“If Trump thinks he can get more than 3% economic growth, he’s dreaming,” ran a Los Angeles Times headline. “Trump’s budget assumes 3 percent annual growth. Why that’s extremely unlikely, explained,” explained an Obama economist at Vox.com.
[Also read: Dems blast booming jobs report, Trump worker agenda, ‘reckless’]
Such prognostications were always rubbish, as the latest economic data have again demonstrated.
The U.S. economy grew at an annualized 4.1 percent in the second quarter, the highest rate since 2014. Last quarter was the fifth straight with more than 2 percent growth, a streak we haven’t seen since 2005-2006. The five full quarters of the Trump administration have averaged 3.19 percent.
With each new batch of good employment figures and good economic statistics, we have argued that sound economic policy put in place by the Republican president and Republican majority on Capitol Hill plays a big role in this robust expansion, and that would lead to wage growth. Growth above 3 percent annually is not a surprise, except to people in official Washington who appear to believe that bad economic policy is somehow inevitable and immutable.
The question isn’t why economic growth has been so robust over the past 15 months. It is why so many left-of-center commentators and number-crunchers were so spectacularly wrong.
Many pundits did not entertain the possibility of faster growth because they favored policies that aimed for redistribution of wealth rather than its creation. But such policies only seemed endless under former President Barack Obama, and could, of course, be ended.
So the pessimists now sound ridiculous. Here are a couple of examples. “U.S. GDP’s best years are behind it,” wrote the L.A. Times’ liberal columnist Michael Hiltzik. Bond guru Bill Gross chipped in, “High rates of growth, and the productivity that drives it, are likely distant memories from a bygone era.”
They didn’t believe much improvement was possible in workforce participation and productivity, which are central to economic well-being and growth.
But 2.4 million people have entered the workforce since President Trump was sworn-in in January 2017, which is 1.5 percent growth, seasonally adjusted. This includes hundreds of thousands who have come off of the rolls of the notionally disabled; it’s amazing how well a booming economy can make people feel.
There are 3.5 million more people working in America today than when Obama left office and his lamentable and anemic economic policies began to end. Millions more working. Millions fewer unemployed. Millions out of the shadows into the labor force. That’s plenty to juice the economy.
The labor market “slack” that experts denied existed? Well, it existed alright, and businesses are now pulling it taut.
Productivity, also, supposedly had no real room to climb. In 2017, productivity made big jumps. Since then, the climb has been slow but steady.
[More: Fewer people are on unemployment benefits than anytime in 44 years]
On what did the experts base their dour certainty? Why did they think the economy couldn’t do any better than it had under Obama?
Maybe they really believed that Obama was doing everything possible to stimulate the economy. After all, he had plenty of bailouts, stimulus spending, special tax credits for favored businesses, subsidies, etc. If this couldn’t get us to a full year of 3 percent growth, the thinking went, nothing could.
Preliminary data suggest that’s not true. Trump practices his share of Obamanomics with tariffs, handouts, bailouts, and the like. But so far, those interventions, which lower growth in the long run, have not eroded his much sounder policies of tax cuts and deregulation that make it more profitable for businesses to hire and invest.
There’s reason to worry, for Trump’s tariffs and trade wars could really hurt. The ups and downs of the economy won’t stop. But for now, the lesson is that experts who thought Obama’s economy was the pinnacle overestimated the merits and underestimated the failures of Obamanomics.
Don’t bet against the American economy, unless you have policies in place that gum up its machinery.
Correction: A previous version of this piece incorrectly cited the Committee for a Responsible Federal Budget as a “liberal budget organization.” They are generally a centrist, nonpartisan organization focused on reducing the national debt. The piece also incorrectly cited CRFB’s Marc Goldwein. Mentions of CRFB and Goldwein have now been struck from the piece.
