OPINION:
President Trump may have a bear market, but he has a Goldilocks economy. While it is too early to definitively know about the former, each passing day shows the latter growing more certain. His critics who are seizing on recent stock market volatility are missing the bigger picture of the economy underlying it.
The stock market is proving to be either too hot or too cold. Last year it was steaming. Now in February it is colder than the weather. Last year it showed no volatility. This year it shows nothing but that.
Mr. Trump’s critics will claim he promised America the moon regarding economic growth. Actually, his claims of 3 percent-plus growth would have just returned America to normal: Post-WWII real GDP annual growth averaged 3.1 percent from 1946-2008. While last year came on surprisingly strong, it fell short.
Last year’s recently released fourth quarter 2.6 percent rate snapped a two-quarter winning streak of above 3 percent growth. It also caused 2017 to come in with a 2.3 percent annual rate — well off Mr. Trump’s claims.
In fairness, 2017 was hobbled by its first quarter’s meager 1.2 percent rise. Considering Mr. Trump was not president until late January, it is hard to fairly blame him. Still, America is a country of results, not excuses. To get three straight quarters of 3 percent growth — a feat unseen since 2005 — let alone a year at that rate, Mr. Trump will have to wait.
Strangely, waiting is better for Mr. Trump. The reason: Mr. While Trump could have claimed ownership for a great first year — and any president would — he lacked a significant policy to attribute growth to. For 2018, he does.
Yes, reducing regulations is important. True, increased national confidence helps. Absolutely, the expectation anti-business policies will not prevail is a boost. Yet in politics it is tangible action that counts. This Mr. Trump did not get until the very end of 2017 with tax reform.
Tax reform sets the stage for 2018. More importantly for Mr. Trump, it sets him up for credit from the widely expected growth.
First, tax reform happened on Mr. Trump’s watch. As president, you own what happens on your watch. Second, when you sign it — and, like tax reform, it would not have happened without you — you doubly do.
Further, tax reform gives Mr. Trump a clear partisan divide. No Democrats in Congress supported it. The left continues to excoriate it. That’s all the better politically for Mr. Trump if it works.
Last year also gives Mr. Trump a clear economic dividing line. Its growth rate was far better than 2016’s 1.6 percent. It was also better than the 1.5 percent annual average during President Obama’s eight years.
Yet 2017’s biggest contribution will not be in the recovery it started, but in the clear demarcation it provides for his signature achievement.
Had 2017 been too cold — as bad as Mr. Obama’s final year — Mr. Trump would have gotten all the blame. Never mind that it would have been in-line with Mr. Obama’s results.
Had 2017 been too hot, it would have been attributed to luck — just as Mr. Obama’s acolytes have tried to credit the former administration for the current’s success. And if 2018 also turned out to be good, critics would have said it was no better than 2017 — so there was neither effect from, nor point to, tax reform.
Already there are signs 2018 is ready to deliver economically. The Atlanta Fed’s economic model projects 5.4 percent growth for the first quarter.
Politically, tax reform’s popularity is beginning to rise, despite unmitigated battering in the press. As its effect is felt, especially accelerating economic growth, expect greater popularity.
Mr. Trump’s critics know this. They cannot help wondering how he could wander into a den of bears and not get mauled the way Mr. Obama did for eight years.
Instead he finds three bowls of porridge. The one too hot was last year’s stock market. The one too cold may prove to be this year’s. However the third and most important, the economy, is proving to be just right.
It offers the perfect comparison between the Obama and Trump economies: Far better than Mr. Obama’s, but with ample room to show tax reform’s boost. His first year economy’s performance was solid, but not spectacular. Yet while falling short of his hope, it sets up a strong second year — and an even stronger cause/effect relationship with his tax reform victory.
• J.T. Young served in the Treasury Department and the Office of Management and Budget.
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