Look for a decline in the U.S. economy very shortly after the triumphant inauguration of Donald Trump!
by Charlie Leck
One of the things I fear the most as Donald Trump puts together his administration, and continues to talk to a Republican Congress, is that our economy is going to tumble early on in Trump’s presidency. Warren Buffet is expressing concerns about the state of the economy and so are many other well established and reputable economists and market watchers.
Consider this: The stock market has risen by significantly more than 200% since Obama took over as President in 2009. That number is based on U.S. stocks that were traded on the two most significant markets in the country (NASDAQ and the NY Stock Exchange). The Standard and Poors 500 has risen more than 180%.
The morning after the election, sensing a potential decline in the stock market, I wrote to a number of the charitable organizations to which we have given quite generously and warned them that we might not be able to be so generous in the coming years. I couldn’t put numbers to my worry, but I do know that the market doesn’t not like uncertainty and instability in American politics. In my November 5 blog, when I predicted Trump’s victory, I also predicted a serious shakiness in world-wide markets in the coming days.
Now I read that such carefully watched investors such as Warren Buffett and George Soros are carefully watching the markets. Several market watchers have reported over the last few days that Berkshire Hathaway (Buffett’s holding company) has been shedding American stocks that rely on consumer spending.
The Republican Congress and Donald Trump are having conversations about a major shake-up in the size of government. They’ve talked for years about seriously reducing the number of government employees. Of course, such a reduction will have an impact on over-all employment numbers and it will, at the same time, reduce the amount of business the government will do with international suppliers. When the government employs fewer people it has the natural and expected impact on the general employment/unemployment in the rest of the nation.
A significant rise in unemployment impacts shopping and spending – from entertainment to automobiles and from dining-out to travel.
Under President Obama the U.S. unemployment rate was reduced significantly and got under 6% in the last year. It appears that major investing companies are expecting it to readjust and rise significantly in the next couple of years. It’s quite common for the rate to do that under a Republican dominated federal government.
The Washington Post said this morning..
“President-elect Donald Trump and the Republican-controlled Congress are drawing up plans to take on government bureaucracy they have long railed against, by eroding job protections and grinding down benefits that federal workers have received for a generation.
“Hiring freezes, an end to automatic raises, a green light to fire poor performers, a ban on union business on the government’s dime and less generous pensions – these are the contours of the blueprint emerging under Republican control of Washington in January.”
This is a common and frequent idea in the philosophy of Stephen K. Bannon (formerly of Breitbart News) and now a senior adviser to President-elect Donald Trump.
Many of us will not be able to spend at the rate we have for the last eight years. Nor will we be able to be as generous as we have to American charitable organizations. If thousands and thousands and thousands of individual household managers react that way, the economy is going to suffer.
If the economy tanks, hundreds and hundreds of generous foundations are going to take a hard look at their budgeted giving. Major charitable organizations will find it necessary to spend far less if the economy shrinks. The housing market will suffer. School and education spending will be reduced. Non-essentials, such as entertainment spending, will be examined carefully by each and every family in the nation. Visitors to food shelves will rise while less money will be given to these important organizations.
I think the American voters who led the march to the polls on November 8 are about to get what they asked for; that is, aid for the very wealthy and an enormous hike in the unemployment of the lower classes. Oh, boy!
The American voter has a short memory. He forgot amazingly quickly how damaged our economy had become between 2000 and 2008. While most of us had far less money to spend, the federal government was spending furiously on the Military-Industrial Complex (against which an important and dependable Republican President – Dwight David Eisenhower – warned us).
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