The Donald’s Delusional SOTU

By David Stockman

As we said on Fox Business yesterday, Donald Trump is walking himself right into a miserable trap. He and his putative “advisors” are apparently so blind to the severe headwinds facing the financial markets and the deep structural impairments plaguing the US economy that they have eagerly embraced a veritable fairy tale.

Namely, that after one year of pugnacious and impulsive tweeting and little else, the Donald has brought the American economy roaring back to life. And we do mean little else because the Trump Administration’s ballyhooed reduction in Federal regulations is almost entirely hot air (more on Thursday) and the tax bill was not signed until nearly the last day of the year.

So the fact that there has been no acceleration of growth whatsoever during the Donald’s first year should not be surprising. After all, there were no policy changes that could have thrust the faltering US economy forward—even as it labored under the same old, same old baggage which has held it back in the years since the Great Recession.

We are referring, of course, to the $67 trillion of public and private debt that now stands at 350% of national income, and which has not been “de-leveraged” by an iota during nearly nine years of so-called recovery.

As it happened, real GDP in Q4 2017 posted exactly 2.499% above where it stood in Q4 2016. Since the average real GDP growth rate since Q1 2014 has clocked-in at 2.518%, you needed a magnifying glass to spot the difference.

Even then, the truth is that real growth actually decelerated slightly during the Donald’s first year on the job—notwithstanding his noisy SOTU boasting to the contrary.

The real truth of the matter, however, is that both of these numbers are pretty punk— given the brutal recession that preceeded the chart below and the massive monetary stimulus that was injected thereafter.

And that’s to say nothing of the fact that the business cycle clock is running out. If after 104 months of so-called recovery, the US economy has not broken out into “escape velocity” there is something fundamentally wrong that Trumpian bloviation is not going to cure.

To be sure, the Trumpian argument is that this is all prospective. With $2,000 tax cuts in their pockets and $1,000 employer bonuses (in purportedly 3 million cases to date) to boot, average American households are going to, well, shop until they drop—-even as corporate business with $350 billion in extra cash flow during 2018-2020 alone will be investing up a storm in both capital and wages, too.

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