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The United States Economy and Politics: The return to a bipolar world

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The United States economy broke out of its decade-long slough in 2018 with its strongest growth since the financial crisis and recession. Unemployment declined to the lowest level in a generation as the labor market steadily produced more jobs than could be filled. Manufacturing, said by many to be a dying sector had its best year in a quarter century.  Equities reached an all-time high then gave back the entire year’s advance in two months. Domestic oil drillers pumped more crude than had ever been extracted on the continent making the United State an energy exporter for the first time in 40 years.  Inflation remained under control. As Jerome Powell, the Chairman of the Federal Reserve said near the end of the year, “These are the good times for the US economy.” 

There was no shortage of concerns. China and the United States engaged in competitive tariffs as the Trump administration tried to change decades-old trade practices between the world’s two largest economies. Global economic growth weakened as the year aged dragged lower by slowdowns in China and the European Union. The EU was captivated by the Brexit drama, the Italian–EU Commission budget spat and in December French street protests which forced President Macron to rescind his fuel tax along with most of his popularity.

The Federal Reserve’s three-year-old effort to return interest rates to a normal range after seven years at the zero bound courted fears that the central bank would put an end to the economic expansion. While last year’s tax reform bill and the continuing reductions to government regulation provided an undoubted boost to the economy it was unclear whether they would result in a sustained level of higher growth.

Domestic US politics remained acrimonious with Democrats objecting to virtually every Republican initiative. Control of Congress and the Presidency by the Republicans did not result in a GOP sweep of legislation with some of the most telling opposition to President Trump’s policies as with the defeat of health care reform coming from within his own party.  

The change of control in the House of Representatives after the November election which will give the Democrats legislative power for the first time in four years promises to complicate the political picture in 2019 and 2020.

Economic trends in the US at year-end appeared vibrant but with a number of potentially damaging developments in the global environment and domestic politics that could inhibit or thwart continued success.  


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