Fact-checking Donald Trump’s first presidential address to Congress

Highlights from Donald Trump’s first speech to Congress.

Jobs, taxes and business

“Since my election, Ford, Fiat Chrysler, General Motors, Sprint, Softbank, Lockheed, Wal Mart, and many others have announced they will invest billions and billions of dollars in the United States and will create tens of thousands of new American jobs.”

Some of these corporations announced jobs and investment before the election, though Ford credited the president with its decision to create 700 jobs and make a $700m investment in Michigan. General Motors had committed $2.9bn and Walmart announced an expansion before any votes were cast, on the other hand, and several companies, including Chrysler, had previously agreed to create jobs.

“Ninety-four million Americans are out of the labor force.”

This is a grossly exaggerated claim that seems to rely on the roughly 94 million civilians who are 16 or older and not in the labor force: a figure that includes retired people, high school and college students, people with a disability, etc. The unemployment rate in January was 4.8%, or about 7.5 million people who are looking for work but can’t find it.

“Over 43 million people are now living in poverty, and over 43 million Americans are on food stamps.”

Trump is correct that about 43 million Americans are classified as living in poverty, according to the Census Bureau, after a small decline last year. He is also correct about 43 million people using food stamps, according to the Supplemental Nutrition Assistance Program. That number reached as high as 47.6 million people in 2013, during the slow recovery.

“We will create massive tax relief for the middle class.”

Trump’s tax plan cuts taxes for all Americans but, by a wide margin, disproportionately helps the wealthiest Americans. According to a conservative thinktank, the Tax Foundation, his plan would save wealthy Americans millions of dollars and add $5.3tn to the national debt. Half of Trump’s tax cuts would go to the top 1% of earners, the thinktank estimates, and most families below the top 20% of earners would have income gains of less than 1%.

“We’ve lost more than one-fourth of our manufacturing jobs since Nafta was approved, and we’ve lost 60,000 factories since China joined the World Trade Organization in 2001.”

According to a study by Ball State University’s Center for Business and Economic Research, slightly more than 10% of the manufacturing jobs lost since the 1970s were due to trade deals such as Nafta. The study estimated that 88% of factory jobs lost since the 1970s were eliminated by automation.

Economists still debate the effect of Nafta on jobs. In 2015, the Congressional Research Service wrote that the “net overall effect” was “relatively modest”. “Nafta did not cause the huge job losses feared by the critics or the large economic gains predicted by supporters.” A 2012 report by the OECD found that manufacturing jobs did flee the US after the deal was signed, but also noted the broader shift toward a service economy.

Trump is correct that China has benefited from trade deals, such as the “most favored nation” status that Bill Clinton renewed for the country. But it too has started to feel the changes of robots replacing humans in the workforce.

“Right now, American companies are taxed at one of the highest rates anywhere in the world.”

The US is not even in the top 30 highest-taxed nations in the world, according to the Organization for Economic Cooperation and Development. The OECD’s most recent data ranks the US 31st of 34 industrialized nations for tax revenue as a percentage of GDP – far behind Denmark, Britain, Germany and Luxembourg. The US ranks 17th for corporate tax revenue, and 19th for tax revenue per capita.

“We have the worst financial recovery in 65 years.”

This claim is true only because the 2008 financial crisis was the worst economic collapse in American history except for the Great Depression, when people starved to death and moved constantly in search of work. In 1933 25% of all workers and 37% of all non-farm workers were out of work. After the 2008 financial crisis, the US lost 8.7m jobs – in October 2010, unemployment reached a peak of 10%. The recession itself lasted 18 months, officially.

“In the last eight years, the past Administration has put on more new debt than nearly all other Presidents combined.”

Trump mostly has this right, except that he ignores key context: Barack Obama inherited the Oval Office while the economy was in freefall, and after his predecessor had signed a huge stimulus bill. Obama continued the recovery efforts of George W Bush, with Republican support from Congress, which ultimately controls the purse strings of government.

“Our trade deficit in goods with the world last year was nearly $800bn.”

Trump has it almost correct that the trade deficit in goods alone neared $800bn; but he ignores the surplus in services, which reduces the deficit to about $502.3 bn, according to the Census Bureau. Economists say investment, something that Trump has welcomed, also contributes to a larger deficit.

Healthcare

“Obamacare is collapsing.”

The Affordable Care Act’s healthcare program does have problems, but it is not “collapsing” or in the much warned “death spiral” in which rising costs push healthy people out of the market, ever increasing fees and then pushing companies out as well. But healthcare premiums are increasing at varying rates around the country, on average by 22%, making an unstable market state-to-state. Rates were increasing before the law was enacted, however, and about 30 million people are enrolled in the program.

Immigration

“By finally enforcing our immigration laws, we will raise wages, help the unemployed, save billions of dollars, and make our communities safer for everyone.”

The economic benefit of Trump’s immigration plans is uncertain. The disappearance of undocumented workers could push Americans into agriculture and construction jobs over the long term, for instance, but it could also sow chaos in those industries in the short term. A fair amount of research suggests that immigration is good for the economy, and some US industries rely heavily on employees with visas (such as tech) or undocumented workers (such as agriculture).

If enacted, Trump’s plans would have also cost taxpayers billions. Trump’s promised wall would cost Americans about $21.6bn – Mexico has flatly refused to pay for it; aggressive deportation plans could cost billions more, especially if Trump greatly expands the number of federal border agents and the number of private prison contractors.

“We’ve defended the borders of other nations while leaving our own border wide open for anyone to cross and for drugs to pour in and at a now unprecedented rate.”

The US’s borders are not “wide open for anyone to cross”, with sections of wall and fencing along the southern border, 21,000 Customs and Border Patrol agents, and a recent history of aggressive deportation. Barack Obama has deported a record more than 2.5 million people, including a record 438,421 people in 2013. The US also has extremely strict vetting for visa applicants and refugees, forcing people to go through multiple rounds of interviews, background checks and medical screenings.

“Where proper vetting cannot occur … we cannot allow a beachhead of terrorism to establish itself in America.”

Trump’s suggestion that the US’s vetting methods cannot account for the systems of countries abroad has flipped the procedure of vetting on its head. The system, among the most intensive screening process in the world for refugees, relies on US agencies to vet applicants, and not those of countries abroad. Refugees must pass multiple background checks and interviews with several agencies, as well as medical checks, fingerprint and photo screenings. The process takes 18-24 months.

Foreign policy

“We’ve spent trillions and trillions of dollars overseas while our infrastructure at home has so badly crumbled.”
“America has spent approximately $6tn in the Middle East, all this while our infrastructure at home is crumbling. With this $6tn we could have rebuilt our country – twice.”

Trump does not specify what spending he’s referring to – though the wars in Afghanistan and Iraq have cost an estimated $4.79tn, according to a study by Brown University researchers.

Trump is correct that US infrastructure, in general, is in dire need of repair and reconstruction. In 2013, the American Society of Civil Engineers reported that the government needs to spend roughly $1.4 tn over the next decade, or $3.6tn by 2020, to overcome the shortfall in infrastructure funding.

Trump’s claim of $6tn is misleading: it includes estimates of future spending, including veterans care for decades in the future.

Crime

“Jamiel’s 17-year-old son was viciously murdered by an illegal immigrant gang member, who had just been released from prison.”

Trump’s anecdote suggests a link between immigrants and crime, but anecdotes about individuals do not paint an accurate picture of about 11 million people, most of whom are not violent offenders or aggravated felons.

On the contrary, presidential commissions and recent academic research has in general found no links between immigrants and crime or lower rates of crime correlated to cities with more immigrants compared to those with fewer immigrants.

“The murder rate in 2015 experienced its largest single-year increase in nearly half a century. In Chicago, more than 4,000 people were shot last year alone — and the murder rate so far this year has been even higher.”

Trump has accurately stated a statistic he often distorts. Last September, the FBI reported that murders and non-negligent manslaughter rose in the US by 10.8% in 2015, the largest single-year increase since 1971. That is not the same as saying there are more murders in the US than at any point since 1971: 15,696 murders were reported in 2015, down from 1991 high of 24,703. The murder rate declined 42% from 1993 to 2014, even though the population increased by a quarter.

Trump correctly cites Chicago’s number of shooting victims; the city has suffered a significant increase in gun violence in the last two years, though it has yet to reach the highs of the mid-1990s. This year has started even more violently than 2016 did, with at least 513 people shot so far in 2017. But fewer people have been killed compared with the same period in 2016, according to the Chicago Tribune, and police do not trust a few months’ worth of data to estimate a trend.

Also worth reading: An annotated guide to Trump’s first address to Congress.
Source for this fact-checking post: The Guardian newspaper article.

How Donald Trump is changing the rules for American business

trumpbusinessamerica

HIS inauguration is still six weeks away but Donald Trump has already sent shock waves through American business. Chief executives—and their companies’ shareholders—are giddy at the president-elect’s promises to slash burdensome regulation, cut taxes and boost the economy with infrastructure spending. Blue-collar workers are cock-a-hoop at his willingness to bully firms into saving their jobs.

In the past few weeks, Mr Trump has lambasted Apple for not producing more bits of its iPhone in America; harangued Ford about plans to move production of its Lincoln sports-utility vehicles; and lashed out at Boeing, not long after the firm’s chief executive had mused publicly about the risks of a protectionist trade policy. Most dramatically, Mr Trump bribed and cajoled Carrier, a maker of air-conditioning units in Indiana, to change its plans and keep 800 jobs in the state rather than move them to Mexico. One poll suggests that six out of ten Americans view Mr Trump more favourably after the Carrier deal. This muscularity is proving popular.

Popular but problematic. The emerging Trump strategy towards business has some promising elements, but others that are deeply worrying. The promise lies in Mr Trump’s enthusiasm for corporate-tax reform, his embrace of infrastructure investment and in some parts of his deregulatory agenda. The dangers stem, first, from the muddled mercantilism that lies behind his attitude to business, and, second, in the tactics—buying off and attacking individual companies—that he uses to achieve his goals. American capitalism has flourished thanks to the predictable application of rules. If, at the margin, that rules-based system is superseded by an ad hoc approach in which businessmen must take heed and pay homage to the whim of King Donald, the long-term damage to America’s economy will be grave.

Read the complete article on The Economist.

 

U.S. political debate stuck in the past.

Excerpts from an article by Chrystia Freeland in the Globe & Mail.

In choosing Paul Ryan as his running mate, Republican presidential contender Mitt Romney swapped his Massachusetts pragmatism for a proudly ideological commitment to limited government. The Democrats, by contrast, believe in the essential role government plays, and are willing to raise taxes, at least on the rich, to pay for it.

Thanks to smart machines and global trade, the well-paying, middle-class jobs that were the backbone of Western democracies are vanishing. The paradoxical driver of this middle-class squeeze is not some villainous force – it is, rather, the success of the world’s best companies, many of them American.

It took more than the spinning jenny or the steam engine to transform local, agrarian, family-based communities into national, urban, individualistic ones. New political and social institutions will be needed to midwife the latest shift into global and virtual communities. Inventing those institutions is difficult, and talking about them can be frightening, but that is the political conversation the Western world should be having.

Read the full article here.

Tax comparisons; rate, number of payments, hours needed to comply

The Globe and Mail “Report On Business” magazine for this month is sitting on my desk. I love this magazine, not only for the articles but also for its style.

One item that caught my eye was a very well designed graph on page 11, under the title “The taxman cometh”, which outlines annual corporate tax rates in different countries, total number of tax payments, and the hours required to comply.

“Taxes may be inevitable, but they’re certainly not all created equal. A recent study by KPMG compared annual corporate tax rates for several countries. It didn’t take into account any tax credits or other loopholes a company may use (GE, for example, didn’t pay any taxes to Uncle Sam last year). Another study looked at the total time it takes businesses to satisfy the taxman. The amount of aggravation, however, is incalculable. ” Steve Brearton.

Tax comparison article from the gloveadvisor.com.

Other KPMG articles, all 768 as of today.