The mojo of Trumpo­nomics

Rapid growth is a sign of po­lit­i­cal suc­cess

The Washington Times Weekly - - Commentary - By Stephen Moore

T.S. Eliot fa­mously wrote that “April is the cru­elest month,” but when it comes to Amer­ica’s fis­cal pic­ture, noth­ing could be fur­ther from the truth about this April. The lat­est gov­ern­ment num­bers con­firm that last month was a block­buster for growth, fed­eral rev­enues and deficit re­duc­tion.

One of the key prin­ci­ples of Trumpo­nomics is that faster eco­nomic growth can help solve a mul­ti­tude of other so­cial and eco­nomic prob­lems — from poverty, to in­ner-city de­cline, to low­er­ing the na­tional debt.

We’re not quite at a sus­tained el­e­vated growth rate of 3 per­cent yet, but the lat­est econ­omy snapshot tells us we are knock­ing on the door. The growth rate over the last four quar­ters came in at 2.9 per­cent, which was higher than any of the eight years of the Obama pres­i­dency. Half­way through this cur­rent quar­ter, which be­gan on April 1, the At­lanta Fed­eral Re­serve es­ti­mates growth at 4 per­cent. If that per­sists through the end of June, we will have reached an av­er­age growth rate of 3 per­cent un­der Pres­i­dent Trump.

Not bad, given that nearly ev­ery lib­eral Trump critic trashed the pres­i­dent’s cam­paign fore­cast of 3 per­cent to 4 per­cent growth as an im­pos­si­ble dream. Econ­o­mists like Larry Sum­mers, Mr. Obama’s first chief econ­o­mist, gloomily de­clared that we were mired in a new era of “sec­u­lar stag­na­tion” and that 3 per­cent growth was un­achiev­able. Paul Krug­man of The New York Times said it was more likely we would see fly­ing cars than 3 per­cent to 4 per­cent growth.

Now for the even bet­ter news. We are al­ready start­ing to see a fis­cal div­i­dend from Mr. Trump’s tax, en­ergy and reg­u­la­tory pro-busi­ness poli­cies. The Con­gres­sional Bud­get Of­fice re­ports that tax rev­enues in April — by far the biggest month of the year for tax col­lec­tions be­cause of the April 15 fil­ing deadline — to­taled $515 bil­lion, which was a ro­bust 13 per­cent rise in re­ceipts over last year.

MoneyWeek re­ports that the $218 bil­lion monthly sur­plus (rev­enues over ex­pen­di­tures) this April was the largest ever, with the pre­vi­ous record be­ing $180 bil­lion in 2001. (April is al­ways the one sur­plus month.)

Here’s the sim­ple les­son: more growth, more tax rev­enue.

But there’s an­other les­son, and it is about how wrong the bean coun­ters were in Congress who said this tax bill would “cost” the Trea­sury $1.5 tril­lion to $2 tril­lion in lost rev­enues over the next decade. If the higher growth rate that Mr. Trump has al­ready ac­com­plished re­mains in place, then the im­pact will be well over $3 tril­lion of more rev­enue and thus lower debt lev­els over the decade. Putting peo­ple to work is the best way to bal­ance the bud­get. Pe­riod.

Crit­ics will dis­miss the im­por­tance of these higher rev­enue col­lec­tions by ar­gu­ing that the new re­ceipts are for 2017 tax pay­ments, which don’t take ac­count of the tax cut that passed in De­cem­ber. This ig­nores that some of the growth we have seen was a re­sult of the an­tic­i­pa­tion of the tax cut. More­over, the fact that the tax cuts are just sink­ing in means we should get even higher growth rates for the next sev­eral years at least.

Alas, it is not all good news in the April sur­prise. The in­ex­cus­able om­nibus spend­ing bill in­creased fed­eral spend­ing by some $300 bil­lion in 2018 and we are start­ing to feel the im­pact of that splurge. Fed­eral out­lays are up 8.7 per­cent in April. That’s un­for­giv­able given that Repub­li­cans run ev­ery­thing in Wash­ing­ton these days.

No one thought that Mr. Trump could ramp up the growth rate to 3 per­cent or that his poli­cies would boost fed­eral rev­enues. But he is do­ing just that — which is why all that the Democrats and the me­dia want to talk about these days is Rus­sia and Stormy Daniels.

If the higher growth rate that Mr. Trump has al­ready ac­com­plished re­mains in place, then the im­pact will be well over $3 tril­lion of more rev­enue and thus lower debt lev­els over the decade.

Stephen Moore is a se­nior fel­low at the Her­itage Foun­da­tion and an eco­nomic con­sul­tant with Free­domWorks. He served as se­nior eco­nomic ad­viser to the Trump cam­paign.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.