“The U.S. Economy is Remarkably Resilient When Government Doesn’t Get in the Way”

“The U.S. economy is remarkably resilient when government doesn’t get in the way.” These are the words of The Wall Street Journal’s editorial board in describing the strong economic growth of the first quarter. The 3.2% real GDP growth surprised the financial community which had been preparing itself for far less.

The board asks, “what changed?” The answer, they write, is:

Well, the economic policy mix. The Trump Administration lifted the threat of new regulation and harassment of business in 2017, which liberated long-stifled animal spirits. Then came the Trump tax reform with its sharp reduction in business tax rates and immediate 100% expensing of new investment. This was targeted precisely to stimulate the weak capital investment that had stymied growth in the Obama years.

This has also kept the U.S. expansion going even as growth in the rest of the world has slowed markedly. U.S. growth over the last four quarters year over year is now above 3%. Politicians in Germany or France would be elated, and maybe faint dead over, if they could keep growth above 3% for 12 months.

Unlike the years leading up to the last recession, the current economy isn’t as dependent on the housing market. Many economists consider housing to be a form of consumption, while capital investment in equipment, intellectual property and new plants pays off for years to come in better productivity and higher wages. This is the tax-reform gift that keeps on giving as lower tax rates that are fixed in law raise the return on capital that encourages more investment. In other words, tax reform isn’t a “sugar high.”

You can see in my chart below that President Trump’s business friendly policies have led to sustained GDP growth unlike anything seen during the Obama-era.

The Journal goes on to note that even many members of Trump’s own party were skeptical of his business-friendly policies. The editors suggest those politicians should be admitting their error now, writing:

In addition to judges, the biggest success of the Trump Presidency has been the economy. The left will never give him credit, but at least the “reformacons” on the right who derided deregulation and corporate tax cuts as an out-of-date agenda should admit how wrong they were. Had Mr. Trump taken their advice, we wouldn’t be seeing a growth rebound that is lifting wages for everyone.

Read more here.

Originally posted on Your Survival Guy.