Did Trump cause the improved GDP growth?

Real GDP rose by 3.0% during the second quarter of 2017, the fastest quarterly rate in over two years, according to data released on Wednesday by the Commerce Department.  Did President Trump cause the accelerating economic growth?

The answer is yes.  The rapid growth was led by a surge in business fixed investment (purchases by businesses of new tools and structures).  If not for that surge, real GDP would have grown by only 2.2%.  The following table shows the contributions of the different types of spending upon economic growth during the second quarter:

Consumption                                       2.28%


    Business Fixed Investment             0.84%

    Residential Fixed Investment        -0.24%

    Change in Inventories                     0.01%

Net Exports                                         0.21%

Government Spending                       -0.05%


Total                                                    3.00%

Business investment depends upon expectations.  During the Obama years, businesses, other than subsidized crony capitalists, were constantly pummeled by new regulations.  As a result, businesses used every device available to preserve themselves, including locating their factories abroad, and avoided new investments in the United States.

Trump actually moved on his promises and reduced harmful business regulation and took actions to reduce the trade deficits.  Business responded to a new set of expectations that were favorable to business.  The stock markets boomed in anticipation.

Moreover, business fixed investment is the key to economic growth.  It not only creates demand, but also gives workers new factories, increasing their productivity and wages. 

The increased business confidence in the United States is the result of actions taken by the president during the months since he took office.  These include:

  1. The appointment of Neil Gorsuch, a judge considered to be dedicated to a strict construction of the Constitution, and the probability of appointments of more strict constructionists to come as a result of the prospective retirement of some leftist judges.
  2. Ending foolish environmental regulations that cause job losses like the EPA's war on coal and hostility to fossil fuels.
  3. Ending the undesirable business regulations that inhibit investment and risk-taking in the U.S. and encourage the movement of factories abroad.
  4. Reversing Obama's refusal to approve the Keystone pipeline.
  5. Rejecting U.S. participation in the Trans Pacific Partnership, a trade agreement that would have shipped hundreds of thousands of American jobs abroad.
  6. Beginning the renegotiation of NAFTA, a trade treaty that has been shipping American jobs to Mexico.
  7. Rejecting U.S. participation in the Paris environmental accord, which would have raised energy prices and cost taxpayers billions in foreign payments.
  8. Rebuilding our military power, thus promoting world stability.
  9. Limiting the immigration of Islamic terrorists like those who bombed the Boston Marathon.
  10. Placing a hiring freeze on federal employment, which gives confidence that the budget will eventually be balanced.
  11. Signing fifteen laws that eliminated regulations promulgated by President Obama.
  12. Signing two laws promoting entrepreneurship by women.

Will the economic boom continue?  Unfortunately, Congress failed to repeal the growth-killing regulations of Obamacare.  Fortunately, Trump has ways to further increase economic growth without congressional help.  For example, he can negotiate better trade agreements and impose trade-balancing tariffs.

Our current trade agreements encourage U.S. companies to locate factories in low-wage countries, secure in the knowledge that the trade agreements guarantee that their products can enter the U.S. duty-free.  Manufacturers are reluctant to build factories in the United States in the face of such artificial competition.

If Trump continues to move America's huge trade deficits toward balance, he will increase investment opportunities for manufacturing within the United States and will increase GDP by increasing net exports.

The result would be higher and higher incomes for American businesses and American workers.  The second quarter of 2017 was the best economic quarter in more than two years.  It may also have been the first quarter of the Trump economic boom.

The Richmans co-authored the 2014 book Balanced Trade, published by Lexington Books, and the 2008 book Trading Away Our Future, published by Ideal Taxes Association.