Growth hits 4 percent in a booming economy
What happened
President Trump took a victory lap after new government data showed the nation’s economy grew at 4.1 percent in the second quarter of the year—the fastest quarterly rate since 2014. The U.S. is now on track for its best year of gross domestic product growth in more than a decade, and Trump touted the numbers as vindication of his economic policies. “Once again, we are the economic envy of the entire world,” the president said last week. The growth was largely propelled by consumers, who stepped up their spending on everything from cars to clothes to meals out. Trump and his advisers said the $1.5 trillion in tax cuts signed into law in December, together with his administration’s cuts to regulations, will ensure that the economy continues to race ahead. “This is a boom that will be sustainable,” said Trump’s chief economic adviser, Larry Kudlow.
The surging economy has been a boon to the president, with a recent NBC/Wall Street Journal poll showing 50 percent of voters approve of his handling of the economy, 5 percentage points more than his overall job approval rating. But many economists caution that the quarter’s figures were inflated by a series of one-time factors, such as the tax cut, and that growth would likely slow in the second half of the year—especially if the U.S.-China trade war intensifies. “We don’t want to overexaggerate the strength of the economy,” said Joe Brusuelas, chief economist of accounting firm RSM, “given the real risks that are being put in place by the policy choices.”
What the editorials said
“Policies matter,” said The Wall Street Journal, “and so does the tone set by political leaders.” Under President Barack Obama, Americans were told “inequality was a bigger problem than slow economic growth” and that only government regulation and “politically directed credit” would create prosperity. The result was economic stagnation. But by taking an ax to red tape and taxes, Trump and the GOP have “liberated risk-taking and investment, spurring a revival in business confidence and growth.”
If only it were so simple, said the Houston Chronicle. Economists note that the growth figure was “juiced by frantic stockpiling” before U.S. and foreign tariffs went into effect. American firms, for example, hurriedly bought Canadian metals earlier this year to get ahead of Trump’s import duties of 25 percent on steel and 10 percent on aluminum. The president should be aware that “what goes up prematurely must come down,” as he’ll surely see in the GDP figures later this year.
What the columnists said
Thank low taxes for “the explosive growth,” said Mike Solon in The Wall Street Journal. In the first five quarters of Trump’s presidency, growth has been almost 40 percent higher than the average rate under Obama. “As usual the largest single beneficiary of faster growth is the government.” The Congressional Budget Office says that the economic uptick has “already added $1.3 trillion to the 10-year federal revenue projection,” proving Trump’s tax cuts were both “fiscally conservative” and “economically powerful.”
The cuts were anything but fiscally conservative, said Catherine Rampell in The Washington Post.. The CBO projects that the tax law will cost the government $2.3 trillion in revenues by 2028. The economic growth it generates will offset that figure by only $461 billion. And because government spending keeps rising, “Trump’s own Office of Management and Budget projects that the deficit will reach nearly $900 billion this year and top $1trillion next year.” Anyway, there’s nothing special about the latest economic results, said Paul Krugman in The New York Times. Under Obama, growth topped 4 percent in four quarters. “One quarter’s growth is a nothingburger.”
“It is simply too soon” to judge the Trump economy, said Ramesh Ponnuru and Michael Strain in National Review. Tax cuts and deregulation should make the economy “modestly stronger over time.” But Trump still “has the potential to do substantial economic damage.” If the president continues to slap tariffs on our trading partners, he’ll hurt the economy by raising consumer prices, disrupting global supply chains, “and inviting a cycle of retaliation from other countries.” At that point, all the “credit Republicans are getting from voters could quickly turn to blame.”