(What’s Left of) Our Economy: Sorry, but Little Evidence Yet That Trump-onomics Left Blacks Behind

Tags

African Americans, Barack Obama, Biden, CCP Virus, coronavirus, COVID 19, Donald Trump, Economic Policy Institute, Federal Reserve, Labor Department, Labor Force Participation Rate, median household income, median weekly earnings, racial economic justice, racial wealth gap, systemic racism, Tracy Jan, unemployment rate, Washington Post, Wuhan virus, {What's Left of) Our Economy

No one should be surprised, much less outraged, if President Biden spends the next year – or four! – blaming the Trump administration for every problem that remains with or emerges in the American economy, or any other dimension of national life. After all, problems do linger from presidency to presidency, and at least as important, it’s the politically expedient road to take — as much history shows.

Less justifiable are journalistic displays of such behavior. But if Tracy Jan’s January 22 Washington Post piece on African Americans and the economy is any indication, not only are four more years of blame-casting in store, but four more years of whoppingly inaccurate and indeed one-sided blame-casting are in store.

Actually, Jan’s article isn’t quite as slanted as the headline, which proclaims “The Trump Economy Left Black Americans Behind.” Readers are told right off the bat, for example, that racial economic gaps have persisted for decades, and that consequently “many black voters” have been “skeptical of the Democratic Party to represent their interests.” The author adds that “unemployment rates for Black people were at a historic low before the coronavirus shutdown, as Trump frequently reminded voters.”

But her dominant themes are that the CCP Virus pandemic has hit black America much harder economically than white, that therefore racial economic disparities have widened during the pandemic, that Trump’s mismanagement of the response was to blame, and that this CCP Virus period failure is enough to warrant labeling his entire term in office a racial economic justice flop.

I’d grade that first claim as largely accurate, as made clear by the impressive evidence Jan cites; the second claim as largely accurate, too; the third claim as more controversial, since it assumes that another President would have fared much better; and the fourth a wild stretch at best.

In fact, even if it is kosher to view 2020 developments as decisive in evaluating the Trump racial economic justice record, and the full range of policies that produced it, it’s important to note that two key indicators showed that the racial economic gap actually narrowed last year – median weekly earnings of full-time workers, and the headline unemployment rate.

Here are the (Labor Department) data for the former, going back to 2009 – the start of the Obama administration, which hasn’t been accused of having a particularly poor racial economic justice record. The numbers are in pre-inflation dollars, and because they come out quarterly, it’s possible to present the figures for the beginnings and ends of the Obama and Trump administrations, and for the CCP Virus period specifically. The ratios between the two are shown as well. 

                               non-hispanic white     non-hispanic black ratio     white-black

2Q 2009:                          757                                 592                             1.28:1

1Q 2017:                          894                                 679                             1.32:1

2Q 2017:                          886                                 689                             1.29:1

1Q 2020:                          980                                 775                             1.26:1

4Q 2020:                       1,007                                 792                             1.27:1

As made clear by the ratio numbers, even counting the pandemic period, weekly pay for the typical black full-time worker rose at a faster rate during the one Trump term than during the two Obama terms. Indeed, during the Obama presidency, the typical black full-time worker fell further behind his or her white counterpart. And between the final pre-virus period last year (the first quarter of 2020) and the final quarter of the year, the gap widened minimally.

The headline unemployment rates that come out monthly (also from the Labor Department) permit an even more precise comparison of the Obama and Trump records, and of the Trump record during the CCP Virus period. And as made clear below, the story they tell (including the ratios presented in the right hand column) isn’t terribly different from that of the weekly pay figures.

                               non-hispanic white     non-hispanic black     white-black

Feb. 09:                              7.6                            13.7                       0.55:1

Jan. 17:                               4.2                             7.4                        0.57:1

Feb. 17:                              4.0                             8.0                        0.50:1

Feb. 20:                              3.5                             6.0                        0.58:1

Dec. 20:                             6.0                             9.9                        0.60:1

The white headline unemployment rate started the Obama years – as the last, post-financial crisis Great Recession was still worsening – at only 55 percent of the rate for blacks. By the final month of his tenure, the white rate had risen to 57 percent of the black rate, meaning that the gap had narrowed slightly. It narrowed significantly faster during the pre-pandemic Trump years, sinces during the former President’s first full month in office, the white rate stood at half the black rate, and hit 58 percent last February, the final full pre-virus month). During the pandemic in 2020, the white-black ratio narrowed even further.

Jan’s narrative is much stronger for data called the Labor Force Participation Rate (LFPR), which gives a more accurate picture of the national employment scene because it reveals and takes into account how many adult Americans have become so discouraged in their search for work that they’ve just given up. The higher the LFPR (also tracked by the Labor Department), the fewer the number of these discouraged workers and vice versa.

                              non-hispanic white     non-hispanic black    white-black

Feb. 09:                            66.2                            62.9                     1.05:1

Jan. 17:                             62.8                            62.2                     1.01:1

Feb. 17:                            62.8                            62.2                     1.01:1

Feb. 20:                            63.2                            63.1                     1.00:1

Dec. 20:                           61.6                            59.8                      1.03:1

These statistics are released monthly (as part of the overall jobs reports) and, as you can see, tend to change only very slowly. But as shown by the dramatic (by these standards) LFPR drop for blacks, the pandemic period has been a stunning exception to the detriment of African Americans. Until then, though, the Obama and Trump results weren’t notably different, especially considering that the former was President twice as long as the latter.

Lots of other relevant statistics only go through 2019, and they don’t exactly scream “Trump failure,” either. Check out one dataset that’s attracted special, and deserved attention – the racial wealth gap. As noted by two other Post writers last year, “More wealth makes for more a comfortable, safer living. And, more importantly, it is passed on to the next generation. Their parents’ wealth gives many white children a boost at birth, an advantage many of their black peers lack.” And my post on the subject at that time expressed full agreement.

The official wealth gap figures come from the Federal Reserve, and are issued only every three years. But since last June (when I first reported on them), we’ve gotten the results (for median households in inflation-adjusted dollars) for 2019. As shown below, they report that although the Obama years saw considerable backsliding, the Trump years showed even greater progress in narrowing disparities:

                               non-hispanic white     non-hispanic black     white-black 

2010:                               144.3                              17.6                    8.20:1

2013:                               146.4                              13.6                  10.76:1

2016:                               181.9                              18.2                    9.99:1

2019:                               188.2                              24.1                    7.81:1

By contrast, the after-inflation dollar median household income numbers (which measure what’s earned each year versus what’s owned in toto) show pre-virus backsliding under Trump. (Here I’m using Labor Department figures as presented by the Economic Policy Institute — definitely a part of “MAGA World” — because they take into account some recent methodological changes made by the Labor Department.)  

                              non-hispanic white     non-hispanic black     white-to-black

2009:                             67,352                         40,231                      1.67:1

2016:                             69,292                         42,684                      1.62:1

2019:                             76,057                         46,073                      1.65:1

Biden has four years to show his racial economic justice stuff, and all Americans should hope that he makes further progress. But where Jan (and so many others) seem to be expecting a major improvement over his predecessors’ record, it seems just as legitimate to wonder if he’ll wind up matching it – even after the results for CCP Virus-ridden 2020 are in.

Making News: Protesting Too Much About My Trump Populism Article

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Economic Policy Institute, EPI, Making News, middle class, Populism, The American Conservative, Trump, working class

This “Making News” item will be a little different, since a new detailed crtitique of my recent American Conservative article challenging the charge that President Trump is a phony populist reveals so much about the agitated way so many Americans – including the so-called experts – discuss and debate public policy.

I’ll start by saying flat out that it was flattering to see two economists at the Economic Policy Institute (EPI) bother to take on my article. As I’ve written previously, I’ve long worked with EPI researchers on trade issues, learned a great deal from them, and believe that their findings in this area (the one with which I’m most familiar) unusually important.

At the same time, an October 28 analysis of my article disappointed for several important reasons. Principally, the authors got my overall argument wrong. Contrary to their claim, I never contended that the faster wage growth during the Trump years compared with relevant Obama years “justifies the vote-flipping” in most of the counties that supported Trump in 2016 after opting for Barack Obama twice “because the Trump administration has done something that has boosted wage growth in these presumably blue-collar counties.”

What I did say was that the faster wage growth was one development that “clashed loudly with the Trump-as-phony-populist charge.” And this conclusion seemed all the stronger given, as I noted, “the common companion depiction of the last Democratic administration as a working- and middle-class champion.”

After all, the phony populist charge implies that while sweet-talking the working- and middle-class populations of flip counties, the President has spent the last four years working on enriching his fellow one-percenters while leaving his less affluent supporters ever deeper in the hole economically.  

The EPI authors are correct in observing that during the first three Trump years, wage growth in these flip counties lagged the national average. But just how important is that point? As I made clear in the 2019 version of this article:

“The only grounds for economic complaint that Trump flip county residents might legitimately have concerns the gap between their well-being and the rest of the country’s. During the last two Obama years, the number of flip counties whose annual salary growth rates topped the U.S. average rose from 89 to 116. During the first two Trump years, their numbers dropped to 84 and then 83. (Between 2015 and 2016, the salary growth in one of these counties matched the national average.)

“But some context is needed here—and quite possibly it hasn’t been missed by flip county voters. Average annual U.S. salaries rose considerably faster during the first two Trump years (3.41 percent and 3.36 percent, respectively) than during the Obama years (3.08 percent and 1.21 percent, respectively). So since the national salary bar for the flip counties has been significantly higher during the Trump years, the fall-off looks pretty moderate, and in absolute terms, the annual increases remain an improvement.”

And son-of-a-gun: Although I didn’t perform this exercise for the latest article, a check of the same government data relied on by the EPI authors and by me shows that the “national salary bar for the flip counties” (which they call “pivot counties”) remained “significantly higher during the Trump years” through 2019.

It’s entirely possible that flip county voters are seething with anger because by this measure, inequality has widened. But it’s at least as possible that they’re mainly impressed that, for the most part, their own annual pay has risen faster under Mr. Trump than under his predecessor.

The EPI authors make a great deal of the argument that, although my factual case is correct, the President had nothing to do with the flip counties’ improved performance. As mentioned above, however, I never claimed cause-and-effect. I simply described the trend, and then did emphasize its great inconsistency with characterizations of Mr. Trump. Determining cause-and-effect entails both analyses of the many moving parts of the economy during the two periods in question, and then inevitably making judgment calls about the conclusions, and which conclusions count the most (e.g., as discussed, do absolute gains matter the most, or does closing the economic gap).

But I do find myself wondering why they say absolutely nothing about the Trump trade tariffs and immigration restrictions that surely helped the national labor market keep tightening, and wages continue their rise — especially for the kinds of jobs that lower- and middle-income Americans tend to hold.

The Shakespearian observation that it’s possible to “protest too much” is a wonderful description of complaints or rejoinders that are so over-the-top that they suggest more than a smidgeon of underlying doubt. That looks like a good way to describe EPI’s treatment of my recent Trump populism article.

(What’s Left of) Our Economy: A Backfiring Attack on Trump’s Trade & Manufacturing Policies

Tags

Barack Obama, CCP Virus, coronavirus, COVID 19, Economic Policy Institute, election 2020, EPI, Great Recession, Joe Biden, manufacturing, offshoring, Trade, Trump, Wuhan virus, {What's Left of) Our Economy

For the record, the Economic Policy Institute (EPI) has done terrific work over decades on the domestic economic impact of U.S. trade policy decision and trade flow, and it’s been great to stand shoulder-to-shoulder with its economists and ther staff during many major trade policy battles starting with the North American Free Trade Agreement (NAFTA).

Which is why I have been absolutely baffled by a recent EPI report that shows signs of furnishing some major trade policy talking points for Democratic nominee Joe Biden’s presidential campaign.

Most puzzling of all: a table in the August 10 study purporting to show that (a) “President Trump’s erratic, ego-driven, and inconsistent trade policies have not achieved any measurable progress” in reversing the offshoring of U.S. manufacturing jobs and the related ,”decline of American manufacturing”; and in fact (b) that “Offshoring and the loss of manufacturing plants have continued under Trump, notwithstanding U.S. Trade Representative Robert Lighthizer’s claim that the administration’s trade policy is helping U.S. workers.”

Here are the main table figures that cover the first two Trump years and the record of its predecessor, the Obama administration (whose Vice President of course was Biden). I started with 2010 because during 2009, the first year of the Obama presidency, the nation was mired in a Great Recession for which he deserves absolutely no blame. In addition, EPI stops the table at 2018 because factory numbers afterwards aren’t yet available. (The gross output figures have been added by me to make further comparisons possible.)

             Change in factory #s            Change in mfg jobs        mfg real gross output

2010:            -11,283                               -755,000                        +5.37 percent

2011:              -5,155                              +222,000                        +2.89 percent

2012:             -2,938                               +223,000                        +1.93 percent

2013:             -4,220                               +101,000                        +2.86 percent

2014:             -4,056                               +121,000                        +0.79 percent

2015:             -2,129                               +192,000                        +0.54 percent

2016:                -999                                 +33,000                        +0.04 percent

2017:                -782                                 +50.000                        +0.99 percent

2018:             -1,005                               +216,000                        +2.31 percent

The first point that needs to be made is that, as must be obvious, these numbers show absolutely no consistent relationship between the annual change (and in this case, decline) in the number of the nation’s “manufacturing establishments” (what these official figures call factories) and the annual change in manufacturing payrolls.  

For example, in each of these years, lots of factories kept closing, yet manufacturing employment kept rising. It’s true that rates of annual change have varied for both categories during this period. But these variations don’t seem to hold any significance, either. If they did, why would the number of closures fall notably between 2011 and 2012, while those years’ manufacturing workers’ numbers rise by almost exactly the same amount? And why the big difference between the number of closures in 2011 and 2012 on the one hand, and in 2018, on the other, and the close resemblance of the employment gains for each of those years?

Further, although it’s true that factory closures continued during the first two Trump years, the annual rate of closures slowed dramatically. Indeed, from 2010 through 2016, the average annual closure rate was 4,397. For 2017-18, this rate was 893.5. That’s not progress? And let’s be fair and not count 2010, because the manufacturing job losses of the Great Recession continued through its early months. The 2011-16 annual average factory closure number was still much higher (3,249.5) than during the Trump years.

Not weird enough for you? According to these EPI figures, despite factories closing at a much faster rate during the Obama years than during the Trump years, manufacturing employment grew faster. From 2011 through 2016, manufactring jobs grew by an annual average of 148,670. The comparable number for the first two Trump years was only 133,000.

At the same, time, this seemingly paradoxical relationship between numbers of factories and numbes of workers isn’t so completely paradoxical after all.  For example, new kinds of machinery and other efficiencies have surely enabled many domestic manufacturers to consolidate their physical footprint, and actually boost production and hiring. Alternatively, manufacturing companies can increase their capacity by expanding existing plants rather than build new facilities.        

Speaking of production, if we’re going to talk about the decline of American manufacturing, we need to talk about output levels and their changes, too. After all, it’s tough to boost or even maintain manufacturing workers’ numbers if production isn’t rising. Yet the annual growth numbers I’ve added to the table (which represent inflation-adjusted gross output), don’t show much of a relationship with closure numbers or employment numbers, either – and that’s the case even leaving out the quasi-manufacturing recession year 2010.

Still, don’t the EPI figures make clear that manufacturing hiring during the first two Trump years was weaker than during the Obama years? They sure do. As mentioned above, from 2011 through 2016, manufacturing payrolls grew by an average of 148,670 each year versus the Trump annual average in 2017 and 2018 of 133,000.

But are the EPI numbers the right numbers? I decided to check since the 50,000 manufacturing jobs increase presented for 2017 seemed way off to me. And there’s strong evidence that my suspicions were justified. Here’s what I found on the Bureau of Labor Statistics website. They represent December-to-December changes, and they’re seasonally adjusted. But the unadjusted numbers aren’t terribly different:

2011:    +207K

2012:    +158K

2013:    +123K

2014:    +209K

2015:     +70K

2016:        -6K

2017:   +185K

2018:   +264K

According to these data, the average annual manufacturing employment increase during the Obama years was 126,830 (again, recession-y 2010 is left out) and the annual average for the first two Trump years was 224,500. So advantage Trump here. The current administration enjoys a big edge even adding in 2019, when industry’s payrolls rose by only 59,000. That performance brings the Trump annual average down to 169,330 – still considerably higher better than the Obama years’ performance.

The EPI report correctly notes that 2020 has been much worse so far for manufacturing employment, and reasonably argues that even though the CCP Virus pandemic has been mainly responsible, “If President Trump wants to take credit for the job growth at the tail end of a decade of recovery from the Great Recession, then he must also own this collapse, thanks to his administration’s mismanagement of the pandemic.”

But if we’re going to start blaming non-trade policy-related factors for changes in manufacturing performance measures, let’s at least be consistent. For manufacturing hiring and growth (1.30 percent) undoubtedly were held down in 2019 by the safety woes experienced by aerospace giant Boeing – and therefore by its vast domestic supply chain – and by the six-week strike at General Motors.

Combine those developments with the inevitability of manufacturing inefficiencies as companies and entire industries adjust to a dramatically different trade policy environment, and the Trump record looks remarkably good. Unless EPI (and other Trump critics) believe that a painless way to transform U.S trade and manufacturing policies (which the institute strongly supports) has ever been possible?

President Trump was clearly (though anything but disastrously) mistaken when he claimed in early 2018 that trade wars are “easy to win.” Let’s hope that the EPI report isn’t a sign that a Biden administration and other critics would peddle the same pipe dreams.

(What’s Left of) Our Economy: How Big a China Virus Hit?

Tags

China virus, coronavirus, COVID 19, Economic Policy Institute, Employment, employment multiplier, Jobs, output, output multiplier, production, {What's Left of) Our Economy

The short answer to the headline’s question? “Really big.” Which is kind of obvious. So today I thought I’d present some information on techniques economists use to come up with a somewhat more specific idea.

First let’s look at jobs – because jobs obviously affect people and their ability to provide for themselves. Economists taking a “put people first” approach would start by looking at the official federal government data on how many Americans are employed by those parts of the economy that clearly will be most seriously affected. Those numbers look like this as of last month’s preliminary figures, in millions of employees:

retail trade:                                                            15.659           1.22

educational services:                                               3.838           1.94

  (includes public & private institutions)

leisure & hospitality:                                            16.873

arts, entertainment, & recreation:                           2.494          3.79

  performing arts & spectator sports:                     0.516

  spectator sports*:                                                 0.146

accommodation & food services:                        14.379          1.61

  accommodation:                                                  2.092

  restaurants & other eating places:                     11.103

*January figure

The indented categories are industries of special interest that are sub-sectors of the larger categories below which they appear. And if you add up the major categories, you come up with 54.193 million workers – nearly 42 percent of the total U.S. private sector workforce.

Sharp-eyed readers will notice a number to the right of the worker figures – that number shows what’s called the employment multiplier for the sector in question. Simply put, it means how many jobs in other parts of the economy the maintenance, creation, or loss of a single job in the first sector affects. In other words, every job in American retail companies and stores affects 1.22 jobs elsewhere (e.g., from suppliers that furnish that industry with the inputs it needs to function, and from the purchases its own workers make from other industries).

Employment multipliers aren’t easy to find – these come from a Washington, D.C. think tank called the Economic Policy Institute, and don’t cover all the initially affected sectors. But from these data alone, it’s obvious that the total number of U.S. jobs that could be lost, or see a cutback in hours, is much greater than the employment damage done, for example, by the simple closing of a single restaurant or sports stadium.

Most economists would also look at how much output the most seriously affected industries contribute to the gross domestic product (GDP – the total sum of all the goods and services Americans turn out during a given time period). GDP and output matter, of course, because if businesses aren’t producing goods and services, they won’t need employees. Here how they look, according to a measure called “value-added” – which seeks to eliminate various forms of double-counting that result when trying to gauge production in sectors that make final products, and sectors that make their parts, components, materials, ingredients, and other inputs. Also important – these figures are not adjusted for inflation.

Percent of total U.S. value-added

retail trade:                                                            5.50           0.66

healthcare services & social assistance:               7.60

educational services:                                            1.20           0.72

performance arts, spectator sports, museums &

  related activities:                                               0.70            0.81

accommodation & food services:                       3.10

  accommodation:                                               0.80

  food services:                                                   2.30

Again, the sub-categories are indented. Here the total percent figure is much smaller than the employment figure. But at 21.20 percent, it’s not bupkis, either.

And as with employment, don’t forget those multipliers (also presented to the right)! Here, the readily available data is scantier, and those I use are from 2012. But clearly the indirect output (and growth) impact will be non-trivial. (These output multipliers come from the Manufacturing Institute of the National Association of Manufacturers.)

Even if the China Virus situation wasn’t still evolving – and possibly dramatically, no one should take these numbers to the bank. Especially important is remembering that none of them take into account the danger that all these jobs and output and income and related business revenue losses bring about the kind of financial system seize-up seen during the financial crisis of 2007-2008. Moreover, although business and entire industry shutdowns will be extensive in the above and other sectors, they won’t be total, or (usually) anywhere close. And the damage will not last forever, or anywhere close.

All the same, we’re talking major drops in employment, incomes, and production – which is exactly why the economic response from Washington needs to focus on getting and guaranteeing money and credit where it’s needed pronto.

Im-Politic: A Good News/Bad News Labor Day Poll for U.S. Labor Unions

Tags

Economic Policy Institute, Gallup, government workers unions, Im-Politic, Labor Day, labor unions, public employee unions, unions, workers

As a firm believer that healthy democracies and vibrant economies need strong, independent labor unions, I’m happy to celebrate Labor Day each year, and pleased that Americans have been doing so now for 125 years. (Whether particular unions today are playing constructive roles is another matter entirely.)

And that’s why I’m also concerned that a recent Gallup poll on Americans’ views of unions contains as much troubling as encouraging news for organized labor.

Gallup’s summary emphasizes the positive, highlighting its finding that union approval is at a near-50 year high (64 percent, specifically). Moreover, that level is up sharply since the 48 percent all-time low recorded by Gallup in 2009. (Its figures go back to 1936, as shown below.)

At least as good, as I see it: On a relative basis, Gallup found that pro-union views lately have grown fastest among most strongly among self-described Republicans – a group that’s never been known for union support. Yet whereas unions’ approval rate grew by 33.33 percent overall from 2009 to 2019, among Republicans, it improved by 55.17 percent (from 29 percent to 45 percent).

This trend surely reflects the shift in the GOP’s base toward Trump-style working class-oriented populism, and away from the rigid claims still made by too many of the party’s representatives in Congress and various types of Washington, D.C.-based hangers on that simply pursuing business’ favored small government/low tax agenda will automatically bring the greatest benefits to the rest of the economy – and will be appreciated by voters.

Political independents’ union backing improved more than the national average, too, during this period – from 44 percent to 61 percent – but the 38 percent shift of has been less dramatic than that for Republicans. Since Democrats have always been most sympathetic to unions, their support levels remain the highest in absolute terms (66 percent), but the post-2009 improvement has been the smallest (24.24 percent).

The problems lurking for unions in these poll results? Mainly, that public approval of unions seems to have little at best to do with unions’ actual membership rolls. As the Gallup results make clear, although union support nowadays is indeed at relatively high levels, they’ve always been on the high side (at least since 1936). Indeed, support levels generally have exceeded 60 percent, even recently.

Yet during this time, union membership in America has nosedived. According to the Economic Policy Institute – a progressive think tank that supports unions and receives funds from organized labor – unions represented about 22 or 23 percent of U.S. workers in the mid-1930s. (See the graphic below.) As of last year, that figure stood at just 10.5 percent. And if not for government workers’ unions, whose membership accounts for nearly 34 percent of public sector employees, the share would be much lower. (See this report by the U.S. Bureau of Labor Statistics for these data.)

Another big potential problem: During the last U.S. recession (which lasted from late-2007 to mid-2009), Gallup has found that public support for unions fell much farther and faster than during previous downturns. Optimists could note that the last recession was unusually deep, and that union approval ratings have rebounded strongly since. But during the Great Depression of the 1930s, which was much worse, union approval according to Gallup was much higher, and the Economic Policy Institute numbers show that union membership actually rose.

It’s also worth mentioning that this Gallup survey overlooked one big issue: Americans’ views of those government workers’ unions. That’s especially important because those public sector workers became a majority of U.S. union members in 2009, and remain so today. I’m not saying that this development has been either good or bad. But it does represent an historic milestone showing that the makeup of organized labor has changed markedly in recent decades. Does most of the public recognize this situation? Much of it? Do Americans regard government unions the same way they view private sector unions? Those are subjects Gallup and other pollsters need to explore. And there’s no reason to wait for next Labor Day. (Here’s a report on a poll dealing with some of these issues, but it’s eight years old.) 

 

Following Up: Democrats’ Safety Net-Heavy Policies Still Missing the Mark for Trump Voters

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2016 election, Center for American Progress, Democrats, Economic Policy Institute, Elizabeth Warren, entitlements, Following Up, manufacturing, middle class, Mitt Romney, Neera Tanden, private sector jobs, progressives, safety net, Trade, Trump, Welfare State, working class

A little over a week ago, I wrote that much of the American Left was way off-base in believing that working class Americans who supported Donald Trump’s successful presidential run had voted against their economic interests. My thesis: These Trump voters were (rightly) much more interested in the family wage private sector jobs his campaign was promising rather than the various forms of welfare that Democratic candidates were strongly suggesting were adequate substitutes. And revealingly, compelling confirmation for my claim arrived just this week – in my email box!

The evidence came in the form of fund-raising pitches from the Economic Policy Institute (EPI) and the Center for American Progress CAP). Yes, it’s true that such solicitations aren’t the same as detailed policy papers. It’s also true that both organizations have in the past supported at least some of the trade policy overhauls emphasized by Mr. Trump as vital to job creation in the genuinely productive sectors of the U.S. economy – especially manufacturing. It seems that their interest in new trade policies continues to some extent. And it’s true as well that funding appeals are practically by definition aimed mainly at core or likely supporters – so they don’t necessarily reflect the full output of thinking of these think tanks.

Nevertheless, as a result, fund-raising pitches almost by definition reveal much about these core backers’ priorities, and those of an organization. And in both the EPI and CAP emails, creating more good jobs via trade was a concept conspicuously absent, while what I’ve described as cleverly disguised (even when necessary or desirable) welfare measures were front and center. And here’s a fact that goes far toward clinching the case that the Left remains largely clueless re helping the “ninety-nine percent” it claims to champion. These think tanks in many ways represent the two main wings of progressivism and the Democratic party– what have been called the Bernie Sanders and Hillary Clinton camps.

Take EPI’s pitch – which came in the form of a note from Democratic Senator Elizabeth Warren of Massachusetts. Warren certainly identified a big problem faced by working class voters and bearing much blame for the neglect they obviously feel: “A lot of people in this country work hard, but they aren’t building any security—and they are angry about it.”

Warren continued:

“They’re angry that bonuses go up for CEOs while their own paychecks are stuck in the same place year after year. They’re angry that basic costs like housing, health care, and childcare have skyrocketed. And they’re angry about a tax system that benefits the rich and powerful.

“They’re angry because our economy and our government work for those who have already made it big, but don’t work for them.”

And in my view, she correctly identified a goal that needs to be achieved for greater and more broadly based American economic success: “Our top economic priority must be improving the lives of working people in this country—because everyone in this country should have a fighting chance to build a future.”

But what did Warren emphasize as the policies most needed to help the working (and middle) class? “[F]ighting to raise the minimum wage to a living wage [and expanding] Social Security for millions of Americans…” along with addressing “the gender and race wage gaps….” The words “trade,” “offshoring,” and “globalization” simply don’t appear.

The appeal for the Center for American Progress came from its president, Neera Tanden. You might be familiar with Tanden from the presidential campaign. As a prominent Hillary Clinton supporter, she’s been a fixture on many of the Sunday morning talk shows. She was also one of the most prominent Democrats embarrassed by the hacked and leaked emails of Clinton campaign manager John Podesta.

Tanden’s email yesterday was titled “Defend Our Economic Security” – and therefore seemed full of promise. I thought that it might deal with neglected issues I’ve written profusely about, like the weaknesses that have emerged in the American defense manufacturing base, or the recklessness of permitting the nation’s best tech companies transfer much of their best (and defense-related) knowhow to China.

No such luck, however. Tanden’s focus instead was on “the issues that matter most to working families” – which of course is laudable. But as her letter makes clear, CAP is most concerned with “how the American middle class has been squeezed by the rising costs of health care, child care, higher education, housing, and retirement” and the greatest challenge it sees is preventing President-elect Trump and the incoming Republican-controlled Congress from cutting the government programs that have helped the middle (and working) class cope with these rising costs.

Again, I have no objection to ensuring the continued health of many of these programs, or entire safety net. But in CAP’s apparent view, they’re ends in and of themselves. I also understand the need to demonize political opponents in fund-raising literature. It’s a tried and true way to fire up the donor base.

But the organization doesn’t seem interested in policies to foster the types of private sector jobs that would enable Americans to reduce their burgeoning reliance on these measures. That notion is also difficult to find at the Economic Policy Institute. Both institutes may be right in viewing a safety net-centric economic game plan as a winning political formula. And if they were, in an ironic way, they’d be confirming one of former GOP presidential candidate Mitt Romney’s biggest verbal mis-steps during the 2012 election – his suggestion that 47 percent of Americans are welfare state takers.

But one of the clearest lessons of the 2016 election is that the masses of working class voters who opted for Mr. Trump aren’t buying it. All of which presents the Democrats – who have styled themselves as the Party of the Common Man – with a dilemma that’s not only momentous, but possibly existential.

Im-Politic: Will Trump-Bashers Start Blaming the Economy’s Victims?

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2016 election, college premium, debt, Donald Trump, Economic Policy Institute, education, Financial Crisis, Im-Politic, incomes, Mainstream Media, manufacturing, Marketwatch.com, offshoring, real wages, recession, The Race to the Bottom, Tim Mullaney, Trade, wages

I guess it was only a matter of time before the Mainstream Media’s hostility to Donald Trump’s presidential candidacy showed signs of moving into its next phase. Its mainstays have blasted the Republican front-runners’ own views and business record and character. They’ve warned that at least some of his supporters are outright racists and other forms of unquestionably bigoted extremists.

Now at least one writer has decided to dump on that large (and perhaps overwhelming) share of Trump-Nation motivated by sagging and even falling incomes. According to Marketwatch.com columnist Tim Mullaney, not only do the downwardly mobile (presumably) whites deserve no sympathy for their plight. They’re the ones who are overwhelmingly responsible.

In Mullaney’s words: “[I]f you’re 45-plus and thinking life passed you by because you didn’t understand the necessity of an education any time after 1975, you were too hormone-addled at 18 to grasp something that had long been obvious.

“When Trump’s base was coming of age, John Naisbitt’s ‘Megatrends’ was a best-seller for a full two years. You couldn’t read it or even hear about it much (and it spawned dozens of books and too many articles and TV segments to count) without understanding factories were closing and not coming back, and people who grew up wanting that life needed a Plan B. The 1982 recession, which launched Barack Obama’s career as a community organizer in neighborhoods hit by steel-mill closings, made it pretty obvious too.”

Mullaney says his background has innoculated him against “liberal elitist” charges, so let’s focus on something that’s more important. This indictment is factually wrong and analytically shortsighted.

As I’ve reminded Mullaney on Twitter, Trump’s support among the college-educated is anything but negligible. And one big reason is that in recent decades the oft-touted wage premium received by college grads over their less-educated counterparts hasn’t prevented their own wages from stagnating and even worse. In other words, more education is a great bet for ensuring that incomes will escape the massive hit taken by the less educated. But that’s not because graduates’ wages have been killing it. It’s because they’ve been declining less than the wages for those lacking a Bachelor’s degree – as this stunning chart shows:

 

Year	Less than high school	High school	Some college	College	Advanced degree
2007	0.0%	0.0%	0.0%	0.0%	0.0%
2008	-1.1%	-0.6%	-1.3%	-0.4%	0.5%
2009	0.5%	1.7%	0.0%	0.4%	4.2%
2010	-2.9%	-0.1%	-1.3%	0.5%	3.3%
2011	-4.1%	-2.1%	-4.0%	-2.3%	0.3%
2012	-4.7%	-2.9%	-5.6%	-1.3%	2.8%
2013	-5.7%	-3.7%	-5.8%	-0.7%	2.2%
2014	-5.2%	-3.7%	-5.9%	-2.0%	0.0%

The bottom line is the cumulative change, meaning that during this period, after-inflation wages for the college-educated actually fell by two percent.  And even for holders of advanced degrees, they only stayed flat.

Nor, as Mullaney (reasonably) supposed, is widespread wage deterioration simply a consequences of the financial crisis and its punishing aftermath. Data compiled by the Economic Policy Institute (the source of the above material, too), show that from 1973 to 2007 (the final year before the recession struck), the wages of college-educated Americans increased by only 14.79 percent. That’s a 34-year period!

It’s true that, even for those who completed “some college” during that longer period, inflation-adjusted wages dipped by 0.65 percent, and they were off by more for those with only high school diplomas or less. But when you throw in the towering levels of student debt so many Americans have amassed in recent years, the case for finishing college looks like even less impressive.

Mullaney’s column also overlooks the heavy price the nation as a whole has paid for the de-industrialization that has eliminated so many middle class job opportunities for working class Americans. Of course, a large percentage of those jobs were wiped out by automation or other efficiency gains. But a large percentage are just as gone because clueless American trade policies either encouraged the offshoring of factories (and labs) to low-income countries or ignored the damage inflicted by predatory competition from higher income countries like Japan. And as I’ve long written, when Washington encouraged downwardly mobile Americans to resort to borrowing to maintain the living standards undermined by these lost incomes, the financial crisis became inevitable.

Nor, as I found out when researching my book The Race to the Bottom back in the late-1990s, more education wasn’t insulating American workers from these globalization-related threats because higher wage, knowledge-intensive jobs were being offshored as well (or taken by high skill H-1B immigrants) and because every other government on earth – including those in low-income countries – was working frantically to better educate its workers, too. And their numbers were immense enough to hold their own wages far below levels in the developed countries.

Moreover, as I also pointed out on Twitter, Trump’s backing among the college educated (and the even better educated) could well be much higher than many polls are showing. The reason? Many such voters are embarrassed to tell telephone pollsters their true political leanings. The evidence? Trump gets much better numbers in on-line polls than in phone surveys.

As always, I’m not saying that Trump would make a good president, much less that he’s beyond criticism. But in covering his campaign – and his constituency – is it too much to ask the media to refrain from blaming victims of America’s unmistakably mismanaged economy for their resentments?

(What’s Left of) Our Economy: A Buy American Road to a Stronger Recovery

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Atlanta Federal Reserve Bank, Buy American, Christopher S. Murphy, Department of Transportation, domestic content, Economic Policy Institute, manufacturing, railroads, recovery, Robert Scott, Trade, Trade Deficits, University of Massachusetts, {What's Left of) Our Economy

As 2015 draws to a close, the bad news about an already dreary American economy seems to be getting worse. For example, the Atlanta Federal Reserve Bank’s system for forecasting economic growth – which has been very reliable lately – currently expects the nation’s output to expand after inflation at an annual rate of only 1.30 percent. So it’s great to be able to report that some in the policy community have been touting practical ways to strengthen the recovery – and good job creation – that don’t depend on creating ever more national debt. Their proposal: require the public sector to buy more U.S.-made goods, and especially manufactures.

Some Buy American rules are permitted by World Trade Organization rules (ditto for similar measures by other countries); therefore Washington and state and local governments are able to make sure that some of what they purchase with Americans’ tax dollars is produced in the United States, and therefore generates growth and employment at home. But as shown by new studies from the University of Massachusetts and the Economic Policy Institute, much more can and should be done.

The UMass report, published earlier this month, makes clear the enormous potential of that further growth. It found that the American public sector is the biggest single customer of goods and services in the world, with its appetite reaching $1.10 trillion in 2013. Moreover, manufactured goods represent $400 billion of that total. Since the American manufacturing sector turned out $2.2 trillion worth of products in 2013 according to the UMass researchers, government is already a huge player.

Although its findings apply to all Buy America programs, the UMass study zeroes in on those that have been in place for buses and rail cars since 1982 – precisely to revive two once-thriving industries that seemed in terminal decline. Indeed, to this day, none of the world’s major rail equipment producers are based in the United States. The study is especially valuable for its detailed examination of the Department of Transportation’s domestic content standards, which regulate how much of the makeup of a manufactured product (i.e., the share of its parts, components, and materials) needs to originate in the United States in order to be legally considered American-made.

The authors conclude that big reasons for the continued troubles of the rolling stock industry have been domestic content provisions that:

> remain too low (largely because the content of sub-components isn’t adequately taken into account, and because the rules don’t cover design and administrative activities);

>are continually compromised by too many waivers;

>and are poorly monitored and enforced.

In addition, the study makes a critical point about the inadequacy of the current “lowest price” standards that enable foreign producers to win many rail and bus contracts for the share of content they can compete for under Buy American rules. These criteria, they rightly note, greatly understate the longer-term benefits to the U.S. economy – and therefore to taxpayers – of nurturing more manufacturing production and employment at home.

As a result, even though the rules require that 60 percent of all federally purchased rail car components be made in the United States, and 100 percent of the final assembly performed domestically, the actual overall mandated U.S. content of these systems is only 40 percent. The UMass researchers estimate that even raising the effective domestic content level for rail car procurement from the current 40 percent to 60 percent would increase by nearly 29 percent the numbers of American jobs created by such spending. And of course, each dollar of that re-channeled spending would stay in the United States and add to economic growth, rather than leaking abroad.

A broader look at the effects of better Buy America policies has been taken by Robert Scott of the Economic Policy Institute. In a late November post, Scott examined the impact of legislation proposed by Connecticut Democratic Senator Christopher S. Murphy that would close major loopholes in existing federal policies and raise the required U.S. content level from 50 percent to 60 percent.

His findings: Simply closing the biggest loophole would boost domestic manufacturing output by $8.5 billion annually (based on recent federal procurement rates) and therefore generate $13.5 billion in new overall growth each year (because increases in manufacturing output have a “multiplier effect” on the rest of the economy). On the employment front, the bill could generate up to 100,000 new manufacturing jobs. And the higher level of domestic content could add to the $160 billion worth of manufactures currently purchased annually by Washington under current Buy America rules, as well as to the jobs they create.

Compared to the size of the American manufacturing sector and the larger economy, these numbers are small. But as big as they are, total federal purchases were only 6. 5 percent of U.S. gross domestic product in 2013. As I have repeatedly written, trade policy overhaul that simply keeps the deficit from rising higher would have much bigger payoffs. How much longer before the president, the Congress, and most of the current crop of presidential candidates get the message?

Making News: Briefing Congress on Trade, a New Position – & More!

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Congress, Economic Policy Institute, fast track, Henry George School, John Conyers, Jr., Making News, Marcy Kaptur, Robert Scott, Seeking Alpha, TPA, TPP, Trade, Trade Promotion Authority, Trans-Pacific Partnership

I’m pleased to announce that I will be speaking next week in Washington, D.C. at a briefing on President Obama’s proposed new trade deals being sponsored by U.S. Representatives Marcy Kaptur of Ohio and John Conyers, Jr. of Michigan.  The briefing will be held Tues., March 3 between noon and 1 in Rm. 2456 of the Rayburn House Office Building.  And it’s open to all media and the general public, as well as Members of Congress and their staffs.  Appearing with me will be economist Robert Scott of the Economic Policy Institute.

Accredited journalists seeking more information can contact Jenny Perrino of Rep. Kaptur’s staff at 202-225-4146 or at jenny.perrino@mail.house.gov.

In addition, it’s an honor to have just been elected to the Board of Trustees of the Henry George School of Social Science in New York City.  The School is planning to expand greatly its educational and research programs on domestic and international economics, and I’m grateful for the opportunity to help out. Keep visiting RealityChek for more details on the School’s activities they develop.

Finally, it was great to see my research on America’s dangerously high trade deficits cited on the popular investing website Seeking Alpha.