President Trump is running his reelection campaign on the economy and proclaiming what a great job he has done. Since he seems to receive higher marks than Joe Biden on rebuilding the economy (from some), I thought it was time to examine the President’s record.
To start, most of President Trump’s current actions and decisions are dictated by one single concern, regardless of how it affects you, the country, or the world. That concern is winning reelection. In the meantime, it is legitimate to question how his policies and his handling of the pandemic (or rather the lack thereof) are really affecting our economy.
Clearly, he mishandled the novel-coronavirus, COVID-19, threat terribly even horrifically with now over 200,000 souls dead in the United States attributed to COVID-19. He absolutely and by his own admission admitted he knew how serious the coronavirus was in February. He knew it spread through particles in the air and that it was an airborne disease. Yet he did nothing to limit its virulence and in fact achieved the opposite by no less referring to it simply as a “hoax”. Imagine for a moment there had been a federal mandate, in January, wearing a mask and social distancing with he himself modeling this behavior, things would be very different, both with the infection rate, deaths and yes, our economy.
Trump said he didn’t want to cause a panic. It was really all about the optics to seemingly keep the U.S. economy chugging along no matter the consequences. Because that’s the main thing he was running his 2020 reelection campaign on — a “great” economy. And ironically, his poor decisions and lack of leadership and handling of the coronavirus was the very thing that hurt our economy the most.
Here’s the list:
1. The coronavirus pandemic has had the biggest effect on the U.S. economy ever with a 5% drop in GDP in the First Quarter and a breathtaking 32.9% drop in the Second Quarter. That’s even worse than the Great Depression. That is the worst in our country’s history.
2. The U.S. stock markets are likely in a bubble because the value of the stock prices doesn’t accurately represent the value of most companies. Some may disagree, but according to Stephanie Bedard-Chateauneuf of CCN, “Here’s the biggest sign we are in a bubble: U.S. tech companies now have a bigger market cap than the entire European stock market.”
3. Unemployment (non-farm) is 8.4%. Almost half of those job losses are permanent. More than 32 million people are receiving either state or federal unemployment benefits, according to the most recent data.
4. His disastrous immigration decisions — which are not rooted in fact (e.g. invading hordes from Central America) — have hurt companies looking for more working-class labor. This labor performs vital tasks for Americans such as harvesting and processing our food. This helps keep the cost of our food low and supply chains open. Maybe you’ve noticed empty shelves at the grocery store?
5. Another thing about limiting immigration is that it reduces the economic growth in this county because our birth rate, at 1.7, is below replacement and at a 32-year low. That is not high enough to grow an economy without immigrants moving here and buying goods and services in our country. By the way, in addition to buying goods and services, even most undocumented workers pay taxes. Otherwise, they would be found.
6. The trade wars were a farce. We now have a larger trade deficit with China than we did when Trump’s trade war started. China’s trade surplus widened sharply to USD 58.93 billion in August 2020 from USD 34.72 billion in the same month the previous year and far above market expectations of USD 50.5 billion.
7. He lied about the increased tariffs on China. Trade tariffs don’t work like he told the American people. China did not pay for the tariffs. Tariffs are paid by the American companies importing the goods. They can either pass them along to their customers — stores, direct to consumers, OEM, etc. (if they’re lucky)— or they can eat the cost increase and destroy their gross profit margins and possibly even go out of business.
8. Almost worse was the retaliatory response by the Chinese to quit buying American goods, much of them agricultural products like soybeans. As an example, the Chinese companies bought soybeans from Brazil. Farm bankruptcies jumped 20% in 2019 (the year the trade war ramped up), to an eight-year high. And in 2020, family farm bankruptcies are 8% above year-ago levels.
9. Our national debt has reached outrageous levels. At almost $27 trillion dollars, by next year it will surpass our GDP. How are we going to pay for that? Almost certainly the FED must allow interest rates to go up. Countries and companies and people will not buy our bonds if they are only getting a 0.71% return. (10-year Treasury bond rate as of the day I write this.)
10. And in fact, the FED just announced a shift in their current monetary policy and will allow interest rates to increase which will disproportionately affect the middle class and working poor because it will lead to inflation and increases of interest rates for goods and services: homes, credit card bills, car loans, food, medicine, etc. As far as the wealthy or asset owning class — not as much of a problem. It will mean higher return rates on their assets. We could go into a period of almost hyperinflation like the beginning of Ronald Reagan’s term as President where the Prime rate rose as high as 24%.
11. The U.S. annual deficit has risen to over $3 trillion and this year isn’t even over yet. If you don’t happen to know the difference between national debt and annual deficit: national debt is the total amount of our debt added up year after year (of course if there is a surplus that would be subtracted, but we haven’t had a surplus since the Obama administration). The annual deficit is our one-year shortfall. So, if our debt is currently at $27 trillion and we have another $3 trillion shortfall from our annual deficit, our national debt will be $30 trillion at the end of the year. Of course, it will be even higher because that $3 trillion deficit is only year-to-date for 2020 and we still have another three months to go.
12. The coronavirus collapse has also put a huge strain on commercial real estate owners. Retail stores are going out of business at an alarming rate. Restaurants are going out of business at an alarming rate, too. People who have jobs are mostly working remotely and companies realize they no longer need the same amount of office space compared to pre-pandemic. I believe that this trend will continue for a long time and maybe even forever. Companies are canceling their leases.
Commercial real estate will start to collapse — the smaller owners who can’t afford their mortgages without tenants paying their leases to occupy the space, will go out of business.
13. This is also affecting rental apartments as people can’t pay their rent, and the eviction moratorium was recently extended. According to an August report by Miller Samuel and real estate giant Douglas Elliman, in Manhattan,13,000 apartments are available — a record.
14. If real estate — both commercial and multi-family housing — are going under in large numbers, then banks and mortgage lenders will be quick to follow for obvious reasons.
15. Payroll tax elimination or a long deferral will almost certainly bankrupt social security. What do we do with all the people who depend on it for their retirement? Go into even more debt?
16. Cities and states may file bankruptcy due to drastic reductions in their tax base and reduced federal funding. Who will pay for the local services they provide like fire, police, schools, roads, sanitation, etc.? The large municipalities, like Los angeles, are already letting management know that layoffs are coming soon. Perhaps the police will be defunded, but not for the reasons you’ve been told. So much for law and order.
17. The tax cuts that passed with a Republican majority in both houses of the United States Congress was a stupid, stupid decision. It was impractical, mostly due to the timing of it. Our debt and deficit levels were already too high. I’m all for tax cuts, and honestly, it benefited me in 2019, but you don’t cut taxes when you’re so deep in a hole that you can’t see your way out. Even George H.W. Bush had the guts to increase taxes when the country needed it even when he said and campaigned on the promise that he wouldn’t. (Remember, “Read My Lips”?) He knew it would probably cost him his reelection and it did. But it was the right thing to do. In my opinion, it was one of the things that set up a good economy for Bill Clinton’s term with several years of annual surpluses.
The idea that Trump’s tax cuts would pass along to the rest of the country was overstated. Some companies invested in expansion and hired more workers, gave raises. But many did not. Many just bought back their own stock. Not surprising. Good to cut taxes when we’re in a surplus or even just a small deficit. Bad to cut taxes when our debt level is skyrocketing. The U.S. government is like an obese person trying to lose weight. They eat that piece of cake and tell themselves that they’ll exercise it off the next day. But then they don’t. We cut taxes and then lie to ourselves that we’ll cut expenses in the next budget. But then we don’t.
18. Furthermore, the travel industry is now crumbling to bits and pieces. I believe that had the pandemic been handled, actually handled, then the economy would have been knocked down, but would have lived to see sunnier days. In other words, much of it would have survived. In Florida alone, tourism dropped 60% in the second quarter. How is tourism in your state?
19. A new national report from Trepp, a data analytics firm, showed that the hotel industry is facing a historic wave of foreclosures as a result of the coronavirus. In July, the percentage of loans that were 30 or more days delinquent is 23.4% as of last month — the highest percentage on record.
Joe Biden is now in the unenviable position as the guy who will come into office with a destroyed economy and a pandemic to boot. He’ll have to try to raise taxes. If the Republicans remain in control of the Senate, good luck with that. The alternative? Hyperinflation. Of course, many of the greedy people will kick and scream if taxes are raised on the wealthy, but it has to be done. Either that or draconian cuts in spending. What do you think the chances are of that happening? Slim to none.
When Trump and his followers say that he is the best one to rebuild the economy, I urge you to read the above list. He’s done a terrible, even horrendous job with our economy. His policies have had a devastating impact on the U.S. economy, and many other countries as well. This simply cannot go on without further dire consequences.
Cynthia Wylie is a published children’s book author with Penguin Random House and has her MA in economics from Georgetown University. She writes about business and economics for Data Driven Investor. When she is not writing, she works on business consulting and turnaround strategies for TheProjectConsultant.com.
Edited by Dennis P. Kamoen, Founder & Editor at Large, The Project Consultant.