Staying blind to the economic boom
Why the left has been so wrong about the ‘impossible’ Trump economic revival
Time Magazine’s cover this week is a classic. It blares: “The Wrecking Crew: How Trump’s Cabinet Is Dismantling Government.” Also last week The New York Times ran a lead editorial complaining that team Trump is shrinking at an “unprecedented” pace the regulatory state that was erected to new heights under President Obama. These and other media reports have had all the subtlety of a primal scream.
Meanwhile, last week the stock market raced to new alltime highs, we had another blockbuster jobs report with another fall in the unemployment rate, and housing sales soared to their highest level in a decade.
Are the editors at the Times or at Time so ideologically blinded that they are incapable of connecting the dots.
The U.S. economic revival has defied the predictions of almost every Donald Trump critic. I vividly remember on the campaign debating Hillary Clinton’s economic gurus who accused Mr. Trump and his advisers like me of “lying” when we said progrowth policies would speed up the economy to 3 to 4 percent growth.
Jason Furman, who chaired the Council of Economic Advisers under Mr. Obama, told reporters earlier this year that the chances of reaching 3 percent growth over a decade were about 1-in-25 — which is what the political experts said was Mr. Trump’s chance of winning the election. Another Obama economist Alan Krueger called the 3 percent growth forecast “extremely rosy.”
Larry Summers, who was the Treasury secretary under President Bill Clinton and a top economic advisor to Mr. Obama challenged the “standards of integrity” of the Trump economic team forecast of 3 percent plus growth. “I do not see how any examination of U.S. history could possibly support the Trump forecast as a reasonable expectation,” he wrote in The Washington Post.
Salon, another liberal publication parodied the Trump GDP forecast saying “Trump’s Growth Forecasts Are the Budgetary Equivalent of Putting Your Fingers in Your Ears and Yelling, ‘Na Na Na Na Na.’”
Congress weighed in too. “This budget relies on absurd economic projections and pretend revenues that no credible economist would validate,” Rep. Pramila Jayapal, Washington Democrat, announced at a House budget hearing.
Investment guru Bill Gross of Janus Capital declared earlier this year in response to the Trump growth forecast: “High rates of growth, and the productivity that drives it, are likely distant memories from a bygone era.”
The sharp-penned Paul Krugman of The New York Times declared the 3 percent Trump growth forecast as an act of “economic arrogance.” He mocked the Trump forecast saying that the productivity improvement necessary for faster growth was as likely as “driverless flying cars arriving en masse.”
An L.A. Times business article from earlier this year was titled: “If Trump thinks he can get more than 3 percent economic growth, he’s dreaming.”
Admittedly, we shouldn’t read too much into six months of very good economic data — including six months of 3 percent-plus economic growth — or the booming stock market. This is short-term data and these trends can always reverse course quickly. President Trump’s more restrictive policies on trade and immigration could harm growth potential.
But so far the Trump haters have missed the call on the trajectory of the economy. Their lousy track record is relevant to the debate over the tax bill, because Mr. Trump’s critics are still accusing the White House of predicting wildeyed rates of growth — egads, 3 percent — over the next decade to camouflage the fiscal effects of the tax cut.
Doubly ironic is that the same Obama-era economists — Mr. Summers, Mr. Kruger and Mr. Furman — who are trashing Mr. Trump’s increasingly realistic forecast of 3 percent growth — are the ones who predicted 4 percent plus growth from the Obama budgets. Mr. Obama never came anywhere near 4 percent growth and at the end of his term growth was trickling down at a pitiful 1.6 percent.
So the same people who accused Mr. Trump’s team of “low standards of integrity” for predicting 3 percent growth were the ones who forecast much faster growth from Mr. Obama — while he was raising taxes. Amazing.
It’s very simple what is going on here. The Obama administration threw every page of its Keynesian economic playbook at the 2008-09 recession. Three tax hikes, zero interest rate monetary policies, $8 trillion of deficit spending, three minimum wage increases, stimulus spending plans, tax increases on the rich, Obamacare, tight financial regulations, a war against fossil fuels, and even more, were somehow going to get us to 4 percent growth.
Free enterprise and probusiness policies were thrown out the window. What was delivered was the weakest recovery from a recession since the 1930s. Middle America felt it, which is why Mr. Trump won these forgotten Americans. The economy’s meager growth rate of 2 percent left a $2 trillion growth deficit by 2016.
One reason that economist Larry Kudlow and I and others assured Donald Trump that 3 to 4 percent growth is achievable was that Mr. Trump could capitalize on the underperformance of the Obama years. Business investment fell almost two-thirds below the long term trend line under Mr. Obama — thanks to higher taxes on investment. Now, partly in anticipation of the tax cut, business spending keeps climbing.
If they really cared about workers and the country, maybe the liberal economists and their shills in the media should show some humility. They should acknowledge they have been dead wrong about how much Obamanomics was going to grow the economy and about how Trumponomics would crash the economy and the stock market. They should just shut up. Or better yet, maybe the rest of us should all just stop listening to them.
If they really cared about workers and the country, maybe the liberal economists and their shills in the media should show some humility.
Stephen Moore is a senior fellow in economics at the Heritage Foundation. He served as a senior economic advisor to the Trump campaign where he helped draft early versions of the Trump tax plan.