All capitalist economies exhibit cyclicality.
The ebb and flow of the marketplace has been an ongoing phenomenon since the beginning of modern economics—even Adam Smith struggled with the phenomenon.
This means that like any other, the American economy always surges the most after the deepest recessions. Like a cyclist coming down off a steep hill, the economy’s momentum is greatest at the start of the next uphill climb right after reaching the bottom of the last hill.
Physics and economics have more in common than you might think, even though President Obama—the far left globalist and statist—squandered his opportunity to preside over the economic rebound that should have come immediately after the Great Recession.
When Obama’s bike came down from the hill, he stomped on the brakes, strangling our resurgent economy with excessive regulation, taxes, and idiotic minimum wage hikes during the midst of a severe recession. His job-killing policies swelled the unemployment and welfare rolls, turning what should have been an economic renaissance into the weakest, flattest recovery in U.S. history.
It wasn’t until President Trump took office that the economy finally turned around in earnest, giving Americans the recovery they had been waiting for over the prior decade.
Unemployment reached historic lows (particularly among minorities), even as more Americans re-entered the workforce after giving up on finding a job during the Obama years. As for the GDP, which showed pathetic, near-zero growth rates under Obama—something he called the “new normal”—President Trump has completely redefined expectations.
After the eight-year war that Obama waged against our economy, GDP has skyrocketed under President Trump—2018 will almost certainly be the first full year that we hit 3 percent growth since 2005.
But as in physics, where every action produces an equal and opposite reaction, economic victories inevitably inspire pushback.
President Trump’s massive economic success sparked fears among some policymakers that the temperature in the kitchen was getting hot, so the Federal Reserve felt the need to rush in and ratchet up interest rates to blunt phantom inflation risks. In their eyes, the Trump economy was just too strong.
The Dow Jones and the S&P 500, after surging over 50 percent between President Trump’s inauguration and the second quarter of 2018, recently entered a selling frenzy almost entirely due to the Fed’s decisions. Yet the stock market is still up around 30 percent in the two years President Trump has been in office.
It’s really that simple. The best and most telling economic report card for any president is what the Fed does during his time in office. The worse a president’s policies are, the kinder the Fed has to be to him. Conversely, the more pro-growth and economically effective a president’s policies are, the more the Fed typically pulls back on the reins, ordering rate hikes to mitigate against the risk of an overheated economy resulting in inflation.
The chart below tells a very clear picture of what our central bankers thought of the last two presidents, demonstrating how Trump’s and Obama’s performances compare. The Fed kept the Obama economy on an unprecedented, nearly decade-long form of monetary life support, and then discharged the economy from the hospital and prescribed a rigorous exercise routine practically the minute Trump took office.
While the Fed coddled Obama and held his hand for seven years before finally asking him to take the training wheels off in his final few months, they’ve done the exact opposite with President Trump.
Nevertheless, the economy’s fundamentals are so strong under President Trump that even the Fed’s aggressive interest rate hikes haven’t been enough to push us back down to the “new normal.”
Doubters need to get real and look at the numbers before selling the Trump economy short.
Stephen B. Meister, founding Partner of Meister, Seelig & Fein, LLP, a law firm headquartered in NYC. Jason D. Meister, 2020 Trump Advisory Board Member.
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.