Welcome to the Trump prosperity — the 3 percent GDP growth accomplished since the recent tax cuts and assault on abusive government regulation took hold are just a prelude of what could be accomplished if the endless Democratic attacks don’t bring down the administration and the organized left — the mainstream media, radical feminists and socialists — don’t highjack our personal liberties and destroy American capitalism.
Soon after President Donald Trump was elected, the naysayers in the liberal-dominated economics profession told us the economy could not accomplish sustained 3-4 percent growth because of slowing productivity and labor force growth. The standard droll was all the good things had been invented — to them, smartphone apps are nice amusements but are not productivity enhancing in the manner of moving assembly line. A slowing birth rate and aging population meant we simply could not add a lot of new workers once unemployment was pushed down below 4 percent.
Now they are telling us Trump’s 3 percent growth over the last year is a sugar high — the jolt of the tax cuts temporarily goosed consumer spending — but businesses are not investing in new machinery as promised. What they miss is that the economy is growing in profoundly different ways than in the past.
Last year, the number of new automobiles and new homes sold — the engines of late-20th century prosperity — essentially flatlined. Younger Americans are learning to drive and moving up to car and home ownership at later ages for interrelated reasons — folks in their teens and 20s have social media to congregate, Amazon to purchase necessities and Uber to get around. Burdensome university tuition and student debt delay big-ticket purchases, marriage and children, and building sites near urban job centers are scarcer and more expensive.
Although investment in machinery to make more cars, houses and other traditional stuff are growing slowly, other forms of consumer and business spending are taking off.
Artificial intelligence devices and software in homes and businesses — productivity enhancing smartphone/tablet apps and computer programs — are multiplying like bees in anticipation of spring pollen.
Last year, the GDP originating from the motor vehicle and parts sectors jumped nearly 12.7 percent. With the number of vehicles sold virtually constant, much of the additional value is for safety and experience-enhancing technologies that automakers are putting into dashboards.
Businesses these days do need some machinery and computers as platforms for new technology, but the truly big investments are tougher to measure — those are in-house training for employees. As businesses grow, especially in the services sector, they are buying robots and scanners, but they need workers with new skills to maintain them and manage the software. Instead of firing workers with outdated skills and seeking new hires, businesses are combing employee databases for folks who are more adaptive and willing to learn and training them up.
Walmart is restructuring to employ fewer but more highly-paid store managers and more consumer-responsive sales associates. And persistently stronger growth and greater reliance on technology rather than brawn are creating new opportunities for women, older workers and the disabled.
These are helping sustain the adult labor force participation rate, which declined rather precipitously during the Obama years as many sought refuge in the expanding social safety net.
The growth potential for the economy is simply the sum of productivity and labor force growth — during the Obama years those sunk to 1 percent and 0.5 percent — but thanks to artificial intelligence and broader opportunities, those jumped to 2.4 percent and 1 percent for the year ending the first quarter of 2019.
Those can be sustained if Congress stops blocking everything Trump and compromises on a solid infrastructure program that includes enhancing technology access as well as the usual roads and bridges, and immigration reform to emphasize skilled workers similar to point systems in Canada and Australia, which face similar skills challenges.20 comments on this story
During the Reagan-Bush-Clinton era, the nation endured long periods of divided government and deep ideological divisions between the left in the Democratic Party and conservative Republicans. But politicians did quaint things like accept the outcome of elections, sustain good humor by refraining from vitriolic remarks aimed at opponents and worked on solutions that improved the lives of ordinary working folks.
Economic growth averaged 3.4 percent for two decades — exactly the potential that the sum of Trump’s recent labor force and productivity growth implies.