Bloomberg points at a large gap between consumer expectations and fiscal reality that has developed since the November election.
Consumers have embraced the idea of a massive improvement in the economy and in their finances as a result of Trump taking office. However, actual measures of economic performance to date have been “disappointing.”
It’s too soon to know if this gap will continue. The last time it was this large was in 2011.
Economic bulls are citing the reduction in regulatory burden as lifting the US economy. A notable example is Alejandro Chafuen, writing in Forbes. The first problem with his analysis is that under current rules, it can take upwards of one year for regulatory changes to take effect. Companies are being advised to maintain compliance woith ACA rules even though healthcare is changing. The second problem is that the economy depends on consumer spending. The 1% can’t carry the US economy.
There’s no reason to assume that Trump’s policies include fiscal stimulus. If anything, the early indication is an increase in taxes on the remnant of the Middle Class and workers coupled with rising health costs that will make most consumers worse off financially than they are today.
So will some economic magic happen, or will consumers have to come to terms with disappointment? Stay tuned.
- Chris Matthews, “These 5 Trends Will Shape the Global Economy in 2017,” Fortune, 1 January 2017. http://fortune.com/2017/01/01/economy-2017/
- Alejandro Chafuen, “The U.S. Economy In 2017: Welcome Higher Growth,” Forbes, 3 January 2017. http://www.forbes.com/sites/alejandrochafuen/2017/01/03/the-u-s-economy-in-2017-welcome-higher-growth/#4a4aec8d77da