All of a sudden all of the political pundits, media reporters and economic sages are spreading doom and gloom on the economy. Here we are in the midst of the biggest and most joyous boom in 30 years and seemingly every headline shouts it can’t and it won’t last. Many liberal economists are now forecasting the economy is running out of gas and America will slide into recession in 2020 because the effects of the tax cuts will die out.
Even many conservatives are worried that the Pelosi Congress will crash the economy with a torrent of anti-growth initiatives — from tax hikes to minimum wage increases to reregulation of the energy, financial services, and health care industries, to a $30 trillion new Medicare for All health care entitlement.
Well, the economy could slip into recession in 2020, sure. But the last people you would want to ask for advice is the same gang of economists who said the boom of the last two years couldn’t possibly happen in the first place. It was just a little over two years ago that Larry Summers, Paul Krugman, Steve Ratner and so many other Trump haters predicted a global economic plane crash if Trump won the election. Instead of a mini-depression, we got 3 to 4 percent growth for the first time in a decade. Larry Summers assured us that above 2 percent growth was nearly impossible to achieve. Maybe it’s time to throw these sages out of the economics profession for malpractice.
As for the conservative worry that the Democratic-controlled House and the resistance movement will disrupt the prosperity path — forget about it. Yes, Pelosi and company are filled with a catalog of economically illiterate ideas. But happily, none of them have even a scintilla chance of passing through the Republican Senate with 60 votes. Even more remote is the possibility that Trump would sign into law anti-growth measures. Trump loves a booming stock market and a surging high-employment economy.
What we will have is two years of policy paralysis and that may be exactly what Wall Street and main Street need right now. Let the power of the tax cuts, energy policies and deregulation work their magic.
All the self-important policy tinkerers inside the halls of power in Washington who think that the galaxy revolves around them may not like to hear this, but when the economy is doing well, all we need is to get the policymakers out of the way. Less is more.
Economic booms don’t burn themselves out and they don’t die of old age. Every recession in American history can be traced to lame-brained policy mistakes. Smoot-Hawley tariffs and price deflation in the late 1920s, the regulatory state and the hyper-inflation of the 1970s, 100 percent government guarantees on low-downpayment mortgages in the 2000s and Barney Frank’s infamous “roll of the dice on the housing market.”
Are threats on the policy horizon? Yes. Trump’s tariffs — especially on steel and aluminum — are problematic and the prospect of a protracted trade war with China would hurt the growth rates of both nations — China far more than us, though. What the pessimists are missing here is that if Trump can pull off a trade deal with Beijing that opens up Chinese markets to American businesses, the U.S. economy and the Dow-Jones will skyrocket.
My bigger worry now is the Federal Reserve Board’s assault on growth and higher wages. The Fed keeps responding to higher growth by raising interest rates even with almost no hints of inflation and with commodity prices falling — which is deflationary. The Fed is too tight.
Trump is right that the party is just starting and there’s no reason to carry away the punch bowl. If Nancy Pelosi and Fed chair Jerome Powell will just get out of the way, this boom, ladies and gentlemen, can last another five years.
Stephen Moore (@StephenMoore) is a senior fellow at the Heritage Foundation and an economic consultant with FreedomWorks. His new book with Arthur Laffer is “Trumponomics.”
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.
