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The American Economy

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The American economy is a pretty big deal, something that I was surprised to realize we don't have a thread dedicated to. So I was thinking we might benefit by having one started. It seems like the kind of subject that can turn hot when things happen, particularly if stock markets turn bearish, or if China does something to affect our trading relationship, or Trump does something Trumpian that has an effect on our national economic situation. Stuff like that.

I acknowledge that we already have an Investing thread, but that's a thread about investing, not a thread about the economy. Investing is about opportunities for people who have money; the economy is higher-level and affects everyone, whether they have money or not. I've misposted about the American economy there. Now I can mispost about it here. :grin: 

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About the part in red, I would argue: well, not now, anyway. Maybe in 2024.

1 big thing: How to cut the trade deficit

Illustration of piggy bank with shadow of bomb looming over it

 

Illustration: Sarah Grillo/Axios

 

The U.S. trade deficit — how much the country buys from abroad versus how much it sells — rose to a 10-year high last year. And economists surveyed by Axios say there's only one certain way that President Trump can achieve his cherished aim of slashing it — push the economy into recession.

Driving the news: The 12.5% jump in the 2018 trade deficit, reported today by the Commerce Department, is the result of a growing economy, stimulated by Trump's tax cuts, economists agree, and not something amiss.

  • That also goes for a record jump to a $419.2 billion deficit with China, up 11.6% over 2017.
  • "People buy more, which means, in turn, that they import more. If you want to reduce the trade deficit, have a recession. Look at 2009," says William Reinsch, a senior trade adviser at the Center for Strategic and International Studies.
  • Of course no one wants a recession.

Background: Trump is conducting a multi-front trade war, the main purpose of which is to push down the country's global trade deficit, which he calls unfair and bad for Americans. Although most mainstream economists disagree — trade deficits reflect economic health, not malaise, they say — cutting the gap is a pillar of Trump's presidency.

By the numbers:

  • The annual U.S. trade deficit surged to $621 billion in 2018. For December alone, there was an 18.8% jump. In both cases, the gaps are the largest since October 2008.
  • The gap was 3% of GDP, up from 2.8% in 2017. "It’s still significantly smaller than in the decade before the Great Recession, when it approached 6%," reports Bloomberg's Katia Dmitrieva.
  • The annual gap is up by $119 billion since Trump became president. But if you go by economic orthodoxy, that's an issue only because he has emphasized it.

"Trump is over a barrel because he has made reducing the trade deficit a measure of his success in trade policy. And by that measure, he is failing," said Edward Alden, a senior fellow at the Council on Foreign Relations.

A thought bubble: Trump has voiced his view on debt for decades. His obsession doesn't mean he is taking the U.S. into recession, but that — if he wants a materially lower trade deficit — he needs to hope for one. Or pile burdens on the economy that take the country there.

The bottom line: As of now, the relatively robust U.S. economy is staving off recession for the rest of the world. The widening trade deficit lowers 2018 GDP growth to 2.9%, 0.3% below previously reported, and that's likely to be the peak before the next economic downturn, says Joseph Brusuelas, chief economist at RSM.

  • The next step is unhappiness: "The trade balance will turn when the U.S. economy sags," said Gary Hufbauer, a respected trade expert with the Peterson Institute for International Economics. "I doubt there will be cheers when that happens."

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Deficits of all types are political weapons used to win elections.  Once a politician that professed to care about deficits is in office, seldom is action taken.

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I know that Bill Gates got a bunch of billionaires to pledge to give away more than half of their money to charity.  

If they are so rich and looking for worthy causes to just give it away,  why not ask them to donate a portion of their yearly gains to the US Treasury every April 15th.  

I don’t think a 60% Too Rich To Care Tax is a bad idea.  

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On 3/7/2019 at 12:02 PM, tiger337 said:

The 3 wealthiest are bezos, gates and buffet. Without getting into my feelings for any of them politically, I ask this question:

How many of them worked their asses off and also put their *** on the line to get where they are? 

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How many at the bottom work their asses off and take risks?

 

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34 minutes ago, Gehringer_2 said:

LOL - if you and WaPo want to call the 10th year of a recovery 'suddenly' that is your god-given semantic right!

I'm sorry their headline offended you.

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2 hours ago, LooseGoose said:

I'm sorry their headline offended you.

hardly offended, just amused at the spin involved in calling upward wage pressure "sudden" when it usually happens years earlier in the business cycle than it has this time around.

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On 3/8/2019 at 10:12 PM, pfife said:

How many at the bottom work their asses off and take risks?

 

They're at the bottom because they apparently aren't taking the right risks. But kudos to them for working hard. 

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20 hours ago, LooseGoose said:

I'm sorry their headline offended you.

I'm sorry reality was lost on you

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8 hours ago, stanpapi said:

They're at the bottom because they apparently aren't taking the right risks. But kudos to them for working hard. 

You didn't answer the question though

Apparently is the operative word in this salad

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14 hours ago, stanpapi said:

They're at the bottom because they apparently aren't taking the right risks. But kudos to them for working hard. 

It's not just about making better choices - otherwise so many people wouldn't be at the bottom - not everyone is stupid. You can take all the risks you want, but if you don't have control of the means of production or the capital to acquire it, you're not going to be able to break into the protectionist club very easily.

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