After years of sluggish growth, the U.S. economy has begun to accelerate. Growth in gross domestic product year over year has ramped up continuously from 2.0 percent in the first quarter of 2017 to 2.8 percent in the most recent data, while the unemployment rate has dipped to 3.8 percent, the lowest level in 18 years, and inflation has remained tame. All these improvements raise the natural question: Can performance be attributed to changes in economic policy?
To be sure, there have been dramatic changes in policy. The Obama administration finalized more than one costly regulation, on average, every day, imposing a cumulative cost of $890 billion on the economy, according to an analysis by the American Action Forum. The Trump administration added a mere $5 billion to this total in fiscal 2017 and plans to reduce costs by $9 billion in fiscal 2018. Similarly, the Tax Cuts and Jobs Act reversed dangerous incentives in business taxation, encouraging firms to innovate, invest, and produce in the United States.
Can more rapid growth be linked to these policy shifts? It is too soon to be definitive, but a variety of evidence suggests so. To begin, attitudes, which can shift quickly in response to new incentives, have been dramatically more positive. The National Federation of Independent Business optimism index rose from 104.9 in December to 107.8 in May, its second-highest level. Similarly, the University of Michigan consumer sentiment survey rose from 96.8 in December to 99.3 in June.