The past few days have seen historic drops in the stock market due to rising fears over the impact of the coronavirus on the world economy. It appears that the fears associated with this potential pandemic are not overstated, with the CDC warning that it’s just a matter of time before it affects the United States.
Trump, for his part, rather than playing the role of leader that we would expect when facing such a crisis, has taken to blaming the media and Democrats for overblowing the risk. Reportedly, these stock market drops, the newly inverted yield curve, and the potential for a recession in this election year have him and his allies deeply worried.
All the attention directed at the economic impact of the coronavirus misses a critical point. Despite claims to the contrary focusing on the low unemployment rate and high consumer confidence, by a number of measures, the U.S. economy isn’t actually doing so well.
Consider the following. Trump promised us 4, 5 or even 6 percent economic growth. Such growth would be extremely impressive considering the fact that in high-growth period of the 1990s, the highest annual GDP growth we experienced was 4.88 in 1998. Since Trump has been president, GDP has grown 2.8 percent in 2017, 2.52 percent in 2018, and 2.32 percent in 2019. And even before the coronavirus threat appeared, economists were forecasting an anemic 1.8 percent growth rate for 2020. So much for promises made, promises kept.
The centerpiece of Trump’s economic policy has been the massive tax cut of 2017. Trump sold it to us arguing that this tax cut would “be rocket fuel for our economy.” Upon passing the tax cuts, Senate Majority Leader Mitch McConnell crowed “after eight straight years of slow growth and underperformance, America is ready to take off.” Treasury Secretary Steven Mnuchin promised that it “will pay for itself with economic growth.”
None of these promises have come true. Economic growth has not topped even 3 percent since it passed, and business investment is actually down. At the same time, the budget deficit has exploded, topping $1 trillion. So the tax cuts were a bust, and that’s even without mentioning their impact upon income inequality.