33 online
Most Popular Choices
Share on Facebook 54 Printer Friendly Page More Sharing
Exclusive to OpEd News:
OpEdNews Op Eds    H3'ed 1/24/20

Trump's Economy - It's a Fraud Too

By       (Page 1 of 2 pages)   12 comments
Message Larry Butler

(Image by Memo Angeles)   Details   DMCA

How good is the Trump economy, really? And for whom?


Republicans tell us it's the best economy in history, but let's look closer. It's true that economic growth in 2019 was over 3% and the stock market stands near all time highs. But for most of us, the spin doesn't quite square with our own eyes and ears, much less our bank accounts. Our income has barely budged in recent years, but expenses continue to rise. What gives?

Let's dissect GDP - Gross Domestic Product. Starting with a rise of 3.09%, we need to take out inflation - 2.3%. That leaves 0.79% of economic growth. But wait - our population grew by 0.59% in the past year too, leaving just 0.2% real, per-capita growth. So we're still in the green, right? Nope. The cost of healthcare increased by 5.94%, and it makes up 17.7% of GDP. Healthcare "contributed" 1.05% to nominal GDP growth - all of it in our bills for insurance, drugs, and provider services! What's left? Our real GDP growth was (drum roll...) MINUS 0.86%.

(Image by Larry Judson Butler)   Details   DMCA

One problem is how we measure economic health. GDP is the value of all the goods and services we produce. It's not a bad approximation of our national income, but it doesn't give a clue about who gains and who doesn't when the economy grows.

Whose economy is it, anyway?

If a rising tide raised all boats, a 3% rise in GDP would be good for everybody. But that's not the way it works. Forty years ago, GDP was shared about 70/30 between labor and capital. That is, 70% of earnings went to workers - regular folks like us. The balance, of course, went to a much smaller number of capitalists - corporations, landlords, and coupon-clippers.

Today, things have changed. That 30% of GDP once claimed by capitalists has now bloated to 43%, leaving a smaller part of the pie for the rest of us. Sure, the pie is bigger, but most metrics show that there are no more calories in the labor slice than forty years ago.

This is a trend that predates the Trump administration by decades. But the corporate tax cut that took effect in 2018 accelerated the trend. In 2018 alone, corporate income taxes declined by $92 billion and personal income taxes rose by $90 billion. The tax cut was good for capital but not for the rest of us.

So we might think the economy is really good for corporations. Is it? Even though the tax cut added $92 billion to corporate profits, the total only rose by $68.7 billion. If it weren't for the tax cut, corporate profits would have declined from $2.06 trillion to a mere $1.97 trillion!

Stock prices

But wait - the stock market is soaring! How can that be? The investor class has been buoyed by three public policies that juice the nominal value of corporate shares - tax cuts, deregulation, and artificially low interest rates.

We've seen how tax cuts raise profits, and profits are a key determinant of stock price. But when the federal government runs a larger deficit, there's a price to pay - either inflation, debt, or higher taxes elsewhere. The corporate tax cut directly raises both debt and taxes for individuals. The effect is to take money from our pockets and put it into the pockets of investors.

Deregulation works a little differently. It does cut corporate costs, and that raises profits. But the costs are just passed on to others. Regulation yields benefits for workers, consumers, and the public - according to the administration itself (OMB) it pays for itself many times over. When regulations are cut, corporations can lay off their costs on others in the form of economic externalities - things like pollution, hazards, labor exploitation, and restraint of trade. The effect of deregulation is to pick the pockets of the many to stuff the pockets of the few.

What about artificially low interest rates? That's good, right? Sure, for corporations. Their valuation can be determined by tallying up all of the projected future profits and adjusting them for their present value. A dollar received today is worth more than a dollar received in ten years, and the present value of a profit earned in future years is discounted in proportion to current interest rates. When the Federal Reserve suppresses interest rates, it artificially raises stock prices. Who loses? Risk-averse investors who depend on interest payments from savings accounts and bonds - retirees and seniors approaching retirement.

Great economy, huh? If real per-capita GDP declined by 0.86% in the past year, and capital's share grew, a lot of folks didn't do well at all. The average non-investor worker is probably 2% to 3% worse off now than a year ago.

Next Page  1  |  2

(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).

Must Read 1   News 1   Valuable 1  
Rate It | View Ratings

Larry Butler Social Media Pages: Facebook page url on login Profile not filled in       Twitter page url on login Profile not filled in       Linkedin page url on login Profile not filled in       Instagram page url on login Profile not filled in

Thirty five years as a small business consultant, CFO, and university educator specializing in quantitative business and economic modeling - a suite of experience now focused on economic inequality. Carefully attributed data, thoughtful (more...)

Go To Commenting
The views expressed herein are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.
Writers Guidelines

Contact EditorContact Editor
Support OpEdNews

OpEdNews depends upon can't survive without your help.

If you value this article and the work of OpEdNews, please either Donate or Purchase a premium membership.

If you've enjoyed this, sign up for our daily or weekly newsletter to get lots of great progressive content.
Daily Weekly     OpEd News Newsletter
   (Opens new browser window)

Most Popular Articles by this Author:     (View All Most Popular Articles by this Author)

The Beginner's Guide to Pissing Off Conservatives

The Myth of Liberal Media Bias

Social Darwinism and Fox Republicans

Why Liberals Lose - The structural flaws in the foundation of American democracy

To Kill Our Elders

Myth #17: We're Number One!

To View Comments or Join the Conversation:

Tell A Friend