Washington- The president donald trump He has been promising for 20 months that the United States was about to experience an economic boom. However, Friday’s surprisingly positive jobs report ended up causing him frustration.
August’s jobs numbers could have provided a welcome respite after months of slow job creation and inflation concerns that have weighed on Trump and his party two months before the election. However, in statements made from the Oval Office, Trump, on the contrary, launched into a tirade against inflation and interest rates. He focused his anger on the financial markets, the Federal Reserve and business partners USA. He questioned the commonly accepted idea in economics that the unexpected creation of 162,000 jobs in August could generate inflationary pressures.
“Success does not cause inflation. Stupidity causes inflation”Trump vented in the Oval Office, calling it “crazy” that stock markets fell on Friday due to concerns about inflation.
During his second term, the combination of a drop in job creation and rising prices has dogged Trump and his promise to immediately unleash historic levels of growth. “When he wins the election, we will immediately begin a new Trump economic boom,” the then-candidate said at a rally held in August 2024 in North Carolina. However, so far, the economy has grown approximately 2% annually, a slower pace than during the former president’s term. Joe Biden.
Trump attributed his inability to achieve stronger growth to rising interest rates on US government debt.and wrote on social media that the country could retaliate by stopping trade with foreign countries.
These have been rising in response to persistently high inflation, fueled by Trump’s tariffs, and oil shortages resulting from the war with Iran. The national debt has already surpassed the daunting $40 billion threshold, and on Friday, the interest rate on the 10-year U.S. Treasury bond rose to 4.79%.
1 / 51 | What is the state with the best economy in the United States? 1 might surprise you. West Virginia ranks 51st. – JON C. HANCOCK
Trump has lost credibility on economic matters
With the promised growth yet to materialize, the president has lost some of the public’s confidence in his ability to lead the world’s largest economy. His own policies have contributed, in part, to the inflation and high interest rates that he wants to blame on others.
“The Government’s credibility in terms of growth, inflation, interest rates, debt and the evolution of the deficit has been affected due to excessive forecasts that do not adjust to economic reality,” said Joe Brusuelas, chief economist at the consulting firm RSM US.
If the Fed did what Trump wants and lowered its benchmark interest rate to get more money flowing into the U.S. economy, the potential influx of cash could further aggravate inflation and add to its political and economic woes.
However, the president disputed this fundamental concept of monetary policy. On Friday he said gross domestic product would grow “12%, 13%, 14% or 15%” if interest rates were lower, while appearing to downplay inflationary risks.
“We could have a GDP that would break any and all records,” he said.
The president’s rating on the economy was just 32% in mid-summer, according to polls by The Associated Press and the NORC Center for Public Affairs Research. When Republicans last faced the midterm elections in 2018, during Trump’s term, their economic rating was 50%.
The president’s threat to restrict foreign trade could jeopardize growth, making the indices even worse. The recent imposition of duty to Canada has become an issue for Republicans in Senate races in Maine and Michigan.
Trump advisors see a brighter future thanks to AI, tariffs and tax cuts
Trump officials say his policies are working as intended. They maintain that the development of artificial intelligence will lead to higher productivity that will drive growth. They say last year’s tariffs should ultimately generate more manufacturing jobs in the United Stateswhile Trump’s tax cuts will generate more business investment and his government’s efforts to detect fraud will save taxpayers.
“I expect more growth,” said Christopher Phelan, chairman of the White House Council of Economic Advisers. “We are taking steps to make good things happen.”
Phelan noted that recent job growth has been about twice what is needed to match population growth. He considers it entirely possible that productivity increases could boost overall growth over the next few years, although he acknowledged that growth alone may not be enough to solve all of the country’s financial challenges.
Since the costs of Social Security and Medicare rise faster than revenues, growth alone is unlikely to significantly reduce budget deficits.
Growth is not enough to heal budget deficits
If U.S. economic growth could exceed 3% annually over the next decade, that alone would be enough to stabilize the government’s already high debt burden, according to an analysis by Ernie Tedeschi, head of economic insights and research at Stripe, the financial technology company.
Tedeschi said he would be “delighted” if AI could help make those kinds of advances ten years in a row, but history shows that such huge growth due to advances in computing is probably “overly optimistic.”
“We should absolutely not make plans based on the optimistic scenario,” he warned.
Until Friday, when the president made his comments on interest rates, the Trump administration had spent the last week trying to make voters feel more confident about the economy.
1/12 | The most popular tariff wars in history. It was December 1773 when, tired of tariffs on the importation of goods, the settlers of the new lands in America declared a boycott of goods produced in Great Britain, particularly tea. (Photo by Time Life Pictures/Mansell/Time Life Pictures/Getty Images) – Archive
Treasury Secretary Scott Bessent specifically highlighted the benefits of stronger growth at the G-20 summit for finance ministers in North Carolina. The Secretary of Commerce, Howard Lutnick, also did so within the framework of the G-20 meetings on innovation.
Still, Bessent told the AP in an interview that he also collaborates with the budget director of the White HouseRuss Vought, to unveil a plan to “reduce the level of debt and the deficit.”
There is a political risk in trying to significantly reduce an annual budget deficit of about $2 billion, which is projected to exceed $3 billion within a decade. Reducing the trajectory of budget deficits would likely help improve interest rates, but could carry political costs in the form of spending cuts and tax increases.
Brusuelas, chief economist at RSM US, noted that Trump would likely have to make sacrifices to meaningfully address debt and reassure financial markets.
“We need a period of slower growth in public spending that includes a direct reduction in spending, as well as tax increases, which would reduce both deficits and interest rates,” he said.