W
hether one agrees with Donald Trump’s economic policies or not, the state of economy he will inherit needs to be clarified. A recent article by the Washington Post’s Catherine Rampell stated as one of her main theses that Trump will inherit a strong and vibrant economy. While other aspects of the article make interesting points, the premise upon which the article’s foundation lies upon is mistaken. The economy that is being handed to President-elect Trump is not in the most favorable conditions as claimed by the article, it is actually the contrary.

In 2008, one of the greatest recession in modern history struck the US and the world. This economic disaster occurred in the last year of the Bush administration as the Obama administration was coming into power. While President Obama inherited the economic disaster and attempted to remedy it, all he has done, similar to his predecessor, is further conceal the root cause of the issue. Despite what Mrs. Rampell claimed as economic success by the Obama administration is anything but success.

The economic conditions presented to the President-elect are not favorable, nor was the economic conditions provided to President Obama. A long understood political maxim has been that the president cannot directly affect the economy, but that has not been the case in the last decade or so. The economy has been sitting on a bubble for a long time. Just like anything, all good things must come to an end. The prosperity under the Clinton years was due to for a recession but was dampened by the Bush administration’s famous tax cuts and other detrimental economic policies. But such meddling could only go so far before coming to an end, which it did in 2008. Even though that would have been the panacea to the economic travails, the Obama administration began to implement a series of government interventions that has helped delay the inevitable, a major recession.

In order to understand why the Washington Post article is incorrect, a review of the main arguments is needed. The article puts forth the following arguments:

2/3 of Trump’s supporters don’t believe government data.

A Gallup Poll found that 2/3 of all Americans do not believe what the mainstream media reports. Another poll found that 81% of all Americans do not trust the government. So despite painting a picture of Trump supporters believing in tin-foil hat theories, which some perhaps do, the country as a whole, liberal or conservative, is tired of what they see as misinformation, such as this Washington Post piece.

The unemployment rate is 4.6%, which President Obama can claim credit for. Anything around 5% or lower is considered full employment but to think of economy as fully employed is misleading. Even though the unemployment rate has been falling since 2008, there are two things not being discussed. The government performs mathematical voodoo and the Obama administration is not the first, it goes back many presidencies. A cognitive dissonance exists amongst the people who use government statistics to claim the country is fully employed yet ignore the other bits of information that exists. There is the U-6 unemployment rate, which accounts for those working part-time but desiring full time work and those who desire work but could not find it. The rate is more than twice the supposed unemployment rate, so how can it be claimed that the economy in great condition when the data says otherwise? Furthermore, the unemployment rate also declines because people are no longer seeking work; therefore that figure in itself is not a true indicator of an economic recovery. It is better to review the labor participation rate in order to comprehend the actual status of the economy. The participation rate hovered at a high of 66% prior to the Great Recession. Since then it has been on a downward trend, currently hovering right below 63%.

While real wages have increased in the last several months, the data set is not an accurate one used to demonstrate the true purchasing power of Americans. Instead what should be reviewed is the real median household income. This has not reached the highs of the late 1990s. This indicator is still trending downwards.

Gas prices should never be used as an indicator of economic prosperity. A president does not control the price of gas; rather it is determined by energy markets as well as the largest oil producer, Saudi Arabia. Current oil prices are low and being kept artificially low by Saudi Arabia supposedly for an array of reason.

The stock market continues to reach new highs. The reason for this continued growth in the last several years has been due to quantitative easing and near zero interest rate. With more $12 trillion dollars printed, nearly $10 trillion in negative-yielding global bonds, and more than 650 interest rate cuts since 2008, the market has been artificially pumped to these new highs and will not sustain. Unfortunately, when the crash occurs, it will have to compensate and will do so in a very detrimental way.

One of the greatest overlooked factors that have not been accounted for is the quality of jobs. In the decade since the Great Recession, most of the jobs created have been service jobs rather than skilled and manufacturing jobs. This is an important indicator that should be accounted for in determining the robustness of an economy. Skilled jobs are vital in ensuring a healthy middle class, which is essential to any democracy. Yet the US economy has transformed since the Great Recession into a 1099 or uber economy. This does not bode well for the future.

While Trump’s plan for an infrastructure overhaul might help alleviate some of the economic toil, it is nothing more than another bandage for a much larger issue. A recession is inevitable; it will come when nobody knows perhaps next year or in four years. But unlike any other recession, this will be worse than the 2008 recession. Similar to Trump’s claim of draining the swamp, the economy has needed draining for the past couple of decades. Perhaps this will happen under the Trump presidency, maybe not. But it should be known that it is not Trump’s economic policies per se that will lead to the next great recession, he may be able to delay it or expedite this collapse but it will not be as a result of him. It is a long time coming and has been only exacerbated by President Obama and his predecessors.

Luis Durani

Luis Durani is currently employed in the oil and gas industry. He previously worked in the nuclear energy industry. He has a M.A. in international affairs with a focus on Chinese foreign policy and the South China Sea, MBA, M.S. in nuclear engineering, B.S. in mechanical engineering and B.A. in political science. He is also author of "Afghanistan: It’s No Nebraska – How to do Deal with a Tribal State" and "China and the South China Sea: The Emergence of the Huaqing Doctrine." Follow him for other articles on Instagram: @Luis_Durani

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