The State of the US Economy

My Comments: Most of us are waiting for the inevitable crash. We hope there’ll never be another, but the realists among us know one will appear sooner or later.

The tax bill enacted in 2017 was supposed to result in greater consumption numbers since it was passed to presumably reduce the tax bill for most of us. The assumption was we’d then increase our spending which would mean the economy would grow as more people spent more money on goods and services.

The following article was published on February 3rd, about 10 days ago. Yes, it has political overtones in that the actual numbers don’t jibe with claims from the White House.

All this is relevant as you save money for your retirement or are already retired and looking for ways to increase the size of your retirement accounts. You may now realize you don’t have enough money in the pot to maintain your standard of living going forward and a growing economy is in your best interest.

The conclusion by the author is that the US economy is nothing to brag about. I’ll let you draw your own conclusions and whether the results mean you have less to worry about.

By David Cay Johnson \ 3 FEB 2020 \ https://tinyurl.com/vsr64ex

At Tuesday night’s State of the Union address, Donald Trump will surely claim he has created a great economy. Trump will try to lower expectations, hoping people forget his towering 2016 claims and promises. My spring 2019 analysis of Trump economic performance was a grade of C , average.

Yet Team Trump claims it is doing just great. “United States GDP Growth Continues Exceeding Expectations” was the headline on a Jan. 30 White House announcement.

Gross Domestic Product growth in the last quarter of 2019 was 2.1%. For the entire year, it was 2.3%. That means economic growth slowed. That’s nothing to brag about. The average growth rate since 1947 has been 3.2%.

Voters should remember Trump promised if elected that he would blow away the performances of predecessor Barack Obama and others.

Here’s Trump in September 2016 on GDP growth: “We are looking at a 3% but we think it could be 5 (%) or even 6 (%). We are going to have growth that will be tremendous.”

During the final presidential debate a month later Trump promised that if elected, “We’re bringing it (economic growth) from 1% up to 4%, and I actually think we an go higher than 4%. I think you can go to 5% or 6%.”

Jobs Growth Slows Under Trump

And how about jobs growth. Trump promised jobs galore. Under Trump, jobs growth slowed significantly.

Obama inherited a collapsing economy. Three million jobs vanished in the first four months of 2009. That awful trend reversed in October 2010 when the economy began growing jobs in an unbroken chain since.

From then through January 2017, Obama’s last month in office, jobs averaged 201,600 per month.

Trump, from February 2017 to the end of 2019, averaged just 191,100. That’s 5% less per month.

Another White House announcement boasted that last year showed an average of 176,000 new jobs per month. That’s 25,000 fewer jobs added each month than under Obama, a decline of almost 13%.

So much for exceeding expectations.

Wages have increased. But that apparently is due to local and state increases in the minimum wage.

The federal minimum wage of $7.25 an hour was set in July 2009. Inflation has eroded its value to about $6 per hour today.

Trump has said he may, possibly, perhaps, someday consider increasing the minimum wage. Trump’s chief economic adviser, Larry Kudlow, calls the minimum wage “a terrible idea.”

Soybeans Shrivel and Farms Go Bust

How’s it going for soybean farmers since Trump’s gratuitous trade war promoted China to buy soybeans from Brazil?

Farm bankruptcies increased by 20% in 2019 compared with 2018, data released by federal courts last week showed.

Family farm bankruptcies, known as Chapter 12 filings, have been on the rise since 2015. But remember Trump promised to improve the lots of America’s farmers, not make them worse.

Trump’s trade war with China has created a boom for Brazilian soybean farmers. Soybeans are America’s second most valuable crop, worth $39 billion in 2018, right behind corn at $51 billion.

In 2019 China grew more than 17 million tons of soybeans, about a third of its consumption. China has started expanding soybean production, which it could quickly multiply. Afterall, the can-do spirit thrives in China, which just built a hospital for Coronavirus patients in 10 days. Ten days.

Should Beijing decide to further expand its soybean farms then American farmers will have permanently lost sales. In turn, American farm incomes will shrink.

To provide cover for his trade war Trump is giving American soybeans farmers $28 billion of taxpayer money. About $19 billion has already been turned over. Don’t expect Trump to mention this Farm Belt welfare as what it is, socialism, and a burden for all taxpayers.

Then there’s the Trump/Radical GOP tax law adopted in December 2017. It slashed the corporate tax rate 40%. The lowered individual rates heavily favor the richest Americans.

That law was, Trump claimed, going to spur a massive increase in domestic capital investment, which is a key to more jobs.

After a brief increase in domestic capital investment in 2018, it has fallen back to previous levels. In other words, the Trump tax cut did not do what Trump promised.

Trump also promised voters he could pay off the federal government’s debt if he got two terms. Instead he already has pushed annual budget deficits back to the trillion-dollar level.

So, as you watch, listen to or read about Trump’s Tuesday night address to Congress, ask yourself if what Trump says is fact or fiction.

One thought on “The State of the US Economy

  1. So Yeon Ryu

    I am so thankful that there are financial advisors out there posting articles like this from lunatics like David Cay Johnston. It tells me that the economy and market still has years to run. Sure, we’ll have pullbacks, but bull markets don’t end until all the emotionally weak annuity hawkers finally give up the goat and finally buy stocks. That’s when you know it’s time to run and hide.

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