Analysis: It’s the 'economy, stupid'. And right now, the Trump economy is blasting off

In Davos, there is almost zero mention of the controversies dogging Trump.

It’s the economy, stupid.

And right now, the Trump economy is blasting off.

Davos Man likes.

Instead, people talk about the real possibility now that growth in the U.S. economy could hit 4 percent this year — a positively Clintonian benchmark. The impact worldwide would be tremendous.

Money in peoples’ pockets—for college, for retirement, for vacations. Businesses booming. New ones starting. And the USA once again the engine pulling the world economy.

We’re a long way from that, for sure.

And there are analysts who say the world’s economies are simply being boosted by all the easy money central banks pumped into them for years — and that’s a bubble that will burst.

But business types here disagree. And they give a lot of credit to Trump for the renewed strength and vigor they sense in the sinews of the global economy.

Deregulation is the first thing they mention. The cost of doing business has come down fast. That means margins will go up. That’s why so many investors see American companies as such good bets.

And that’s all Trump.

The tax cut is also—no surprise—hugely popular here. It seems the old US corporate tax structure was operating as a kind of logjam in the world economy, freezing up the flow of money and distorting investment decisions.

The dam broke. Trump broke it.

And now corporations are paying bonuses and boosting wages for American workers. All that money is just now beginning to hit the economy.

One example: J.P. Morgan says it will spend $20 billion over five years to raise hourly pay of its workers and open new branches in the U.S., as a direct result of the tax cut.

Needless to say, if the American economy is running at 4 percent growth later this year—Democrats can probably kiss goodbye to their dreams of a wave election sweeping them into power.

And if Trump and Congress pass a $1 trillion infrastructure bill that would pour more money into the US economy next year—2020 looks very different, too.

At the moment both men came to power, an economic paradigm had hit a dead end.

For Reagan, the New Deal approach to the economy had faltered, growth had dried up, inflation raged, working-class Americans were struggling and beginning to give up hope.

For Trump, the “neoliberal” approach that Reagan had helped to establish and Clinton had refined, had faltered. Growth had slowed, inequality had skyrocketed, working-class Americans felt abandoned and many despaired, turning to opiates and anger for relief.

Things needed to change. In 1980 and in 2016.

The direction of the change may differ profoundly, but maybe it’s just the jolt of change itself that counts. Maybe the economy just needs a good hard kick from time to time to get the engine to turn over and the thing going forward again.