Top GDP Growth Rates in U.S. History
:: By: Larry Walker, II ::
In an October 4, 2015 interview on Meet the Press, Donald Trump was asked which government programs he will cut so his tax reduction plan won’t blow a hole in the deficit.
Trump’s first response described how we are going to save a lot in administrative costs by exempting millions of Americans from filing income tax returns. Under his plan, single individuals making under $25,000 and couples making less than $50,000 will not owe any income tax, and will thus not be required to file tax returns. This totally makes sense to me, as I outlined a similar plan in a post entitled, Tax Simplification, Part II – Saving $1,756 Billion, Overnight. Although it’s only part of the answer, it may actually be a bigger deal than some imagine.
Next, Mr. Trump remarked that his dynamic revenue plan focuses on growth. “We’re going to grow the economy. If China grows at 7%, they’re having a terrible year. We’re saying we can’t grow at 3% or 4%.” Overriding the host’s rude interruptions, Mr. Trump continued, “If we do 6% or 7% under my plan, everybody benefits.”
Snarky host, Chuck Todd, blurted out, “We’ve never done [sic]; we’ve never had a year at 6% or 7%.”
Of course, the public should be aware of Mr. Todd’s background. Although he may sound like an economic expert to some, he actually attended George Washington University from 1990 to 1994, majoring in political science with a minor in music, but never graduated. He certainly lacks proficiency in matters involving business, economics, or finance.
Mr. Todd would have no idea that the U.S. economy has in the past grown at rates as high as follows:
- 10.8% (1934)
- 12.9% (1936)
- 17.7% (1941)
- 18.9% (1942)
- 17.0% (1943)
He would likewise have no clue that, back in the good old days, the U.S. economy grew in the 7% to 8% range (see chart below):
- 7.3% (1984)
- 7.1% (1955)
- 8.1% (1951)
- 8.7% (1950)
- 8.0% (1944)
- 8.8% (1940)
- 8.0% (1939)
- 8.9% (1935)
In fact, Ronald Reagan was the last American president to put together a cogent pro-growth economic plan which thrust GDP above the 7.0% mark. Of course Mr. Todd could have looked this up before making a fool out of himself and NBC, but like many of his colleagues, he suffers from the recency effect. He is unable to see beyond the pathetic growth rates of -3.0% to 2.5%, which the U.S. has realized since 2009 (i.e. their new normal).
Mr. Trump continued to discuss how his tax plan will disincentivize corporate inversions (where U.S. companies move overseas to capitalize on lower tax rates and cheap labor). He described how his plan will incentivize U.S. companies to bring an estimated $2.1 trillion (or more) in profits held overseas back to the U.S. for domestic investment. Both policies work to raise GDP, expand the workforce and boost tax revenues.
Trump also discussed his plan to balance our longstanding trade deficits with China, Mexico, Japan and other nations through imposing a scaled tariff. Since over the last decade, trade deficits with the three named countries alone amount to $2.7 trillion, $602.6 billion, and $716.5 billion, respectively, Trump’s balanced trade initiative could add another $4.1 trillion to the national economy.
Mr. Todd continued to interrupt, “We still have a hole in the deficit that this tax plan blows open; unless you tell us what you’re cutting.” Of course this is a classic gotcha question, since most liberals view cutting anything, even waste, fraud and abuse, as a negative.
Given the anemic growth rates he and other liberals are accustomed to, failing to account for the $1.8 trillion saved by exempting millions from income tax filing requirements, and gains realized through disincentivizing corporate inversions, recovering overseas profits, and balancing trade, Chuck Todd concluded that Donald Trump’s tax plan may add as much as $10 trillion to the debt over 10 years.
To this, Mr. Trump simply reiterated, “If we can get it (i.e. the growth rate) up to 5% or 6% it’s a huge difference.”
Mr. Todd again interrupted, “Okay, 6% is something we have not done.”
Trump refuted, “Well, we used to do it in the old days.”
It turns out that Mr. Todd is wrong, and that Mr. Trump, who has the kind of thinking America needs to solve its trade, growth, and debt problems, is correct. The chart here shows U.S. GDP growth rates from 1930 through 2014. Growth of 6% or more has been achieved numerous times in the past and is entirely possible in the future. The first step in getting there is to stop listening to know-nothing media pundits. The second step is to elect a president with notable acumen in financial matters.
“Solving a multi-trillion dollar problem just may require the mind of a billionaire.”