President Donald Trump is at it again, informing us that under his watch, we have the greatest economy ever - low gas prices, low inflation, low unemployment, record high financial markets, and another quarter of economic growth. In reality, we had that under President Barack Obama. But Trump's take then was that the economy was a disaster and the Bureau of Labor (BLS) Statistics were phony, not to be believed. Now that he's in charge, the BLS stats are fine. Success must be his alone - or is it?
Gas prices have been low for some time. The unemployment rate has been declining since end of the Bush Recession in 2009. Financial markets have risen since their trough during the Bush Recession. Although there have been problems with income distribution for decades, the economy has grown for 96 straight months beginning autumn of 2009. The Obama administration got us out of the hole the economy was in. It's fine that the economy has continued the trajectory during Trump's first seven months in office. But just as the Trump administration has initiated no major legislation that has reversed the upward trend, neither has it passed any major legislation which could legitimately credit him for continued economic performance.
This 96-month upward trajectory was well-established before Trump took office. With the White House in chaotic disarray, and even with his Republicans in total control of congress, there is nothing of substance with which credit Trump with prosperity, except possibly for one intangible - hope and expectations.
Over these 96 months, economic growth has averaged around a slow but steady 2.1 percent. The economy grew at 1.2 percent for the first quarter of 2017, and 2.6 percent for the second quarter, not significantly different than under the Obama administration. This is to be expected as the factors that drove the economy for 96 months remain largely unchanged - so far.
So what is all the hoopla about this "Trump Bump," that has yet to occur? It's about hope, illusions, and false assumptions.
Wall Street money managers and Fortune 500 CEOs salivate like a bunch of Pavlov's dogs at the mere mention of deregulation and tax cuts. Surely, they believe, these "business friendly" actions will juice the economy and further elevate financial markets.
The Trump Administration is indeed hard at work eliminating environmental regulations. While this may not immediately affect the economy one way or the other, the long term damage to the environment, and ultimately to the broader economy, will surely be negative. And tax cuts under the guise of "tax reform" are still far off.
Strong corporate profits and historically low interest rates are credited by those who claim to know about such things for the impressive rise in stock prices during the last eight years. Fed Chairman Janet Yellen is competent and will pull no surprises. Although the Fed has modestly raised interest rates, and there are more increases on the horizon, rates will undoubtedly remain consistent with the ability of the economy to accommodate them.
Tax cuts under the guise of "tax reform" are another matter. If Trump thought that repealing and replacing the Affordable Care Act (ACA) was easy and he was going to do it on his first day in office, wait till he tries messing with the tax code. Every lobbyist on K Street will come out of the woodwork, defending their tax loopholes, er, "special breaks that are for the public good."
Whenever politicians talk about "tax reform," it's time to run for the hills. Many of us prefer "the devil we know" compared to what politicians under the guise of "reform" or "simplification" might come up with.
The illusion and false assumption that tax cuts will automatically propel the economy to new heights persists. Compare Wisconsin's austerity program with Minnesota going the other direction, increasing spending on education and other public goods. Okay, critics would argue that Minnesota's increased progressive income taxes are not responsible for what has become known as the "Minnesota Miracle." But it's fact that in spite of Minnesota's taxes, it has flourished while Wisconsin has languished to the point of having to cough up a $3 billion incentive package to beg Foxconn to possibly locate a plant in Speaker Paul Ryan's congressional district.
Kansas Gov. Sam Brownback's huge tax cuts designed to lure business to the prairie has been an abysmal failure. Public education in Kansas has suffered terribly, and the Republican legislature had no choice but to enact some tax increases.
Tax structure is only one factor affecting business profits and business location, and not the major one. Strength of consumer demand for product is paramount for business profits. Quality of education and the work force, and infrastructure, are prime factors dictating location.
Trump's supporters lament that it is the fault of the media, creating distractions that keep the Trump administration from acting. That's utter nonsense. After all, Republicans, not the media, control the agenda and the congress, lock, stock, and barrel.
The most absurd lame alibi for Trump's lack of legislative progress is offered by Andrew Roth, chief lobbyist for the conservative Club for Growth. He cites "Distractions caused by a White House that is still in a transitional phase," and a "dysfunctional Republican Party in Congress that includes too many liberals." He wasn't referring to liberal Democrats. He goes on, "It is well past time that people recognize that there are far too many Democrats in the Republican Party."
Whazzat? "Democrats in the Republican Party?"
Total control of three branches of government by Trump and his Republicans. And lack of progress is the fault of the media and Republicans "who are really Democrats?"
Meanwhile, Wall Street and corporate America dream on, laboring under the false assumption that tax cuts are key to prosperity.
But be careful what you wish for. Even if they come to pass, they will not achieve the intended result.
- John Waelti of Monroe, a retired professor of economics, can be reached at jjwaelti1@tds.net. His column appears Fridays in the Monroe Times.
Gas prices have been low for some time. The unemployment rate has been declining since end of the Bush Recession in 2009. Financial markets have risen since their trough during the Bush Recession. Although there have been problems with income distribution for decades, the economy has grown for 96 straight months beginning autumn of 2009. The Obama administration got us out of the hole the economy was in. It's fine that the economy has continued the trajectory during Trump's first seven months in office. But just as the Trump administration has initiated no major legislation that has reversed the upward trend, neither has it passed any major legislation which could legitimately credit him for continued economic performance.
This 96-month upward trajectory was well-established before Trump took office. With the White House in chaotic disarray, and even with his Republicans in total control of congress, there is nothing of substance with which credit Trump with prosperity, except possibly for one intangible - hope and expectations.
Over these 96 months, economic growth has averaged around a slow but steady 2.1 percent. The economy grew at 1.2 percent for the first quarter of 2017, and 2.6 percent for the second quarter, not significantly different than under the Obama administration. This is to be expected as the factors that drove the economy for 96 months remain largely unchanged - so far.
So what is all the hoopla about this "Trump Bump," that has yet to occur? It's about hope, illusions, and false assumptions.
Wall Street money managers and Fortune 500 CEOs salivate like a bunch of Pavlov's dogs at the mere mention of deregulation and tax cuts. Surely, they believe, these "business friendly" actions will juice the economy and further elevate financial markets.
The Trump Administration is indeed hard at work eliminating environmental regulations. While this may not immediately affect the economy one way or the other, the long term damage to the environment, and ultimately to the broader economy, will surely be negative. And tax cuts under the guise of "tax reform" are still far off.
Strong corporate profits and historically low interest rates are credited by those who claim to know about such things for the impressive rise in stock prices during the last eight years. Fed Chairman Janet Yellen is competent and will pull no surprises. Although the Fed has modestly raised interest rates, and there are more increases on the horizon, rates will undoubtedly remain consistent with the ability of the economy to accommodate them.
Tax cuts under the guise of "tax reform" are another matter. If Trump thought that repealing and replacing the Affordable Care Act (ACA) was easy and he was going to do it on his first day in office, wait till he tries messing with the tax code. Every lobbyist on K Street will come out of the woodwork, defending their tax loopholes, er, "special breaks that are for the public good."
Whenever politicians talk about "tax reform," it's time to run for the hills. Many of us prefer "the devil we know" compared to what politicians under the guise of "reform" or "simplification" might come up with.
The illusion and false assumption that tax cuts will automatically propel the economy to new heights persists. Compare Wisconsin's austerity program with Minnesota going the other direction, increasing spending on education and other public goods. Okay, critics would argue that Minnesota's increased progressive income taxes are not responsible for what has become known as the "Minnesota Miracle." But it's fact that in spite of Minnesota's taxes, it has flourished while Wisconsin has languished to the point of having to cough up a $3 billion incentive package to beg Foxconn to possibly locate a plant in Speaker Paul Ryan's congressional district.
Kansas Gov. Sam Brownback's huge tax cuts designed to lure business to the prairie has been an abysmal failure. Public education in Kansas has suffered terribly, and the Republican legislature had no choice but to enact some tax increases.
Tax structure is only one factor affecting business profits and business location, and not the major one. Strength of consumer demand for product is paramount for business profits. Quality of education and the work force, and infrastructure, are prime factors dictating location.
Trump's supporters lament that it is the fault of the media, creating distractions that keep the Trump administration from acting. That's utter nonsense. After all, Republicans, not the media, control the agenda and the congress, lock, stock, and barrel.
The most absurd lame alibi for Trump's lack of legislative progress is offered by Andrew Roth, chief lobbyist for the conservative Club for Growth. He cites "Distractions caused by a White House that is still in a transitional phase," and a "dysfunctional Republican Party in Congress that includes too many liberals." He wasn't referring to liberal Democrats. He goes on, "It is well past time that people recognize that there are far too many Democrats in the Republican Party."
Whazzat? "Democrats in the Republican Party?"
Total control of three branches of government by Trump and his Republicans. And lack of progress is the fault of the media and Republicans "who are really Democrats?"
Meanwhile, Wall Street and corporate America dream on, laboring under the false assumption that tax cuts are key to prosperity.
But be careful what you wish for. Even if they come to pass, they will not achieve the intended result.
- John Waelti of Monroe, a retired professor of economics, can be reached at jjwaelti1@tds.net. His column appears Fridays in the Monroe Times.
