Uncertainty Dims Hallelujah Economic Times for Republicans

Stimulated by Trump’s tax cuts, the national economy grew 4.2% in the second quarter (final BEA estimate), up from 2.1% in the first quarter. Corporate profits jumped 3.0%, up from 1.2%. The national unemployment rate at 3.9% is the lowest since December 2000. Total nonfarm employment is nearly 150 million, the highest ever.  And average wages are the highest ever.

This should be hallelujah time for those in charge, i.e. Republicans.

It’s not. That nasty thing called uncertainty is the problem.

“The one thing all human beings do when they are confronted with uncertainty is pull back, withdraw, disengage,” said former Federal Reserve Chairman Alan Greenspan, “and that means economic activity, which is really dealing with people, just goes straight down.”

Uncertainty over continued economic growth is rising. Increasing oil prices due, in part, to sanctions on Iran; rising inflation due, in part, to tax cut stimulus during an already rising economy; other price increases due to tariffs; increasing costs for health care; and rising interest rates have the potential to negatively impact consumer spending. With consumption accounting for approximately 68% of GDP, lower consumer spending would slow economic growth.

Indeed, Kiplinger cautions growth will slow in the third and fourth quarters and average 2.9% for the year. The Conference Board forecasts growth will slow further to 2.3% by the end of 2019 due to “domestic and foreign headwinds.”

Those foreign headwinds include the growing likelihood for an all-out trade war with China and a shooting war with Iran, plus decaying relations with long-time allies, particularly Germany, Canada, and Turkey.

Uncertainty over whether last month’s uncertainties – the future of FBI U.S. Deputy Attorney General Rod Rosenstein, Mueller investigation guilty pleas, keeping government from shutting down, and the Kavanaugh nomination – will be replaced by another big set of serious uncertainties is of concern.

Who will be in charge come January after mid-term elections is another uncertainty, escalated by Trump’s comment that there will be “violence” if Democrats take control. So too is what impact the rapidly rising national debt, spurred by massive new spending, will have on the economy.

Much uncertainty, of course, comes from the President himself.

“It takes quite a President to preside over an economy with unemployment rates below 4% and not to benefit politically,” read an opinion piece in the Huffington Post.

The New York Times reported that Mick Mulvaney, the federal budget director, told a gathering of party officials in early September that Republicans would fare better in November’s elections if they could “subtract” the president’s divisive persona from voters’ minds, and stress instead that the country is in a “pretty good” condition.

“You may hate the president, and there’s a lot of people who do, but they certainly like the way the country is going,” Mr. Mulvaney said, adding of voters: “If you figure out a way to subtract from that equation how they feel about the president, the numbers go up dramatically.”

An article in the Washington Examiner pointed to Trump’s low approval rating and predicted “grim tidings” for Republicans in mid-term elections.

A glimmer of hope for Republicans is there is still over a month for uncertainty to dim while the economy will still be sparkling.

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