the overall trade deficit.
Artificially boosting the trade deficit would play into Trump’s hands, giving him more firepower when railing against trade deals or calling for border taxes. Trump has frequently brought up the trade deficit, arguing it’s a sign that the country is losing to everyone else, although he often gets the number wrong. He likes to cite a $800 billion deficit, but with both goods and services taken into account, it’s more like $500 billion.
Trump’s fickle relationship with official government data has been clear before. He’s called the unemployment rate published by the Bureau of Labor Statistics “one of the biggest hoaxes in American modern politics” and argued that the real rate is 42 percent (the BLS says it is currently below five percent). Yet while there are a number of ways to measure the labor market, to get to 42 percent economists would have to include everyone who doesn’t have a job, which includes retirees, college students, and stay-at-home-parents.