The U.S. Economy is NOT Strong
The media is complicit in promoting the lie…Why do Dems accept it?
The Wall Street Dow Jones Industrial Average is almost 30,000. Official unemployment is near historic lows. According to these indicators alone, the economy is doing great.
Unfortunately, many of the democratic presidential contenders agree.
But with the slightest economic literacy, we find an economy on Federal Reserve life support.
WALL STREET AND THE FEDERAL RESERVE
After relentless hammering from Trump, Federal Reserve Chairman Jay Powell is now compliant in keeping the Wall Street bubble inflated.
It began with interest rate cuts in September. And then T-bill purchases averaging $60 billion per month with nearly $400 billion dollars injected into the economy over the past five months.
The Fed also provided over $6 trillion in overnight loans to calm the repo market with daily injections of taxpayer dollars going to private banks to ensure the money market doesn’t lock up the global credit system.
And when we trace the great stock market bubble, it is important to note that stock prices are moving in tandem with the expansion of the fed’s balance sheet.
Jay Powell is testifying in front of Congress today and tomorrow. You can follow one line of questioning from Congresswoman Katie Porter about the Fed’s so called independence after Powell was seen at a lavish party at the home of Jeff Bezos with Jared, Ivanka, and JP Morgan’s Jamie Dimon.
REAL UNEMPLOYMENT, INFLATION, AND JOB NUMBERS
The February 7th, 2020 White House Press Release touts the following numbers:
- 7 million jobs created since Trump’s election. In the 38 months since the election, the economy has created at least 100,000 jobs in 34 of those months and has added jobs every single month.
- Average hourly earnings grew 3.1 percent year-over-year, marking the 18th consecutive month of growth of 3 percent or more.
- Unemployment rate is 3.6 percent in January, remaining near its lowest level since May 1969.
Let us take a closer look at these indicators.
Job creation — not as good as Obama
- According to CNN, “During Trump’s first 36 months in office, the US economy has gained 6.6 million jobs. But during a comparable 36-month period at the end of Obama’s tenure, employers added 8.1 million jobs, or 23% more than what has been added since Trump took office.”
- We need to create 145,000 jobs per month just to absorb new entrants into the labor market. So real job growth begins only above this number.
Average hourly earnings weakened by inflation
- U.S. inflation rate for 2019 was 2.3% or the highest in 8 years. So if wage earnings increased 3.1% year over year, minus the 2.3% inflation, actual average annual wage earnings is less than 1%.
- Also, it is important to note that the current Consumer Price Index (CPI) underreports inflation. According to Government Shadow Statistics, when we use the CPI as it was calculated before 1990, we currently have almost 6% real inflation.
Unemployment
- U-3 unemployment rate is the official government number, which currently sits at 3.6 percent.
- However, long-term discouraged workers were defined out of official existence in 1994. When adding discouraged workers with the BLS estimate of U-6 unemployment, which includes short-term discouraged workers, as well as those forced to work part-time because they cannot find full-time employment, we are near 20% unemployed and underemployed.
The Trump Administration is doing worse than Obama on job creation. Wage earnings are stagnant or possibly negative. And the unemployment rate continues to be abysmal.
Now, let us turn our focus toward other structurally deficient and alarming statistics that are avoided when discussing Trump’s winning economy.
MAIN STREET
When we move our gaze away from Wall Street and the Federal Reserve and focus on the working class, we see an economy in serious decline.
- 6 out of 10 Americans lack the savings to handle an unforeseen $1,000 expense.
- The U.S. manufacturing survey shows worst contraction in a decade.
- The Baltic Dry Index is an international measure of trade based on shipping physical goods. It is currently at a record low.
- Trump’s tax cut has led to a $1 trillion dollar deficit.
It is important to remember that Obama inherited a $1.4 trillion deficit shortfall and cut it by 60 percent in eight years. Trump has doubled the deficit he received in less than four years
According to Washington Post, Trump’s “new budget proposes to add another $3.4 trillion by 2024 to the debt on top of the $3 trillion Trump has already added, by piling on $1-trillion-a-year budget deficits during a peacetime expansion.”
If this is a strong economy, then the next downturn will increase poverty, immiseration, and morbidity throughout the land.
AUSTERITY IS THE NEXT MOVE OF THE TRUMP ADMINISTRATION
As the economy continues to stumble toward a slow or precipitous decline, Trump proposes cuts to social security and medicare, disability benefits, and the privatization of the U.S. Post Office and Veteran’s Affairs.
Cuts to food stamps will begin in April.
The Fed Chair Powell stated today that “now would be a good time to reduce the federal budget deficit, which is expected to top $1 trillion this year.”
Even Mayor Pete is selling himself as a deficit reduction hawk.
In a previous essay, how are we going to pay for it, I laid out some simple policy prescriptions to prevent the next wave of killer austerity cuts.
We need to brace ourselves for the growing calls for austerity from both sides of the aisle. And we need to counter austerity with bold proposals to increase taxes on the rich. We also need to reassert control over the Federal Reserve’s credit window and redirect it away from Wall Street and instead invest in 21st century infrastructure throughout the country to increase production and jobs.
The U.S. economy is NOT strong.
We need to push the Democrats Party to talk about the weak economy and the need to increase revenues to beat back the growing calls for austerity.
