Trump speech, reality at odds
THE dismal picture of the US economy that President Donald Trump painted in his inaugural address on Friday is at odds with the economic reality of most Americans.
Trump described a nation despairing and in decline.
“We’ve made other countries rich while the wealth, strength and confidence of our country has dissipated over the horizon,” he said, returning to that theme several times during his 16-minute address.
He spoke of “rusted-out factories scattered like tombstones”, and of a middle class whose wealth “has been ripped from their homes and then redistributed all across the world”.
In fact, the United States is in the midst of one of the longest sustained economic expansions in the nation’s history. The stock market has climbed to record heights; incomes are increasing after years of stagnation; and corporations are recording enormous profits.
Some measures of consumer confidence show optimism about the economic outlook, and job and income prospects have climbed to the highest levels in more than a decade.
The striking contrast between his speeches and reality partly reflected Trump’s focus on the decline of a particular part of the US economy: the Rust Belt cities that were once the beating heart of US industry, and whose residents in Pennsylvania, Ohio, Michigan and Wisconsin propelled Trump into the presidency.
Trump has often described the entirety of the US as if it were Youngstown, Ohio, with its factories gone and its residents embittered. And on Friday, as he had before, he blamed foreign trade for the decline.
“One by one, the factories shuttered and left our shores, with not even a thought about the millions and millions of American workers that we left behind,” the president said.
While at odds with most economic assessments, his words find an audience in places that have been left behind.
“President Trump made it clear that he understands that, despite a declining federal unemployment rate and a rising stock market, there are certain industries and communities that are still struggling,” said M Robert Weidner III, chief executive of the Metals Service Center Institute, a trade group for producers and distributors of industrial metals.
“I’m more hopeful today than I have been in a long time,” Weidner added.
But it is a misleading diagnosis of the reasons for the decline of factory work.
There were more than 17 million US factory workers two decades ago; now there are slightly more than 12 million. Some kinds of manufacturing, like textiles and furniture, have largely disappeared. And increased foreign trade did play a role in the decline.
But most economists agree that technological progress is the primary cause. The value of America’s industrial output is at the highest level in history, but those goods are produced by fewer workers, a trend that cannot be reversed by changes in trade policy.
Moreover, the broader economy is showing new signs of vitality. Economic growth since the recession has been modest at best, and during most of President Barack Obama’s tenure, the gains accrued mostly to the wealthy. Corporations posted record profits while wages stagnated. But those trends began to shift during the second half of Obama’s second term.
The private sector added jobs in each of the past 74 months, a record that lowered the unemployment rate to 4.7 percent in December. Crucially, those gains are finally starting to lift middle-class incomes. The median household income increased by 5.2 percent in 2015, the largest single-year increase since record-keeping began in 1967. Economists estimate that median household income rose again in 2016. Official data will be released later this year.
Trump offered few details about his plans to improve the economy. The administration quickly posted on its website an overview that said Trump plans “to create 25 million new American jobs in the next decade and return to 4 percent annual economic growth”.
Trump and his advisers have promised legislation to cut taxes, a rollback of regulations and changes in trade policy aimed at reducing imports of foreign goods and services.
But his administration started with a smaller step. On Friday, it suspended a plan to reduce the fees that borrowers pay on some federally backed mortgage loans.
The Obama administration announced the cut last week to make homeownership more accessible to lower-income borrowers. A family that borrowed $200,000 would have saved $500 in annual fees. Republicans had decried the change as risky. The fees cover the cost of defaults, so the change would have reduced the money available to cover such losses.