In the end, it is all about End Demand, or aggregate demand, or more explicitly, effective demand. It is clear that Donald Trump, with his ill-fated tax cuts for the wealthy, has not kindled end demand. Four great charts below will prove the obvious, that money is not getting into the hands of those who could benefit the most and productivity is withering in the USA and has been since 2004/2005. In this endeavor, capitalism is stumbling. Withering productivity destroys the concept of trickle down, or supply side economics, and it will be shown why below.

While other charts not listed in this article show a relentless upward slope to total personal consumption, when compared to GDP, consumers are just bumping along, and have lost ground, percentage wise, to total GDP. Certainly the relentless upward slope is nowhere to be found, but we have reached instead a plateau and even a decline YOY from 4th quarter 2017 to 4th quarter 2018. Chart 1 above shows this plateau.

One would have expected greater wealth to filter down from the Trump tax cuts, but it looks like business and wealthy individuals are holding on to those tax cuts. 

And wealthy persons, owners of stock, as well as tourists and foreign consumer purchases from outside our nation, as well as easy credit at home, have kept spending in the above chart at close to 70 percent of GDP. We know it isn't domestic wages that is causing this increase in consumer expenditures, as the following chart 2 shows through 2017:

The media push to console the working class by showing that consumers share a huge portion of our nation's GDP through consumption never seems to fit comfortably with the relentless decline in wages compared to GDP growth. The consumer seems to be powerful but much of the nation lives paycheck to paycheck.

While a second income kept the wolf from breaking down the doors of many households in the last century, there really was little choice available to working people after 2000. And yet, even now, with multigenerational households and two or more wage earners, wages continued to decline in the aggregate as a percentage of GDP, in almost a relentless fashion.

As we get to the place where people cannot buy the fruits of their labor, the economy approaches danger.

According to chart number 2, as soon as wages spiked upward, a recession would ensue. This appears to have been going on since the beginning of chart 2 back in the 40's! That is why Janet Yellen spoke about allowing the economy to run hot. Well, with low productivity it was hardly hot, but she had the right concept if no means to make it so.

One new macro economic indicator of the health of the real US economy is Yelp. Business Insider shows that most industry is in decline.

High Pressure Economy or Not

We hear the term high pressure economy these days. But is it? A study in 2017 clearly shows we are not in that economy quite yet:

• The main cause of the weakness in private investment is the chronic shortfall of aggregate demand (spending by households, governments, and businesses), relative to the economy’s productive capacity, lingering from the Great Recession. In other words, businesses are not investing in productivity-boosting equipment because their customers aren’t demanding enough to ensure that the existing productive capacity will be fully used.

The article is quite clear. End demand is weak, therefore investment in productivity increases is weak. Pretty simple. Keynes was right and Kalecki was right and Will Rogers was right.  Donald Trump, Herbert Hoover, and George W. Bush attempted supply side trickle down in times of low productivity. That was a fatal error.

Supply-siders may get lucky when productivity is bouncing higher, as when Reagan benefited in the 1980's. But in times of low productivity growth, supply-side economics is a joke, a Laffer if you will, but not really that funny. See chart 4 below to track that productivity history. Perhaps Art Laffer thought that juicing stock buybacks would sustain the economy like it did when initiated in 1982, during Reagan.

Investing in the real economy when there is no demand is throwing money down a rat hole, and investing in the real economy isn't what happens when stock buybacks are a major form of the investment, anyway.

Chart 3: OECD (2019), GDP per hour worked (indicator). doi: 10.1787/1439e590-en (Accessed on 06 February 2019)

So then, chart 3 above shows hourly wage increases. Hourly wages can only increase in a healthy economy as productivity increases. The percentage of productivity increase offsets the percentage of wage increase, adding no extra cost to businesses. We can see that as to wages, the chart above shows that the US is below the trend line average for all nations as to hourly growth.Even though the US has increased productivity to 105+ in 2018, it is still below the OECD trendline in chart three to this day.  Productivity is not growing because capitalists are not investing due to weak demand.

Chart 4

One hopes that the Economic Policy Institute is right, that productivity growth is just in a slump, but not a permanent one. But slump it is as we see in chart 4 above. Obama and Trump were dealt a really bad hand. Trump blames Obama but now it must be dawning on him that he is just another Obama with a much meaner temperament.

The financial economy does not really care what happens on much of main street. But government and capitalism should care. The hollowing out of America allows populist irregulars like Donald Trump to be elected. And he is fettered by the same systemic productivity slump that fettered Obama. His hype didn't get money into the hands of the people who needed it. Even Little Marco Rubio said as much.

Keep electing unbalanced strong men and your nation may be put into peril at some point. We can't get used to the election of a steady stream of populists, coming from the far right or far left when the productivity slump is set to continue for awhile longer at least.

I haven't heard much about helicopter money lately, but there seems to be no other way to get money into the hands of the people who can spend it without destroying their households due to excessive credit.

Whatever course government takes, the Fed and government cannot keep giving us this notion that we have recovered and that the economy is high pressured and back to normal. It isn't and won't be until labor is compensated somehow for its share of GDP. Any past or current Fed governor who says our economy is now high pressured is lying. You hear that sort of talk on CNBC as that network interviews Fed leaders. Yellen called for it and here is  the definition:

In a "high-pressure" economy, the jobless rate would be allowed to drop below full employment, and inflation would be permitted to run hotter than its goal, before the Fed would start tightening.

That didn't happen. Inflation didn't bounce. The high pressure economy didn't pressurize. The Fed likely holds out hope that this objective will still work. But if wages accelerate past productivity gains, that will end badly as well!

Conclusion

If productivity cannot be increased, wages cannot really grow that fast without a huge population boom. Trump is limiting legal and illegal immigration. Birth rates are plummeting. As a result, helicopter money is the only way to increase effective demand. There is no other way to bypass the productivity doldrums short of war.

Rule number one: Supply side does not work when productivity growth is languishing. It then becomes a gift to the wealthy and causes major resentment that is justified, by everyone else.

Trump is stuck and on the road to failure, as are his replacements, when the time comes for the American public to cry out to POTUS those famous last words, You're Fired!