Trump boosted Christmas spending? Doubtful
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Parsing President-elect Trump's tweets seems to be a sisyphean task. I am rather skeptical of the advisability of spending significant effort analyzing each one, when so many seem either to express petulance or to divert attention from other, more pressing issues. 

When it comes to the economy, however, I see some importance in debunking claims that sound plausible, but in fact are based on little or no evidence. In one of his latest tweets, Trump takes credit for the post-election stock market rally and an apparently solid Christmas retail season. Could there be any truth to this statement?

Neither claim is completely out of the realm of the possible, but neither can be confirmed with any great degree of confidence. The stock market claim probably has more plausibility.

Stock markets are notoriously subject to mood swings. Despite academic claims that stock markets are efficient machines that accurately incorporate all available information into equity prices, the enormous swings and lasting bull and bear markets suggest that euphoria and depression are relevant terms.

The post-election stock market rally has all the markings of an episode of euphoria. My guess is that investors have decided that Trump will succeed in drastically cutting taxes and regulations.

The end of gridlock, along with Republican control of the White House and Congress, may also be fueling this optimism. When the realities of achieving consensus in the House and Senate on complicated issues set in, the optimism may fade.

But, for now, there does seem to be a significant shift in how investors view the near-term future.

The holiday shopping season is considerably less plausible. Comprehensive data on retail sales and personal consumption will not be available for a while yet.

However, the idea that Americans, flushed with new hope, are flocking to the mall in a Trump boomlet seems…pretty silly. Every major indicator of consumer health has actually been fairly strong in the last two years.

Poverty fell in 2015 for the first time since the Great Recession began and disposable income growth has been moderately strong. 

One of the great puzzles of the Obama years is the degree to which the solid record of recovery translated into such a widespread perception of stagnation.

I suspect that longer-term trends, including declining labor force participation and the bifurcation of the labor market into well-paying, highly skilled jobs and poorly-paying, low-skilled jobs were the most likely culprits.

Far too many people were left out of the recovery. The success of Congressional Republicans in blocking some of the simple, effective policies proposed by the Obama Administration, including Medicaid expansion and extended unemployment benefits, also has to be a factor.

Mr. Trump sees optimism everywhere, but his vision hardly extends beyond his family and his Wall Street friends. Having nominated a cabinet drawing heavily on plutocrats, Mr. Trump may not be aware that the stock market is not what interests average Americans.

Perhaps he does not know that the blue collar workers who voted for him in Michigan, Ohio and Wisconsin are not also hedge fund managers.

 

Evan Kraft specializes in the economics of transition, monetary policy and banking issues at American University. He served as Director of the Research Department and Adviser to the Governor of the Croatian National Bank. 


 

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