The economy grew at an improved, inflation-adjusted 2.6 percent annualized in the second quarter, the Bureau of Economic Analysis reports. That is up from 1.2 percent in the first quarter.
While slightly better, it is still nowhere near 3 percent annualized — not seen since 2005 — a level White House Office of Management and Budget (OMB) director Mick Mulvaney promised would be restored in an oped to the Wall Street Journal on July 12, “Introducing Maga-nomics.”
“For merely suggesting that we can get back to that level, the administration has been criticized as unrealistic. That’s fine with us. We heard the same pessimism 40 years ago, when the country was mired in ‘stagflation’ and ‘malaise.’ But Ronald Reagan dared to challenge that thinking and steered us to a boom that many people thought unachievable,” Mulvaney wrote.
To put these numbers in perspective, to get to 3 percent growth for 2017 will now require more than 4 percent inflation-adjusted growth the remaining two quarters.
To be fair, the Trump budget submitted by OMB and Mulvaney soberly does not see the U.S. returning to 3 percent until 2021. So, how does Mulvaney and the White House economic team see this much-needed growth coming back to the U.S.?
For starters, Americans need to get back to work. As Mulvaney sagely notes: “Growth also depends on the size of the workforce. Although the labor pool is aging, we are also seeing people who could be working but are staying home. We badly need them to go back to work. We believe that most want to do this but simply lack the opportunity.”
And to get there, Mulvaney cites several planks of the Trump economic agenda, the preconditions for restoring growth and returning working aged, able-bodied adults to the labor force, without which the goal of robust growth will remain out of reach.
A few of these are in the White House’s control, but the rest rely on an unreliable Republican Congress. Let’s review them: “Tax reform… Curbing unnecessary regulation… Welfare reform… Smart energy strategy… Rebuilding America’s infrastructure… Fair trade for America… [and] Government spending restraint.”
Of those, Trump holds the reins on any new regulations that might be issued — including rulemakings rescinding or modifying older, economy-killing regulations — and so the White House controls its own destiny there. A score of midnight Obama regulations were put on Trump’s desk for rescission, and he signed them. In addition, if the administration wants to, for example, rescind the EPA carbon endangerment finding classifying carbon dioxide as a harmful pollutant under the Clean Air Act, or regulations issued by the former Obama administration against new and existing coal power plants, it can do so. Another harmful regulation, “Waters of the United States” — regulating every puddle in America — has already been slated for termination.
Similarly, Trump can unlock American energy resources and build relationships with our neighbors. The Department of Energy can issue permits to drill on federal lands. The Trump administration has already agreed to greenlight building the Keystone XL pipeline from Canada and also the Dakota Access pipeline from the North Dakota Bakken shale oil formation.
On trade, Trump has initiated renegotiation of the North American Free Trade Agreement (NAFTA) and reached a new resolution with the country of Mexico on that country’s sugar dumping. So far, so good.
The rest of the agenda, however, depends on Congress. While the Trump administration might be able to find certain funds at departments and agencies to be repurposed for infrastructure, with a billion dollars here and there, spending of any magnitude on infrastructure must originate in Congress.
Similarly, restraint on spending, welfare reform and tax reform are absolutely Congressional issues and perhaps the most important. Here, there is some progress. The House budget bill offered by House Budget Committee Chairwoman Rep. Diane Black (R-Tenn.) offers $203 billion of so-called mandatory spending cuts over the next decade.
This is a good first step, but it only provides about $20 billion a year worth of wiggle room on budget reconciliation for tax relief. That’s almost nothing. A rounding error. Not enough to restore robust growth.
And now that Obamacare repeal and replace is on the rocks, the Black budget may be the only game in town.
If Congressional Republicans were serious about tax reform — which, try to find a Republican running for anything who doesn’t say he wants to cut taxes — and they know their only vehicle for possibly passing tax cut bills is on budget reconciliation (only requiring 51 votes to pass in the Senate) then the only way to get tax relief to the American people without changing the rules is with big, off-setting spending cuts.
To create more substantial tax relief will now require even larger spending cuts. Here, Black, who is now running for Governor of Tennessee, might do well to go back to the Trump-Mulvaney budget, which besides repealing Obamacare, found a little less than $2.5 trillion of mandatory spending cuts over the next decade, plus another nearly $1.8 trillion of discretionary spending cuts out of agency budgets.
Going into 2017, House and Senate leaders knew all of this. That is why they led with repealing and replacing Obamacare, to get the best possible budget score for the tax cuts that were to come second. Instead, Congress is returning home for August recess completely empty-handed.
Now, it is up to constituents to remind Congress that it is not President Trump they are ultimately failing politically, but the American people, who they promised to restore economic growth to.
The President can only do so much, and for his part, Trump is keeping up his part of the bargain on regulations, energy and trade. The opposite, mind you, of what #NeverTrumpers warned of in 2016. It was supposed to be Trump who would be wandering off the reservation, failing to cut spending or be committed to repealing Obamacare or some other imagined sin.
Instead, it is the GOP Congress — whose brightest stars challenged Trump for the Republican nomination in 2016 — that appears as if it could not govern its way out of an empty room.
If this Republican majority in name only Congress cannot even get a decent tax bill on a Republican president’s desk, then they are not a political party, but a disparate group of climbers and ego-maniacs. Yes, that includes Sen. John “Let’s see Donald make America great again now” McCain (R-Ariz.). With their failure so goes any hope of the economic recovery we all hope to see.
Good luck at your town halls, Congress, and remember, it is your names on the ballot in 2018, not President Trump’s.