Question

How is the economy? Who is responsible for the economy, President Obama, President Trump, both, neither? Taking into account tax cuts, inflation, and other factors, is the economy sustainable?

Answer 1

The economy maintained a concrete pace of growth in the third quarter following Q2’s four-year high reading, underpinned by private outlays and a replacement of inventories. Despite the robust headline print, all was not colorful: Exports lessened for the first time in nearly two years, business investment decreased significantly and residential investment continued its fall. That said, private consumption should remain optimistic in Q4, thanks to strong job gains, rising wage growth and near-record consumer reliability as of October. Meanwhile, the midterm elections on 6 November saw Democrats re-aquire the House, which will likely annoy the Trump administration’s legislative agenda. On the trade front, President Trump’s scheduled meeting with Chinese President Xi Jinping on 30 November might help to soften relations between the two countries. However, the forth coming deal seems highly unlikely, as reflected by the dispute-ridden Asia Pacific Economic Cooperation meeting held on 17–18 November, and President Trump’s continual pressure to impose tariffs on the remaining USD 257 billion of Chinese imports, in addition to increasing the existing levies rate to 25% on 1 January.

A rigid labor market enriching private consumption,togther with heightened government spending, should persist to support growth. Despite this, the economy looks set to slow in 2019 and 2020 as the monetary stimulus fades and steady interest rate hikes drag on growth. Moreover, a further escalation of the trade war with China could weigh greatly on investment and the trade sector in the medium-term. Focus Economics panelists see GDP expanding 2.5% in 2019, unaffected from last month’s estimate, and 1.7% in 2020.

Despite facing challenges at the domestic level along with a rapidly changing global landscape, the U.S. economy is still the largest and most prominent in the world. The U.S. economy represents about 20% of total global produce, and is still larger than that of China. In addition to this, according to the IMF, the U.S. has the sixth highest per capita GDP .The U.S. economy displays a highly-developed and sophisticated service sector, which accounts for about 80% of its output. The U.S. economy is conquered by services-oriented companies in areas such as technology, financial services, healthcare and retail. Large U.S. corporations also play a vital role on the global front, with more than a fifth of companies on the Fortune Global 500 emerging from the United States.

Even though the services sector is the main locomotive of the economy, the U.S. also has a significant manufacturing base, which represents approximately 15% of output. The U.S. is the second largest producer in the world and a chief leader in higher-value industries such as automobiles, aerospace, machinery, telecommunications and chemicals. In the interim, agriculture represents less than 2% of produce. Nevertheless, large amounts of arable land, sophisticated farming technology and liberal government subsidies make the U.S. a net exporter of food and the largest agricultural exporting country in the world.

The U.S. economy maintains its powerhouse status through a varied combination of characteristics. The country has access to plentiful natural resources and a sophisticated physical infrastructure. It also has a large, well-educated and industrious workforce.Furthermore , the physical and human capital is fully leveraged in a free-market and business-oriented environment. The government and the people of the United States both play a part tobring in this unique economic environment. The government provides political stability, a functional legal system, and a regulatory structure that allows the economy to boom. The general population, including a multiplicity of immigrants, brings a solid work ethic, as well as a sense of entrepreneurship and risk taking to the diversity. Economic growth in the United States is continually being moved forward by ongoing innovation, research and development as well as capital investment.

The U.S. economy is currently emerging from a period of considerable disorder A mix of factors, including low interest rates, prevalent mortgage lending, unwarranted risk taking in the financial sector, high consumer indebtedness and negligent government regulation, led to a major recession that began in 2008. The housing market and several major banks warped and the U.S. economy proceeded to agreement until the third quarter of 2009 in what was the deepest and longest slump since the Great Depression. The U.S. government interfered by using USD 700 billion to purchase mortgage-related assets and propping up large floundering corporations in order to soothe the financial system. It also initiatied a stimulus package worth USD 831 billion to be spent across the following 10 years to boost the economy.

The economy has been recovering slowly yet hapharzardly since the depths of the recession in 2009. The economy has received further buttress through expansionary monetary policies. This includes not only holding interest rates at the lower bound, but also the alternative practice of the government buying large amounts of financial assets to raise the money supply and hold down long term interest rates—a practice known as “quantitative easing”.

While the labor market has improved significantly and employment has returned to pre-crisis levels, there is still widespread debate regarding the health of the U.S. economy. Moreover, even though the worst effects of the recession are now vanishing, the economy still faces a diversity of significant challenges going forward. Worsening infrastructure, wage stagnation, increasing income inequality, elevated pension and medical costs, as well as large current account and government budget deficits, are all issues challenging the US economy.

Trump’s vs Obama’s Economy:

Bureau of Labor Statistics, of the U.S. claimed that economy added 2,188,000 jobs in 2017 — Trump’s first year in office. So far, it has supplemented 1,306,000 jobs in 2018. However, the economy added more jobs in every year of Obama’s second term than it did in Trump’s first year. This holds accurate when examining the average number of jobs added per month.

Trump, for instance, inherited an economy that was in the route of bouncing back after a long recessionary drain. This makes it difficult to disentangle the results of his policies from the broader trend.

It is fair, for instance, for Obama to propose that the recession ended and the economy started flourishing again on his watch. In fact, if you were to chart various economic indicators on a graph, you would find it difficult to know exactly where the Obama Presidency ended and Trump’s began. To just give one example, the U.S. economy created nearly 4 million jobs in the last 18 months of Obama’s term, practically indistinguishable of the first 18 months of Trump’s.

Obviously, Obama was starting from the nadir of the Great Recession, so economic and job growth should have been anticipated. And many economists suggest that the increased taxes, burdensome regulations enacted in bills such as Dodd-Frank and the Affordable Care Act, as well as the sensitivity that Obama was anti-business, slowed the economic revival. In terms of economic yield, this was the slowest economic recovery since World War II.

Moreover, it is remarkable that growth had slowed during Obama’s last year in office, sinking from 2.3 percent in the second quarter of 2016 to just 1.8 percent in the final quarter.

Donald Trump's economy

In the meantime, economic growth under Trump has averaged 2.9 percent, and will likely reach the pinnacle of 3 percent this year. That’s significantly more than the 1.5-1.75 percent growth rate anticipated by the Federal Reserve Bank of San Francisco when Trump took office.

The economy has also raised 3.6 million jobs since the start of Trump’s presidency, and unemployment has decreasedfrom 4.8 percent to 3.9 percent. Unemployment rates for women, African-Americans and Latinos are all at multi-decade falls. Real disposable income — which barely increased during Obama’s reign— is now raising about .3 percent. And small-business optimism has reached its maximum level ever recorded.

Alternatively, it is far too soon for many of the President’s initiatives, such as tax and regulatory cuts, to have fundamentally distorted business incentives. Besides, those cuts have been much lesser than the president likes to boast. For example, according to the American Action Forum, net deregulation this year under Trump will save businesses roughly $1.6 billion. This is a step in the true direction but a fall in the bucket of an $18.6 trillion economy. And those savings will easily be offset by the economic damage from the tariffs that the Trump administration has been imposing on imported goods.

Is this sustainable growth or no is the question?

Rather than a basic shift in the economy, we may simply be seeing a "sugar high," the stimulative impact of tax cuts shared with massive increases in deficit spending. Government spending is up 7 percent since last year, and that is mirrored in gross domestic product numbers. There is valid reason, therefore, to question whether the growth we are seeing is sustainable.

Deficits are anticipated to hit $1 trillion soon, and the national debt will top $30 trillion by 2025. That level of debt will act as a substantial pull on the economy, not to mention Trump’s aforesaid trade policies and new immigration restrictions.

Both Trump and Obama are presenting rival versions of: "You didn’t build that." Both are signifying that it is the president — and government more normally — that moves America’s economic engine. They are both not jusifiable.

It is the American people — workers, entrepreneurs and investors — who make the American economy vibrate.

Apparently, government policy matters. Good policies can motivate investment and innovation; bad policies can decrease it. But no president can handle the individual choices of 325 million producers and consumers. Imbuing the president with magical powers to manage the economy is to invite the sort of prying that can only get in the way of American dynamism.

The best option that a president — any president — can give for the economy is to move out of the way and let Americans innovate and produce.

The president who did that could really claim glory.

Obama economy

• The economy profitted a net 11.6 million jobs. The unemployment rate slashed to below the historical standard.
• Average weekly wages for all workers were up 4.0 percent after inflation. The gain was 3.7 percent for just manufacture and nonsupervisory employees.
• After-tax corporate gains also set records, as did stock prices. The S&P 500 index increased166 percent.
• The number of people lacking health insurance decreased by 15 million. Premiums rose, but more gradually than before.
• The federal debt owed to the public increased 128 percent. Deficits were rising as Obama deceased.
• Home prices rose 20 percent. However, the home ownership rate hit the lowest point in half a century.
• Illegal immigration fell: The Border Patrol caught 35 percent lesser people trying to get into the U.S. from Mexico.
• Wind and solar power raised 369 percent. Coal production deteriorated 38 percent. Carbon emissions from burning fossil fuel dropped 11 percent.
• Production of handguns increased192 percent, to a record level.
• The murder rate slashed to the lowest on record in 2014, then rose and finished at the same rate as when Obama took office.
• Jobs — Over Obama’s eight years in office, the economy added a net total of more than 11.6 million jobs — a n increase in total nonfarm employment of 8.7 percent, as per the Bureau of Labor Statistics

·         Obama had the distinctive disadvantage of taking office in the middle of the worst financial crisis since the Great Depression. More than 4 million jobs were gone in his first year in office, on top of the 4 million lost in George W. Bush’s final year.

·         Certainly, Bush’s eight years were marked by two recessions, along with one that began two months after he took office in 2001. That helps understand why job creation on his watch was by far the most terrible of any post-war administration.

·         Both Bush and Obama also were bucking well built demographic trends. The heaving percentages of women entering the job market, which intiated in the 1960s, peaked at the end of the Clinton administration. Also, “baby boomers” — those born in the years after WWII veterans came back from the war to take up family life embraced retirement age in great numbers during Obama’s time.

·         Labor Force Participation — Because of these and other factors, comparatively fewer people said they needed to work. Under Obama, the labor force — those working or energetically looking for a job — fell from 65.7 percent of those age 16 and older to 62.9 percent.

·         Job Openings — With comparatively fewer people seeking employment, a job scarcity changed to a worker shortage under Obama. The Department of Labor reported that the number of vacant job openings nearly doubled during Obama’s time, touching just under 6 million in July 2016. That was at the time the highest in the more than 16 years that Labor Department statisticians had tracked this number.

·         Before Obama’s tenure, the only time job openings reached the highest 5 million was January 2001. During Obama’s second term, there were 25 months with over 5 million job openings. It has since continued toincrease , topping 6 million for the first time in April 2017, under President Donald Trump.

·         Unemployment — The unemployment rate was very high when Obama took office — 7.8 percent — and it continued to worsen in his first year. It peaked at 10 percent in October 2009 and didn’t drop below 9 percent till two years after that.

·         But gradually, and more or less steadily, the rate improved. By the time Obama left office, the jobless rate hadfallen 3 full percentage points, an enhancement exceeded only by the slightly bigger decreases during the Clinton and Kennedy-Johnson administrations

The inflation-adjusted incomes of American households reached the pinnacle ever recorded under the tenure of Obama. The Census Bureau’s evaluation of median household income reached $59,039 in 2016. That was $2,963 more in “real” (inflation-adjusted) dollars than in 2008, by and large a gain of 5.3 percent. Home values rebounded under Obama, attaining a new high in his final year.

Sales figures from the National Association of Realtors display the national median price of an accessible single-family home was $235,500 in 2016which was $38,900 higher than in 2008, an increase of 19.8 percent under Obama.

The 2016 figure was a proof, but only in raw dollars, without accounting for inflation. Prices reached their pre-recession high in 2006 between then and Obama’s final year, home prices rose 6.1 percent, while the Consumer Price Index increased to19 percent.

Home Ownership

The home ownership rate glided down under Obama, touching the lowest point in more than half a century during his final year.

In Obama’s last quarter, the rate rebounded to 63.7 percent, as the economy improved and sales of new and existing homes hit their excellent unsurpassed pace since before Obama entered office. But the ownership rate was still 3.8 percentage points lesser than the quarter before he took office.

• Corporations did much better job than workers during Obama’s time. Their profits hit several new yearly highs during his time.

Food Stamps

The number of people receiving food aid under the Supplemental Nutrition Assistance Program (formerly known as “food stamps”) increased by a third under Obama.

In Obama’s last month in office, there were just under 42.7 million Americans getting SNAP assistance, a gain of 10.7 million or just under 33.5 percent from January 2009.

The number rose as the 2007-2009 recession threw millions out of work, as benefit levels were improved for several years by the stimulus legislation Obama signed in 2009. The average benefit per person increased from around $113 per person in January 2009 to around $134 in July.

But then millions were taken away from the rolls as employment and incomes improved, and as Congress cut profit levels, which decreased to a monthly average of around $124 per person in Obama’s final month.

Calculating from his first month to his last, benefit levels and enrollment both grew very less under Obama than under his predecessor.

Stock Prices

Owners of corporate stocks also did quite well under Obama. The Standard & Poor’s 500-stock average more than increased two fold— rising by 166 percent during his eight years in office.

Debt and Deficits

The federal debt increased more than two times under Obama, and he left Trump a legacy of worsening deficits.

Debt — On the day Obama left office, the U.S. government’s debt payable to the public was more than $14.4 trillion, an increase of more than 128 percent during his eight years.

The debt also has grown noticeably even when measured as a percentage of the growing economy, from 52.3 percent of gross domestic product at the end of fiscal year 2009 to 77.0 percent as of the end of fiscal year 2016 on Sept. 30, 2016, according to chronological budget figures of the past from the Office of Management and Budget.

Deficits — Under Obama, annual federal deficits decreased, but then turned up again.

The deficit hit $1.4 trillion in fiscal year 2009. and spending measures that contributed as much as $203 billion to FY 2009’s red ink.

After that, the yearly deficits fell markedly for several years. In fiscal year 2015, the deficit was $438 billion, a drop of 69 percent from FY 2009.

However deficits were again on the rise as Obama left office.

CBO also shows that under current law, annual deficits will again exceed $1 trillion in 2022 and beyond. As things stand, federal debtpayable to the public will reach 80 percent of GDP in 2020, and more than 91 percent in 2027, CBO projects.

·         Coverage — Millions of Americans gained health insurance coverage as a consequence of the Affordable Care Act, also known as Obama care.

·         The percentage of all U.S. residents who lack coverage fell sharply, from 14.7 percent the year before Obama took up office in the White House to 9.0 percent in his final year — the lowest on record. Nonetheless, those gains fell far short of Obama’s 2007 campaign promise to “cover every American.”

Immigration

The flow of people caught crossing the U.S.-Mexico border illegally reduced markedly under Obama. In his final year, the U.S. Border Patrol detained just under 443,000, down 35 percent from the year before he took office.

Though it’s unfeasible to know how many illegal crossings went undetected, the number of those apprehended is the best available indicator of the overall trend.

·         Oil — U.S. crude oil production, mainly due to advances in drilling technology, heaved under Obama, helping to bring down fuel prices. In 2016, the U.S. produced 77 percent more crude oil than it did in 2008.

·         .

·         Wind & Solar — Wind and solar power has more than quadrupled under Obama. Electricity generated by large-scale wind and solar power facilities rose by 369 percent during the Obama years.

·         The increase in solar power in particular has been remarkable. The U.S. produced nearly 43 times more electricity from solar power in 2016 than in 2008.

·         Coal — As wind and solar rose, coal decreased. Obama put forth new restrictions that his administration called a “Clean Power Plan,” and his critics dubbed a “war on coal.”

·         During the Obama years, electric utilities drifted away from burning coal, which accounted for 48 percent of their power generation in 2008, however only 30 percent in 2016. The share supplied by burning natural gas went up from 21 percent to 34 percent, and the share supplied by nuclear plants remained steady at just under 20 percent.

·         Carbon Emissions — for the moment, the amount of carbon dioxide emitted into the atmosphere from U.S. energy-related sources has decreased during Obama’s time.

·         Trade

·         Obama assured in his 2010 State of the Union address to “double our exports over the next five years.” That however didn’t happen.

·         Instead, as the economies of major U.S. trading partners resisted, so did U.S. exports.

·         During the full eight years of Obama’s presidency, annual exports of goods and services increased by just under 20 percent (and actually declined in 2015 and 2016).

·         Meanwhile imports grew even more slowly, by just 6.4 percent, and so the U.S. trade deficitslashed by nearly 29 percent.

·         Guns

·         Obama campaigned on a promise to restore the “assault weapon” ban that expired in 2004, but that didn’t happen either. As president, he alsosuggested that never passed.

·         Instead, annual U.S. handgun production nearly tripled, as millions of Americans crowded to buy firearms.

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·         Crime

·         Despite more than a score of mass shootings, crime decreased substantially overall during the Obama years.

Car Mileage

Obama set a goal of doubling the fuel competence of cars and light trucks, but that promise isn’t working out. Although he put in place a regulatory requirement that cars and light trucks average 54.5 miles per gallon by

Meanwhile, the Obama mileage control are under review by the new administration.