The U.S. economy “outperformed expectations” in 2018, for the second year in a row, states a new report from the Council of Economic Advisers (CEA).
Jobs and economic output are now growing faster than at any other time since the Great Recession ended in 2009, the CEA reported in its summary of the 2019 Economic Report of the President. CEA released the report on March 18.
“The strong economic performance in 2017 and 2018 constituted a sharp break from the previous pace of economic and employment growth since the start of the present expansion,” the report’s authors wrote.
There were “more job openings than unemployed [persons] in 2018 for the first time on record,” as both wages and employment have been rising, the CEA summary says.
‘Triumph of Free Enterprise’
The improving U.S. economic performance reflects an unleashing of the private sector, says Dr. Tim Huelskamp, president and CEO of The Heartland Institute, which publishes Budget and Tax News.
“This economic report is not only full of positive economic news for Americans and our economy, but it also reflects the triumph of free enterprise over big government,” Huelskamp said.
Increased investment resulting from the lower burden on capital and the cutting of red tape led to robust employment growth, Huelskamp says.
“Entrepreneurs and businesses created millions of new jobs, in large part because of President Trump’s efforts to reduce regulations and cut taxes,” Huelskamp said.
Growth Exceeding Projections
“The U.S. economy has created 5.3 million jobs since I was elected to office,” said President Donald Trump in his report to Congress. “Wage growth continued in 2018, with the lowest-earning workers experiencing the strongest gains.
“By the fourth quarter of 2018, real disposable personal income per household was up more than $2,200 from the end of 2017,” Trump said. “The national unemployment rate reached a nearly 50-year low of 3.7 percent in September 2018, hovering at or below 4 percent for 11 consecutive months—the longest streak in nearly five decades.”
The economy outperformed official Congressional Budget Office forecasts, says Merrill Matthews, a resident scholar with the Institute for Policy Innovation.
“The Trump economy has exceeded many of the CBO’s projections,” Matthews said. “By contrast, actual results during the Obama administration were usually much lower than CBO projections.”
‘Tax Cuts Are Working’
Pro-market policy changes led to increased capital formation and higher worker pay, says Adam Michel, a senior policy analyst at The Heritage Foundation.
“Deregulation and then tax cuts created clear signs that caused investment and wage growth to increase significantly,” Michel said.
Buybacks of company shares by some corporations led to more profitable uses of capital, says Michel.
“What are investors doing with their stock buyback dollars? It appears they are reinvesting that money in new, more innovative businesses,” said Michel.
“Stock buybacks and the resulting significant increases in investment actually show the tax cuts are working as intended, by refueling a resurgence of American investment and productivity, which are the main drivers behind the current, highest wage growth rate in a decade,” Michel said.
Energy Boom Drives Economy
America’s booming energy sector has helped fuel this economic growth, says Matthews.
“The president’s efforts to free up the production of crude oil and natural gas have goosed an already thriving market,” said Matthews. “This has allowed the United States to surpass Saudi Arabia and Russia to become the largest crude oil and natural gas producer in the world.”
Forecasts 3 Percent Growth
If the president’s program is implemented fully, the economy will grow at a substantial rate over the next decade, the report states.
“The Trump Administration’s policy-inclusive forecast (which assumes full implementation of the Administration’s economic agenda) is for real GDP to grow at an average annual rate of 3.0 percent during the 11 years between 2018 and 2029,” wrote the report’s authors.
If the United States follows an agenda that attracts capital investment, economic growth will continue to improve, says David Ranson, president of HCWE & Co. and a policy advisor to The Heartland Institute.
“[Those policies are] a low, stable, and simple tax-rate structure; tranquil capital markets; the lifting of excessively burdensome regulation; and a stable and strong dollar,” said Ranson.
“Historically, the economy has never had any difficulty growing sustainably at or above 3 percent when those policies are followed,” Ranson said.
Bonner R. Cohen, Ph.D. ([email protected]) is a senior fellow at the National Center for Public Policy Research.
Donald J. Trump, Economic Report of the President, Together with the Annual Report of the Council of Economic Advisers, March 2019: https://heartland.org/publications-resources/publications/economic-report-of-the-president-together-with-the-annual-report-of-the-council-of-economic-advisers
Kevin A. Hassett, Richard V. Burkhauser, and Tomas J. Philipson, “A Summary of the 2019 Economic Report of the President,” Council of Economic Advisers, March 2019: https://www.whitehouse.gov/articles/summary-2019-economic-report-president/