Donald Trump may well have found plenty to crow about in his State of the Union address to Congress last night but all too few of the handful of positives that have, in his view, occurred during the first year of his presidency can really be put down to him.
OK, so you are going to retort by asking what about record levels of employment across all sectors of the economy and indeed, record low levels of unemployment apparently in the American African and Hispanic Communities. You will probably say to me that the US economy is doing great, that the stock market is at near record highs and that very few are about to suggest that a crash is on the way.
Fair enough and it is unarguable that consumer and business confidence across many parts of the US is high and also that, with the US corporate results season about to begin, the likelihood is that the majority of large manufacturing and service based businesses will demonstrate that they are prospering.
And then you will probably want to remind me that the benefit of the personal and corporate tax cuts that Donald Trump has fought so hard for and finally won is yet to begin to impact positively on the economy.
All of the above points are true of course but, tax cuts apart, my point is that none, or should I say, very little of this is really down to the Trump regime or anything that the White House administration has so far done.
The question that I would ask, assuming of course that Donald Trump is not given a second term as president three years from now, would be given the mess that whoever is voted in will probably be forced to pick up, who on earth would want to be the next President of the United States?
What mess I here you say and I agree? Never in my memory was an American president looked on with so much disdain by the nation’s allies and friends. Never have quite so many nations feared what might come out of the White House next and what damage this may do to the already unstable geo-political situation that afflicts so many parts of the world. Never has such a large and seemingly responsible nation showed itself up for what it is under Donald Trump by denying climate change and the need for all nations to come together and work together to find solutions that work.
And what about the US economy, is Donald Trump right to claim any degree of success? Well, for a start and ignoring factors such as reducing taxation that has come on his watch and that, even I must admit, can sometimes end up raising tax receipt levels for the government of the day should the economy become even more buoyant, most estimates put the cost of the Trump package of tax cuts at $1.5 trillion over a ten year period.
Personally I think that figure is somewhat low but who am I to know. The bottom line is that without spending an extra dime on infrastructure Donald Trump will, over ten years, have probably added another $1.5 trillion to the already high debt mountain.
Sure, it would be wrong to ignore the possibility that if economic growth could be sustained at 3% then the tax cuts would in effect pay for themselves. That though is very unlikely and I have a nasty feeling that by attempting to stoke the economy with tax cuts and other goodies the US administration is fuelling the fires of potential inflation. If that occurs, forget any talk about growth.
By the way, just in case you might have forgotten, US national debt has already topped $20 trillion, fractionally short of the $20.5 trillion allowable limit, and the annual deficit is creeping ever closer toward $1 trillion. In his State of the Union address last night the President appealed for unity in helping to appropriate $1.5 trillion for urgently needed and long overdue infrastructure spending.
My old chum Anthony Peters, now an independent at Blockex, summed the current situation for President Trump up very well in his morning note today when he said “In context, aggregate federal, state and local authority tax take amounts to approximate US$ 6.5 trillion per annum. Against that stand close to US$ 7 trillion of spending so the gross public sector deficit is already around US$ 0.5 trillion per year. Now he intends for the three levels of the public sector to somehow find another US$ 1.5 trillion for infrastructure. America is between a rock and a hard place – it cannot afford the infrastructure upgrades it so badly needs while, as Trump has quite correctly taken on board, it can do without them even less.
Just last week the US Treasury said that the US would need to borrow $441 billion in privately held debt this quarter alone! Remember too that we are still another of those two week spending bills that allow the US system of government and all its workers to come to work and be paid. That ‘Stopgap’ Bill expires again next week and who knows what will happen next?
So much for the economy but what else came out of the State of the Union speech? For unity read discord and disharmony. For glass half full read glass half empty. For all the talk of building a safe, strong and proud America read building an isolationist America. Sorry, but the rhetoric and pleas for harmony and bi-partisan cooperation hardly wash alongside the continual, as evidenced in the further attack on Obamacare and reversal of his decision to close Guantanamo Bay, anti-Obama rhetoric. If I was American I doubt that I would be Democrat but no one is about to convince me that Mr. Trump speaks for the majority of Americans who feel neglected and ignored.
Yes, for a Trump speech this was well delivered by him and well thought out and written by his advisors. His immigration theme fell on mainly deaf ears and it was noticeable how for the most part the president stayed away from talking about Russia and China albeit that he did at least mention North Korea and Afghanistan.
At least the US president does come before Congress annually to provide some kind of view of where the nation is. Here in the UK we are left to what a Prime Minister decides to talk about at the annual party conference or indeed, the annual speech given to the Lord Mayor’s Banquet at the Guildhall. These tend to stick to one rather than all subjects of government responsibility.
Mind you, one can imagine how, whether the speech was brilliant or duff, it would be torn apart the BBC’s ruling political classes whose personal mandate appears to be rid the nation of Mrs May at all cost. Unlike the British who have long distrusted their politicians Donald Trump is probably the first US president to be rounded on in the manner that British politicians have become so used to.
CHW (London – 31st January 2018)
Howard Wheeldon FRAeS
Wheeldon Strategic Advisory Ltd,
M: +44 7710 779785