The Trump Economy
Progress abounds, but there are also perils
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.