The Trump Economy: Great Again?

As far as I’m concerned, The Donald was elected President in 2016 for one reason.  At a time when President Obama and Senator Clinton claimed everything was fine, because the economy was recovering in a cyclical sense, and because things have (for the most part) remained fine for college and graduate-school educated people who were born in 1957 or earlier (59 years old or older at the time, 63 or older today).  Trump was willing to acknowledge that for less well educated Americans, and even for better educated people who were born later, things have significantly become worse over the long term.  And that the U.S. as a whole is getting poorer, deeper in debt, more dependent on subsidies from the rest of the world.  He didn’t really understand why, or have a real idea what to do about it, but he at least pretended to care about what those inside the affluent bi-coastal bubble were indifferent to.   When later-born generations saw that no one was really speaking to, or caring about, their situation and concerns, they stayed home.  Meanwhile working class Whites, and some working class Blacks and Hispanics, took a chance on Trump, just as Michael Moore predicted.

Trump’s best line?  “What have you got to lose?”  

Now it is four years later, and The Donald is singing a different tune. Things are Great Again! he says, and all because of him, and if it wasn’t for bad luck – a once in a century pandemic – he would have been re-elected easily.  As of last December some people seemed to buy it.

But is this true?  We would be having an election about nothing, absent COVID-19, but now we are having an election about almost nothing.  Just Generation Greed’s culture wars, which are mostly about sex, rather than the extent to which the future and those who will be living in it are screwed.  But I couldn’t let Trump’s assertions go unanswered.  He was, in this case, right the first time, and what he said the first time in 2016 was still true in 2019, before the pandemic even hit.

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The “good news,” according to some, was sky-high stock prices, pushed up by money printing by the Federal Reserve, and low unemployment compared with the worst of the Great Recession.  That was also the good news at the end of the Obama Administration.   Yes, until last year things were getting better in a cyclical sense.  But most people have become worse off over the long term, and more privileged people have taken more from them, by riding the business cycle.  

When the economy is up, those in the political/union class and the executive/financial class can take more without anyone else being left with less immediately, because there is “plenty of money. “ When the economy turns down everyone else, the serfs, and those in later-born generations, are forced to accept less due to circumstances beyond our control.

Over a period of years after a recession, and with the anesthetic of being able to spend money they don’t have by borrowing, some people make adjustments and get used to being worse off, since they are at least better off than they had been at the most recent bottom.  But the next top finds them worse off than the previous top, with higher taxes, worse public services, and diminished benefits, lower wages, and a higher cost of living – all to benefit older generations in general, and those working the system in particular.  And the next bottom finds them worse off than in the bottom before. 

For most Americans, and nearly all Americans born after 1957 or so, the future keeps ratcheting down, cycle-by-cycle.  I would expect 2021 to be worse than 2010, which was worse than 2003, which was worse than 1991.  But for now, let’s see how the peak year of 2019 compares with 2007 and 2000, the prior cyclical peaks.  Great Again? 

Work Income

I discussed income in my prior post on data from the 2019 American Community Survey.

https://larrylittlefield.wordpress.com/2020/10/05/the-2019-american-community-survey-last-year-compared-with-prior-economic-peaks-nyc-and-the-u-s/

The data shows that median (cash) work income for all U.S. workers was 4.3% lower, adjusted for inflation, in 2019 than it had been in 2000. I had found a 4.5% decrease from 2005 to 2015, at a mid-point of the most recent economic cycle.

https://larrylittlefield.wordpress.com/2016/10/16/american-community-survey-data-falling-median-work-earnings-by-educational-attainment/

The decrease was a combination of lower pay per hour, and a lower share of workers with full-time-year-round jobs, as a result of the rise of the “gig” economy.   And thanks to that gig economy, among other factors, the typical private sector worker’s non-wage income (health benefits, retirement benefits) probably fell more than wages and salaries.  The median earnings of male full-time year-round workers fell 9.3%, while the median earnings of female full-time year-round workers edged up 0.3%.

I was able to get median work earnings by educational attainment for 2007 and 2019.  

While overall U.S. median earnings per worker was 4.3% lower, adjusted for inflation, in 2019 than it had been in 2000, it was nonetheless 1.3% higher in 2019 than it had been in 2007.  But only because the Millennials, now fully in the labor force, have even higher average educational attainment than the generations that proceeded them. 

Looking at those in different education cohorts separately, one finds that the median earnings of workers with high school diplomas was 3.6% lower in 2019 than it had been in 2007, after adjustment for inflation.  It was 5.9% lower for workers with some college or associate degrees, 2.4% lower for those with bachelor’s degrees, and 0.1% for those with graduate degrees.  All these declines were less than the decreases I had found previously for the 2005 to 2015 period, at the mid-point of the economic cycle.   But even so, nationwide, measured from the economic peak in 2007 to the economic peak in 2019, and adjusted for inflation and for educational attainment, median earnings fell once again.   Continuing the long fall in what people are paid.

With one exception: workers without high school diploma.  Those workers had an inflation-adjusted increase in median earnings at 8.1% overall, 10.2% for male workers, and 14.5% for female workers.  This may reflect the higher minimum wages required by law in some states and cities, along with the restaurant boom that pushed up wages even where the law did not require.   The Trump Administration, however, could hardly take credit for the former, and COVID-19 has certainly wiped out the latter.

Poverty

Higher minimum wages may have been responsible for the one piece of good news I found – the U.S. poverty rate, at 12.2% in 2000, was only at 12.3% in 2019.  

But there is another possibility.  For the past 50 years, government programs have shifted more and more money to seniors, leaving less and less money for families with children.  It is children who are poor in America, and with the relatively large Millennial generation exiting childhood, a smaller number of poor children may explain the small long-term increase in poverty.  Meanwhile more Baby Boomers have joined the privileged group – today’s seniors.   

And now?  Don’t be surprised if during this recession poverty soars to levels not seen since before 1970.  At least for non-seniors.

Housing

The poverty rate is based on a formula that does not adjust for the cost of housing in different places.

https://www.census.gov/topics/income-poverty/poverty/guidance/poverty-measures.html

From 2000 to 2019 the percent of rent households who paid at least 30.0% of their income for rent increased from 41.3% to 48.5% nationwide.  This despite the fact that a higher share of total households, and thus households higher up in the income distribution, were renting.  In New York City, and places like it, the squeeze was even greater.

Housing is one the sectors most affected by federal, state and local government policies, along with health care and education.  These services have continued to get more and more expensive compared with most people’s income, leaving them poorer.  The Trump Administration did not alter the trend.  In fact, at one point it arranged to make it possible for 50 percent of the income of later born generations to go to debts, so they could pay higher prices for Generation Greed’s houses.

Unemployment

During the 2016 election, The Donald claimed that the low unemployment rate celebrated by the Obama Administration was fake, because so many people had dropped out of the labor force. According to NPR (their link trashes my post but you can search for it)…

The unemployment rate has fallen during President Barack Obama’s tenure from a high of 10 percent in October 2009, to 4.9 percent in June 2016. That would seem to provide a relatively strong economic record for Democratic candidate Hillary Clinton to run on, yet Republican rival Donald Trump and his surrogates have consistently cast doubt on the low, and steadily declining, unemployment rate reported by the Bureau of Labor Statistics.

For instance, Donald Trump, speaking after he won the New Hampshire primary in February, said: “When people look and look and look, and then they give up looking for a job, they’re taken off the rolls, so the number isn’t reflective. I’ve seen numbers of 24 percent, I actually saw a number of 42 percent unemployment—42 percent. And it could be.”

While he characteristically exaggerated, and what he called a fraud is just another way of looking at things that the Bureau of Labor Statistics has reported for decades, he was essentially right.  Many older workers without pensions were pushed out of the labor force during the Great Recession and never returned; many younger would-be workers had trouble entering the labor force.  And in 2019?

Same situation. The share of all U.S. residents ages 16 or more who were unemployed had fallen from 3.5% in 2000 to 2.9% in 2019.  But the share who were employed had also fallen from 62.3% to 60.2%.   Unemployment was low because the labor force had shrunk as the Baby Boomers dropped out or retired.  The same situation Trump had criticized Obama for.

Getting the data from the Bureau of Labor Statistics…

https://www.bls.gov/cps/

One finds that the 3.7% unemployment rate for 2019 (the unemployed divided by the labor force rather than the entire population) was in fact lower than the 4.6% rate for 2007, but only due to the same factor Trump criticized in 2016.

The labor force participation rate, the share of those ages 16+ who were either working or looking for work (and thus unemployed), was 63.1% in 2019, down from 66.0% in 2007.  From the low point of 62.7% in 2015, the “best economy ever” according to The Donald had only managed to lure 0.4% of the working age population to start looking for a job.  

I had hoped that the retirement of the Baby Boomers would force U.S. employers to start hiring and training teenagers, and providing new jobs for older Americans as a bridge to retirement.  Even if their pay continued to drop, they’d at least find work.  It didn’t happen. The share of that population that had a job in 2019 was lower by 2.0% compared with the prior peak in 2007. And with more of those workers concentrated in a few booming metros (or at least they were booming pre-COVID-19), much bigger drops must be present elsewhere in the country. 

GDP: The New Normal

How about inflation-adjusted GDP, the value of all goods and services produced in the country, and the most common measure of the strength of the economy?

Starting from the bottom of the Great Recession in 2010, the U.S. economy only expanded at a slow, “new normal” rate of 2.2% through 2017, the last year under an Obama-Administration budget.  I thought this was pretty good given the mess Generation Greed has left this country in, and the demographic headwind of an aging population.  It was certainly better than Japan.  But to critics, this “weak” growth showed the economy was mismanaged. It is something The Donald promised to change.  So what happened?

https://www.economist.com/united-states/2019/10/31/americas-economy-is-resisting-the-pull-of-recession

This was not the way it was supposed to go. “Four, five and maybe even six percent” growth was what President Donald Trump promised in December 2017. Even within the relatively sober pages of the budget proposal released by the administration in March this year, Mr Trump’s team forecast economic growth rates of 3% or more right through to 2024—which would be the last full year of a second Trump term, were one to occur. 

Instead, the American economy, which just missed the 3% growth target in 2018 despite the boost from the president’s budget-busting tax bill, continues to lose steam. In the third quarter of this year gdp, adjusted for inflation, rose at an annualised rate of 1.9%, down from 2% in the previous three months. The question hanging over Mr Trump, and millions of American workers, is just how far the slowdown will run and how deep it will go.  The first signs of trouble for America’s economy appeared in late 2018.

A financial crisis had already started in late 2019.  The Federal Reserve had already been forced to back off its plans to normalize interest rates away from zero, and implement its first bailout of this recession, of the repo market.

https://www.reuters.com/article/us-usa-fed-repo-tools-explainer/repo-is-wall-streets-big-year-end-worry-why-idUSKBN1YR0F2

This shows that our unsustainable, debt-driven economy was about to tank even before COVID-19.  The Donald managed to get a one-year sugar high of 2.9% GDP growth in 2018, but only by vastly expanding the national debt.  That was barely higher than the growth rate of 2015, during the Obama Administration.  And the 2.3% growth rate for 2019 was barely higher than the average for the Obama Administration.

Continuing the pattern of each top being worse than the one before, and each bottom also worse than the one before, expect 2020 and 2021 to be worse than 2008 to 2010.

National Debt

As the King of Debt, The Donald had promised to pay off the national debt by the end of a second term.

https://www.cnn.com/2016/04/02/politics/donald-trump-national-debt/index.html

Donald Trump predicts he could rid the United States of its $19 trillion debt in two terms as president.

Eliminating the national debt, which Trump said he could accomplish “over a period of eight years,” was one of several ambitious claims Trump made in an interview with The Washington Post published on Saturday. The Republican front-runner explained that he will govern in the similarly atypical, convention-defying manner he has campaigned.

While many economists have argued that many of Trump’s economic proposals — including massive across-the-board tax cuts and potentially engaging in trade wars — could damage the U.S. economically, Trump was characteristically defiant.

Trump had also promised to do something for working people, to make the wealthy people (like himself) pay more in taxes by closing loopholes, and to turn the Republicans into a “worker’s party.”  He not only had the Presidency, but also Republican control of both houses of Congress, for two years, just as Obama had.  

The one significant piece of legislation that he actually passed before the Democrats took the House in 2018, however, was a massive tax cut for the rich and corporations, scheduled to expire with a massive tax increase for ordinary people in a decade, when the last of Generation Greed has retired and many are dead.  The third massive tax cut for the rich of this era, all passed by the Republicans.  Grabbing more for the better off, and shifting the cost to later born generations who are poorer, turns out to be all the Republicans really stand for.  And despite all the drama of the Trump Administration, and all the tweets, this is really the only big thing The Donald actually did.

Finally, after nine years of soaring federal debt as a percent of GDP during the last two Bush II Administration budgets and the first seven Obama Administration budgets, federal debt fell as a percent of GDP in Obama’s last budget.  

The Donald and Republican Congress reversed that, with the massive tax cut for the rich and a big increase in spending.  The Trump debt was soaring even when the economy was growing, as in the Reagan and Bush II Administrations.  

And now that we have a possible Depression?  Never, even during the worst of the Great Depression and WWII, did the Administration of FDR run a deficit of more than 7.5% of GDP. The projected deficit this year? About 20.0% I have read, a Baby Boomer budget if there ever was one.  Poorer, late born generations have had even more of their future sold out from under them.  

Trade

What, if anything, does Donald Trump really believe?  The only reason he is right about anything, it seems, is because he says one thing on one day, and its opposite the next, so he is bound to be right at least some of the time.  But many people who follow these things have decided that he really believes one thing – that the U.S. trade and current account (trade plus investment returns) deficits are examples of Americans being losers, and being cheated.  That is something he didn’t quite understand, but set out to change.

The data shows that the U.S. current account was mostly balanced until the Reagan Administration.  To the extent that the U.S. had a deficit in trade in goods and services, this was offset by the high returns Americans earned from investing in other countries, compared with the lower returns people in other countries earned from investing in the “financially safe” United States.  

But then the current account deficit soared, reaching a peak of more than 5.0% of GDP during the Bush II Administration.   To be able to consume more than they produced and import more than they exported, Generation Greed era Americans have been selling their debt, their infrastructure, their buildings, and their companies off to people, businesses, and governments in the rest of the world.  It was a big party that other counties lent us money to pay for, but one that wiped out blue collar jobs all over the U.S.

Things were only slightly better during the Obama Administration. Even during the 2013 to 2017 period, after the U.S. had pulled away from the Great Recession, the U.S. current account deficit averaged 2.1% of GDP.  During the first two Trump Administration budgets, after he launched trade war all over the world?  It was up to 2.2% of GDP.  And now?

https://apnews.com/article/dd93ecd3cafc5df88a8f9f4a61693b07

The Commerce Department reported that the July deficit, the gap between what America buys and what it sells to foreigners, was 18.9% higher than the June deficit of $53.5 billion. It was the largest monthly deficit since July 2008 during the 2007-2009 recession.

The July deficit increase was driven by a record 10.9% increase in imports which rose to $231.7 billion. Exports were also up but by a smaller 8.1% to $168.1 billion.

When Donald Trump campaigned for president in 2016 he pledged to sharply lower the country’s large trade deficits, especially with China, which for years has been the country with the largest trade surplus with the United States.

To be fair, economists have not explained how the U.S. could run a current account deficit year-after-year without the dollar collapsing, the cost of imports soaring, and the cost of exports to those elsewhere plunging, bringing trade back into balance.  The economists just keep repeating the mantra that under the theory of comparative advantage everyone should be better off if imports are paid for with exports, but the have nothing to say about what happens when that isn’t true for 40 years.  But I have explained it.  

https://larrylittlefield.wordpress.com/2018/09/06/rising-u-s-debt-is-the-real-cause-of-the-u-s-trade-deficit-and-inequality/

And so has an electronics repair entrepreneur, from the street level, at 2:00 to 15:40 or so.

A reality that is perfectly obvious to anyone with open eyes. So when The Donald jacked up debt, he jacked up the trade deficit, and inequality – all at the expense of later-born generations.  

And what will happen if the rate of return Americans are forced to pay out of the country now increases?  We have provided our children and grandchildren with a future of not only having more and more of their future tax payments sucked into the past paid out of the country, with nothing in return, also but and more of their rents, more and more of the profits from the businesses where they work, more and more of their utility bills, and perhaps tolls paid for permission to use ourtheir streets, after the streets are sold off to pay public employee pensions.  The United States will have, after 250 years, gone back to being a colony. 

New Businesses

In addition to the slow, “new normal” rate of growth of the Obama Administration, and the Bush II Administration, another economic deficiency was growing monopoly and oligopoly, and a slowdown in the creation of new businesses.  The Donald said he would cut red tape, because that (and not access to capital or the fact that Americans were getting poorer and there was no one left to sell to) was the reason people weren’t starting new businesses.  Was he right?

He didn’t move the needle.  Not in the United States.  

There were over 20 million jobs in businesses that were less than one year old every quarter from the start of 1995 to the end of 2002.  That slowed to fewer than 15 million starting in 2009 before increasing to barely more than 15 million starting in late 2015.  One finds virtually no difference between the Trump Administration and the end of the Obama Administration.

And not in New York State.

So much for The Donald, genius entrepreneur, understanding the slowdown in start-ups and doing something about it.

“You’re fired.”

Now in fairness, there appears to have been a sudden increase in new business formation, just in the past few months.  

https://www.economist.com/united-states/2020/10/10/the-number-of-new-businesses-in-america-is-booming

But many of these would be entrepreneurs are probably existing entrepreneurs who were forced out of business by COVID-19, and are now planning their comeback.  After decades of near zero anti-trust enforcements, and with two political parties who are against new businesses and in favor of crony capitalism – thanks to campaign contributions – we will almost certainly end up with fewer independent firms at the end of this recession.

In Conclusion 

Looking at the charts, one can’t blame these problems on Donald Trump. The blame falls with his generation (and Biden’s).  Those born later and not in the deals are being drowned by a social tsunami.

But Trump certainly didn’t make anything better, and if anything made things worse worse, particularly with regard to inequality and the bankruptcy of the government.   Just like the Obama Administration, the reality is Meet the New Boss, Same as the Old Boss.  Complete with a suicide rate than has risen 13 years in a row, starting with the Bush II Administration, right through the Obama Administration, and well into the Trump Administration – all without even being talked about by our “leaders.”

Donald Trump is also not responsible for tribalism, the dark quarter of the human soul that both political parties have long sought to manipulate to keep people voting for them, and retain power, while offering a worse and worse deal for those not working the system.  But he has brought that practice to a new low as well. And now he will serve as an excuse for both parties and their special interests continuing to cash in the future of everyone else, by having set the bar so low.   That is his legacy. 

That and one other thing.  Treason.  What else can you call his assertion that he might very well violate his oath of office to “preserve, protect, and defend the Constitution of the United States” by overthrowing the government if he is not re-elected?  “I do solemnly swear?”  What a joke!  Those who came of age in the swinging sixties are too hip to take that sort of thing seriously.  Trump truly is THE MAN of his generation.

https://www.climateone.org/video/bruce-gibney-generation-sociopaths

2 thoughts on “The Trump Economy: Great Again?

  1. larrylittlefield Post author

    The New York Post endorses Trump, based on his economic record.

    https://nypost.com/2020/10/26/the-new-york-post-endorses-president-donald-j-trump-for-re-election/

    “We can return to the explosive job creation, rising wages and general prosperity we had before the pandemic.”

    Wrong.

    “The New York Post endorses President Donald J. Trump for re-election.”

    “Elections are always about the economy, but never more so than this year.”

    Wrong. They must be endorsing Trump for another reason, in reality.

    Unless all their readers expect to be dead in 20 years, and want to make sure there will be nothing left that isn’t cashed in before you got. As in the bumper sticker “I’m spending my children’s inheritance… and their future income, and their future spending, and those of our grandchildren and everyone else’s too.” Not that Biden, the candidate of Democratic special interests, will be that much better. But it makes no sense to vote for Trump based on his economic record.

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