Part Three – Donald Trump Economic Policy Nonsensical?

Economy Section

Trump stayed mum on today’s record stock market drop, which the record market highs had been a favorite talking point for him.  Monday wasn’t a record percentage drop, but by far broke the record for total points dropped.  Lots of factors can play into the stock market, so let’s back up & explore some possible reasons for the big drops lately.  One of Trump’s biggest instincts, besides lying, is to always find reasons to brag about himself (even though in his most recent speech he just called himself “non-braggadocious”).  So he’s primed the pump with a stimulus that increases debt when the economy didn’t really need it.  Obama did that too in his first year, but he was fighting off the ravages of the great recession.  So Trump temporarily juiced the economy with tax cuts, which we are seeing some effects spiking growth while boosting his approval ratings up to around 40%.  And large corporations were generally already flush with cash, so what was the real point of huge corporate cuts?  But Wall St. might be sensing Fool’s Gold.

Just cutting taxes is such a simpleminded approach to our very complex economic issues, where Trump seems to be running the economy like a drunken sailor.  It comes at a steep price, with the Treasury projecting the approximate doubling of our deficits & the CBO tracing that increase directly to the revenue drop from the tax cuts.  So as I keep warning, Trump policies targeting short-term gain will become overshadowed by long-term pain.  So it looks as though these shortsighted fiscal policies have the stock market spooked, anticipating higher interest rates as we’re seeing much higher deficits along with potential inflationary pressures.  It also moved up the calendar for hitting the debt ceiling to only about a month from now, offering the opportunity for Trump & a bitterly-divided Congress to bring a calamitous default upon our nation.  All this plus investors shifting funds to bonds likely explain much of this market correction.  So this mystique of the Donald Trump economic policy being infallible that he tries to convey to his base, it may be showing some dents.

Wage growth is slightly inching upward, perhaps finally feeling the effects of full employment taking hold, &/or perhaps it’s reflecting the temporary sugar-high coming from the glow of the tax cuts.  The prez’s economic agenda all revolves around how his talking points will play with his base, rather than a deep-dive into figuring out viable ideas translating into actions genuinely helping the long-term outlook for the economy.  Trump is selling the sizzle, which it remains to be seen how well that holds up.  Economies tend to have their ebbs & flows largely apart from current fiscal policy, so when Trump & his surrogates point to a growing economy as the central hub of the success of this presidency, what will the talking point be when the economy dips?  Likewise with his bragging when the stock market hit record highs, expect the silence to be deafening for as long as this current market struggles.  There are numerous factors that affect economic performance, so only time can tell how well the Donald Trump economic policy ends up working.  But it seems to me it’s mostly built on the power of his own words heightening optimism to sustain growth, rather than actual coherent policies.

So check out the Dow plunge & other economic challenges in the related articles below.  Here is an excerpt from us-job-numbers-and-wage-growth-are-up-but-inequality-is-also-on-the-rise, showing it could be full employment that might finally have wages inching up.  That happened without Trump’s help.  Problem is, especially the way the tax cuts were designed, the trend of growing wage/wealth gaps keep accelerating with the biggest gains going to the top, & here we see the bottom 83% stuck with pay increase percentages still in the low 2’s:

A tightening labour market and unemployment at 4.1% (a 17-year low) appears finally to be making its way into people’s pockets as employers are forced to raise wages in order to attract talent. But the big numbers hide an ominous trend. For many Americans, slow wage growth isn’t just a hangover of the post-2008 “great recession”. For those without a college degree the sluggish rate of growth can be traced back to the 1970s, and the more recent slump deepened that inequality. The latest jobs figures show that wages for “production non-supervisory” positions – the bottom 83% of the jobs market – grew at 2.4%. Elise Gould, senior economist at the Economic Policy Institute, said that suggested gains for those in more senior positions were far greater than the 2.9% headline rate. “The top 17% seems to be pulling away and it looks to me that that distance is a little problematic,” she said.

Inside the link when-a-full-time-job-isnt-enough-to-make-it, this excerpt is far too representative of the struggles faced every day by working-class Americans, indicating a basic flaw in the economic model where in a nation like ours despite creating massive wealth, we still have millions of workers with jobs not paying a livable wage.  Something is way out of whack from which we need to seek answers, but DC leadership keep enabling our crony capitalist system by cowering to big corporate & Wall St. interests.  These views of mine are not from a leftist-liberal viewpoint, just observations based on how the American Dream of shared economic growth no longer holds true, shortchanging workers:

A new NPR/Marist poll finds that 1 in 5 jobs in America is held by a worker under contract. Within a decade, contractors and freelancers could make up half of the American workforce. In a series, NPR explores many aspects of this change. After working full time at a museum, Emily Doherty does something millions of Americans do each day: head to a second job. In her case, it means donning a petticoat to portray a Colonial-era woman at living-history museums or national parks, where she sings and play-acts. The 28-year-old needs the extra work so she can make ends meet, plus pay her $500-per-month student loan payment. Doherty is among the 30 percent of Americans who do something else for pay in addition to their full-time jobs, according to a recent NPR/Marist poll. “I’d like to own a house someday,” says Doherty, who lives in Virginia. “The only way I’m going to be able to do that is if I work two jobs.”

These excerpts from employers-are-setting-workers-up-for-failure, the workplace of the future will take on an entirely new dimension, so we’d better figure out a constructive way to prepare the workforce for it. I was as anti-union as anyone back in the 1970’s & 1980’s because they were greedy & corrupt.  But these days workers need a much stronger voice on their behalf since for decades the pendulum has swung against them. With America’s leadership in a state of dysfunction bogged down with partisan gridlock, the most innovative ideas for putting the working class as a whole into more productive jobs are likely going to come from other countries who are more forward-thinking:

Regardless, Wartzman and other experts are incredulous when they see such findings: “The best and largest body of evidence suggests that over decades employers by and large have invested less and less in worker development and training,” he said. That’s especially apparent with training for frontline employees; according to Wartzman, most training goes towards management training nowadays.

The debate over who—the federal government, schools, employers—should provide training to workers is decades old. When it comes to workers’ preferences, 14 percent of laborers say the onus should be on colleges and universities, while 50 percent say it should be on the federal government and 61 percent look toward employers, according to a new report by Northeastern University and Gallup.

No one sector bears all of the training responsibility. For Shook, “a strong collaboration between companies, organized labor, governance, and academia to radically rethink how we are going to prepare people for the future workforce” is necessary. Still, when public-sector programs fail, it tends to be because of a gap between the needs of the marketplace and what is going on in the classroom, Wartzman told me—and that demonstrates the need for employer involvement.

 As a successful businessman, Trump portrays himself as being a superstar priming the economy.  The group of links below on stock market losses & a projected $1 Trillion deficit sort of punch holes in that facade.  And about that brag the black unemployment rate is the lowest in history, that’s no longer the case as there was a big jump in black unemployment in the recent jobs report, explained inside the link the-black-unemployment-rate-spiked-in-january-muddling-trumps-message.  And about all that red ink?  Before getting carried away with the euphoria of what we’re hearing is this Trump economic miracle, maybe Trumpeters who are carry-overs from the tea party movement might be bothered by these new numbers.  Looks like the short-term juice coming from the new trickle-down tax plan is further robbing our kids’ futures by ballooning the federal debt some more.  It could be all those boasts from Trump’s SOTU are starting to unravel only a few days later.  Expect the deficits to blow well past $1 Trillion annually once we add in infrastructure & boosting up the military.  Of course, all bets are off if we soon weasel our way into a debt default, which could spiral us into recession & really blow the doors off the deficits, plus prove to the world we really are a basket case.  I’ve always known conservatives to be fiscally responsible, but that was years ago when the GOP was still sane.  I guess that tea party fury they took out on Obama, does a GOP President get a pass on huge deficits?  Check out these alarming stats taken from the-us-government-is-set-to-borrow-nearly-dollar1-trillion-this-year-an-84-percent-jump-from-last-year:

It was another crazy news week, so it’s understandable if you missed a small but important announcement from the Treasury Department: The federal government is on track to borrow nearly $1 trillion this fiscal year — Trump’s first full year in charge of the budget. That’s almost double what the government borrowed in fiscal year 2017. Here are the exact figures: The U.S. Treasury expects to borrow $955 billion this fiscal year, according to a documents released Wednesday. It’s the highest amount of borrowing in six years, and a big jump from the $519 billion the federal government borrowed last year. Treasury mainly attributed the increase to the “fiscal outlook.” The Congressional Budget Office was more blunt. In a report this week, the CBO said tax receipts are going to be lower because of the new tax law.

 

The uptick in borrowing is yet another complication in the heated debates in Congress over whether to spend more money on infrastructure, the military, disaster relief and other domestic programs. The deficit is already up significantly, even before Congress allots more money to any of these areas.

The White House got a taste of just how problematic this debt situation could get this week. Investors are concerned about all the additional borrowing and the likelihood of higher inflation, which is why the interest rates on U.S. government bonds hit the highest level since 2014. That, in turn, partly drove the worst weekly sell-off in the stock market in two years. Trump’s Treasury forecasts borrowing over $1 trillion in 2019 and over $1.1 trillion in 2020. Before taking office, Trump described himself as the “king of debt,” although he campaigned on reducing the national debt.

In the article how-democracies-die-trump-book, this graph shows just one reason why they die, evidence of hopeless polarization & gridlock: