The Rule Of Three

You don’t know what the “Rule of Three” is. I know, because I invented it, and I’m only just now about to tell you. Economists around the world may have another name for it, for all I know, but this is my name for it, and whatever its official name is, it’s a concept you need to know.

 
The Rule of Three pertains to the number of years it takes for any president’s economic policy to take effect. Got that?

Repeat after me: Three years. Roughly three years before any president’s economic policy is felt on the economy.

It’s a general rule, but one I’ve seen over and over again. Sometimes economic policy can have an immediate effect, such as Barack Obama’s economic stimulus package of 2009. That had a positive, if short-lived, effect. Or Donald Trump’s increased tariffs, which have had a negative impact on everyone except the steel industry. But even steel workers have not yet seen those increased profits become higher wages yet, so they’re about to go on strike – with Republican union-busters stacked in the House, Senate and White House. So that’s a negative impact on everybody.

But in general, three years is usually how long it takes. Jimmy Carter responded to, and fixed, the inflation crisis during the last two years of his presidency. The effect was felt in Reagan’s first year. Reagan took credit. The public, who didn’t know about the Rule of Three, lionized Reagan.

Clinton got credit for his economic policies, mostly because eight years made absolutely certain that nobody else could get credit.

What about Bush Jr.? His tax cuts and deregulation of the banks led to the housing bubble forming around 2005, roughly three years after implemented. But banks are crafty. They kept the bubble inflated long after it should have burst. Loans upon loans floated the bubble from 2005 well into 2006. Then Alan Greenspan orchestrated a number of privately-funded bailouts of banks in peril in ’06 and ’07, all the while preaching that the private industry needed no regulation. The fact that he implemented the regulation he said he didn’t need is one of the true ironies of history.

Obama’s policies halted the downward spiral in 2009, but a second planned economic stimulus was thwarted by Republicans after 2010. They knew about the Rule of Three, and reasoned, correctly, that if the economy took a downward turn by 2012, they could retake the White House. Throwing the entire public under the bus didn’t matter to them. But because the public wasn’t paying attention (like always), Republicans didn’t take any blame for deliberately slowing down the economy. The economy recovered, albeit slowly, mostly because the stalemate between Obama and Congress kept anything at all from happening, good or bad. By 2012, the sputtering economy had improved enough for Obama to win re-election, despite Republican efforts to ruin it.

Back to Trump: He is now implementing the worst economic policy in living memory, and this comes from economists on both sides of the political aisle. But the economy is still strong. Why? Again, the Rule of Three.

If you’re a farmer, or a Harley Davidson worker, or a GM employee, you’re feeling the pinch already. But if not, the rest of you will feel it later.

There’s an economic storm coming.

Will it hit by 2020? The Tariffs are causing problems already, but economists have differing opinions as to whether Trumponomics will hit most pocketbooks by then. I don’t wish hardship upon anyone. But Trump is bringing the hardship. It will hit anyway, so he might as well be the one to take the legitimate blame. But if the good economy he inherited from Obama remains resilient, in spite of his pulling the wires out of the controls and throwing sand into the gears, he might not get the blame until 2021, when it’s too late.

On the other hand, maybe if more people know about the Rule of Three, they will realize that Trump’s bad economic policies need to get voted out long before 2021.

 

 

Eric

 

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