By Steve Brawner,
© 2019 by Steve Brawner Communications, Inc.
May 21, 2019
No one can predict the future, and that includes economists. So I’m simply going to tell you what a really smart guy said, and you can do with it what you will.
The smart guy was Bob Costello, the American Trucking Associations’ chief economist. He was in Little Rock May 16 to speak to the Arkansas Trucking Association. I should tell you I do some freelance writing for publications produced by both associations.
That stuff out of the way, here’s what he said: The economy is “slowing, but we’re still growing.” Costello does not expect a recession until 2021 or later.
If he’s right – sorry, Democrats. You can still beat President Trump, but you’ll have to do so in the face of a decent economy. No one should hope for bad economic news as a way to win an election, anyway. But if you were, you wouldn’t be the first.
Costello said the economy grew at an annual rate of 3.2 percent in the first quarter, but much of that growth was the result of inventories being stockpiled in anticipation of the trade war with China.
Take away those bloated inventories, and the gross domestic product grew 1.9 percent, which is decent. Costello expects about 2 percent growth in the coming quarters.
This summer, the economic expansion will be 10 years old, the longest in recent U.S. history. Costello said there’s no reason for the expansion to end.
“Economic expansions do not die of old age,” he said. “They don’t. They’re usually murdered.”
When a recession comes, it could be caused by a bubble, like the tech bubble in the late 1990s, or the housing bubble that cratered the economy in the late 2000s. Another cause would be the Federal Reserve raising interest rates, but the Fed has hit the pause button on that.
And then there’s the trade war, which Costello said keeps him up at night. I’m not against Trump trying to rebalance a trading arrangement that’s unfair to Americans and too advantageous to China, a bad actor. But it’s a reality that Chinese-made goods will become more expensive, and Chinese markets will be closed, as Arkansas soybean farmers already know too well. If there’s any long-term good, it will be preceded by short-term pain.
Meanwhile, the United States-Mexico-Canada Agreement, Trump’s negotiated replacement of the North American Free Trade Agreement, remains unratified. Costello said 90 percent of the new agreement is the same as the old one, but overall, it’s a better deal for the United States. But some Democratic members of Congress are leery of giving Trump a victory. If they refuse to go along, then Trump might engage in a “high stakes game of chicken” where he threatens to pull out of NAFTA as a negotiating tactic.
Costello is hoping Congress approves the deal by the end of October. Otherwise, it might not get approved.
One issue that Costello didn’t mention – his address was tailored toward trucking – is that much of our current prosperity is borrowed from the future.
According to the government’s Bureau of Economic Analysis, the gross domestic product as of the first quarter was $21 trillion. Trump’s Office of Management and Budget has estimated that the federal budget deficit will be $1.09 trillion this year. (The Congressional Budget Office earlier projected it would be $897 billion.) That trillion or so dollars is being added to the national debt, now $22 trillion.
Either way, about 5 percent of the economy this year will be based on federal government borrowing. Well, that’s not accurate. “Borrowing” is a voluntary transaction. Our “lenders” in this case, our children and grandchildren, did not have a say in this arrangement.
So I guess “stealing” would be more accurate. But hey, we did have that 3.2 percent growth in the first quarter, so I guess the news is pretty good. For us.