The Trump Economy
Anyone who has been paying attention the last few years must realize a major shift has taken place in the US. The main reason is a shift in our government from the Obama years to the new Trump administration. There are two camps of thought. One that believes the economy works in a regular cycle and what goes and changes have little to do with Washington politics. The other believes federal government regulations and policies have a direct effect on our economy and jobs and investments. Who is right?
- Aug. 2018
updated Jan. 2019
Perception is one thing but real hard economic data is hard to argue with. We can attack this problem in several ways. If we examine the various economic indicators, like GDP and jobs and and taxes and wages and debts and interest rate... we can see a pattern. Moreover, consumer sentiments and business outlook and global trade and stability of the market is another aspect to consider. Finally, the man on the street and how they perceive the overall economic condition is also a gage.
There is no argument that macro economics moves in cycles. We have over the past 80 years a periodic boom and recession which occurs on average every 7 or 8 years. However, within those cycles are another secondary effect. This is the effect of government in controlling the money supply and interest rates via the Federal Reserve in an attempt to moderate the economic impact of these cycles. Just for an example, in a heated economy when the inflation rises, the Federal Reserve raises interest rate to slow down the boom. On the other hand, during a recession, the Federal Reserve would lower interest rate in an attempt to stimulate growth and investment in the private sector. It does not always work in the real world. Depending what else is going on, the government has limited powers in changing the direction of a $19 trillion economy of the US.
World trade has been growing and playing a bigger part of our economy. We are a global society. Many of our large corporations have businesses overseas. They are constrainted by what goes on in other nations. More and more of our economy is tied to other nations and their economic well being. A recession in China will have a negative effect on our economy and vice versa.
Economics is not an exact science. Unlike chemistry or physics, we cannot predict the outcome. There are some basic principles. However, public perception and sentiment do play a role in the course of our economy. For example, if the consumer confidence is high, people are more likely to spend on discretionary items such as vacations and going out to eat... This in turn will generate more business and lead to more hiring and higher wages. On the other hand, if consumers cut back during recession, the business is affected negatively. A feedback loop is inherent in these various cycles.
Here Are The Facts...
- Major Tax Reformed Bill passed over last 30 years
- Regulation reform - two regulations removed for every one added
- GDP above 4%
- Federal Fund rate at 2% and returning to normal
- DOW at all time high over 26,000
- Unemployment rate - U6 is 7.5% a better gage of real unemployment.
- Up to $250 billion repatriated by companies from overseas
- Most Americans will receive a tax reduction of $1500 this year.
- the National Debt climbed to $21.5 trillon.
- A new NAFTA deal worked out with Mexico
- The small business optimism index from the National Federation of Independent Business jumped to 108.8 in August, a new all-time high.
The SPY Index Fund Since Election of Trump - Up 38%
Things have started to move in the right direction. There is much more to be done. The deficit is a huge looming problem. Unemployment and under employment is still too high. Wages are not keeping up with rising costs. Full time jobs with benefits are hard to get. Our trade inbalance with China is growing.
It was President Obama who said “elections have consequences...” He passed the ACA healthcare bill in 2010. Now, President Trump passed the Tax Reform bill. There effects on the economy cannot be understated.
Whether you like him or not, it is Trump’s economy now at least for the next two years.
Best Cartoon of the Year!
Opinion From the Other Side - Sept. 11, 2018
I am pasting an opposing opinion posted in the comments section by another hubber.
Here is her post and predictions...
I wont make peace with any of them. They are personal and vicious. On purpose. And they get away with it.
And i am making a prediction. By this time next year, if Trump party still reigns, we will be back in recession, only 20 times worse, and many many rights will be gone.
Trump economy is the same old trickle up nonsense always plied by Republicans. Only Trump has empowered the filthy rich and those who get rich off human misery, such as private corporations and the Zio-Nazis of the world.
More laws to lock up more people so they can profit.
Trump news only.
Trump radio, state tv.
Back to stone ages for any but white judeo xtian male.
History repeating. IF Trump party stays in charge.
That is my opinion.
Latest Update News...1/25/2019
The USA has moved up from #18 to #12 on the economic freedom index. This is very good news.
On the other hand, Venezuela has moved down to next to dead last. Socialism failed every time it is tried.
Some Related Info
- 1.4 Million Households Drop Off Food Stamps Under Trump
More than 1.4 million households dropped off food stamps since President Donald Trump's first full month in office, USDA data shows.
- The really bad news amid latest market volatility: Only half of Americans actually own stocks - Mark
And the wealthiest among us own 81% of their value.
- Obama: America is not in decline, Trump lacks “magic wand” to grow economy | PBS NewsHour
President Obama defended his economic record on Wednesday during a visit to an Indiana city that has come to symbolize the nation’s uneven recovery, saying that he created millions of new jobs and questioning Republican Donald Trump’s ability to stee
- Tax Reform 2018 Explained - What the 2018 Tax Changes Mean for You
President Trump signed Congress' tax reform package, and most of the new rules go into effect in 2018. Here's what's changing - spoiler: it's a lot.
- Trump tax plan: 13 companies with most overseas cash for repatriation - Business Insider
President Donald Trump's tax plan could bring $250 billion into the US in the form of repatriated overseas cash. These are the 13 companies set to benefit most.
Obama Speech on Trump Economic Success
Update - Jan. 2019
Before the mid term election. Trump made a statement that was prophetic. He said, “if you want the market to go down, vote Democrat.”
Since the Democrats won back the majority in the House of Representative, the market has indeed drop about 15%. It is probably unfair to blame this all on the election. It did play a part.
There were a few other issues at play.
1. The federal Reserve have been increasing the interested rate slowly and trying to get the rate back to a more normal level. We are not there yet but any increase of rates have tremendous impact on the market. The reason is simple. When rates go up, it gives some investor option to move their assets into other forms of investments.
2. The trade discussions between the US and China was heated. Trump is using the threat of increased tariffs to level the playing field with our China trade partners. They have been stealing our intellectual properties along with currency manipulation to undermine our exports.
3. The market was on a huge run up, increasing 20% in 2017 after the election of Trump. In the first 10 months of 2018, it went up another 10%. This was unprecedented In recent history. A correction was due in any case. That is the nature of the stock market. Smart investors will use these corrections as buying opportunities.
4. The important thing to understand is that economies do under go cycles. Regardless who is sitting in the White House, the economy will move up and down. However, this past two years have demonstrated that government policies do have an economic effect as well. When Trump passed tax reform, and renegotiated trade deals, remove some regulations on business and revised some ACA rulings, all contributed to a healthier business climate and help investment grow.
It is worth noting, after a volitile month of Dec. 2018, the market has regained most of the losses and we are on an up trend. This is due mainly to better economic outlook and business fundamentals. The earnings are good and oil prices are low and tax reform is bringing some jobs and manufacturing plants back to the US.
© 2018 Jack Lee