Friday, September 14, 2018

Why Trump Isn't Getting Any "Credit" For the Economy

Many political pundits from both sides of aisle have speculated as to why Donald Trump isn't getting the credit he deserves for what they claim is a strong economy. Both seem to be in agreement that Trump is stepping on his own message. If he would stop tweeting and talk more about the economy, both his approval numbers and the generic ballot would be higher than they currently are and Republicans would not be facing the possible loss of their majorities in both houses of Congress. Certainly, if you just look at just the raw data - unemployment at 3.9 percent and 2nd quarter GDP at 4 percent - the argument can certainly be made that the overall fundamentals are quite strong.

There's just one problem with that assessment: it isn't true. The fact is the economy isn't nearly as strong as many have stated. So says David Leonhardt, whose piece in The New York Times is aptly titled, "We're Measuring the Economy All Wrong."

According to Leonhardt, the metrics that are used to arrive at the unemployment rate and GDP growth were invented in the 1870s and the Great Depression respectively to mollify concerns people had over the strength of the economy, and they are very "misleading."

For instance, the unemployment rate excludes people who have "given up" looking for work. Including these people into the mix gives us what we call the labor force participation rate. Since 1960, the difference between the unemployment rate and those who have given up looking for work has grown steadily. The real unemployment rate is actually closer to 15 percent, and it is likely higher in those areas of the country that voted for Trump.

Similarly, GDP growth is another misleading economic indicator. It measures how well Wall Street is doing, but for families living on Main Street, the vast majority of the wealth has gone to the top 1 to 2 percent. A 401k retirement account only means something if you have one to invest in. And if you're one of the millions of people who live paycheck to paycheck, it's yet another part of that elusive American dream that has turned into a nightmare.

Then there's the GOP tax "reform" law that will penalize middle-class families who own homes. The elimination of the personal exemption and the cap on the SALT deduction will be prove to be a rude awakening for them next April 15th. When expected refunds shrink or disappear altogether, the public outcry within the electorate will be palpable. That's why Republicans aren't running on it. They know there's a tsunami coming their way. The only question is how many of them will be swept out to sea in November.

When you combine the rise in the cost of living - rent, healthcare, energy, groceries, etc. - with the stagnation in wages, the middle class - the bedrock of this economy - has been under tremendous stress dating back to the '80s. Many of them voted for Trump in 2016 believing he would improve their lives. The fact that he hasn't is the biggest reason why he and his party are not getting the "credit" they think they deserve for it.

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