The art of making the American economy great again

September 2017 | EXPERT BRIEFING | ECONOMIC TRENDS

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One of president Trump’s most memorable election slogans was his pledge to ‘Make America Great Again’. This had the twin benefit of being both memorable and vague. The US economy was growing reasonably well when Trump came to power, with unemployment at low levels by historical standards. There were ongoing concerns about rising inequalities and, in fact, anger toward the elites was one of the drivers behind the unexpected Trump victory.

The concerns about rising inequality in the US can be traced back at least to the 1980s, at a time of rapid globalisation and changes away from collective ideas to more individualistic modes to thinking. With the onset of the financial crisis in 2007 and 2008, the stresses in the system were made starker. The perception was that the wealthy few were bailed out while much of the rest of the country suffered by losing jobs and homes.

Banks and other financial institutions were rescued to prevent a financial collapse but could not prevent the economy frrm going into a recession. With the help of record low interest rates and quantitative easing, the economy gradually recovered and the job market improved after 2009. Unemployment fell from almost 10 percent in 2009 to 4.6 percent in 2016. However, wages did not grow despite the improving jobs market.

When Trump ran for office, his populist rhetoric of ‘America first’ resonated well with voters in key swing states who, perhaps, were hoping for greater access to a share of the country’s profits.

Six months into Trump’s presidency, various national and international opinion polls have found that Americans are feeling optimistic about their jobs, the strength of the country’s economy and their own fortunes, but the president’s approval ratings have hit an all-time low of 36 percent – the lowest for a modern presidency.

Despite the plunging popularity and the failure to make progress on key campaign promises, the economy seems to be robust.

With the ongoing investigations probing into possible links between the Trump campaign of 2016 and the seeming incapacity of the Republicans to pass legislation, such as laws to repeal and replace the Affordable Care Act, investors are perhaps getting a little jittery that these delays will derail the president’s pro-growth economic agenda of tax cuts and infrastructure spending. The prospects of the latter had helped to propel the dollar to 14-year peaks after the November election. However, during the course of 2017, the dollar has lost all of this gain it made since the electoral outcome.

Despite this, we suspect that the Trump administration may not be too unhappy, considering the boost it has given the export competitiveness of the US.

It is not difficult to take a critical view of the first six months of the Trump administration. President Trump and his administration have not managed to pass any concrete legislation apart from withdrawing from the Paris climate agreement and the Trans Pacific Partnership (TPP). There has been no sign on moving forward legislation toward lowering individual and corporate taxes, rebuilding America’s infrastructure or bringing back jobs from overseas, let alone building a wall.

The administration has appeared to be in chaos and confusion at times. The president has appeared more concerned with repealing the legacy of his predecessors than creating his own.

However, these are still early days and it is possible that the administration will start coming up with a more coherent way of operating and a more constructive legislative programme which will pave the way to actually making ‘America Great Again’.

Mihir Kapadia is the founder and CEO of Sun Global Investments. He can be contacted by email: sunglobal@sterlingmedia.co.uk.

Mihir Kapadia

Sun Global Investments