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600-page White House report: Why yes, Obama’s policies did cause all that puny economic growth

By —— Bio and Archives--February 22, 2018

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600-page White House report: Why yes, Obama's policies did cause all that puny economic growth
I’m not sure we needed a 600-page report to tell us that. We’ve dealt with it often here, simply because we’re paying attention. But if you want the data and the policy correlations to back it up, the White House economic team has done the work for you.

The Wall Street Journal’s news pages seem to think it’s untoward that Trump’s team is blaming Obama:

President Donald Trump’s first official economic report to Congress makes a lengthy case that the U.S. economy has been weak in recent years, not because of the severity of the most recent recession, but because of policy mistakes by Mr. Trump’s predecessor.

“The stagnation of America’s middle class in the wake of the recession is much worse than believed, and government policy under President Obama should share some of the blame,” said Kevin Hassett, the chair of the Council of Economic Advisers, the lead author of the report and the president’s top economist. “One explanation for this historical slowdown is that Obama’s tax and transfer policies worsened the wound.”

The nearly-600 page Economic Report of the President, released Wednesday, is the most detailed analysis of the economy and economic policy by Mr. Trump’s staff. By reversing the Obama administration policies, the report argues, the economy will be able to grow 3% a year over the next decade.

“In recent years, the pursuit of alternative policy aspirations at the expense of growth has imposed real economic costs on the American people, in the form of diminished opportunity, security, equity, and even health,” the report said.

Mr. Hassett said the report is also critical of other administrations, noting that trade deals of recent decades were “filled with concessions that relatively feckless negotiators of the past made to our trading partners.”

In chapters on taxes, regulation, labor market policies, infrastructure, trade, health and cybersecurity, the Trump administration argued that its policies would provide modest boosts to gross domestic product that, when added up, would be sufficient to shift output onto a higher trajectory over the next decade.

Liberals argument of the so-called Great Recession of 2008-2009

The idea that growth under Obama should have been less because the recession preceding it was so severe is simply bizarre. Historically, the growth you experience after a recession is faster than usual because pent-up demand rewards greater productivity once the shackles are off.

I’ve often heard liberals try to make the argument that the so-called Great Recession of 2008-2009 was a “very unusual event” that didn’t follow the pattern of other recessions, and that this was the reason we needed to get used to the “secular stagnation” that would give us nothing better than 2.0 percent growth as far as the eye could see.

The Journal’s lead seems to embrace that thinking full-on, but it’s a nutty argument with no basis in fact. What caused the crash of 2008 was a meltdown in the mortgage market, brought on by far too many people who had qualified for mortgages (often with government backing) that they couldn’t pay off or even stay current on. There got to be so many of these toxic mortgages that the government decided to step in with massive cash infusions to prevent the banks who held them from collapsing.

A lot of people faced foreclosure, but that should in no way have prevented large-scale productivity. Those who defaulted on this mortgages often ended up in more affordable - if not as luxurious - living conditions that better suited their economic conditions and freed them up to spend more money on their basic everyday needs.


Continued below...

$862 billion “stimulus” that was supposed to pay for “shovel-ready” construction jobs

What didn’t help was Obama’s policy priorities. The $862 billion “stimulus” that was supposed to pay for “shovel-ready” construction jobs did little of that, and if it was supposed to fuel a growth explosion it failed miserably - as public spending usually does when it’s politically directed. Engineering a government takeover of the health care industry surely didn’t help, and the same is true of Obama’s eight-year long regulatory and investigative assault of the American business sector.

If economic policy at the federal level didn’t suppress growth, then we shouldn’t see any better growth now that the Trump Administration has emphasized lower tax liabilities and lighter regulation. So far we’ve averaged just about 3.0 percent growth in the past three quarters, and we’ll see what happens during this first quarter when the tax cut and the other policy changes are fully in effect.

So should the Trump economic team have issued a report blaming Obama for the poor growth we had during his presidency? Absolutely. If we don’t identify the causes of our problems, we’re not going to know how to solve them. And you’re certainly not going to hear this from CNN, MSNBC, ABC, CBS, the Times, the Post . . . so someone has lay it out there.

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Dan Calabrese -- Bio and Archives | Comments

Dan Calabrese’s column is distributed by HermanCain.com, which can be found at HermanCain

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