Goosed by the Republican tax scam, 2018 was the best possible for stocks and dividends – between low unemployment, impact of tax cut giving more cash, strong consumer confidence – and yet, the year ended in negative territory, largely due to Trump’s tariffs and trade wars.
The impact of shutting the government had not even manifest yet.
Trump has wielded his America First fist by riding the historically long bull market business cycle, largely due to the slow, steady and sustainable initiatives of the Obama Administration (yes, presidential policies can impact the economy), not the least were the trade agreements, regulation, incentives to transition the economy to clean, renewable energy, a rational immigration policy, getting health care costs under some control.
But all has been undone by Trump.
The government shutdown, which is costing $1 billion a week (before the ripple effect that multiples impacts fourfold), does something more: it halts the supply of money that pays people’s salaries, contractors their fees (Trump is very good at stiffing), so they can’t pay people, hire people, buy supplies.
Federal workers missing paychecks are barely able to pay mortgage or rent, car loans, doctor bills and food (food pantries are doing a thriving business), let alone buy a new washing machine to replace a broken one.
These 800,000 people who are having to raid their college and retirement funds rack up credit card debt, perhaps take payday loans at exorbitant interest, will never recover because the hit to their equity compounds over time.
Many will see their credit rating hurt, which they will have to pay for Trump’s malevolence for the rest of their lives. The American Dream of owning a home. Forget about it.
That sets off a chain reaction. With the economy already slowing and no “sugar high” tax cut to goose it – can’t cut taxes anymore, no money to invest in infrastructure, let alone a “Green New Deal” – even Trump’s economic advisors (an oxymoron), are now saying the impact is double what they originally projected, shaving 0.1 percent from Gross National Product every week.
That rosy 4 percent annual growth in GDP that Trump’s tax scam was supposed to produce?
The IMF back in October was projecting the U.S. economy would grow only 2.5 percent in 2019. We will be lucky to get by with any growth at all. (The U.S. did not even bother to attend the Davos Economic Forum.)
The Washington Post quotes Tina Fordham, chief global political analyst at Citigroup, saying “The number one question in the mind of leaders in Davos now is what on earth is Donald Trump up to?
We’ve very clearly moved in terms of investor sentiment from the Trump bump euphoria surrounding tax cuts and deregulation to fears of a Trump slump.”
Chief executives from around the world now rank a global recession as their top concern according to a Conference Board survey, when a year ago, global recession was an after-thought, ranked 19th. Global trade threats rank second.
And what of the US credit rating? The dysfunction of the federal government when Republicans threatened to default on debt during Obama’s administration caused rating agencies to threaten to downgrade the nation’s heretofore unshakably stellar ratings.
The dysfunction is that much worse when you have Senate Republicans refusing to pass spending bills they had already passed unless spiteful, fickle Trump gives his okay. And China, which is seeing its own slowdown to only 6.7 percent growth (largely because of Trump’s trade war), is unlikely to continue to buy US debt, which is exploding by nearly $1 trillion, thanks to the Republican tax scam and the Trump slowdown.
Trump’s policies, directed at cutting food stamps, making health care more expensive, cutting Social Security, Medicare and Medicaid are literal attacks on consumers, his disdain for workers (40 percent of Americans don’t have $400 in the bank; 80 percent live paycheck to paycheck) exacerbate the already cavernous gap between rich (and politically powerful) and poor (and politically impotent).
Trump has been trying to fill the holes created by his own economic policies – $12 billion to rescue farmers hurt by his own tariffs, now they can’t even get it because the government is shut down.
Nor are there the federal workers to process loans to farmers and small businesses, IRS refunds, even the e-verify program so that employers can hire workers. Manufacturing slows in face of declining demand.
And climate disasters such as the apocalyptic proportion wildfires in California, hurricanes in the Southeast that are taking an incredible bite out of the economy? Unbelievably, Trump is trying to extort the Democrats to give him the $5.7 billion for his blasted border wall in order to get $12.7 billion on hurricane and wildfire disaster relief (the number of hostages Trump is taking is growing exponentially).
Meanwhile, the government shutdown means that precious time is lost to make preparations for next year’s hurricanes and wildfires. In some ways, climate disaster is the Trump Administration’s infrastructure spending plan.
On the other hand, Trump has squandered all the tools the government might use to give the economy a soft landing – adding $2 trillion to the national debt when the economy was booming (instead of having stimulus funding for infrastructure and keeping police and teachers employed to rescue the economy from recession as Obama did to turn the 2008 Recession around), interest rates already low, burning bridges from foreign investors (China), and the idiots he has surrounded himself with (“The government shutdown is like a vacation without having to take vacation days”; “Aluminum tariffs add maybe a few pennies to the cost of a can of Coke”; “Foreign countries are cheating the US with trade deficits”; “Tax cuts will pay for themselves.”).
This is truly a disaster economy. And its name is Trump.
