Has the US Economy Reached a Plateau?

The economy has thrived since president Trump was elected. The president exuded confidence and has sought to bring manufacturing jobs back to our shores. He cut taxes and regulations. In many parts of the country today employers cannot even find enough workers to fill their positions.

The Trump economy peaked at almost 3% growth in 2017 which was considered impossible during the stagnant Obama years when 1.5% or less was common.

Some predictions said that we would get to 4% and more in 2018 but the first quarter hit only 2.3%. Meanwhile the stock market has fallen back from its peak Trump numbers.

So what is going on? Has the economy reached a plateau after the Trump Bump wore off?

Maybe, maybe not. Here are some facts to think about:

*Looking ahead over the long-term the economy is in good shape and poised for solid growth for as long as Trump policies remain in effect.

*A higher growth rate could cause inflation so a lower rate is not all bad news.

*If Obama-era ‘green’ policies and tax policies were still in effect gasoline would be $5 a gallon and growth would be 1%.

*The warmer months should bring better growth figures especially as the tax bill of December 2017 starts to take full effect.

*164,000 jobs were created in April, which is a mediocre number. A great number would have been 250,000 or more. The short month of February had 324,000(!)

*The ‘official’ unemployment rate fell to 3.9% in April, which is historically low.

So if unemployment is historically low and workers cannot be found to fill jobs in many parts of the country do we really need millions of new jobs?

Maybe not. The really good news is that crucial manufacturing and mining jobs are increasing again after decades of decline. Manufacturing jobs in April jumped by 24,000 while mining jobs increased by 8,000.

But that is just a drop in the bucket compared to the historical losses that we have sustained. Manufacturing jobs peaked in 1979 at 19 million but have fallen to 12 million today in a much larger population. This is one of the reasons that our economy will likely not regain its postwar 1950s, 1960s and 1970s vitality with 5% growth and more.

It is important to remember that manufacturing and mining jobs “create” wealth but that government “consumes” wealth. Today we have 22 million Americans working in government on the federal, state, county and local level (excluding the US military) but just 12 million in manufacturing. In 1960 we had the opposite; we had 15 million in manufacturing and 9 million in government.

So the problem is obvious. This is perhaps the most significant brake on economic growth. This would take years to solve, i.e., to cut back government employment and replace it with private-sector jobs.

*We have a huge national debt today. The debt-to-GDP ratio is roughly 100%, i.e., the accumulated debt is $21 trillion while our annual economic production (Gross Domestic Product or GDP) is also around $21 trillion (the debt is 100% of GDP). Greece collapsed at 170%. Japan has more than 220% which is why Japan has been in a permanent recession since 1990.

According to historical data a national debt above 60% suppresses the opportunity for significant economic growth. The debt was 60% when Bush left office in 2009. Obama jacked it up to 100% by borrowing $10 trillion.

*American taxpayers currently dish out more than $500 billion every year just to pay interest on the national debt, but not to pay off any of it. This is a huge drag on the economy and a waste of valuable capital. Until this number comes way down significant and meaningful growth will be tough to attain.

See the problem? The problem is government. And the problem pre-Trump was four types of government – regulation, taxes, debt and bureaucracy. Trump has pared back two of the four – taxes and regulation.

Conclusion: We need good policies over many years to keep the economy strong for a growing population. This includes cutting government spending, reducing government employment and slashing government debt.

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