Trump goes 2-for-2 with quarters topping 3.0 GDP growth

Two consecutive quarters of GDP growth that's 3.0 percent or higher. That hasn't happened in a very long time. How long? How about: Not a single time during the Obama presidency? We've now had two complete quarters of the Trump Administration, and we're 2-for-2. Does the Donald deserve all the credit, or are we talking about a massive case of correlation without causation? It's not completely one or the other, but there are some obvious reasons to believe the change of administrations has a lot to do with the very good news we got on Friday:

---

The Commerce Department announced Friday that the U.S.’s third-quarter growth rate was 3%, following 3.1% in the second quarter. Two quarters don’t settle the argument, but the details inside the Department’s report should tilt the debate toward those who believe the Trump Administration’s proposed business-tax reforms could return the economy to higher growth. Business investment, a laggard in recent years, is gaining strength. It rose 6.7% in the second quarter and 3.9% in the third, with the decline most likely caused in part by the hurricanes. The 3% GDP growth despite the hurricanes surprised most economists. On Friday the White House Council of Economic Advisors released a new report detailing its case for dropping the U.S. corporate tax rate to 20%, which is that a globally competitive rate will reduce the cost of capital here, spur capital investment and produce growth in output and workers’ wages.

If someone wants to argue this has nothing the do with Trump, the most convincing case is that Trump's major economic priorities haven't passed yet. Tax reform is on the agenda but it hasn't happened yet. ObamaCare repeal hasn't happened. If these two things are as important as we've always said they - and they are - then how can you claim Trump's policies are driving the growth? Trump's policies aren't really in place anymore.

---

---

But some of them are. Remember, the decisions of businesses to spend and invest owes a great deal to what they believe is their risk in doing so. When Obama was president, businesses had a reasonable fear of legal and regulatory harassment, not to mention attempts by unions to organize their work forces - often with the government tipping the scales in the unions' favor. Many even found themselves grappling with legal investigations undertaken for little purpose apart from sheer harassment. If nothing else, the departure of Obama meant businesses could breathe easy concerning issues like this. At least they wouldn't face an administration overtly hostile toward business, and seeking ways to use the power of the executive branch to cause them problems. But there's more. By reversing Obama executive orders on offshore drilling, and by approving the Keystone XL pipeline, Trump removed obstacles to prosperity in U.S. fuel industries, not to mention easing the pressure hostile nations can place on us because of our need for fossil fuels. The result has been U.S. strength in global energy markets like nothing we've ever seen before, and puts industries like construction, transport and manufacturing in a strong position to invest because it frees up capital otherwise spent on high-priced foreign fuel. Trump has also worked with Congress to reverse a significant number of Obama-imposed regulations, thus removing significant fiscal and operational burdens on the business community It's no surprise business investment is driving growth. Businesses were reluctant to invest when they had reason to fear the government would not only harass them with regulations and legal investigations, but would also confiscate much of the prospective reward for putting their capital at risk. Two consecutive quarters of 3.0 percent GDP growth is a good start, but it's not the best we can do. Cut marginal tax rates and reduce the corporate rate from 35 percent to 20 percent, and then let's see just what the U.S. engine of growth is really capable of.

---