I have long said that the actions of government are not the primary drivers of the economy. But, insofar as government has influence, the congress has about twice the influence of the President. Also, the influence is not immediate, and certainly does not begin at the moment of election, except in an indirect way on the decisions people make based on their projection of what the new congress and president will do. If this seems obvious, remember that during campaigns advocates for one group or another (okay, only one group usually, but I'm trying to be open-minded here) will quote statistics based on "when Bush was elected in 2000 the NASDAC/unemployment rate/price of gas was..." I have even seen that applied her in NH to the date the NH primary was won, which is a full year before a president even gets to start stealing the White House art and silver.
Remember in the summer of 2000 Bush and Cheney were castigated for "talking down the Clinton economy," which was indeed eroding and did crater, and the dire predictions some few made in 2006 when the Democrats won the mid-term elections, erasing any chance of regulating mortgage derivatives. Neither of those were the whole story, but they are parts of the story that don't get told anymore, so I bring them up.
Thus, claims that the Trump economy started in January 2017 are not fully defensible, whether in praise or blame. I have said that it takes about 18 months for the economy to fully turn over and be attributable to a new congress and president. Don't mistake this for the opposite extreme and think I am saying that this has been the Obama economy until today. But it takes time even to write executive orders, never mind pass legislation and put new policies into effect. There is never a 100% turnover, as actions in the past can have consequences for decades. There are still pieces one could pull out and say "this is the continuing effect of the Roosevelt economy." Yet we can't think twenty levels in every offhand conversation. We have to make some simplifications in order to speak at all.
So the 115th Congress (majority Republican) with influence from Trump now deserves primary blame or credit going forward for the economy inherited from the 114th Congress (majority Republican) with influence from Obama. Ordinarily I set the 50-50 point about a year after the new Congress starts, accelerating after that. Because Donald Trump was dramatic and the responses to him were dramatic, I would be inclined to assign him greater, and quicker influence than other presidents. Still, not so much as Congress. And neither so much as a dozen other influences: technology, the Fed, wars, trade agreements...and the random nature of so much of life.
Trump's supporters want to give him all credit for everything since January 2017. I think he has done well, but I also think it's an exaggeration to give him - or any new president - that much credit or blame.
8 comments:
Assistant Village Idiot: Thus, claims that the Trump economy started in January 2017 are not fully defensible, whether in praise or blame.
The only thing we might add is that different effects take differing amounts of time to take place. So, the corporate tax cut should spur at least some investment, plus parasitize overseas investment, which should spur longer term growth. However, the policy is pro-cyclical, so due to the tight labor market, reduction in immigration, and that it was funded through deficits, it may result in increased inflation and pressure on interest rates.
The expansion that began under Obama is still ongoing, and the current administration should implement a policy of steady economic improvement, especially this late in the market cycle.
Animal spirits is the term John Maynard Keynes used in his 1936 book The General Theory of Employment, Interest and Money to describe the instincts, proclivities and emotions that ostensibly influence and guide human behavior, and which can be measured in terms of, for example, consumer confidence. It has since been argued that trust is also included in or produced by "animal spirits".
https://en.wikipedia.org/wiki/Animal_spirits_(Keynes)
Economic expansion is triggered by the supply side, demand being unlimited. In other words, investment. Businesses do not invest when the future is uncertain. One of the major factors driving uncertainty is regulation and the prospect of more of the same. Regulation is the one area that the president has considerable power. Trump's restraint of the regulatory agencies is probably the major factor in the current rather impressive growth.
Roy Lofquist: Trump's restraint of the regulatory agencies is probably the major factor in the current rather impressive growth.
The current real GDP growth rate is not remarkable for the expansion which began in 2009.
Zachriel,
GDP is a very poor measure of economic progress.
https://en.wikipedia.org/wiki/Gross_domestic_product#Limitations_and_criticisms
Of more immediate interest:
1. Lowest unemployment rate in 18 years.
2. Lowest minority unemployment rate ever.
3. Record receipts by the federal government.
4. 30% rise in the stock markets.
Institutional investors do not sit on the increased value of their assets. They are leveraged into new investments.
This just in: lowest unemployment rate in 45 years.
http://www.breitbart.com/big-government/2018/06/14/ongoing-unemployment-drops-to-lowest-level-since-december-1973/
Roy Lofquist,
Again, they are consistent with the continuing expansion since 2009.
Civilian Unemployment
Unemployment, African American
Federal Receipts
Dow Jones
I will simply note that Zachriel has not seemed to read, and certainly not addressed, paragraphs 1-4.
Assistant Village Idiot: I will simply note that Zachriel has not seemed to read, and certainly not addressed, paragraphs 1-4.
We certainly read, and then largely agreed with your post, which is why we didn't address all the specifics.
Assistant Village Idiot (Paragraph 1): I have long said that the actions of government are not the primary drivers of the economy.
Agreed. The federal government can only act in a general way over the market economy. However, it can throttle, stimulate or dampen, overall economic activity. It can also enhance technological advances through scientific investment, but that's not at issue here.
Assistant Village Idiot (Paragraph 3: Thus, claims that the Trump economy started in January 2017 are not fully defensible, whether in praise or blame.
Agreed. The current economic expansion is a continuation of the expansion that began in 2009. Prudent policy can help maintain that upward trajectory, but there are contradictions inherent in every expansion that result in the market cycle.
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