Another flawed “analysis”



Dear Editor:

In June, I took you to task for printing the sycophantic nonsense of Phil Grant’s support of the Trump administration without giving a countervailing opinion an equal amount of the paper’s “real estate.” I suggested Roger Bowen as a possible qualified candidate for that role.

Thus I was gratified to see Bowen and Grant juxtaposed on, generally, the same topic (Trump) and allocated roughly an equal share of the Letters/Commentary page. However, I continue to be appalled that you give the “analysis” submitted by Grant (one hopes you do not actually solicit this “stuff”) the prominence you do. Why? Anyone who has completed even an introductory course in economics readily grasps that Grant’s work product is superficial, often counterfactual, myopic and so analytically incomplete as to be worthless as a substantive assessment of economic performance.

Space constraints do not permit an exhaustive critique of Grant’s most recent exercise in willful, well maybe not, ignorance (“Why growth in GDP? It’s President Trump’s policies,” July 25). Grant would have your readers believe that GDP growth under Trump’s economic policies is, without exception or qualification, the only meaningful measure of the American economy, has been unequaled in recent history and represents the predicate for a healthy economy as far as the eye can see, or at least as long as Trump is in office and able to continue his policies. Bunk. The real growth rate in GDP is an important metric in assessing the performance of any economy. It cannot, however, be viewed in isolation.

Though he is averse to them, these are a few facts Grant might ponder:

  • Obama inherited the worst recession since the Great Depression. His fiscal policies and the concomitant monetary policy pursued by the Fed were the only sensible and effective responses to the crises. From a growth rate of negative 2.75 percent in 2008, Obama’s policies returned the economy to an average growth rate in GDP of just under 2 percent for his entire term in office, averaging 2.3 percent during his final term. No political bias is embedded in that statistic. It is a fact (U.S. Bureau of Economic Analysis).
  • The Solyndra debacle (Grant’s reference to giving public money to “Democratic-friendly companies”) cost the government $500 million, barely a rounding error in the federal budget.
  • Obama held office for eight years. Over that eight-year period, the federal debt increased by $7 trillion, from $12 trillion to $19 trillion. Trump and his fiscal policies will have increased the federal debt from $19 trillion to a conservatively estimated $25 trillion by 2021. So who will have “added by far the most federal debt we have ever seen during one president’s administration”? And that is without a slowing in GDP growth Grant touts but most economists expect.
  • GDP growth under Trump for 2018 has already been revised downward from slightly above 3 percent (Trump promised 4 percent) to 2.5 percent, juiced mostly by the 2017 tax cuts. GDP growth for Q2 2019 was reported at 2.1 percent and may well be subject to downward revision. The consensus forecast among professional economists for 2019’s growth in GDP is 2.3 percent, the average rate of GDP growth since 2009 and identical to the growth rate during Obama’s final term. Moreover, some economists with an excellent predictive track record foresee sub-2 percent GDP growth in 2020 as a result of the negative effects of Trump’s trade policies, a slowing Chinese economy and Brexit.
  • Trump’s only trade agreement, the USMCA, is little more than warmed over NAFTA and has yet to be ratified by Congress. His efforts with China are stalled and likely to remain that way. Xi has the luxury of time; Trump doesn’t.
  • Finally, as important as GDP growth is the ratio of federal debt to GDP. That statistic is arguably even more relevant to overall long-term economic health, i.e. how much of GDP growth is financed by debt (in excess of 30 percent now held by foreign investors) and what are the current and expected burdens of servicing that debt, i.e. what portion of the federal budget will be devoted to non-discretionary interest payments? By 2021, the debt to GDP ratio is projected to exceed 110 percent. Notably this is without the effect of a slowdown in GDP growth. By contrast, China’s debt to GDP ratio is 50 percent. Not surprisingly, Grant ignores the debt to GDP burden and its potential effect on the economy.

I close with two comments. Mr. Grant should stop masquerading as an economist. He is not and he embarrasses himself impersonating one. And your readers will be heartened to know that this is my last response to Mr. Grant’s submissions to The American. There are things in life known as “life’s too short issues.” Grant and his claptrap stand prominently among them.

G. Wilson Thomas II

Hancock

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