At the final 2016 presidential debate, Hillary Clinton cited "independent experts" (namely, this guy, whose predictions about President Trump's impact on the economy have been proven laughably wrong thus far) in asserting that Trump's tax plan would cost the US millions of jobs and risked plunging the economy into another major downturn -- the latter claim premised on the unserious falsehood that tax cuts "caused" the 2008 collapse. Skip ahead to the 2:25 mark, and watch her lay out the attack:
"By contrast, Donald’s plan has been analyzed to conclude it might lose 3.5 million jobs. Why? Because his whole plan is to cut taxes, to give the biggest tax breaks ever to the wealthy and to corporations, adding $20 trillion to our debt, and causing the kind of dislocation that we have seen before, because it truly will be trickle-down economics on steroids. So the plan I have I think will actually produce greater opportunities. The plan he has will cost us jobs and possibly lead to another Great Recession."
Clinton said Trump's tax plan would shed as many as 3.5 million jobs. Now that tax reform has been implemented, CBO has boosted its US job creation estimates by 2.6 million. Hillary also warned of bloating the national debt, which is one of the few major concerns I have about the new tax law -- though her specific admonition was off by many trillions of dollars. (It's also difficult to swallow a lecture about fiscal discipline from anyone who is a denialist about entitlement spending and the coming debt crisis -- which both major 2016 nominees were, unfortunately). Flash forward to June 1, 2018, roughly a year-and-a-half into Trump's presidency. The book is hardly closed on his policies' economic legacy, but the results we've seen to date don't remotely resemble Mrs. Clinton's dystopian warnings. The latest jobs report is outstanding, with US unemployment falling to a tie for the lowest level since Mrs. Clinton was graduating college, roughly half a century ago:
The jobless rate inched down to 3.8% in May, another sign of the strong economy and tight labor market. That tied the lowest unemployment rate since 1969. Since then, the only other time unemployment was this low was in April 2000. The economy added 223,000 jobs, better than economists expected...Wages grew 2.7% in May compared with a year earlier. Wage growth has picked up in recent months, but economists have been puzzled for a long time about why it isn't climbing faster. In a job market this tight, employers are typically forced to pay much more to attract workers. Economists believe that the unemployment rate still has more room to fall. The job gains were broad. Over the past year, the economy has added an average 191,000 jobs a month.
Not only is hiring still going strong, long-stagnant wages are up nearly three percent over the last 12 months. That's really significant for American families, and suggests a lagging recovery element is finally picking up. The top line numbers are robust, as are other important indicators, so this assessment is reflective of the consensus verdict:
“In short, the economy and labor market appear to be firing on all cylinders, with all sectors showing strength.” - @CapEconUS— James Pethokoukis (@JimPethokoukis) June 1, 2018
Meanwhile, here's the latest GDP growth projection from the Atlanta fed:
Modeled predictions are not to be confused with real measured outcomes (see here), but the trendline is obviously pointed in the right direction. Put simply, the economy is booming, and there are reasons to be optimistic that it hasn't even reached its full potential yet. During the 2016 campaign, Donald Trump repeatedly promised to cut taxes on families and corporations to create a stronger business and hiring climate, and also pledged to take a buzzsaw to the federal government's burdensome tangle of regulatory excess. He has followed through on both agenda items, and the results are speaking -- loudly -- for themselves. Liberals' lazy fear-mongering that pro-growth policies "don't work" and were responsible for getting us into the 2008 meltdown (to call that causal claim 'simplistic' is far too generous -- it's wrong) are being debunked by reality. Events can always intervene, and unforeseen factors can always undermine or erase positive movement, but America's economic engine is humming along, and Trump/GOP policies are a major reason why. But what could derail or hamper this progress? Foolish, self-inflicted wounds like trade wars with allies, for starters. An excerpt from today's exasperated Wall Street Journal editorial blasting Trump's self-defeating tariff misadventures:
His decision to slap tariffs on steel and aluminum imports from Europe, Canada and Mexico will hurt the U.S. economy, his own foreign policy and perhaps Republicans in November. In March Commerce Secretary Wilbur Ross dangled temporary exemptions to 25% steel and 10% aluminum tariffs to extort trade concessions from U.S. allies. Mr. Ross withdrew the exemptions on Thursday, saying the U.S. “was unable to reach satisfactory arrangements” with Canada, Mexico and the European Union. He means they didn’t unilaterally surrender...American businesses rely on complex cross-border supply chains that take time and money to change. Most will have to internalize the tariff costs, which will mean raising prices or hiring fewer workers and paying lower wages. The tariffs also create uncertainty as businesses petition Commerce for product exemptions while delaying investment. Note to Mr. Trump: Regulatory uncertainty was a big reason growth was so slow during the Obama years. Taxing steel and aluminum imports will make U.S. manufacturers less competitive... a 25% increase in input costs is nothing to sniff at. Companies use imported steel and aluminum in everything from cars to beer cans to Hershey’s kisses wrappers.
Notice that the oft-repeated argument about having "leverage" to negotiate better deals...didn't play out here. We pounded our chests and rattled the protectionism saber, and other countries refused to give in. The notion that a circular firing squad of punishment will somehow improve the dynamic defies all economic sense. Aside from slapping American consumers and businesses with an effective tax, this move is also inviting painful repercussions from affected trading partners:
Other countries are retaliating. Europe has teed up tariffs of up to 50% on $3.3 billion of U.S. products including bourbon, motorboats, cranberries and playing cards. Canada plans to hit up to $12.8 billion in products including U.S. steel, yogurt, hair lacquers, beer kegs and sailboats. Mexico announced tariffs on U.S. steel, lamps, pork, apples, grapes and cheese. Many items on the tariff lists overlap because they target states that Mr. Trump won and House districts where Republicans have competitive races...Mr. Trump has been establishing a solid economic record with tax cuts and deregulation, but his escalating trade war puts that at risk. He aspires to be Ronald Reagan but his tariff folly echoes of Herbert Hoover.
These other nations are shrewd; their targeted retaliatory actions are clearly intended to bring about acute political discomfort for Trump's party, which is why -- aside from tested principles -- many Republicans are unambiguously bucking Trump on this issue. Finally, because some Republican voters seem to have decided that "sound economics" means "whatever Trump wants," I'll leave you with a helpful and digestible tutorial on free trade and protectionism from the inimitible free market genius, Milton Friedman: