Trump’s Economy: The Best or The Bubble?
How about “neither”. :-)
Let’s look at the second claim first: are “jobs” at the best point in history?
History is a long time. People need to stop taking Trump literally. He speaks in broad, sweeping strokes.
It is also worth mentioning that the unemployment rate has historically improved over the course of Democratic administrations and worsened over the course of Republican administrations. The main exceptions to this 90-year trend are the Carter and Reagan years
When you first point out two very LARGE exceptions to a rule, you negate your point. Further, you need to define “Administration”: Do you mean just the President’s party? Or what party controls Congress? Did you include mixed government? Keep in mind that we do not live in a dictatorship; the President has less ability to move the economy than Congress, and most certainly both have less ability than the (a) business cycle, and (b) the Fed.
The US economy is a very large ship. When some sort of significant event happens, it’s doubtful that partisan politics are involved.
It is possible — if not likely — that Mr. Trump’s deficitary fiscal policy, which so far seem to benefit non-productive forces in the economy, will lead to increased speculation and a dangerous overheating which would lead to the formation of dangerous financial bubbles.
Entirely possible. However, this was not a factor in any of the last three major negative fiscal events. The last time that government fiscal policy caused a recession was (arguably) 1937, and that’s because FDR decided to LOWER the deficit, not raise it. It remains the best single US argument against austerity we have.
Coupled with a spate of deregulation and possible exogenous shocks from trade disputes or a potential confrontation with Iran, it is difficult to view the next 2 years with complete equanimity.
There is never a period of time when headline risk does not threaten the economy, so it doesn’t make much sense to call it out now. The trade matter is entirely different; we’re in uncharted territory, here; a very unusual game of dares is being played.
Job creation is one thing, but the quality of the jobs is a different matter. The Obama recovery was criticized, with some justification, as creating jobs that generated fewer hours and less wages than the ones lost during the 2008 Financial Crisis.
That characterization remains accurate: the Trump Tax Cuts have not translated into higher pay for workers.
Hm. The major tax legislation of the Trump era was the corporate tax restructuring, which was not significantly different than the package that Mr. Obama was proposing. At any rate, I wouldn’t expect statistically causal and relevant data to be calculable for some time; the restructuring (which includes a lot more than just lower rates) changes boardroom business decisions which are taken slowly, and the impact of which is felt over years. One does not decide to built a new plant in Alabama rather than India overnight, and after the decision is taken, the economics of that decision don’t hit the books (and employment stats) for years.
For starters, the American economy is the only major economy that is growing robustly — the rest of the world already seems to be slipping into recession.
No question that Europe’s economic behavior is disappointing.
Similarly, the Case-Shiller Home Price Index is at a maximum not seen since before the 2008 bubble burst.
I am also concerned about this. Mr. Obama — after some arm twisting, since lending money to stable borrowers does not help minorities — finally reconstituted Frannie mortgage standards back in 2013, five years after the crisis and fifteen years after they were abandoned because the GSE’s wanted to play in the casino. However, as eligible borrowers shrank in number, home prices skyrocketed. This is not normal behavior, and smells “bubblicious” to me as well.
Non-bank corporate debt, on the other hand, has already exceeded the levels seen in 2008, indicating that US firms are over-leveraged and vulnerable to interest rate increases.
Which are currently in process.
In response, both corporate AAA bonds and 10-year Treasuries have been creeping up.
The 10 year note is normally around 4%, if memory serves; might be closer to 5%. We can’t say that the “recession is over” until we get there. If returning the rates to normal sends us back into recession, then the free marketers who have been lecturing us for a decade that there’s no free lunch (referring to TARP, TALF, and QE) will have been right. All we did was postpone the pain of 2008, spreading it out and delaying it.
any responsible Administration and Congress would be making every possible effort to reduce the deficit still further while the going was good.
We have no responsible politicians. Republicans know that this should be done, but fear the electoral blowback. Democrats just don’t care either way.
The deliberate skew towards the wealthiest Americans also exacerbates the already dangerous inequality in wealth and income, which can only lead to further social unrest and radicalization. Mr. Trump and his Republican allies in Congress are knowingly and recklessly weakening the nation in order to fatten their wealthy and corporate backers.
Odd statement, more political than fact. FACT is that income inequality has been rising on the same slope since the late 1960s; it really doesn’t care who is the president, who controls Congress, what the tax scheme is…….it just keeps going up. Until we realize that this isn’t a problem that politics can fix….. well, it will keep rising.
Coupled with a modest tax cut and a large fiscal stimulus package, Mr. Reagan engineered a Keynesian recovering that lasted into 1990.
Significantly too simple an analysis, and nothing is truly “Keynesian” if it’s spending into an existing deficit. (Keynes would have flipped in his grave.) Here’s the sequence of events:
- Reagan dropped rates but also ended the practice of tax sheltering. This allowed marginal rate to drop without dropping effective rates.
- The tax sheltering, in a nutshell, allowed richer americans to invest a dollar in some government-approved plan and get 2 or 3 dollars in tax relief in exchange. So, the rich put big buckets of money into these plans. When Reagan ended them, all that money needed something to do, so it went into real estate and the stock market, both which took off for the stratosphere.
- At the same time, Reagan increased military spending significantly, which poured out into the private sector. So, it wasn’t really a “stimulus” package in the classic sense, but it had a similar effect.