“Things are getting better. We can’t go back”. It is in these terms that the economic success of Donald Trump is praised in a spot for the midterms, the midterm elections in the United States. Since the start of the campaign, the economy has been the major card of the American president: hardly a day goes by without the billionaire not boasting of the country’s economic dynamism, taking full credit for this performance and encouraging Americans to vote for Republican candidates. While it is true that the US economy is doing very well, Donald Trump cannot take all the credit for this alone and should be wary of the future.
A healthy economy
Billionaire Donald Trump had promised to restore the greatness of the United States and it is clear that, on a purely economic level, the country is doing like a charm. US growth surged in the second quarter of 2018, crossing the 4% mark for the first time in four years. The Fed, the central bank of the United States, now expects growth of 3.1% this year. If this forecast were to come true, it would be the highest since 2005. A dynamic that makes the president happy: “The economy is doing very well, perhaps the best in the history of our country”, he boasted recently.
As for the unemployment rate, it fell in September to 3.7%, its lowest level since December 1969. It is already lower than the initial forecast of 3.9%, while there is still a quarter to be counted. The Trump administration also likes to point out that the unemployment rate in the Hispanic and black communities has fallen sharply since the former businessman became president, even if it remains significantly higher than that of whites. However, these figures do not take into account the approximately 23 million inactive adults, or 11% of 25-54 year olds (compared to 9% in 2007), who are not taken into account in unemployment statistics.
Many indicators in the green. Donald Trump’s influence on these good economic results is real: the tax overhaul enacted by the President at the end of 2017, the largest in thirty years, greatly stimulates the American economy since it has reduced certain income taxes and above all significantly lowered corporate tax (from 35% to 21%). The profile of Donald Trump, a billionaire in the business world, has also helped restore confidence on Wall Street: the Dow Jones is currently up 45% since the presidential election in November 2016.
Final touch to the table, several other indicators link the months in the green: inflation is under control (2.2%), household confidence regularly reaches peaks and household consumption, the real engine of growth, is in rise.
Trump can thank Obama
However, Donald Trump is also and above all surfing on an extremely favorable economic situation. The billionaire took office when the economy had already been cleaned up by the administration of his predecessor, Barack Obama, who had taken office in a country in the grip of a deep recession following the financial crisis of 2008. And the way the current tenant of the White House has of attributing to himself all the laurels of the good health of the American economy has even pushed Barack Obama to come out of his reserve.
Obama is setting things straight. At the beginning of September, the former president, split a public intervention to make a point. Barack Obama first recalled the context: when he was elected in 2008, the American economy was losing 800,000 jobs every month. “When I left office, household income was close to a record (…) and wages were rising,” argued the 44th President of the United States.
“When I hear how well the economy is doing, I say let’s remember when the recovery started,” he insisted. “I am happy that it is continuing but when we hear about an economic miracle (…) I have to remind them that the employment figures are quite close to what they were in 2015 and 2016.” In fact, job creations were, on monthly average, 183,000 in 2017 and 211,000 this year, against 195,000 in 2016 and 226,000 in 2015.
“There is no doubt that the credit is due to a mixture” of the two presidencies, said Douglas Holtz-Eakin, former director of the Congressional Budget Office. “The figures clearly show that the expansion started under President Obama (…) and Trump is surfing on the trends he inherited,” said Jared Bernstein, the former economic adviser to the vice-president of ‘Obama, Joe Biden.
A darkening future
If the United States does well, economic momentum could slow down in the years to come, at the same time as the effects of the fiscal and budgetary stimulus will fade. The IMF thus projects a slowdown in growth to 1.9% in 2020 and 1.7% in 2021. In addition, it is these same measures that inflate the debt and the budget deficit, which reached nearly 1,000 billion at the end of September. (5% of GDP), a threshold that should not have been crossed until 2020. According to the Congressional Budget Office, at this rate, the debt could reach 96% of GDP in 2028, against 78% this year. Concretely: the American economy lives on credit.
Poverty hardly goes down. Donald Trump also fails to reduce a deep evil in American society: poverty. According to the Census Bureau, 12.3% of Americans live below the poverty line, or 40 million people. And despite the exceptional growth, the rate fell just 0.4% in 2017. it’s shameful”, denounced the UN rapporteur on extreme poverty. Slowing growth therefore does not bode well for Americans’ standard of living in the coming years, especially as Republicans in Congress continue to attempt to torpedo Obamacare and have begun to obstruct several social programs, such as the distribution of food stamps.
Finally, the international context seems less and less favorable to the United States, which can only attack… Donald Trump. The tariff war waged by Washington with Europe and China could deal a severe blow to American growth. As for oil prices, they started to rise again due to tensions between the United States and Iran. Two factors that could seriously shake the confidence of households and businesses by driving up import prices.
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