American Elephants


Who Said the Economy Could Not Return to 3% Growth? by The Elephant's Child

I frequently mutter something to the effect that Democrats don’t understand economics, that’s why they are Democrats. Democrats were saying that there was no chance of returning the economy to 3% growth, but as the media have once again reported, the economy “surprisingly” grew at a 3% pace in the third quarter, despite the impact of three major hurricanes. Most economists had reduced their estimates to just above 1% because of the impact of Hurricanes Harvey and Irma on the economy. Those who keep expecting a big slowdown should look at what’s really going on.

The IBD/TIPP Economic Optimism Index, the Conference Board’s Consumer Confidence Index, the National Association of Manufacturers survey and the Institute for Supply Management all report stronger optimism and rising factory output. Overall optimism hasn’t been this high in over a decade.

The current unemployment rate at 4.2% is the lowest since before the financial crisis. Total employment has jumped more than 2.2 million since Trump entered office. Even the broadest U.S. unemployment measure, so-called U6, now stands at 8.3% — its lowest since June of 2007.

Meanwhile, all major stock market indexes are up strongly since Trump’s unexpected win last November, with the Dow Jones industrial average breaching 23,000 for the first time this month. The stock market, as we’ve said before, is a reliable if imperfect predictor of future economic activity. Its message today is unequivocal: Expect more of the same.

Donald Trump has embarked on a sweeping round of deregulations in recent history. He got rid of Obama’s disastrous “Clean Power Plan,” and the Paris Climate Accord, which did nothing whatsoever for the climate and sent a lot of U.S. money to emerging nations to solve their climate problems. He is now removing the restrictions that Obama put on federal energy lands. Oil is flowing through the Dakota Access pipeline, and with the fracking revolution the United States will be a global energy powerhouse again.

Democrats are all about control, which means that they try to regulate everything. And regulation means extra costs, inefficient ways of doing things, silly extra requirements all of which slow an economy down. When excess regulation is removed, companies are encouraged to invest in new equipment, plants and training, and to hire more workers. That’s what makes an economy grow. Tax reform gives businesses more of their own money to  invest in growth.

The Federal Register, the bible of federal rules, came in at a record high 97,110 pages of rules under President Obama. Trump has already knocked it down the 45,678 pages, and he’s just getting started. Many of his new rules in the pipeline are about getting rid of old regulations.

Wayne Crews, who is CEI’s regulatory analyst, estimates that the economic cost to the economy is $2 trillion, or roughly 12% of  current GDP. Obama’s regulatory state has been especially hard on small businesses. I can name a significant number of small businesses who disappeared during the Obama administration.

 

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Deregulation is key in giving the business sector confidence. GDP at 3% or greater should be the norm with a pro growth business climate coming from DC. Will see later today what the GOP tax reform plan looks like. I don’t expect much with our current set of clowns in leadership. Nowadays politics gets in the way of sound policy.

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Comment by Douglas Allen




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