WASHINGTON. Contrary to the forecast of nearly every economist, America’s gross domestic product (GDP) grew at a 3.2% rate in the first quarter of 2019. The consensus view was that first-quarter growth would be about 2.3%. Even with the first quarter number, however, most economists believe that growth for the entire year 2019 will be less than the 2.9% growth rate recorded last year. It’s very likely that these economists are wrong. The Trump economy is actually taking off.
We must remember that during the past four years, the first quarter of each year marked the slowest quarter of growth, coming as it does after each year’s annual Christmas holiday buying binge. Given that simple economic fact, it is likely that the US economy could see upward of a 4% or more percentage GDP growth rate in the second and / or third quarters of 2019. This means that for the first time since 2005, America’s annual economic growth will likely exceed 3%.
Fortunately for all American citizens, the Trump administration has made high growth its number one economic policy goal. This contrasts sharply with the prior administration’s priorities. The Obama administration’s top economic goal was to cure perceived social injustices. Unfortunately, each time Obama imposed another social injustice corrective, he placed an ever mounting series of impediments on the robust economic growth this country so badly needed after the Great Recession.
Obama’s social injustices
Obama regarded it as a social injustice that all Americans did not have health insurance. He convinced Congress to pass the Affordable Care Act (ACA), otherwise known as “Obamacare.” As it turned out, this much-vaunted imposition of effectively socialized medicine actually ended up benefiting only 6% of the American population, or about 20 million people. Obamacare only increased the portion of the population carrying health insurance from 85% of Americans to 91%.
Obamacare was, and is, effectively a massive income redistribution scheme that benefited only a small percentage of Americans while burdening the majority with ever higher premiums for far more restrictive coverage.
From an economic standpoint, the results proved even worse. The ACA added more costs for businesses and individuals alike. This slowed badly-needed post-Great Recession US economic growth even further.
The ACA also increased taxes for all Americans which also slowed economic growth further still. Obama then raised the capital gains tax rate from 15% to 20% and up to 23.8% for the highest income earners. This reduced new capital formation which tended to slow economic growth.
The Dodd-Frank labyrinth
Obama reasoned that the Great Recession was caused primarily by predatory lending in the real estate sector. This meant that banks granted mortgage loans to individuals incapable of repaying those loans. What Obama failed to see was that the banks’ declining loan standards had actually been pushed by government agencies that were encouraged by liberal Democrats to make more loans available to lower-income individuals. Unfortunately, that tactic fell apart when tens of thousands of Americans lost their jobs in the Great Recession, including a vast majority of lower-income Americans who’d bought new homes with “liar loans.”
Despite this background of government malfeasance, Obama felt consumers needed to be protected against “banking practices” like this. So he pushed the Dodd-Frank bill through Congress, imposing a massive number of new restrictions on the banks’ lending practices.
Dodd-Frank did eliminate genuinely predatory lending. Assuming, of course, that relevant government agencies don’t once again push the looser lending standards that got the industry in trouble in the first place. But more problematically, this legislation also severely restricted all lending. Most particularly, the new law severely restricted loans to individual consumers and small businesses. Indeed, most of these no longer qualified under Dodd-Frank’s highly restrictive regulations. Without consumer and small business lending, there is no multiplying effect of monetary policy. Unsurprisingly, this, too tended to slow economic growth to a trickle.
Slow growth economy causes many problems
Unmoved, Obama also added thousands of new regulations allegedly limiting the ability of businesses to “take advantage” of willing consumers. This assumed “consumer protection” once again added more costs for businesses and slowed economic growth still further.
Because of the consistently slow growth Obama economy, many recent college graduates could not find employment opportunities. Millions were forced to take jobs that did not require a college degree, and for which they were over-qualified. Subsequently, this chronic underemployment resulted in lower incomes. This, in turn, became a real problem since most of those grads had student loan debt they found impossible to repay given the low salaries they were forced to take.
As a result of the college grads taking jobs which did not require a college degree, those without a degree found no opportunity at all. Millions of workers became so discouraged that they stopped looking for a job and left the labor force. That pushed the labor force participation rate down to near-record lows.
Trump’s economic growth policies are changing the employment picture
Because President Trump set economic growth as his top policy priority from the very beginning of his administration, the employment picture is rapidly changing. Underemployed grads are moving up to higher paying jobs that reflect their skills. Discouraged workers are re-entering the job market as they, too, find new opportunities in the vibrant Trump economy.
For the past eight months, there have been more job openings than unemployed people in America. This permits wages to rise, something this country’s middle- and lower-class workers have not experienced for decades. Continued economic growth will provide even more opportunities for all well-prepared Americans. Advantage: The Trump economy.
Every Democrat in Congress voted against Trump’s economic policies. More than 90% of media coverage of President Trump remains negative. And die-hard “never Trumper” members of the President’s own party continue to rail against him. But even so, by any objective standard, Trump has caused a near-miraculous recovery in America’s once-moribund economy. The current Trump economy has saved thousands of American jobs and has added even more new jobs in the process.
The Trump economic miracle
Trump was sworn into office in late January 2017. He spent the next few months eliminating hundreds of unnecessary regulations. He and the GOP later passed a massively effective tax reduction bill that jolted American business back into high gear while providing most working Americans with bigger paychecks beginning in 2018.
Since April 2017, the American economy has grown at a more than a 3% annual rate. That is significantly better than the dismal 2% rate achieved by the prior administration.
The Trump economy is taking off. Most Americans already see this. But the media and the Democrats do not.
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