Which is more disconcerting, the possibility of a Mid-East War, or President Trump?

 

Economics Without The B.S.**: 

[**  Double entendre intended.]

You would think with the outbreak of hostilities between Israel and Iran and the possibility of a Middle East War, the center for much of the world’s crude oil production, that the international stock markets, the overnight American stock markets, the price of crude oil, would all be reacting extremely volatile. Actually there is very little movement in the action. Crude oil is only slightly higher. Some of the overnight markets are actually positive; and the one’s that are negative are by no more than 0.5%. The value of the dollar, the world's reserve currency which has been slipping since Trump took office, and the value of gold, which is supposed to be a safe haven in times of trouble, are little changed. The bond market has little reaction.

Now remember when Trump announced “Liberation Day”? All the markets – in Asia, Europe, the overnight American markets, and the daytime markets – plunged, about 4%. The value of the dollar dropped precipitously. The bond market became unsteady. And gold rose in value as investors fled to safety.

Now you know what worries international investors.

Economic Activity: Are we doing better under President Trump?

 

Economics Without The B.S.**: 

[**  Double entendre intended.]

Well Trump has only been in office just under five months, so we need to give him a little more time before we make an evaluation – perhaps at the end of the year.  Opinions are mixed on the outcome we will have as they read the current data of a somewhat slowing economy, with some more positive while others are negative.

I don’t think anybody really knows the outcome of how the tariffs will play out, and that includes President Trump and his own people.  We have a very big economy, with many sectors, and international trade – both exports and imports – being only around 30% of our GDP, with exports around 12% and imports around 15% to 20% prior to Trump getting into office.  Still, we have a lot of economic activity that is indirectly tied to international trade. 

Trump and his people are trying to remake our economy, and after five months that appears to be happening.  For the past twenty-five years – since 2001 – we have had difficulty achieving economic growth rates above 3%; and our historic average is well above 3.5%.  We just had a report from the Atlanta Federal Reserve’s GDPNow that this quarter’s growth rate is humming along at close to 4% -- that’s where it stands right now, it is not a prediction of where it will be at the end of the quarter.  But their model has been pretty elevated most of this quarter, which started in April right after Trump’s “Liberation Day” where he imposed very high tariffs.

How did we get to around 4% Real GDP growth if most people think our economy is slowing; some even said it was shrinking?  Well here is their report today.

And let’s make a comparison to the report one month ago.

Notice that one month ago -- May 8th -- the GDPNow number was 2.3% and Net Exports was a negative number, because we had more imports than exports, and in the GDP accounting that results in a negative number for the Net. Today -- June 9th -- the GDPNow number is 3.8% and Net Exports are a positive number, over 2%. That change in the Net number from a negative (-0.6%) to a positive (2%) explains most of the difference between a 2.3% GDP and a 3.8% GDP -- Consumer Spending also slowed from 2.3% to 1.7%, with the other factors for investment, private inventories, and government spending fairly constant.

So the irony is that while the productivity, as measured by the GDP (Gross Domestic Product), took a big increase, the economic activity actually decreased because we had less imports coming into our economy and this was not made up by increasing our exports – less than a 2% increase from last quarter – or our domestic consumption and spending.

We will see if this continues.  If it does, President Trump and his people are going to be in for a big surprise.  And I would not expect the GDP numbers to stay elevated – above 3% -- if our economic activity is shrinking.

How could we tell?  Well we could look at some other indicators beside measuring broad based productivity like the GDP.  We could look at employment – if the economic activity is picking up, even though Imports are decreasing, we would expect more jobs to be created.  

Doesn't look very good at present when you compare it to some of the better times like the '60s or 1990s; does it?

We could look at Industrial Production.  President Trump said the reason for the tariffs is to get more investment in our own economy.

Doesn't look much better, does it?

And we could look at incomes and personal spending.  If economic activity is picking up we should expect, with more jobs, more spending following more income.

Kind of disappointing, isn’t it?  I would say Mr. Trump and his associates have some work to do.  Let’s wait till the end of the year to make our evaluation.

David Brooks, NY Times: The Democrats’ Problems Are Bigger Than You Think

 

Economics Without The B.S.**: 

[**  Double entendre intended.]

David Brooks, with an Op Ed in the New York Times this past week:

"The problem is not the party leaders. The problem is you. You don’t understand how big a shift we’re in the middle of."

https://www.nytimes.com/2025/06/05/opinion/democrats-trump-winning.html?unlocked_article_code=1.NU8.4LEZ.kp5_wkUjqCnX&smid=url-share

I think Brooks is right, we have in place a political system that has resisted change, and that is just what "The People" wanted -- I'm doing fine, don't bother me.

1. “The system is rigged.” This became evident with the international recovery from the Financial Crisis of 2008; in America, Wall Street got bailed out while Main Street had to figure it out for themselves. This resulted in a populist backlash on the political Left (the Occupy Wall Street Movement) and Right (the Tea Party Movement).

2. In my opinion, to disperse the power and influence of organized elites which is concentrated in our political institutions you need to decentralize the decision-making – make it occur at the local level, instead of the federal level. The federal level should give only general guidance and funding without restrictions. The decentralization may be disorderly somewhat, but this should work its way out.

3. Trump, by being disruptive and less than effective, may be helping in this effort of decentralization in an unintentional way.

President Trump, pardon all illegal immigrants whose only crime is minor.

 

Economics Without The B.S.**: 

[**  Double entendre intended.]

The Trump Administration right now is rounding up people in San Diego and Los Angeles who they say are criminals, with the criminality having to do with coming into this country illegally, without documents, and in some cases forging documents (like a Social Security card) so that they could find legal work.

I say if this is the crime then President Trump should use his powers, which he has used many times before, and pardon these individuals so that they can remain in this country legally.

After all, President Trump has already pardoned people who were convicted of rape, sexual abuse of a minor, and the January 6th insurrection to include seditious conspiracy. He also commuted the sentences of the leaders of the January 6th insurrection.

***************************************************

And you can check this out on the web, with an AI Assistant.

“Reports from NPR indicate that among the individuals pardoned by Donald Trump who were involved in the January 6th Capitol riot, some had prior criminal convictions for charges including rape. These pardons specifically applied to their January 6th-related offenses, but their previous criminal records, including for violent crimes, were part of their history.

For example, NPR identified dozens of defendants with prior convictions or pending charges for crimes such as rape, sexual abuse of a minor, and domestic violence who received pardons from Trump for their involvement in the January 6th events."

“On his first day in office (January 20, 2025), Donald Trump issued a sweeping proclamation granting clemency to over 1,500 people convicted or charged with offenses related to the January 6th Capitol attack.

This included:

• Commuting the sentences of 14 individuals, notably leaders of the Proud Boys and Oath Keepers, who had been convicted of serious charges like seditious conspiracy. Their convictions remain on record, but they were released from prison.

• Granting a full, complete, and unconditional pardon to all other individuals convicted of offenses related to the January 6th events.

• Directing the Department of Justice to dismiss with prejudice all pending indictments against individuals for their conduct related to January 6th.

This means that a large number of individuals who participated in the January 6th events, including some who assaulted police officers or engaged in violent acts, had their sentences commuted or were fully pardoned. These actions were met with significant criticism, with opponents arguing that they undermined the rule of law and downplayed the seriousness of the attack on the Capitol.”

If you want to make America Great Again...then you have to restore The Great Society

 

Economics Without The B.S.**: 

[**  Double entendre intended.]

The link between economic growth and progress was broken, and must be restored!

What Were LBJ's "Great Society" Programs?

How did he/we do it?  We had the greatest period of peacetime economic growth -- the 1960s -- in our history.  And it was broadbased, with the narrowest gap in income and wealth inequality.

	Real GDP	Real GDP          per Capita
1790 to 1810	4.96%	1.81%
1790 to 2024	3.77%	1.81%
1790 to 2000	3.96%	1.86%
1866 to 1896	3.96%	1.53%
1947 to 2024	3.09%	1.94%
1947 to 2000	3.52%	2.20%
1947 to 1973	3.87%	2.33%
1958 to 1973	4.11%	2.74%
1960s	4.53%	3.13%
1970 to 1980	2.92%	1.84%
1982 to 1989	3.62%	2.68%
1992 to 2000	3.84%	2.60%
2001 to 2024	2.13%	1.34%
2002 to 2024 Just the positive years, not including 2001, 2009, and 2020	2.76%	2.01%

Citation: Louis Johnston and Samuel H. Williamson, "What Was the U.S. GDP Then?" MeasuringWorth, 2025.  Downloaded May 22nd 2025.  My calculations.

If you just took the positive years of economic growth between 2001 to the present, leaving out the recessions, it would be twenty-five years of economic growth at least 1% below the historic average of our growth since 1790 and almost that bad since the post-World War II days of 1947 to 2000 – 2.8% versus 3.8% or 3.5% -- and that’s just counting the good years of the last 25 years, while leaving in all the panics of the 19^th Century and the Great Depression of the 1930s.

What if we had grown by just the average – an additional 1% per year more than we did over the last 25 years – 3.5% per year?^[1]  Where would we be today?  Our GDP today is around $30 trillion.  In 2001 our GDP was around $10.5 trillion.  Today in 2025 it would be either $40 trillion or well over $50 trillion depending on your starting point of 1790 or 1947, a $10 to $20 trillion difference.

What would be the difference in revenues collected?  Well the federal  government collects about 17% of the GDP.  So for each additional $10 trillion that would be $1.7 trillion ($3.4 trillion with a $50 trillion GDP economy); and that’s each year, and that’s without making the federal government any more efficient or changing anything, just doing what it has normally done.  It would be an additional $800 billion in revenues for all of the states for each additional $10 trillion added to the GDP (that would be $1.6 trillion with a $50 trillion GDP economy).

So think about that?  We currently have a $30 trillion economy and the President and Congress are trying to cut $1.5 trillion in programs, programs that are not waste, but help people.  This rationale would be obliviated if we just had normal/average economic growth over the last twenty-five years.  And I am just talking about doing what we did before, nothing exceptional; just being average.  And the $1.7 trillion additional revenues for each additional $10 trillion of GDP production is only the federal government’s portion.  That additional ten trillion dollars is coming from our private sector, our businesses, their activity.  That’s jobs, the additional jobs that we don’t have today.  That’s the additional consumer spending that we would be generating.  That’s the additional services our private sector would be providing.  

Now do you get it?

 

¹  The formula for compounded annual growth rate of change is used:

^{CAGR = ((Ending Value / Beginning Value)^(1 / Number of Years)) - 1} 

The GDP dollar values are for nominal GDP (e.g. $30 trillion) not the Real GDP which factors out inflation.  But the growth rates I cite (e.g. 3.5%) are the growth rates for the Real GDP.  For the CAGR formula I use the nominal GDP for the Ending Value and the Beginning Value.  These Nominal GDP growth rates are:

1790 to 1810      7.06% 1790 to 2024      5.51% 1790 to 2000      5.62% 1866 to 1896      1.70% 1947 to 2024      6.47% 1947 to 2000      7.35% 1947 to 1973      7.09% 1958 to 1973      7.15%    1960s                6.93% 1970 to 1980      9.86% 1982 to 1989      7.33% 1992 to 2000      5.83% 2001 to 2024      4.49% 2002 to 2024      5.70%  Just the positive   years not including 2001, 2009, and 2020

So the difference in the rates of growth, whether comparing them by nominal values (not adjusted for inflation) or Real GDP (adjusted for inflation), the difference is still 1%.  And you can note that the difference in Nominal GDP would be greater when the excellent growth of the 1960s is used for comparison, or the period from 1947 to 2000 – both being around 7%, and therefore a difference of 2.5% from the present period of 2001 to 2025.

 

I know this may sound mixed up for most folks.  But I did this because these are the ways you read these numbers in the news.  When they say the economy today is a $30 trillion economy they are giving you the Nominal GDP value, and not the Real GDP value of $23.5 trillion.  And when they say the economy has grown at a 3% pace, they are giving you the rate of growth of the Real GDP, in order to factor out inflationary growth.  I hope that clears it up for you.  That’s economists for today.