During the 2016 election cycle, Trump and his Republicans would say nothing good about the economy. In Trump's words, the economy was a "total disaster," and would collapse with failure to "repeal the Obamacare disaster." According to Trump, economic data compiled by the Bureau of Labor Statistics were fraudulent. Financial markets were "in a bubble," the result of Fed Chair Yellen's low interest rates. Markets would collapse as interest rates were raised.
Now that he's been president for seven months, Trump insists that "the economy is wonderful." Even the "phony statistics" compiled by the BLS are now believable. Everything good about the economy is due to, guess who, Donald Trump, even though there has been no significant legislation to change anything relating to the economy.
The rates of economic growth and unemployment remain similar to those under Obama. Inflation rates remain low. Yes, financial markets have risen since Trump's Electoral College victory. But financial markets have risen from the trough of the Bush Recession all through President Obama's tenure.
Nevertheless, Trump claims credit for the same economy that he trashed during his election campaign. He highlights the high-flying financial markets as his accomplishment alone. As usual, the sleep-walking corporate broadcast media obediently gives voice to his illusions, as if they were fact.
In reality, the primary change has been in Wall Street and Corporate America's hopes, illusions and expectations. These columns have long reminded readers that Wall Street and Corporate America resemble a pack of Pavlov's dogs, salivating at the prospect of reward in the form of tax cuts and increased corporate profits that would propel ever-rising financial markets.
At least three factors illustrate fiction of the "Trump Bump": That he alone was responsible, that he will propel markets to new heights, and that financial markets are the all-important measure for the broad economy. Let's examine each in turn.
The Dow Jones Industrial Average rose from a low of 6,443 during the trough of the Bush Recession to 18,332 on Election Day and is now around 22,000. Approximately 83 percent of total gain was under the Obama Administration. Little, except hope and expectations, has thus far changed under Trump that would affect the economy.
Just as presidents get too much credit for "job creation," they probably get too much credit for financial market performance. But even if they get more credit or blame than deserved, economic policy matters - a lot. Financial markets depend on many factors, including corporate profits that in turn depend on employment and consumer demand. If consumers don't have the dough, they can't buy the product. Macroeconomic policy matters.
Corporate profits under the Obama Administration have fared well notwithstanding standard Republican dogma alleging that Democrats are "anti-business." Trump and his Republicans will never credit the Obama administration for the economic recovery. It's politically more expedient to criticize the recovery as being "too slow," in spite of it being one of the longest ever, and in spite of Republican effort to stymie everything constructive that the Obama administration proposed.
How about future financial markets under Trump? Stock markets tend to be forward looking, based on expectations - in this case future tax cuts that have - or had - Wall Street and Corporate America salivating like that pack of Pavlov's dogs expecting reward. Like the "repeal of Obamacare" that was going to be a slam dunk, tax cuts under the guise of "tax reform" were going to be a cinch. "Everybody," including Democrats and the obedient clones of the broadcast media, agreed that "tax reform is urgently needed."
However, as of this writing, the "Trump Bump" appears to have hit a traffic bump. The internecine Republican squabbling characterizing total failure of the "easy" promised repeal of Obamacare has given pause to promise of tax reform.
Even if the linchpin of Republican economic orthodoxy, that tax cuts will propel higher corporate profits, would come to pass, legislative success may not produce higher profits and steadily rising financial markets. But what's important for now is that doubt of legislative success will dampen even the expectations of the hoped for result.
What about that "giant bubble," ostensibly created by Fed Chair Yellen's low interest rates? Surely, the bubble would burst as Yellen would raise interest rates. Unsurprisingly, since Trump is president, high-flying markets are due to him and will continue. Fed Chair Yellen has not deliberately raised interest rates in order to "send the markets lower" and embarrass Trump. In fact, she has been incredibly transparent and predictable, in stark contrast to a predecessor, former Chair Alan Greenspan who resembled the Wizard of Oz behind the drape, making everybody believe he was in control as he baffled the media with indecipherable nonsense.
Trump will likely replace Chair Yellen when her term is up. We should worry about that, but that's another story.
Finally, what is the relevance of Trump's ballyhooed financial markets to the total economy? Rising markets reflect strong corporate profits and continuing optimism. They indicate rising value of 401(k) and other retirement plans of middle class workers fortunate enough to have them - and rising net worth of all stockholders able to purchase shares and be part owners of business enterprise - all good.
However, while rising financial markets are preferable to falling markets, they are an inadequate measure for assessing the health of the total economy. The rising values of the skewed distribution of stock ownership do not indicate increased income or wealth for the broad class of consumers; personal consumption accounts for about 70 percent of economic activity.
Twenty percent of Americans own 92 percent of stock wealth. The tremendous increase in market capitalization has left the majority of Americans behind. It is especially ironic that much of Trump's most loyal base is composed of low-income recipients who own absolutely no stocks.
Trump's most ardent supporters are pleased with his social conservatism. But Trump's stock market fiction holds no promise for economic improvement for his low-income supporters.
- John Waelti of Monroe, a retired professor of economics, can be reached at jjwaelti1@tds.net. His column appears Fridays in the Monroe Times.
Now that he's been president for seven months, Trump insists that "the economy is wonderful." Even the "phony statistics" compiled by the BLS are now believable. Everything good about the economy is due to, guess who, Donald Trump, even though there has been no significant legislation to change anything relating to the economy.
The rates of economic growth and unemployment remain similar to those under Obama. Inflation rates remain low. Yes, financial markets have risen since Trump's Electoral College victory. But financial markets have risen from the trough of the Bush Recession all through President Obama's tenure.
Nevertheless, Trump claims credit for the same economy that he trashed during his election campaign. He highlights the high-flying financial markets as his accomplishment alone. As usual, the sleep-walking corporate broadcast media obediently gives voice to his illusions, as if they were fact.
In reality, the primary change has been in Wall Street and Corporate America's hopes, illusions and expectations. These columns have long reminded readers that Wall Street and Corporate America resemble a pack of Pavlov's dogs, salivating at the prospect of reward in the form of tax cuts and increased corporate profits that would propel ever-rising financial markets.
At least three factors illustrate fiction of the "Trump Bump": That he alone was responsible, that he will propel markets to new heights, and that financial markets are the all-important measure for the broad economy. Let's examine each in turn.
The Dow Jones Industrial Average rose from a low of 6,443 during the trough of the Bush Recession to 18,332 on Election Day and is now around 22,000. Approximately 83 percent of total gain was under the Obama Administration. Little, except hope and expectations, has thus far changed under Trump that would affect the economy.
Just as presidents get too much credit for "job creation," they probably get too much credit for financial market performance. But even if they get more credit or blame than deserved, economic policy matters - a lot. Financial markets depend on many factors, including corporate profits that in turn depend on employment and consumer demand. If consumers don't have the dough, they can't buy the product. Macroeconomic policy matters.
Corporate profits under the Obama Administration have fared well notwithstanding standard Republican dogma alleging that Democrats are "anti-business." Trump and his Republicans will never credit the Obama administration for the economic recovery. It's politically more expedient to criticize the recovery as being "too slow," in spite of it being one of the longest ever, and in spite of Republican effort to stymie everything constructive that the Obama administration proposed.
How about future financial markets under Trump? Stock markets tend to be forward looking, based on expectations - in this case future tax cuts that have - or had - Wall Street and Corporate America salivating like that pack of Pavlov's dogs expecting reward. Like the "repeal of Obamacare" that was going to be a slam dunk, tax cuts under the guise of "tax reform" were going to be a cinch. "Everybody," including Democrats and the obedient clones of the broadcast media, agreed that "tax reform is urgently needed."
However, as of this writing, the "Trump Bump" appears to have hit a traffic bump. The internecine Republican squabbling characterizing total failure of the "easy" promised repeal of Obamacare has given pause to promise of tax reform.
Even if the linchpin of Republican economic orthodoxy, that tax cuts will propel higher corporate profits, would come to pass, legislative success may not produce higher profits and steadily rising financial markets. But what's important for now is that doubt of legislative success will dampen even the expectations of the hoped for result.
What about that "giant bubble," ostensibly created by Fed Chair Yellen's low interest rates? Surely, the bubble would burst as Yellen would raise interest rates. Unsurprisingly, since Trump is president, high-flying markets are due to him and will continue. Fed Chair Yellen has not deliberately raised interest rates in order to "send the markets lower" and embarrass Trump. In fact, she has been incredibly transparent and predictable, in stark contrast to a predecessor, former Chair Alan Greenspan who resembled the Wizard of Oz behind the drape, making everybody believe he was in control as he baffled the media with indecipherable nonsense.
Trump will likely replace Chair Yellen when her term is up. We should worry about that, but that's another story.
Finally, what is the relevance of Trump's ballyhooed financial markets to the total economy? Rising markets reflect strong corporate profits and continuing optimism. They indicate rising value of 401(k) and other retirement plans of middle class workers fortunate enough to have them - and rising net worth of all stockholders able to purchase shares and be part owners of business enterprise - all good.
However, while rising financial markets are preferable to falling markets, they are an inadequate measure for assessing the health of the total economy. The rising values of the skewed distribution of stock ownership do not indicate increased income or wealth for the broad class of consumers; personal consumption accounts for about 70 percent of economic activity.
Twenty percent of Americans own 92 percent of stock wealth. The tremendous increase in market capitalization has left the majority of Americans behind. It is especially ironic that much of Trump's most loyal base is composed of low-income recipients who own absolutely no stocks.
Trump's most ardent supporters are pleased with his social conservatism. But Trump's stock market fiction holds no promise for economic improvement for his low-income supporters.
- John Waelti of Monroe, a retired professor of economics, can be reached at jjwaelti1@tds.net. His column appears Fridays in the Monroe Times.
