What Donald Trump gets right and wrong about the economy

Republican headliner Donald Trump made extensive remarks about the economy during a recent interview with the Washington Post. We analyzed several key statements to determine what the Republican presidential front-runner gets right and wrong about the economy:

“We’re not at 5% unemployment. We’re at a number that’s probably into the 20s if you look at the real number.” The official unemployment rate is 5%, but the Labor Department actually publishes six different measures of unemployment. The official rate is known as U-3. Some people call a different measure, U-6, the “real” unemployment rate because it measures people who can’t get the jobs they want, as well as people with no job at all. The U-6 rate has never been in the 20s, but it peaked at 17.1% in 2010 and is 9.8% now—nearly twice the official rate.

“I think it’s a terrible time [to invest] right now. Because the dollar is so strong.” Trump’s right about the strong dollar: Compared with a basket of global currencies, the dollar began a strengthening cycle in 2014 and is still close to peaks it hit in early 2015. But a strong dollar doesn’t necessarily mean it’s a bad time to invest in stocks. On one hand, it pushes down the price of oil and other commodities, which worries investors if prices get too low. But that’s a benefit for consumers and businesses that pay for energy. A strong dollar also lures more foreigners to U.S. assets, where they can presumably get a better return. On the whole, nobody ever really knows whether it’s a great or terrible time to buy stocks.

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“I’m talking about a bubble where you go into a very massive recession.” Economists have debunked Trump’s claim that the U.S. economy is headed for recession, especially a massive one. But it’s possible that stock values are overinflated due to extraordinary monetary easing, buybacks by companies, and other factors. It’s also true that many Americans feel like they’re living in a massive recession, even if national data says otherwise; globalization and digitization have transformed whole sectors of the economy and eliminated many U.S. jobs permanently.

“You have cheap money that nobody can get unless you’re rich.” There’s truth to this. Interest rates are obviously extremely low, yet people with lower credit scores struggle to qualify for mortgages and other loans. Banks have been loosening lending standards since 2010, but only gradually.

“You have the regulators … running the banks.” The banks might agree. New rules included in the 2010 Dodd-Frank reforms have put limits on the amount of risky trading banks can do and required them to hold more capital. That has suppressed bank profitability, with bank stocks performing poorly compared with the broader market. Other than the banks, nobody’s really complaining, though.

“We’re the highest-taxed nation in the world.” Not true. The federal corporate tax rate of 35% is, in fact, one of the highest in the world. But a variety of studies have found the “effective” federal rate for U.S. corporations—what companies pay after deductions and other tax breaks—is around 27%, more or less average for advanced economies. American multinationals such as Apple (AAPL), General Electric (GE) and Pfizer (PFE) are also adept at shifting profits to other countries where tax rates are lower, to minimize their tax bills. As for personal income taxes, rates in the U.S. are lower than in many European countries, with higher thresholds for when the top rate kicks in. American taxpayers actually get a pretty good deal, compared with fellow taxpayers in other countries.

“Look, we are losing $500 billion a year on trade deficits with China. Okay?” U.S. exports to China totaled $116 billion in 2015, while imports from China totaled $482 billion. That’s an annual trade deficit of $366 billion (not $500 billion). The deficit with China is large, but it’s hard to say we “lose” that money, since Americans buy stuff with it. If you spend $400 on a smartphone or TV, is that money “lost?” Hardly. There might be better ways to protect American jobs, but most economists think new tariffs or other protectionist measures would do more harm than good. Possibly a lot of harm.

“We’ve got to get rid of the $19 trillion in debt…. I think I could do it fairly quickly … I would say over a period of eight years.” That would be miraculous, especially considering that Trump’s tax plan calls for tax cuts that would reduce federal revenue by about $1 trillion per year, adding $8 trillion or so to the debt over eight years. Putting that aside, consider that the U.S. government spends about $4 trillion each year. If you cut that spending in half, and dedicated $2 trillion per year to paying off the debt, you’d pay it down in maybe 10 years. But you’d also have to slash spending for Medicare, Social Security, defense and everything else the government pays for, which would probably cause the massive recession Trump is worried about. If the U.S. economy grew at a faster pace than any advanced economy, ever, that would make the job easier. But Trump hasn’t yet explained how he’ll accomplish that.

Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.