As this is written, the Dow Jones and, more significantly, the S&P 500, are hovering around record highs. Financial markets are not the entire economy, but let’s look at the rest of it. Payrolls have surged by 254,000 in September. The economy grew at three percent last quarter. Unemployment remains low. Inflation has declined dramatically, approaching the Fed’s target of two percent. Even gas prices are lower than those higher prices that portended “the end of the world.” Real wages are up, including among the lowest brackets. Consumer spending and retail sales are robust, and corporate profits remain high.
But, ain’t it awful!
Or so Donald Trump, Fox news, and the right wing “ain’t it awful” crowd complain that the economy is so awful, and must be saved by “the only man who can fix it.”
The Economist magazine writes that “The American economy has left other rich countries in the dust,” and expects that to continue. To be clear, the Economist magazine is not a liberal rag, but a respected publication geared toward high profile individuals, organizations, and entrepreneurs, covering politics, science, and the arts, in addition to economics. It basically recommends centrist policies, and is critical of anything it considers as leftist.
If this were Trump’s economy, he would be hailing it as the best ever, all due to his self-proclaimed financial genius, the same “genius” that led him to claim bankruptcy multiple times. He predicted a stock market crash under Biden’s economy. It didn’t happen, so he now claims credit for buoyant financial markets because of his “impending election” — and a certain crash if Harris is elected.
The “ain’t it awful” crowd has nevertheless succeeded in persuading many voters to favor Trump over candidate Harris as “better for the economy.” Those who believe the economy was great under Trump have selective memories. The economy that Trump inherited from Obama was basically Obama’s economy, including its upward trend when Trump inherited it. Low inflation, high employment, and rising financial markets: Trump didn’t create it; he inherited it.
When Trump left office, he left the economy in the tank. Yes, the Pandemic was under Trump’s watch. But he failed to deal with it. To deal with it, you first have to recognize that it exists, and will get worse if not immediately dealt with. Politicians are criticized for not thinking beyond the next election. Trump can’t think beyond the next news cycle. He insisted that, if ignored, the Pandemic would just go away. Don’t test because it might reveal increasing numbers of sick people, bad numbers for him, suggesting he might have to make some difficult decisions to deal with it.
Although dealing with the Pandemic would have required some difficult, unpopular at the time, decisions, Trump missed his chance to ultimately be a hero by having dealt with the Pandemic, and avoiding those disastrous results. Had he faced reality, he would at this moment very likely be President. But that would have required foresight that is not Trump’s shtick.
It was left to President Biden to pick up the pieces of the economy that Trump left in shambles. With the assistance of vaccines, the nation began recovering from the Pandemic. But constricted supply chains don’t crank up overnight. Recovering from the Pandemic, people welcomed the chance to get out and about, and spend money to satisfy that pent up demand. Increased demand against the still stubborn supply chains inevitably increased prices. How convenient for the MAGA crowd. With help from the media nitwits, blame Biden and Harris for the inflation, the primary cause of which was restricted supply caused by the Pandemic that Trump failed to deal with.
Yes, there was spending enabled by the rescue policies passed under both the Trump and Biden administrations. Recall that those government rescue plans enabled businesses and individuals to avoid bankruptcy, and to remain economically whole during the economic shutdown. But the post-Pandemic spending, against the supply constraints, naturally increased prices.
The Fed thus far has engineered a “soft landing,” reducing the rate of inflation without causing recession. Easing supply constraints took pressure off prices, even as consumers and businesses continued spending, reducing likelihood of a severe recession that was predicted by many critics.
But politically? Recovering from the Pandemic, Biden occupied the White House. So he pays the price for worldwide inflation that he did not cause — a perfect opportunity for Trump to remind people that it didn’t happen under him.
So, what is Trump’s solution to this “awful economy”?
To the extent that one can decipher Trump’s inane rambling, his “solution” is based on three things: drill baby drill, tariffs that he claims are paid by foreign countries, and deporting immigrants that he blames for everything from crime, to “robbing Americans of jobs,” to high housing prices.
This country is now producing more oil than ever. Drilling on ecologically fragile lands is environmentally damaging. Oil companies pay attention to markets, and if they believe more production is profitable, they have the existing resources with which to do it.
Tariffs are not paid by foreign sellers. They are paid by domestic buyers and, largely if not totally, passed on to consumers and businesses. Furthermore, tariffs induce other countries to respond in kind, reducing our exports. Our major exports include agricultural commodities.
Mass deportations of immigrants, whether legal or illegal, reduce our labor supply. Low income immigrants are not competing for domestic housing. Rather, without immigrants in the construction industry, housing prices would be ever higher. Nor are they “robbing American workers” of jobs. We don’t see native-born Americans lining up to staff meat packing plants with their horribly miserable and often-dangerous jobs. Native-born Americans are not itching to do the back-breaking work of harvesting and processing fruits and vegetables. Over half the dairy industry is now staffed by foreign born workers, in sharp contrast to decades ago when people like many readers of this column did that work.
A panel of 16 Nobel Laureate economists insists that Trump’s proposals would be inflationary. We now have by far the strongest economy in the world with a Democratic President, and his vice president now running for the job. But “ain’t it awful?”
— John Waelti of Monroe, a retired professor of economics, can be reached at jjwaelti1@tds.net. His column appears monthly in the Monroe Times.