Month: May 2017

Sacrifices to the Gods of Jobs

/ ontheoutside / 4 Comments

Since the election there has been a continuing focus on the “Trump core voters”–people whose standard of living plummeted after the loss of good unionized industrial jobs.

During the campaign Trump’s story was that the jobs were lost to unfair trade practices, and that the cures were tariffs, deportations of immigrants, and abandoning NAFTA.  In the months since Trump assumed office, his emphasis has shifted.  China is our friend, the NAFTA discussion is on hold, and all the stress is on prosperity to be created through a huge tax cut for the rich.

Few economists believed the first story (most put the emphasis on technology change), and even fewer believe the second.  All of that, however, makes it even more important to understand what is actually going on.

The message here is that the problems of the “Trump core” are not isolated, but emblematic of fundamental trends in American society.   And Trump’s currently-proposed cure is more a problem than a solution.

 

We begin by referencing a recent article which points out how the problems of the Trump core voters fit squarely within the context of the decline of the middle class.

There is in fact no mystery about what is going on.  US society has been changing in fundamental ways, and those changes include a number of separate trends:

– The Trump core voter issues

– Underfunding of education, including a huge rise in the cost of college

– Infrastructure decay

– Decline of the middle class

– Vast increase in wealth inequality by any measure

– The Tea Party and Donald Trump

Briefly stated, the country is losing the public infrastructure necessary to maintain the middle class.  That trend is fundamentally tied up with wealth inequality, and in fact there is feedback that is accelerating both the inequality and the middle class decline.  Part of the problem is familiar “trickle-down economics”—the historically false idea that giveaways to the rich produce jobs—but the current version of it has reached a stage where it threatens the country as we know it.

To see that we go through the items one-by-one:

  1. Trump core voter issues

In any analysis of the problems of Trump core voters, the interrelated factors of globalization, technological change, and deunionization all play a role.  Industry world-wide (even in China) has moved up the technology curve, and good jobs demand more education and skills.  Workers without such skills are at the bottom of the heap:  competing for scarce jobs with no leverage and without union support.

This is not the first time that the US has experienced such transitions—think of textiles in New England.   Such dislocations are hard and can take time.  It is the role of government to provide support, retraining, and incentives to reestablish the economic base.  Education in particular is critical, both for the job-seekers and perhaps even more for their children.  In the current environment there has been little money or appetite for any of that.

The Trump budget in fact cuts essentially all such support in favor of nothing but more “tickle-down”—cut taxes on the rich and everything will be great.

  1. Education

The problems with education, however, go beyond the Trump core voters.   In the current economy (as just discussed), education is the key for most people to join the middle class, and we are making that harder than ever.   Many states have cut back on education budgets across the board.

The most obvious example, though, is the huge rise in college debt coming from rising tuition even at public colleges.  Even though college is for most people a prerequisite to a good job, we are making that a tough gate to get through.  As a society we have effectively abandoned our commitment to free public education.  And if there is any single thing that is important in “making our country great” it is education.

  1. Infrastructure decay

Like education, this is an example of refusal to fund the public good.  In the Presidential campaign both Trump and Clinton raised infrastructure repairs as an issue.  Further, since infrastructure work is personnel intensive, it can be a means of dealing with the transition issues discussed for Trump voters.  However, really doing something means significant money must be spent.

Despite Trump’s pronouncements on the role of the private sector, there is no way to make this happen without government spending, and it remains to be seen if there is a will to do it.   (Trump’s budget has seed money for privatizing bridges and airports, but the program is far from clear.  There’s no guaranteeing what will get done, and the opportunities for corruption are very large.)

Moreover for the middle class, infrastructure isn’t limited to just roads and airports.   There are many factors, including such basics as healthcare and childcare, which have a role in the viability of the middle class.  There is currently little support for any of it.

  1. Decline of the middle class

The previous points described some of what has been lost for the middle class.   And statistics show the result.   It has become harder to get in (and even those that do can have crushing debt), and harder to stay in if anything goes wrong.  Far fewer people now think their children will make out better than they did.

We also have examples of pending Trump administration programs that will make matters worse.  Healthcare, judging from the House bill, will become more uncertain and expensive, particularly if you are elderly or have pre-existing conditions.   For education, DeVos has already made things worse for student debt, and her voucher program will deliver for a payoff for people who already have kids in private schools, but has no commitment to delivering quality education for all.

All told pretty grim.

  1. The role of inequality

To start with, it is important to recognize how drastically things have changed in this country—for example from 1980 to 2014 incomes of the top 1% have tripled in real dollars, but incomes of the bottom 50% were unchanged.  And the effect actually was more pronounced the higher up the ladder you go–the increases for the top .01% were significantly greater than for the top 1 %.

As usual more money buys more power, and we’ve now reached the stage where even individuals (super-rich ones like the Koch brothers, Robert Mercer, Betsy DeVos) can dictate public policy.   That effect was enhanced by the Citizen’s United decision, since they now have unlimited ability to affect elections.   Overall–more money drives legislation favorable to the elites, which in turn makes them ever richer and more powerful.

There have been two primary parts to their message:

– Opposition to government social welfare programs of any kind (“governments can do nothing”).

– Pressure for tax cuts for the wealthy (“we are the job creators”).

The first attacks low and middle class programs (even education)—which they don’t want to pay for.  (Robert Mercer, one of Trump’s primary backers, famously said that people on welfare are worth less than cats.)  The second drives increasing inequality—more and more wealth and power for the elites (i.e. Trump and his cabinet).

  1. The Tea Party and Donald Trump

Ordinary “trickle-down” economics has always offered a historically false promise—cut taxes on the rich, and things will get better.

With the Tea Party and Trump we seem to have gone one step further.  Great sums of money have gone into promoting the idea that since jobs come from the private sector, the only way to have jobs is to let the private sector do everything it wants.  Jobs are gifts from the “job creators.”  Getting more jobs means doing everything possible to keep the job creators happy.  Government can only get in the way.  The recipe for more jobs is tax cuts for the job creators (corporate and personal) and elimination of programs that might disturb them (or take money they might otherwise get).  We must keep up the sacrifices to the jealous gods of jobs.

That message runs counter to both logic and history.  Corporations don’t hire people because they are happy or grateful; that would be incompetent and bad business.   They hire based on growth opportunities and in locations that suit their purposes.  And government has a lot to say about conditions for growth and how people will actually benefit.  It is precisely the elements of the public good—education, infrastructure, research—that create the environment that makes for our success, both as a country and as individuals.  The economic successes of Silicon Valley and the current centers of biotech didn’t come from their being the cheapest and most docile places to do business. Historically, overall economic performance under Democratic administrations has actually been significantly better than for Republican ones by essentially all measures.

Nonetheless, the simplicity of the message has led to its overwhelming success.   It has become so powerful, that when it fails we only get more of the same.   We have now been through several cycles of:

Tax cuts for the rich and reduced funding for social programs =>

Reduced support for middle class people to succeed =>

Fewer people in good jobs =>

Even more tax cuts for the rich and cuts to programs

That is basically how we got from the Tea Party to Trump.  The Republican Congress tried desperately to repeal the Obamacare surtax and blocked all attempts at social welfare legislation—including initiatives for early childhood education and community college support.  That paid off with Trump elected on a spurious jobs platform that has translated in the budget to extreme tax cuts for the rich and even more drastic cuts to all services.

The “jobs are gifts” fiction has now reached the level of religious fervor:  we must be ready to sacrifice all (environment, education, minimum wage) to the corporate “job creators” so that they will grant us jobs.  Trump’s budget effectively does just that.

“jobs are gifts” is like quicksand—you can’t get out.  We can’t stop the decline of the middle class, because if we stop giving to the rich they’ll take our jobs away.  So we continue to spiral down to a two-tiered society with a growing gap and little in between.

As always with “trickle-down” economics, the sacrifices are real but the promises are not.  There is no cornucopia of good jobs coming to the “Trump voters” or others looking for middle class income without education or skills.  Nothing in Trump’s budget will fix mismatches of jobs and skills, but the tax cuts are real money.

In fact with the specifics of Trump’s tax plan, things look decidedly bleak.  With huge deficit spending at this stage of the business cycle we are inviting another crash on the order of 2008 or worse.  We survived 2008, because the people in charge knew enough to act countercyclically.   We won’t have that luxury this time, which is exactly what happened in 1929.

 

On the other hand if we can overcome the “jobs are gifts” fiction, the world suddenly looks brighter.  That’s not to say all the problems will go away, but at least we can systematically make things better.

First of all, it isn’t that hard to fix things.  The country is prosperous, but the prosperity has been accompanied by dramatic inequality.  We need to broaden prosperity by broadening opportunity, similar to what happened in the fifties and sixties.  History has shown that contrary to the “gift” fiction, broadened prosperity actually helps rather than hinders growth.  Education, research, and even (with global warming) the maligned EPA are keys to growth.

Second, despite all the penny-pinching gloom, we do have the resources to make it happen.  The straitjacket we’re in now is of our own doing.   There are many examples.

Republicans like to talk about the impending entitlements disaster:  Social Security and Medicare.  In fact neither is unmanageable.

Social Security is self-funded, but it is currently paying a portion of benefits out of past savings, and in 2034 that pot of past savings will be exhausted.   However what happens in 2034 has been much exaggerated–current funding would continue to pay 3/4 of benefits for the foreseeable future.   (“Social Security is bankrupt” is another trick of language, falsely implying there will be nothing after 2034.)  For the remaining 1/4, one first notes that the Social Security payroll tax has become increasingly regressive–the tax is paid only on the first $118,00 of income, and with the growing wage inequality a higher and higher percentage of earnings is outside the cap.  Doing away with the earnings cap is estimated to cover benefits for an additional 30 years—at which point no one knows what the demographics will look like.  That isn’t necessarily the best solution, but it shows that solving the problem is only a matter of will.

As for Medicare, the issue–rising medical costs–is the same problem faced by every developed country and every insurance company in the world.  There’s no way that problem isn’t solvable.

In fact with growing income inequality, the tax system has become more regressive overall, and it takes surprisingly little adjustment to save the middle class.

Current personal income tax tiering is simply out of whack with the magnitude of the incomes built up by growing inequality.  Also, despite the dire predictions of the “jobs as gifts” fiction, there is no evidence that taxing high end personal incomes costs jobs.  Obviously there are many things worth fixing in the tax code, but it doesn’t take high risk or rocket science to generate money to save the middle class.

As to getting there, you might (or might not) say:  the only thing we have to fear is fearmongering itself!  Unfortunately there is a lot of it:

– Citizen’s United—lets individuals put limitless money into politics (“Jobs are gifts!”, “Governments can do nothing!”)

– Limitations of the press—entertainment seems to win out over substance

– Demagogues and politics of identity—unfortunately always a danger in democracy

One can only hope that people will come to realize that “jobs are gifts” is just a trick, and that divisiveness and scapegoating are conscious techniques of some members of the .01% to divide and conquer the broader population.

We have to be very clear this is not anti-business.  Historically what works is to have government and business as countervailing forces that keep each other honest.   That’s what gave us prosperity in the past, and what is clearly (explicitly) out of kilter in the present.

The one good thing you can say about the present state of affairs is that perhaps it is the cathartic moment that lets people realize that the grim worldview is false, that they don’t have to be fighting with each other for shrinking crumbs from the elite, and that broader prosperity is not only possible, but actually doable.

Who Are the Scheming Elites?

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As an insult “elitist” now ranks only just below “radical Islamic terrorist”.

The image it brings up is clear: rich, snobbish, nose-in-the-air, dismissive of the inferior beings below.  It works sort of like “welfare queens”—people you have no trouble hating.  Welfare queens, however, were a made-up campaign slogan—statistically they didn’t exist.    Elites do exist, but they don’t necessarily fit the image, and the term is so slippery in application that its usage rivals “welfare queens” in calculated dishonesty.

The snobbish elites are a fabricated diversion, while the real elites are emptying the till.

The story begins simply enough.  In his speeches Trump most often used “elites” in a very specific sense—to mean the political elite worldwide, for example:

“Hillary Clinton and her friends in global finance want to scare America into thinking small — and they want to scare the American people out of voting for a better future.  I want you to imagine how much better our future can be if we declare independence from the elites who’ve led us to one financial and foreign policy disaster after another.”

One can argue about what to think of that group, but you don’t run into those people every day—so they can’t have much to do with the image–and what is bad about them is not that they’re nasty to deal with.  But they sure are bad!

There are of course other groups that can be considered “elite,” most notably the super rich—who are beneficiaries of the policies Trump says he deplores.  No one knows them either, so they have no association with the derogatory image.  Since Trump and his cohorts are neither everyday people nor past politicians, they get a free ride.  They’re not elite!  That’s handy, since it enables people like Trump himself or someone like Bill O’Reilly (net worth $85M) to present themselves as the anti-elite “just like us.”

There is, however, a much larger group now considered “elite”.  That includes intellectuals and by extension just about anyone from the two coasts with a job that needs a college degree.   Since you do meet people like that, and there are some that meet the image—they’re all like that!  And by association they’re every bit as evil as the first group.   Furthermore, as Fox News tells people every day, “they hate us and think we’re stupid!”

It’s amazing the extent to which this sort of “cultural profiling” is accepted as fact–it’s okay to decide that how a person talks and dresses tells you all there is to know.  As a recent example, the CNN reporter at Trump’s hundred-days rally Harrisburg talked about the contrast between the “elite” participants at the Washington Correspondents’ Dinner and the real working people at Trump’s rally.  Also it seems to be enough to discredit climate change that the scientists behind it are “elite” and therefore self-interested.

Who are the people in this last group of elites?  To start with, the average salary for a scientific researcher last year was $76,341—not bad but not luxurious for a family in a metropolitan area with student loans to pay off.   They have not stolen jobs from the Trump base.  Further as a group this population has been supportive of government policies to benefit people less well off—medical care, education, day care.  They also tend to work many hours a week, because competition for advancement is intense, and because they believe in progress.

The “they hate us and think we’re stupid” charge deserves special mention.   You can find bad apples anywhere, but in this case even the most-repeated examples are not quite what they seem.   Hillary Clinton’s infamous “deplorables” speech (included at the end), was a badly-expressed plea to a group of anti-Trump donors to take the problems of Trump’s base seriously.

So the primary definition of “elite” these days is not money, influence, or actual behavior.  It is language, dress, or maybe the kind of music you listen to.  And there’s a reason why Trump, the Republican party, and Fox News like it that way.   They are pushing one of the most damaging, recurring myths of history:  “My people are not like that.”  For the Trump core:  “Trump and his people are like you, and their success is your success.  You don’t need to ask questions, because they’re yours.“

It’s a trick of language.  They are the elite.  This always plays out the same way–they will act for themselves and claim it is for everyone.  Trump has already announced three different tax cuts for the rich (Obamacare, corporate tax pass-through, personal income), with nothing more than perfunctory slogans to say it will help anyone else.

The last hundred years have shown unequivocally that broad-based prosperity requires all groups within society to recognize common interests and work together.  The Fox News version of “elite” is a divide and conquer strategy, splitting the broader population so that vast sums can move to the elites of money and power.

If we want to talk about elites, we should talk about the real ones.   The scheming elites are the ones we’ve got running things.

 

Here, for the record, is the relevant part of the “deplorables” speech:

“I know there are only 60 days left to make our case — and don’t get complacent, don’t see the latest outrageous, offensive, inappropriate comment and think, well, he’s done this time. We are living in a volatile political environment. You know, to just be grossly generalistic, you could put half of Trump’s supporters into what I call the basket of deplorables. Right? The racist, sexist, homophobic, xenophobic, Islamaphobic — you name it. And unfortunately there are people like that. And he has lifted them up. He has given voice to their websites that used to only have 11,000 people — now 11 million. He tweets and retweets their offensive hateful mean-spirited rhetoric. Now, some of those folks — they are irredeemable, but thankfully they are not America.”

“But the other basket — and I know this because I see friends from all over America here — I see friends from Florida and Georgia and South Carolina and Texas — as well as, you know, New York and California — but that other basket of people are people who feel that the government has let them down, the economy has let them down, nobody cares about them, nobody worries about what happens to their lives and their futures, and they’re just desperate for change. It doesn’t really even matter where it comes from. They don’t buy everything he says, but he seems to hold out some hope that their lives will be different. They won’t wake up and see their jobs disappear, lose a kid to heroin, feel like they’re in a dead-end. Those are people we have to understand and empathize with as well.”

Trump’s 100 Days – Threats We Now Know

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There have been many articles celebrating Trump’s lack of progress despite Republican majorities in both houses of Congress.   There are two problems with that:

  1. We should not be confusing tactical victories with permanent success, as there are still years ahead.  (If you want to be pessimistic, you could even say that Trump doesn’t concern himself much with Congress, because if he gets another Supreme Court judge he won’t have to.)
  2. We are doing Trump a favor by focusing criticism on his tactical failures. What’s bad about Trump is his program, and if he hasn’t been very successful at getting it done, so much the better.

With that as introduction, the major takeaway from Trump’s first 100 days is not what didn’t happen but what we now know about what is to come.  This post hits a few particularly painful points on that list.

Climate change

This is an issue where orthodoxy has thus far taken precedence over any kind of rational decision-making.  As things stand Trump is blocking all climate change research or even discussion, thereby not only impeding progress on a critical international issue but also effectively handcuffing US businesses in competing for the monumental work that will need to be done.

The only glimmer of light is that Trump has not yet decided what to do about the Paris agreements.   With that there may be some chance for reason.   No business could ever run this way—head in the sand on an issue critical for its future.   Given the level of support among scientists, climate change cannot seriously be dismissed as a hoax.  And given the huge threats and business opportunities it poses, we should be after all the data we can get.   You’d think there was some rational business person in the White House?

The economy

It seems strange that with a President elected for his business background, we have a clear potential for economic disaster.  The problem is that Trump acts with the same impulses built up over the years of running his own business:  taxes and regulation are bad, stimulus is good, research is irrelevant.  The fact of being President has not changed his point of view.

Trump’s new tax plan looks like a classic case of bad management:  huge unbudgeted stimulation of an economy already moving toward full employment, producing unsustainable deficits, leading to a shutdown of government spending, and then a crash.  On the Congressional Republican side, despite all the balanced budget hawkishness of the past, it seems no one is watching the store.

There are of course other problems as well.  Trump’s fixation on traditional businesses discounts the real sources of the country’s economic strength.  Non-competitive, non-unionized businesses selling only domestically at artificially high prices will not make this country great—there’s nothing keeping that boat afloat.  The US has maintained dominance by staying ahead of the innovation curve—based in significant measure on government-supported research.  In that respect cutting the NIH budget is incredible given the importance of biotech.  Energy research is equally important and fares even worse.

Trump-promoted xenophobia counts here also.  For many years the US has attracted the best and brightest from all over the world, as the perceived best place to realize their dreams.  As has been much discussed, more than half of Silicon Valley companies have non-native CEO’s.   As a telling symbol, we should remember that Steve Jobs’ father was a Syrian immigrant.  Trump has torn up the welcome mat, and we will pay.   This is already not just theory.

Jobs

Trump presents himself as the jobs President, and astonishingly many people still believe him.  However there seems to be only one kind of job he is interested in—low skill, low wage jobs in price sensitive industries.  Those are the “stolen” jobs that he has convinced people he can bring back.  Trump made a big show of supposedly reviving coal mining, but had no time for the three times as many jobs in alternative energy.   Even more to the point are his proposed budget cuts for successful Appalachian job training programs.

Trump’s fixation on reviving old-time factory jobs makes him the bad jobs President.  Manufacturing has changed since the “stolen” jobs went away—they are now high-tech (and the immigrants didn’t steal them).  The fewer low-tech versions—most certainly in non-union states—are not what anyone has in mind.  There’s nothing that prevents economic revival in Appalachia and elsewhere, but there’s an essential role for government in making that happen:  education, retraining, and incentive to locate.   Trump’s much-discussed solutions–tariffs, relaxed regulation, expulsion of immigrants—don’t even address the problem.   Trumps proposed tax cuts are a windfall for the richest of the rich, but no salvation for the blue-collar types claims to represent.

On jobs Trump has been selling a particularly insidious message:  that jobs are gifts from business, and for that reason any regulation or taxation immediately translates to a loss of jobs.  Therefore government has no power to do good and must just stay out of the way.

That is an easy story to sell–and particularly to people worried about their jobs—but history has shown it is manifestly false.  Government action, including regulation, is necessary for prosperity.  Business by itself will not deliver a high standard of living, an educated work force, an unpolluted environment, a research base for continued economic power.  Jobs come from providing all conditions for economic growth, and good jobs need both good government and good business.  States with strong economies work that way.

Trump is inviting us to a race to the bottom:   Let’s stake our future on competing with China, Korea, Mexico to make the same products everyone else does.  And if we have to throw away environment, education, healthcare, unions—heck that’s what it takes to make America great!  (The much-discussed book Strangers in Their Own Land gives a telling picture of where that argument leads.)

Education

Education is as crucial as anything you can think of for the standard of living in this country and for anyone’s definition of making America great.  The Department of Education, however, has been sold to a rich ideologue.  As has been pointed out, Betsy DeVos is the first Education Secretary to be opposed to public education–her stated aim is to put as many children as possible in religious schools.  Her program–as she shoved it down the throats of several midwestern states–has not produced results (including in her own state of Michigan).  Further, her objective–a fully privatized school system with vouchers but no regulation of schools–is characterized by:

– No standards for schools

– No constraints on student selection by schools

– No constraints on tuition cost—the voucher just pays what it pays

Incredibly this is complete segmentation of opportunity based on ability to pay, with no one responsible for the quality of what is delivered for the voucher fee.

Since all of this is well-known, one can wonder why she had only token opposition from Republicans at confirmation.  That question unfortunately has a clear answer:  this was a matter of party principle—the office was paid-for and delivered.

(Since confirmation DeVos has also rolled back efforts to deal with student college debt without an alternative proposal.  This is a real problem for the country, as even state universities have become much more expensive in the last decade.)

Healthcare

We now see the alarming spectacle of healthcare being deliberately sacrificed to a program of tax cuts for the rich.

Protecting the environment

The EPA is now put at the service of the people it is supposed to regulate.  All academics have been removed from its Scientific Review Board to be replaced by business people.

Equality and equality of opportunity

Trump is proposing three different tax cuts explicitly for the rich:

  1. Repeal of the Obamacare-financing surcharges.
  2. Reduction of the business income tax with proceeds passed through to investors
  3. Reduction of high-end tax rates together with a new loophole for private companies

Trump gleefully predicts all of this will be revenue neutral, because of the huge growth that will follow.  No one else thinks that’s true, so what it will mean is a reduction of government services (note that the Republican Healthcare plan is not self-financing like Obamacare—it is just another vulnerable budget item) and ultimately more taxes for the middle class.

Democracy in America

Trump’s congratulations to Erdogan in Turkey and praise for Duterte in the Philippines tell you everything there is to say about Trump’s respect for democracy.  With one more Supreme Court appointment we may find that we are in a war on terror, where the President as Commander in Chief can do as he sees fit.

We just have to hope that Ruth Bader Ginsburg can hang around for the duration.