Writer’s Lounge – Trump’s So Called “Booming Economy” Is Actually A Bust

January 30, 2020January 30, 2020

The “Booming Economy” that isn’t.

Whenever the Trump Media Circus, GOP members of the House or Senate or the “stand by their man” faithful Trump voters recognize that Trump is not on solid ground with the general public, they go to the “booming economy” card.

Trump’s radioactive behavior, his dishonesty and his onslaught against the rule of law, are all mitigated, they say, if the economy is as hunky dory as it is. That’s all that really matters, they would argue.

“You can’t remove a president from office that has created a booming economy.”

The economy is not a mantra that if you chant it repeatedly, the fundamentals will realign themselves to the aspirations and yearning intentions of the person chanting it.

And of course – “hope” has come back into popular favor with these people, after having trashed it for 8 years when it was the motto of the Obama presidency. Sometimes, no matter how much something is repeated, it doesn’t change the basic reality.

That doesn’t mean you won’t hear more of same for the remainder of the year. If in fact, the economy is not “booming” – what is it actually doing?

Well, recently, we published a report about the accumulation of household debt in America and the storm clouds it is producing that hang over the nation’s financial health. The magnitude of this household debt, is a topic that the mass media reporting on the economy shies away from, because the data is contradictory to the soft data they prefer to highlight as they sing soothing trail songs to consumers to prevent a stampede.

At this point, the household debt is so close to $14 Trillion, you can reach out and touch it, though you may prefer not to. Here was the article that covered that aspect:

photo of a pile of Visa and Mastercard credit cards.

The Piper Of January Comes Calling - The Consumer Debt Casino Bet

The amount of consumer debt has ballooned to perilous levels and poses an extreme risk to the economy, despite consumer confidence readings that ignore the exposure to another national financial catastrophe.

As a bookend to that, Tony Wyman has written an essay about how a failure in leadership has badly fumbled an opportunity to create an economic recovery in this country that would genuinely touch every segment of society and be self sustaining. What we have is something altogether different.

Here is the piece in full:

When we look at the economy as a whole, because we aren’t social economists, we tend to look at the broader measures that tell how the country is doing. The problem with this approach is it doesn’t tell us enough about the real day-to-day impact that macro economic decisions have on regular people.

Think about it this way: If you do a study of the median income of men in a bar you might determine the median income of the whiskey drinkers present might be, say, $40,000.

But, if Bill Gates walks in, suddenly the median income spikes to, say, $20,000,000. No one in the room is any wealthier, but the appearance created by the data is the bar’s patrons are fabulously wealthy when, really, it is only the presence of Mr. Gates that creates the mirage.

Unemployment is such a mirage. The official number is only a gauge of people looking for work. Long-term unemployed who no longer are seeking employment aren’t counted in the numbers. Underemployed people – people with degrees, for example, who are driving Ubers because they can’t find more appropriate work – are also not represented.

Another thing this is underrepresented in news stories about the economy is the level of investment in infrastructure and other investments that will generate real growth over long periods.

This is where Mr. Trump’s economic mismanagement of the economy will greatly harm future growth. When elected, he promised $1.5 trillion in new infrastructural spending, but his plan is effectively dead in the water. In the meantime, the American Society for Civil Engineers gives the nation’s infrastructure a D+.

Poor infrastructure costs the nation hundreds of billions annually in decreased productivity, growing inefficiency and lost or spoiled goods. If Mr. Trump’s wants his claim fulfilled this is the “greatest economy of all time,” improving the nation’s infrastructure is the best way to make the boast true.

Businesses were among the largest beneficiaries of President Trump’s signature tax cut passed in 2017, but there’s little evidence that those savings trickled down to a broader swath of workers.

While unemployment (as measured by the Bureau of Labor Statistics’ “U-3” number), is at a record low and stocks are at record highs, wealth inequality persists. In fact, 65% of Harvard Business School alumni ages 18-44 said the U.S. should use the tax system to undertake more redistribution toward lower-income individuals.

“There’s lots of areas where the narrative isn’t exactly right,” Harvard Business School Professor Michael Porter, co-author of a recent Harvard study that points out the miscarriage of the recovery said. “For example, we have a lot of people employed, but there’s a lot of data that shows that the people employed are often not getting a living wage, or they’re not being paid for their qualifications. A lot of college graduates in jobs that don’t really compensate them for what they know.”

Porter said the real unemployment rate is closer to 10%.

bar graph illustrating data from the Federal Reserve Bank of Philadelphia indicating contraction of the economy in several states including Pennsylvania - a key battleground state for Donald Trump's election prospects.

Further undermining the conventional narrative that economic conditions are as rosy as the daily messaging from the financial media, is the report issued in November from the Federal Reserve Bank of Philadelphia.

The report alerts readers to the economic indicators they have examined, that show that as many as nine states have been identified as heading into a downturn within the next six months. It’s worth looking at what the repercussions for the president’s re-election prospects might be in context to this.

Leading the list is West Virginia, but significantly, Pennsylvania is noted by them as being poised to experience a decline that could equal or exceed levels not seen since May 2009. Trump won both states, but while his margin in West Virginia was overwhelming, his percentage of victory in Pennsylvania was razor thin – a negligible .072 or 44,000 votes statewide.

The remainder of the votes that gave Trump the edge in electoral votes nationally, were spread between Wisconsin and Michigan, both of which, like Pennsylvania, have been experiencing significant hits to their economies from the loss of trade revenue with China.

The other states projected to experience economic reversals are Delaware, Montana, Oklahoma, Vermont, New Jersey, Kentucky, Missouri, Iowa and Connecticut. Montana, Oklahoma, Missouri, Iowa and Kentucky stand out as alarm bells for the Trump campaign as they are all states he won in 2016.

But there are more possible political lane closures for Trump, based on a review of data from the U.S. Bureau of Economic Analysis.

New Hampshire is a state that Trump’s political strategists have been touting as a possible pick up state, because the numbers were quite close in 2016. New Hampshire was chugging along in the first quarter of 2019 at an 8.6 GDP (Gross Domestic Product) growth clip, but when the data was tallied for the 2nd quarter, the engine stalled at a startling 1.4% rate.

Most likely, that state is off the pick up column now. It’s just 4 electoral votes, but they all add up on one side of the ledger or the other. Of considerably deeper concern to the Trump camp, is Ohio, which represents 18 electoral votes. Ohio went from a so-so 2.3 GDP in the same time frame, to 1.3 in the next reporting period. Job growth there is lagging even more than elsewhere in the region.

Trump is not going to be able to credibly ask swing voters in that state, “Are you better off today than you were four years ago?”. Rudy Fictenbaum, writing in the Columbus Dispatch, sums up the attitude of many Ohioans after 3 years of Trump:

Working people in Ohio continue to live lives fraught with financial insecurity. The real day-to-day issues that families talk about around the kitchen table — good-paying jobs, living wages, affordable health care and medications, college tuition, keeping the lights on and the water running — are not being addressed. In the past year, Ohio lost 9,300 jobs in construction and 2,700 jobs in manufacturing. These are the jobs we need to build a robust economy, but the simple truth is Ohioans are being left behind and the economic prosperity promised by the Trump administration has not found its way to Ohio.

While this may not be the view of all likely voters in Ohio, it could very well represent the views among the ranks of independents, which in recent polling, are moving away from Trump by double digits.

The Trump campaign cannot afford to have Ohio in play, but neither can it afford to have Florida in play – and in play it may be if projections of slowing growth materialize in the run up to November.

The broader national picture in terms of what has just been reported, paints a dismal picture for Trump’s “booming economy” narrative.

The Commerce Department just released data that details a slowing down trend in the economy during Trump’s term in office. Whereas GDP growth in the U.S. was an unimpressive 2.4 in 2017, ticked up to 2.9, but never hit 3 percent in 2018, it plummeted to 2.3 in 2019.

Worse yet, the fourth quarter slowed to 2.1%. Additional indicators of trouble ahead are that while the dollar value of the national GDP is $21.7 Trillion, the national debt is racing towards the $24 Trillion mark.

Given the fact that American consumers are accountable to 68% of the national GDP, the slowdown in consumer spending from 3.2 in the third quarter to 1.8 percent in the final three months of 2019.

Whereas Trump made many idle boasts about being able to boost GDP into the 4, 5 or 6 percent range, by virtue of “Trumphoria” alone, no such results have materialized, nor has his tax avoidance windfall to corporations and 1%ers produced measurable results in the GDP or deficit reduction.

Wage growth at best, has workers at the low end of the economic strata, treading water at best. Disposable spending is down nearly by half, from 2.9 to 1.5 in the fourth quarter.

Manufacturing and capital expenditures are seriously off and our exports have been hammered by the trade war. That’s a reality check that blows massive holes in the hull of the “booming economy” fable.

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