By Karen Rubin, News& Photo Features
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 pay checks 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 any more, 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% from Gross National Product every week. That rosy 4% annual growth in GDP that Trump’s tax scam was supposed to produce? The IMF back in October was projecting the US economy would grow only 2.5% in 2019. We will be lucky to get by with any growth at all. (The US did not even bother to attend the Davos Economic Forum.)
The Washington Post’s DealBook 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% 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, who tried to overturn Civil Service laws and union rules in order to fire any federal worker who was not obviously loyal, apparently sees the silver lining in that federal workers may just leave, but then, who would do the work? No matter, Trump and his enablers have such contempt for government, they don’t actually care.
Trump’s attitude – suborned by Republican enablers – shows such disdain for working people, ironic considering he was supposed to have been “elected” by “forgotten” working people, who are the foundation of the economy and economic growth (consumer spending used to be 70% of the economy, a smaller percentage today because of Trump’s bloated military budget).
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% of Americans don’t have $400 in the bank; 80% live paycheck to paycheck) exacerbate the already cavernous gap between rich (and politically powerful) and poor (and politically impotent).
Indeed, 42 people control half the personal wealth of the world, $201.9 trillion; that is, they have as much wealth as the 3.7 billion people who make up the lower-income half of the world, according to Oxfam, an anti-poverty charity. In the United States, the richest 1% have as much wealth as the “bottom” 90%; just 3 families have as much wealth as the bottom half.
Ultimately, though, it is middle class – and policies that enable people to move up into the middle class – that propel and sustain an economy and not incidentally, preserve a stable, democratic body politic.
The US, which pulled the world out of the recession the US set off with the fraudulent credit default swaps (a result of Bush/Cheney’s laissez-faire policies renewed by Trump), is now triggering another global slowdown, so those trade deficits he ridiculously equates with foreign aid? The markets for US products will dry up.
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.
And what if TSA workers and air traffic controllers and prison guards and Coast Guard members really do get fed up working for free and don’t show up? Not only is national security threatened (I hope terrorists don’t read the articles that show how vulnerable we are), but the economy would simply stop dead.
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.”).
Before the onset of the Bush/Cheney Great Recession, Naomi Klein wrote a book titled “The Shock Doctrine: The Rise of Disaster Capitalism.” This is truly a disaster economy. And its title is “Trump”.
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