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Home https://server7.kproxy.com/servlet/redirect.srv/sruj/smyrwpoii/p2/ US https://server7.kproxy.com/servlet/redirect.srv/sruj/smyrwpoii/p2/ This is Donald Trump's economy, two years in

This is Donald Trump's economy, two years in



An enormous tax cut and continued spending growth added rocket fuel to a slow recovery that started in 2010 in the wake of the financial crisis. At the same time, an array of tariffs has upended supply chains and raised prices, throwing businesses into a fog of uncertainty.

A year ago, Trump could still lay blame for the condition of the economy on his predecessor.

"Net-net we are doing slightly better, especially in the short run, because the fiscal stimulus is likely to have a higher upside weight than the negative ones, which tend to be longer longing and more prolonged, "says Greg Daco, chief economist at Oxford Economics. "The economy has really eaten its cake, and it does not have much left on the table."

Here are the major ways the Trump administration has impacted the economy so far.

Tax cuts and rising deficits

The Tax Cuts and Jobs Act of 2017 dumped billions of dollars into the US economy, and even more came from Trump's first budget, which was beefed up to the Department of Defense and cut little else.

Much of the cash went back to shareholders in the form of stock buybacks, but it has been a boom in business investment and goosed growth in the third quarter to the highest level since 2014. The Tax Policy Center estimates tax cuts added 0.8% to gross domestic product in 2018, at a time when global growth was petering out.

"Over the course of 2018, most major economies around the word began to slow down, and the US did not," notes Courtney Rickert McCaffrey, with the management consulting firm AT Kearney.

That additional stimulus helped the job market to be tightened to the point where workers who had previously been overlooked, including people of color, veterans, the disabled, and the long-term unemployed, came into the labor force and posted their lowest unemployment rates in decades.

However, the increase is projected to fade in the coming years, down to 0.5% in 2020 and a negligible amount in 2027. The extra growth also came with greater federal deficits, with revenues expected to drop by about $ 1.9 trillion over ten years, according to the Congressional Budget Office.

"From what I've seen, I do not think this is a long-term productive investment in US economy's ability to grow in a sustainable way," McCaffrey says.

A crisis in international trade

Trump's trade policy has been an emotional rollercoaster for businesses that depend on either imported components or overseas markets.

Relief that the Trump administration reached an agreement with Canada and Mexico on minor revisions to the North American Free Trade Agreement has faded in the face of Trump's threats to pull out of NAFTA if Congress does not ratify the new deal.
And dread over the cost of tariffs that now apply to nearly $ 300 billion in US imports is compounded by the fear of new tariffs on even more Chinese goods if a deal is not reached.
Oxford Economics estimates the tariffs shaved between 0.1 and 0.2% off growth in 2018, and Tax Foundation projects will eliminate 94,303 jobs over the longer run.

The tariffs have one beneficiary: Steel producers who have been steadily hiring people and adding capacity since Trump took office. But anyone who uses steel and aluminum – or produces any of the thousands of goods that have been the subject of retaliatory tariffs from China, Canada and the European Union – has suffered.

The Federal Reserve's latest Beige Book, an anecdotal survey of business conditions across the country, mentioned "tariffs" 20 times – mostly in connection with how manufacturers are trying to raise prices to compensate for higher input costs. In a separate survey of 1,257 small business executives by the executive coaching company Vistage, only 4% said they benefited from the tariffs, while 43% said they had a negative impact.

"Whatever benefit they have experienced from the tax cut, the tariffs have upset that," says Vistage research director Joe Galvin. "The challenge they face is how do I pass that cost along? This is a direct profit hit. It comes right out of margins."

Taking a hatchet to regulations

The White House consistently talked about its effort to cut "red tape" as a major accomplishment in freeing businesses to be more productive rather than spending time and money compliant with federal rules . A report released recently by the Office of Information and Regulatory Affairs claims that the cost savings totaled $ 33 billion since Trump took office.
This is not much in the context of a $ 20 trillion American economy, as the Brookings Institution pointed out. And many of those savings estimates depend on not counting the economic consequences of the additional risks to health and safety that come with lifting regulations – much of which is eventually borne by the government

However, the widely-publicized rollbacks of Obama-era rules like small rivers and streams and other increasing emission standards for passenger cars and light trucks may have fueled some of the exuberance of mid-2018, as evidenced by the National All-Time High Optimism index reading in August.

"I do not know it's a substantial effect as much as there's a belief that it's had a positive effect," says Galvin, of Vistage.

Rolling up America's welcome mat

Sometimes you do not have to have an official economic policy to have an economic effect – all you need is tweets.

Trump's rhetoric and crackdown on immigrants and visitors – beginning with the early, chaotic roll-out of a travel ban on visitors from some Muslim-majority nations – has deterred foreign visitors and international students who have been coming to US 'tourist attractions and universities in lower numbers over the past year.

"Many foreigners do not like Trump or they – mistakenly, in my view – think he does not like them," wrote Trump campaign advisor Steve Moore wrote in a report commissioned by a coalition of travel industry associations about need to promote America as a destination. "We know that this can persuade foreigners to avoid coming to the US and spending their money here."
It's obvious in other dimensions as well. Foreign direct investment in the United States dropped sharply in 2017 from the previous two years and actually turned negative in the second quarter of 2018. That means foreign businesses are less interested in building factories and buying companies in the US

And it may be taking a toll on America's attractiveness to foreign scientists and engineers, who are choosing employers in Canada over those in the US

"Restrictions and delays in visa and passport applications have weighed down on immigration," says Daco, of Oxford Economics. "From an economic perspective immigration is a positive one, so reducing immigration has weighed down on the economy."


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