Stay­ing blind to the eco­nomic boom

Why the left has been so wrong about the ‘im­pos­si­ble’ Trump eco­nomic re­vival

The Washington Times Weekly - - Commentary - By Stephen Moore

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.


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