If Donald Trump Is Correct, the U.S. Economy Is Actually Terrible for the Average American
Most people know the stock market soared in 2017. If you’ve got a big portfolio or a bundle stored away for retirement, that’s great news. Unfortunately for most Americans, that’s simply not the case.
But stocks are only part of the story. Many people, including President Trump, point to a nation’s GDP growth as a key figure of a country’s financial strength. At the 2016 debate in Las Vegas, Trump said as president he would be bringing it “from 1% up to 4%.” He added, “I actually think we can go higher than 4%.”
By the time Trump’s team submitted its first budget, that number shrank to 3%. Unfortunately for Trump and everyone else counting on it, he missed each one of those targets. Meanwhile, our neighbors and allies kept moving forward. Here’s how U.S. growth has looked under Trump and what it means for most Americans in 2018.
1. Growth slumped to 2.6% in late 2017
After two consecutive quarters of growth just above 3%, economists and the Trump administration got bad news about the last three months of 2017. During that time, GDP growth slipped to 2.6%.
When that report came out, Trump had just given his late January speech at Davos. “After years of stagnation, the United States is once again experiencing strong economic growth,” the president said. However, the rate for his first 11+ months in office was even lower.
Next: If 2.6% sounds low, the news for 2017 will make you cringe.
2. The 2017 report showed 2.3% growth for the U.S. economy
Technically, Trump didn’t enter office until late January 2017, so 20 days of the past year fall under the Obama administration. However, for that mostly Trump period, the U.S. economy grew 2.3% for the year.
Looking at recent history, this pace of growth is normal, but it falls well below the expectations set by the first businessman president. Besides, what about all the folks getting bonuses and companies hiring following the GOP tax plan passing? Didn’t that movement boost economic numbers?
Next: Hardly any Americans got bonuses or raises following the GOP tax cuts.
3. Poll shows 2% of Americans got a raise or bonus
Trump’s tax plan slashed the corporate rate by over 40%, meaning billions for some of the richest Americans and many companies. However, a late January 2018 report showed hardly any working Americans joining in on the fun.
According to a Reuters/Ipsos poll, only 2% of U.S. adults got a raise, bonus, or another new type of benefit following the tax cuts passing in December 2017. It’s difficult to see substantially higher growth without more money circulating to first-time small business owners.
Next: Lots of layoffs came with the tax plan, too.
4. Many corporations took tax cuts yet claimed losses
The Trump administration’s big promise with tax reform came down to higher-than-expected growth. Senior adviser Gary Cohn, the former Goldman Sachs banker, said the economy would see 4% growth in 2018 if the GOP tax plan became law.
However, just a few weeks following the tax cuts, major U.S. corporations began laying workers off in what they saw as economic headwinds.
Kimberly-Clark, the manufacturer of Huggies and Kleenex, said 5,500 workers would be let go and the tax cuts would go toward “restructuring.”
Walmart, Comcast, and AT&T added many thousands more layoffs to the list by mid-January.
If growth is to soar to the heights Cohn predicted, it’s odd that America’s top corporations are shrinking their workforce. Looking at Americans’ savings accounts, there’s another bad trend.
Next: Americans may be expecting an income boost they won’t get.
5. The average American’s savings hit 10-year lows
When someone promises you’ll get rich soon, most people take the opportunity to spend some cash they worked hard to save. That seemed to happen in December 2017, with news of tax cuts in the air.
According to consumer spending reports, Americans really dipped into those savings, and accounts hit a 10-year low. One Wells Fargo economist said it was a reflection of the rising housing market and the surging stock market. Yet there was one catch.
“U.S. consumers will need to see continuous growth in income over the year in order to be able to continue to keep up the current pace of consumption,” the economist told Reuters.
Next: Significant wage growth is not happening; growth in the labor force is an even taller order.
6. Wage growth is a tall order
Economists point to growth in productivity and/or labor force as ways to drive GDP growth. Neither of those is taking place in the U.S.
As Michael Hiltzik pointed out in the Los Angeles Times, the World Economic Forum ranked the U.S. quite low in wage and income inequality, suggesting problems ahead.
Meanwhile, America’s aging workforce and Trump’s prohibitive immigration policies means fewer workers are entering the fold. Herein may lie a clue to the successes among our neighbors and allies.
Next: The economies of our neighbors and allies rank higher than the U.S.
7. Germany, Canada, and France had stronger economies in 2017
The WEF report echoes some things economists say but the ruling party ignores. Noting the U.S. “average healthy life expectancy is among the lowest in advanced economies,” the report suggested a need to tackle challenges in “access to healthcare, education, and economic opportunity.”
Germany (12), Canada (17), and France (18) all ranked higher than the U.S. (23) on the WEF index.
Finally, though Trump and the Republican party continue taking a victory lap on it, WEF economists said “the recent tax reforms put forth by the current administration are likely to increase the size of the country’s debt and further widen economic and social inequalities in the long run.”
Next: Economists don’t see 3% growth coming in 2018, either.
8. Optimistic readings cap U.S. growth at 2.7%
As disinterested observers helpfully point out, a nation struggling to provide health care to its citizens only has a certain amount of potential in terms of economic growth. Employees who skip routine doctor visits often end up much sicker and costing the economy more in the long run.
This is one more factor: The International Monetary Fund capped its GDP forecast at 2.7% for the U.S. in 2018. After starting out at 2.3%, the IMF number moved from the tax cuts.
As for Gary Cohn’s 4%, no serious economist would entertain the idea. Goldman Sachs, Cohn’s former employer, estimated 2.5% in November.
Next: This top U.S. industry has struggled mightily under Trump.
9. The Trump tourism slump hints of danger areas
For a peek inside the headwinds faces by the U.S. economy, you need only look at the tourism industry. Trade groups estimate Trump administration policies cost the country 40,000 jobs and $32.2 billion in lost income in 2017.
In addition, the industry said a total of 100,000 jobs could have been added had Trump merely held the pace of the previous year. Sometimes, powerful economic indicators are not enough. You also need a leader who doesn’t tweet.
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