The only reason Donald Trump’s goal of 4 percent annual economic growth seems so high is that economic growth under the Obama administration has been so low.
Many economists never had high expectations for President Obama’s economic policies, which have created the most lackluster economy of any president in modern times.
Thus when Republican presidential nominee Donald Trump talks of 4 percent economic growth, the left and the media shake their collective heads. If Obama’s unprecedented levels of government borrowing and spending and regulations couldn’t jump-start the economy, they wonder, what could?
The answer is that government spending and regulations are a drag on the economy, not a boost.
Historically, 3 percent to 4 percent economic growth, or higher, is the norm for the U.S. economy. It’s Obama’s underperforming economy that’s the outlier.
According to the World Bank, over the past 54 years, the economy hit or exceeded 4 percent growth in 35 percent of the years. Add in those years with a 3 percent economic growth rate or more and it’s more than half.
President Obama has never had a year of 3 percent economic growth — never. Indeed, he holds the record for the longest string of sub-3 percent economic growth.
Sometimes it isn’t good to be No. 1.
And yet the president is as clueless about why his economic policies have failed as he is about why millions of Americans lost their health coverage, or why health insurers are fleeing Obamacare exchanges, and why the young and healthy decided not to play his health insurance game.
Remember his multiple “Summer of Recovery” initiatives that would finally jump-start the economy? Nobody else does either?
Democratic presidential nominee Hillary Clinton excuses Obama’s poor economic performance by claiming the 2007-09 recession was the worst downturn since the Great Depression. But as many economists have pointed out — most recently, Harvard economist Robert J. Barro in the Wall Street Journal — historically, the deeper the recession, the larger the recovery.
A big economic dip is usually followed by a big economic bounce — but we never got the bounce under Obama.
What does it take to hit 4 percent economic growth?
The short answer is a new president with different policies. But we won’t get that with Hillary Clinton, who is campaigning to be the third term of Obama’s presidency — or worse. That means higher taxes and more government spending. And it means more government mandates imposed on business, such as a higher minimum wage and more benefits, along with price controls if things don’t go the right way, which they won’t.
My prediction is that if Hillary becomes president and is successful in implementing most or all of her economic policies, 1.5 percent economic growth will be considered a good year.
Trump, by contrast, proposes the most important corporate income tax cut yet.
A 15 percent corporate tax rate, rather than the current 35 percent rate — the highest in the developed world — would spur massive business investment. And for the simple reason that potential investments that don’t make sense at a 35 percent tax rate could make a lot of sense at 15 percent.
Just ask yourself how many consumers would refuse to buy a major item such as a new car at one price, but would pull out their checkbooks if that item cost 20 percent less.
The Tax Foundation estimates that the Trump tax plan would reduce federal revenues by between $2.6 trillion and $3.9 trillion over 10 years. That estimate has shaken the big-spenders because they think the government needs moreof your money, not less.
But if the government hasn’t extracted that money from you and businesses, you are free to spend it yourself.
Besides, an economy growing at 4 percent needs less money for welfare benefits, Medicaid coverage, and other means-tested handouts — because more people will be on a payroll rather than the government dole.
Eight years of the Obama administration have lowered our expectations in many areas, but none so much as economic growth. Too many people now think that a 2 percent growth rate is the new normal.
But it will only be “normal” if big-spending and high-tax presidents are the new normal.