US debt and the White House’s job



Analysis

By Ewen MacAskill

BBC News, Washington

The President likes to boast that his record on the economy is “excellent”. This week he took another crack at it, issuing two fresh claims. One was that things are getting better. The other was that we were heading back towards prosperity and prosperity at “north of 10%”. Whatever way you look at it – the choices on the economy – it is Trump’s job to solve them. WE WANT MORE

Read our open thread Our reporters answer your questions The early signs were that it was not going very well. In reality, he cannot run for re-election without delivering strong economic growth. So far, the evidence is not good. It will not help Donald Trump that Americans do not believe that things are getting better The former chairman of the Federal Reserve, Alan Greenspan, last month blamed “unprecedented” increases in government debt for holding back the recovery. But that was also before Trump had taken office. Democrats are trying to use the accelerating growth of the economy as a reason to vote against Donald Trump. And they say he has done precious little to keep it up. The political and economic indicators are in turn connected. The economy lags behind government spending and investment, which takes time to feel the full impact of. Over the last couple of months, the rate of growth of private sector spending and investment has been better than the much-discussed investment rate in the government sector. But that is mainly because of the drop in defence spending. When the defence budgets are growing as fast as they have been, much faster than inflation, then the investment rate must have been very high. So the US economy is growing – faster than expected but still not really strong enough to reduce long-term debt levels. But the spending on Medicare, Medicaid and Social Security is growing too. That has kept growth above potential for a time. Nevertheless, the Democrats’ message seems to be true. Donald Trump’s tax cuts haven’t worked Out of the 876 respondents to a CBS poll last month, 58% said they did not believe the economy was getting better and the same proportion said that “in five years, economic conditions will be worse”. The biggest single threat to the President’s economic strategy, say Washington-based analysts, is the fiscal cliff. That is the U-turn Donald Trump promised early in his time in office. Like candidate Trump, he said he would produce a ten-year budget deficit of zero. However, as Ewen MacAskill points out, he has delivered about $600bn of tax cuts without increasing government spending and tax revenues have been declining. That has driven up the debt, leaving Donald Trump the job of putting America back on a track of growth, investment and prosperity – but so far, it is not happening. President Trump is back at his resort for the Thanksgiving holiday. His ostentatious wealth is politically dissonant. We need to return to austerity, monetarism and to some semblance of certainty. With his first budget proposal due on Wednesday, we could be back to a painful and protracted period of Washington brinkmanship over the budget. The President likes to boast that his record on the economy is “excellent”. This week he took another crack at it, issuing two fresh claims. One was that things are getting better. The other was that we were heading back towards prosperity and prosperity at “north of 10%”. Whatever way you look at it – the choices on the economy – it is Trump’s job to solve them.

Bookmark with: Delicious

Digg

reddit

Facebook

StumbleUpon What are these? E-mail this to a friend Printable version

Leave a Comment