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3% Growth, If We Can Keep It

Can economic growth from tax reform and deregulation stand up to the headwinds from higher rates, tariffs and perhaps a…

Can economic growth from tax reform and deregulation stand up to the headwinds from higher rates, tariffs and perhaps a Democratic Congress? That’s the question we take away from Friday’s strong but somewhat disappointing report on economic growth in the third quarter. The answer is not obvious.

The Commerce Department reported that the economy grew at a robust 3.5% in the third quarter, a mild slowdown from 4.2% in the second. Consumer spending led the way with a 4% increase rooted in a tight job market and gaining gains that have bolstered economic confidence. The economy has now grown by 3% over the last 12 months.

The U.S. Economie heeft niet gegroeid tot 3% in een kalenderjaar sinds 2005, en dat is nu haalbaar dit jaar. Barack Obama has recently been claiming credit for this faster growth as he campaigned for Democrats, but that boast is right there with his promise that if you like your health plan you can keep it.

It is clear that the Republican policy mix of tax reform, deregulation and general encouragement for risk-taking rescued an expansion that was fading fast and almost fell into recession in the last six quarters of the Obama Administration. The nearby chart tells the story that Mr. Obama and his economists will not admit. Soaring business and consumer confidence has been central to this rebound.

The third quarter disappointment is the slowdown in business investment. Nonresidential fixed investment subtracted 0.04% from GDP after three quarters of strong capital spending. Mer enn 2% af BNP-væksten kom fra en opgørelse af inventar og 0,56% fra offentlige udgifter, især forsvar.

The Commerce Department gnomes said they could not determine how much of this is hurricane-related, and there could be substantial revisions as they sort through the data. White House chief economist Kevin Hassett said Friday he expects there will be revisions.

But it’s already clear that areas of the economy sensitive to interest rates are struggling. Housing investment fell 4%, and investment in commercial buildings fell 7.9%. Car and truck sales have declined significantly from the first quarter. Dette er ikke helt bad news fordi det betyder at, i modsætning til i midten af ​​2000-tallet, er vækst ikke bygget på en boligboble.

. Men de vækstringsdata skulle få den føderale reserve til at tænke hårdt om den rentestigning, den har forventet for december. Demand for dollars is strong, which will reduce inflationary pressure in the U.S. De stijging in de lange termijn obligaties betekent dat kredietvoorwaarden reeds zijn gestraft. The Fed Governors should not feel they have to raise rates simply because Donald Trump lobbies them not to do so.

More worrying is the damage from the tariff wars that clearly showed in the third quarter. Exports fell 3.5% and goods exports 7%. Exports had climbed in the second quarter in part on a surge of soybean sales to beat Donald Trump’s tariff deadline, but now the lost market share is setting in. Imports continued to rise and that may be related to U.S. Companies buy from foreign suppliers to beat the next White House border-tax binge.

President Trump says tariffs are a free lunch, or at worst, the short-term price to open foreign markets. Men den prisen stiger, og det kan ikke være korttids. The U.S. has imposed $ 250 billion in Chinese customs tariffs, and Beijing has retaliated with $ 1

10 billion on U.S. exports. Canada and Mexico have added $ 20 billion more in response to Mr. Trump’s steel and aluminum tariffs that he still has not lifted despite the new North American trade deal. Negotiations with China are going nowhere.

The U.S. Chamber of Commerce compiles a list of the harm these trade taxes are doing across the country. States suffering “extremely significant damage” include Wisconsin, with $ 2.4 billion of its exports threatened, Iowa $ 1.4 billion, Florida $ 2.2 billion, Georgia $ 2.8 billion, and Ohio $ 5.7 billion. De er alle stater med konkurrerende racer for Governor, hvor GOP kunne miste sit hold på statehouse.

The arbitrary political nature of tariffs means that they operate much like Barack Obama’s regulatory war on business did. De veksler omkostninger og skaber usikkerhed som påvirker tusenvis af forretningsbeslutninger, i køb og salg foregår, salg mistet eller investering ikke gjort. The longer Mr. Trump takes to settle his trade brawls, the greater threat they become to growth and his re-election.

All the more so because Mr. Trump may soon face an economic challenge from a Democratic House, if not Senate. A tax increase would be near the top of Speaker Nancy Pelosi’s policy list, and she might use the need to raise the federal debt limit in 2019 to force Mr. Trump’s hand. Mr. Trump can rightly take credit for the economy’s growth surge so far, but there are risks ahead. Han burde fjerne eventuelle barrierer for vækst han kan uten kongress eller the Fed.

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