It’s hard to imagine that Donald Trump
Donald John TrumpTiger Woods calls Nike's Kaepernick campaign a 'beautiful spot' EPA lost more than 1,500 workers in first 18 months of Trump administration: report Trump: Races that GOP was not thinking about winning 'are now very close' MORE, or any Hollywood producer for that matter, could have orchestrated a better rollout for the White House tax plan. Nearly every day another major American company announces bonuses, pay raises, benefit hikes, and the like.
The latest good news comes from FedEx and Exxon, which together will invest more than $50 billion in America. Thousands of added workers will get a pay raise. This brings the total number of Americans receiving Trump bonuses to well over 3 million. That’s an outstanding pace of 10,000 workers a day.
Americans are feeling the love, too. Today, 66 percent of the public ranks the economy as good or great, a complete turnaround from the gloom workers were feeling in the late Bush and Obama years. Most economists ridiculed Trump’s game plan and predicted that it would tank the American economy and crash land the stock market. Three percent growth was written off as the impossible dream.
But we witnessed the economy ramped up to 3 percent and higher growth in Trump’s first full two quarters, but then slipped a bit to a disappointing 2.6 percent last quarter. Were the pessimists right that 3 percent sustained growth is impossible? Not at all. Part of the growth pause was a result of the tax bill’s passage in December.
Economist Arthur Laffer has found that some firms delayed capital and construction projects to Jan. 1 to take advantage of the lower tax rates on profits and the immediate expensing of capital purchases beginning in 2018. Why spend in 2017 when the taxes will be one-third lower in 2018? If Laffer is right, then the growth that would have happened in late 2017 has been shifted into 2018. Expect a blockbuster first half of the year.
Growth creates its own momentum. The combination of high consumer and business confidence, repatriated capital to the United States, lower tax rates on investment, lightened regulation, wealth effects from the booming stock market, and an improvement in international markets adds up to a banner year for 2018.
So how good can it get? I’m predicting 3.5 percent to 4 percent growth for 2018 and into 2019 led by the biggest investment boom in 25 years. Investment has to be the driver of growth because labor force growth is constrained by demographics, although a tight job market and increased pay will lure millions of workers sidelined back into the labor force. We are also seeing a rise in the rate of new small businesses, which is where future growth comes from.
Given that 2 percent growth was the norm during the Obama years, 4 percent growth will feel like getting behind the wheel of a Ferrari after driving a Pinto. What could upset this apple cart? New restrictions on immigration quotas would be an unforced error given our skilled labor force needs. A trade war could send the financial markets into a tailspin. The North American Free Trade Agreement needs to be mended rather than ended. We don’t need a congressional spending splurge either.
But what the economy really needs now is for the government and regulators to step out of the way and let private businesses and industry do their thing. The skeptics are still saying this kind of prosperity isn’t possible, but how many times does Trump have to prove them wrong before they change their mind?
Stephen Moore is a distinguished visiting fellow at the Heritage Foundation, a consultant at FreedomWorks, and a senior economic analyst at CNN. He served as an economic advisor to Donald Trump’s 2016 presidential campaign. You can follow him on Twitter @StephenMoore.
