The Trump Econ­omy

Progress abounds, but there are also per­ils

The Washington Times Weekly - - Commentary - By Stephen Moore

Well fi­nally we are get­ting that “Sum­mer of re­cov­ery.” The July jobs re­port was a block­buster — solid job gains across the econ­omy, low­est un­em­ploy­ment rate in more than a decade, and a nice bump up in wages. This was a re­port that tran­scends spin. You just have to tip your hat to Amer­i­can busi­nesses and say: well done.

Still Don­ald Trump gets no re­spect. Even though nearly ev­ery poll for the past six years tell us that Amer­i­cans care most about jobs and the econ­omy (with ter­ror­ism oc­ca­sion­ally tak­ing over first place), the me­dia nat­u­rally won’t cover the un­de­ni­able eco­nomic speed up since the election of Don­ald J. Trump.

With the Dow at 22,000, solid job gains, con­fi­dence high and and growth jump­ing to 2.6 per­cent in the last quar­ter un­der Pres­i­dent Trump, the econ­omy clearly has a new bounce in its step.

The gains to in­vestors and pen­sion funds (for tens of mil­lions of mid­dle class fam­i­lies) is on the mag­ni­tude of $4 tril­lion.

If the econ­omy and jobs had done this well un­der Pres­i­dent Obama he and the me­dia would have been do­ing cart­wheels down Penn­syl­va­nia Av­enue.

Even worse, when the me­dia does cover the jobs and growth story, ev­ery re­porter asks me: does Mr. Trump de­serve credit for these num­bers? Well if he doesn’t, who does? Lib­er­als ar­gue that this is a con­tin­u­a­tion of the Obama re­cov­ery, but there’s a big prob­lem with that anal­y­sis: the econ­omy was de­cel­er­at­ing un­der Mr. Obama, not speed­ing up. In Mr. Obama’s last year in of­fice, 2016, the econ­omy was barely limp­ing to keep ahead of an­other re­ces­sion.

My fa­vorite mo­ment in the post-election anal­y­sis was the morn­ing af­ter the election when No­bel Prize- win­ning econ­o­mist Paul Krug­man, who also twice writes a col­umn for The New York Times, was asked when the stock mar­ket would re­cover, and he fa­mously groused: “Never!”

And then over the next eight hours the stock mar­ket soared by some 700 points. And now it has shot up more than 3,000 points since that day. Yet Paul Krug­man is the guru who the left un­fail­ingly turns to for this kind of sage wis­dom.

I’ve ar­gued that this Trump bounce is the re­sult of two fac­tors. First, is the relief by in­vestors, work­ers and em­ploy­ers that the Obama eight-year as­sault against busi­ness is over. This is the ding dong the witch is dead ef­fect.

The truth is Mr. Trump could sim­ply sit in the Oval Of­fice for four years like a potted plant and that would be a vast im­prove­ment over the Obama agenda, which was al­most in ev­ery case — from tax in­creases, to spend­ing stim­u­lus bills, to Oba­macare, Dodd-Frank, the war on fos­sil fu­els, and so on — bad for growth.

The sec­ond fac­tor that has in­jected op­ti­mism into the econ­omy has been the an­tic­i­pa­tion ef­fect of good things to come. Oba­macare re­peal (whoops), less reg­u­la­tion, the big­gest tax cut since Rea­gan, pro-Amer­ica en­ergy poli­cies, and so on. The White House re­ports that in­stead of two reg­u­la­tory roll­backs for ev­ery new reg­u­la­tion en­acted, as Mr. Trump promised, there have so far been 16 roll­backs for ev­ery new rule. Hal­lelul­jah.

Dereg­u­la­tion has caused a re­newed surge in Amer­i­can en­ergy pro­duc­tion — in­clud­ing a big lift for coal. Rather than putting coal out of busi­ness as Mr. Obama and Hil­lary promised to do, un­der Mr. Trump Amer­ica is now ex­port­ing Amer­i­can coal to places in Eastern Europe, such as Croa­tia.

Now for a note of cau­tion: it’s easy to get too car­ried away by a buoy­ant stock mar­ket, as Ge­orge W. Bush dis­cov­ered at the end of his ad­min­is­tra­tion, and these eq­uity mar­kets can turn on a dime. So Mr. Trump would be wise not to get too car­ried away with the run­away stock mar­ket.

The big­ger peril is what if Repub­li­cans don’t get their act to­gether and what if they strike out on the tax cut as they did last month on Oba­macare re­peal? In that case, the roar­ing stock mar­ket that we are to­day cel­e­brat­ing is likely to turn into a bear­ish sell off.

Put sim­ply, if the GOP whiffs on the tax cut, it will harm the econ­omy and the stock mar­ket. It will put in dire jeop­ardy the Repub­li­can ma­jori­ties in the midterm elec­tions in 2018. So los­ing is not an op­tion here.

That is why Repub­li­can lead­ers would be wise to down­size their grand am­bi­tions of a to­tal re­write of the tax code and sim­ply sell the Amer­i­can peo­ple on a job cre­ation tax cut that will ben­e­fit all Amer­i­can com­pa­nies in­clud­ing the 26 mil­lion small busi­nesses and put about $2,000 of tax relief into the pock­ets of fi­nan­cially stressed work­ers.

With a pro-growth tax cut 3 per­cent-plus GDP growth is right around the cor­ner. This won’t just mean more jobs, but pay raises for work­ers in a tighter la­bor mar­ket. In that case, the Trump bounce that we are see­ing to­day will be a moon bounce in 2018. So just do it. Stephen Moore is a se­nior fel­low at the Her­itage Foun­da­tion and an eco­nomic con­sul­tant with Free­dom Works.


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