The Real Economy: Rosy or Grim

Author: Gary Hart

Like many who occupy the periphery of American politics, I too readily accepted the conventional wisdom that presidents serving during a strong economy virtually always are re-elected.  Thus, predict the conventional wise people, Donald Trump will be re-elected.

Wrong, says my son John who knows a lot more about a lot of things, including economics, than I do.  Instead of insisting I take his word for it, he provides hard evidence, the kind conventional political journalists seem to ignore.

Most recently there is the Brookings Institute study that demonstrates the following facts (in this era where facts are dismissed by those in power): despite an official unemployment rate of 3.5% cheered to the rafters by the “base” (composed of those as ignorant of economics as I am), 53 million workers—44 % of all workers—earn barely earn enough to live on.  They are employed but scraping by.  Their median income is $18,000 a year.

As Brookings points out, these are by no means young people just getting started. Two thirds of these low wage workers are in their prime working years between 25 and 54.  Most are primary wage earners working full time.  “Millions of hardworking American adults struggle to eke out a living and support their families on very low wages.”

Under the rosy employment number, this is the reality.  The current administration, taking over from the Obama recovery, has not improved their economic conditions at all.  The stock market is up…for those who own stock.  Corporate profits are up, thanks largely to the budget busting tax breaks Trump gave them, and then used to buy back their own stock, not raise wages, employ more people, or invest in equipment.

So, there is the superficial economy, rosy, and there is the real economy, pretty grim.

With some notable exceptions, the American people are not stupid.  We know how the top one percent or top ten percent will vote.  What about the 53 million working people struggling to get by.

Trump has had almost a full term to lift the working poor up and he has failed.

Instead, we have trade wars with China, “easy to win” according to the “art of the deal” president sheltering in Mar-a-Lago.  That costs 28 billion dollars and counting just to bail out farmers who lost their principal markets.

I know firsthand people with advanced degrees and impressive resume`s who cannot find work in this economy.  Education is part of the solution but offers no guarantees.

The array of Democratic presidential candidates tries to make these arguments.  But too often they get drowned out by the incessant polls, fund raising reports, stories about squabbles, who’s up and who’s down, inside political baseball.

America’s real economy is not in good shape.  A variety of indices show “basic cost of living (housing, food, childcare, transportation, health care, taxes) frequently outpace earnings from low-wage jobs, even in families with more than one worker.”

A cautionary word: don’t accept quarterly job numbers, stock market ratings, and administration propagandists as the sole and most reliable indicators of economic health.

Having a job satisfies one number.  Earning enough to live on decently is quite another and hopefully will drive the outcome of this year’s election.

There is a deal, green or otherwise, out there to be made.  But it won’t be made by this president.

 

10 Responses to “The Real Economy: Rosy or Grim”

  1. Brian McCarthy Says:

    Senator,

    The last election proved that a lot of us, including myself, know nothing about American politics and our attempts at predicting outcomes of major elections are as useful as predicting weather. My degree in PoliSci is worth as much as my professor’s promise, in 1996, that another impeachment or another electoral win for a popular vote loser were historical anachronisms and Certainly! never to be repeated.

    The bottom line comes down to this: why do blue collar, working class white people vote against their own economic interests? Why does a white, working class man like my uncle think that his political interests are the same as those of a white billionaire and not the same as those of a black or Hispanic man of similar economic circumstances?

    When the Democrats can answer that question, and provide an alternative, convincingly, they may win again. Otherwise, they will wander the desert eternally like Labour in the UK.

    BCM

  2. Elizabeth Miller Says:

    You hit the nail on the head, there, Brian!

    Republican economic policies and ideology – anti-growth, bad for the economy, and almost always end in disaster.

    Democratic economic policies and ideology – pro-growth, good for the economy, with some caveats, and generally mitigate against disaster.

    The last three decades provide ample proof of this. Why Democrats can’t develop a winning message around these facts is beyond my comprehension.

    You know, the last person in a Democratic administration who was quite able to explain this in a clear and concise manner was none other than Senator Elizabeth Warrens perceived nemesis and President Obama’s treasury secretary, Timothy Geithner, the guy who merely single-handedly saved Main Street from the most destructive global financial crisis since the Great Depression.

    Too bad Geithner’s name is radioactive. I blame Senator Warren for that, of course. 🙂

  3. Elizabeth Miller Says:

    I think Democrats will fall into a familiar trap if they just harp on the fact that the real economy is not as good as some number might suggest. Sure, they should start from that premise but then move on to what will get them elected.

    And, that is to finally, at long last, develop a message that can persuade voters that it’s the Democrats who have, time and again, implemented the kind of tax and fiscal policies that are pro-growth and that the vast majority of Americans can see and feel.

    If Democrats can’t do this, then I’m ready to make a prediction right here and now that president Trump will indeed be re-elected and Democrats will have deserved to lose.

  4. Michael Says:

    The turning point was the election of Reagan in 1980. It was then that we began chipping away at the economy engineered under FDR during the Great Depression that led to a great American middle-class that became the envy of the world. Conservative economists used the stagflation-racked 1970s as an opportunity to push an agenda for restructuring the economy. Never let a crisis go to waste. There was nothing intrinsically wrong with the American economy that could not have been repaired without reorganizing it in a way that funneled wealth upward. The inflation was a product of two oil shocks and a Fed that acted as an instrument of Nixon’s 1972 re-election campaign. There was no need for massive tax cuts, deregulating Wall St, the non-enforcement of antitrust laws, or the union busting. The severe early 1980s recession induced by the Fed under Paul Volker, hiking rates to near 20%, did finally wring the inflation out of the economy. When rates fell again, pent-up demand ensured a rapid recovery. The same thing would have happened if Carter had been reelected, but the Republicans went about relentlessly turning Reaganomics into a religion. The answer to every economic problem became tax cuts for the “job creator” wealthy and more deregulation. Deficit spending became a cause for alarm only when Democrats were in power. Tragically for working Americans, the Republican Party was so skilled at spreading the propaganda of neo-liberalism that the Democrats bought into it too, although with a more “human face.” It took a generation for the fraud to be exposed. It finally happened with the latest round of tax giveaways to the wealthy and big corporations under Trump. Income inequality is now so acute that voters no longer believe the snake oil of tax cuts as an economic cure-all. They were so unpopular that Republicans couldn’t even run on them in 2018. As for the stock market, It’s no secret that historically low interest rates juiced by massive deficit spending and huge corporate tax cuts cause it to soar. And that only adds to economic injustice. The challenge now is for the Democrats to be bold. Say outright that Republican economics have been poison for the middle class and working people. Young generations are outvoting all others and are looking for new alternatives. Higher, more progressive tax rates for the wealthy; more public investment in infrastructure, research and development; a green new deal; the kind of antitrust enforcement we used to have; regulate the banks and financial-services sector. We should not be afraid to say that deficit spending on investment in people pays off in future growth. Deficits cause by tax cuts for the wealthy is money that is set on fire. There are new 21st- Century challenges, but for a solid new economy what works for everyone we only have to look as far as the FDR republic that existed from WWII to 1980. They got it right.

  5. Neil McCarthy Says:

    Michael is correct. Some of us even tried to run for Congress in the 1990s preaching the gospel of FDR (I know; I was one one of them). Alas, Brian and Elizabeth are right too, because some of us also lost. In 1992, I argued for a tax increase on those making $250,000 or more annually (which was still real money then); in the county where I made the proposal, there were about 250 individuals who fell into that category, or an almost infinitesmal minority. But I was tagged a “tax and spend” liberal and lost that county by an even greater margin than the defeat in the district as a whole. In fact, the towns I won were the relatively rich ones. Snake oil has been for sale since 1980; unfortunately, too many have bought it.

  6. Elizabeth Miller Says:

    Neil,

    Would you agree that the economy is key to a Democratic presidential victory in 2020?

    I mean, if Democrats can’t make a persuasive argument that they are the best stewards of the economy and expose Republican economic policy for what it is – bad for America and for most Americans – then they may not deserve to win.

  7. Elizabeth Miller Says:

    You make a very interesting point about needing to persuade the majority that the tired old ‘tax and spend liberal’ tags and other equally non-serious labels that Democrats need to shake off, finally, in 2020.

  8. Michael Says:

    Neil McCarthy, kudos for getting into the arena. After a generation, a global financial meltdown, and young people now outvoting all previous generations, maybe it is time to try again.

  9. Neil McCarthy Says:

    Elizabeth, I think “talking economics” is a key to a Demcocratic victory in 2020. I think that is part of the point John Hart made to his father and that Michael made above.

    Taking off on some of Michael’s points, the part of “neo-liberalism” that Democrats bought into in the ’80s and ’90s (in the persons of people like Paul Tsongas, Bill Bradley, etc.) was that productivity was a necessary condition of growth. So, they acceded to de-regulation on the grounds that it would increase productivity. Ditto on tax cuts. We then got an enormous hike in productivity, but mostly because computerization became a part of all workplaces and industries and spawned its own economy in the Silicon Valley and via the internet. The GOP then made the classic post hoc ergo propter hoc mistake and convinced the world that tax cuts and dereguation were a panacea. They weren’t. But what they did do was create enormous inequality.

    Part of the genius of FDR, especially via Social Security and the NLRA, is that he engineered some redistribution, so that, when economic productivity took off after World War II, a real middle clas prospered and was relatively secure. That class is now either shrinking or constantly under the stress of trying to maintain itself given the lack of job security. The folks voting for Trump in the Pennsylvania T and in the mid-west and upper midwest are in that category. You have to talk to them and make it real to get them back.

    But to make it real, you also have to win a working majority in Congress. The presidency is not enough. The best example is the last Democratic president (for whom a lot of those Trump voters actually voted for). Obama’s hands were tied; he never really had the Congressional power to do much after his first two years (and getting Obamacare and the stimulus in that period was a real accomplishment).

  10. Elizabeth Miller Says:

    All excellent points, Neil and, I agree.

    Let’s see how the Democrats talk about the economy and hope that it’s not just about how grim it may be and more about why Democratic policies have always been much better for the economy.

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