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Aug. 22, 2019, 9:08 a.m. EDT

Recession? Bring it on! says Trump

No, the fundamentals of the economy are not ‘solid’

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By Rex Nutting, MarketWatch

The drop in the ISM composite index shows a sharp slowdown in American businesses, but not a contraction — yet.

Donald Trump doth protest too much. The louder he insists that everything is fine in the economy, the more we’re convinced that maybe it isn’t.

The economy is “strong,” “incredible” and “terrific,” according to President Trump. The best in the world. All the other presidents are envious of Trump’s beautiful economy, he says.

The fundamentals of the economy are “solid,” says Kellyanne Conway, a senior White House adviser skilled in public relations. Top economic officials — and skilled spin doctors in their own right — Larry Kudlow and Peter Navarro repeated the same talking points on the Sunday TV show circuit this weekend.

Airbrushed Tariff Man

There are elements of strength in the economy, for sure. But we know that Trump and his aides aren’t telling us the whole story. It’s an airbrushed version of reality, and the thing that’s been left out is the 800-pound gorilla better known as Tariff Man.

If the economy were really doing so great, we wouldn’t see the president of the United States debasing himself by begging the Federal Reserve for lower interest rates. We wouldn’t see the White House float (then kill and then float again) a trial balloon about a payroll tax holiday and another supply-side tax cut for the 1%.

We wouldn’t be hearing from business leaders and consumers alike that they are getting more pessimistic about the economy. We wouldn’t see the yield curve inverting.

The Federal Reserve certainly wouldn’t be cutting interest rates if the economy were as great as the White House says it is.

If the economic fundamentals really were “solid,” you wouldn’t see the White House sending out its cheerleaders to convince us. Trump and his aides would let the facts speak for themselves.

In fact, the economic fundamentals aren’t all that great. Some fundamentals are very good, but others aren’t. That’s par for an economy that’s growing at about 2% per year.

Let’s go through the fundamentals, one by one.


The consumer is the strongest part of the economy right now. Consumers are enjoying the sweet spot of the business cycle, with a very low unemployment rate. Consumption is strong and personal savings rates are up. Higher incomes mean consumer debts are manageable.

These aggregate numbers mask a lot of inequality, however.

Most of the income growth in the past 10 years has gone to the elites. It’s only now, with the unemployment rate far below what policy makers thought possible, that the middle class and the working class are finally reaping the benefits of the strong economy with fatter paychecks and more opportunities for a good job.

Households are more vulnerable to a slowdown than many think. A lot of families are one layoff slip away from poverty. They need this expansion to continue.

Consumers are still quite confident about the economy, but the Fed’s rate cut shook them up by making them wonder if they ought to hunker down and ride out the storm that’s coming.

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