The Liberals’ Fiscal Feint

The Liberals’ latest anti-tax cut crusade amounts to the pot calling the kettle black. Their goal is two-fold: Obscure Obama’s poor fiscal and economic record, while undermining tax cuts as a means of reversing it. They desperately need to do both; otherwise the connection between raising taxes, and decreasing growth, and lowering taxes and increasing growth, could become unmistakably clear.

Lacking a positive record on “money matters” to embrace, Obama’s apologists were stuck proving a negative: Things would have been worse. With the Trump administration’s tax cut, they imagine a favorable comparison has finally arrived in fiscal performance.

An objective look at the Obama record shows this a hard case to make. Obama almost immediately signed an $800 billion “stimulus” bill. This helped fuel an 18 percent jump in 2009 outlays that effectively increased spending permanently — although dropping a minuscule 2 percent in 2010, 2011 and 2012’s levels were both higher than 2009’s.

In comparison to his one-way spending policy, Obama was of at least two minds on taxes. Obama defenders today attacking tax cuts do not mention him extending the Bush tax cuts for two additional years in 2010 — a year after the recession had ended. Either Obama was for tax cuts before he was against them, or presumably these were deemed good for the economy then, but not now — or even later under Obama, who hiked them and added Obamacare taxes too.

As for debt, it grew 250 percent under Obama: From $5.8 trillion when he took office, to $14.2 trillion when he left it.

For all these bucks, America got precious little bang. From 2009 to 2016, American annual real GDP growth averaged just 1.5 percent. Even removing 2009’s contraction, it averaged just 2.1 percent.

While quick to cite the recession, today’s tax cut critics do not mention the favorable factors existing for an Obama rebound. Following a recession, even a return to normal appears as a comparatively large increase. And the Fed was more than accommodative to aid it: Bringing interest rates to historic lows and keeping them there, while massively adding to its balance sheet. Yet so stubbornly did rebound not come, the same critics of today’s tax cuts were yesterday’s defenders of poor growth as “the new normal.”

Even looking at Congressional Budget Office (instead of the administration’s own) projections of the Trump administration’s fiscal future, there is little room for negative comparison to Obama’s performance. On spending, Obama administration outlays were never below the federal 50-year average (20.3 percent) as a percentage of GDP. Regretfully, neither are projections for the Trump administration; however, this is not where liberal detractors’ fiscal criticism lies.

On taxes, the Obama administration’s on-and-off tax cut policy saw federal revenues hit their 50-year average (17.4 percent) as a percentage of GDP in 2014, Obama’s sixth year in office. CBO projections for the Trump administration show federal revenues hitting the 50-year average in 2024, potentially Trump’s eighth year in office.

Under Obama, debt held by the public went from 39.3 percent of GDP to 76.7 percent — an increase of 37.4 percent. CBO projects the Trump administration increasing it from 76.7 percent to 89.5 percent — an increase of 12.8 percent.

The real difference between the two administrations rests on economic growth. The Trump administration’s first year GDP growth was 2.3 percent. Held back by 2017’s first quarter (Trump was not in office when it began), his first year growth was still above the Obama’s administration’s overall 1.5 percent average, and even above its 2010-2016 2.1 percent average. When 2017’s Q4 came in at 2.9 percent, the Trump administration just missed three consecutive quarters of 3 percent-or-better growth — a feat unseen since 2005’s Q1.

By straight comparison, the Trump and Obama administrations appear roughly even fiscally, with Trump ahead economically. However, the potential for the Trump economy to perform significantly better also offers the chance for the Trump fiscal numbers to be substantially better too. Higher growth, like that seen in the last three quarters, would reduce spending and debt increases, as tax revenues grew.

In short, the Trump administration’s worst case fiscal and economic scenario would only match the Obama administration’s actual one. Saddled with the overhang of the Obama years’ hangover, estimators are still factoring in lower growth than what has been recently occurring.

Really, liberal detractors are not upset by projections that the Trump administration would keep spending at levels the Obama administration set — they would excoriate its lowering. Nor are they truly concerned about projections of its deficits and debt. Their outrage lies with the tax cuts, and particularly the potential cuts offer to achieve economic growth the Obama administration never attained.

An equation in America’s mind between lower taxes and higher growth would be economically damaging to liberals’ hopes of raising taxes again. And a juxtaposition between low Obama economic growth and high Trump economic growth would be politically devastating to their ability to do so.

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