Like all candidates for the presidency, Donald Trump made a number of rather bold and likely fanciful claims that he would restore prosperous times to the U.S., even going so far as to say that we should expect the return of sustained 3.5 to 4% (or even higher!) rates of year-over-year GDP growth.
But I believe he's going to have a very difficult time of it.
It's obvious enough that we need serious reform in a number of areas. First, our tax code, especially the corporate tax, is in serious need of a do-over. In fact, many analysts consider our corporate tax system the worst in the advanced world. Even Jason Furman, way back in 2007, rendered that opinion. Yet his boss was M.I.A. on that issue to an extent equal to his predecessors.
Second, there's little doubt that our clusterfuck of a regulatory thicket is an impediment to growth. Real reform is obviously needed in that area as well.
Third, our ever-bloating debt burden is a restraint to growth. John Mauldin recently reminded readers that we also have to take into account state and local level public debt to get the real picture, and estimates that the total (federal, state, local) debt is now well over 120% of GDP. Reinhart and Rogoff have written that when a nation's public debt burden passes 60% by a significant margin, it acts as a lasting impediment to growth.
Conservative commentators such as Steve Forbes, Stephen Moore, and Larry Kudlow have often opined that if we were to re-run the Reagan playbook," we could restore the growth rates of the early-to-mid '80s or the last half of the '90s.
Not a chance, in my opinion.
Today's economy does not resemble that of 1981 at all. For starters, inflation and interest rates were through the roof at that time. Once the Federal Reserve under Volcker did what needed to be done and crushed the back of inflation, the economy was teed up nicely for a powerful cyclical recovery. Also, the debt/GDP ratio was only a little over 30%, so we had the fiscal space within which to cut taxes significantly and also increase spending, which of course we did. I'm not arguing that it was necessarily good to run the post-1981 deficits that we did; only that we had the fiscal space within which to do so, as there was still an economically non-destructive path back to fiscal sustainability. (The debt/GDP ratio at the end of the '80s was still about 50%.)
But now we are not remotely in the same situation.
For starters, the debt/GDP ratio is double what is was in 1989, and even more than that if you add in state and local debt. Further, there's no credible path to fiscal sustainability even if we leave most current policy in place, let alone if we pass large tax cuts, a large infrastructure spending surge, and increase defense spending. Doing all that would likely add $10 trillion more to the federal debt by sometime in the early 2020s. Would that precipitate a catastrophic crisis at some point during the next few years? I have a feeling we are going to find out.
Further, high rates of economic growth are likely not to be in the cards, no matter what we do on the policy front. Economic growth is a function of increases in total factor productivity and the size of the workforce. For reasons that are widely debated, but far from completely known, productivity gains have slowed to a crawl since around 2004. We need a fresh new round of technological advancement. It's been pointed out by many analysts that innovations of the last decade or so, while fun and interesting, are not economically transformative in the ways that earlier advances were.
Although I think that good tax reform and well-done regulatory relief are unambiguously good things, I'm still afraid we are going to be in for a slow-growth slog for years to come. I suspect that this may present very difficult challenges for Trump and the Republican congressional majority.
We have certainly seen many markers of great optimism, especially since the U.S. stock market has taken a very nice ride all the way into the high 2300s, but I'm afraid that level of exuberance in unwarranted.
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- Texas Contrarian
- 03-12-2017, 03:55 PM
- WTF
- 03-12-2017, 06:26 PM
Excellent points
We are getting dangerously close to the income inequity of the 20's...add in all this xenophobia and nationalism. Let's just say I'm not as giddy as most.
Hopefully this thread will not devolve into the usual caca slinging
We are getting dangerously close to the income inequity of the 20's...add in all this xenophobia and nationalism. Let's just say I'm not as giddy as most.
Hopefully this thread will not devolve into the usual caca slinging
- bambino
- 03-12-2017, 06:32 PM
It's all Trumps fault.
- WTF
- 03-12-2017, 06:45 PM
- canuckeight
- 03-12-2017, 06:50 PM
I believe we start to run into economic headwinds this week
1. The debt ceiling limit on the 15th. Since most of congress hates Trump both sides of the isle will stall him on raising it. They thought Hillary was going to win so Boehner and Obama capped the debt ceiling at 20T back in 2015. Leaving them enough room to borrow and also leaving HRC 485 billion in the checkbook. When she didn't win they spent most of the money on all the bills leaving the checkbook with about 200 billion. We spend 65 billion a month.
2. Interest rates. This will be interesting on the 15th as well.
Not sure of the math but an interest rate hike will increase our monthly debt
Not to mention can congress get health care done, then tax cuts?
We will have to wait and see, interesting times coming. Needless to say.
1. The debt ceiling limit on the 15th. Since most of congress hates Trump both sides of the isle will stall him on raising it. They thought Hillary was going to win so Boehner and Obama capped the debt ceiling at 20T back in 2015. Leaving them enough room to borrow and also leaving HRC 485 billion in the checkbook. When she didn't win they spent most of the money on all the bills leaving the checkbook with about 200 billion. We spend 65 billion a month.
2. Interest rates. This will be interesting on the 15th as well.
Not sure of the math but an interest rate hike will increase our monthly debt
Not to mention can congress get health care done, then tax cuts?
We will have to wait and see, interesting times coming. Needless to say.
- bambino
- 03-12-2017, 06:53 PM
- IIFFOFRDB
- 03-12-2017, 09:11 PM
- IIFFOFRDB
- 03-13-2017, 09:20 AM
Russian Agent Cracka @HouseCracka 8h8 hours ago
More
I predicted that they would crash the economy before election I was wrong looks like they're going to do it this summer to blame Trump.
- Yssup Rider
- 03-13-2017, 10:15 AM
Two posts. Then came the "cacao slinging."
Tsk. Tsk.
Usual suspects, too. One who doesn't understand the OP and the other who is incapable.
Good thread, Cap. I'm sorry it's already been hijacked.
Tsk. Tsk.
Usual suspects, too. One who doesn't understand the OP and the other who is incapable.
Good thread, Cap. I'm sorry it's already been hijacked.
- BigLouie
- 03-13-2017, 02:37 PM
- Ex-CEO
- 03-14-2017, 01:12 PM
Earlier I saw some pundit on Stuart Varney's TV show say that if Ryan & Co. fails to get the health care reform effort on track, it might set back the whole agenda for the rest of the year. Even including tax reform.
I want Trump to succeed, but I agree - it's going to be difficult. Especially with the fakestream media going into all-out warfare mode.
I want Trump to succeed, but I agree - it's going to be difficult. Especially with the fakestream media going into all-out warfare mode.
- Texas Contrarian
- 03-19-2017, 06:47 PM
.
The WSJ's Daniel Henninger --- like me, certainly no liberal --- cogently articulated some of my concerns last week:
The Republican ObamaCare Choke
Daniel Henninger
March 15, 2017 6:52 p.m. ET
Less than three months into full control of government and the chance to reshape the American system for a generation, Republicans are doing something no one thought possible: They are reinventing the circular firing squad.
Even a politician of such limitless cynicism as Chuck Schumer is agog: “We are on offense and united. They are on defense and divided, the opposite of what people would have predicted a month or two ago.”
Maybe in politics, genes really are destiny. Under pressure from a CBO “score,” the genetic disposition of Republican politicians is to go wobbly. The disposition of movement conservatives is to get out the long knives and start carving up other conservatives.
The result will be guaranteed political defeat for years if congressional Republicans choke at the chance to repeal and replace ObamaCare.
The Beltway bubble has never looked so big or real as now, to wit: The Trump-Ryan-Price health-care reform bill is too tough on Medicaid. Or it isn’t tough enough. It will break the Trump entitlement bond with the middle class. We want the 2015 repeal-only bill. Let ObamaCare collapse. What’s the rush? We can do this reform some other time.
The American people didn’t endure and survive the 2016 presidential election for this. The public that voted Donald Trump into the White House will drive Republicans into a deserved wilderness if they go back on the only promise anyone can remember them making the past six years.
The day the Republicans clutch on this reform, there will be six-column headlines across the Washington Post and New York Times: “Trump Abandons Promises on Health Care.”
It will be a fast ride downhill from there. That is because the health-care reform bill is linked inextricably to the politics of tax reform, the second pillar of the Trump legislative agenda.
The CBO score gifted the Republicans with $1 trillion in savings over a decade from the adjusted spending baseline, a number that would carry forward into the score for the tax bill, enabling the lower tax rates on income and capital that will lift the economy. (Remember that promise?)
The cruder political point is that if health-care reform fails under media-driven Beltway pressure, the same timid people will next block the historic tax-reform bill with the same tactics. They will peck it to death with misgivings. Political courage used to have a postelection shelf life of about 12 months. Now it has the life cycle of a moth.
The logic is inescapable of what will happen if reform of both health care and taxes goes out with a whimper. As President Trump’s political capital and approval decline under a barrage of media-payback glee, and as the clock moves closer to the midterm election, Republicans will head for the tall weeds on everything. The Trump presidency will be over in under a year.
The conservative “friends” counseling Mr. Trump to give up now on health-care reform will move overnight to the next darling, say, Sen. Mike Lee who wrote on the Heritage Foundation’s blog Monday that Republicans should vote for repeal only and “take our time” on reform.
In the wake of repeal only, the U.S. health insurance market would be reduced to a shambles. After that, the next major party will be the Libertarians, because the GOP will be defunct. Maybe that’s what cable-TV star Rand Paul is up to.
An important separation may be occurring with this bill. On one side you have the status quo. It’s not just the American Medical Association and others who created the ObamaCare that failed and want its replacement to fail. The status quo is also the activist groups and pundits whose status and power are tied to keeping their opinions first and all else second.
Across from this status quo that is the one real thing that drove the 2016 election: the voting public’s desire for change. The 2016 election seemed like a radical upheaval, but it was mainly a cry for a restoration.
That means restoring the balance of power between the branches of government that was undone by Barack Obama. When some members of Congress say they “won’t vote” for the health-care bill, what they are saying is: “Let’s negotiate. I want something for my vote.” Mr. Trump’s personal willingness to do business with his opposition restores this normal reality to American politics.
The election was also about resetting the balance of authority between Washington and the states—a key goal of this reform’s Medicaid provisions. The Democrats are united in opposition because they’ve become a rule-from-Washington party. But the Republicans?
If this bill fails, there is only one Plan B. It will be a single-payer system enacted after 2020 with votes from what’s left of the Republican party after—Donald Trump is right about this—they get wiped out in 2018 and lose the presidency two years later. After blowing it on ObamaCare, why would anyone vote for them again?
Write henninger@wsj.com.
Appeared in the Mar. 16, 2017, print edition as 'The GOP’s ObamaCare Choke.'
.
The WSJ's Daniel Henninger --- like me, certainly no liberal --- cogently articulated some of my concerns last week:
The Republican ObamaCare Choke
Daniel Henninger
March 15, 2017 6:52 p.m. ET
Less than three months into full control of government and the chance to reshape the American system for a generation, Republicans are doing something no one thought possible: They are reinventing the circular firing squad.
Even a politician of such limitless cynicism as Chuck Schumer is agog: “We are on offense and united. They are on defense and divided, the opposite of what people would have predicted a month or two ago.”
Maybe in politics, genes really are destiny. Under pressure from a CBO “score,” the genetic disposition of Republican politicians is to go wobbly. The disposition of movement conservatives is to get out the long knives and start carving up other conservatives.
The result will be guaranteed political defeat for years if congressional Republicans choke at the chance to repeal and replace ObamaCare.
The Beltway bubble has never looked so big or real as now, to wit: The Trump-Ryan-Price health-care reform bill is too tough on Medicaid. Or it isn’t tough enough. It will break the Trump entitlement bond with the middle class. We want the 2015 repeal-only bill. Let ObamaCare collapse. What’s the rush? We can do this reform some other time.
The American people didn’t endure and survive the 2016 presidential election for this. The public that voted Donald Trump into the White House will drive Republicans into a deserved wilderness if they go back on the only promise anyone can remember them making the past six years.
The day the Republicans clutch on this reform, there will be six-column headlines across the Washington Post and New York Times: “Trump Abandons Promises on Health Care.”
It will be a fast ride downhill from there. That is because the health-care reform bill is linked inextricably to the politics of tax reform, the second pillar of the Trump legislative agenda.
The CBO score gifted the Republicans with $1 trillion in savings over a decade from the adjusted spending baseline, a number that would carry forward into the score for the tax bill, enabling the lower tax rates on income and capital that will lift the economy. (Remember that promise?)
The cruder political point is that if health-care reform fails under media-driven Beltway pressure, the same timid people will next block the historic tax-reform bill with the same tactics. They will peck it to death with misgivings. Political courage used to have a postelection shelf life of about 12 months. Now it has the life cycle of a moth.
The logic is inescapable of what will happen if reform of both health care and taxes goes out with a whimper. As President Trump’s political capital and approval decline under a barrage of media-payback glee, and as the clock moves closer to the midterm election, Republicans will head for the tall weeds on everything. The Trump presidency will be over in under a year.
The conservative “friends” counseling Mr. Trump to give up now on health-care reform will move overnight to the next darling, say, Sen. Mike Lee who wrote on the Heritage Foundation’s blog Monday that Republicans should vote for repeal only and “take our time” on reform.
In the wake of repeal only, the U.S. health insurance market would be reduced to a shambles. After that, the next major party will be the Libertarians, because the GOP will be defunct. Maybe that’s what cable-TV star Rand Paul is up to.
An important separation may be occurring with this bill. On one side you have the status quo. It’s not just the American Medical Association and others who created the ObamaCare that failed and want its replacement to fail. The status quo is also the activist groups and pundits whose status and power are tied to keeping their opinions first and all else second.
Across from this status quo that is the one real thing that drove the 2016 election: the voting public’s desire for change. The 2016 election seemed like a radical upheaval, but it was mainly a cry for a restoration.
That means restoring the balance of power between the branches of government that was undone by Barack Obama. When some members of Congress say they “won’t vote” for the health-care bill, what they are saying is: “Let’s negotiate. I want something for my vote.” Mr. Trump’s personal willingness to do business with his opposition restores this normal reality to American politics.
The election was also about resetting the balance of authority between Washington and the states—a key goal of this reform’s Medicaid provisions. The Democrats are united in opposition because they’ve become a rule-from-Washington party. But the Republicans?
If this bill fails, there is only one Plan B. It will be a single-payer system enacted after 2020 with votes from what’s left of the Republican party after—Donald Trump is right about this—they get wiped out in 2018 and lose the presidency two years later. After blowing it on ObamaCare, why would anyone vote for them again?
Write henninger@wsj.com.
Appeared in the Mar. 16, 2017, print edition as 'The GOP’s ObamaCare Choke.'
.
- gnadfly
- 03-20-2017, 06:52 PM
.According to the previous President, Obamacare wasn't going to add one thin dime to nation debt? Wasn't according to the CBO the bill supposed to be revenue neutral?
.....
The CBO score gifted the Republicans with $1 trillion in savings over a decade from the adjusted spending baseline, a number that would carry forward into the score for the tax bill, enabling the lower tax rates on income and capital that will lift the economy. .....
. Originally Posted by CaptainMidnight
Which CBO projection is he talking about? I haven't seen a favorable CBO projection of any non Obamacare bill.
That's the problem. There needs to be an Obamacare autopsy of it, Medicare, Medicaid, private insurance along with believable numbers of who is getting what for how much.
The CBO is complicit in "fake news." I realize they had to run models with the numbers they were given but their Obamacare predictions are falling apart due to factors that were already known.
I agree that the Republicans have a big issue dealing with Obamacare AND flattening the tax code at the same time.
- gnadfly
- 03-20-2017, 06:54 PM
I believe we start to run into economic headwinds this weekWe still need cheap money. Obama had 8 years of free money.
....
2. Interest rates. This will be interesting on the 15th as well.
Not sure of the math but an interest rate hike will increase our monthly debt
... Originally Posted by canuckeight
- Texas Contrarian
- 03-27-2017, 03:28 PM
I agree that the Republicans have a big issue dealing with Obamacare AND flattening the tax code at the same time. Originally Posted by gnadflyAnd after Friday's debacle, I think tax reform is going to be even more difficult to achieve.
The problem as I see it is that Trump exhausted a large portion of whatever limited political capital he had at his disposal beforehand.
Even honest Democrats agree that something needs to be done about the clusterfuck that answers to the name of Obamacare. But the Ryan-generated bill, if passed, would have guaranteed that Republicans would soon lose the battle in the court of public opinion. And badly, I suspect.
But Republicans faced a lose-lose situation, since dumping Ryan's lemon-flavored production will leave the party flapping in the wind searching for answers, and likely for an extended period of time.
In any event, effective tax reform was always going to be a heavy lift. Among other things, Republicans sharply disagree on the border adjustment tax. But Friday's debacle will likely make matters even more difficult.
It's likely to be a very chaotic year.
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