June 4, 2019 - Douglas Myser

Will Trump's economy follow Bush's. That idea seems to be popping up in media circles these days, with many noted economists stating the short term economic boost provided by the Tax Cuts and Jobs Act may fade away, leaving us with larger deficits to deal with down the road. The comparison is the George W. Bush's tax cuts, which had the same impact initially, but later added to the national debt. Will Trump's economy follow Bush's.

Although the economic contexts for the start of the Donald Trump and George W. Bush administrations were very different, both presidents responded with essentially the same economic formula--tax cuts, higher spending and aggressive deregulation. In both cases, as expected, the economy responded to the stimulus with boosted growth of stocks and gross domestic product. For Trump, the good numbers on unemployment, GDP and stocks were more immediate, owing to the much more favorable economy when he took office, than they were for Bush. Both Presidents were also offered a similar opportunity; to put the nation's finances on more solid footing. What happened next under Bush may give us a window into what is coming in the next few years.

When Bush took office, there was a slowing economy, and the stock market was declining. Unemployment was low but rising. There had also been four straight years of budget surpluses, 1998 to 2001, under President Bill Clinton. As a result, the debt was shrinking fast as a percentage of GDP. Economists even mused about the possible evaporation of the U.S. bond market. In 2001 the national debt stood at 54.8 percent of GDP. Trump inherited a very different economy. Unemployment was falling (4.4 percent in 2017 from a 2010 high of 9.6 percent) amid a historically long expansion albeit at growth rates that were below average for the post World War Two period.

After the initial Bush Tax cuts went into effect, eventually the economy dissolved, leading to the worst recession since the Great Depression. Then came those who owed the IRS and looked for a Tax Resolution firm to bail them out. By 2009 GDP had fallen by 2.5 percent, and average unemployment jumped from 5. percent to 9.3 percent in one year. The government began to bailout the banks, and the new Obama administration used further Keynesian stimulus to halt the freefall in 2010. Many families financials were utterly destroyed by the Great Depression from 2007 to 2010. Many also owed IRS taxes as a result and had to contact a Tax Resolution Services company for Tax Relief options.