Good Economic News

The Real Lull Before The Storm – by Jerry Jasinowski

One of the reasons we savor athletic events is the conclusion of either victory or defeat. In most of life, and especially politics and economics, people can and will argue all day who was right and who was wrong. To be sure, sports fans too will claim their team was betrayed by faulty officiating or some such, but the final outcome of the contest offers a refreshing clarity not available in other fields.

I have seen reports that many people out in the hinterland, far from the partisan babble of Washington or the constant hysteria of the news media, are quite content with the performance thus far of President Trump. They don’t sit around watching MSNBC; rather, they observe the world around them which is what they really care about.

And what they see is a resurgent economy which has added jobs for 85 consecutive months. The unemployment rate has fallen below 4 percent to its lowest level since 2000. Interest rates and inflation remain low. The GDP in the most recent quarter grew at a respectable 3 percent, well above the 2-2.5 we have become accustomed to. The stock markets continue to reach new highs. What’s not to like?

But it is also true that the national economy like a large ship at sea has its own momentum that is difficult to adjust. Most economists I know see the current economic surge as a result of the Federal Reserve’s easy money policy and the huge bailout package put in place by the outgoing Obama Administration.

As a practical matter, it is difficult to point to anything that the Trump Administration has done that might be contributing to the current expansion, unless it is the ongoing deregulation efforts which have yet make a dent in business activity. It is the nature of politicians to claim credit when things are going well and to blame others when they going south. The pundits are left to argue who deserves the credit or blame.

The more pressing concern for those of us who worry about the economy is the potential impact of President Trump’s erratic policy shifts, the on-again off-again efforts to replace Obamacare and, most importantly, the long-term impact of the half-baked tax bill now working its way through Congress.

The major flaw of the tax legislation as presently constituted is its failure to embrace anything resembling fundamental reform that would contribute to growth. It is rather a crass effort to impose major tax cuts without paying for them, adding trillions to the national debt.

It is difficult for a rational observer to see how cutting business taxes will inspire business to make more productive investment when business is already sitting on trillions it doesn’t know what to do with. We are about to embark upon another sea of red ink that can only distort financial markets and impede economic growth. The current spate of good news must be the lull before the storm President Trump has been warning us about.

Jerry Jasinowski, an economist and author, served as President of the National Association of Manufacturers for 14 years and later The Manufacturing Institute. Jerry is available for speaking engagements. November 2017

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