Punishing Trump and the Economy for Success

By | 2018-09-18T23:52:39+00:00 September 19th, 2018|
Print Friendly, PDF & Email

Donald Trump is a brash, out-of-the-box president who had the temerity to defeat Hillary Clinton and is guilty of heaping scorn on members of Washington’s entrenched ruling class. For this crime,  they are punishing him severely. Mostly they are Democrats who created and for years presided over a highly regulated, weak, and short-on-jobs economy and who now seem to be moving even farther left toward outright socialism.

To rid themselves of Donald Trump, a troublesome priest of capitalism and economic abundance, they retaliated with a special prosecutor and a nonstop scorched-earth attack by the media that may first debilitate and then depose him from office by extraordinary means.

In the meantime, the formerly weak economy has become strong under Trump’s stewardship—and, if allowed to continue on course, may permanently raise the definition of “middle class prosperity” to a much higher level of real disposable income.

Trump‘s ongoing tax, regulatory and trade reforms were designed to provide sustained increases in job, wage, and productivity growth over time, and they are likely to do that—but in a burst of “free at last” exuberance, the economy has grown more quickly than a strictly mathematical computer model might have suggested.  The economy is “crushing it” says Larry Kudlow. So do the facts.

Instead of the weak, almost jobless economy Trump inherited, we now have a Fed-certified “strong” economy.  GDP is growing at a 4.1 percent rate and the Atlanta Fed is forecasting 4.6 percent for the third quarter.  Consumer confidence is the highest in 20 years. We have the largest number of jobs in history (155,965,000 in July).  Real wages in the last two quarters have been the highest in 70 years. Black and Hispanic unemployment rates are at or near record lows.  Overall unemployment is at its lowest since the 1960s. Manufacturing output is trending upward, retail sales are booming, and inflation is tame—thereby suggesting that productivity (output per hour worked) may at long last be increasing.  Hallelujah!

Economics 101 teaches that a high level of productivity is the key to economic prosperity—and common sense teaches that the keys to high levels of productivity in an economy are the same as the meritorious personal characteristics of high achievers: namely smarts, sweat, and integrity.

The pro-productivity formula works like this—(1) smart people in the private sector work hard in creating the best technologies and machinery for smart companies to buy for the use of highly skilled, hardworking employees, and (2) smart people in government work hard to avoid doing dumb things that lower the quality of the workforce or prevent companies from investing in the most efficient tools.

Washington, of course, has a long history of doing dumb things to impede productivity.  As a result, output per hour has seldom reached its potential and productivity has been declining for over a decade—but that is changing.  Highly pedigreed tax reforms are removing the destructive double taxes on productivity-enhancing investments and deregulation is quickly freeing our muscular economic arms and legs from the millions of little regulatory ropes with which Lilliputians in Washington for so long have restrained us.

When these and other fiscal reforms are combined with similar successes in nondiscriminatory, merit-based education, employment, and immigration policies, there is a good possibility that America’s productivity levels will increase sufficiently to sustain an ongoing expansion in jobs and wage growth without triggering inflation.

That economically optimal result could raise the “well-offness” quotient of American families—including the benchmark middle class—to a whole new, much higher level of prosperity.  There would still be business cycles with ups and downs, but with the economy operating closer to its productive potential, the baseline from which variations occur could be permanently much higher.

No guarantees, of course, but the prospects for success are good and the prize is great.  So why do the anti-Trump forces not give economic abundance a chance? Instead, they redouble their efforts to stage a partisan attack on the Trump presidency, to reverse his pro-growth, pro-jobs reforms and, after dismantling the underpinnings of our presently booming economy with its oodles of jobs, to revert back to the low-growth, high-unemployment Obama years, with the compulsory scarcities and mind-cramping restraints of socialism waiting in the wings.

The big existential question, the one that must be soon resolved, is whether, in addition to Trump haters, there are enough America haters to carry out a coup d’état that would do fundamental, almost certainly fatal, damage to our Constitutional Republic.

Photo Credit: Xinhua/Xu Jinquan via Getty Images

Ernest S. Christian is a lawyer. Gary Robbins is an economist. Both served as tax policy officials in the Treasury Department in the Ford and Reagan administrations, respectively.