The Democrats' Real Priority
In January 2009 Barack Obama was sworn in as president. At the time, the U.S. was in the midst of a severe recession. The top priority for government economic policy should have been economic growth. Growth would quickly end the recession, start a recovery that should last a year or so and then lead to a six to eight percent expansion. Unfortunately, that never happened.
The Federal Reserve massively increased the money supply and dramatically reduced interest rates to near zero. That alone should have stimulated economic growth. Then Congress passed a massive government spending bill that resulted in the annual budget deficit topping $1.4 trillion in 2009. The deficit stayed above $1 trillion for the next three years. That too should have led to increased economic growth.
But that didn’t happen either. In fact, during President Obama’s eight years in office, annual growth never reached even 3%. The historical average for annual economic is in the 3% to 3½% range. Obama was the only president in history to serve a term in office without having one year where economic growth was at least 3%.
There is a simple reason why growth never accelerated and why the slow economic recovery lasted until President Trump took office. Currently the economy is finally in expansion, likely resulting in 2018 being the first year annual economic growth exceeded 3% since 2005.
The simple reason is: President Obama’s top economic policy priority was curing perceived social injustices rather than stimulating economic growth. Each time Obama took action to solve these perceived social injustices, burdens were placed on economic growth.
The Affordable Care Act (ACA), the Dodd/Frank bill, raising taxes on the highest income earners, raising the capital gains tax and imposing thousands of new regulations were meant to cure those perceived social injustices. Instead they added burdens to economic growth and stagnated the economy, while doing little else.
The ACA added to the cost for business. The Dodd/Frank bill caused banks to severely limit lending. Raising taxes on the highest income earners and raising the capital gains tax reduced capital formation. New regulations added to the cost of doing business. Each of those action, tends to reduce economic growth.
The most expansive Monetary and Fiscal policies ever simultaneously implemented in the U.S., failed to grow the economy, although the actions were enough to at least end the recession. The problem was that the economy never got out of recovery and into expansion.
As a result of President Trump’s policy of placing economic growth as the top priority, we have finally entered an economic expansion. Unless a newly elected Democratic House of Representatives forces some growth stifling policies through Congress and/or the Federal Reserve gets too aggressive, the expansion should continue for many years.
But the Dems say that when they take office in January, they will put curing perceived social injustices as their top priority. Many Dems perceive Donald Trump as president, to be the most pressing social injustice. As such, many Dems want to continue to resist Trump’s policies and some still want to impeach Trump, even though there are no impeachable offenses.
The Dems know that they won’t be able to put any of their agenda into law, since both the President and the Senate are in the hands of the GOP. If the Dems were truly concerned about improving the welfare of Americans they would try to work with the GOP to keep the expansion going.
Instead they will concentrate on introducing bills that have no chance of passage and the will continue to try to find the nonexistent collusion between the Trump campaign and the Russians. This will be a waste of time and resources for both the Dems and the GOP.
If the Dems could finally get over the fact that they lost the presidency in 2016, they may be able to push through at least some of their policy goals. The Dems should realize that President Trump has the mind of a Republican and the heart of a Democrat. As such he may be sympathetic to at least some of their policies.
Most of the economic problems and many of the social problems we are experiencing today are a result of the long-term stagnant economy. Since the almost decades-long slow growth produced little new opportunity, some are questioning whether capitalism is really best for the U.S. Many are even advocating socialistic policies.
The U.S. went from birth of a new nation to the most prosperous, most powerful and most free country on earth in about 150 years, mainly because of the freedom Americans had to pursue their dreams with little government interference. Socialism is exactly opposite to that.
Socialism will increase the role of government, limit individual freedom and further stagnate the economy.
While it is true that there is a social responsibility for Americans, that responsibility cannot be the primary focus. Economic growth that leads to true prosperity will reduce the severity of virtually all social problems.
Dems should take positive action to continue to encourage growth. Once true prosperity returns, the country will be in a much stronger position to tackle social issues and the GOP will be more willing to compromise.
Today, since it has been such a long time, Americans have forgotten what true prosperity feels like. If the Dems in Congress would set reaching economic prosperity as their top goal, all Americans would benefit.