What's happening to the American economy isn't just a problem for U.S. citizens, but also for the Turnbull Government and its big business cronies. Alan Austin reports.
TRACKING THE American economy has extra zest and zing for Australians this year. Its health is always of concern because of its elephantine size and global influence. Additionally, it is now the economy the Business Council of Australia (BCA) looks to as a shining beacon of hope for downtrodden workers who, it claims, will enjoy more jobs, more hours worked and better wages when company taxes are slashed.
The USA under Donald Trump, according to BCA chief executive Jennifer Westacott, is “an open for business country while we have become a business-bashing, closed-for-business country”. (Yes, she said that with the Coalition in office, not Labor, which probably says more about the BCA than anyone else.)
So how is the U.S. economy tracking, seven months after the US House of Representatives approved President Trump’s proposal to slash the Federal company tax rate from 35% to 21%?
U.S. results so far this year show outcomes are pretty much the opposite of what the BCA – and the Turnbull and Trump administrations – expected. Contrary to "expert" predictions, the constant media hype and Trumpian tweets, things are actually quite dire.
Economic growth lagging
Annual growth in gross domestic product (GDP) at the end of the first quarter this year was just 2.8%, which is poor in the current global trade and investment boom. This ranks 115th in the world — out of 183 countries. Earlier this year, the U.S. ranked 110th, but has now been overtaken by Peru, Mauritania, Ukraine, El Salvador and Zimbabwe.
Among the 35 rich developed countries comprising the Organisation for Economic Cooperation and Development (OECD), the U.S. growth ranks equal 19th. During the global financial crisis, the America ranked ninth.
The number of unemployed increased by 499,000 in June, wiping out all gains since October last year. Total number of jobless is back up to 6,564,000. Yes, more than six-and-a-half million.
The jobless rate has risen to 4.0%, which sees its world ranking tumble further. The U.S. now ranks equal 49th on jobs in the world and equal 12th in the OECD.
Total U.S. Federal government debt has just clicked over $21.25 trillion. More than $1.35 trillion was added just in the year to June. That is the highest since 2012 — during the worst recession in 80 years. That is more than the entire annual GDP of Australia. Or Spain or Mexico, for that matter. In just one year.
Treasury’s monthly numbers for revenue and spending reveal why the debt is blowing out so rapidly. The accumulated deficit so far this financial year, from 1 October to the end of May, is $532.2 billion. That is up a staggering $99.4 billion – or 23.0% – on the equivalent period last year.
Revenue this year is running at 80.7% of spending.
Trump has ran up the deficit given corporate tax credit since Obama! pic.twitter.com/G9iGJ3i9Rp— Kirby1996 (@JacquelineDalla) July 18, 2018
As in Australia, the shift in wealth and income from the poor and middle to the top end has resulted in depressed retail trade. Retail worker numbers fell in June by 21,600, leaving employees in the sector virtually unchanged over the last year of booming global commerce.
Job numbers actually declined last year in electronics and appliances, health and personal care, sporting goods, department stores and parts of the auto trade.
This has had a flow-on effect to wholesale trade, transportation and advertising — none of which shows significant increase in people employed over the last 12 months.
Inflation has steadily climbed from 1.9% in May last year to 2.9% this year. The U.S. now ranks a dismal 31st among the 35 OECD countries on inflation. The only OECD countries with higher rates are Hungary, Estonia, Mexico and Turkey.
Demands on welfare remain high, with more beneficiaries receiving school breakfasts, school lunches, commodity supplemental food and child and adult care food now than this time last year.
Other sectors in a serious Trump slump include tourism returns, down 4.7% on last year, the Dow Jones index, down around 1,400 points from its late January high, and the minimum hourly wage, which has not budged since 2009.
With the global trade and profits boom now in its fourth year, demand for U.S. goods and services from abroad remains strong. This is reflected in increased jobs in mining and logging, oil and gas extraction, mining support, manufacturing and other goods-producing sectors.
The domestic economy overall, however, is in steady decline. Clearly, it was healthier – and workers were better off – before the 2017 tax cuts.
Why is this happening?
This is precisely what the Trumpists said wouldn’t happen and the realists said would.
A recent National Association for Business Economics survey found a clear majority of businesses were not investing the corporate tax cut windfalls to create more productive enterprises and hire more staff. They are going instead to share buy-backs, higher dividends and larger executive packages, much of this shunted straight offshore.
This adds to the evidence from Australia and elsewhere that administrations which actively seek to shift wealth and income from the poor and middle to the rich do not just hurt the poor and the middle. They also damage the health of the economy overall.
What is happening to the U.S. economy is certainly a problem for the majority of its citizens. It is also a problem for the Business Council of Australia and the Turnbull Government.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License
"The experience overseas with company tax cuts is it's all going to share buybacks and executive salaries. It's not going to the workers," @SwannyQLD tells @annabelcrabb #Insiders #auspol pic.twitter.com/MNOzXbuJzP— Jade Chinese (@FamilyMassageWA) July 1, 2018
See the USA... https://t.co/W64T7TubZo
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