Leading Us Down the Wrong Path

An avid supporter of President Trump recently espoused a lengthy list of Trump’s economic achievements.   The author mentioned such things as GPD growth, reduced unemployment, more money in people’s pocket, a higher stock market, etc.

   

One can always find statistics to support any notion they desire.  I found some that show just the opposite of the list that was championed.  Fixed investment made a negative contribution (-0.04 percentage points compared to +1.1 percentage points in Q2) and fell 0.3 percent after a 6.4 percent jump in Q2.  Investment in structures slumped 7.9 percent after rising 14.5 percent, the biggest fall since Q4 2015, and residential investment went down for the third straight quarter (-4 percent compared to -1.3 percent).   Also, investment slowed for equipment (0.4 percent compared to 4.6 percent) and intellectual property products (7.9 percent compared to 10.5 percent).  Exports fell 3.5 percent , mainly due to a decline in soybean exports to China after Beijing's tariffs took effect.   Imports rose 9.1 percent, rebounding from a 0.6 percent decline in Q2, before US import tariffs take complete effect.   As a result, the impact from trade was -1.78 percent, compared to +1.22 percent in Q2.

All negative stuff, and pretty confusing, right?   My point is when judging the economic success or failure of measures put into place to aid our economy one needs to move past the short term benefits and look at what will be their long term lasting effects.

What was missing from the economic accolades recently presented was a clear understanding of just how this present rosy picture came about.

The listed economic achievements of President Trump while presently beneficial are predicted by federal and private economists to lead to a major recession by 2020.  The reason for this is Trump’s use of tax cuts and higher spending to create his healthy-looking economic picture.  These are now generating massive trillion dollar budget deficits as far as the eye can see.  In the long run this will hurt growth by crowding out private investment and lead to higher inflation.

Unlike the trillion dollar budget deficits that occurred during the Obama administration that were temporary and largely the result of the Great Recession, the Trump deficits, that will soon exceed $1 trillion, are the result of PERMANENT changes in federal spending and revenue.  These will continue to be in place until some President and Congress decide to reverse them.

 

So those that continue to cite the sterling economic conditions as President Trump’s finest achievements better enjoy them while they can.   Past history has clearly demonstrated that continued escalations of U.S. deficit spending will at some point burst the bubble and lead to a  recession. 

President Trump clearly has the U.S. on such a path.  He is very aware of the fact that people are happy when more money flows into their pockets even if it eventually leads to their fiscal demise.  Louisiana folks should be especially mindful  about the long term effects of rosy short term economic benefits.  Does the name Bobby Jindal ring a bell?

Hopefully,  when  we reap the long term consequences of President Trump’s short term economic achievements, which won’t be pretty, we will remember who to thank.  Now I’m sure most will dismiss all this as pure speculation and more anti-Trumpism, and simply continue to “enjoy the ride” like some gambler at a roulette table, but just don’t forget, you’ve been warned.