The Trump Economy and Buyer Psychology
There was one thing most voters agreed on before the 2016 presidential election, and that was that Donald Trump was a good businessman and would likely do a good job handling the economy. After eight years of halting, lackluster economic growth under the heavy government hand of President Obama, Trump's supporters hoped The Donald would be able to unshackle the economy and inject real growth back into the country's business environs.
He has done so. The facts are irrefutable:
Stocks are markedly higher than at the end of Obama's tenure. The Dow is over 26K now (mid-Aug. 2018) compared to 19.8K when Obama left office, and the more broadly based S&P 500 is over 2,800 now compared to 2,270 when Obama left office.
Unemployment is down to 3.9%, the lowest in decades.
Economic growth: The GDP rose at a 4.1% annual pace in Q2 2018, compared to a tepid 2.14% average GDP growth in the 2010-2016 recovery years under Obama.
The question is why, and how much is this president – or any president – really responsible for the economy's performance, good or bad?
Rabid, resentful liberal partisans – still reeling in utter shock and disbelief over Hillary's ignominious defeat, and eager to downplay any Trump success – are only too quick to point out that they feel that Obama handed Trump an altogether better economic hand than the one President Bush gave to Obama, so President Trump had a "head start" over Obama. With the country's banking system supposedly teetering on the brink of total collapse in the waning Bush years (according to liberal revisionists), it is Obama who deserves the credit for stabilizing a potentially calamitous situation and bringing order and sanity back to American economic markets. In liberal chronicles, any further growth in the ensuing Trump years is the result of Obama's measured, steady hand on the financial tiller as he masterfully guided the fragile American economic boat around the rocky shoals, as it were, and avoided additional damage.
Nice story. Blatantly untrue, however, despite the popular narrative put forth by the liberal mainstream media and repeated endlessly by accuracy-challenged Democratic politicians. The banking crisis was brought about largely by Democratic-sponsored, P.C.-driven lowered lending standards, which led to the creation of mortgage loans to borrowers patently unqualified to receive them. It was a financial time bomb waiting to go off. It finally did, and when it happened, the brilliant, heroic efforts of Sheila Bair (head of the FDIC under President Bush) ensured that not a single bank failed, maintaining confidence in the system and preventing an out-of-control run on the banks. In fact, President Bush put in place all the solutions to the crisis – including TARP – and the system was already recovering by the time Obama took office several months later.
Much to the total chagrin of rabid, resentful conservative partisans, however, Obama does deserve some credit. His calm, reassuring demeanor did indeed deliver a settling effect to deeply worried world markets. And while his "Stimulus" was little more than political showmanship of essentially no tangible positive economic value, it did demonstrate that the American administration was engaged and willing to take action. Sometimes, appearances can be as meaningful and comforting as substance. The world breathed a sigh of relief: the president was hands-on. Things would get better.
They did. Unfortunately, they didn't get that much better. Once past the immediate danger of the Great Recession, the Obama recovery was the weakest economic recovery after a recession in over 50 years. The weak recovery was indeed Obama's fault, as he took the opportunity presented by a desperate economic situation to impose his onerous, punishing ideological thumbprint on what he saw as the unfair aspects of our free-market system.
Under the banner of the undefinable but haughty-sounding phrase of "social justice," Obama targeted businesses with a raft of thicket-like, punitive regulations, increased their taxes and generally made it far more difficult for private businesses – large and small – to make a substantial profit. Make no mistake: the unspoken, never-admitted-to but unquestioned target of his actions was private business, owned and run, in Obama's mind, mostly by conservative Republicans, whose ill gotten profits never filtered down to the "deserving" – his voting base. Obama would change that.
For example, he weaponized the EPA by empowering the bureaucrats there to impose new emissions regulations so intentionally, unrealistically strict that targeted companies would be virtually forced out of business. Another action was his ACA Obamacare, which weighed down companies with virtually untenable financial requirements and new taxes for providing mandatory health care coverage for their employees. These are just two of the most visible of an uninterrupted eight-year string of anti-business actions on Obama's part. The net result of Obama's web of politically motivated anti-business taxes and regulations was an incredibly weak economic recovery – one that averaged only about 2% annual GDP growth from 2010-2016.
The real culprit of Obama's actions was the creation of tremendous uncertainty. Companies simply didn't know what new punishment, regulation, or tax awaited them around the bend. One anti-business action after another was flung at them by the Obama administration; companies were shell-shocked into inaction. They dared not make a risky move in terms of aggressive expansion or major capital investment for fear of yet another social justice landmine being tossed in their path.
Whether it's an individual, the head of a household, or the CEO of a billion-dollar company, when the outlook is uncertain and likely negative, it's human nature to play things conservatively, close to the vest, and take no chances. People spend the bare minimum, just enough to get by. Families cut back: no new car or extravagant vacation this year. Not until things improve. Companies don't expand, and they don't hire beyond what's absolutely necessary. They go into cost-cutting survival mode, hoping to ride out the storm.
That is precisely the negative atmosphere that Trump has removed, and that's why things are so much better. Buyer psychology is buyer psychology, regardless of scale. "Buyers" – individual consumers, heads of households, hiring agents, corporate purchasing managers, expansion-minded CEOs – all feel immeasurably more confident and certain about the economic landscape now, under President Trump, than they did under Obama. People don't feel that they're going to be blindsided or have the rug pulled out from underneath them. This administration has earned the confidence of the business community by rolling back punitive regulations and lowering taxes in a commonsense fashion, and it shows in the employment gains across all demographic groups; the markets' performance; and the GDP growth, which is averaging above 3% and poised to go higher, something that eluded the anti-business Obama administration.
President Trump deserves direct, unequivocal credit for the current economic turnaround. His removal of unneeded, punishing regulations and his tax-cutting measures have sent an unmistakable signal to buyers of all stripes and sizes that the country's business conditions really are better and it's safe to come out now. President Trump understands "buyer psychology" the way few, if any, past presidents have. This is a prime example of presidential leadership, coming from a skilled, experienced businessperson and exercised to the good of all Americans.