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November 5, 2018


Large economies such as ours are like giant supertankers; it takes a long time for supertankers to change course (they can’t turn on a dime) and usually years for economies to change courses, depending upon the depths to which such economies have sunk, the pace of success of policymakers in bringing recovery about etc., and the same time schedule generally applies to the failure of policymakers in economies that have boomed and are tanking as well. I have noted that when the economy is “good” those politicians in power claim credit for it but that when it is “bad” it was either their predecessors’ fault or due to some externality or other which no one could control.

I have found no cases in which politicians have owned up to their own failed policies in bringing about recession or depression. It’s always the other guy’s fault or due to war, pestilence or some other unavoidable happenstance. (Piketty calls wars “shocks,” shocks, that is, to the economic systems of the parties involved and neutral nations who are affected.) However, not all externalities and so-called “shocks” are unavoidable. Policymakers can make intelligent decisions that can iron out the ups and downs of market-based economies and make for fair and equitable distribution of the economy’s income and wealth using known remedies that have succeeded in the past. (See New Deal days.)

Let’s take a quick look at the background for assignment of blame for economic performance. Thus we know that aggregate demand is the sole arbiter of economic growth in market-based economies. We also know that giving taxpayers’ money to the rich on the theory that such recipients will reinvest such funds in new plant and enhanced employment doesn’t happen, that such a “trickle down” plan results in a bonanza of stock buybacks and increased dividends, not to corporate workers who would have spent such monies and thus stimulate demand which in turn would have created economic growth.

It is clear as day to non-ideological economists that trickledown economics is and always has been a political fiction designed to garner political contributions to the policymakers who continue, in spite of study after study to the contrary, to perpetuate this play for pay economic myth. Rational policymakers legislating for the common good and not for their campaign coffers, if they really want to see economic growth in our economy which would benefit all Americans rich and poor, would end wage inequality by legislating living wages to labor. Typically giveaways to the rich such as that in the recent Trump/Ryan tax bill do bring about a temporary upward blip in employment and demand, but at great cost to our future in that such temporary economic improvement funded by borrowed money has us looking at a record-shattering trillion dollar current deficit, a huge increase in our long term debt, not to mention that both are at interest – and interest rates are on the rise, making our 22 trillion dollar debt near unmanageable, especially with the tax cuts simultaneously given the rich which, predictably, calls for cuts in social services in order to finance the giveaway to the rich.

Back to the blame game – the economic ship of state moves slowly. Thus Bush’s Great Recession, second only to the Great Depression in severity, was Obama’s economy for several years before he could get Bush’s supertanker of big bank mortgage fraud turned around, and Obama’s recovered economy is Trump’s economy today. Trump, predictably, claims the economy’s current temporary success as his own when he only got on base about five feet from home plate.

It isn’t his economy, not any more than Trump’s successor will be able to take credit or deny liability for the economy Trump leaves him or her which, with Trump’s trade games, tariffs, ballooning budget and long term deficits (at increasing interest) and other market-roiling activities have caused me to predict a recession no later than next year – unless a Democratic House in charge of the purse strings can somehow restore order in the chaos Trump has bestowed on world markets, including our own, markets that first and foremost need stability and order, not daily tariff and sanction threats designed to achieve domestic political goals.

So after all the pretense, posturing and finger-pointing are over, who’s at fault for the coming downturn from Obama’s recovery Trump claims to be his own in today’s convulsed world markets and debt- encumbered emerging economies such as Brazil and others? I say Trump given his present trajectories will be at fault and advise readers to fasten their belts as our economic supertanker begins to turn, but you be the judge. There’s still time for us to batten down the hatches, ignore the Dow and recession-proof our assets, but no one knows just how long. You be the judge on that score, too.        GERALD        E





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