A Tale of Two Slow Economies
Obama spent all your money. Trump wants to let you keep it. Which one do you think the Leftmedia cheered?
Why did Americans spend less money than expected in the first quarter of 2017? The low GDP growth of only 0.7% in the first quarter must be analyzed for the sake of policy, but question the Leftmedia headlines. Leftists have demonized Donald Trump incessantly during his first 100 days to further their narrative of an illegitimate president. This is just the latest episode.
The question about a decline in retail spending is being genuinely pondered among economists, politicians and others trying to understand the economic paradox of America’s first quarter. High consumer confidence and an investment surge in the stock market didn’t translate into strong economic growth. The optimism came in the wake created by the USS Trump throwing overboard excessive regulations with tremendous anticipation that major tax reforms are next and, hopefully, a repeal of ObamaCare. Yet consumers didn’t spend money at the pace projected nor desired.
All sorts of theories exist — from a delay in IRS tax refunds due to fraud protections involving returns claiming certain Earned Income Tax Credits to the unseasonably warm weather to the March blizzard in the Northeast.
The Wall Street Journal noted Friday, “With confidence and stock prices high, gasoline prices modest and jobs and wages increasing, spending ought to be picking up.” Nonetheless, the fact remains: Something prevented U.S. consumers from spending. This is critical when household consumption accounts for around 70% of the U.S. economy.
Let’s state a few undeniable truths. First, the economy, while measured on specific, objective metrics, is also driven by perception — perhaps that’s obvious when one of those analytics is “consumer confidence.” Measuring the degree of consumer optimism about the state of their own financial health and the economy is based on the study of a consumer’s intention to spend and save. That’s sounds mighty precise, huh?
Second, it depends on whose economy it is as to whether the accounts of its health, failing or otherwise, are reported and how the topic is treated. We just endured eight years of the slowest recovery in American history — never reaching 3% in annual growth, while the federal debt doubled due to excessive government spending and regulation that flattened economic output and depressed wages. The Obama economy was good for the investor class but decimated the middle, working class, as evidenced by historic lows in labor participation for able-bodied adults.
On cue, in the last weeks of Barack Obama’s presidency, CNBC staked out any economic good news resulting from the election upset in November — meaning the death of the Regulation-Nation — as the result of the mythical growth policies of the 44th president. Noting that Trump was “heading to the White House with a pledge to revive the U.S. economy and put millions of Americans back to work,” the December 2 CNBC piece declared, “much of that goal has already been accomplished by President Barack Obama.”
The national media, formerly known as journalists, clearly talked up the Obama economy, even in the waning moments of his regime. And, inarguably, the same concubines of the DNC will criticize every aspect of the Trump administration.
Back to the underlying question, but let’s add a twist. Why did consumers hold onto their money despite the clear optimism of the Donald Trump presidency? Remove the Twitter posts from @RealDonaldTrump and #POTUS and his ongoing brawl with the #Presstitutes, the results of Trump’s first 100 days in office prove he’s keeping his campaign promises.
Remember Obama’s first 100 days? By mid-February, the American Recovery Act (a.k.a. the “stimulus”) was moving to distribute a trillion dollars in government spending for those non-existent shovel-ready-jobs, making the massive deficit spending program a blue state bailout. Obama then set out to heavily regulate the economy, nationalizing one-sixth of it and foisting major bureaucratic controls on the financial sector.
Unlike the Obama stimulus, the Trump administration is proposing historic corporate and individual tax cuts to prevent government from confiscating earned wealth that could be in the hands of its producer. Again, Democrats and their media enablers wail that these tax cuts “could cost the government $ 6 trillion.”
Exactly what money does government have? And who earned the money that was confiscated via taxes? The only money the government has was taken from those of us who produce.
Thoughtful and serious economists and policymakers understand and agree that allowing consumers to maintain this hefty sum and, in turn, spend it grows the overall economy. Cutting corporate tax rates down to 15% and the pass-through taxes paid by owners of small businesses from over 39% to 15% is rocket fuel to the engine of our economy.
Meanwhile, after more than seven years of soaring rhetoric, breathless campaign promises and more than 50 repeal votes in the House during the Obama administration, ObamaCare still exists. It may be the failure thus far to repeal that monstrosity that still has the American economic engine idling at the starting line.
So to recap, when Obama entered office during a recession and drove up federal spending to unimaginable levels, proceeding to double the national debt in eight years, the media cheered the (paltry) economic growth. Now that Trump has taken office amidst slow GDP growth, his proposal to let those who earn the money keep more of it so as to jumpstart real and lasting economic growth is derided as unaffordable. The elites and the media are wrong on both counts. Keep that in mind in the days ahead.