Now that Trump is president we are seeing his promise for robust growth and prosperity being delivered. Gone is the slowest recovery in history from a deep recession. This isn't even a regular recovery any more. The "Trump Effect" is like the difference between your regular house cleaning, and those times when you do a really deep cleaning and get into all the corners!
The Millennials, X-generation, and even Baby Boomers in the workforce today are too young to know what it is like to have an economy running above 4% GDP growth, let alone touching as high as the 5-6% Trump promises.
Keep in mind that USA businesses have spent the last 8 years cutting costs and increasing efficiency to get through the Great Recession and tepid growth while trying to maintain margins despite revenue declines. So as growth comes and productivity increases along with capacity utilization, operating/profit margins are going to expand dramatically. Couple this with the soon to be passed Tax Cuts and Jobs Act, and that means we will see historic leaps in earnings retained AFTER taxes, in my opinion.
The implications to all of this is enormous and profound. We can experience effects that we simply have not seen in most folks' lifetime. Here is a PARTIAL LIST OF BENEFITS:
1. INCREASE IN WORKFORCE PARTICIPATION - There are early signs already, even with 3% GDP growth, of the labour market tightening. The unemployment rate of those at least 25 years old without a high school diploma fell to 5.2% last month, down from 7.9% a year earlier. That was the lowest rate recorded to date, US Labor Secretary Alexander Acosta said.
Chronically under & unemployed will be drawn into the workforce by employers desperate for labor and willing to take greater hiring risks to fill needed positions. Offers of training and apprenticeships for low/no skill people will give people who really need a chance a great opportunity to get on the ladder. Couple this anticipated welfare reforms, those who have exploited our system will be forced off the public taxpayers' teat.
The benefit to our economy is two fold and compound. People moving off of tax payer assistance and into the workforce go from being an unproductive drain on our economy and contributors to our national deficit, to productive members of society and contributors to the economy and tax revenue.
2. PHILANTHROPY - Greater profits, greater dividends, greater stock prices, greater bonuses and greater wages will all lead to greater reasons for greater GIVING. I expect we will see increases in philanthropy. Gifts will find their way into all sorts of causes including the arts, science, education, medicine, poverty, hunger, and non-profits of all types.
3. THE GOOD LIFE - As folks feel good about their household wealth, income and job security, they have more desire and means for the finer/funner things in life. This translates into greater expenditures on everything from decorating to travel, from dining out to kitchen renovations with upscale appliances, from jewelry to plastic surgery. As consumers feel better about their household wealth/income they open their wallets and seek ways to express their wealth. Money may not buy happiness but people have not stopped trying! And since the consumer represents 70% of the economy, those efforts create a positive head wind for the economy - which produces spiraling growth with success feeding on success.
4. GENERATIONAL WEALTH TRANSFER - America is experiencing the greatest transfer of wealth in history. Socialists like Bernie Sanders would have been happy to see the government confiscate nearly all of that money through taxes. Thanks to Trump and Republicans that money gets to mostly stay in the families of those who earned and created the wealth. So that money can continue to do what it has always done - ADD TO THE GROWTH OF THE PRIVATE SECTOR WHO PAY THE GREATEST PORTION OF TAXES ALREADY, CREATE THE MOST JOBS, AND DONATE THE MOST MONEY TO GREAT CAUSES. Rather than expanding the size and waste of the government.
5. MONEY FOR THE IMPORTANT AND NEGLECTED STUFF - With money rolling into state and local governments as a result of leaps in revenue, wages, sales taxes, etc, our local needs can be better met. That could a new fire truck, a bridge renovation, modernization of waste and water systems, or any number of overdue and valid improvements that got put off during the great recession and slow recovery. Hopefully our local representatives have learned to be more efficient and smart with our tax dollars these past 9 years. (I'd really like to hear the POTUS announce an increase to the gasoline tax with all revenues applied to infrastructure.)
6. HOUSEHOLD FORMATION AND EXPANSION - When people feel good about the future they take risks. Three of the biggest risks a person or couple can make are to get married, have a baby, buy a home. I am talking big increases in household formation - the core trend for an expansionary economy.
CONCLUSION:
Like any deep cleaning, the place can look and feel great afterward. This new robust economy can produce the deep cleaning America has needed. It can truly "Make America great again!"
