Over the last few weeks, we've been exploring the competing narratives about the US economy -- with the White House insisting that all is well, as many in the media hype up the possibility of a coming recession. My general conclusion at this point has been that while there are some soft spots and genuine warning signs, the economy's fundamentals remain quite strong. Unemployment has been quite low, the job market has been quite robust, and wage growth has broken free from years of frustrating stagnation. We also recently received positive news on other indicators, including productivity, retail sales, and overall consumer spending:
U.S. consumers spent more in July than economists expected, the federal government said on Thursday, as retail sales rose 0.7% vs. the 0.3% estimated. Excluding automobile sales, a more volatile component, retail sales rose 1% — double what economists anticipated. Why it matters: Consumers were largely unfazed by the increasing economic uncertainty in July, defying other indicators that point to a global slowdown or recession. The data also comes as Walmart, one of the world’s biggest retailers, posted strong financials for its most recent quarter.
But perception can sometimes shape or morph into reality, so if the media's recession drumbeat started to shake Americans' confidence, there's a chance it could become a self-fulfilling prophesy. Not so fast. Over to you, Americans -- via Team Trump:
More great economic news!— Andrew Clark (@AndrewHClark) August 27, 2019
Americans' confidence in the U.S. economy has climbed to the highest levels in nearly 19 years - the highest since November 2000!
"Hiring and income gains are keeping consumers upbeat." https://t.co/lYCHHswvfR
U.S. consumer confidence declined in August by less than forecast as Americans’ assessment of current conditions climbed to the highest level in almost 19 years, helped by a job market that remains robust. The Conference Board’s index eased to 135.1 this month from a revised 135.8, according to data from the New York-based group Tuesday that exceeded all estimates in a Bloomberg survey of economists. The gauge of views on the present situation jumped to 177.2, the highest since November 2000...The reading shows hiring and income gains are keeping consumers upbeat and assuaging concerns about the economy’s prospects in light of slowing global growth, volatile financial markets and escalating U.S.-China trade tensions. The level of confidence could allow for sustained household spending that remains a mainstay of the economy. The share of respondents who say jobs are currently plentiful jumped to 51.2%, the highest since September 2000, while the share saying jobs are hard to get declined to the lowest in three months.
In spite of the global slowdown and an escalating trade war with China (which may be slightly de-escalating), Americans feel good about their job prospects and income games. These are powerful countervailing factors. I'll also note that part of the reason people's take-home pay is up is the 2017 tax reform law, which reduced average tax burdens across every single income group in the country, with the possible exception of millionaires. The 2020 Democrats, in addition to proposing an explosion of new spending -- which will massively exacerbate our already-scandalous deficit and debt trajectory -- are pledging to cancel the successful GOP-passed tax cuts. This would raise taxes on working-class and middle-income Americans. The opposition party has an insatiable appetite for confiscating more of people's private wealth and earnings:
BREAKING: Biden admonished a Democratic supporter in New Hampshire yesterday about her state's independent streak, telling her: "Your state has to stop 'Don't tax me.' "— Paul Sperry (@paulsperry_) August 26, 2019
Finally, no, the tax cuts are not the reason we have disastrous deficits and a looming debt crisis. As usual, it's the overspending:
Revenue up 3%, spending up 8% equals deficit of $897 billion in 10 months. DC doesn’t care. https://t.co/caOIIgwDRi— Jeb Bush (@JebBush) August 13, 2019
Taxes were cut, federal revenues went up, but were eclipsed by accelerating bipartisan spending. You do the math.