What History Tells Us About Trump's 3% Growth Rate Forecast

Larry Summers, along with most reputable economists, has been highly critical of the 3% growth forecasts made by the Trump administration.  He argues that it is inconsistent with US history.  His analysis of US history shows why the Trump forecast is highly improbable but it also provides a good lesson about the factors that drive economic growth.

Summers argues that GDP growth per adult is a critical factor.  We get more GDP growth when the number of adults producing output rises; we also get more growth when the output per person increases (productivity).  He then looks at GDP growth history in terms of those factors.

Between 1961 and 2000 GDP growth was driven by two factors.  The adult population grew at 7.4% and the percent of women in the workforce grew from 33% in 1960 to 62% in 2000.  The population growth rate will by only be 0.2% between 2021 and 2027.  Moreover, the percent of women in the workforce has been constant at 62% since 2000.  There will be no boost to the GDP growth rate over the Trump forecast period from population growth or the entry of women into the workforce.

The Trump forecast is for 2.8% growth per adult between 2021 and 2027.  We have seldom had a seven year period with that kind of growth per adult.  That is because the business cycle always includes downturns or recessions over a seven year period.  Even if the underlying growth rate was 3% we can't assume a business cycle with no downturns or recessions.

We had three periods of 2.8% growth per adult since 1961.  They were all driven by a tailwind from the business cycle.  That is, we moved from a period of high unemployment to a period of lower unemployment.  Reductions in the unemployment rate led to a faster growth rate. The Trump forecast is for a 2.8% growth rate from a period of low unemployment.  It will not be driven by a business cycle tailwind like our other periods of 2.8% growth rates over seven years.

Summers concludes that the Trump growth forecast ignores what we have learned from US history.  He then asks why Trump's team of investment bankers made such an aggressive growth forecast?  They would not have invested in business with that kind of forecast when they worked on Wall Street.  The answer is pretty simple.  It was necessary to support Trump's boast that he would "Make America Great Again".  Moreover, it would not be possible for Trump to cut taxes without producing large budget deficits unless they produced unprecedented economic growth.  Ronald Reagan made huge tax cuts that did increase the growth rate but they were boosted by a business cycle tailwind as we recovered from recession.  The growth rate was also boosted by the Fed which cut interest rates substantially.  Interest rates can't be reduced much more today.  We expect that the Fed will begin to raise interest rates.  Trump's economic team has given Trump what he needed, but it do so at the cost of its credibility.  We are not surprised when Trump makes false claims; it is disappointing that his economic team cannot be trusted to make honest forecasts.

Why Trump Is A Bullshitter And Not A Liar

This article instructs us on the difference between a liar and a bullshitter.  A liar knows the difference between a lie and the truth.  That is why a liar attempts to prevent disconfirming facts from becoming public.  A bullshitter does not care about the truth.  The truth is anything that is useful at the moment.  If things change the bullshitter will seem to contradict himself.  There is no contradiction because nothing is true; it changes with circumstances.  Ignorant people tend to be bullshitters.  They don't know the subject matter so they resort to a random stream of nonsense.  They don't expect others to see it as ignorance and incoherence.  Bullshit is also used as a loyalty test by Trump.  He makes a bullshit statement and then he observes whether members of his staff repeat the bullshit.  His communication staff have to deal with this all of the time.  Sean Spicer passed his test of loyalty when he repeated Trump's bullshit about the size of his inauguration crowd, his electoral college landslide, and why he lost the popular vote.  He proved his loyalty but he lost his credibility with the media.  Trump then blamed his communication people for not convincing the press to believe the bullshit.  The bottom line is that Trump has created a world in which bullshit dominates much of our discussion and some media outlets produce bullshit on a regular basis.

Is Trump King Lear, Richard lll, Or 1984?

This article is for Shakespeare fans.  It argues that we have avoided 1984 and settled into the tragedy of King Lear.  One of the commentators explained why Richard lll was a more apt comparison.  In any case Trump is a recognizable character who was understood by great writers. Our tragedy is that our electoral system failed to do its job.  Too many did not recognize this king for who he is.  It is our tragedy.

Trump Claims That He Hit A Home Run On His Trip: It Was Not For The Home Team

Donald Trump is his own favorite cheerleader.  He announced that he hit a proverbial "home run" on his trip.  It doesn't get any better than that in baseball.  But he did not hit a home run for the home team.  The relationship between the US and Europe has been the key component of US foreign policy since the end of WWll.  He weakened that relationship during his trip.  He scolded our partners in Europe about not paying their fair share for NATO.  His real audience for that message is his political base in the US.  They don't like anything foreign.  He was also critical of our trade policy with Europe.  In particular, it was directed at Germany for selling lots of cars to US consumers.  He suggested that the US and Germany would have to work out a new trade plan.  That only showed his ignorance.  Trade policy between the US and Germany is dictated by our trade policy with Europe.  Angela Merkel spent two days in the presence of The Donald and she told an audience in Germany that its partnership with the US had been tarnished.  She got a standing ovation for one minute after that comment.  The audience knew who she was talking about.  Trump is considered a clown in much of Europe.

So what team did Trump's home run count for?  It was great for his relationship with his "America First" base and it could not have been better for Putin.  Anything that weakens NATO and the US relationship with Europe is consistent with his foreign policy objectives.  Our clown prince will not change his spots.  The damage that he has done, and will continue to do, will damage the US along with the rest of the world.

Why Don't We Give Americans What They Want?

What Americans want differs by income level.  Noah Smith tells what Americans want by income level and he tells us how to give them what they want.  The only problem is that our political system makes it difficult for us to do simple things.  Perhaps we should concentrate and doing what people want and push our politicians it directions that many of them will not take.  That leads to the next problem.  We need to push the right kind of people into running for office.  We also need a political party to put these things into their platform.

How Public Education In Oklahoma Has Suffered From State Budget Policies

Politicians in Oklahoma have forced many school districts to move to four day weeks.  Changes in the state budget started in 2008.  Since that time spending per student has declined by 14% and there has been no increase in teacher salaries since 2008.  Oklahoma spends $8,000 per student.  Only Arizona, Utah and Idaho spend less.  To make matters worse federal spending on public education has been reduced in Trump's budget proposal.  This is how he, and state legislatures, intend to make America great again.  The jobs of the future will demand higher levels of cognitive skill.  Children from Oklahoma, and other red states which have adopted similar policies, will have a severe disadvantage in the labor market.  Ignorance is also bad for a democratic society.  Perhaps that is what right wing politicians want.  They don't get their campaign funding from low income citizens and they manage to convince them to vote for policies which are against their self interest.

Why Scientists Disagree About Global Warming???

The Heartland Institute published a book (pamphlet) called "Why Scientists Disagree About Global Warming".  They are sending this pamphlet to all of the science teachers in the US.  They have also sent it to elected officials and other groups.  One of the teachers who received the pamphlet from Heartland decided to have her students do a little bit of research on Heartland and the NIPPC which provided the content.  Unknowingly,  Heartland provided a great opportunity for students to learn about how to research propaganda.  I have summarized some of the their findings below.  I would encourage other science teachers to have their students do a similar study.  It is very easy to do for most students who know how to use google and their computers.  Heartland has provided teachers with a great opportunity to participate in the debunking of propaganda on global warming.

The Heartland Institute is a non-profit "think tank" it is designated by the IRS as a 501(c)3 entity.  Donors to Heartland are not required to be identified and donations are tax deductible.  Heartland describes itself as a promoter of freedom.  It promotes free market solutions to social and economic problems.  Its goal is to limit government in order to promote personal liberty.  Exxon has provided several million dollars to Heartland over a number of years.  It is not surprising that Heartland has taken the position that government intervention into the energy industry, in order to mitigate global warming,  violates the freedom of energy producers and consumers of energy.  It sponsored an organization called the Non-government International Panel on Climate Change (NIPCC) to produce the pamphlet which argues that there is no scientific consensus about human contribution global warming.

The NIPCC consists of a around 23 authors from 15 nations.  They are not all scientists.  It opposes the Intergovernmental Panel on Climate Change (IPCC).  The IPCC consists of several hundred scientists from around the world who produce research that is published in peer reviewed scientific journals.  IPCC research has led to the conclusion that global warming is real, and that the emission of carbon dioxide and other greenhouse gases is responsible for global warming.  NIPCC claims that there is no consensus among scientists about human contributions to climate change.  It produced the pamphlet funded by Heartland to attack the consensus of climate scientists.

The forward to the NIPPC pamphlet was written by Marita Noon.  She started her career as a Christian motivational speaker under the name of Marita Littnauer.  She is now the director for Energy Makes America Great Again and a companion organization called Citizens Alliance for Responsible Energy (CARE).  CARE receives its funding from the New Mexico Oil and Gas Industry.  It claims that it promotes freedom and the American way of life by educating the public and policy makers regarding energy.  Noon has been a columnist for Breitbart and other far right organizations.

Marita Noon's forward in the pamphlet starts out with an attack on President Obama for placing a priority on mitigating global warming.  She argues that this was done instead of dealing the threats from ISIS which is engaged in global acts of terror.  That sets the tone for a forward produced by a motivational speaker and not a scientist.  She goes on to argue, among other things, that the alarmist view of global warming is at the core of renewable energy subsidies that transfer wealth from the general public to a "small politically connected cabal of climate profiteers.  That sets the stage for her to thank the producers of the pamphlet which proves that there is no scientific consensus on climate change.

The pamphlet published by the Heartland institute was written by three authors who have been critical of human contributions to climate change for many years.  Craig Idso has a PhD in geography and like his father Sherwood Idso he has argued that carbon dioxide provides more good than it does harm.  He has received an $11,000 per month stipend from Heartland.  He is an Adjunct Scholar at the Cato Institute, which like Heartland, is a think tank that promotes limited government, free markets and personal liberty.

S. Fred Singer is a 93 year old physicist from Austria who has been a critic of global warming for many years.  He has received $5,000 monthly stipend from Heartland for his contributions.  Robert Carter, who recently passed away, is the third author of the NIPPC pamphlet.  He is a marine geologist  from Australia.  He served on the Institute for Public Affairs in Australia.  All of its directors serve on the boards of fossil fuel businesses.  He once claimed that coral reefs are in no danger from global warming.  It is common knowledge today that coral reefs are in serious danger from climate change.  Some the damage may be irreversible.

The name given to the organization that produced the pamphlet is similar to that of IPPC in only one respect.  It calls itself the Non-Governmental IPPC.  The implication is that IPPC is a government organization and that NIPPC is free from government imposed requirements on its operation.  That is absurd to begin with.  The hundreds of scientists that participate in IPPC research and its conclusions do not work for government.  On the other hand,  the Heartland Institute receives much of its funding from Exxon and other organizations that are affected financially by government sponsored efforts to reduce greenhouse gas emissions.  Heartland, and a number of other right wing think tanks such as Cato, The American Enterprise Institute, Heritage, etc. etc. claim to be defenders of freedom.  Their defense of freedom is also a defense of fossil fuel industry financial performance.  Heartland's critique of the IPCC is that it is motivated by the incentive to promote government funding for research on climate change.  No evidence is provided to support the conclusion that hundreds of dedicated scientists are willing to fudge their data in order to maintain government funding.  There are lots of reasons why firms in the energy industry fund organizations like Heartland and other think tanks that are devoted to promoting the freedom of businesses and less interference from government in the market system.

The producers of the pamphlet are correct when they argue it is very difficult to reach consensus in science.  There will always be debates about research findings.  Its also true that new studies will provide better answers to important questions.  The IPPC process for reaching conclusions among hundreds of scientists is not easy.  It has taken many years of research and debate to get agreement about the conclusions that have been reached.  The NIPPC starts out with the premise that climate change is a function of natural phenomena and that human contribution is not important.  They have not proved that point in their pamphlet. Instead they have tried to discredit the efforts of hundreds of scientists that came to a conclusion that Heartland and its funding organizations dislike.