Following up

Takes me a long time to write even a short post for the blog. This means that, if there is a graph, I get to spend a lot of time looking at it and thinking about it. Sometimes that leads to a follow-up post.

 

This is Fernando Martin's graph that I was talking about yesterday, showing 10-year averages of annual growth rates:

From Why Does Economic Growth Keep Slowing Down? by Fernando Martin

It ends at 2016. (It comes from a post from February 2017.)

This is my graph from yesterday, a smaller version of it:

My graph, modeled on Fernando's. I show data thru 2024 Q3.

The big difference between the two graphs is that mine is newer, so it shows data after 2016.

If we focus on those added years, we see an absolutely incredible upswing in the economy's performance during the Trump years, the 2017-2020 period. Maybe Trump's people were looking at a graph like this when they wrote:

Before the Coronavirus spread from China across the globe, President Trump helped America build its strongest economy in history.

in a trumpwhitehouse.archives.gov site titled "Economy & Jobs - The White House".

My graph shows the 10-year rate of growth falling from around 3.4 percent in 2005 to around 1.8 percent in 2010, to around 1.5 percent in 2016. Then comes the turn-around: from around 1.6 percent growth in 2017 to 2.1 in 2018, to 2.5 percent in 2019. A really remarkable and long-delayed recovery.

However, the dates are end-dates of 10-year periods. The growth shown at 2005, for example, is not the growth for 2005. It is the growth for the whole 10-year period ending at 2005, the 1995-2005 period.

It took five years for the growth rate to fall from 2.4 percent (2005) to 1.8 percent (2010) -- and not lower than 1.8 percent in 2010 despite annual readings of -2.5 percent in 2008 and -4 percent in 2009 -- because the data plotted at 2010 is an average (or a CAGR) of all the growth between 2000 and 2010. Not every year in that decade was a financial crisis year.

The rapid downtrend shown on the graph between 2005 and 2010 is the result of the high-growth years from 1995 to 2000 gradually dropping out of the calculation, one year at a time.

Likewise, the incredible upswing of 2017-2019 was the direct result of data for the bad years 2007, 2008, and 2009 dropping out of the calculation. When you add up ten numbers and take the average, and then take the lowest numbers out of the calculation, the average goes up. And when you add in the new data, now a decade after the financial crisis of 2008 and with things a little better, that new data is bound to push the average up even more -- not because it was the strongest economy in history, but because anything even close to 2 percent growth would have been enough to push the average up.

And that's what won the 2024 election for Donald Trump.

One more thing: If I change the period length from 10 years to 14 years, then we don't get the "strongest economy in history" until the Biden years!