With Trump Optimism of Small Business Soars

Pledges for Trump

“You boys know what makes this bird go up?  Funding makes this bird go up.  That’s right.  No bucks, no Buck Rogers.”

– Gordon Cooper and Gus Grissom, The Right Stuff (film)

Things are looking up for the United States economy in 2017.  You can just feel it.  Something great is about to happen.

Wal-Mart and General Motors also made job and investment pledges for Trump.  Wal-Mart said they’ll add 10,000 jobs this year.  General Motors announced $1 billion in investment, which would generate 1,500 U.S. jobs. Following these pledges, Trump tweeted:

“Thank you to General Motors and Walmart for starting the big jobs push back into the U.S.!”

In a separate tweet, Trump added:

“With all of the jobs I am bringing back into the U.S. (even before taking office), with all of the new auto plants coming back into our country… I believe the people are seeing ‘big stuff’.”

“Big Stuff”

No doubt, ‘big stuff’ is a sight to behold.  Before taking office, Trump’s already created new jobs, new growth, and new demand.  What a remarkable achievement.

Indeed, President Trump’s efforts are impressive on surface.  They’re noble too.  As an American working stiff, we can certainly appreciate Trump’s sentiments. But are Trump’s efforts to bring jobs back to the U.S. equally impressive below the surface?  To satisfy our insatiable curiosity, we scratched off the top layer of curd to see what we could find.

In the case of Bayer and Monsanto, we discover their pronouncement is more than simply an act benevolence.  In fact, the two companies are awaiting regulatory approval of their agreed $66 billion deal from Trump’s incoming administration.  What’s more, the $8 billion investment pledge is equal to what they’d already planned to spend.

Small Business Optimism

Trump’s real achievement is actually depicted above: small business optimism has soared in the wake of his election victory. We can absolutely guarantee that this would not have happened if Clinton had won. Her economic program was a pure mixture of socialism and big business cronyism – in many ways it would have been Barrack “You Didn’t Build That” Obama on steroids. Small businessmen would have faced rising taxes and a vast increase in onerous regulations – many allegedly needed to “save the planet”, which is the most hubristic and absurd promotion authoritarian Western central planning elites have ever come up with (here is George Carlin’s classic take-down of this propaganda meme, which we encourage everyone to spread far and wide) - Click to enlarge

“Both Wal-Mart and GM’s new U.S. job plans are also part of previously announced investment plans.

“Wal-Mart said it would create 10,000 jobs, equal to less than 1 percent of its U.S. workforce, this year as part of a $6.8 billion capital spending plan announced in October.

“General Motors said it would invest an additional $1 billion in its U.S. factories and move some production from Mexico – moves that would create or retain 1,500 jobs.  As of December 2015, it employed 97,000 U.S. workers.”

The Right Stuff

“Facts are stubborn things,” President John Adams once remarked.  Obviously, Adams was speaking in a different day and age.  Because these days no one cares about the facts.

Bayer, Monsanto, Wal-Mart, General Motors, and the like; these companies know what’s good for their businesses.  Specifically, they know that politics is good business.  Their pledges make great headlines.  Moreover, they allow Trump to tout all the ‘big stuff’ that is happening.

Here at the Economic Prism we are in full support of ‘big stuff,’ whatever it may be.  Go big or go homes, they say.  But what we really want to know is if Trump’s ‘big stuff’ is the right stuff?

Larry Summers – former Treasury Secretary, and all around know-it-all – doesn’t think so.  This week he told the rich and powerful at their annual hootenanny in Davos, Switzerland, that Trump’s policies will end up hurting his voters.  But what does Summers know anyway?

When it comes down to it, mass credit creation by the Federal Reserve is what allowed the trade balance to get so out of whack in the first place.  This, in turn, accelerated globalization and offshoring of American jobs.

Attempting to reverse the flow of jobs while not correcting the fiat money problem is a losing proposition.  It’s the wrong stuff.  To the contrary, sound money, and the just discipline that comes with it, is the right stuff.

Unfortunately, a major collapse – or two – will be needed for people to seriously consider such outmoded ideals.

Federal Debt, GDP, Debt Securities

The result of a system of unsound money running wild for decades: a huge mountain of debt and very little to show for it in terms of economic output growth. In fact, the enormous growth in the supply of money and credit has lowered growth in economic output rather than increasing it. - Click to enlarge