The Economy, One Year Post-Election

One year after Trump’s election finds the economy in many ways stronger than before the election. How much of that can be attributed to the current administration? Probably very little.

The stock market has certainly gone up – about 20% in the past year. Corporate earnings are up, which is related, and much of this buoyancy is psychological – investors tend to be from the higher net worth end of the spectrum, and they’re feeling optimistic about their future tax and earnings situations under Trump, so they’re putting more into stocks. This is good for the economy, certainly, but how much it benefits the person on the street is always debatable – it often has little or no relationship to real earnings, spending power, etc.

Unemployment is low, but we’ve written before about how misleading this number can be – it doesn’t take into account underemployment or those who’ve given up trying to find work. Low is better than high, but not a reliable indicator of economic health.

The international trade balance is, remarkably, improving, although only slightly and most of the credit for that belongs to new methods of extracting oil developed over the last five or six years – especially fracking – which have turned the US balance of oil importing and exporting activities (per CNN) around. A good thing, if you ignore the potential environmental costs of these extraction methods – but in either case, not something the current administration can take credit for.

Americans are borrowing more (good for the economy, questionable practice for individuals, as 80% of Americans are carrying too much debt already (MSN)). Most of that borrowing goes toward major purchases like homes, cars and educations – housing prices have finally been going up again over the last year. These also are likely delayed reactions to the dismal market of recent years, but a decent sign of recovering economic health. Retail and consumer spending is not up and may even be down, which is a better indication of how much disposable income the average person feels like he or she has.

We asked conservative Mark Smiley, former chair of the RI Republican Party, what had changed in the last year economically. “There’s been a heck of a lot of change, but I don’t think you can say that it’s because of Trump – his only real impact so far is that some people are more confident that government is going to stay out of their business. There’s a lot to be said for businesses just having more confidence. It takes a long time for governmental policies to take effect – four years is optimistic. There is a big problem with the fact that we try to pin what’s happening today on the current president, and it really has little to do with him.”

Tom Sgouros, author of Checking the Banks and Public Finance Researcher for the Haas Institute for a Fair and Inclusive Society at UC Berkley surprisingly, expresses similar sentiments. “On fiscal and monetary policy, the president can have short-term impact, but President Trump hasn’t really influenced those areas so far. Stocks are going up, which is a reflection of confidence … in terms of what the president can control, he’s focusing on a lot of infrastructural spending that’s on the table, that may go through, but most of it is really glorified labor. It’s not really investment that improves anything.

“Think about the I-195 bridge. When we were done with it the first time, there were a lot of new possibilities. We made a lot of cities more accessible. Cape Cod was made more accessible. A lot of shipping and transportation was made more affordable. That investment changed lives and made things better – it was an investment with a very real return on that investment. When you invest in the repairs, as we’re doing now, it creates some short-term construction jobs, and the repairs are good and necessary, but at the end of that, nothing’s really changed. There are no new possibilities; the return on that investment is a lot lower. Trump’s infrastructural proposals are heavy on that kind of investment, and lacking the [other] more groundbreaking ideas. Things like science research, green energy investment, it’s fair to say education – depending on whom you talk to, that can definitely be considered an investment – Trump’s shaping of spending priorities that he has control over is playing down a lot of the potential investments … that could make new things possible that weren’t possible before. In RI, ocean research – pretty much any science funding – is at risk. Science research is at risk nationwide, with the exception of NASA’s space initiatives. NASA climate research is threatened. These are things that are threatened to be slashed, but so far he hasn’t really done [anything].”

Is there anything being enacted now that would come back and haunt us in four years, or 10 years? Smiley says, “Well, he is actively trying to eliminate some departments, or prevent them from functioning. I don’t know what the ramifications of that will be. I don’t think you can actually remove the EPA, but some of the things they do are outrageous. The Department of Education – what is it they are supposed to do? If you ask some teachers, they’ll tell you all it does is create a lot of bureaucratic paperwork, overhead and extra work and regulations that weigh teachers down. If he’s able to minimize some of that, it could have long-lasting beneficial effects.”

The consensus for year one, though, is that except for the short-term psychological confidence game that happens in stock trading, any actual change the current administration might attempt won’t be known for years, and any benefits (or fails) currently being felt are the results of the last eight years – some in government policy, many in the evolution of economic sectors and innovations.

Take the proposed tax plan, which last week was being touted as meaning “a $4,000 raise for the average working American,” according to presidential spokesperson Huckabee. While that math is highly suspect, it’s not completely made up (responsible economists can be found purporting everything from $1,000 to $3,500 – which would round up to $4,000) IF you believe that corporations which save money on taxes will pass those savings on to their employees. Except, that’s not what corporations do – it’s not their mandate. Possibly, they’d pass it on to shareholders, which is their mandate. More likely, it would get absorbed in upper-level executive salaries, making our current prime division between haves and have-nots ever wider. BUT even if you’re an optimist concerning the souls of corporations, and believe they’d magically trickle-down the savings, that difference wouldn’t be felt until after 1. The law were enacted, 2. The next tax cycle was concluded, 3. The savings therefrom were realized on balance sheets, 4. The next round of subsequent budgeting was explored in corporations that benefitted, 5. Any resulting raises were considered, usually awarded on an annual basis, and 6. The recipients of those (in my opinion chimerical) raises started to pump the results into the economy or into their savings. By then, another ass will be seated in the oval office (one hopes, anyway) and would probably receive full credit for any fiscal bump.