The “Great” Pre-Pandemic Economy Was Revised Downard

Written by SK Ashby

The Commerce Department's latest report showed that our economy contracted at an annualized rate of almost 33 percent during the second quarter of 2020, but today's report also covered economic growth in 2019.

The economy was not as strong as previously estimated in the second half of 2019 and in the months leading up to the coronavirus pandemic. The Commerce Department's revision shows the economy grew by 2.2 percent in 2019, down from 2.3 percent.

The downgrade has been attributed to weak consumer spending and, moreover, the underlying data tells us that Trump's global trade war was both making matters worse and partially masking the problem.

The Commerce Department said on Thursday gross domestic product increased 2.2% last year, revised down from the previously estimated 2.3% and also reflective of consumer spending that had begun to show signs of fatigue heading into 2020. The 2019 growth rate was the slowest expansion since 2016.

The revision to 2019 growth came as GDP in the second quarter of that year was significantly cut, reflecting downgrades to consumer spending and business investment in equipment. Though growth in the second half was much stronger than previously reported, it was mostly driven by a shrinking import bill.

Growth in consumer spending was marked down through the last six months of 2019, indicating a loss of underlying economic strength even before the COVID-19 pandemic hit the United States' shores and tanked the economy in the first quarter of this year. The economy fell into recession in February.

In other words, Trump's trade war led to a drop in consumer spending and business investment while, at the same time, the drop in imports made our balance sheets look better than they actually were as prices increased on essential good that people generally can't go without.

Trump has claimed and will continue to claim even after he's gone that the economy was "great again" before the coronavirus pandemic, but it wasn't. And even the momentary high points of the economy under Trump can be attributed to his machinations.

Republicans said the economy would grow by 4 percent or more on a permanent basis because of their tax cuts, but it didn't. We saw one quarter of 4 percent growth in 2018, but that only happened because businesses rushed to import and export as much as they possibly could in the months before Trump first imposed tariffs on a wide range of Chinese goods worth more than $200 billion per year.

But none of that ever trickled down to people who actually make our economy run. The tax cuts were transformed into stock buybacks and dividend payments. The trade war led to layoffs. The people who actually make up our economy -- the "essential workers" who we sacrificed in the pandemic -- never saw fruit from Trump's policies but many have paid a high price for it. Some have paid the ultimate price while the rest of us will be stuck with the bill for a generation to come.