As he did in his first term as president, President Donald Trump is once again predicting an economic boom the likes of which the U.S. has never before seen. In reviewing the publicly available economic data since Ronald Reagan, the period in which the U.S. grew the fastest with the most job creation did not occur in Trump’s first term and is unlikely to do so in this term, the reasons why to be explained shortly. First, a brief review of recent economic history where the biggest economic boom actually took place. Former President Bill Clinton’s eight years in office produced nearly 4% annual growth, over 240,000 jobs added per month and an inflation rate that averaged less than 3%, considered very low for that time. The unemployment rate when Clinton first took office was 7.3% and bottomed at 3.8% by April 2000. By contrast, in Trump’s first term, the economy added under 200,000 jobs per month, roughly equal to that of former President Barack Obama, while GDP growth averaged 2.3%, again, roughly equal to Obama’s last three years in office, while inflation was less than a quarter percentage point lower than in Obama’s second term. (Trump’s numbers, of course, were skewed by the Covid crisis, which featured the steepest and shortest recession in U.S. history.) All that leads me to the notion that a boom, the likes of which we have not seen, is unlikely even if the “Big Beautiful Bill” passes through Congress and lands on Trump’s desk. And here’s why. Nothing new to help growth First, the bill largely extends existing tax rates that were put in place in 2017, without further lowering corporate taxes, as once promised, from 21% to 15%. There are no major additional tax cuts included in the bill. The bill simply makes much of the existing code permanent. No change, no gain. It’s true that taxes on tips, overtime and Social Security payments may be eliminated, but that could also lead to employers seeking out ways, in the first two cases anyway, to pay lower wages if tips and overtime go untaxed. Beyond that, there’s not much new in the bill that would accelerate economic growth, nor would a failure of the bill’s passage lead to a 68% tax increase for everyone in America, as the president has warned . Published analyses have suggested that 68% of Americans could see a 7% increase in their taxes, but not a 68% increase in what they pay. Given the prospects for rising inflation amid recently imposed tariffs, and a subsequent slowing in consumer spending, some of which is already taking place, the economy appears to be downshifting rather than speeding up. Job growth , as we saw on Friday, has moderated for several months in a row and while not reflective of a recession, we’re also witnessing a jump in jobless claims, announced layoffs and, according to some published reports, consumers maxing out credit cards to buy the basics. Add to that the reductions in support for the poorest Americans, whether its access to Medicaid or food stamps, and the ingredients for a further slowdown are embedded in the bill, especially for those who can least afford to have government assistance reduced in a meaningful way. Big changes needed The Department of Government Efficiency spending cuts are also affecting government stimulus in so far as key funding in technology, medicine and education are being slashed, threatening the very areas that make the U.S. economy competitive and very much growth-oriented. The bill, by most accounts, also adds from $2.4 trillion to $3.3 trillion to the budget deficit over the next decade. With the current national debt standing at a record $36.2 trillion, higher federal borrowing needs could further push up borrowing costs as investors, especially international ones, now nervous about America’s fiscal position could demand higher yields to compensate them for the risk, however unlikely, that the U.S. runs into trouble in paying its bills. During the Clinton administration, tax rates were higher, and yet growth was stronger, 22.7 million jobs were added and the budget deficit turned to surplus by the end of his term. None of those metrics are supported by existing or proposed policy initiatives today. The Clinton boom was second only to that of FDR, whose economy grew strongly as Roosevelt took over, quite literally, at the very bottom of the Great Depression. In modern times, Clinton’s economy was stronger than that of any president who came before or after him. None of the policies currently being pursued by this administration offer the same prospects for growth though, even like Clinton, this president has a major technological revolution underway. That big, beautiful bill would require some big, bountiful changes if it hopes to stimulate growth in a way in which all Americans, rather than perhaps a handful of billionaires, will share meaningfully in any future prosperity.
