SPOKANE, Wash.–What do U.S. presidents and their policies mean for economic performance? And what about the current president?
Credit unions got a frank and often funny perspective on those questions from one economist here.
Speaking to the Northwest Credit Union Association’s MAXX Conference here, Dr. Stephen Happel, Emeritus Professor at Arizona State University, said he has learned four things during his career:
- There are no free lunches. “When I hear free, I want to climb into a bunker and put on a helmet,” said Happel. “Capitalism is the best economic system, by far, hands down. I think Bernie Sanders is a terrorist and should be put in jail. It’s like Dennis Miller said: ‘Socialism is like a nude beach. It sounds great until you get there.’”
- The long-term economic growth potential in the U.S. is 3%. Those who say it’s just 2% are “hogwash,” according to Happel. “If you think long term growth potential is 2%, you’re dancing in the streets right now. But if you’re someone like me, it’s nothing to be jubilant about.”
- A good heart is not enough to do good economics. “Begrudgingly, I will admit most of the Democratic candidates have good hearts, but…”
- “I am an optimist. I’m a 72 -year-old man with a 20-year-old son, so that will tell you something right there.”
The Presidents
Looking to some of the prior presidential administrations and their effects on the economy, Happel offered the following:
- 1950s, Eisenhower. “It wasn’t happy days. Growth was 2.6%. It wasn’t a great growth decade.”
- 1960s, Kennedy/Johnson. Decade saw strong 4.8% average growth.
- 1980s, Reagan. The country thought “he worked with chimpanzees so maybe he can work with Congress,” quipped Happel. But Reagan also dialed back taxes and regulations and the economy boomed.
- 1980s/early 90s, George Bush I. Bush raised taxes and growth averaged 2.1%, noted Happel.
- 1990s, Clinton. “Then we get horny Bill Clinton. Growth over 4% for three years running. Why: Two words: Monica Lewinsky. He’s so busy defending himself he doesn’t have time to screw up the economy.”
- Early 2000s, Bush II. “He started out well with tax cuts, but then it all goes to hell for him. We don’t need any more Bush’s as president.”
- Early 2000s, Obama. “Growth in 2009 was -3%. In contrast to Reagan, Obama offers temporary tax rebates and a $754-billion spending package. Kept rates low. I can find no other country where that combination has ever worked. I am critical of Obama from the very beginning, and growth under Obama averaged 1.5%.”
- Trump. 2016. “Begrudgingly, I voted for Trump and it nearly leads to divorce in my household. From an economic standpoint, I’m thinking he’s superior to Clinton. I think what the heck, he seems semi-intelligent and he’ll grow into the job. Can we have the room laugh at that?”
The Current State
In 2016, economic growth 1.6%. Through January 2019 growth averaged more than 3%, noted Happel. “I said growth will be over 3% assuming tariffs don’t screw up the U.S. economy. Well, tariffs have screwed up the U.S. economy. If you look at the forecast, industrial production, we’re getting whacked there. There is major uncertainty. Consumer spending, 70% of GDP, has been very strong, but it’s down from 4% to 3% this year. Still, that’s a good number.”
Areas of Concern
Happel said areas of concern for credit unions should include the forecasted decline in new auto and truck sales and in home building. But he added it “could be worse,” and the U.S., consumer has shown a strong proclivity for rebounding.
“The blue chip forecasters now say there is a 40% chance of recession next year, and there’s a good possibility,” said Happel. “The economics profession is in disarray right now.”
Happel reviewed what he sees as the negatives, the neutrals, and the positives in the economy.
The Negatives
- Tariffs & related uncertainty
- The inverted yield curve (“Which has predicted eight out the last five recessions, so keep that in mind,” said Happel.)
- Federal deficits that are now the largest as a percentage of GDP during peacetime in U.S. history.
- Brexit, Germany, Hong Kong, slow China growth, and a small business index showing 40% are in trouble or worries.
The Neutrals
- Retail sales are up, “but I now see retail sales fell in September.”
- Impeachment. “I don’t know what to say. A lot of people believe because Trump is under pressure, he will strike a deal with China to look good. Some people believe impeachment would be good for economy. I don’t know.”
The Positives
- Housing starts are up 12%.
- Industrial production rebounded in past few months.
- The U.S. unemployment rate is lowest it’s been in 50 years, and for African-Americans is 5.5%, the lowest it’s ever been on record.
“The economy is very robust. I am very optimistic,” said Happel. “Americans’ have a way of coming back.”