The Trump “Miracle”…. but not for all

President Trump and his supporters have been very keen to trumpet the success of the Trump led US economy. And it is hard to argue against noticing that the GDP has risen in Mr Trump’s first term. The employment data also looks positive in that fewer are registering as unemployed.

For those who don’t look too closely, such statistics certainly make it seem more likely that Mr Trump can be returned for a second term. But if you check out the underlying detail you may agree with me that the taking of these indicators out of context does not give a true picture of what is really going on.

Of course some people must be advantaged every time the GDP rises, but as it turns out, on this occasion with closer examination we find, not only while some the rich minority have clearly done better, it is a good number of the poorer majority who now find themselves worse off. It also turns out much of the GDP is siphoned off and we see from many company reports that many have preferred to take advantage of the situation to build inventories, perhaps in part as a buffer for the increasingly entrenched trade war situation.

Nevertheless some, including some lucky investors, have obviously still benefitted.  Any rich recipients of such a windfall would presumably see the economics very differently from those denied a share. Perhaps this explains in part why, when surveyed recently via a Gallup poll, those polled were ask to register their support for Mr Trump’s earlier decision when he announced his tax rebates for the rich.

According to the afore-mentioned Poll results 40% of the population accepted that Mr Trump had done the right thing but 49% had actually disagreed. One of a number of reasons for the disagreement might well have been that the gap from tax no longer being paid turned out to be part of the now reduced safety net for poorer people.

One key recent survey conducted for the Federal Reserve, at least according to Deutsche Bank’s Torsten Sløk, showed that the distribution of household wealth in America has tended to become steadily more disproportionate over the past decade, with the richest 10% of U.S. households representing 70% of all U.S. wealth in 2018, compared with 60% in 1989. More to the point, again according to Sløk, was that it turned out that the increases in wealth following the tax rebates mainly went to the wealthy BUT many others were measurably worse off.

The employment figures are even more ambiguous. It is absolutely true that the number of registered unemployed in the US has dropped. This should be good. Well not necessarily! The important figure we should consider is the number of registered employed as a proportion of those actually potentially available for employment. The fact is that despite the population increase, the number employed today has dropped compared with the number employed back in the year 2000.

The economist Jeffrey D Sachs noted: “The civilian employment rate in April 2019 has been reported at 60.6% of the working-age population, but this is down from its annual peak of 64.4% in 2000. Much of America’s currently low unemployment rate reflects the withdrawal of many low-wage Americans from the labor force”.

Even in their own terms, the GDP and employment data are much less impressive than the headlines suggest. First-quarter GDP growth, for example, showed a surge in inventories, which might signal slowing output growth in future quarters. And it is, at best, a preliminary prediction.

Likewise, while a lower unemployment rate would normally seem heartening, in the event, it turned out that part of the reported decline in April also reflected a reduction in the labor force.

Perhaps it needs to be stressed the number of people in the theoretically employable group has risen in the same time. The answer to this apparent puzzle is very simple. We note a now growing host of factors that prevent more outside the workforce for registering as unemployed. For example some states have shortened the time for individuals to be out of work before removing them from the list. Similarly the reason for giving termination is now more likely to disqualify individuals for registering as unemployed. State regulations have also been toughened for those who cannot prove their right to work eg those without a green card type qualification or the alien versus permanent resident alternative.

Some long term arrangements, like turning a blind eye to undocumented workers eg many farm labourers in the Mid West or construction labourers where the employer had been anxious to reduce costs, (cf Trump construction sites!), are now being more carefully policed. In summary there are fewer employed but fewer can register as unemployed or register for unemployment insurance. Now bring in the afore-mentioned the GDP increase not being shared with the whole population. In short, this means the Trump administration’s chosen macroeconomic indicators of GDP and employment may sound good but they certainly have limited bearing on true wellbeing for many.

We might look for example at the declining life expectancy for 2016 and 2017 despite population increase. This should signal a warning especially as it coincides with factors like a decreasing access to health care amongst the poor, a soaring opioid epidemic, and increasing suicide rates, all of which do not indicate an increase in well-being or happiness.

The US population with half describing their current position as “excellent” or “good,” yet the other half describing them as “only fair” or “poor” is not particularly good given that the US has the strongest GDP figures of all developed nations. Some 49% of Americans believe the economic situation is improving, while 50% feel that it is worsening or staying the same. It should also concern the decision makers that only 31% claim to be satisfied with the direction their country has country, while 67% are dissatisfied.

Some of the dissatisfaction may of course be related to the increasing split in the community between those supporting President Trump and those opposing his Presidency.  Other factors include: spiralling personal debt (including credit card debt, student loans and the notion of personal share of the National debt) all of which have  worsened despite President’s Trumps promise to do away with the National debt together with reduction in the all important statistic of home ownership. As it happens, the national homeownership rate for the first quarter of 2019 was 64.2% (according to the U.S. Census Bureau). That is below the historic average of 65.2%, which dates back to the 1960s.

Another alarming issue not captured by GDP or unemployment rates is the sharp rise in anxiety among Americans. Whether or not this extends to the red-hatted Americans inside the group I have heard some cynics call “the prosperity gospel brigade” is not immediately clear to me. But the point is this. Gallup recently reviewed a set of troubling views reflecting concerns well beyond the President tweets and boasts about successes. In the Gallup summary we read:

“Even as their economy roared, more Americans were stressed, angry, and worried last year than they have been at most points during the past decade. Asked about their feelings the previous day, the majority of Americans (55%) in 2018 said they had experienced stress during a lot of the day, nearly half (45%) said they felt worried a lot, and more than one in five (22%) said they felt anger a lot.”

Stress, worry, and anger all hit ten-year US highs in 2018. From the samples compared with those elsewhere, Gallup rated the US as the seventh-most stressed population in the world in 2018, less stressed than Greece, the Philippines, and Iran, but surprisingly more stressed than samples in Uganda, Turkey, and Venezuela.

Americans’ self-reported happiness also declined in 2018. Asked by Gallup how they would rate their life on a scale from zero (worst life) to ten (best life), Americans in 2018 responded with an average of 6.9, down from 7.0 in 2017, and 7.3 during 2006-2008. For the year 2018, America was placed, perhaps more significantly in the bottom half of the OECD countries, down from 19th in 2016-2018.

Even in their own terms, the GDP and employment data are much less impressive than the headlines suggest. First-quarter GDP growth, for example, showed a surge in inventories, which might portend slowing output growth in future quarters. And it is, in any event, a preliminary estimate. Likewise, as explained above, while a lower unemployment rate sounds heartening, part of the reported decline in April reflected a reduction in the labor force.

As a New Zealander, like many others living outside the US I am surprised that when the economy is being assessed and “found” to be successful by the current administration, that the success is not being set in context. Even a casual glance at the main figures (eg the US Debt Clock) shows horrendous level of student debt and extraordinary health costs for the average citizen. But I would have also thought that the notion that US should be successful as a stand alone economy is curiously outdated by the way the world now works.

In the hope of generating some critical thought I further offer the following for discussion by my readers.

1. If the world trade system is now governed by the WTO (which short cuts the complexities of supply trains and sets up long term trade policies) I would wonder at the wisdom of the scorning of WTO generated trade arrangements and controls and instead prefer the new Trump administration system of arbitrarily messing about with abrupt tariffs, which to me seems to unsettle the trading partners’ home economies and makes the US seem a less reliable trading partner when compared with other large economies where arrangements are much more settled. (Over the last two years we in New Zealand have moved ahead with our trade with China and made much more limited progress with new markets in the US).

2. The notion of financial profit being the only measure of an economy would appear particularly problematic. For example the burgeoning weapons trade whereby the US has made Saudi Arabia one of the strongest military powers in the world, may have made the shareholders in the US arms production factories rich, but the refugee problem has come close to breaking point as a consequence, particularly where civilian populations are frequently targets in places like Yemen and Syria.

3. While the UN has been an previous expense for the US, pulling back on US contributions to relief programmes may save money in the short term, but also makes many regions a more unstable and destabilizes future markets.

4. There seems to be a confusion between building the local US economic system while at the same time choosing to crush any economy which follows its own interests rather than supporting the interests of the United States (think Iran wishing to build its own economy with its own oil trade or Cuba being punished for historic attempts to take back its own political system).  Many polls taken outside the US in the last two years show a dropping international confidence in the leadership in the US and we might wonder if reactions from overseas organizations and leaders regularly rubbished by the President may be a contributing factor to the loss of confidence.

5. I would have thought that some of the more astute in the Trump Administration would have noted that larger trading blocs are increasingly side-lining the US in major trading deals. This may yet moderate the enthusiasm of traditional supporters for the current economic direction chosen by the President and its much internally vaunted successes.

NOTE  The first part of this article leans heavily on work done by Jeffrey Sachs.  Reader feedback and criticism would be appreciated for all the suggested interpretations in this post since they vary from much of the reported claimed economic successes of the Trump administration.

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