U.S. Economy Leaving Europe and the Rest of the World Behind Print
By Timothy H. Lee
Thursday, June 21 2018
[T]he U.S. has deregulated and cut taxes since the dawn of the Trump presidency, whereas Europe micromanages its economy in the manner preferred by Obama Administration alumni and their domestic apologists.

It wasn't supposed to happen this way. 

The 2016 election of Donald Trump was supposed to usher in an era of economic mismanagement and market decline, while our European exemplars flourished under their more enlightened socialized model. 

The late satirist H.L. Mencken once observed, "Democracy is the theory that the common people know what they want, and deserve to get it good and hard."  In similar vein, liberals aghast at Trump's victory anticipated and even hoped for the United States to suffer as retribution for Flyover Country voters' poor life choices in November 2016. 

Literally on election night, for instance, the political left's favorite economist Paul Krugman predicted market crashes from which we would "never" recover.  And just this month, latenight comedian Bill Maher spoke for many when he openly hoped for a catastrophic American recession: 

I feel like the bottom has to fall out at some point.  And by the way, I'm hoping for it.  I think one way you get rid of Trump is a crashing economy.  So please, bring on the recession.  Sorry if it hurts people, but it's either root for a recession or you lose your democracy. 


Well, a funny thing is starting to happen, much to their dismay. 

Namely, American economic growth is leaving the world behind.  A month ago, The Wall Street Journal noted the emerging signs under a buried Page B12 headline "Bond Gauge Signals Confidence in U.S.": 

The gap between the yields on 10-year U.S. Treasury notes and German government bonds reached its widest in almost three decades, a sign of investor confidence that growth remains steadier in the U.S. than in Europe.  The gap last week hit 2.445 percentage points, its widest since April 1989...  "That spread is probably anticipating the U.S. economy is going to grow stronger than the rest of the world, and Germany in particular," said Jack McIntyre, who manages global bond portfolios at Brandywine Global Investment Management. 

Then last week, the European Central Bank announced that it would maintain interest rates through next summer, which manifests its concern that Europe's economy shows increasing signs of fragility. 

In contrast, the U.S. Federal Reserve last week not only raised our benchmark interest rate by one quarter of a percentage point, but also suggested that it could accelerate the pace of rate increases going forward due to our suddenly booming economic growth and employment gains. 

Accordingly, our economy is accelerating just as others are slowing, which breaks from an extended period during which the world's major economies had been trending uniformly.  And it's not just Europe that is slowing down, as the Journal noted: 

Europe isn't the only region to show signs of cooling down.  The People's Bank of China this week also left a suite of key short-term interest rates unchanged.  New data showed business activity, including investment and retail sales, slowed in May, suggesting the world's second-largest economy is facing growing headwinds.  The disappointing figures "warranted China to take a cautious tone," said Tommy Xie, an economist at OCBC Bank. 

Meanwhile, the Trump economy has already averaged 3% growth in the first year of his presidency, which Obama Administration officials rationalized was a thing of the past.  And it's only beginning to expand even faster.  For the second quarter that just ended May 31, analysts predict growth exceeding 4%. 

What explains all of this? 

Well, the U.S. has deregulated and cut taxes since the dawn of the Trump presidency, whereas Europe micromanages its economy in the manner preferred by Obama Administration alumni and their domestic apologists.  And just last week, a federal court rejected a government effort to prevent the private merger between AT&T and Time-Warner, Inc., whereas Europe places a far heavier thumb upon its market participants. 

America accelerating even while the economies of Europe and China begin to decline is something that everyone here should celebrate.  It's unfortunate that too many on the political left refuse to join the party, and even hope for it to come to an abrupt end.