Why Trump cant take credit for stock markets boom
PHILADELPHIA Whenever unflattering news comes out, President Trump resorts to one of two strategies: attack some unrelated culture-wars punching bag (NFL players, the media, Crooked Hillary) or brag about the stock market. In the past month, hes tweeted about stock prices more than every other day, on average.
According to Trump, the rising market is evidence of how awesome his presidency has been for the U.S. economy. At one point, he even touted a confused (i.e., wrong) claim that equity market increases were tantamount to wiping out our national debt.
Trump often complains that journalists ignore whats happened to the stock market under his watch and particularly his record compared with former President Barack Obamas. As he tweeted last week, Can you imagine if O was president and had these numbers would be biggest story on earth!
So, lets talk about why boasting about market movements is a bit boneheaded, shall we?
First and foremost, stock markets dont reflect the underlying health of the economy. Or the financial security of the middle class. Or any other broader measure of social welfare, for that matter.
Think of stock prices as a claim on the after-tax profits of a firm. Trump just signed a bill that cut taxes on companies. This means their after-tax profits will rise even if companies dont expand, become more efficient or make any other pre-tax changes.
Of course, then, stock prices should go up. If they didnt, something would be very wrong.
Shareholders think they have more money in their pockets. Thats because, lo and behold, they do! MIT economics professor David Autor told me at the annual American Economic Association meetings here over the weekend.
But, Autor adds, that doesnt mean society got richer; we just shifted some money around: This was a huge transfer of wealth away from taxpayers, and to corporations.
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