Im-Politic: Trump’s Decidedly Non-Racist Economic Record

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African Americans, Barack Obama, CCP Virus, coronavirus, COVID 19, election 2020, families, family income, Federal Reserve, Hispanics, Im-Politic, inquality, Joe Biden, median income, racism, Survey of Consumer Finances, Trump, wealth gap, whites, Wuhan virus, xenophobia

Some pre-debate advice for Democratic presidential nominee Joe Biden: Don’t rush to trot out your charge that Donald Trump is the first racist President in American history. Because if Mr. Trump has been briefed with any competence, two recent official economic reports have just come out making clear that when it comes to African Americans and Hispanic Americans, – at least before the outbreak of the CCP Virus that has hit minorities especially hard for longstanding structural reasons – the incumbent’s economic record compares quite favorably to that of the Obama administration for which Biden rode shotgun.

The evidence we’ll look at today drawn from the latest edition of the Federal Reserve’s Survey of Consumer Finances, contains arguably the most important finding of all: The wealth gap separating African Americans and Hispanic Americans on the one hand from white Americans on the other narrowed more during Mr. Trump’s first three years in office than during the final three years of the Obama administration. (RealityChek regulars know that such time frames provide the best apples-to-apples data needed for comparisons, since they came right next to each other in the same economic cycle – in this case, the post-2009 expansion.)

This racial wealth gap is often described as the most damning indictment of the nation’s longstanding failure to generate equal economic opportunity, since the wealth created by one generation can be passed down to future generations, and thereby boost the odds that beneficiaries are cushioned against major economic and financial stress, and foster all the self-reinforcing social as well as economic advantages flowing from such achievement of the American Dream.

The numbers come both from the Fed’s new survey, which covers the 2016-2019 period, and its previous survey, which covered the 2013-2016 period, and here they are, starting with the growth in median family net worth (the Fed’s preferred measure of wealth) for all American families, for non-Hispanic white families, for non-Hispanic black families, and for Hispanic families.

During the final three Obama years, in pre-inflation dollars, this net worth increased as follows for the aforementioned three groups pre-tax

for all U.S. families: +16.25 percent

for white non-Hispanics: +16.80 percent

for black non-Hispanics: +29.41 percent

for Hispanics: +45.77 percent

As a result, median wealth for black non-Hispanic and Hispanic families as a share of median family wealth for their white counterparts rose as follows:

                                                                   2013                    2016

black non-Hispanic families:              9.29 percent        10.29 percent

Hispanic families:                               9.70 percent        12.11 percent

Alternatively put, black non-Hispanic families closed the wealth gap with white non-Hispanic families by 10.76 percent, and Hispanic families by 24.85 percent. No denying that’s progress.

And the Trump record through 2019 in comparison? We’ll start again with the increases in pre-tax median family net worth from 2016 until then:

for all U.S. families: +17.58 percent

for white non-Hispanics: +3.46 percent

for black non-Hispanics : +32.42 percent

for Hispanics: +65.30 percent

So during the first three Trump years, median family wealth overall grew faster than during the final three Obama years, and minority families far outgained white families in this regard. Moreover, this was especially true for Hispanic families, who belong to an ethnic group Mr. Trump is often accused of despising.

That this minority family outperformance bettered that achieved during the most analogous Obama period comes through even more clearly from the following table, which shows how minority families’ net worth grew as a share of white family net worth between 2016 and 2019:

                                                                    2016                    2019

black non-Hispanic families:              10.01 percent       12.81 percent

Hispanic families:                               12.04 percent       19.23 percent

Again, alternatively put, during the Trump years, these results mean that black non-Hispanic families closed the wealth gap with white families by 27.97 percent, and Hispanic families by 59.72 percent. So both groups made much more relative progress during the Trump supposedly racist and xenophobic Trump administration (pre-CCP Virus) than during the supposedly racially enlightened Obama administration.

The Trump record isn’t as good when it comes to another measure of economic peformance – pre-tax family incomes and their growth. But any fair-minded observer would have to agree that it’s more than respectable, especially considering the President’s reputation among so many of his opponents.

Once more, let’s start with the Obama record on this score between 2013 and 2016. (These results aren’t adjusted for inflation, either. During these years, median family income grew as follows for the groups in question:

for all U.S. families: +9.56 percent

for white non-Hispanics: +6.44 percent

for black non-Hispanics: +9.94 percent

for Hispanics: +14.93 percent

As a result, median incomes for black non-Hispanic and Hispanic families as a share of median income for their white counterparts rose as follows:

                                                                    2013                    2016

black non-Hispanic families:               56.00 percent       57.84 percent

Hispanic families:                                58.26 percent       62.91 percent

So the income gap with white non-Hispanic families shrank by 1.13 percent for black families and by 7.98 percent for Hispanic families. These relative gains generally were far smaller than those registered for wealth, but they were gains all the same

At first glance, it’s clear that the Trump record between 2016 and 2019 lagged the Obama era progress. Here’s how family incomes rose then for the groups concerned:

for all U.S. families: +4.64 percent

for white non-Hispanics: +6.00 percent

for black non-Hispanics: +7.00 percent

for Hispanics: -0.49 percent

The same conclusion flows from examining the changes in minority groups’ family income as a share of non-white Hispanic families’ income:

                                                                    2016                    2019

black non-Hispanic families:               57.76 percent      58.41 percent

Hispanic families:                                62.83 percent      58.99 percent

In fact, Hispanic families actually lost ground on this front.

And not surprisingly, the income gap between Hispanic families and white non-Hispanic families widened by 6.11 percent during these Trump years, while that between black and white non-Hispanic families narrowed by much less than during the final three Obama years (1.13 percent versus 3.29 percent).

These Fed figures hardly show that President Trump, as he likes to claim, has done more for African Americans than any President in history Lincoln aside, or that Hispanic Americans have been special beneficiaries of his policies. But they do show impressive progress for minority groups and, perhaps more important, progress that compares well with such achievements under the nation’s first African American President.

Therefore, Biden (and other Trump opponents) could well be right about the President’s racism and xenophobia when all considerations are taken into account. But if so, he’s clearly the strangest racist and xenophobe in U.S. history – a conclusion that will be supported when RealityChek turns next to the new poverty statistics and another set of income figures just issued by the Census Bureau. .

(What’s Left of) Our Economy: It’s Not Just Inequality

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carried interest, family formation, Federal Reserve, housing, Immigration, inequality, lobbying, median income, millennials, offshoring, private equity, quantitative easing, recession, stock buybacks, tax loopholes, Trade, wages, {What's Left of) Our Economy

Folks at the Social Contract‘s Writers’ Workshop seemed so pleased with my talk on sources of inequality in the U.S. that it seemed worth sharing on RealityChek. Here goes.

Inequality clearly has been a major preoccupation of Americans this year, especially in the chattering classes. The most talked-about economics book in recent memory focused on the subject (Thomas Piketty’s Capital in in the Twenty-First Century). And although some polling evidence indicates that Main Street-ers are more concerned with jumpstarting economic growth than with reducing the rich-poor gap, politicians such as President Obama and likely presidential contender Hillary Clinton have called narrowing the gap a major national priority.

But for all the attention the subject has received, two important points are still generally overlooked. First, inequality is far from America’s leading income-related challenge nowadays. After adjusting for inflation, the median incomes of Americans aren’t simply falling behind those of the top one percent or however the affluent are labeled. They’re falling, period.

In other words, the vast majority of Americans have gotten poorer in absolute terms according to the broadest measure of economic well-being (which includes benefits, rental and investment income, and other earnings as well as wages and salaries). Moreover, this decline didn’t start during the financial crisis and Great Recession. It dates back 25 years. And it’s continued into the recovery. At least as striking, although the nation has suffered worse economic times in its history, never before has such income deterioration lasted so long.

As never before, then, Americans are confronted with the question, “Why is a national economy developed and organized in the first place if not to help most people improve their lives?” An economy in which living standards are falling for the majority for more than two decades is an economy that can only be labeled a failure.

But not only is America’s income problem worse than widely recognized (at least by the powers-that-be). The roots of this problem are more numerous and widespread than commonly supposed. And those inequality engines that have been identified look even stronger, and work in a greater number of ways, than originally thought.

For example, critics of U.S. trade policy have long argued that recent American trade deals and related policy decisions have worsened income inequality by providing too many incentives for businesses to ship lucrative middle class jobs overseas. But it’s increasingly clear that jobs don’t actually need to be exported for these policies to drive down worker incomes. Simply making the offshoring option widely available to employers has surely curbed employees’ wage demands, much less willingness to strike.

Open Borders-style immigration policies, it should be equally clear, have pressured incomes on the bottom rungs of the U.S. economic ladder by flooding their job markets with millions of poorly skilled and educated foreign-born competitors. But such policies also fuel inequality, as I wrote in Fortune this summer, by increasing the demand for public services whose costs the rich can often evade or limit by their ability to exploit tax loopholes.

But the list of inequality engines hardly stops there. For example, even aside from immigration issues, tax loopholes tend to benefit the wealthy disproportionately because they reflect the kind of lobbying power that less wealthy Americans can rarely mobilize. One prime example: how private equity fund partners have persuaded Washington to tax the vast bulk of their earnings at the low long-term capital gains rate rather than at the much higher income rate.

And speaking of American finance, let’s not forget how regulations encourage publicly held companies to use debt to buy back enormous amounts of their own stock. These purchases of course boost stock prices and massively benefit top executives – who often are compensated with stock or paid based on share performance. But they can often harm non-managerial workers because they further divorce corporate financial performance from the vigor of the real economy whose fortunes they once depended on. Thus they tend to undercut business’ actual and perceived stakes in broadly based and shared national prosperity.

Once the equity markets began recovering in spring of 2009, largely due to cost-cutting that super-charged profits despite ongoing economic malaise, CEOs and their boards unquestionably realized that their company’s fates were no longer closely connected to those of their customers. And when investors began worrying about the sustainability of such bottom-line growth, the buyback spree enabled Corporate America to persist with customer- and worker-light strategies.

Macro-economic forces are also helping to weaken wages and incomes for huge percentages of the American people. On top of the recession’s impact on the entire economy, it’s been widely noted that it and the historically weak recovery have taken an especially heavy toll on younger Americans. Forced to postpone family formation and first-time home-buying, the typical millennial will face unprecedented obstacles to amassing the kind of nest egg that has underlay middle class and working class prosperity for decades.

Finally, just as stock buybacks have loosened the relationship between Corporate America and the rest of the economy, the Federal Reserve’s quantitative easing measures have loosened the relationship between those who do and don’t own capital, and inevitably fostered neglect of the latter. The main purpose of the Fed’s bond-buying has been to lower the returns on safe assets like treasury bills to induce investors to abandon them for riskier, higher-yielding assets with greater potential to quicken economic growth.

The growth effects have disappointed even the Fed, it’s just been learned. But QE has been a roaring success in boosting asset prices across the board, and thus immensely enriching those who owned them already or were capable of buying them.

My audience at the Writers’ Workshop consisted mainly of activists who have worked long and hard on the remarkably successful campaign to prevent a dramatic and disastrous loosening of controls over American immigration flows. I ended by congratulating them on their ability to resist the combined forces of Big Business, organized labor, the White House, the leaders of both major political parties, and Big Media – and by telling them how fervently I hoped that their counterparts working to dismantle other engines of income deterioration would get their acts together as effectively.