Trump Economic Report Blames Obama Policies for Slow Growth -- Update
February 21 2018 - 1:43PM
Dow Jones News
By Josh Zumbrun
President Donald Trump's first official economic report to
Congress makes a lengthy case that the U.S. economy has been weak
in recent years, not because of the severity of the most recent
recession, but because of policy mistakes by Mr. Trump's
predecessor.
"The stagnation of America's middle class in the wake of the
recession is much worse than believed, and government policy under
President Obama should share some of the blame," said Kevin
Hassett, the chair of the Council of Economic Advisers, the lead
author of the report and the president's top economist. "One
explanation for this historical slowdown is that Obama's tax and
transfer policies worsened the wound."
The nearly-600 page Economic Report of the President, released
Wednesday, is the most detailed analysis of the economy and
economic policy by Mr. Trump's staff. By reversing the Obama
administration policies, the report argues, the economy will be
able to grow 3% a year over the next decade.
"In recent years, the pursuit of alternative policy aspirations
at the expense of growth has imposed real economic costs on the
American people, in the form of diminished opportunity, security,
equity, and even health, " the report said.
Mr. Hassett said the report is also critical of other
administrations, noting that trade deals of recent decades were
"filled with concessions that relatively feckless negotiators of
the past made to our trading partners."
In chapters on taxes, regulation, labor market policies,
infrastructure, trade, health and cybersecurity, the Trump
administration argued that its policies would provide modest boosts
to gross domestic product that, when added up, would be sufficient
to shift output onto a higher trajectory over the next decade.
The report repeated an estimate, disputed by Democrats, that
recently passed tax legislation will increase average annual
household income by $4,000.
Jason Furman, who was chairman of the CEA under President Barack
Obama, said the reports' own data undercuts many of its points.
Mr. Furman pointed to data in the report showing that
productivity growth had slowed down even more sharply in other
advanced economies, and was not a U.S. specific phenomenon. "If
anything, this demonstrates the relative strengths of economic
policy-making in the Obama administration," Mr. Furman said.
The report reopens the debate on why the labor-force
participation rate, defined as the share of Americans working or
looking for work, had declined in recent years.
It concluded that while the retirement of the oldest members of
the baby boomer generation is reducing the labor-force
participation rate, half the decline since the fourth quarter of
2007 has been accounted for by nondemographic factors. The report
singled out government transfer payments, such as unemployment
insurance, food stamps and disability insurance, as programs that
contributed to people remaining out of the labor force.
Mr. Obama's CEA released a report in 2014 arguing that only
one-sixth of the decline in labor-force participation could be
attributed to factors other than demographics and recovering from a
deep recession.
Mr. Furman said Wednesday that data included in the new CEA
report show that the decline in labor-force participation, for
prime-age men, had been declining since at least 1970. "That is at
odds with the report's attempt to pin the blame on Obama's
policies," Mr. Furman said.
Mr. Trump's CEA said the volume of regulations under Mr. Obama
had reduced growth and raised the amount of time spent complying
with regulations from 8.8 billion hours in 2010 to 9.8 billion in
2015. It mentioned environmental and labor regulations as among
those that had been particularly detrimental, and said financial
regulations had grown needlessly complex.
The CEA also noted that the previous administration's focus on
expanding health insurance coverage had ignored the importance of
health issues beyond insurance, such as drug abuse, poor diets that
lead to obesity and smoking.
Write to Josh Zumbrun at Josh.Zumbrun@wsj.com
(END) Dow Jones Newswires
February 21, 2018 13:28 ET (18:28 GMT)
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