When President Donald Trump told the Davos World Economic Forum that America is “once again experiencing strong economic growth,” the Associated Press hurried to publish a “fact check” contradicting the chief executive.
“The economy is doing better by some measures but data released just as Trump finished speaking shows it hasn’t yet accelerated meaningfully since his inauguration,” AP said, referring to the Department of Commerce Bureau of Economic Analysis report that the gross domestic product grew 2.6 percent during the fourth quarter of 2017.
“Hasn’t yet accelerated meaningfully”? It was as if AP’s editors couldn’t bear to look at the whole picture of U.S. economic growth in the past year, a picture Trump was eager to share with the assembled world leaders in the Swiss Alps.
“After years of stagnation the nation is once again experiencing strong economic growth. The stock market is smashing one record after another, and has added more than $7 trillion in new wealth since my election. Consumer confidence, business confidence, and manufacturing confidence are the highest that they have been in many decades.
“Since my election, we’ve created 2.4 million jobs, and that number is going up very, very substantially. Small-business optimism is at an all-time high. New unemployment claims are near the lowest we’ve seen in almost half a century. African-American unemployment reached the lowest rate ever recorded in the United States, and so has unemployment among Hispanic-Americans.”
So who presented the most accurate picture of the state of the U.S. economy? The numbers strongly point to the president, relying on the facts AP preferred to shuffle to the back of the bus, especially when compared to his predecessor, President Barack Obama.
The economy barely moved at all during Obama’s final year in the Oval Office, growing a mere 1.5 percent, according to the government. The 2.3 percent growth figure for Trump’s first year in office fell short of his widely touted 3.0 percent target, but that mark was reached in two quarters of 2017.
The growth figure for the second quarter was 3.1 percent and 3.3 percent for the third quarter. The 2.6 percent fourth quarter was down but included the strongest holiday sales in three years.
By comparison, Obama was the first president to not have at least one year of growth at 3.0 or better, even with two terms in the White House. Not coincidentally, costly new federal regulatory regimes also skyrocketed under Obama.
Significantly, the economic results for Trump’s first year only reflected his delivering on his campaign promise to unleash the economy in part by removing the deadening hand of bureaucratic federal regulation.
Trump spoke in Davos at length about his deregulatory campaign, noting that “we have undertaken the most extensive regulatory reduction ever conceived. Regulation is stealth taxation … Like many other countries’ unelected bureaucrats, we have, believe me, we have them all over the place, and they have imposed crushing and anti-business and anti-worker regulations on our citizens with no vote, no legislative debate, and no real accountability.
“In America, those days are over. I pledged to eliminate two unnecessary regulations for every one new regulation. We have succeeded beyond our highest expectations. Instead of two for one, we have cut 22 burdensome regulations for every one new rule.”
It takes time for the economy to recover the costs of excessive regulatory compliance and to redirect capital to productive uses, so the gains seen during Trump’s first year are likely attributable in significant part to the expectations generated by his slashing the red tape. The full impact of the deregulation is still to be felt.
Trump seemed to have such a point in mind when he told Davos listeners that “we are freeing our businesses and workers so they can thrive and flourish as never before. We are creating an environment that attracts capital, invites investment, and rewards production. America is the place to do business, so come to America where you can innovate, create and build.”
With Trump’s tax reforms, including substantial decreases in both corporate and individual rates, most economists see continued economic growth in 2018.
With Trump’s tax reforms, including substantial decreases in both corporate and individual rates, most economists see continued economic growth in 2018 even as they caution about being overly optimistic about longer-term prospects.
As Wall Street Journal reporter Ben Leubsdorf wrote earlier this month: “One reason for the rosy 2018 forecasts: a package of tax-law changes enacted last month. More than 90 percent of economists said the tax cuts would increase GDP growth over the next two years, similar to their thinking in earlier months when the details of the legislation were still in flux.”
Expert caution about the long-term impact of tax cuts is not new. Similar cautions were widespread in the months after President Ronald Reagan’s 1981 tax cuts were enacted.
But as Heritage Foundation economist Peter Sperry noted during debate in 2001 on President George W. Bush’s tax proposals, the Reagan program “resulted in the largest peacetime economic boom in American history and nearly 35 million more jobs.”