At Atlantic Derek Thompson writes about the awful truth that neither Democrats nor Republicans want to talk about: good things can happen in a Donald Trump presidency. Let’s turn to his conclusion first:
Democrats don’t want to talk about low-income wage growth, because it feels too close to saying, “Good things can happen while Trump is presidentâ€; and Republicans don’t want to talk about the reason behind it, because it’s dangerously close to saying, “Our singular fixation with corporate-tax rates is foolish and Keynes was right.â€
But good things can happen while Trump is president, and Keynes was right. “Tighter labor markets sure are good for workers who work in low-wage industries,†Bunker told me. “This recovery has not been spectacular. But if we let the labor market get stronger for a long time, you will see these results.â€
and then to the meat of the article:
So, let’s play a game of wish-casting.
- Imagine a world where wage growth was truly stagnant only for workers in high-wage industries, such as medicine and consulting.
- Imagine a labor market where earnings growth for low-wage workers, such as those who work in retail and restaurants, had doubled in the past five years.
- Imagine an economy where wages for the poorest Americans were rising twice as fast as hourly earnings for high-wage earners.
It turns out that all three of those things are happening right now.
I’m skeptical that Keynes has anything to do with it. What Keynes wrote was that a shortfall in aggregate demand can be countered by government spending by issuing credit. There is presently no shortfall in aggregate demand.
But two factors do have something to do with it. The first, as I have been saying for years, is a tighter labor market. There are only three sources for low-wage workers:
- Turn high-wage workers into low-wage workers. We have been doing that for thirty years with our self-destructive trade policy.
- New workers without experience or marketable skills come into the work force endogenously. They’re born and then mal-educated. We’ve been doing that for decades, too. In Los Angeles a quarter of all students fail to gradate on time. The same is true in New York City. It’s the same in Chicago.
- Immigration, particularly illegal immigration.
Regardless of who is president in 2020 or 2021, we need to keep doing the things we’re doing now to tighten the labor market. To do otherwise is unconscionable.
The other factor is the cut in the corporate tax rate. Polling information from the National Federation of Independent Businesses show that small business owners, despite having to offer higher wage to attract workers, are willing to carry on because of lower corporate taxes.
Trump’s personality, rough demeanor, runaway mouth certainly gets in the way of upping his likability, his poll numbers and his chances of re-election. However, putting all that aside, he’s making foreign policy inroads, decreasing income inequality, and has created favorable domestic changes like few other leaders before him.
In fact in between the folds of smaller news stories are an array of positive outreach gestures to minority groups and blue collar workers. In conjunction with this outreach, demographics of both major parties seem to have undergone dramatic shifts, where republicans appear to now represent the interests of the “little guy†while democrats play to society’s high rollers.
For example, Trump’s focus and appeal is framed in actions increasing opportunities and wages for the working and middle classes. Addressing immigration flaws, establishing voter ID, untangling regulations strangling small business creation, discouraging globalism’s transfer of jobs overseas, standing up for legal gun ownership, supporting a healthy skepticism over AGW are issues the public deems important, but are undercut by democrats and viewed as wrong and/or unworthy of serious debate.
OTOH, the Democrats highlight a punishing greenhouse gas agenda, are intent on destroying private health insurance in favor of a government controlled Medicare for all plan, pursue victimizing minorities rather than encouraging their upward mobility, seem content with ballot harvesting, outdated voter registries, giving non-citizen voting rights in order to capture a winning head count, aided and abetted by calling for the US to become a border less country. They also support higher taxation (fingers pointed at the rich), deride producers, and are far more interested in impeachment goals (literally from day 1 of the current presidency) than attending to passing trade legislation, engaging in bipartisan infrastructure upgrades, pharmaceutical drug, opioid abuse, or immigration reform.
There’s really no getting around it, how many contentious issues and opposing viewpoints are on the table to consider leading up to the 2020 election. The big question is, will the deciding factor be based on Trump’s divisive personality or on what his presidency has positively accomplished?
The cut in corporate taxes also means an increase in debt. GDP growth bumped up to 2.5% (revised back from 2.9%) and it now looks like it is back around 2% again. So it looks like the tax cut and regulation changes have had little overall effect. Job growth continues at about the same rate we had with Obama so whatever is causing that job growth is continuing so it is nice to see some wage growth, but it is still hard to tell how much of that wages growth is due to labor market numbers and how much to increases in minimum wages at the state level.
Also, wages for low wage workers surpassed, in rate of change, higher wage workers starting in 2015 with a pretty much constant increase since 2012. What happened in 2012 that started this?
Steve
The cut in the corporate tax rate has increased job creation as well as raising wages. In 2016 the GDP was predicted for the next year to rise to no more than 1.9%. That figure has been surpassed. However, with economies around the world now slowing, so is our’s. Decreasing regulations, though, has injected small businesses with optimism and so called “animal spirits.†Under the Obama administration small businesses were going out of business faster than they were being created. Furthermore, more than 350 companies have so far signed an agreement with the government (including big names like Apple,Google), to train 6 million for new jobs.
I know democrats like to give credit to Obama for any economic growth or improvements, but the stats just don’t jive with that delusional thinking.