What is easier:
- first 100 pushups
- or subsequent 100 pushups?
I don't know if you've ever done a lot of physical rehabilitation, but I had to learn to walk properly again after snapping my left leg in half and spending 4 months on crutches. The first step was hard. Expanding it to an actual walk was the hardest part. Once I had basic movement and some degree of strength and stamina in the leg it became easier and easier. That's a far better analogy for the economic situations being compared.
When an economy is tanked your monetary and fiscal policy stools are stretched (c.f. Japan's "lost decade" - which is now more than 2 decades long - where growth has been extremely slow and difficult to achieve). It's harder to keep afloat the boat full of holes than it is to row it later once the holes are patched.
Trump's economic stewardship is still in its infancy. Expenditure on infrastructure (note: walls don't count) was a genuinely tremendous idea and something from which the US could really benefit, but we haven't seen it materialise in the way that Trump promised. His other approaches are naïve at best. Some short term gain will result but with an overburdened debt the US government needs to maintain revenue whilst reducing costs (which obviously makes infrastructure investment difficult but mostly in the short term with significant long term benefits).
Trump is reducing government revenue in the medium to long term (assuming he maintains his current policies and remains in power) without cutting costs. Indeed, he's pissing away money on this like his military parade. Sure, in the overall scheme of the economy it's not a lot of money and it comes out of already approved budgets, but it means other things that would have normally been covered will no longer be able to be funded, just so he can play with his soldier toys. His running costs are higher because he and his family don't spend most of their time at the WH and he constantly goes to his own resorts which cost more than using facilities like Camp David, for example. Again, in the overall scheme of things not huge amounts, but it adds up and it tells a story of someone who really has no concept of having to worry about money. He lacks a holistic view of the economy and instead just deals with little pockets of it. He thinks he's done a great thing with the tariffs and then he has to bail out farmers and consumers have to pay the price for both.
Now let's look more at that 4.1% (which is a snapshot figure - so don't go comparing that to the average YoY figures). What would cause that? Trump? Sure, definitely some impact there. The current trade war has already fired some shots and that has had the effect of some global importers grabbing US made goods before retaliatory tariffs are put in place - so that's a short term impact. In fact, net exports contributed 1% of that 4.1% quarterly growth - that's huge, an unsustainable (particualrly given that there hasn't been a massive resurgence in US manufacturing and because the USD hasn't dropped against other major currencies to make US exports more competitive - and that last fact is Trump policy to have a strong dollar and he's set the perfect storm for maitaining that, BTW). Soybeans, for example and mentioned in this thread already, are cheap in the US at the moment and so are being bought, but that's not a long term trend.
Talking about manufacturing, you have GM warning that profits will be thinner due to increases in commodity costs due to the tariffs on steel and aluminium (OK, they reported it was due to aluminum because they're US based...). Harley-Davidson expects to take a hit of $100m.
Government spending, also, contributed to that increase. Unfortunately, it's not infrastructure spending so there's less potential for a good ROI there and at a time when the US is struggling with runaway debt, adding more to it and reducing revenue isn't helpful in the medium to long term.
Furthermore, those tax cuts haven't actually resulted in investment. Equipment investment was slow, so there's no signs yet of any manufacturing revival which is what's required from tax cuts if you want a long term benefit in that area. Just posting it to the bottom line and paying shareholders (or executives) doesn't help in the long term.
Redidential investment fell by 1.1% so even putting that tax cut cash in the minds of home owners or investors that they'll have more cash hasn't improved their optimism. Housing is one of the powerhouse elements of the US economy. So that's not good news.
Then you've got interest rates. They're on the rise. Trump thinks that's bad becuase he doesn't understand that the rates are at emergency levels and that a rise actually indicates a return to a more sustainable economic position. Except, rises aren't likely to be sustained because the economy doesn't have long term recovery elements in place. The yield curve is flattening out (which can be a sign of a recession, but not necessarily). Basically, the market isn't banking on higher borrowings which would be supported by economic growth - because the market can't see a sustained economic growth (and, yes, that can and usually is a self-fulfilling prophecy - but the GOP loves the market, right?).
Other concerns are that economies move in cycles and the current recovering from the GFC has been quite long so there is a real possibility of underlying cyclical factors pushing against sustained growth. That's not a foregone conclusion. Australia hasn't had a recession since June 1991 - but you can't really look to the exceptions as a guide regarding typical perfomance.
And in real terms, how has this flowed through to the workers that Trump promised would benefit? Well, real wage growth has been slipping since Trump took over. It actualkly went negative (just slightly) last month which is certainly a "peak and trough" bump because it's only a monthly figure, but the overall trend has been down and the levels were not high to begin with. So, yeah, tax cuts have not flowed through to workers. And bear in mind that most companies sorted out their books and returned to very good profitability years ago, having recovered from the GFC, so it's not as though they're trying to recover their financial positions. They're just not passing on the cuts to workers.
So, yeah, there's a lot of work to be done but there are more tools available now than when the economy was weaker when Obama took over. It should be easier now, not harder.
