The stock market took a dive yesterday as fears of higher interest rates combined with the negative effects of the Trump tariffs. Interest rates have been climbing in anticipation of faster growth, as we saw last quarter when the GDP went above 4% (4.2%) for the first time during Trump. Consistent GDP growth is good, but many economists argue that it should remain in the 2-3% range to avoid bubbles and inflation. The third quarter is looking like another 4% GDP result, which is leading some to fear that the economy will overheat.
How did we get here? The business community took the Trump Tax Scam to heart, believing against all historical evidence that tax breaks for corporations and the wealthy would translate into sustained economic growth. Instead, the gains reaped by corporations have been used for stock buybacks and higher dividends, which has enriched shareholders (mostly wealthy executives) and propelled stock prices higher, but has done little to bolster or expand our underlying economy. Very little has been trickling down to the rest of us, which is why “trickle down” economics has been a proven failure as an economic policy. Perhaps the markets are starting to realize that recent market gains were built on buybacks, not a better business environment.
What we know is that tariffs like those Trump slapped on China usually and historically have a devastating effect on our GDP. Why? Just look at Ford for the answer. The car-maker is laying off 20,000 workers after taking a $1billion hit from the Trump tariffs. And farmers are also hurting from the tariffs, even after a Trump bailout only partially reimbursed them for their tariff-related losses. The last time we entered this kind of tariff based trade war, our GDP dropped 8%.
Higher interest rates will also be a drag on the economy, causing borrowers to spend more of their income on debt payments. And as our national debt mushrooms, it will also cost our treasury immensely more to service. Oil prices are already higher, creating more drag, and home heating costs are predicted to be anywhere from 11% to 18% higher this winter. Health insurance premiums are also soaring under Trump, and drug prices are rising fast despite promises from Trump on the campaign trail to negotiate and keep them down.
October has often been the month of market recalibration. Corporate earnings are still strong and so is consumer sentiment, so yesterday’s plunge may only be a healthy and temporary correction. But it’s critical to note that the underlying fundamentals don’t support the story of sustained 4% growth. Trump’s Tax Scam and his tariffs are bound to hurt our economy in the long run, along with so many other factors like heathcare costs.
Rep John Faso has done nothing to help the situation. He wants to tear down our social safety net by hurting SNAP, chipping away at Medicare and Social Security, and supporting low-cost garbage heathcare plans that will increase premiums for the rest of us. Faso supports debunked trickle-down economics, and seems fine with the mushrooming deficit, even though he was a virulent deficit hawk under Obama.
Let’s keep working to Fire Feckless Faso and elect Antonio Delgado. Phonebank & canvass.
REMINDER: NYS Voter Registration for the Midterms closes THIS FRIDAY, OCTOBER 12.