The economic shock from the shutdowns in response to the COVID-19 pandemic were unprecedented. Never had state governors imposed stay-at-home orders that cut people off from their lives and livelihoods. Those costly policies were bad enough, but then came historic increases in deficit spending and money creation.
While these may have been well-intentioned policies early on, their repercussions—amplified by misguided macroeconomic policy since January 2021—continue to plague many Americans. The antidote is pro-growth policies.
There was a vibrant economy on the eve of this shock. In fact, about three quarters of the flows of people into employment were Americans returning to the workforce—the highest on record.
For context, 2.3 million prime-age Americans—people between the ages of 25 and 54—returned to the labor force during Trump, after 1.6 million left during the Obama recovery. This happened with a robust private sector providing many opportunities because the Trump administration focused on removing barriers by getting the Tax Cuts and Jobs Act of 2017 through Congress and providing substantial, sensible deregulation.
We often hear that these tax cuts were “trickle-down economics” or “tax cuts for the rich and big business.” But the change in real (inflation-adjusted) wages was positive across the income spectrum. The bottom 10% of the wage distribution rose by 10% while the top 10% rose half as fast. And real wealth for the bottom 50% increased by 28%, while that of the top 1% increased by just 9%.
The results show those tax cuts weren’t designed for the “rich.”
In 2019, the real median household income hit a record high, and the poverty rate reached a record low. Poverty rates fell to the lowest on record for Blacks and Hispanics, and child poverty fell to 14.4%—a nearly 50-year low. Clearly, Americans were doing well across the board, especially those who had historically been left behind.
These stellar results were from reducing barriers by government in people’s lives—a stark contrast to what happened by state governments during the pandemic and exacerbated thereafter by Biden’s big-government policies.
While there were similar spending bills passed into law during both administrations, it’s comparing apples and oranges.
Trump supported congressional efforts in March and April 2020 when huge swaths of the economy were shut down, 22 million Americans were laid off, and 70% of the economy faced collapse. In contrast, Biden substantially increased regulations immediately and passed a nearly $2 trillion spending bill in March 2021—an amount equal to approximately 10% of the U.S. economy, at a moment when the U.S. economy was already 10 months into recovery.
Another difference was that Trump introduced sunsets for emergency pandemic provisions so that they would expire. But Biden continued and expanded many of them, increasing dependency on government.
Through March 2022, employment is back up 20.4 million but remains 1.6 million below the peak in February 2020. While Biden touts the most jobs gained in one year in 2021, more jobs were recovered in just the two months of May and June 2020 than in all 12 months of 2021, and nearly two-thirds of this jobs recovery was during Trump. Moreover, job gains of 6.7 million in 2021 were far less than the glorified projections coming from the White House of around 10 million.
Just think if Biden had practiced the pro-growth policies of Trump.
Instead, inflation is at a 40-year high and looks to continue to soar, fueled by a host of self-imposed costly policies in Washington.
This includes Biden’s over-regulating of the oil and gas sector, massive unnecessary spending bills, and attempts to drastically raise taxes. And the Federal Reserve has more than doubled its balance sheet over the last two years, purchasing a majority of the $6 trillion increased national debt in that period, which is a 25% increase to $30 trillion.
These policies, which simultaneously boost demand while constraining supply, have brought the prospect of stagflation—high inflation and low growth—back for the first time since the late 1970s.
Rather than directly addressing the crisis, Biden has consistently deflected the issue by first doubting the reality of inflation to now falsely blaming it on corporate greed or Russian President Vladimir Putin. But the causes and consequences fall at his feet.
It’s time to return to the proven, pro-growth policies that worked during the Trump administration, along with an essential missing factor then of spending restraint by Congress. Doing so will provide a solid foundation for more opportunities to let people prosper.
This commentary was based on the remarks by Mr. Ginn and Mr. Goodspeed on a panel at the Texas Public Policy Foundation’s 2022 Policy Orientation.