The Commerce Department released on Friday its first estimate of second-quarter economic growth, and the only good thing we can say is that 2.1 percent was better than expected.
But at least we can take comfort in 2018, when the economy grew at 3 percent annually, right? Um …
Actually, Commerce also announced a revision for 2018, lowering growth from 3 percent to 2.5 percent. Ouch!
Economic growth was revised up for 2017, to 2.8 percent—still below 3 percent.
Trump’s economic performance so far is better than the 2.1 percent average economic growth over President Obama’s eight-year tenure—but not a lot.
Remember how conservatives criticized Obama for never having hit even one year of 3 percent economic growth (though he did hit or exceed 3 percent in some quarters)? Conservatives dubbed it the slow-growth economy.
Yes, the economy was growing, but it was underperforming because of Obama’s policies and massive government spending.
Well, apparently things haven’t changed all that much, and arguably for the same reasons.
The economy certainly has some strong points, thanks in large part to tax reform, with unemployment hitting historic lows, wages rising and consumer spending up.
But the Commerce Department saw a reduction in private business investment, a delaying of investment decisions amidst the trade uncertainties, and a large decline in foreign investment in the U.S.
And who can blame businesses? Employers don’t know if they or vendors in their supply chain could be hit with tariffs or other restrictions, which tend to lead to declining sales and lost profits.
In short, businesses can see the yellow caution flags waving and many are taking cautionary steps.
Unfortunately, the economic growth reduction exacerbates another problem—the $22 trillion national debt.
Many deficit hawks have changed their narrative. If Congress won’t control spending, at least a strong Trump economy with 3 percent growth—and maybe 4 percent in the near future—would bring in additional revenue to help offset the deficit spending.
At this point no one can confidently predict 3 percent growth in the near future.
Yes, the Federal Reserve Bank may have been too aggressive in raising interest rates. But the reason it is considering lowering interest rates at its meeting this week is because it can see the economic headwinds facing the U.S. and many other countries—caused in large part by the economic disruptions and uncertainties created by trade wars.
Trump sees a strong economy as a referendum on how well he’s doing as president—and as key to his reelection chances. A 2.5 percent growth rate is nothing to boast about.
If the president still wants to hit the 3 percent mark before his reelection, he will need to get most of the trade issues resolved—quickly.
July 30, 2019