Tags: Trump Administration | trump | obama | economy.stagnation

US Roars Because Trump Reversed Obama Stagnation

US Roars Because Trump Reversed Obama Stagnation
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Thursday, 20 February 2020 01:32 PM Current | Bio | Archive

The U.S. economy is the best it has been in more than a decade. The robust economy is due entirely to President Donald Trump’s policies which include reversing former President Barack Obama’s policies.

In fact, had Obama done absolutely nothing, the economy would have been in much better shape.

Obama’s policies resulted in the slowest recovery ever.

When Obama entered office, the economy was in the middle of a severe recession mostly triggered by the financial crisis. Normally when the economy enters a deep recession, government policy is geared to increase growth. The economy usually springs back quickly.

After the recession in 1961, President John F. Kennedy took action to stimulate growth. In 1962 growth was 6.1%. After the very deep recession in 1982, President Ronald Reagan took action to stimulate growth. In 1984, the economy grew at a 7.2% annual rate. After the deep recession in 2009, Obama took action to cure perceived social injustices, instead of stimulating growth. The result was that the economy never reached even 3% growth.

Obama did convince Congress to pass a massive spending bill. The bill did not stimulate growth. It did increase the annual deficit from $455 trillion in 2008 to $1.4 trillion in 2009. The country is still struggling to get the annual deficit down.

Obama’s stimulus package increased unemployment compensation for the unemployed, increased spending on food stamps and welfare and provided healthcare for the unemployed. While Obama viewed this as a benefit to those in need, the real effect was to allow workers to stay unemployed for a longer time period instead of seeking employment. This tended to slow economic growth.

Obama thought it was an injustice that all Americans didn't have health insurance. He convinced Congress to pass the Affordable Care Act (ACA). There were 21 new or increased taxes in the ACA. Those taxes reduced disposable income and tended to slow economic growth.

In addition, the ACA eventually required all employers with at least 50 employees to provide health insurance for all employees who work at least 30 hours per week, or pay a fine in excess of $3,000 per employee per year. This added to the cost of labor for business and tended to slow economic growth.

Obama thought it was an injustice that banks took advantage of lower-income borrowers by granting mortgages the borrowers simply couldn't afford. Obama believed this is what caused the entire financial crisis. To stop this “predatory” lending, Obama convinced Congress to pass the Dodd-Frank bill. The law did eliminate predatory lending but it also reduced all bank lending.

When banks are not lending there is no multiplying effect of monetary policy. This tended to minimize the impact of the vast increases in the money supply. That tended to slow economic growth.

Obama also thought it was an injustice that business took advantage of consumers. Obama, mostly through executive order, imposed thousands of new regulations on business which Obama felt would protect consumers. These regulations added to the cost of business and tended to slow economic growth.

While economic growth hit 2.9% in 2015, the best growth rate during the entire Obama administration, growth slowed to 1.6% in 2016. During the fourth quarter of 2016, growth slowed to 1.2%. The economy was heading for recession.

Had Obama done nothing and not passed any legislation, economic growth would have been much better. Every action Obama took, tended to slow economic growth. But the actions did tend to cure Obama’s perceived social injustices.

In 2017, Trump entered office. He immediately eliminated thousands of counter-productive and growth-slowing regulations. Growth increased to 2.4%.

Trump convinced Congress to cut taxes for all Americans. This increased spendable income for consumers and increased capital formation for corporations. This tended to increase economic growth so that in 2018 growth increased to 2.9%. Had the Federal Reserve (Fed) not increased interest rates eight times from the end of 2016 to the end of 2018, growth would have easily exceeded 3%.

Trump also convinced Congress to repeal the growth stifling portions of Dodd-Frank. Last year, the Fed decreased interest rates three times and stopped their policy of reducing their balance sheet which shrinks the money supply. This, coupled with the Fed’s realization that raising interest rates was counter-productive, should lead to higher growth this year.

The current economy, with higher growth, lower unemployment, rising wages, and reduced income inequality is all a result of Trump’s growth-inducing policies.

Any notion that Obama is responsible for today’s good economy is pure poppycock.

Dr. Michael Busler, Ph.D., is a public policy analyst and a professor of finance at Stockton University in Galloway, New Jersey, where he teaches undergraduate and graduate courses in finance and economics. He has written op-ed columns in major newspapers for more than 35 years.

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DrMichaelBuslerPhD
The current economy, with higher growth, lower unemployment, rising wages, and reduced income inequality is all a result of Trump’s growth inducing policies. Any notion that Obama is responsible for today’s good economy is pure poppycock.
trump, obama, economy.stagnation
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2020-32-20
Thursday, 20 February 2020 01:32 PM
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