Consumer confidence has hit a 16 year high. That this comes two month into a new presidency is surely just a coincidence. As shown in a previous blog, the last two presidents have the worst economic records in more than 50 years. George H. W. Bush and Jimmy Carter, both one term presidents, presided over better economies than Obama and W, who each somehow served two terms. By historical standards, the last 16 years have been a disaster.
From JFK to Clinton's final year, the US growth rate averaged 3.6%. From the beginning of George W. Bush to the end of the Obama presidency, the US growth rate was 1.8%! In the last 16 years, the growth exceeded the average of 3.6% only once: 3.8% in 2004, nicely timed for W's reelection. What if the last 16 years had just been average? Let's do some math!
Bob puts $100 in a CD that offers 1.8% interest and another CD that offers 3.6%. After a year, the difference is paltry: $1.80. After 5 years, the gap is $10.01. At 10 years, it is $22.90. At the end of 16 years, Bob finds that his CDs are worth $133.03 and $176.10. Of course, on this scale, $43 is not a big difference for a 16 year investment. But what if we were talking about a trillion dollars? That would be a gap of $430 billion! The economy would be 30% larger than it is today and maybe the debt wouldn't be $20 trillion.
Trump has clearly shown his intent to abandon many of the policies of the last 16 years. He didn't like Bush's activist foreign policy and has decried Obama's Affordable Care Act. There is the promise of unleashing the economy from the mountains of regulations that have accumulated. The long blocked pipelines have been approved. It is clear that business has an ally in the White House rather than an adversary. The economy improves when businesses grow, not when government grows.
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