10-year economy rife with twists and turns

IT

has been 10 years since the US economy fizzled and we suffered through the Great Recession.

And over the last decade, you’ve probably read about how the economy is doing better, or not so good, or is recovering, or is going into another recession.

Better, worse, better, worse. It’s been hard to get a handle on the health of the economy when you look at monthly data. That’s why I asked Walter J. ( John)

Williams of ShadowStats. com to give me a list of the ways in which 2017’s economy is better than it was in 2007 — and ways in which it isn’t.

Forget all the short-term vacillations — the monthly employment reports, the annual inflation gauges, etc. For better or worse, this is a straight comparison of what the economy was doing at its peak in the fourth quarter of 2007 compared to what it is doing now. First the upside:

The nation’s gross domestic prod- uct: It has expanded by 14.4 percent from the fourth quarter of 2007 to the third quarter of 2017. That’s pretty good, although not as high as we’d like over an entire decade.

Payroll employment: Has expanded by 6.2 percent from its peak in January 2008, according to the Labor Department’s October report.

Again, pretty good. But there needs to be steady job growth just to employ new people coming into the workforce. Vibrant job growth, not just “good,” is needed to do that. Plus, we need to get people laid off because of the recession back to work.

Retail sales: Up 9.4 percent from November 2007 to September 2017. True, the distribution of these sales has changed greatly with the growth of Amazon, but people have been spending more.

Not great growth, but a definite improvement. Now the down side:

Housing starts: Are 50.4 percent below what they were at the pre-recession peak reached in January 2006. Housing is a major source of wellpaying skilled jobs.

Manufacturing: Hit its pre-recession peak in December 2007, and it is still 6.3 percent shy of that peak. That’s 117 straight months of no economic expansion, which is the “longest drought in the 100-year history of [that] economic series,” says Williams.

Again, manufacturing jobs are good ones. And the jobs we have been creating aren’t living up to those standards.

Industrial production: Still down 0.7 percent from its pre-recession high in December 2007. That’s mostly because of the weakness in manufacturing.

And industrial production is only doing that well because of oil production increases attributable to shale oil discoveries.

The US trade deficit: Worse than it was in 2007. Petroleum consumption, an indicator of how the economy is doing, has had no expansion and neither has the amount of freight being transported. That, too, shows whether the economy is doing well.

And we all know about the nation’s budget deficit — that’s a lot worse. And even with Washington spending like a drunken mariner, the economy still isn’t popping.

Will tax reform provide the spark (as the Trump administration hopes) or merely get the US into a deeper hole (as I and a lot of others think). We’ll see.

But there you have it. The next time someone asks how the economy is doing, answer: “It’s complicated.”

Stock prices went down sharply last Wednesday after it became known that the Senate’s version of the tax reform bill would delay corporate cuts until 2019.

I’ll predict it again — major tax reform isn’t going to happen because nobody is going to be willing to take a tax increase so that someone else can get a cut. Simple greed involved here.

And since the tax cuts need to be revenue neutral, someone has to give for someone else to take. In the end, all Washington lobbyists and special interest groups aren’t going to be willing to yield on issues that’ll cost them.

But that’s not the main thing I wanted to write about today.

First, there’s one thing that needs to be understood about the estimate for the debt increase under the tax reform bill, which is $1.5 trillion or $1.7 trillion, depending on who you believe.

That doesn’t look too bad when you put it next to the enormous $20 trillion that the US already owes.

But here’s the problem. That $1.5 trillion to $1.7 trillion is just for the tax changes. It’s on top of what the deficit would be anyway. In other words, if the US is running a $200-billion-ayear deficit, multiply that by 10 years and that’s another $2 trillion in debt. And we’ve been running deficits well over $200 billion a year for a while now. So that means that, because of tax reform, the debt level will increase by the $1.5 trillion to $1.7 trillion — plus the regular deficit of $2 trillion. So the total will be $3.5 trillion to $3.7 trillion. And then there is concern for Japan, where stocks fell sharply the night before the US selloff. It looked very suspicious when stocks in Tokyo suddenly started improving after the big drop. Everyone figured it was the secret Japanese government bailout of its own market. The world financial markets are being rigged. Tokyo rescued the Japanese market, and the US is expected to do the same when the time comes for its bubble to burst. And if you don’t believe in free and fair markets, that’s fine. But government rigs don’t last forever, so remember to be careful. Someone is going to pay dearly for what’s going on.