If you’ve been watching the news lately you’ve been hearing Trump and certain of his advisors (Mnuchin and Cohn) talking about the pro-growth economic strategy they’re going to be implementing in the White House.
Judging by what they’ve said there’s trickle-down aspects to it and Keynesian aspects to it as well, likely shaping up a bit like Reaganomics and bit like nothing we’ve really ever seen before. Basically their plan is to cut taxes for the very wealthy but also for corporations, to roll back regulation across sectors (finance, energy, pharma, metals & mining, etc.), to invest heavily in infrastructure and the military, and importantly, to renegotiate international trade deals to more strongly favor US economic interests (aka keep jobs here and rebalance our trade deficits).
At the end of the day, folks like Mnuchin and Trump are saying we could hit 4% sustained economic growth in the US.
Now, there are plenty of people who say this is never going to happen. There others who say it certainly could. What I’m so amazed with is why nearly everyone, whether they think it can happen or not, wants it to.
Yeah, I said it. Who needs 4% growth?
Now before you either freak the eff out or just stop reading, let me do a little explaining. I’ll preface by saying that all else being equal, 4% economic growth is obviously an awesome thing that would benefit everybody. Now shut up allow me to walk through my argument one step at a time:
- I don’t have the numbers in front of me but basically Obama never reached that golden 3% GDP growth (never really got that close)
- However, despite all the doom and gloom of the Republican/populist rhetoric (#tombstonefactory), the economy’s not doing that bad…
- Obama finished out his presidency with 4.8% unemployment in the US, which is pretty much at historic lows
- Corporate earnings have improved, inflation is showing life, the Fed successfully raised rates, global growth has stabilized, and the Dow just broke 20,000
- PSA: This post isn’t about Obama or how he did or didn’t do a good job
- The point is, it’s not amazing out there, but we’re doing fine. People have jobs in America right now. There’s really no emergency
- Trump comes in and the stock market shoots up and there’s political optimism and suddenly 4% could be real. But honestly, any President could create a “Trump rally”, including Obama
- All you have to do is go in and say you’re going to stop regulating everything. I mean duh it’s going to be good for our economic growth if you let oil companies do whatever they want and you promise to pour money into defense…
- The reason this didn’t happen under Obama and other presidents is that they didn’t want to let industry run wild. They wanted to implement regulations. For a reason. Whether these regulations were excessive or not is a different argument, but the point is, they knew there were economic costs to these moves and saw it as worth it
- Personally, in a general sense, I agree with them. And here’s where I finally get to my point:
- 4% or 3% or what have you, is just a number. A very meaningful number, yes, but it’s not perfect. It obviously does not reflect any of the moral/ethical/human rights etc. side effects of our economic output. But even more importantly, it totally fails to capture any effects to our economic growth that may occur down the line
- For example, 4% growth in an oil-pumpin’ Trump economy would totally ignore the fact that fossil fuel resources are (extremely) limited. It would also totally ignore the fact that environmental damage resulting from increased fossil fuel use has massive costs to our economy (natural disasters, managing air pollution, and the big whammy: a lack of investment in alternative energy, the growth driver of the future)
- PS China and India are investing big time in green energy, software/consumer products and slowly withdrawing from fossil fuels and heavy industry
- Other costs include the possibility of another global financial crisis as a result of financial deregulation and the possibility of trade wars as a result of protectionist foreign policy
- In a general sense, we’d be trading fantastic growth in the short term for a whole slew of inevitable problems and disadvantages in the future. Investing in dying industries in favor of new, growing ones for the sake of holding onto to soon-obsolete jobs (Dead man walking!)
- And for what? As discussed ten or so points ago, our economy is doing fine. Not fantastic, but just fine. Why risk it all?
- I was perfectly happy in the 2% growth world. Where we were near full employment, I could still breathe the city air, Planned Parenthood was funded, and I wasn’t the least bit worried about the next frickin’ mortgage crisis