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Thread: Trump's Economy

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    Senior Contributor DOR's Avatar
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    Trump's Economy

    First Quarter 2018:
    Now, it’s Trump’s economy



    The US economy grew 2.86% year-on-year in the first quarter of 2018, three tenths of a point faster than in the previous season. It’s the seventh straight increase in the pace of growth, dating back to Q-2 2016.

    Private consumption, which accounts for more than two-thirds of all economic transactions in the economy, slowed slightly, from 2.85% in Q-4 2017 to 2.63% in the latest period. Demand for services (44.8% of GDP) was up a sluggish 2% over January-March 2017 while goods purchases by households (23.6% of the economy) rose 3.6%.

    Capital investment (a 16.7% slice of the total) rose a healthy 4.9% on the strength of non-residential construction. Government spending (18.1% of GDP) rose 1.2% after falling an average of 0.9% per quarter over the past seven years. Naturally, federal spending (+2%) and particularly defense (+3.6%) drove ahead. The GOPers are back in charge, so what do you expect?

    Exports (12.9%) were up 3.1% and imports (18.1%) by 3.4%. As a result, domestic demand – the measure that looks at exports and something to be taken away from the economy and imports as a contribution – rose 3.1%, the best pace in nine quarters.

    When the Fed thinks about adjusting interest rates, it looks at the change in prices households pay. By that measure, the private consumption deflator, inflation was 1.8% in the first three months of the year, the fastest pace in six years. That’s still below the target 2% minimum, but it is encouraging nonetheless.
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    Trade deficit rises $28 billion. No worries trade wars are easy?

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    Senior Contributor DOR's Avatar
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    Quote Originally Posted by snapper View Post
    Trade deficit rises $28 billion. No worries trade wars are easy?

    There’s a dead easy way to reduce the deficit, and by deficit I mean the one that counts: current account balance, including goods, services and investment flows.

    The technique is called driving the economy into the toilet.
    Very simple and very effective.
    Destroy demand, and watch imports dry up.

    Average, 2005-07
    Real GDP: +2.6% p.a.
    Current account balance: -$188.5 per quarter average


    Average, 2008-10
    Real GDP: +0.1% p.a.
    Current account balance: -$107.5 per quarter average

    That’s a 43% improvement, at the cost of just a 2.5 percentage point decline in growth.

    (let's not talk about unemployment or financial sector meltdown. trade is all that matters, right?)
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    Senior Contributor DOR's Avatar
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    Imports are good for America.

    Consider the following:

    • When consumer goods become cheaper, crime decreases because it is less attractive to steal them.
    • When smoke detectors become cheaper, it is less likely that your family will die in a fire.
    • When surgical-type gloves are so cheap fast food workers use them, people don’t pass on germs as easily. The food may still make you sick, but dirty hands are less likely to be the reason.
    • Insurance premiums fall when always-on cameras are cheap enough to be everywhere – in cars, homes, shops and on the streets – proving who did what and to whom.



    So, the next time some protectionist clown (Hello, Mr President!) claims that imports are bad, ask he how he’d pay for safety and security if prices suddenly shot up.

    But, don’t we import too much?

    Share of global imports, selected years:
    _ _ _ _ _ _ _ _ Korea, Taiwan, Hong Kong, Japan,
    _ _ _ _ U.S.A. _ China, Singapore, Malaysia, Thailand
    1948 _ 13.0% _ _ _ _ _ 5.2%
    1953 _ 20.5% _ _ _ _ _ 8.1%
    1963 _ 16.1% _ _ _ _ _ 8.2%
    1973 _ _7.2% _ _ _ _ _11.3%
    1983 _ 18.5% _ _ _ _ _13.9%
    1993 _ 21.3% _ _ _ _ _19.3%
    2003 _ 22.4% _ _ _ _ _19.0%
    2016 _ 19.4% _ _ _ _ _22.7%

    The dates were selected by the latest WTO report on global trade: wto.org
    Last edited by DOR; 01 May 18, at 09:20.
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    Ian Bremmer's recent book, Us Vs Them, is a pretty good demonstration regarding the breakdown between strict economic efficiency and politics.

    essentially the vast increase in labor supply caused by globalization and technology exerts a massive downward pressure on wages and allows capital to vastly concentrate wealth.

    GOP mantras of deregulation and supply-side economics hugely amplifies these natural effects. same with The New Democratic mantra of free trade and deregulation, although to a lesser extent.

    the demise of the New Democrats and New Labour on the UK side was largely a realization that calling a "truce" in the "class wars" would not necessarily mean that the GOP/wealthy would try to find middle ground. the old Mandelson quote about New Labour being "intensely relaxed about people getting filthy rich as long as they pay their taxes" has been repudiated...even by Mandelson himself.

    in short the discussions about the economic -effectiveness- of free trade vs protectionism is moot. intellectually i understand that the threatened Trump tariffs are stupid, and that the new iteration (voluntary quotas!) is even stupider.

    but we're essentially living in a world where "blame the filthy foreigner" is an easier and less politically fraught (domestically anyways) way of demonstrating populism vs raising taxes. after all, raising taxes at all is anathema for the GOP, while raising taxes on the poor/middle-class/upper-middle class is anathema for the Dems.
    There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

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    When China, and later India joined the global economy, it added hundreds of millions of workers to the potential labor pool. Potential, because a Sichuanese farmer in 1983 wasn’t actually employed in the global economy.

    In the 1980s, these two countries contributed 0.6% of the global increase in merchandise exports. In the 1990s, in grew five-fold, to a 2.9% share of the rise. The take-off was in the early 2000s, when it averaged over 22%. But, post GNAFCrisis, it fell back to less than 16%.

    In 2000-09, China’s share of the growth in global merchandise imports – what China buys, not what it sells – was 17.8%. The next closest contributor was the US, at 10.2%. Germany, 6.2%. India, 4.1%.

    The key narritive that's missing from the "massive increase in the labor force" perspective is the "massive increase in the consumer market," and "massive drop in prices" bit.
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    The key narritive that's missing from the "massive increase in the labor force" perspective is the "massive increase in the consumer market," and "massive drop in prices" bit.
    yes...but it's not clear, to put it kindly, whether "massive drop in prices" offsets income stagnation from the expanded labor pool as well as price inflation on services/housing market/education/medicine.

    whereas of course it's far more clear that your regular Chinese person HAS benefited.

    again, intellectually i understand that this comparison is not exactly an apples to apples comparison as China started on a far lower threshold and remains far below the US standard. however, the rate of improvement comparison is obvious to all and people do not operate in a vacuum.

    this also applies to the economic argument that "technology today is far better than it was 50 years ago, so that a poor person today has options not available to the richest of the rich in 1970". which is a true but meaningless statement because that's not how people FEEL economic growth.

    Trump, Brexit, Italy, Hungary, Poland-- these are all worldwide demonstrations that the 1990s consensus...basically the Washington Consensus...is spent. we're well past the point where economic efficiency/rising-tide-lifts-all-boats is a persuasive political argument. think about it: this is all happening during a time of relative global prosperity and growth. frankly i'm a bit terrified regarding the next inevitable downturn, even if we don't have such an utter moron as President by then.
    There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

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    Calories.
    It's all about calories (and, protein).

    Once everyone on the planet has enough to eat, we can start worrying about whether people FEEL economic growth. Or, whether animals have FEELINGS. Or, vegans.
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    heh heh, on the contrary-- people who are starving don't have the time to elect nationalistic populist strongmen.

    seriously, the news from Europe worries me. Trump is a largely ineffectual clown. Orban is a clown but rather more effectual; good thing he's only in charge of a third-rate power.

    but France is not a third-rate power, and say Macron/En Marche collapses...
    There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

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    Brookings Institute

    Trump lags behind his predecessors on economic growth
    Robert Shapiro, May 17, 2018

    In recent months, President Trump has tweeted that economic growth under his presidency ďis better than it has been in many decades, the Economy is raging at an all-time high, and is set to get even better,Ē and ďIt has been many years [sic] that we have seen these kind of (economic) numbers.Ē

    While some hyperbole is a matter of opinion, Trumpís claim that his stewardship of the economy puts his predecessors to shame can be checked by public information that is readily available to all. In fact, the data show that compared to his predecessors, Trumpís record so far falls somewhere between unremarkable and substandard. Moreover, other economic data suggest that the current expansion will likely wind down before his term ends, and his boasting will ring hollow once the economy slips into recession.

    It is commonly said that a President deserves some credit or blame for the economyís performance only after heís been in office about six months. On those terms, letís measure Trumpís words against the record for real GDP growth over the last three quarters (July 2017 through March 2018). Over those quarters, GDP has grown at an annual rate of 2.6 percent. Comparing that pace to his last nine predecessors over comparable periods in their first terms, Trump here bests the four presidents who faced recessions in their first year in office (Barack Obama, George W. Bush, Ronald Reagan and Richard Nixon). Trumpís other five predecessors came to office, as he did, during economic expansions. Among them, heís tied for last place: Real GDP growth under Trump over the three quarters has lagged Bill Clinton, Jimmy Carter, Lyndon Johnson and John Kennedy, and tied George H.W. Bush, as the data in the following table shows.

    The Early Economic Records of Presidents from Kennedy to Trump
    President GDP Business Investment Investment in Equipment
    Kennedy_ _ _7.0% _ _ _8.3% _ _ _ _ _ _ 14.2%
    Johnson_ _ _6.3% _ _ _10.7% _ _ _ _ _ _ 11.9%
    Nixon_ _ _0.0% _ _ _-1.6% _ _ _ _ _ _ -0.3%
    Carter_ _ _ 2.7% _ _ _ 8.2% _ _ _ _ _ _ 12.2%
    Reagan_ _ _-2.1% _ _ _3.0% _ _ _ _ _ _ -3.0%
    Bush-1_ _ _2.6% _ _ _ 0.5% _ _ _ _ _ _ -0.2%
    Clinton_ _ _ 3.5% _ _ _ 7.7% _ _ _ _ _ _ 13.5%
    Bush-2_ _ _1.1% _ _ _ -4.7% _ _ __ _ _ -6.1%
    Obama_ _ _ 2.2% _ _ _ 1.5% _ _ _ _ _ _ 14.7%
    Trump_ _ _ 2.6% _ _ _ 5.9% _ _ _ _ _ _ 9.0%

    Source: Bureau of Economic Analysis. These measures represent annual growth rates of real GDP, business fixed investment, and investment in equipment over the three quarters from each presidentís third, fourth and fifth quarters in office.

    Like all of those predecessors, Trump promised to reform regulation and boost business investment, because such measures can stimulate faster growth. Moreover, if the new investments focus on productivity-boosting equipment, they also can help raise peopleís incomes. Through all of last year, Trump and his advisors insisted that business investment would soar once he cut onerous regulations and Congress slashed the corporate tax rate.

    So, Trump devoted much of his first six months in office to rolling back regulations and much of the next months on his single major legislative achievement, sharp reductions in taxes. The table above shows what has happened to business investment generally and to new investments in equipment over the last three quarters, again compared to the results in comparable periods under his predecessors. On overall business investment, Trumpís record again beats the four presidents who faced recessions in their first year in office (Obama, Bush-2, Reagan and Nixon), plus Bush-1)óhardly a heavy liftóand trails his four other predecessors (Clinton, Carter, LBJ and JFK). On investment in equipment, the comparisons are the same except here he trails Obama as well the four other Democratic presidents since 1960.

    Many economists (myself included) pointed out that Trumpís tax and regulatory changes would likely have little effect on investment. The truth is, U.S. companies had been able to borrow the funds to invest for virtually nothing for a decade, adjusting for inflation. So, there was little holding them back from investing here except a shortage of attractive opportunities, and Trumpís changes didnít alter that reality in any meaningful way.

    Trumpís middling record on GDP and investment raises the question of how much longer the current expansion, now just two months shy of entering its tenth year, can last. Developed economies move in business cycles, and so they weaken eventually as a matter of course. Thatís where the United States is today. This late in any economic expansion, the pool of available workers for new jobs is modest, most attractive investment opportunities have been taken, and any pent-up consumer demand for large durable purchases has been exhausted.

    No economist, much less any politician, has a test or technique to accurately predict the onset of a recession. One important reason is that a recession usually requires a shock that tips a weakening economy into a contraction. In recent decades, those shocks have come from sudden increases in oil prices, a precipitous housing decline, and aggressive interest rate hikes by the Federal Reserve. So, Trump has to bet his reelection hopes not only on somehow getting a pass from the Mueller investigation. He also will have to trust that the Fed doesnít double down on raising interest rates, that we can avoid a trade war and a crisis involving Korea, Syria or Iran, and that some other, yet-unforeseen development doesnít tip the balance.
    https://www.brookings.edu/blog/fixgo...onomic-growth/
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    DJT's obviously full of shit, but comparing the economic growth of the DJT economy to JFK and LBJ economies is ludicrous.
    "The great questions of the day will not be settled by means of speeches and majority decisions but by iron and blood"-Otto Von Bismarck

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    so, where's that massive wage growth that the tax cut was supposed to unleash?


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    There is a cult of ignorance in the United States, and there has always been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that "My ignorance is just as good as your knowledge."- Isaac Asimov

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    From the Department of Keeping It in Context:

    Real average hourly earnings by production and non-supervisory employees, percent change from a year ago.

    _ _ _ _ _ _ _ _ _ _ Manufacturing _ _ Construction
    1950s _ _ _ _ _ _ _ _ _ _ +3.1% _ _ _ _ _ _ _ +4.2%
    1960s _ _ _ _ _ _ _ _ _ _ +1.7% _ _ _ _ _ _ _ +3.2%
    1970s _ _ _ _ _ _ _ _ _ _ +0.8% _ _ _ _ _ _ _ +0.2%
    1980s _ _ _ _ _ _ _ _ _ _-0.7% _ _ _ _ _ _ _-1.3%
    1990s _ _ _ _ _ _ _ _ _ _ 0.0% _ _ _ _ _ _ _-0.3%
    2000s _ _ _ _ _ _ _ _ _ _ +0.3% _ _ _ _ _ _ _ +0.5%
    2010s _ _ _ _ _ _ _ _ _ _ +0.1% _ _ _ _ _ _ _ +0.5%
    Average _ _ _ _ _ _ _ _ _ +0.8% _ _ _ _ _ _ _ +1.0%

    2017 _ _ _ _ _ _ _ _ _ _ +0.0% _ _ _ _ _ _ _ +0.8%
    2018 _ _ _ _ _ _ _ _ _ _ +0.8% _ _ _ _ _ _ _ +1.2%

    Data to April 2018.
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