I am not an economist, but shouldn’t the deficit be going down if we have a “strong economy”?
In 2016, candidate Trump talked big about eliminating the debt (all $19 trillion at the time) “over a period of eight years.” After taking office, however, he doesn’t seem all that concerned, even going so far as shrugging off the projected “hockey stick” spike in debt that his own senior staff members showed him in 2017 by responding, “Yeah, but I won’t be here.” Consider those words.
Although the talk about a booming economy is getting louder, there are signs of a recession on the horizon. Why else would the Federal Reserve lower interest rates 0.25%? President Trump wanted them to go further by dropping interest rates an entire percentage point. That doesn’t happen when the future economic outlook is strong. Not to mention the brief inverted yield curve, the ongoing trade war, and volatile stock market. No doubt, with the 2020 election coming up, the President’s best bet is for an ongoing mantra of “strong economy.”
There are always headlines (and tweets) made when the stock market reaches new levels or drops sharply. Both have been happening a lot in the last two and a half years. How much does the stock market affect you? The reality is that only 10% of Americans hold 84% of the stocks and nearly half of Americans don’t have any stocks at all. So, when the market is doing great, it’s doing really well for a small percentage of people and isn’t a reliable indicator of how well the U.S. economy is doing in general. Meanwhile, the deficit is going up again. Ponder that.
Where did the true deficit hawks go? Under GOP control of the House, Senate, and Presidency from 2017-2019 (when the economy was already strong) the deficit has spiked in large part due to the Trump Tax Cuts and Jobs Act.
The Trump Tax Cuts went into effect on January 1, 2018. Many people were shocked this spring when they found they didn’t get their relied upon Federal Tax return. It turns out the tax cut for most Americans was so slim that they didn’t recognize they’d gotten it throughout the year. As time passes and more numbers roll in, it’s becoming clear where the vast majority of money from those tax cuts went; to the highest earners on Wall Street.
What are they doing with it? S&P 500 companies are buying back their own stock at record levels. The last five quarters averaged $202.4 billion (more than $1.012 trillion total) in buybacks. This is a 54.6% increase from the preceding five quarters. In other words, the highest earning corporations took the huge tax cuts gifted by the Trump Administration and GOP controlled House and Senate of 2017-2019 and used that money to invest in… themselves, not so much their workers.
Some wages are rising, largely due to state-by-state minimum wage increases. Jobless rates are low, and that’s better than the alternative. However, former Federal Reserve Chair Janet Yellen pointed out that millions of Americans are still struggling despite holding multiple part time jobs, which don’t provide the same benefits as the pre-Great Recession full-time positions.
Meanwhile, the Chinese/American trade war continues to harm Americans who produce goods for or purchase from China, particularly farmers.
Speaking of, President Trump’s Agriculture Secretary Sonny Perdue was in Minnesota earlier this August. At a time when net farm income has dropped nearly 50% since the 2013 peak, and debt held by American farmers has reached $409 billion (up $24 billion from last year alone), and suicide hotlines for milk farmers are posted by cooperatives, Perdue felt it was appropriate to joke, “What do you call two farmers in a basement? A whine cellar.” He got boos from Minnesota farmers.
Perhaps they were being overly sensitive about a joke that wasn’t politically correct. Or, perhaps Perdue, a mere multimillionaire among the wealthiest cabinet in U.S. history including the President, is out of touch with the life-changing and even life-threatening circumstances this administration has forced upon America’s breadbasket.
Trump Eliminating Debt in 8 years: https://www.washingtonpost.com/news/post-politics/wp/2016/04/02/transcript-donald-trump-interview-with-bob-woodward-and-robert-costa/
% of Americans Owning Stock: https://www.politifact.com/california/statements/2018/sep/18/ro-khanna/what-percentage-americans-own-stocks/
POTUS requests 1% Interest Rate Drop: https://www.usatoday.com/story/money/2019/04/30/trump-urges-federal-reserve-lower-interest-rates/3629310002/
Tax Cuts Contributing to Deficit: https://www.politico.com/story/2018/02/28/tax-cuts-trump-gop-analysis-430781
U.S. and MN unemployment: https://www.deptofnumbers.com/unemployment/minnesota/
States with Min. Wage increases: https://ballotpedia.org/Minimum_wage_increases_in_2019
Dairy Co-op Suicide Hotline: https://www.sprc.org/news/vermont-dairy-co-op-sends-farmers-suicide-hotline-numbers-after-milk-prices-plummet
Perdue Jokes about Farmers Whining: https://www.rawstory.com/2019/08/were-not-doing-great-furious-farmers-unleash-on-trumps-ag-secretary-after-he-tells-joke-about-whining-farmers/