Like Hoover and Dubya, will Trump eat his words about the economy?

Guest Post by Paul Brandus

“The fundamental business of the country, that is the production and distribution of commodities, is on a sound and prosperous basis,” Herbert Hoover said on October 25, 1929.

Oops.

“The basics in the economy are good,” George W. Bush said on Dec. 4, 2007.

Double oops.

Both of these presidents would soon regret their words. Hoover’s comments came after “Black Thursday,” when stocks fell 11% in the morning before clawing back—only to plunge 13% on “Black Monday” (Oct. 28), and another 12% the day after that. It was the beginning of the worst economic downturn the United States had ever seen—the Great Depression, which was made worse by a bone-headed decision to impose tariffs on America’s trade partners.

In Bush’s case, stocks were already two months into a collapse that would take the S&P 500 SPX, -0.28%   down a staggering 56% in 17 months. Behind the crash: a housing bubble—inflated by a period of low interest rates—had burst the year before, causing mortgage delinquency rates to spike and spill over into the credit market. Bush’s downturn turned into the worst since Hoover’s.

Which brings us to President Trump. This is neither 1929 nor 2007. Even so, we’ve shed $2.1 trillion in stock market wealth since the market high of Sept. 20 (per Wilshire Associates), more than enough to be concerned about. Trump keeps reassuring us, as Hoover and Bush did, that everything will be fine. The economy’s the greatest it has ever been, he brags (it’s not, but that’s another discussion). And those tariffs? They’re “working big time,” he says. “Believe me.” He’s always asking us to believe him.

Just how solid the economy really is I’ll get to in a moment. But this has to be pointed out first: Trump has bragged about the stock market so much—71 tweets since being elected and countless spoken references—that he now owns it for better or worse. In TrumpWorld, you must ignore the fact that the S&P 500 more than tripled (+221%) between the market low of 666 (March 9, 2009) and election day 2016 (2,139), or that for full calendar years 2009 through 2016 it averaged gains of 14.6% each and every year. None of these facts matter at all. In TrumpWorld, the stock market’s rocket ride only began the day after he was elected.

The president has used stocks as a proxy for his policies, his competence, his entire presidency. “The Stock Market just reached an All-Time High during my Administration for the 102nd Time, a presidential record, by far, for less than two years,” he tweeted two weeks ago.

But Trump wants to have his cake and eat it too. When stocks go up, he wants all the credit. It’s all because of his genius, his leadership, his Superman cape (ask Kanye West about this). Yet when stocks go down, it’s clearly somebody else’s fault. Who? Why the Fed of course, for raising rates. “They’ve gone crazy,” Trump insists. And maybe in the grand scheme of things, or as West calls it, the “infinite universe,” maybe he’s right. But grabbing all the credit but refusing to accept any blame? Trump has become just another buck-passing DC politician.

Anyway, just how solid is the economy? You never hear the president mention things like this:

The housing industry—one-sixth of the economy—is cooling.

The auto industry is cooling.

Corporate profits are still rising—but the rate of growth is slowing.

Scores of companies say they are being hammered by Trump’s tariff war. Remember: China and other countries don’t pay for tariffs like Trump—in one of his bigger falsehoods—claims. Companies pay when they bring goods into the country—and pass the cost along to you, in the form of higher prices. In the end, you pay. Not Xi Jinping.

Meantime, there are a raft of overseas problems, and if you think in a hyperconnected world that problems elsewhere don’t impact us, you better think again.

The absence of commentary from Trump on these realities doesn’t mean they don’t exist. They do exist and any one of them, or a combination of them, could spell trouble if they get out of hand. Liberal Trump haters are itching to bring on the Hoover and Bush comparisons. Are they actually wishing for a downturn just so they can make a point? Shameful. But with economic problems lurking—and which could blow up at any time—Trump may want to tone it down. But that’s not his style.