Shaping the Trump economy
The president needs only a small number of deserters to get him the tax deal he wants
The Trump economy badly needs two things to lift it out of the eight-year Obama lethargy: across the board tax cuts and global trade expansion.
America’s middle-class incomes shot up by 3.2 percent last year, according to the U.S. Census Bureau, after a decade marked by the Great Recession, weak economic growth and widespread unemployment.
The federal agency, which compiles economic statistics throughout the country, reported Tuesday that U.S. median household income climbed to $59,039 in 2016.
That’s a hefty increase over the previous year’s $57,230 median income figure.
The nation’s poverty rate also fell last year to 12.7 percent, “with 40.6 million people in poverty, 2.5 million fewer than in 2015,” the report said.
However, the bureau said the poverty numbers were “not statistically different from the 2007 rate (12.5 percent), the year before the most recent recession.”
Large numbers of Americans are still at or below the poverty income line, and a number of cities are still losing jobs.
“Some 1.3 million people joined America’s civilian labor force over the past year,” says a survey report by the 24/7 Wall St. website.
But “the recovery has eluded some parts of the country. Approximately 1 in 5 U.S. metro areas lost jobs over the past 12 months, and the number of employed persons has decreased by at least 1 percent in 25 of the country’s 388 metropolitan areas,” writes Steven M. Peters.
Among some of the job losers: Binghamton, N.Y., where unemployment is 5.5 percent; Williamsport, Penn., 5.6 percent; Lafayette, La., 5.7 percent; Rocky Mount, N.C., 6.1 percent; Danville, Ill., 6.7 percent; Shreveport-Bossier City, La., 5.7 percent; Rockford, Ill., 6.3 percent; Elmira, N.Y., 5.5 percent; and Caspar, Wyo., 5.2 percent.
Lagging job growth was clearly evident last month when the Bureau of Labor Statistics (BLS) reported that the economy produced a lower-than-projected 156,000 jobs.
Wage growth was pathetic, too. Average hourly wages increased a mere 3 cents in August.
Earlier this summer, the BLS appeared much too eager to report that job growth was exploding under the Trump administration, only to see some of its estimated numbers shrink under subsequent revisions.
It turns out that the number of jobs created in July and June have been revised downward by 41,000.
Since he was sworn into office in January, President Trump says his job creation record has been “excellent.”
But economic reporters put his score at around 170,000 jobs a month, a rate that can only be called mediocre.
The Obama economy limped through his presidency at an average two percent growth rate, because he raised taxes that crippled new business creation and investment, and unleashed a tidal wave of suffocating regulations on businesses large and small.
The Trump economy badly needs two things to lift it out of the eight-year Obama lethargy: across the board tax cuts and global trade expansion. Mr. Trump is working hard on the first, and still fighting against the second.
Throughout the first half of this year, Mr. Trump has been pushing Congress to give him a sweeping tax cut reform bill, without offering any detailed specifics.
Let’s be blunt about this: the House and Senate will write whatever tax bill Congress may pass, if it passes anything. And that is very much in doubt right now.
Internal debates in committee rooms are all about the rate cuts, but also about making the bill revenue-neutral by eliminating or reducing loopholes, deductions and other forms of corporate welfare.
That would raise revenue on certain sectors in exchange for lower tax rates overall. President Reagan won that fight against a Democratic-run House by appealing to a small, pro-growth group of Southern conservative Democrats.
Mr. Trump is using Mr. Reagan’s playbook by also reaching out to Democrats who face tough re-election prospects back home. As a party, they are overwhelmingly opposed to any and all tax cuts, but Mr. Trump needs only a small number of deserters to send him the bill he wants.
Bashing free trade deals has long been the bible of the Democratic Party’s socialists, leftists, liberals and its union bosses. Their mantra: it kills jobs and makes us poorer.
Mr. Trump grabbed the issue and ran with it, scaring voters about the trade deficit. But over a century or more of trade deals, America has grown wealthier, not poorer, stronger, not weaker.
Earlier this month, the U.S. and Mexico met in four days of talks about changing the rules of the North American Free Trade Agreement, with the U.S. focusing on the trade deficit.
But that doesn’t reflect the stream of capital investment flowing between us and our trading partners. “The trade deficit is a macroeconomic issue. It has nothing to do with trade policy,” says Jaime Zabludovsky, who helped negotiate NAFTA in the 1990s.
Trade helps U.S. firms to become more competitive in what we make and sell here at home, and benefits hard-pressed consumers with less expensive products.