It has been a very long time since we had economy worth cheering about, much less one worth writing about. On Friday, 2nd Quarter GDP growth was announced as a healthy 4.1%. This kind of growth, not seen since 2014, has served to validate the pro-business policies that the Trump administration implemented from day one. After the doldrums of 8 years of Obama economic policy that promoted tepid 2% per year GDP growth as the new normal, we have seen 18 months of Trump economic policies reinvigorate the previously moribund US economy.
The administration’s willingness to encourage innovation by reducing Obama era regulations such as those that reduced energy companies’ ability to frack on federal lands, has helped keep oil prices low at a time when OPEC has dramatically reduced barrel production. The EPA has also begun the process to eliminate unrealistic fuel efficiency standards that caused automotive manufacturers around the globe to develop emission cheating systems while hampering a valuable US industry. Financial services firms have also benefitted greatly from roll backs in the landmark Dodd-Frank regulation. Investment banks freed from requirements that they produce yearly living wills (a roadmap of how to liquidate assets in case of a banking collapse), have been able to reduce spending on compliance personnel and instead focus on hiring more front office staff in order to expand lending operations. Additionally, an increase in the minimum requirement for stress tests from $50 Billion to $250 Billion has encouraged regional banks to make greater investments as we saw in the recent merger between Fifth Third Bank and MB Financial. All of this has combined to increase consumer confidence and encourage spending thereby leading to the remarkably higher GDP numbers.
In spite of this strong economic growth, the President’s critics have chosen to ignore strong domestic policy in favor of focusing on the increasingly contentious nature of tariff negotiations with the EU and China. After successful negotiations with EU President Jean-Claude Juncker this week, saw concessions made on soybeans and a promise to reduce tariffs and subsidies to zero, Trump said “We had a big day, very big. We set out to launch a new phase of close friendship between the United States and the European Union, strong trade relationships where both of us will win.” The successful negotiations with the EU show that we should have more faith in the President’s negotiating ability. The concessions on soybeans in particular will help counteract threats from China to slap tariffs on their biggest US import. Such deft negotiations make the decision this week to provide US farmers with a $12 Billion handout unpalatable.
The blame however, falls at the feet of Senate Republicans such as Orrin Hatch (R-UT) and Johnny Isakson (R-Ga.) who have proven that they do not have the stomach to wage the trade wars necessary to maintain US economic hegemony. As President Trump tweeted on Wednesday before his meeting with the EU, “Every time I see a weak politician asking to stop Trade talks or the use of Tariffs to counter unfair Tariffs, I wonder, what can they be thinking? Are we just going to continue and let our farmers and country get ripped off? Lost $817 Billion on Trade last year. No weakness!” Given the strong economic growth that we have seen at home, the President has without doubt earned some trust and leeway.
With the International Monetary Fund reporting this week that China is set to overtake the United States as the world’s largest economy in the next decade, it is now more important than ever to ensure that we do everything in our power to protect the economy. There is no longer room for error, so to all the critics, I say Grow Baby Grow!