How to Beg Your Way to a Recession

Uber-economist and self-proclaimed economic genius, Donald John Trump, has unleashed his expertise on the global economy. Ignoring his own experts, violating the most basic free-trade precepts of the Republican Party, Donald Trump has heralded a new era in federal deficits and trade wars without much in countervailing benefits. We have massive tax cuts for the rich, but virtually no new high-paying jobs, particularly missing among his blue-collar constituency, and virtually nothing by way of improvement in education, job-training, infrastructure upgrades and repairs and job-creating scientific research.

Indeed, it doesn’t take a genius to look behind his glorious numbers to see the bold-face lies inherent in his taking credit for an “exploding economy.” No, Donald, having a quarter with 4.1% GDP growth is not “the first time in history.” It has happened 117 times before, and even 4 times during your arch-enemy Barack Obama’s administration.

And no Donald, a sky-high GDP doesn’t mean that much anyway, if you dissect the statistics. Rich folks have made so much money, bolstered by that tax cut, that they make the economy as a whole look great. But 70% of working Americans have not received an increase in buying-power in four decades! I believe a huge chunk of those voters are in your base. Costs of food, healthcare, fuel and housing, you’ll pardon the pun, have gone through the roof.

Since most Americans have benefited profoundly from low-priced manufactures from China, your slapping a massive duty on Chinese goods simply makes life more expensive for most of us, while creating very, very few jobs here. The few aluminum and steel workers that got jobs pale in comparison to the numbers of workers who lost their jobs because Trump-trade wars have forced their companies into massive layoffs, sometime exporting those jobs to other countries not impacted by such obscene tariffs… or simply driving other small businesses entirely out of existence.

And while you will wind up negotiating a trade deal with China, and you will claim that what you negotiate is a big win, China would have negotiated those deals without the trade war, but Xi Jinping cannot afford to back down to Donald Trump and have any semblance of credibility with his own people. In short, Donald, you ain’t gonna get much! Not to mention that even though China does not import that much in the way of American goods, she does have some very clever ways to make life hell for Americans trying to do business there without using tariffs.

“‘The first thing to observe here is that China is not a country of laws, it's an authoritarian dictatorship,’ said Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics, who warned that American businesses could take the punishment for Trump’s antagonism. ‘So from that opening point, China is potentially able to play much, much dirtier than the United States.’

“‘He will essentially force the Chinese government to retaliate in other ways — and those other ways can be much more costly to American firms,’ he said. ‘That belief is premised on a fundamentally erroneous assumption about how the modern economy works … and a lack of concern with how engaged American businesses are involved already in China.’

“American manufacturers like automakers have made considerable investments into manufacturing facilities in China, and the financial and professional services sectors have a large and profitable presence there. These and other multinationals operating in China are vulnerable to a wide array of actions the government could take against them.

“For example, Chinese officials could slow the customs process for U.S. products entering the country, launch investigations into or spring inspections onto factories, hotels or other businesses — all activities for which a veneer of plausible deniability would make proving a punitive motive difficult. The Chinese government could restrict access to its market by stopping American business investment or, if the situation worsened, mandate that they divest entirely, said Mark Zandi, chief economist at Moody’s Analytics.

“For manufacturers in particular, this prospect could be a big hit to the bottom line. ‘That would be very disruptive, it would be more costly and it would be a mess,’ Zandi said.” NBC News, June 19^th. But the tariffs on imported aluminum and steel, among the highest charged, apply to Canada and Europe as much as they apply to China. Construction costs have taken a huge economic hit as building costs have skyrocketed. Real estate is already priced out of the market for too many. Cars, appliances, etc. and other “durables” will begin to price themselves away from affordability as well.

But very few Americans will see any tangible benefits from anything Trump is likely to accomplish, and his multi-billion-dollar agricultural bailout fund being doled out to Trump-supporting farm states will run out soon. If China doesn’t back down soon, an unexpected political result, those farm states will be hammered, and those farmers will pay for their love-of-Trump with their livelihoods. They have to hope that Trump will accept face-saving tokens in the world of trade concessions, tiny little benefits, and will be able to sell those to his constituency as “huge concessions.” He seems to have a way with his base by just putting labels on what he does as “winning” and “unprecedented.” Little becomes big just by saying so.

“In a survey by two American chambers of commerce in China, nearly two-thirds of US firms who responded said the waves of new tariffs have harmed their business…

“The United States and China have so far slapped tariffs of 25% on more than $50 billion worth of each other's exports and more are in the pipeline. President Donald Trump said last week [early September] that new tariffs on $200 billion of Chinese goods could go into effect ‘very soon’ and warned that an even bigger raft of measures is in the works.

“‘Tariffs are already negatively impacting US companies and the imposition of a proposed $200 billion tranche will bring a lot more pain,’ Eric Zheng, chairman of the American Chamber of Commerce in Shanghai, said Thursday in a statement. ‘The US administration will be hurting the companies it should be helping.’

“The damage from the trade war to US businesses in China includes lost profits, higher manufacturing costs and lower demand for their products, according to the survey of more than 430 companies in industries ranging from technology to health care.

“About 30% of firms said they were shifting parts of their supply chains away from China and the United States to buy components from other places. A similar amount said they were delaying investment decisions because of the trade tensions.” CNN Money, September 13^th. Carrier (air conditioning), much touted by Trump as he kept a few jobs in Indiana, obviously only very temporarily and Harley Davidson are two very visible companies laying off American workers and moving some of their operations to countries not engaged in a trade war with China.

So add the failed, deficit exploding tax cut, the fact that too many companies have grown simply by over-borrowing as interest rates were cheap (and they are going up now), the hidden short-terms life expectancy from old oil fields that have been “fracked” about as much as they are going to get (the basis for new American oil supremacy), the clearly teetering UK economy as it simply cannot extract the kinds of concessions from the European Union that it expected and needs to stop the hemorrhaging of its expected growth projections to the the staggering student loan debt that is beginning to savage the spending power of young entrants into the job market and the exploding cost of healthcare ravaged by Republican attacks, pushing affordability out the window. And then there is the rising tide of bad debt, carried by way to many American lenders, in the developing world.

All of these elements are cumulative. And they feed upon each other and, eventually, pull the rug out of any justifiable support for a stock market that is overheated and heading for a major adjustment. Housing bubble again? Not quite as bad as before but very unpleasant. Sure Republicans, we will see that trickle-down theory at work. But it won’t a higher tide floats all boats; it will be the pain inflicted on all of us when the weight of fail policies trickles down to infect the entire economy. Let’s just hope it is a trickle of a recession… not dam bursting one.

I’m Peter Dekom, and the thought of an incompetent Donald Trump steering our economy based on his obviously erroneous assumptions about how the world works – micro-economic bullying at an individual corporate level does not work against entire nations and trading blocs – instills me with fear.