Remember when Mitt Romney was trashed for saying that “corporations are people?”
President Obama, who claimed to corner the market on compassion, never understood that it is people — consumers, people who manage big companies and people who own smaller firms — that ultimately lead the economy forward.
We are in the midst of an authentic economic boom. Why? Because those same people are making decisions to hire and invest, decisions that emerge from their growing confidence.
The National Federation of Independent Businesses (NFIB), which conducts regular surveys of small business owners, reported this week that optimism among its members in August had hit an all-time high.
Optimism topped the prior record set in 1983, a year in which Ronald Reagan was president and GDP grew at 4.6 percent. What happened next? Growth jumped in 1984 to 7.2 percent.
Soaring optimism and an accelerating economy are extraordinary achievements, especially given that the liberal media is not exactly cheerleading from the sidelines.
Buried in every article reporting that wage growth was the strongest for nine years or that productivity is finally beginning to increase are dark warnings about the impact of trade conflicts or the threat of looming inflation.
It’s understandable; Republicans are campaigning with surging growth at their back, and the anti-Trump press certainly does not want to help them out. But those ominous warning can take a toll on sentiment.
Still, the numbers are undeniable. A record number of people are quitting their jobs, confident something better will come along. Job openings are at a record high; consumer confidence, according to the Conference Board, was the highest in August since 2000; and capital investment is ratcheting up.
Some are beginning to hint that there’s more good news to come. One of Wall Street’s leading economists sent a report to clients this week saying various industries are still strengthening, with the banner: “Strength of U.S. Economy May Be Underestimated.”
This growth potential has been underestimated by the likes of Larry Summers who said our growth would forever be tempered by “secular stagnation” or by House Minority Leader Nancy Pelosi (D-Calif.) who scoffed that lower taxes won’t help the middle class.
But the impact of the Trump agenda is not underestimated by business leaders who protested in vain against the regulatory assault from the Obama White House and complained that high tax rates were impeding their competitiveness.
There are, to be sure, reasons that the economy could slow. First is the real possibility that Democrats take over the House of Representatives in November. Promises to impeach President Trump, roll back tax cuts and reverse significant regulatory relief would go a long way toward undermining the confidence with which CEOs are investing today.
Also, there is no question that the trade skirmishes with China, the EU and our North American Free Trade Agreement (NAFTA) partners have alarmed some sectors.
It looks likely that the NAFTA reboot will be put to bed soon (Canada is hinting at flexibility with respect to its steep dairy tariffs), and there is apparently progress behind the scenes with the EU.
China continues to press a hard line with negotiations, but we are skeptical they will allow their economy to slow further just to save face. If the EU and the U.S. move together toward significant World Trade Organization (WTO) reforms, the Chinese will suffer. Our guess is they will forestall that outcome by coming back to the table.
Trade tensions are not as concerning for those running small businesses as they are for big corporations, since the little guys generally have less exposure to overseas markets.
Threats of tariffs and disrupted trade agreements may alarm the head of General Motors but are unlikely to mean much to the person who owns several car washes or McDonald’s franchises.
That person is more concerned with tax rates, materials costs, health-care costs for employees, the availability of workers and the endless haggling with federal and local authorities over safety and labor rules. Those issues are real, and some, like prices for raw materials or the difficulty filling jobs, are increasingly troublesome.
But, for the most part, those problems are being buried by surging demand. Business has, according to many, never been better.
The NFIB survey showed hiring plans setting a new record, while the number of owners declaring the time is right for expansion tied the all-time high reached in May.
Sales, investment and earnings are breaking records. According to NFIB, “August is the ninth consecutive strong month of reported sales gains after years of low or negative numbers.”
If President Obama is puzzled why some give President Trump credit for the surging economy, it comes down to this: During his eight years in office, business leaders never felt confident about the future. It takes confidence to build a new plant or gear up for higher sales.
Today, as lower taxes make firms more profitable and lighter regulations allow them to be more agile and focused on satisfying customers rather than Uncle Sam, managers are more willing to plunge ahead. Last month, a record number of business owners decided to build inventories — making the bet that higher demand is here to stay.
NFIB Chief Economist Bill Dunkelberg said in a press release, “At the beginning of this historic run, Index gains were dominated by expectations…Now the Index is dominated by real business activity that makes GDP grow: job creation plans, job openings, string capital spending plans, record inventory investment plans, and earnings.”
This is exactly what the Trump economic plan of lower taxes and lighter regulations was meant to create. It wasn’t a shot in the dark. It had happened before, under President Reagan.
Published on The Hill