Why Is President Trump Talking Down the Trump Economy?

Maybe one of the reasons so many see a recession on the horizon is that the president and the White House keep acting like it is.

The U.S economy certainly has significant strengths. GDP growth is slowing, down to about 2.1 percent, but not close to negative territory. The unemployment rate is down, continuing the slow but steady job creation levels that began when President Obama was in office.

But there are grey clouds that could indicate a storm is on its way. The inverted yield curve is the sign that has been most worrisome to the stock market, indicating a precipitous decline in confidence. But there is considerable evidence that investor skittishness reflects trends in the real economy.

U.S manufacturing is already in a recession, having suffered two consecutive quarters of negative growth, with the quarter that ended June 30th showing a 1.2 percent decline. Manufacturing in the United States is now at its slowest rate of growth since the 2009 recession.

The agriculture sector might be even more symptomatic of a declining economy. The USDA chief economist has warned that farm incomes are down almost 30 percent from the 10-year average, a decline driven by falling commodity prices. At $66 billion, expectations of farm income are less than half of what they were in 2013.

Perhaps even more than manufacturing, the woes besetting U.S agriculture primarily stem from the trade war with China. China’s decision this month to block all agricultural imports from the United States was a body blow to farmers who had already seen their income slashed by the trade war with China.

Particularly hard hit have been producers of soybeans, the most valuable U.S crop. The fall in soybean sales to China forced the Administration to provide $28 billion in aid to farmers. But soybean producers are concerned that China’s efforts to develop new soybean sources, such as in Russia, may foretell a long-term, perhaps permanent, decline.

Meanwhile, rising prices for farm equipment have left farmers trapped between a rock and a hard place.

Fear of recession is heavy in the air among U.S trading partners. Germany, Japan and Brazil face the prospects of recession, as does the United Kingdom, given fears of the impact of a no-deal Brexit. Growth has virtually ground to a halt in Italy. Singapore is on the brink of recession, and China is suffering a severe decline in economic growth.

But while the glass is half-full, for some reason the White House has been shining a spotlight on the fact it is also half-empty. Desperate-sounding tweets about “the crazy inverted yield curve” have only enhanced concerns. And while Trump has declared that the U.S economy is motoring head, he also appears to belie that position by repeatedly calling on the Fed to reduce its benchmark interest rates, a course usually followed by countries facing economic problems.

Trump also has floated the argument that the weakness of so many national economies bodes well for the U.S economy. But, in fact, it is hard to boom when your partners are headed for a bust. And the threats facing countries around the world is far from reassuring to American investors, who understand the interconnected nature of the global economy.

White House consideration of possible tax cuts represents another indication of concern. While many tax rates are steep, talk of reducing some is seen as another panicky sign.

A good example is confusion over the prospects of a cut in payroll taxes. While White House staff dismissed the idea immediately on Monday, Trump resuscitated it on Tuesday, saying: “(Cuts in) payroll taxes is something a lot of people would like to see. I am looking at it.”

Trump also raised the possibility of indexing capital gains tax rates to inflation - without congressional approval. Whatever one’s views on these proposals, they do not give investors confidence that an economic decline is not on the horizon - or that the White House is prepared to deal with one.

After 10 years of steady growth, the U.S may be due for a recession. And there may be little any government can do to forestall one. But one thing that will not do the economy any good is for the president and senior White House aides to run around like the sky is falling. The economy has considerable strengths. Throwing their hands up in the air has only depressed confidence that the United States and the world may weather an economic storm.