According to CNBC Trump’s tariff on steel and aluminum will add $1,800 to the cost of a Toyota Camry sedan, assembled in Kentucky. A similar cost would occur for a Tundra pickup truck and around $2,900 on a Sienna minivan. To some degree the same will happen to all automobile costs because so many materials and parts are imported.
Trump loves to brag about the economy and takes major credit for it. He mostly points to the rising stock market and falling unemployment rates. What he doesn’t mention is the stagnation of wages for the working class, the shortage and rising cost of housing, the skyrocketing cost of education, the in-affordability of medical care, and the enormous tax breaks he’s given to the super wealthy.
His economic policies may be having some positive short-term effects but can they sustain themselves? I see evidence that the can’t. According to Reuter’s the national deficit will rise from $665 billion in 2017 to$804 billion at the end of fiscal 2018. This is deficit at historical levels. Reuter’s also forecast that by 2028 the national debt will amount to 100% of our gross domestic product.
Under Trump and the GOP in Congress the rising debt coupled with the decline in the bond market means the federal government may find it impossible to borrow money to cover its future expenses. Should this happen you can expect the rate of inflation to soar.
Inflation is something I have first hand knowledge of. During the late 1960s and well into the 1970s the government was trying to pay for the war in Vietnam at the same time funding the social safety net and other domestic programs. As the debt went up the value of the American dollar went down. That results in increased prices for most consumer goods. During the decade of the 70s consumer prices took a sharp turn upwards driven by OPEC’s oil embargo, the money borrowed to pay for the war in Vietnam, and other government spending.
AVERAGE INFLATION RATES DURING THE 1970S
One of the most effected aspects of the American economy was the cost of borrowing money. According to UPI, in “1970 the average home mortgage interest rate was 8.5 percent and the average monthly home payment was only $126.88. Ten years later, interest rates averaged 12 percent and monthly house payments averaged $621. average monthly payments at $621.” The cost of farmland skyrocketed as did the cost of planting a crop. The result was large numbers of family farms being bought out by large agribusiness firms.
Maybe the only bright spot was for those people who had large savings accounts since the interest paid on investments were quite high. If they were able to hold on until interest rates fell they found themselves with a tidy profit.
One of the truths about the economy is that it is never static. It has always witnessed highs and lows, booms and busts. For most of our nation’s history this was considered normal and little was done to temper the effects. Somewhere in the early 20th century Democrats began to adopt the idea that the government steer or control the economic swings by using its powers to create policies, print or withdraw currency, create public works projects, and to regulate certain businesses.
This began to change with the election of Ronald Reagan and the GOP’s love of the trickle down theory of economics. Pour money into the top (tax breaks) and in theory it will result in economic investment, economic growth, and increased wealth all the way down to the bottom. In both the Bush and Trump administrations those at the top were given huge unfunded tax breaks and little of the money ever made it to the bottom The result has been the shrinking of the American middle class and the widening gap between the rich and poor.
As a retiree, living on the proverbial fixed income, I’m experiencing the effects of creeping inflation and it threatens to worse. My health care has inched up, food cost have increased, gasoline reached historical prices before falling back some. However, gas prices are on the rise again. The cost of heating my home is much greater than it was ten years ago. Restaurant prices have forced us to learn how to use our oven and the cost of motels and other travel costs have introduced us to the new rage, staycations.
As long as the ultra conservatives hold control over the government things for the average person are going to stay the same or worsen. Capitalism is a great economic format if it is not unfettered capitalism and unfettering is what conservatives do best.