Is the US economy poised for economic growth in 2017?
When the broad U.S. stock market set new records in the wake of President Trump’s election on Nov. 8, 2016, it went against the so-called experts’ predictions, which expected just the opposite.
This belief was strenuously fed by a one-sided American media that propagandized a GOP victory as the forerunner to another “great financial crisis,” similar to the 2007-11 downward spiral.
It’s no accident that this same left-wing-controlled string of newspapers, TV shows, and magazines have been strangely silent about the economic misdirection of the Obama regime, which wasted a near trillion dollar Congressional “gift” by spending that large amount on the emergence of Obamacare, cap-and-trade, and several eventually bankrupt solar panel companies. That period also saw the doubling of the U.S. Treasury debt from $10 trillion to near the $20 trillion mark. At the same time, the emphasis on small-business-strangulating regulations (Dodd-Frank) made 2016 the worst year for the “independents” in a generation.
The miraculous electoral victory of Trump has put American business genius in charge of the most prolific combination of population (330 million), fossil fuel reserves (coal, oil, natural gas), agriculture, and metal commodities — plus technology — that the world has ever seen.
With a group of experts comprising the team to finally take advantage of America’s superb “firepower,” the positive reversal of White House leadership will catapult the U.S. back on top, where its potential advantages had previously been ill-used.
Rebuilding the once world-leading manufacturing sector will be high on the list of the new president’s first 100 days. With the advantage of an overwhelming House majority, and a slight advantage in the Senate, Trump has the potential support base in place. The previous turnaround champ, President Ronald Reagan, did not have this advantage when being inaugurated on Jan. 20, 1981. Furthermore, Trump has the opportunities of a near all-time low interest rate, while Reagan had to face a two-year battle to crush a monetary inflation that had shot completely out of control.
The year 2017 contains a combination of solvable problems, such as a rational overall income tax approach. High on the list will be the rebuilding of a once dominant global manufacturing sector, much of which had scattered to low-cost overseas production, such as in China, Southeast Asia, and Mexico. This will be done positively by tax incentives and punitive tariffs for U.S. conglomerates’ offshore production finding its way back to the home country.
Also high on the list is an approach for bringing back the trillions in U.S. companies’ profits by setting up a reasonable (10 percent) permanent incentive. If Trump is successful in accomplishing most of these objectives, the 45th president will grace U.S. history as one of the greatest.
Will Trump’s offshore penalty revitalize economy?
A key element of Trump’s attempt to substantially increase U.S. manufacturing employment and inflate gross domestic product growth is a projected 35% tariff imposed on products shipped back to the U.S. by foreign-based American companies.
A major case in point was Ford Motor Co.’s announcement that all “small cars” would be produced in that leading automotive giant’s Mexican plant. Since this decision was made prior to Trump’s election, time will tell whether Trump sticks to his “penalty tariffs” and whether Ford and other manufacturing companies will pull back from the major penalties that would be incurred if Trump’s warning is ignored.
It goes without saying that both former two-term Presidents Obama and Bush did nothing to forestall the flight of hundreds, if not thousands, of companies — especially conglomerate divisions — to low-cost manufacturing all over the world. While driven by higher profit margins, engendering improved profitability, this had been done during the last 20-25 years, with impunity. This had the effort of cutting full-time factory workers from 20 million to 12 million since the turn of the millennium.
This shrinkage was sped up by dramatically evolving technology and Obama’s indifference to the rapid melting of the manufacturing sector. The outgoing president seemed to be impervious to the damage done, especially to small businesses. This was incurred by a combination of Dodd-Frank regulations, the war on coal, and the influx of “open borders,” which put an ever-increasing number of U.S. workers on the unemployment line and dependent on U.S. government handouts.
A further negative undercutting the U.S. economy was the one-sided nature of numerous bi-national and multi-national trade agreements favoring foreign negotiators and signed by Obama. This administration’s attitude did much to put a record number of privately-owned corporate entities out of business.
This was in addition to the lowest startup number in the past 25 years, shrinking the number of total independent businesses left standing. The past eight years also set a new record in percentage and number of part-time workers making up America’s once overpowering global industrial superiority.
President Trump will have his hands full in a massive attempt to reverse the all-time high executive orders of the Obama Administration, and the indifference to infrastructure upgrading, while spending a trillion-dollar debt addition on climatological purity, controversial healthcare, and the attempt to minimize fossil fuels with renewables. The latter have already proven totally impractical.
Why ‘Trump’ stock markets foiled expectations
After it became clear that Trump was elected president, the major U.S. stock markets stumbled 800 points on the Dow Jones Industrial Average.
The conventional wisdom expected higher corporate taxes, stoppage of international trade, and much higher interest rates leading to inflation.
But when the morning after indicated a much more friendly economic climate, including regulation reversal, infrastructure building, and increased domestic employment, the markets quickly reversed, resulting in lifetime-high stock market indexes. In these early days of the Trump presidency, both the new president’s statements, as well as his appointments, are much more reflective of the Reagan “business surge.” This “Trumpism” combined domestic and foreign policy that foresaw and substantially reversed the restrictive inflationary policies of Reagan’s predecessor, President Jimmy Carter. A comparison of the Obama/Trump successor to Carter/Reagan would reflect a similar historical repeat.
While the large populous resistance to President Trump’s election is showing no signs of acceptance by a bitterly disappointed opposition claiming legitimacy from popular vote success, Trump’s political strength and cabinet solidity will make the opposition voices less powerful in their resistance.
The extremely numerous initiatives awaiting implementation in 2017 will comprise the most numerous economic and political changes the U.S. has seen in almost a century. But the ability to carry most of them out during the Trump presidency’s first year will decide the size of the “stamp” history puts on Trump’s presidency — and the subsequent award of a reelection.
Is global warming a hoax?
According to Trump, the “trillions” spent on attempting to regulate the four-billion-year-old Earth’s climate is a “hoax” that utilized unprecedented funds needed for employment growth and a long-delayed national infrastructure renewal.
It is an uncontested fact that the bulk of the funds voted by Congress shortly after Obama was inaugurated, at the depth of the financial recession in early 2009, were marked for re-employment and infrastructure. President Obama and his chief of staff, Rahm Emmanuel, chose instead to fund “affordable healthcare,” cap-and-trade, and costly solar power panel plants. Most of the latter wound up in bankruptcy due to Chinese imports at half the cost of domestic producers.
Cap-and-trade was meant to reward manufacturers who would greatly reduce the effluence of carbon dioxide (Co2) under the direction of former Vice President Al Gore. This never came to a House vote due to tea-party-led mid-term GOP House majority takeover, which rejected this Administration caper.
While scientific judgments accuse the global climatological threat of being detrimental to the earth’s survival, their influence with the Obama Administration and several liberal-led Western governments have led to multi-national pronouncements, the virtual liquidation of coal, and restrictive regulations in the production of oil and natural gas.
While America’s economic competitors are enthusiastically voting to severely restrict the use of “anti-climatic” power generating commodities, these nations are happy to let the U.S. carry the major reduction load.
Unquestionably, the superfluous use of cheap coal power to generate energy befouled the air in several big U.S. cities by the mid-20th century, but these have been cleared up; meanwhile, the war against coal has hit fever pitch only recently.
Ironically, presidential candidate Hillary Clinton may have lost her quest for the White House due to her promise to “shut down the coal mines.” Critical states in the Midwest very likely voted for Trump due to the accelerating loss of fossil fuels production jobs with no positive offset in sight.
While the “climatological” battle and its long-term restrictions drag on, it’s a sure bet that it will receive no support from the Trump Administration.
Why Russia may become a manufacturing center
While Russia, and the much larger Soviet Union before it, was historically devoid of a broad range of manufacturing activities, current downward cost spirals may be about to change that.
While reigning over the Soviet Union, Moscow depended on its several East German, Baltic, Balkan, and Muslim Republics to provide consumer goods. The Soviets concentrated on military structure and a thriving space exploration technology while competing with the U.S. superpower status.
Over the past 30 years, the residual Russian nation of 140 million relied almost exclusively on oil and natural gas production and a pan-European system of pipelines to generate budgetary expenditures and a positive trade balance. But the current expanded fossil fuel price crisis has plummeted this once world-feared superpower into a current cost depression that has left its factories standing idle — and many of its citizens unemployed.
Russia’s worst currency crisis in decades, and a precipitous drop in wages, has brought its manufacturing costs down to the level of China and its competitors. Since world trade is quick to jump on consumer/producer goods pricing, already Korea’s Samsung electronics, Sweden’s Ikea, and the U.S.’s Mars are speedily taking advantage of Russia’s phenomenal price drops.
Russian factories are known to provide quality standards acceptable to Europeans, and even the U.S., to the point that even China’s huge population demand is showing interest.
The quick reversion of Russia’s massive producer economy, which generated a near 4% gross domestic product loss in 2015, is showing a positive comeback in 2016. This is equivalent to 2014, when Russia’s Brent crude oil was generating over $100 per barrel in the first half of that year.
With wages rising in much of Eastern Europe, the Russian manufacturing sector, already respected for good quality, is bent on developing a manufacturing hub for all of Eastern Europe and making itself available to the West, even including active U.S. world traders.
What is obviously holding back the Russians at this time is their lack of broad experience in consumer goods production. Since the days of the czars a century ago, when this world’s most spacious nation modeled its economy along European lines, Russia has focused on military and, lately, space activities.
But this will not require extended time for a nation that produced as many military aircraft as the U.S. in the last year of World War II and launched the first space capsule in the 1960s, spurring the U.S. to do likewise and sending the first men to the moon.
Whether the current Russian regimented leadership considers massive world trade a long-term proposition rather than a critical short-lived expedient will determine whether the intrepid Russians compound their current advantage.
Is the world’s population reaching peak level?
With a world population having reached 7.5 billion at the end of 2016, it’s a near certainty that 10 billion humans will occupy the earth by mid-century.
Not long ago, it would have been inconceivable that such high numbers could be accommodated on this third planet from the sun. Population experts in the mid-20th century estimated a peak of five billion due to the limitations of food, housing, employment, and atmosphere. At that time of nuclear standoff between the U.S. and the Soviet Union, there were somber predictions that nuclear annihilation was a factor to be reckoned with due to just such an accident, as almost became reality in late summer 1962. At that point in time, the gap between the Euro/American world and the overwhelming undeveloped masses everywhere else seemed irrevocable.
But the economic emergence of China, India, and the fast-developing Southeast Asian block has turned such previous predictions on its head. No one predicted the quintupling of the Sino/Indian population in a few short decades. Or that this would be accompanied by an economic/industrial development of such once backward nations. These are now near the top of the world’s gross domestic product (GDP) standing.
Despite the rapid evolution of high technology that has overtaken the developed world of the U.S., Japan, Germany, and, surprisingly, China, the pace of global population growth has far exceeded the five billion figure, in addition to its economic evolution.
China and India alone make up 60% of the current world population, and such once-forgotten growth nations as Pakistan, Vietnam, Bangladesh, Indonesia, and the Philippines are multiplying their numbers rapidly while also generating impressive economic growth.
While Turkey, Egypt, and Iran are on the verge of reaching the 100 million population mark, the Middle East is the one region that poses the danger of destructive global war due to the leadership struggle within the Islamist world expansion. Also, sub-Saharan Africa and much of South America have yet to equal the phenomenal economic development of much of Southeast Asia.
When looking ahead, today’s predictions could turn out to be futile. This is especially true, since the idea of a unified civilized world (United Nations) is, unfortunately, less likely than originally expected in the mid-20th century, when the end of the struggle between the U.S. and Soviet superpowers seemed to hold the key to eventual world peace.
Trillion-dollar college debt belies “free education”
The “free education,” which became a major plank in Democratic candidate Hillary Clinton’s platform, has proven its bankruptcy by its near-trillion-dollar debt. This is owed by hundreds of thousands of university graduates unable to pay the loans incurred by “government-supported” financial institutions.
This concept drove many future job aspirants to the dead end of a “liberal arts” diploma, which has proven almost worthless, especially in the increasingly tight job markets that erupted during the Great Recession and have only improved grudgingly in the past seven years thereafter.
Although it’s questionable as to how this debt will ever be paid off, as the majority of these graduates are coming off the “government dole” or living with their parents, even greater damage has been generated by shutting down many hundreds of secondary technical high schools that prepared their graduates for the nation’s hard-pressed mechanical crafts such as plumbing, electrical repairs, plastering, lathering, and the ability to provide the many skills needed in the huge maintenance and repair industry that is currently providing a major growth factor throughout the nation.
It’s not surprising that a shortage of truck drivers has developed recently, for which many companies are willing to pay close to six-figure salaries. No wonder that many of these liberal arts and science students were marching in protest against the election of Trump, who is determined to reverse the free-education dreams of the hundreds of thousands yet waiting to graduate.
The well-spring of opposition to Trump’s election has come from many of these “ultra-liberal” inspired students anticipating a free ride from Hillary Clinton, whose eventual election was thought to be a foregone conclusion, according to most professional pollsters.
To overcome the false promises of the last decade will be a major hurdle that will have to be overcome by Trump and his team of implementers. It may, unfortunately, become one of the most difficult, overriding tasks ever faced by an incoming president.
This article was originally titled “On the verge” in the February 2017 print edition of Plumbing & Mechanical.