This article was published by The McAlvany Intelligence Advisor on Friday, August 23, 2019:
President Donald J. Trump has kept so many of his campaign promises that there are websites dedicated to keeping track of them. Others spend lots of their digital ink keeping up with them.
For instance, in the first 18 months of his first term, the Federalist Papers website lists 60 promises he has kept while PromisesKept.com lists so many that it has listed them by category: economy, jobs, immigration, foreign policy, national defense, etc.
One primary promise has yet to be fulfilled: a robust economy growing at three percent or more every year. On Thursday, however, he came close. Target shares opened at a record high following its report that its second-quarter revenues and earnings beat Wall Street’s expectations and boosted its full-year earnings outlook. Right behind Target came Kohl’s, which also reported better-than-expected earnings for the second quarter.
Lowe’s shares jumped when it reported that second-quarter earnings and revenue also exceeded Wall Street’s forecasts, with same-store sales up 3.2%, hitting Donald Trump’s minimum expectations of at least three percent annual growth under his care.
Home Depot also surprised Wall Street to the upside when its second-quarter earnings surpassed expectations.
This was followed by news that the number of IRA and 401(k) account holders with a million dollars or more in their accounts set a record high in the second quarter at Fidelity Investments. Hidden behind the headlines was part of the reason: employers, enjoying record profits, are increasingly sharing their success by kicking in ever-greater contributions for their employees.
But still the man isn’t happy. Just two days after Walmart posted its blowout numbers for the second quarter and predicted that sales would continue to grow “to the upper end of the 2.5% to 3.0% range” next year, the president tweeted his approval: “Our Economy is very strong.”
But then he added that he wants it even stronger, and the main obstacle is the Fed: “The Fed [Funds] Rate … should be reduced by at least 100 basis points [one percent], with perhaps some quantitative easing [QE] as well. If that happened, our Economy would be even better … good for everyone!”
On Wednesday Trump said the only problem with the U.S. economy “is [Fed Chairman] Jay Powell and the Fed. He’s like a golfer who can’t putt, has no touch. Big U.S. growth if he does the right thing, [a] BIG CUT … but don’t count on him! …. Wake up Federal Reserve. Such growth potential, almost like never before!”
The obstacle, according to the president, is the Fed’s unwillingness to cut rates further, substantially, and soon. He tweeted that it’s hard for the U.S. to compete abroad when other countries have much lower interest rates.Trump has some supporters at the Fed, including the president of the San Francisco Federal Reserve Bank, Mary Daly. Although not a member of the rate-setting Federal Open Market Committee (FOMC), she made it clear that not only does she support the president in his quest for lower interest rates, she isn’t doing it for fear of an impending recession: “I should stress,” she wrote during a Q-and-A on the Quora website,” that my support for this cut is based around my desire to see our economy expansion continue – not because I see an impending downturn on the horizon.”
She doesn’t see a recession in the near future: “I don’t think we’re headed towards a recession right now. When I look at the data coming in, I see solid domestic momentum that points to a continued economic expansion … the labor market is strong, consumer confidence is high, and consumer spending is healthy.”
It’s hard not to perceive the Fed as an obstacle to completing this part of the president’s agenda. After all, it was just late last year when the Fed, in a “preemptive strike against incipient inflation,” raised rates, which resulted in Wall Street dropping nearly 20 percent almost immediately. When that “incipient inflation” never appeared, the Fed took its collective foot off the brake and the economy has moved higher ever since (although not in a straight line!).
So, ever the pragmatist, the president is making other plans, proposing a temporary cut in payroll taxes and adjusting the capital gains tax rate so that investors don’t get punished twice by paying taxes on phantom profits.
Some say his move is political. After all, a strong economy next November would help his chances for a second term. But the president is also doing what most politicians have never done: keeping his promises. And one of them is that of a strong, robust, healthy, full-employment economy under his administration.
PromisesKept.com: Keep America Great! President Donald J. Trump’s Accomplishments
TheFederalistPapers.org: Trump Releases List of 60 Promises Kept; Media Ignores (as of June, 2018)
The Wall Street Journal: Trump Calls for a Big Fed Rate Cut, Again Criticizes Central Bank Chairman
The Wall Street Journal: Fed Minutes to Show Extent of Committee Divisions on Last Month’s Rate Cut
The Wall Street Journal: Warning Signs Point to a Global Slowdown
The Wall Street Journal: Fed’s Daly: July Rate Cut Was Right Move, Recession Not Imminent