Markets are expecting a Trump economic miracle with real GDP growth estimates of 4% per year and more. The cheerleaders cite tax cuts, infrastructure spending and deregulation unleashing a wave of new economic activity. But that’s not where growth comes from, argues Rudi Fronk and Jim Anthony, cofounders of Seabridge Gold, as they discuss some basic contradictions in Trumponomics.
Economic growth is not a mystery. As Dr. John Hussman reminds us, economic growth always comes down to the sum of just two things: 1) more people working, 2) higher productivity. Add them up and you get the real growth rate. Everything else means nothing unless it contributes to these two factors.
Hussman assumes that the unemployment rate falls to an incredibly optimistic 2% by 2024 (from its current level of 4.7%). Built-in labor force demographics (slow population growth and an aging population) would limit annual growth in U.S. employment to just 0.7% annually at most. That’s what this factor would contribute to the real economic growth rate…0.7%…which can only be altered by massive immigration and a new Trump administration certainly doesn’t stand for that. In Reagan’s day, the unemployment rate was above 10%; there were millions of people ready and willing to work. Now, the unemployment rate is less than half what it was in 1982.
Some analysts point to the fact that there are 95 million Americans of working age who are not in the work force; all they need is an opportunity to work. This is naïve. More than 18 million have a “health problem or disability which prevents them from working or which limits the kind or amount of work they can do.” Another estimated 30 million reportedly do not have marketable skills. Many more are at home looking after children or family members. How many are actually able …read more