EC Tax Cuts And Fiscal Stimulus Will Not ‘Trump’ Tighter Financial Conditions

What is GDP per capita? It is the value of all goods and services produced in an economy divided by the number of people living in it. Why is it important? It is one of the premier ways to identify both the comfort level of a country’s citizens at a given moment in time as well as the well-being of citizens over time.

At the present moment, people living in the United States have it pretty good. Not quite as good as those who live in Switzerland, Norway or Hong Kong, but better than those in Canada, Japan or Germany. GDP per capita in the United States? $57,220.

Perhaps more importantly, inflation-adjusted GDP per capita has been growing at a noticeably slower pace since 1980. Real GDP per capita for the 50 years prior to 1980 averaged 2.4%. Since then? 1.7%. It has averaged a less-than-robust 1.4% in the current economic recovery (5/09-12/16).

The picture becomes uglier when one evaluates the growth slowdown in 10-year blocks. (See below.) Reagan and Clinton may have had some successes in the 80s and 90s, but neither altered the overall trajectory. If Reagan, Bush Sr., Clinton, Bush Jr. and Obama could not alter the downward path, what can Trump do to provide a sustainable standard-of-living uptrend for the American people?

gdp-per-capita-dilemma

According to Gallup, the decline is a direct function of soaring costs in three sectors: education, housing and health care. For example, the research found that all goods and services have risen in price 2.5x since 1980. Call this the inflation rate (2.5%). Yet education has catapulted nearly 9x in the last 35 years alone. Indeed, when I attended Arizona State University in the mid-80s, I paid about $1200 in annual tuition fees. Care to wager an estimate on the tuition that we pay for my daughter’s in-state experience at UCSD? Excluding books, room, board and supplies? $13,573 per year. That’s close to 11 times more pricey than when I pursued an undergraduate degree.

I doubt that I need to chronicle the health care debacle. In brief, health care has pole vaulted 5x since 1980 or 2x the rate of overall inflation (2.5%.).

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Disclosure: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered ...

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