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Politics

The Illusion of Trump’s Economy

What is the robbing of a bank compared to the founding of a bank?

-Bertolt Brecht.

I really wish people would shut up about Trump building an amazing economy, when really the economy seems to be performing in line with the recovery manned by Obama after the 2007-2009 recession. I hate even having to talk about this because I am thoroughly an anti-capitalist. I have no respect for a system that causes poverty and hardship whilst effectively bailing out the banks that caused said poverty and hardship. However, the present situation of the world is so skewed that things have to be asserted without a shadow of a doubt. To suggest an elitist, fascist-adjacent figure such as Trump has been exceptionally good at handling the American economy is egregious in its falsehood and dangerous because so many people seem to buy into this idea that he has been a positive figure within politics. For clarity, I don’t think I have respect for any single American president, but we still have to be as truthful as possible.

            I have heard two common arguments from Trump supporters about the president: 1) Trump has created a great, if not, record-breaking amount of job growth and 2) The American stock market, in the context of Covid-19, is doing well. If we look at job growth in America, Trump claimed in his State of the Union address that he had created 7 million new jobs since his election. FactCheck.Org places his job creation at 6.7 million once he had taken office, pointing out that he was in fact taking credit for job growth that occurred whilst Obama was still in office. For further context, Obama entered office under an economic recession which was the largest downturn since the Great Depression and according to the Federal Reserve Board cost every single American approximately $70,000. Trump entered office under a significantly healthier labour market than Obama did, and it is thanks to his predecessor that Trump has relatively stable economic growth. CNN Business tracks job growth and unemployment rates, contextualising that Trump benefited from continually decreasing unemployment numbers under Obama and in fact had less job gains in his first 35 months than Obama had in his last 35 months of presidency.

            We’ve established Trump hasn’t done anything particularly magical with employment, there is no reason to believe that he has personally contributed to growth except from benefitting from the economic recovery undertaken by Obama. If we turn to the stock market, we can acknowledge that after having tanked under the Covid-19 pandemic it has recovered. Is this something that we can: 1) attribute to Trump and 2) does the stock market’s health have the same positive effect as employment? Neil Dutta, writing for Business Insider, argues that various factors contribute to the stock market’s rise even during the ongoing pandemic. The reopening of parts of Europe has led to a potential confidence which benefits the US dollar exchange rate. Dutta notes that businesses like restaurants, hotels, and movie theatres make up less than 5% of private GDP and that the bulk of the stock market is concerned with industrial and technological businesses that might be less restricted than retail. We like to think that the stock market doing well automatically means that we, the average Joe, benefits from it. But…do we?

            So far, I’ve addressed employment levels under Trump and the stock market in the context of Covid-19, but I think we need to talk about these topics with further context. Even as unemployment has been steadily declining, real wage growth has been stagnant for about four decades even accounting for inflation. This means that a worker has less purchasing power whilst more money is accrued by the people at the very top. Drew DeSilva, for the Pew Research Center, posits one theory that employers are less inclined to increase wages based on other benefits such as health insurance, although this may not account for the fact that 70% of employee compensation comes in the form of wages. A potential factor I find personally interesting is the decline of labour unions, a form of employee solidarity discouraged widely over the last century. A potentially egregious note, which I’m inclined to make, is that similarly to wage stagnation, the gap between wages and productivity has grown wider. From 1979 onwards productivity rose 108.1% whilst hourly wages only grew 11.6%. Capitalists have grown richer and richer whilst the majority of the workforce have stayed in the same place, having to live in accordance to the health of the economy in general.

            Wage stagnation has an arguable correlation with an inability to invest in stock, meaning most of the workforce has not got much in the way of stock hold. Robin Wigglesworth, quoting Goldman Sachs, states that the richest 1% of Americans account for more than half the value of equities owned by US households. This level of disparity is staggering. When the stock market is performing well, how are we meant to reasonably conclude that it is to the benefit of each and every American? Zack Friedman, writing for Forbes, cites a study that notes that more than half of minimum wage workers have to work more than one job to make ends meet. According to the same study more than 1 in 4 workers do not accrue savings each month and nearly 3 in 4 workers are in some form of debt. It doesn’t seem to stand to reason that the health of the stock market is congruent with the health of the worker or their wealth.

            Finally, some thoughts on the recession which Obama inherited and subsequently dealt with, in the process benefitting Trump with a positive net gain of job growth. The 2008 recession was a result of deregulation which led to banks granting more subprime mortgages to people who truly couldn’t afford them and essentially causing a bubble which then burst when returns weren’t possible. The banks responsible for the crisis were not in any sense reasonably punished nor reprimanded but instead bailed out by the government. Gautam Mukunda, writing for the Harvard Business Review, states that none of the banks’ CEOs were fired nor did the bailouts stop executives from being generously paid. What are we meant to make of this when millions of Americans lost their jobs and had to scrape by whilst the rich were relatively unaffected? Where do we find ourselves now?

            Some of Trump’s success with the economy is attributed to his policies of deregulation. The 2008 recession was brought about by Randian-inspired deregulation, how much faith can we place in Trump’s deregulation of various industries? The decline in regulation of greenhouse gases emissions standards will be detrimental to an environment that has passed the threshold whereby the annual increase in global temperature will continue to the point that the oceans will rise and forest fires will increase and little can be done to reverse these disasters. With banks being deregulated yet again under Trump, should we expect a different if not positive outcome compared to 2008? Not only this, but certain health and safety regulations have been repealed to help speed along the building of the border wall with Mexico so we can only wait and see to how the stripping back of said regulations will benefit the people at the top and the workers. Slavoj Žižek, in the spirit of Marx, says that history repeats itself: first as tragedy, then as farce. If the 2008 recession was a tragedy, then…well.    

            The economic problems shadowing Trump despite the supposedly positive figures have been there since Obama and have been there for several decades. Ultimately, neither Trump nor Obama has greatly combatted the real causes of wealth disparity or economic hardship in America but have responded as and when is strictly necessary. Deregulation will hurt the working class in the long term and unless solidarity is cultivated amongst the workforce, there is no reason to believe that wages will truly grow any time soon nor will economic disparity narrow. I wish I knew how to end this blog but truthfully, I am the furthest thing from an economist and I just feel depleted whenever somebody says Trump has done incredible things for the economy. Trump is at most working in accordance with the general tracking of Obama’s recession response and is looking to strip away certain liberties and regulations which would potentially affect workers first and foremost. Please, please, please shut up about Trump and the economy.

Further reading:

Courtney Bublé, ‘Watchdogs Criticize Trump Administration’s Deregulation Efforts During Pandemic,’ Government Executive. Available at: https://www.govexec.com/management/2020/05/watchdogs-criticize-trump-administrations-deregulation-during-pandemic/165371/

John Cassidy, ‘As a Businessman, Trump Was the Biggest Loser of All,’ The New Yorker. Available at: https://www.newyorker.com/news/our-columnists/as-a-businessman-trump-was-the-biggest-loser-of-all

Drew DeSilver, ‘For most U.S. workers, real wages have barely budged in decades,’ Pew Research Center. Available at: https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/

Neil Dutta, ‘There are clear reasons for the stock market’s surge, despite the terrible pandemic news,’ Business Insider. Available at: https://www.businessinsider.com/why-stock-market-rising-despite-coronavirus-pandemic-higher-us-cases-2020-7?r=US&IR=T

Economic Policy Institute, ‘The Productivity–Pay Gap,’ Economic Policy Institute. Available at: https://www.epi.org/productivity-pay-gap/

Bill Fay, ‘Poverty in the United States,’ Debt.Org. Available at: https://www.debt.org/faqs/americans-in-debt/poverty-united-states/

Zack Friedman, ‘78% Of Workers Live Paycheck To Paycheck,’ Forbes. Available at: https://www.forbes.com/sites/zackfriedman/2019/01/11/live-paycheck-to-paycheck-government-shutdown/#5f5a5bdc4f10

Chris Isidore, ‘How Trump’s three years of job gains compares to Obama’s,’ CNN Business. Available at: https://edition.cnn.com/2020/02/06/economy/trump-obama-jobs-comparison/index.html

Brooks Jackson, ‘Trump’s Numbers January 2020 Update,’ FactCheck.Org. Available at: https://www.factcheck.org/2020/01/trumps-numbers-january-2020-update/

Eugene Kiely, Brooks Jackson, Lori Robertson, et. al., ‘FactChecking the State of the Union,’ FactCheck.Org. Available at: https://www.factcheck.org/2020/02/factchecking-the-state-of-the-union-3/

Michael Kranish and Marc Fisher, ‘Trump Revealed: An American Journey of Ambition, Ego, Money, and Power,’ Scribner.

Gautam Mukunda, ‘The Social and Political Costs of the Financial Crisis, 10 Years Later,’ Harvard Business Review. Available at: https://hbr.org/2018/09/the-social-and-political-costs-of-the-financial-crisis-10-years-later

Mayra Rodriguez Valladares, ‘The Weakening Of Big Bank Regulations Under Trump Is The Seed For The Next Financial Crisis,’ Forbes. Available at: https://www.forbes.com/sites/mayrarodriguezvalladares/2019/05/22/the-weakening-of-big-bank-regulations-under-trump-is-the-seed-for-the-next-financial-crisis/#3f93a2474f4c

Robin Wigglesworth, ‘How America’s 1% came to dominate stock ownership,’ Financial Post. Available at: https://financialpost.com/investing/how-americas-1-came-to-dominate-stock-ownership

 Joseph Zeballos-Roig, ‘Trump keeps touting the fact that more Americans are working than ever before. But the boast is almost meaningless for one key reason,’ Business Insider. Available at: https://www.businessinsider.com/trump-record-high-employment-jobs-numbers-boast-meaningless-2019-11?r=US&IR=T

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