Comparing a Trump Turbo-Charged Economy with the Reagan Recovery

Trump’s economists are far too conservative in estimating the effect of Trump’s Reaganesque policies economic policies. Why shouldn’t Reagan-like policies yield Reagan-like results of 5%, 6% or even 9% growth?

From Donald Trump’s own website comes: “The Trump campaign’s economist estimates that the plan would conservareagantively boost growth to 3.5 percent per year on average, well above the 2 percent currently projected by government forecasters, with the potential to reach a 4% growth rate.” This may well be a far too conservative an estimate. While Donald Trump is an eternal optimist, he is also a conservative businessman. Trump’s motto is, “under budget—ahead of schedule.”

 

But consider the Reagan Recovery. Much of Trump’s plan is what Reagan accomplished. Reagan lowered tax rates across the board. Reagan reduced regulations and employed a sound money Federal Reserve policy. As a result, two years into his administration the amazing 92 month Reagan Recovery began. To quoting Peter Ferrara:trump

 During this seven-year recovery, the economy grew by almost one-third, the equivalent of adding the entire economy of West Germany, the third-largest in the world at the time, to the U.S. economy.  In 1984 alone real economic growth boomed by 6.8%, the highest in 50 years.  Nearly 20 million new jobs were created during the recovery, increasing U.S. civilian employment by almost 20%.

Three percent was the lowest quarterly growth rate under Reagan. Growth rates hit 9% in Reagan’s second quarter and typically ranged real-gdp-growth-recoveryabove 5%.

A Trump turbo-charged economy has advantages that Reagan did not. First of all, Reagan began with double digit interest rates. Today, the United States interest rates are at historic lows. Because of these low interest rates, a business friendly administration may see real investment soar within his first 100 days. The Reagan recovery, on the other hand, took two years to get started.

Secondly, America is in the process of a fundamental energy transformation. New clean technologies in coal and in fossil fuel extraction has the potential to make the United States no only energy independent but an net exporter of energy. This combined with an America first trade policy could easily foster even more investment in U.S. manufacturing.

Third, assuming there is some relationship between the unemployment numbers and reality, American workers are in more demand than they were during the Reagan’s years. When Reagan first took office obama-vs-reagan-jobs1unemployment was at 7.5%, and before his policies took hold the unemployment rate rose to 10.8%. All of these factors speak to a quick increase in net household income for every American. This net increase in household income will, in turn, increase economic demand and spur further domestic growth.

Finally, thanks to the Reagan Revolution, the cold war is over. Yes, Trump is committed to increasing the strength of the U.S. military, but America does not face a challenge similar to that of Reagan’s. The war on terrorism will take common sense and vigilance, but it will demand international cooperation rather than demanding the projection of a world-wide American military presence.

If the Reagan Recovery hit 9% and ranged well above 4%, why shouldn’t a turbo charged Trump economy accomplish similar results.cvuyjw5umaal6yf

There is one more reason to be optimistic about a Trump economic explosion— the repeal of Obamacare. By some estimates the economic growth in 2014 would have been ten times greater without the burden of Obamacare. While it is true that Trump has not specified cuts in domestic spending similar to Reagan’s, simply repealing the Affordable Care Act in itself will achieve a very similar result.

A projected growth of 3% to 4% over ten years is far too conservative. Instead, we can expect an economy at least as robust as the Reagan years and that will be reason enough to celebrate a Trump victory for generations

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