Trump inherited from the previous Obama (a Democrat) administration a strong economy based on sound fundamentals. Obama, in turn, had inherited the Great 2008 Recession from his previous Bush (a Republican) administration. The Bush administration had somehow taken the Clinton administration's strong fundamental economy with budget surpluses and in a mere 8 years, turned it into the Great 2008 Recession. Does anybody see an emerging trend here?
After less than two years, Trump is on the very same track that Bush followed. The Republican controlled congress did everything possible to suppress Obama's attempts to resuscitate the economy during his administration. They failed to completely smother it, but they did manage to keep it somewhat flat. In the first year of the Trump administration, this same Republican controlled congress took specific action to surge the economy with tax cuts (which mainly benefited the very wealthy) and 1.3 trillion of spending in the Trump first FY budget.
Cutting taxes and increasing spending was the necessary fuel thrown on the Obama sound fundamental economy fire to give the economy traction. Of course it took off, but there is a time-bomb ticking off the days to the next Republican inspired recession. It took off like a rocket, but the fundamentals don't look good now. The biggest indicator of a problem is the accelerated increase in debt. The recent Dow Jones drops are a harbinger of this and other festering economic problems.
This course of action is exactly the same as the Bush administration on their eight year rush to recession. The historical basis of this trend goes all the way back to the Reagan administration with the only difference being that Reagan inherited a very weak economy that was blamed on the one term Democratic Carter presidency which followed eight years of Republican's Nixon and Ford.
Reagan in the early years of his administration executed a healthy tax cut that benefited all but mostly the very rich, and radically increased defense spending. He did not make these changes on a sound analysis of the facts. It was more a knee-jerk by Reagan blindly implementing the extreme conservative agenda in the hopes that it would work without any fundamental knowledge.
Reagan's economic 'policies' did not go good well from early in his first term. Some of this chaos was inherited by Reagan from previous administrations, but the sky-rocketing national debt was all caused by Reagan policies. In this early time, his economic policy was being seriously questioned. The resulting outcry had his own VP George H W Bush calling the Reagan cobbled together economic strategy 'Voodoo Economics' referring to the fact that it was not based on any study or good precedent.
Just before the end of his first term his nearly $1 trillion increase in defense spending started to kick in and stimulate the economy. Key among this increase in defense spending included loser projects like reviving funding to the over-budget, technically flawed B-1 bomber that the Air Force didn't even want and the great 'Star Wars' debacle. Maybe nothing worth having was done, but the $1 trillion dollars did set the economy on fire.
After this perceived economic turnaround, Voodoo Economics began to be hailed as economic genius. It was taken up by some economist under the new name of Trickle-down economic, but in the nearly four decades of its deployment, it has repeatedly demonstrated failure at both the national level and for several states who tried it (e.g. Kansas, Arizona, Kentucky, and West Virginia). The end of Reagan's second term saw the onset of a recession that extended into the one-term presidency of his VP H W Bush's.
This recession dogged H W Bush until he was defeat by Democrat Clinton in 1992. Clinton raised taxes to get the debt under control, and the economy surged through the late 1990's. At the end of Clinton's second term, the Federal budget was actually showing a budget surplus. W Bush lost the popular vote, but was maneuvered into office by political cronies and the Supreme Court. Shortly after W Bush took office, the Republican congress cut taxes and started a massive spending agenda. The Clinton surpluses were followed after two W Bush terms deficit debt and the Great Recession of 2008.
It took two terms of Obama to reverse this recession and return a robust economy. Part of Obama's difficulties were the result of a Republican controlled congress that was installed in 2010. This congress denied him any support in his recovery efforts by being the congress of 'no', but he still managed get the economy back on track.
The history of Trickle-down economics on nation debt can easily be seen in this CBO plot of debt percentage of GBP from 1940 projected out to 2020 illustrated in the figure below. The highest percentage of debt occurred at the end of World War II in 1946. It reach an all-time low in 1981 which was the last budget year for the Carter administration.
It steadily increased through 1980 years of the Republican presidents Reagan and H W Bush with the introduction of Trickle-down policies. Clinton was able to reverse the debt trend with budget surplus by the end of his second term. The W Bush presidency took those Clinton surplus and restarted the debt ascension. Obama inherited 2008 Recession debt growth. He slowed it and started its decline in 2016 when Trump was inaugurated. Trump with his tax cut and budget spending restarted the ascension.
One lesson is very clear from this chart. A clear trend of debt increase is observed with the implementation of the Republican Trickle-down economics. Trickle-down implementation has repeatedly failed across this country resulting in massive debt and diminished or eliminated public services such as education.
We know from experience that a flat economy with a good foundation can be stimulated with tax cuts and increase government spending. It will takeoff like a rocket. The Republicans have learned that lesson quite well.
The other economy lesson has proved to be a little bit more difficult for Republicans to learn. This other lesson involves the effect of increase spending and a large tax cut. This combination inevitably creates deficit debt that is detrimental to long-term economic stability, and nothing ever really trickles down. Perhaps Republicans have failed to notice this inevitable consequence, but more likely, they just don't care as they pursue any avenue to win.
Whether these recent Dow Jones losses are the immediate precursor of the coming Republican recession remains to be seen. But one thing remains certain, the inevitable Republican recession is definitely coming.
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