The U.S. economy grew at a healthy 3.2 percent annual rate in the first three months of the year, according to a preliminary estimate from the Bureau of Economic Analysis on Friday. The growth estimate, which may yet be revised, was surprisingly strong; as recently as April 1, economists were predicting a desultory quarter that barely moved the GDP needle. It's also a bit of a rebound from the fourth quarter of 2018, when growth sagged to a 2.2 percent annual rate.
Before you pop the champagne corks, consider that the source of growth wasn't ideal. The BEA credited "an upturn in state and local government spending, accelerations in private inventory investment and in exports, and a smaller decrease in residential investment." Aside from the increase in exports, those aren't indicators of growth to come.
Nor is it the 4 percent growth that Trump promised on the campaign trail. Yet, it's another indication that the economy's pace has picked up under Trump, especially over the past 12 months.
Trump tweeted: " Just out: Real GDP for First Quarter grew 3.2 percent at an annual rate. This is far above expectations or projections. Importantly, inflation VERY LOW. MAKE AMERICA GREAT AGAIN!"
The president naturally touted the GDP news, and some of his policies have helped. In particular, the tax cuts and the enormous federal budget deficit have pumped in fuel, although the stimulus will wear off at some point. (Note that in his tweet, he subtly called on the Federal Reserve to lower interest rates — "inflation VERY LOW" — and provide yet more stimulus.)
Meanwhile, other Trump policies are tapping the brakes on growth — most notably, the tariffs he has slapped on global steel and aluminum imports and the trade war he has launched with China. Tariffs repeatedly threatened on car imports would raise prices and further dampen auto sales here — even by domestic automakers, which rely on global supply chains. By the way, sales of autos and auto parts declined in the first quarter by 0.5 percent.
Regardless, the economy continues to be the best thing going for the president's reelection campaign. Democrats can no doubt find millions of voters who aren't basking in the warmth — too great a share of the new wealth is being captured by the sliver of Americans who already have plenty. But it's hard to persuade the country at large that times are tough and people are suffering when the tide is rising pretty steadily now, and has been rising for so long.
This dilemma has been faced by many a challenger to an incumbent president, and it's often insurmountable. The only incumbent to lose in recent decades was George H.W. Bush, and that's because the economy went into recession halfway through his term.
That's why Democrats are likely to appeal to voters' sense of fairness by focusing on income inequality, while also shining a spotlight on the financial problems faced by big groups of Americans — the staggering amount of student loan debt, for example, or unaffordable medical bills and insurance premiums.
There's no shortage of people who feel they've been left behind in this long expansion. But as employers pay higher wages, households save more, home values climb and the stock market hits new peaks, the rising tide is lifting more and more boats. Including the one carrying the Trump campaign.
— Reprinted with permission