WASHINGTON, November 1, 2016 – With the news of the FBI reopening the criminal investigation into Hillary Clinton’s emails, crucial news about the economy is being overlooked. While the latest economic numbers are better than what we have seen for the last year, the U.S. economy remains very sluggish with more slowing likely in the current quarter.
Last week the U.S. Bureau of Economic Analysis reported that “Real gross domestic product increased at an annual rate of 2.9 percent in the third quarter of 2016.” While many in the mainstream media are hailing this as a success, it is really not impressive at all.
So far, for 2016, the economy has grown at a 1.7 percent annual rate. Even if GDP in the fourth quarter performs as well as the last quarter, growth for the entire year will be about 2%. That marks the eleventh consecutive year that annual growth in GDP will be less than 3%. That has never happened in the US.
Recall after the more severe 1981 recession, GDP growth averaged more than 4% annually for the next four years. After the recession in 1991, annual growth averaged about 3% until 1996 when Congress reduced the capital gains tax rate from 28% to 20%, reduced welfare rolls and declared “the era of big government is over.” Then from 1996 to 2000, growth averaged about 4%.
As we have noted in numerous prior columns, economic growth should be the nation’s top priority. Economic growth would solve virtually all of our economic problems. Growth would increase demand for labor which would create more jobs and increase wages. Growth would reduce government spending on social programs while increasing tax revenue, all of which helps to reduce the deficit and public debt.
Growth would provide opportunity to those who feel they have been left behind. This is especially true for college graduates who have few opportunities, with many being forced to accept lower wage jobs. The higher wages would mean that their heavy debt load would be less of a problem.
Growth would increase opportunities and wages from craftspeople iworking with their hands and actually building things. Growth would expand opportunities for small businesses that provide the vast majority of new jobs created. And growth would reduce income inequality, which has worsened significantly during the last 11 years of slow to no growth, by reducing poverty, pushing the bottom up instead of trying to pull the top down.
If the slow growth pattern continues, it is likely that a recession will arrive here early next year. What actually happens, however, depends upon economic as well as political events. The most significant element will be the economic policy of the next U.S. President.
If Hillary Clinton is elected president, slow growth will continue and a recession will arrive sometime in 2017. Clinton’s stated policy objectives of raising the minimum wage, taxing the highest income earners, increasing government spending on social and jobs programs, increasing regulations on big corporations, expanding the Affordable Care Act and eventually taxing the middle class to pay for her programs, will all tend to slow economic growth.
Clinton has not set growth as a top priority. Rather, her policies are geared to “cure perceived social injustices.” She perceives it to be a social injustice to allow a person to work 40 hours a week and earn only $15,000 per year. She perceives it to be a social injustice that the highest income earners don’t pay their “fair share” of taxes. It is a social injustice that every American does not have health insurance and that big corporations take advantage of the average person.
While curing perceived social injustices should be a goal of economic policy, that goal is more easily achieved when the economy is strong and is growing.
Donald Trump, in spite of his character flaws, has outlined policies geared toward real economic growth These policies track closely with those that were proven to be effective under Presidents Kennedy, Reagan and even Bill Clinton. Trump will lower taxes for all Americans, reduce regulations that stymie growth, repeal and replace the Affordable Care Act, negotiate or re-negotiate free trade agreements that are fair to American workers, reduce spending on counterproductive government programs and allow the free market to operate without the burden of endless and cripping Federal regulations.
Trump’s policies will lead to substantial annual economic growth likely in the formerly normal 4 to 5 percent range.
The U.S. economy needs growth. Trump’s policies will encourage growth. The U.S. needs Donald Trump as President.