by John Steinberger | December 30, 2019 4:58 pm
Most of us learned in history class about the Roaring 20s from 1920 to 1929. During that decade, American wealth doubled, the Dow Jones stock index rose by 500%, the consumer economy and middle class lifestyle emerged, and households were able to purchase labor-saving devices like washing machines and vacuum cleaners. A surging economy and the successful policies of the Trump Administration will enable America to recapture the Roaring 20s in the 21st Century.
What you may not have learned in school is that America was in the midst of an economic depression under President Woodrow Wilson following World War I. High taxes and economic decline caused America’s Gross Domestic Product (GDP) to contract in 1919 and 1920. Republican Warren Harding won the 1920 election in a landslide, but slump continued into Harding’s first year. Harding and his successor Calvin Coolidge (1923-1929) brought the economy back with a series of tax cuts. The top income tax rate went from 77% under President Wilson to 24% under President Coolidge. The policy resulted in an average annual GDP growth of 4.7% from 1922 to 1929 and rising wages.
The Tax Cuts and Jobs Act, passed by Congress at the end of President Donald Trump’s first year, has led to a surge in job creation and rising wages. The stock markets have achieved record high closes on a regular basis. A boom in American oil and natural gas production has kept energy costs low. About 12% of American households have accumulated a net worth of more than $1 million. Here are some reasons for optimism going into the next decade:
Millennials embracing the investor class. An increasing number of the millennial generation (currently aged 23-38) are investing in the stock market and buying homes. A recent study by the Transamerica Center for Retirement Studies shows that 73% of millennials are participating in company 401k plans.
Better trade deals. The Trump Administration has reversed 30 years of American trade policy by getting trading partners to remove barriers to entry for American products. Revised trade agreements with South Korea and Japan have been completed. China has agreed to purchase an additional $50 billion in U.S. agricultural products, and the Senate will take up the USMCA trade deal with Canada and Mexico, which will be favorable to American manufacturing and agriculture. When UK formally exits the European Union in 2020, a big trade deal will be worked out.
More young adults interring the skilled trades. There are currently more than 7 million positions that remain unfilled because of a workforce skills gap. The Trump Administration has partnered with hundreds of businesses in the Pledge to America’s Workers. The businesses, ranging from small construction companies to major technology corporations, have pledged to train 14.4 million workers over a 5-year period. Apprentices can quickly enter the workforce and earn high wages, rather than borrowing vast amounts of money for four-year college degrees that often don’t qualify graduates for the jobs in demand.
Acceleration of new technologies. New products are coming to market at the fastest rate in history, with consumers who are eagerly buying them. The NASDAQ stock index of 100 internet and technology corporations went up about 35% in 2019 alone and shows no signs of losing strength. American companies lead the world in innovation and new product development.
The 21st Century Roaring 20s will launch with President Trump running for re-election in 2020. Presidents always earn a second term when the economy is strong. Expect more tax cuts, regulatory reforms, trade deals, government reforms and manufacturing growth in the second Trump term. The number of households with million dollar net worth will likely double. The American people will not want to let go of that kind of prosperity.
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