Why the US economy isn't quite the weakling Trump says it is

The United States isn't exactly the economic doormat Donald Trump decries in his campaign rhetoric.

"Our country is in deep trouble," Trump said in Monday night's debate with Hillary Clinton.

"We are in a competition with the world, and I want America to win," he said in a speech last month. "We don't win anymore."

The U.S. economy does face serious challenges: An aging workforce, low worker productivity, still-sluggish growth, stagnant pay and a steady loss of good-paying manufacturing jobs — a loss that's brought pain to many American communities.

But the facts don't bear out Trump's assertion that the United States has become a global weakling, an economic pushover exploited by its competitors. Whether measured by its pace of expansion, job gains, financial might, global competitiveness or sheer size, the U.S. economy remains the envy of much of the developed world.

"Over the past 10 years, the U.S. has done better than pretty much any other advanced country, certainly the European competitors," says Daron Acemoglu, an economist at the Massachusetts Institute of Technology.


— The United States ranked third out of 140 countries in the World Economic Forum's economic competitiveness rankings, just behind Switzerland and Singapore. China comes in 28th, Japan sixth and Germany fourth. (The report evaluates countries' policies and institutions — in such areas as education, health care and finance — to see whether they make the economy more efficient and contribute to prosperity.)

— Though Trump complained Monday about America's "regulations on top of regulations," the U.S. ranked No. 7 out of 189 countries in the World Bank's "ease of doing business" survey. By contrast, China, the world's second-largest economy after the United States, was No. 84.

— The United States has outpaced other advanced nations collectively for each of the past four years and likely will do so again in 2016, according to the International Monetary Fund.

— American employers have added jobs for a record 71 consecutive months and added a robust average of 204,000 a month over the past year. Unemployment has sunk to 4.9 percent — essentially what economists call full employment. The number of Americans seeking unemployment aid has been fewer than 300,000 for 81 straight weeks. It's the longest such streak since 1970, when the labor force was only about half as big as it is now.

"Among developed nations, the U.S. is the best performer by far," says Sung Won Sohn, an economist at California State University Channel Islands.

Some of Trump's specific complaints don't hold up to scrutiny. He has asserted that "the United States has the highest business tax rates among the major industrialized nations." On paper, the corporate tax rate — 35 percent — does look onerous. But few corporations actually pay that rate because they capitalize on deductions, credits and loopholes in the tax code. Take those into account, and the effective U.S. corporate tax rate is around 27 percent, in line with global averages.

Still, Trump's message resonates in Rust Belt communities that have lost industrial plants and in Southern mill towns whose garment factories have vanished along with jobs. Since 1979, the United States has lost over 7 million manufacturing jobs, though factory employment has risen slightly since bottoming in 2010.

Trump blames unfair competition from China, Japan, Mexico and other countries for the devastation. But in many cases, advances in technology are the biggest factor in the job losses: Robots and other machines allow factories to produce more with fewer people.

Machines that use increasingly sophisticated technology reduce the incentive for companies to go overseas in search of cheap labor. So some companies have been bringing jobs back to the United States.

The Reshoring Initiative, a nonprofit that lobbies manufacturers to bring jobs back to the United States, says companies were moving an average 220,000 jobs a year to other countries a decade ago, after subtracting jobs that returned to the U.S. or were created by foreign investment. Now, it says, the number of jobs being taken abroad is roughly offset by jobs being brought back or created by foreign investment.

What's more, China, which Trump argues is outfoxing the U.S. on trade, is losing its cost advantage.

"Rapidly rising real wages indicate that the end of cheap labor in China is at hand" a report this year by economists David Autor of MIT, David Dorn at the University of Zurich and Gordon Hanson of the University of California, San Diego concluded.

Sohn says the biggest long-term threat to the United States is its inability to live within its means. The Congressional Budget Office predicts that the federal debt — excluding what agencies borrow from each other — will climb from $14.1 trillion this year to $23.1 trillion in 2026 as baby boomers retire and tap Social Security and Medicare. The debt reflects years of annual budget deficits — the gap between what the government spends and what it collects in taxes.

On Monday, Trump promised to deliver the biggest tax cuts "since Ronald Reagan."

The Committee for a Responsible Federal Budget estimates that Trump's proposals would add $5.3 trillion to the federal debt over the next decade, versus $200 billion for Hillary Clinton's plans.

"We're on a dangerous path," Sohn says.

If Trump were elected, he said, the deficits likely "would go up significantly, which would make the situation worse."


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