GDP Boomed In the Second Quarter, But Will Trade Fears Kill Growth?

The initial estimates of second quarter GDP growth are in and the economy is booming. The economy grew at 4.1 percent despite fears of a trade war fueled by President Trump’s tariff policy. The April through June growth was powered by consumer spending, exports and business investment.

The 4.1 percent growth rate was the best in four years. The last time that the GDP - the total value of goods and services produced across the national economy – grew more rapidly was in the third quarter of 2014 when the US posted 4.9 percent GDP growth. The second quarter numbers were significantly better than the first quarter growth rate of 2.2 percent.

“We're on track to hit the highest annual growth rate in over 13 years,” President Donald Trump said shortly after the Commerce Department announcement. “And I will say this right now and I will say it strongly, as the deals come in one by one, we're going to go a lot higher than these numbers, and these are great numbers.”

Trump also claimed that that the economy under his administration grew at a rate ten times faster than under Presidents Obama or Bush. The Wall Street Journal notes that this claim is false. Those presidents each had four quarters of economic growth that was greater than 4.1 percent. President Obama’s best showing was the second quarter of 2014 when the economy posted 5.1 percent growth, the best numbers posted since the 2008 recession.

Consumer spending accounted for more than two-thirds of the growth. This increase “was more powerful than anticipated and speaks to the impact of an increasingly tight labor market and strong job growth on consumer income and households’ confidence,” said Brian Coulton, chief economist at Fitch Ratings. Coulton added that the “numbers really bring the possibility of 3% growth for 2018 as a whole into the frame.”

The big question about continued GDP growth deals with Trump’s trade policy. Exports rose strongly in the second quarter and contributed 1.06 percent to the overall growth rate. The boom in exports was largely due to tariff-targeted nations such as China ordering US products like soybeans before export taxes kick in. Regardless of the outcome of the trade discussions, US export levels are likely to return to historically lower levels.

If the trade war continues to heat up to the point where American businesses dependent upon international trade lay off workers and cut wages, consumer spending could also take a hit in future quarters. The University of Michigan’s consumer sentiment index has already reported that consumer confidence is down slightly for July based on “consumers who had negative concerns about the [trade] tariffs [and] voiced a much more pessimistic economic outlook.”

For now, however, President Trump and the Republicans can bask in the strong numbers in the run-up to the November midterm elections. They can justifiably point to tax reform and deregulation as factors in the current economic boom. The problem will be in convincing voters that President Trump’s trade policies won’t lead to a bust.

Originally published on The Resurgent

Obama by the numbers

7.6 percent: Unemployment rate in January 2009 (BLS)

9.1 percent: Unemployment rate today (BLS)

10.4 percent: Georgia unemployment rate January 2009 (AJC)

10.2 percent: Georgia unemployment rate today (Ga. Dept. of Labor)

14-20 percent: Percentage that Obama claimed health insurance premiums would be reduced by Obamacare (CBS News)

9 percent: Percentage that health insurance premiums increased in 2011 (PBS)

$666 billion: Cost of the stimulus law (Weekly Standard)

2.4 million: Number of jobs “created or saved” by the stimulus according to the Council of Economic Advisors (Weekly Standard)

$278,000: Cost per stimulus job “created or saved” (Weekly Standard)

$535 million: Amount of federal loan guarantees lost in the bankruptcy of Solyndra

$10 billion: Total amount of federal loan guarantees to “green” companies (IBD)

283: Number of “green” jobs created (IBD)

$23 million: Cost in federal loans per “green” job created (IBD)

10 percent: Federal deficit as a percentage of GDP in 2009 (USgovernmentspending.com)

11 percent: Estimated federal deficit as a percentage of GDP in 2011 (USgovernmentspending.com)

$10.632 trillion: Federal debt in January 2009 (Treasurydirect.gov)

$14.856 trillion: Federal debt today (Treasurydirect.gov)

84 percent: Federal debt as a percentage of GDP in 2009 (USgovernmentspending.com)

102 percent: Federal debt as a percentage of GDP in 2011 (USgovernmentspending.com)

2.8 percent: U.S. economic growth rate in 2010 (Indexmundi.com)

1.3 percent: U.S. economic growth rate in second quarter 2011 (Tradingeconomics.com)

Over 2,500: Estimated number of guns that the BATFE allowed to be smuggled to Mexico under Operation Fast and Furious (CBS News)

More than200: Number of Mexicans killed by guns connected to Fast and Furious (Townhall.com)

1: Number of Border Patrol agents murdered by guns connected to Fast and Furious

0: Diplomatic successes in which Iran agreed to stop developing nuclear weapons

65 percent: President Obama’s approval rating in January 2009 (Rasmussen)

42 percent: President Obama’s approval rating today (Rasmussen)

23: Number of senate seats held by Democrats and Democratic-leaning independents that are up for election in 2012

4: Number of seats needed by Republicans to take control of the Senate

1: Terms that President Obama is likely to serve

Read this article on Examiner.com:

http://www.examiner.com/conservative-in-atlanta/obama-by-the-numbers

Tort Reform: The Mississippi Miracle

Tort reform has long been touted as a way to help reduce rising healthcare costs in the United States. Opponents belittle the effects of tort reform and claim that the right to bring almost unlimited lawsuits actually helps society by making products safer.

“Tort” is a legal term for a wrongful act that causes an injury to a person, their property, or their reputation. If a tort is committed, the injured person may be entitled to compensation. To obtain compensation, it is frequently necessary to file a lawsuit. The lawyers who represent plaintiffs in these lawsuits often work on a contingency basis, which means that they are paid a percentage of the money that the jury awards if they win the case.

Tort cases are a major source of income for personal injury lawyers. Consequently, the trial lawyers lobbying groups are major opponents of tort reform. Trial lawyers are second only to unions in providing contributions to the Democratic Party.

In 2004, the trial lawyers lost a major battle in Mississippi. Before 2004, Mississippi was a state known for frivolous lawsuits. Lawyers came from all around the country to file class action suits in Mississippi. Insurance companies were fleeing the state and those that remained were raising premiums or refusing to write policies. The US Chamber of Commerce rated Mississippi 50th in every judicial category. The state was referred to as “the jackpot justice capitol of America” and a “judicial hellhole.”

In 2004, Mississippi passed a tort reform package that resulted in a drastic change in the state’s legal landscape. After five years of political warfare, Mississippi’s legislature passed venue reform, which prevents lawyers from shopping for sympathetic courts, and limits on subjective and non-economic damages, such as pain and suffering. During the same period that tort reform was being passed, Mississippians also elected more judges that limited class action (multiple plaintiff) lawsuits and out-of-state plaintiffs.

The result was dramatic and rapid. Prior to the reform, medical malpractice rates had risen by 20-25%. Many doctors stopped practicing or moved out of state. Some areas were left without obstetricians within 100 miles. Since the reform, rates have not risen at all, and have even decreased by 30-45%. The number of medical malpractice suits has fallen by 90%.

Mississippi’s business-friendly climate has also attracted investment and jobs to the state. Approximately 60,000 new jobs have been created in the four years since the tort reform was passed compared to 30,000 jobs lost in four years before reform. Textron has invested $35 million and Kingsford Charcoal $20 million in the state. Winchester Ammunition returned to the state with a $3.5 million payroll. FedEx built a $1 billion dollar facility. Toyota even built a $1.2 billion, 200,000-worker plant. The Toyota plant is contingent on tort reform remaining the law of the land in Mississippi.

Overall, Mississippi is better off than before tort reform. Unemployment is down to 6% from a high of 9% prior to reform. In 2007, Mississippi’s per capita income growth was 6.7%. This places Mississippi third out of the fifty states.

Tort reform is a proven economic winner. Tragically, due to Democratic election victories in 2006, many states are repealing business-friendly laws and passing new laws, such as a patient bill of rights, that give people additional rights to sue. More lawsuits would have the effect of increasing costs to consumers and contributing to stagnant economic growth.

Tort reform is not about eliminating the right to sue. It is about eliminating outrageous damage awards and frivolous lawsuits. Tort reform does not prevent the recovery of legitimate damages, but it does prevent people from winning a legal lottery over a minor wrong. Tort reform prevents lawyers from looting a company of its hard-earned profits for a minor mistake or technicality.

The US legal system is estimated to cost each American family about $7,000 annually. One Mississippi CEO reported that his company saved $70,000 monthly on its legal bills after the passage of the reforms. Tort costs are spread through society by higher prices for consumer goods, higher insurance premiums, and more expensive health care. Tort reform in more states and at the federal level would save American families thousands of dollars and help to spur economic growth.

Sources:

http://www.opinionjournal.com/cc/?id=110007260
“Mississippi’s Tort Reform Triumph,” Wall Street Journal, May 10-11, 2008