The Economy Trump Built
If it was the greatest in history like he says it was, why did it collapse even before the pandemic hit?
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Photo by Sigmund on Unsplash
Everything Trump touches dies. And the US economy is no exception. In January 2017, Trump inherited a multi-year Obama-Biden recovery that was on track to become, by July 2019, the longest U.S. economic expansion in history.
But three years into his Presidency, despite—or because of—all his best efforts, Trump had brought that record-breaking expansion to a screeching halt.
The preventable Trump Recession, which began in February 2020, would have been bad enough. But February was also the month that Trump, fully briefed on the coming pandemic, went missing in action. Instead of putting a plan in place to stop COVID-19 spreading unchecked from coast-to-coast, Trump golfed, held rallies, flew to Hollywood and Las Vegas for fundraisers, and even took an ego-stroking trip to India. Meanwhile, the virus “seeded” in NY and California and all points in between, setting the stage for a year of unprecedented death, despair and devastation.
Trump’s complete dereliction of duty turned what could have been a mild recession into a full blown economic crash—one that we may not fully recover from for many years.
Failed Policies, Broken Promises
What went wrong? Why was America in such a weak position heading into 2020? How did three years of Trump’s mismanagement put the world’s largest economy into such a precarious position that it collapsed faster than a fake University?
Let’s start with the absolute failure of the Trump tax cuts (aka “The GOP Tax Scam”).
As I wrote on January 2, 2020:
Trump claimed his tax cuts for corporations and the already-rich would magically “skyrocket” the economy and deliver 5-6% GDP growth. In reality, despite all Trump’s talk of rising stock prices (fueled in part by stock buybacks by companies who chose not to invest their tax cuts in job-creating business expansion), nominal GDP growth is currently just over 2% and slowing.
The consensus outlook was that growth would slow to 1.8% in 2020:
Growing consumer debt was also slowing the economy’s potential heading into 2020. As The Wall Street Journal reported: “consumer debt, not counting mortgages, has climbed to $4 trillion—higher than it has ever been even after adjusting for inflation.”
As the year began, Trump was relentlessly hyping the economy like it was a packet of Trump Steaks, but as I wrote on January 22:
Trump’s trade wars plunged U.S. manufacturing into a full-year recession in 2019.
A Farm Bureau report that showed that the number of farms filing for bankruptcy in 2019 surged by 24%, the worst levels since “the heights of the the 1980s farm crisis.”
In Wisconsin, the dairy industry was hit especially hard. 818 farms went out of business, the most bankruptcies ever in a single year.
Steelworkers in Michigan got laid off at Christmas.
Eight coal mining companies went bankrupt in 2019 alone.
While the unemployment rate did continue its downward trend under Trump, Business Insider pointed out in January that, “Trump's ongoing trade wars sapped business confidence. Companies have pulled back on hiring workers as a result.”
In fact, despite his promise that the Trump tax cuts would “skyrocket” the economy, Trump actually sent the deficit skyrocketing while massively underperforming on jobs. In his first three years in office he created 1.5 million fewer jobs than Obama-Biden did in their last three years.
Remember, this was long before Trump’s lazy, inept and reckless response to the coronavirus completely crashed the economy. But back in January, while Trump was hyping “the best economy in our history,” he knew the economy was already on the skids.
He also knew that his tax cuts had failed completely. Instead of boosting the economy and growing tax revenues to help pay down the $19 trillion national debt he had promised to eliminate in 8 years, Trump’s tax cuts did the opposite. Revenues fell and the debt was heading in the wrong direction, fast.
Under Trump, America’s debt rose $4.1 trillion in less than three years to a new all-time high of $23.1 trillion at the end of 2019.
Despite the underlying weakness, Trump retained one YUGE advantage. The mainstream media continued to lazily parrot everything the Carnival-Barking-Clown-in-Chief was saying about the “terrific” economy, without ever fully educating the public about the smoke and mirrors Trump was using to pump up the stock market and keep unemployment low.
A House of Cards Built Entirely on Debt
Experts knew exactly what was happening.
In August 2019, bond guru Jeffrey Gundlach told New York Magazine: “I give a 75 percent chance of recession prior to the election and have for months.”
This was months before Covid appeared. And Gundlach’s recession prediction was 100 percent correct. As we now know, the Trump Recession began in February—a month before the economy’s “Covid Crash.”
In the same article, Gundlach explained how Trump had created the illusion of growth, even when there was actually less than zero:
Last year (i.e. 2018), the national debt increased by over 6 percent of GDP. And nominal GDP growth was 5 or 5.1 percent. So all of the growth of the economy basically can be ascribed to debt. Another way to put it is if we hadn’t increased the national debt at all and just kept it the same, there would’ve been no economic growth. There would’ve been a negative sign. Which means there’s no organic growth in the economy.
Meanwhile, the rest of the media went along with the myth of the “Trump Economy” even when, just one peek behind the curtain, would have revealed it as a sham.
The USA: Trump’s Biggest Bankruptcy Yet.
Then came March 2020. Even if Trump was still telling us the “Carona germ” was under control and nothing to worry about, the stock market finally made him pay attention. After an 1,190-point fall on February 27, the Dow plunged 2,014 points on March 9, another 2,353 points on March 12, and another 2,997 points on March 16. Those are the three biggest point drops in history.
By then, of course, it was too late. While other countries such as South Korea, Taiwan and Germany had acted fast to ramp up testing and contact tracing, Trump had allowed the virus to spread unchecked for far too long to put the genie back in the bottle.
Because he had first weakened the country’s economic foundations—and then paid no attention to the pandemic warnings even when they started “blinking red,” the U.S. “suffered its sharpest quarterly contraction in at least 73 years in the second quarter”.
Desperate to prop up the economy and re-inflate the stock market, Trump and the GOP agreed to $3 trillion in debt-busting relief packages, even as Trump and his criminal associates made sure to skim hundreds of millions off the top to make sure they and their cronies were taken care of.
The result. We’re in a deep hole. The U.S. economy has lost 10.7 million jobs since February. The Labor Force Participation Rate is lower now than it was at any point of Obama’s eight years in office. Black (12.1%) and Hispanic (10.3%) unemployment rates are both in double-digits. Tapped-out consumers are being forced to raid retirement savings. Big companies are going bankrupt at a record rate. And no one is even keeping track of all the thousands of small businesses that are shutting down across the country. As Bloomberg notes, “the drag on the economy from these failures could be huge.”
The Trump House of Cards has collapsed completely. America has become Trump’s biggest bankruptcy yet.
And The $19 Trillion He Said Was Going to Zero?
It’s now $27 trillion—and climbing.
Whoever wins the election, the next four years will be tough. But at least Joe Biden has dealt with an economic crash caused by an idiot Republican before. He has a plan to get the country back on track. Trump’s alma mater Wharton has endorsed the Biden plan. Goldman Sachs agrees Biden and the Democrats are a way better option than re-electing the corrupt failure Trump. And Moody’s says the Biden plan will create 7 million more jobs than Trump’s nonsense.
In this year of Trump-inflicted American Carnage, there really is only one way forward. Please vote accordingly.
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so, I'm not sure if you are aware of this or not, but the way money is created in america -and nearly every other country on earth- is through credit. in other words, when banks make loans, money is created simultaneously. also, gdp is measured in usd. and so in other words, in order for gdp to increase, more money needs to be created, which means that more credit needs to be created. when you criticize trump for building an economy with debt or whatever you said, you expose yourself as having absolutely no business writing about the economy.
oh - and by the way, obama had the very first trillion dollar deficit. I believe he may have been into his second term by the time the budget deficit was < 1 trillion. so, obama was creating lots of credit too.