AP: Obama's nose is growing

[Angrboda]

The economy is doing well. Who deserves the credit?

At the risk of making ourselves unpopular with both sides, we’re going to say each has a point. The growing economy represents the acceleration of a trend that began in Mr. Obama’s first presidential term, when he was trying to pull the country out of an epic recession (with an assist from a bailout fund that President George W. Bush pushed through Congress in late 2008). The most controversial measure of his term, Obamacare, was said by the GOP to be a job killer, which it wasn’t, to put it mildly. The second-most controversial, roughly $763 billion in tax cuts and spending increases — “the stimulus” — probably added 2 percent to annual growth, according to a 2017 paper by Gerald A. Carlino of the Philadelphia Federal Reserve Bank.

Mr. Trump, therefore, inherited a tightening labor market, good for workers. However, it stands to reason that the massive new tax cuts and spending increases he signed into law reheated the already warmed-up economy. So give Mr. Trump that much credit.

If he and the Republicans can take responsibility for the benefits of his policies, however, they must also own the potential costs. Despite GOP promises that lower taxes would pay for themselves in higher growth, federal revenue has gone up only 1 percent so far this year, according to the Congressional Budget Office, not nearly enough to offset higher spending, especially for rising interest payments. The budget deficit is up $222 billion. Debt represents a long-term threat to growth; the costs of Mr. Trump’s deregulation, of which he also boasts, may ultimately be measured in the coin of decreased public health and safety. Trade wars, too, remain a risk factor.

The Federal Reserve’s policies probably deserve more credit for the recovery than politicians of either party. Yet Mr. Trump has recently bashed the Fed for raising rates, a challenge to the central bank’s independence, which, if the president pursues it, could turn into a historic mistake.