Where is U.S. growth going to start?
It’s been a frustrating period for economic growth in America. The economy has expanded at an average annual rate of just 2.1 percent since 2010, compared to more than 3 percent in the 1980s and ’90s. In the second quarter of the year, the economic growth rate barely topped 1 percent.
That’s bad for working families, who see more job opportunities and better wages when the economy is growing faster.
Presidents have limited power to change the fundamental drivers of economic growth, which include consumer spending, population change, and business investment. But to the extent that they can do anything, candidates Hillary Clinton and Donald Trump have drastically different conceptions of where new growth will come from. The contrast was on full display during the debate Monday night at Hofstra.
Here’s the distinction in a nutshell: Trump would try to boost growth by forcing companies to stay in America and pushing immigrants out. Clinton would try to boost growth by making America a more attractive place to invest, making American workers more attractive to employ, and making sure people have enough in their pockets to revive the kind of consumer demand that has fueled America’s economic engine since the end of World War II.
Trump laid out his philosophy when debate moderator Lester Holt asked how Trump would raise wages and create new jobs in America. (He’s promised 25 million of them, which is demographically impossible without an increase in immigration that he opposes.)
Trump answered in exactly one dimension: Manufacturing jobs that in recent decades have migrated to Mexico and China. He’d bring them back, he and his advisers say, by charging steep tariffs on imports and slashing corporate tax rates so that companies bring cash back from overseas. “That’s going to be a job creator like we haven’t seen since Ronald Reagan,” Trump said. “It’s going to be a beautiful thing to watch.”
There are a number of problems with that simple prescription, which itself is based on faulty assumptions about the current dynamics of global trade.
First, although Trump isn’t wrong that trade deals played a role in manufacturing job loss, the movement of manufacturing overseas was, to a large extent, going to happen anyway.
Second, even if he magically forced companies to return all of their manufacturing output to the United States, it could never replace all the jobs that were lost, since advancing technology allows companies to produce the same amount of stuff with many fewer people.