(May 2018) Trump & The GOP have lit the fuse on an economic timebomb that is set to go off on the Democrats watch (pardon the mixed metaphor.)
Two reasons why this is coming (guaranteed):
First, Trump’s massive un-paid-for Corporate tax cut will explode the National Debt. The “official” size of the Trump deficit was estimated to be “$1.2 Trillion”, but last March, the Treasury reported that the federal government ran a $209 Billion dollar deficit just for the month of March. Multiply that times 12, and if things don’t change, that translates to a $2.4 Trillion dollar annual deficit, TWICE the predicted amount. And this was when people were still paying the 2017 tax rate. Next year, the Federal Reserve will be left with no choice but to raise interest rates in order to raise enough capital to cover the shortfall. That will suck hundreds of billions out of the economy… slowing spending, thus slowing the economy and costing jobs.
The next danger sign is the recent rise in oil/gas prices (gasoline is nearly a dollar per gallon higher today than it was the day Obama left office.) “Unofficially”, every $1 increase in the price of a gallon of gas is roughly equal to a $100 Billion dollar tax increase on the Middle Class… more than wiping out Trump’s “tax cut” that was helping to boost his economy. That’s how much money Trump’s gas price increase will suck out of the economy this year. (Trump once attacked Obama for rising gas prices in this 2011 tweet.) Rising gasoline prices are the most regressive “tax” of all. The poorer you are, the larger a percentage of your income goes to buying fuel.
So why are gas prices going up? The latest direct cause was Trump pulling out of the Iran deal, but prices have actually been going up for a while. I would never say any one factor is the sole cause because that would be a serious over-simplification. (Before that, it was his saber-rattling… just as Bush’s incessant saber-rattling drove up oil prices during his presidency.) Everything from bad weather to global instability can interrupt the supply/supply-chain affects oil/gas prices. Under Bush, unrestricted Market Speculators anxious over Middle East instability were almost single-handedly responsible for the meteoric rise in the price of oil. But this article is not about what influences gas prices.
The Bush Administration is still a recent memory to me, and I’ve argued with many of my fellow Democrats over what I saw as the impetus for the “Crash of 2008”...exploding oil/gas prices. And now I see it happening again.
Yes, Banking Industry abuses and the Mortgage Crisis greased the skids, but the fuse was oil prices going from <$23/barrel to $147/barrel before it was all over. Under Bush, soaring gas prices sucked so much money out of the economy, people started losing their jobs as sales slowed (and even when shoppers were consuming, fewer items were being bought because the rising cost of production & transportation made products more expensive.) This sent the economy into a death spiral resulting in the “The Great Recession” of 2008. Bush had already cut interest rates to the bone to counter the first of his two recessions (and don’t blame 9/11. Seven of Bush’s nine interest rate cuts his first year came before 9/11). Those rock bottom interest rates coupled with “Interest Only Mortgages” created a massive real-estate bubble (last seen in 1929) that ended up going off on Democrat’s watch in 2007/2008. When people started losing their jobs, they couldn’t make their mortgage payments and started losing their homes, causing banks to raise the rates on all those “Adjustable Rate Mortgages” to recoup their losses, sucking still more money out of the economy. Vicious cycle ensued.
And you know the rest.
I see it happening again. Gas prices are going up-up-up despite Trump’s “Drill Here. Drill Now” energy policy. Massive tax cuts (“Trickle-down economics part deux”) … permanent for the rich but “temporary” for the poor (“temporary” in quotes because the Bush tax cuts were supposed to be temporary too. Then the GOP argued they needed to be made permanent after the economy tanked due to those very same tax cuts), and low interest rates with no place to go but up… and “up” they must to cover the budget shortfall of his tax cuts. They have to. There’s no avoiding it (not as long as we continue to pour unlimited money into the military.) Trump is using every Republican short-term economic trick in the book (tax cuts and deregulation, coupled with low interest rates) normally reserved to goose the economy when things go bad, to boost what was already a healthy economy. This leaves them with no recourse when things actually DO go bad (sometime next year by my estimate.)
I have serious mixed feelings about a possible “Democratic wave” election in 2018 that could put Democrats in charge of both houses of Congress for 2019/2020 when all this drops. While we desperately need a Congress that will say “No” to Trump and start to counter some of his disastrous policies, if the economy does go bust as I predict sometime next year (following multiple Fed rate hikes and gas prices continuing to spike,) the rapid decline will happen on the Democrats watch. They will be blamed, and Trump will stand a better chance of reelection… only compounding the disaster (worse, if Republicans regain control in 2020… a Census year… they will redistrict themselves into the majority for another decade.)
The only “solution” I can think of to this pending crisis (and why I wrote this) is to start preparing voters for what’s to come so Democrats aren’t blamed when it happens… because it IS going to happen. Inform voters that promoting Green Energy creates jobs and reduces our reliance on oil which will drive gas prices lower. Remind them Trump promised “Mexico” would pay for his ridiculous wall (“It’s gonna be so easy!”), yet two years later, he’s still trying to figure out how to get Americans to pay for it. And personally, I’d also demonstrate how Trump is profiting off the presidency to make himself rich. We saw this exact same crash happen under Bush-43, and Trump has demonstrated over & over again that he has NO knowledge of history as he repeats all of Dubya’s mistakes in his bizarre desperate need to undo everything President Obama did to rescue the economy after George W. Bush nearly wiped it out.
ADDENDUM: Of course, as some have pointed out in the comments, there are numerous other factors that can (and will) contribute to the coming economic downturn. The latest being Trump’s announcement of reckless/irresponsible/untargeted tariffs on steel & aluminum imports that threaten so start a Trade War. If American exports are targeted, hurting sales of U.S. products in other countries, that will only slow U.S. production yet more, contributing to the economic slowdown I foresee in the coming year.
ADDENDUM #2 (July 5th):
How many of you had this experience with Family yesterday?
I spent the Fourth with my folks who are Conservative Trump voters who refuse to watch the news... except for Fox.
I went over in the morning. "Fox & Friends" is on the TV. Naturally, it's Hyper-Patriotism Day because of the holiday, and they are reporting on the "controversy" surrounding a C&W song entitled "I Stand for the Flag".
My step-mother asks aloud, "Why is that controversial?"
"Because it's ridiculing NFL players who are protesting by kneeling during the Anthem."
(Angrily), "Those players are paid MILLIONS of dollars BY THE FANS TO DO THEIR JOB! What do they have to protest anyway?"
(pause) "Well there are better times to do that. Protest on your own time. YOU DO NOT PROTEST ON THE FOURTH OF JULY!"
"This wasn't just today. They've been protesting for over a year."
"I don't want to discuss it anymore. We simply disagree."
Minutes later, Trump is seen giving a speech on TV.
"Trump REALLY IS Making America Great Again. The economy is doing better than it has in decades! It's because he's *a financial genius*!"
Caught off-guard, I audibly snorted suppressing my laughter but did not reply.
This is what I'm warning people about. My folks are not alone. They don't follow the news. They believe everything is fantastic and don't know we are headed for a massive crash... which, if Democrats win... is going to happen ON THEIR WATCH and will get all the blame by these low information voters.
ADDENDUM #3 (April 2019):
While there has been some slowing of the economy and sporadic dips in job creation, the Saudi’s seem to have done their level best to keep oil/gas prices low via an increase in production (a thank you for Trump defending them regarding Kashogee?) But they can’t keep that up forever. And now that gas prices are back on the rise (sucking billions out of the economy), bringing inflation with it (products become more expensive as the cost of production & transport rises), my prediction appears to only have been delayed, not wrong.