I’m back from a hiatus at my north woods retreat, and there’s a bit to catch up on. For now, however, I’m wondering what has really changed in terms of the economy since Trump took office seven months ago. Let me begin by sharing a recent experience.
My wife and I stopped into a small restaurant in Boulder Junction, Wisconsin for dinner one evening earlier this week. Boulder Junction is a tiny town in Vilas County in northern Wisconsin, a popular vacation area frequented mostly by folks from Chicago and Milwaukee. A polite Asian lady, speaking broken English, seated us and told us the waitress would take our order shortly. Upon ordering, the waitress assured us that our order would be prepared as we had requested. It wasn’t. When we complained, the waitress – without even offering to make it right – apologized and explained that there was a “language barrier” in the kitchen. A language barrier in Boulder Junction! I couldn’t believe it.
Another old lodge that we visit for dinner is staffed with waiters and waitresses from Lithuania. They just can’t find reliable help in the north woods of Wisconsin, they explain. However, another restaurant just up the road seems to have no problem.
I know what’s going on here. These little businesses don’t have the wherewithal to recruit foreign laborers. So how do they get them? While I can’t provide proof, I’m certain that the Chamber of Commerce is importing foreign labor and pushing them on these businesses, or making them available at rates so cheap that these businesses don’t even have to bother with trying to hire locally. So, when it comes to Trump’s promises to stop these kinds of practices, there’s no evidence that anything has changed.
Changing gears, the Commerce Department released the June trade figures last week. Here’s a chart that shows the balance of trade in manufactured goods: Manf’d Goods Balance of Trade. As you can see, it continues on the same downhill trajectory that it’s been on throughout the Obama administration. In fact, in the 2nd quarter of 2017, the deficit in manufactured goods set a new record of $185.6 billion. In other words, contrary to Trump’s inaugural vow that:
“… rusted out factories scattered like tombstones … stops right here and stops right now!”
matters have actually gotten worse. While the Trump administration is currently involved in renegotiating NAFTA and in negotiations with the Chinese, and the U.S. negotiators are reportedly taking a much harder line in these negotiations, I’m very pessimistic that any improvement in our balance of trade will result. Why? Because there’s nothing to negotiate. The ONLY thing that will make a difference in America’s favor is tariffs, something that no nation would agree to in “negotiations.” Anything they will agree to will be totally unenforceable and any attempts to enforce them would be met with whining and, more importantly, a cut-off in funding of candidates unless they pressure the Trump administration to back off of enforcement actions. These same kinds of negotiations have been tried and have failed for decades. Most recently, Obama’s deal with South Korea, which he hailed as a “big win for American workers,” has actually proven to be a disaster.
In the meantime, the “new normal” economy that emerged during the Obama administration, in the wake of the Great Recession, goes on. GDP growth remains stuck in the 1-2% range, wages are stagnant and job growth (when viewed in the context of the “100,000 jobs is the new zero” economy) is anemic at best. The economy is being kept afloat by deficit spending (up 10% so far this year), a once-again growth in credit and an inflated stock market. The illusion of good times isn’t going to last.
I’m growing impatient with the Trump administration’s dithering on these issues. Can you tell?