Economic tinkering, more of the same with the surveillance state, and a precarious trade war isn’t what one would expect on the path to greatness.
August 26, 2019
By: Bobby Casey, Managing Director GWP
When the MAGA slogan first came out, it was criticized for the same reasons as Michelle Obama’s statement, “for the first time in my life, I’m really proud of my country”. This is saying that up to that point, she had never been proud of her country.
Semantically, MAGA suggests that America was once great, it no longer is, and Trump will return it to greatness.
Both are without question a jibe against the United States. I suppose what made people rally around these statements is the fact that individuals didn’t think those statements were referring to them personally, but rather everyone else.
If we take MAGA at face value then, when do we know when we’ve achieved this greatness? Do we wait for the White House to make a statement through the press secretary? Or for that matter, does the White House even know what they are looking for as greatness indicators?
I don’t dispute some of the good things that are happening. Low unemployment, lower taxes, higher estate planning thresholds. I’m for all for that!
Spending and deficits are up, however. What’s more, when you drill down, you see American household debt continues to creep up. As of early 2019, the US credit card debt was up 4% from the previous year to $949 billion nationally.
According to NerdWallet’s annual evaluation of US household debt, it breaks down like this:
- Any debt: $135,065 average HH; $13.67 trillion nationally
- Credit Cards: $6,741 average HH; $423.8 billion nationally
- Mortgages: $185,591 average HH; $9.24 trillion nationally
- Auto Loans: $27,630 average HH; $1.28 trillion nationally
- Student Loans: $47,634 average HH; $1.49 trillion nationally
Even without the mortgage included, Americans are looking at an average of $85,000 per household in personal debts. Granted these are averages, and the medians would be lower.
Value Penguin shows that the median household credit card debt is closer to $2,300, while median adult savings accounts were at $7,000.
Regardless, Americans are ill prepared for that inevitable rainy day, much less their own retirements. Much like the different levels of government that also run on debt, so too are American households.
Debt isn’t a sign of economic health, it’s a sign of economic servitude. Credit score companies reward people with higher scores who keep a certain amount of revolving debt to show that they can reliably pay month to month, but don’t confuse that with economic health.
This debt trend has been consistent dating back several presidents, but hasn’t changed since 2016 under Trump either.
Low unemployment and high consumer activity is often touted as strong economic indicators. But people’s spending habits are predictable and stable. The consumer demand is often accommodated by debt. And low unemployment doesn’t address displacement from full-time careers to part-time work.
The real sign of economic health is investment and production. We recently saw an inversion in the yield curve, where short term treasuries were paying off higher than longer term ones.
Several possible factors could be behind that. Even without the inversion, the difference between long and short term bonds have been narrow ever since the 2008 economic crisis. That crisis ushered in zero and negative interest rates.
ZIR and NIR don’t just apply to private bank accounts. There’s $15 trillion invested in negative interest rate bonds right now. Oddly, bond prices are soaring while stock prices are dropping and that could be contributing to the trends we see.
While a bit premature — and more likely politically motivated — murmurs of an economic recession began to surface in response to the recent inversion.
That lead to White House murmurs of a possible cut in payroll taxes.
It wasn’t even clear which side of the payroll taxes would be cut: the employer obligation or the employee obligation. Analysis indicates for every percent cut on the employer side, $60 billion is federal revenues would be lost. For every percent cut on the employee side, $75 billion in federal revenue would be lost.
Payroll taxes go toward “mandatory spending” such as Social Security and Medicare. These two entitlements are already insolvent and expected to be depleted in a matter of a few decades, without any cuts to payroll taxes.
To cut those taxes without offsetting them with spending cuts, while normal, is irresponsible.
The engine didn’t even warm up on that idea before Trump flipped on that and essentially said, the economy is healthy enough to where we don’t need more tax cuts.
(On a side note: taxes shouldn’t be leveled based on what the government thinks people can afford. That’s all but an endorsement of “from each according to his ability”.)
Trump acknowledges in that statement that cutting taxes helps the economy. He also tacitly acknoweldges that the trade war hurts American consumers.
While he plans to hike tariffs again on China, he deferred some of them until after the holiday shopping season, in response to the outcry from retailers. Since retailers buy their holiday inventory in advance, Americans are in the clear through the holidays.
But what comes after the holidays is the next shoe to drop. All this toggling and obfuscating tells me that he doesn’t know which direction greatness is, but he’s too proud to get directions.
Earlier this year, I mentioned how the NSA’s data collection program is set to expire in 2019. A recent memo out of the Director of National Intelligence’s office urged a re-authorization of the NSA surveillance program section 215 of the USA Freedom Act of 2015.
So the Trump administration is looking to re-up on this surveillance program?
I can’t help but think this is just a bunch of food rearrangement on the plate. Nothing is gone, just re-positioned.
Tinkering around the edges of a national situation as big as the one the US faces has become the political norm. Trump doesn’t seem to be deviating from that protocol.
Greatness is subjective. Just like Hope and Change pretty much meant whatever you wanted it to mean, so too is this nebulous Greatness America is striving to regain.
Greatness really should stand on its own. It’s not just getting what you want. Some of the things Trump wants has nothing to do with greatness. His endorsement of this trade war and surveillance prove that much.
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