Call It the Trump Effect

That’s right. The Trump effect on the economy.True enough, the ink is barely dry on the one, big, beautiful bill.And the impact of that, in its entirety, is going to really boost factory building and the blue-collar boom next year. Some of the business tax cuts are retroactive to January 1 of this year, though.So American business is already hard at work — buying new equipment, machinery, and various information software right now, and paying for it with their 100 percent immediate cost write-off.You can see this in the revised GDP report for the second quarter, which ended in June.Real GDP jumped 3.8 percent. That’s a big number.It was the first real quarter responding to Mr. Trump’s optimistic and bullish psychology that America is back. The hottest country in the world.Speaking of optimistic and bullish psychology, since early April the S&P 500 stock index is up 32 percent and the tech-heavy Nasdaq is up 46 percent.Investment money is pouring in, with domestic businesses starting to take new risks to expand their operations.And my hunch is a lot of entrepreneurs are out there starting new businesses.In fact, new business formations since January are projected to rise 16 percent — that’s according to the St. Louis Federal Reserve Bank.And here’s a key part of the Trumpian philosophy — get out there and build. Especially factories. When you build new factories, you’re talking construction, pipes, power, trucks, cars, jobs, wages, diners, restaurants, bodegas, office buildings, homes, and so on.And that means even more jobs and even higher wages — at lower tax rates.President Biden’s last quarter was negative 0.6 percent GDP. Mr. Trump’s first quarter? Plus 3.8 percent GDP.It’s kind of like East Berlin and West Berlin. East Germany and West Germany.Big government socialism failed. Free market capitalism succeeds.Inside Mr. Trump’s 3.8 percent second quarter GDP — the biggest winner was business equipment spending. Plus 8.5 percent. Overall business investment was up 7.3 percent.Intellectual property products — plus 15 percent. Consumers were ok, at 2.5 percent. Yet here’s an interesting wrinkle on this story, producers are producing more than consumers are consuming.The business side is growing faster than the consumer side. And right now that is very healthy.One byproduct of that is lower inflation.I don’t know why so-called experts don’t use the GDP deflator, which is in this report and covers the entire economy. In any case, that measure of inflation was only 2.1 percent in the second quarter.Just a tick above the Fed’s 2 percent target. And that suggests that Treasury man Scott Bessent is on target when he says the Fed should lower rates by as much as 150 basis points — or 1.5 percent.So, as usual, Jay Powell’s Fed is wrong on growth and wrong on inflation. Growth was higher. And inflation was lower.But, right now, the Trump effect on the economy and the stock market is the biggest story around town.From Mr. Kudlow’s broadcast on Fox Business Network.

Call It the Trump Effect

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