By Jeffrey A. Tucker

The Trump administration received some very welcome news in the form of third-quarter economic growth. Even adjusted for inflation, it came in at a strong 4.3 percent. That bolsters confidence in the White House and probably helps shore up Trump’s popularity at a time when it seems to have stalled somewhat. It’s the kind of report that makes for a very good day.

When Trump began his protectionist/tariff crusade, there were widespread predictions of doom. The last time tariffs had been anywhere near this high was 1930 with the Smoot-Hawley Act that many economists blame for deepening the economic crisis. So powerful was this lesson that the whole of the tariff power was transferred to the executive branch after the war, for fear that Congress simply could not exercise the power with any real competence.

As it turns out, the tariffs have not tanked economic life. The GDP report also benefits because of the manner in which it is calculated. Exports add to the calculation while imports reduce it. Trump’s entire policy has centered on boosting exports and taxing imports. As a result, the GDP numbers look better than they might otherwise.

That said, there is genuine growth in this report and that’s nothing to regret.

At the same time, there are some provisos worth mentioning. This good report follows years of data and reporting chaos that have raised profound questions about the credibility of these numbers. The dramatic tanking of GDP combined with its quick soaring soon after the lockdowns ended is enough to make you wonder. How many dislocations took place? Can we really put a number on the chaos of the times? How much if any of the sufferings of this period were actually mitigated by declining GDP?

It’s also unclear whether and to what extent the growth numbers of 2021-2024 can really be trusted. Reporting declined and there was much funny business in both jobs reporting and inflation data. Making small tweaks in the data to make them fit with independent reports from industry reveals not growth but recession.

In the same way, one wonders what growth even means following such a chaotic period. If all we are doing is rebuilding what has been destroyed, there is no net benefit. If a hurricane hits your house and you rebuild it, you are still a net loser because you sank resources into a project that you otherwise might have avoided. What’s more, what looks like economic growth could be more due to anomalies in the timeframe of reporting.

It’s particularly troubling when you consider the longer timeframe going back to the 1950s, when quarterly real growth of 5-10 percent was not unusual. Birth rates were high, budget deficits lower, government spending was in control, and savings rates meant investment without huge amounts of leverage. None of that is true today. Also today’s growth lives off preposterous amounts of leverage.

In the financial market industry, it is hard to find anyone who genuinely believes that markets these days are on firm ground. Indeed, most everyone in private will say that we are living in the midst of the mother of all bubbles. It could explode at any time. Indeed, hardly anyone even understands why the bubble has not popped already.

The personal savings rate continues to fall and is down to 4.7 percent. That compares with 10 and 12 percent in the 1950s and 1960s. Corporate debt just hit $14 trillion. Such numbers would be unthinkable 50-75 years ago, when businesses were expected to run without debt in order to pay dividends. These days, any company that is not leveraged to the maximum extent is downgraded for leaving money on the table.

Looking carefully at the AI industry, it does sometimes appear as if a handful of highly leveraged companies are merely investing in each other and living off reputation exuberance that generates ever higher stock prices. One wonders how much of it is real or if this is better named artificial innovation. It’s hard to say.

This is my real concern about this moment, namely that too much of what we are calling growth is not that at all but rather unsustainable debt backed by fiat money. This cannot go on forever but we don’t know when the not-forever point will be revealed.

What’s more tragic is what might have been over the last three decades but did not materialize. By historical standards, the last several decades have looked more like comparative stagnation. This makes no sense given the wild innovations that are now part of our lives, from databasing through the internet to the app economy to AI today. All of this should have driven remarkable growth that should compare to the double-digit growth of the Gilded Age that lifted vast swaths of the population out of poverty. Instead, we are barely getting by with 2-4 percent growth punctuated by recession and crisis.

What we have here is a tragically missed opportunity. We should have seen wildly wonderful growth. Instead we are barely getting by.

The main culprits for flagging growth have been inflation and the preposterous size of government, which operates as a drag on economic growth. And actually, these are two symptoms of the deeper problem of fiat money itself. The money was fundamentally broken more than half a century ago and we’ve not yet recovered from that disaster.

In any case, this new GDP report does give the Trump administration a new lease on life and offers a hint of optimism about the midterm elections. I say that with one big proviso: inflation has to get in check in order to quell the rising population panic over affordability. That’s the problem that hits Americans most directly and also the one most difficult to solve.