Most recent news on the U.S. economy has been upbeat and triumphant but the reality, as Alan Austin reports, is different.
PRESIDENT DONALD TRUMP'S ceaseless bragging about the U.S. economy being “the best in the World and in our Country’s history” has gained traction.
The reality is virtually the opposite. When Trump won office, America’s economy ranked 23rd in the world and 15th in the Organisation for Economic Cooperation and Development (OECD). That’s the club of 36 wealthy developed capitalist economies.
Today, the U.S. economy ranks outside the world’s top 40 and outside the OECD’s top 20. That is almost certainly its lowest ranking ever.
Hoodwinking the gullible
Three deceptions mask this deterioration. These deceptions, incidentally, have also enabled the monumentally incompetent Coalition to gain office in Australia in 2013 and win two elections since.
First, the current strong global boom is keeping growth positive and generating employment virtually everywhere, even under the most appalling mismanagement.
Venezuela, the world’s most spectacular economic disaster zone, currently has its jobless rate declining, wages rising, the ease of doing business at an all-time high and its stock market, the IBVC, at record highs. Same as the USA. And for the same reason: the whole world is in one of the greatest booms in investment, jobs and profits since the invention – in Venezuela – of the water turbine.
The second ruse is that many economic outcomes advance automatically with population growth, even in an average economy under ordinary conditions. These include job numbers, national income, houses, stock market values, government revenue, government spending, imports, gross domestic product (GDP) and others.
All these should reach a new record every month (or quarter or year) just as a matter of course – provided the economy ticks along normally. Inflation and increasing productivity will accelerate the increase.
So it's no cause for celebration when any of these reaches "a new all-time record".
The third deception is that when a pro-rich party is in office the dominant news media in the USA – as in Australia – prefer the narrative of a successful, vibrant economy over the dismal reality. So they lie.
For the record, these are the main areas of deterioration of the U.S. economy since massive tax cuts for the rich were introduced in December 2017.
Revenue bleeding badly while spending surges
Government spending for the financial year to date, from October 2018 to May 2019, is a staggering $3,013.5 billion. More than three trillion. That is up by $256.8 billion, or 9.3%, on the same period last year.
Simultaneously, revenue for the year to date is just $2,274.9 billion. That’s an increase of only $50.3 billion, or 2.3%, on last year.
That is an extraordinary shortfall. Just to match current spending, the revenue should have risen by 32.1% over last year. But instead of rejigging the tax levels to achieve this, the administration has done the opposite.
The accumulated deficit – spending minus revenue – so far this financial year is $738.6 billion. That is deeper by $206.4 billion – or 38.8% – than last year. That is truly an appalling turnaround, with no sign of easing.
Revenue is now running at just 81% of spending.
The green graph shows where the U.S. was placed among OECD members four years ago on budget deficit as a percentage of GDP. Pretty close to the middle.
The grey chart shows where the U.S. ranks now after the tax cuts slashed revenue and wasteful decisions blew out spending. Stone cold motherless last.
Note that the number of OECD economies now in budget surplus has increased from six to 14. Only four economies deepened their deficits: Canada, Estonia, Turkey and the USA.
Dire federal debt
The debt is now deeper than $22 trillion. It has blown out by $1.54 trillion since the 2017 tax cuts and by more than two trillion since the inauguration.
In contrast, most well-managed economies are rapidly reducing their national debt. The graph below shows the average for the 19 Euro area countries. Several are repaying debt faster than this average.
Interest bill soaring
Interest paid on the debt for the first eight months of this fiscal year was $354.1 billion, 11.3% higher than last year.
That is $2,460 per U.S. taxpayer. Every year. Most Americans have no idea they are paying this much.
The worsening trade deficit with the rest of the world is arguably Trump’s most spectacular failure. The self-proclaimed great deal maker tweeted in 2017 that the trade deficit was ‘massive’ and ‘must go down quickly’. He affirmed this was the result of ‘very stupid trade deals and policies’.
Now, after several trade deals have been “renegotiated”, monthly deficits are jammed below $50 billion. The average over the last 12 months of the Obama Administration was just $41.9 billion.
The U.S. employment rate has improved. But not as much as in countries surfing the global wave. A close look at the latest data confirms all is not well. The jobless rate has crept up from 3.58% in April to 3.62% in May to 3.67% in June. This now ranks 46th in the world and tenth in the OECD.
The number of ‘persons who currently want a job’ is now above 5.3 million, higher than a year ago.
Other sectors of concern:
- welfare payments to people in poverty;
- other measures of poverty;
- equality of wealth and income;
- tourist arrivals;
- personal savings;
- downturn in retail sales;
- downturn in factory activity;
- downturn in manufacturing output;
- industrial output overall; and
new home sales.
One thing seems clear. The U.S. now, more than ever, is experiencing 'very stupid trade deals and policies'.
Support independent journalism Subscribe to IA.