I am listening to the State of the Union speech in another room, as I write this. And President Trump is taking credit for the booming economy, naturally. But I just have one question. And yes it is a rhetorical one: President Trump couldn’t possibly be responsible for the good economy, could he?
He isn’t smart, or well-educated (like Pres. Obama was–sorry but it’s true). He doesn’t know what he is doing, clearly. And he can’t even run his own business.
There is some other reason, isn’t there?
I will start the discussion by throwing out a couple reasons. He may have inherited the Obama economy. I did hear that in a couple of places. He may just be surrounding himself with capable advisers. But every president does that. And it could just be coincidence.
President Trump injected something like 1.5 trillion dollars into the economy with his debt financed tax cuts. This did boost the economy, no lie. Much of the economic gains are due to Obama’s policies; just take a look at the trends of the metric of your choice. I have no doubt that Trump has goosed the economy, but the costs are not clear yet. They will be.
I am as harsh a critic of Trump as there is, but in terms of the recent “growth,” I would say that Trump’s policies have had something to do with it. He’s cut taxes and regulations, which have made businesses more profitable.
The flip side is that wealth continues to be concentrated into fewer hands, and the wage growth is being eaten up by tariffs. And they won’t have much more in the bank when the economy collapses.
We’re dealing with the same thing we always deal with when Republicans control the government: republicans favor growth over economic stability, increases in wealth over increases in employment.
His policies were the same as Bush’s, except in one respect. The result should be the same. That one respect in which they differ is the trade war/tariffs thing, which can hardly help. Like Ronnie before him, it’s all going on the credit card. Look at his history in business. Some real highs there, sure, but when it crashed, it crashed hard. Individuals go broke slowly, than all at once. Countries just do it all at once.
A certain amount of economic momentum is influenced by how people subjectively feel about their economic situation regardless of what the underlying numbers of financial metrics say. The Presidential bully pulpit can influence the psyche of the masses, making more people think things are going well.
Nope. This is Trump. And the boring explanation comes from reports like from The Atlantic, but for an entertaining way to look at it one has to check what John Oliver told us about how out there Trump’s economic adviser Peter Navarro is.
The UK has the same employment rate as the US, following the exact same line.
So, given that the UK is being run by people who are not Donald Trump and they’ve been threatening a fair amount of economic havoc, via Brexit, I think that it’s reasonable to say that whatever is causing insanely low unemployment rates is probably unrelated to politics nor good economic policy.
Personal guesses:
The invention of the gig economy
Rebound from the recession
I’m not strongly leaning towards either of those and expect that it’s probably neither, but I don’t have a better guess, as yet.
For any other economic metrics, I would go with:
Rebound from the recession.
The Republicans printing money into the economy, to try and stay afloat, despite everything that Trump would try to do to break everything.
The Fed, for less self-serving reasons, doing the same and keeping interest rates relatively low despite the good economy. Trump’s actions are driving up risk, which makes businesses want to act cautiously - which is bad for the economy - so the Fed is having to encourage them towards accepting more risk.
On these, I feel comfortable that they’re the correct answer. Basically, on the latter two, Trump is such a clear disaster that everyone prepared for it in advance and have protected us from him, successfully.
Laffer is the guy who came up with the Laffer Curve, which basically is used by conservatives when they say cutting taxes will increase government revenue, i.e. tax cuts pay for themselves.
According to Laffer, Obama isn’t an economist and doesn’t understand economics while Trump is an economist and has a deep understanding of economics.
Obama was also poorly served by his economic advisers while Trump’s advisers, guys like Steve Mnuchin and Larry Kudlow, are geniuses.
I guess Trump was triggered by Obama’s tweet about the economy and the puppets have their marching orders to push back and refute the facts.
I guess they want for us to know how the genius Trump has saved us from bumbling and ignorant Obama and his economy.
Trump gave a huge tax cut to the wealthiest Americans.
Q: What do wealthy people, that already have all the money they need for anything they want, do with extra cash?
A: They invest it. Mostly in the stock market.
Q: What effect does this have on stock prices?
A: It increases the demand for stocks, especially blue-chip stocks upon which the market indices are based. Indeed, much of the investment will be in index funds, which specifically target these bell-weather stocks. Stock prices in general, and stock indices in particular rise in response.
Thus Trump’s signature achievement (tax cut for the wealthy) probably has improved the stock market indices. Many will argue that this is just the sort of thing that creates a bubble, and is thus a bad thing in the long term.
Ignoring the stock market, the economy isn’t doing great. Trump has exploded the budget deficit. Wages are not keeping pace with inflation. His idiotic tariffs have closed factories, and farms are going bankrupt at record rates. He is stealing money from the military to build his ill-conceived wall. GDP growth is slower than Obama’s last three years, and far below Trump’s 2016 campaign promises.
Trump’s solution (as reflected in his FY 2021 budget proposals) to the deficit issue is massive cuts to Social Security and Medicare. That may be the one issue that could possibly make a dent in the mental wall many of his supporters seem to have. If not, hopefully the 2018 election results indicate they won’t be needed to save the country.
