Dividends and US economy falls short of Trump’s growth target in 2019

In an article in late January by Lucia Mutikani of Reuters, the US economy missed the Trump’s administration’s 3% growth target for the second straight year. The growth rate was 2.3%.

The President has been suggesting the $1.5 trillion dollar tax cut to corporations would jump start the economy to greater growth which would lower the trillion dollar deficit and everyone would be increasingly happier.

The domestic economy has maintained a moderate pace of growth and Fed Chair Jerome Powell has kept the Federal interest rates unchanged.

Growth was helped by increased government spending on defense however because of the tariffs with China inventory accumulation was down. According to Chris Rupkey, chief economist at MUFG in New York, the economy is in a good place only because the trade war made imports so expensive that American businesses and consumers cut back their purchases. Now the trade war is over, maybe prices will fall.

Economists have discussed that slashing the corporate tax rate from 35% to 21% would not boost long term growth because of productivity and population growth.

Linking to dividend paying stocks, what the expectations of the government for the economy matters to the deficit and one day it will have to be paid. Many suggest it is manageable but we all know who the government will turn to pay it off. It is harder to increase taxes on companies than it is on individuals.

There are more questions than answers, till the next time – to raising questions.

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