Goosing growth: Can Trump deliver?
Lots of good things are happening in the American economy. Chances are you’re benefiting, or soon will: The stock market is up nearly 28 percent since Election Day 2016; growth is humming at 3 percent; unemployment’s at its lowest point in 17 years.
What’s going on? More important, what will keep it going?
One clue is the above reference to November 2016. Since the election of President Donald Trump, the market has been on a run as investors anticipate ways he’ll fan the flames of growth. Certainly, Trump is happy to take credit: “The reason our stock market is so successful is because of me,” he boasted recently. “I’ve always been good with money.”
Yes, well, the president is free to brag, as long as he’s ready to accept blame if the numbers go south. Markets go up — and down — for many reasons.
Just kidding. We know this egocentric president would prefer not to accept responsibility for failures. We are certain, however, that Trump understands he’s under pressure to deliver on his promise of creating greater prosperity — or the market gains he obsesses over may evaporate.
Trump’s sales pitch is that he’s the corner office genius who will jump-start growth that’s been stuck in a sleepy pattern of 2 percent annually since the end of the Great Recession eight years ago. Trump says getting to sustained 3 percent growth will create 12 million new jobs and generate $10 trillion of new economic activity. Treasury Secretary Steven Mnuchin says 3 percent growth will bring in close to $2 trillion of additional tax revenues over a decade. Wages will increase too.
A country can dream, can’t it? ... Yet market confidence is a mysterious beast. Investors and CEOs took a shine to his mix of cheerleading and proposals and began placing bets the president would find ways to goose growth.
So far, their optimism has been rewarded. The U.S. economy is rocking: two straight quarters at 3 percent growth. Some of the credit goes to forces beyond Trump’s control. The U.S. benefits from stronger growth in Europe, China and Japan. But some of the credit goes to Trump and a Republican-controlled Congress taking on the mission of job creation. Employers believe he’s going to deliver . ...
The most consequential action Trump can take — and must take if he wants to sustain market gains — is to pull off tax reform. Markets are betting it will happen; CEOs are pushing for it. The crucial components for the business community are tax cuts, including inducements that would encourage corporations to repatriate dollars earned offshore. The trick is crafting a tax bill that won’t add an additional $1.5 trillion or more to the national debt.
“If we can get this right, we not only help U.S. businesses compete globally, but it will drive greater investment and job creation here at home,” John Stephens, chief financial officer of AT&T, said on a recent investor conference call. “Tax reform is the catalyst we need to spur investment.”
Trump knows that’s true. We’ll see if he’s got the skill to make it happen.