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:
- 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.
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.
- 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.
- 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.
- 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).
- 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.