Latest Quarterly GDP Growth as Ballyhooed by Trump Becomes Misleading by Not Telling the Whole Story….As the Trump administration refers to the latest quarterly GDP growth as their own economic miracle, the real miracle is in an economy with such strong growth & low unemployment, workers are still not enjoying the benefits. The truth hurts, but we must reveal & react to what’s actually happening: ceos-using-share-
The official rate of unemployment in America has plunged to a remarkably low 3.8%. The Federal Reserve forecasts that the unemployment rate will reach 3.5% by the end of the year. But the official rate hides more troubling realities: legions of college grads overqualified for their jobs, a growing number of contract workers with no job security, and an army of part-time workers desperate for full-time jobs. Almost 80% of Americans say they live from paycheck to paycheck, many not knowing how big their next one will be.
Blanketing all of this are stagnant wages and vanishing job benefits. The typical American worker now earns around $44,500 a year, not much more than what the typical worker earned in 40 years ago, adjusted for inflation. Although the US economy continues to grow, most of the gains have been going to a relatively few top executives of large companies, financiers, and inventors and owners of digital devices. America doesn’t have a jobs crisis. It has a good jobs crisis. When Republicans delivered their $1.5tn tax cut last December they predicted a big wage boost for American workers. Forget it. Wages actually dropped in the second quarter of this year. Not even the current low rate of unemployment is forcing employers to raise wages. Contrast this with the late 1990s, the last time unemployment dipped close to where it is today, when the portion of national income going into wages was 3% points higher than it is today.
What’s going on? Simply put, the vast majority of American workers have lost just about all their bargaining power. The erosion of that bargaining power is one of the biggest economic stories of the past four decades, yet it’s less about supply and demand than about institutions and politics. Starting in the 1980s and with increasing ferocity since then, private-sector employers have fought against unions. Two fundamental forces have changed the structure of the US economy, directly altering the balance of power between business and labor. The first is the increasing difficulty for workers of joining together in trade unions. The second is the growing ease by which corporations can join together in oligopolies or to form monopolies. By the mid-1950s more than a third of all private-sector workers in the United States were unionized. In subsequent decades public employees became organized, too. Employers were required by law not just to permit unions but to negotiate in good faith with them. This gave workers significant power to demand better wages, hours, benefits, and working conditions. (Agreements in unionized industries set the benchmarks for the non-unionized).
Yet starting in the 1980s and with increasing ferocity since then, private-sector employers have fought against unions. Ronald Reagan’s decision to fire the nation’s air-traffic controllers, who went on an illegal strike, signaled to private-sector employers that fighting unions was legitimate. A wave of hostile takeovers pushed employers to do whatever was necessary to maximize shareholder returns. Together, they ushered in an era of union-busting. Employers have been firing workers who attempt to organize, threatening to relocate to more “business friendly” states if companies unionize, mounting campaigns against union votes, and summoning replacement workers when unionized workers strike. Employer groups have lobbied states to enact more so-called “right-to-work” laws that bar unions from requiring dues from workers they represent. A recent supreme court opinion delivered by the court’s five Republican appointees has extended the principle of “right-to-work” to public employees. Today, fewer than 7% of private-sector workers are unionized, and public-employee unions are in grave jeopardy, not least because of the supreme court ruling. The declining share of total US income going to the middle since the late 1960s – defined as 50% above and 50% below the median – correlates directly with that decline in unionization. Perhaps even more significantly, the share of total income going to the richest 10 percent of Americans over the last century is almost exactly inversely related to the share of the nation’s workers who are unionized. When it comes to dividing up the pie, most American workers today have little or no say. The pie is growing but they’re getting only the crumbs.
Over the same period time, antitrust enforcement has gone into remission. The US government has essentially given a green light to companies seeking to gain monopoly power over digital platforms and networks (Google, Apple, Amazon, Facebook); wanting to merge into giant oligopolies (pharmaceuticals, health insurers, airlines, seed producers, food processors, military contractors, Wall Street banks, internet service providers); or intent on creating local monopolies (food distributors, waste disposal companies, hospitals). This means workers are spending more on such goods and services than they would were these markets more competitive. It’s exactly as if their paychecks were cut. Concentrated economic power has also given corporations more ability to hold down wages, because workers have less choice of whom to work for. And it has let companies impose on workers provisions that further weaken their bargaining power, such as anti-poaching and mandatory arbitration agreements. This great shift in bargaining power, from workers to corporations, has pushed a larger portion of national income into profits and a lower portion into wages than at any time since the second world war. In recent years, most of those profits have gone into higher executive pay and higher share prices rather than into new investment or worker pay. Add to this the fact that the richest 10% of Americans own about 80% of all shares of stock (the top 1% owns about 40%), and you get a broader picture of how and why inequality has widened so dramatically.
Another consequence: corporations and wealthy individuals have had more money to pour into political campaigns and lobbying, while labor unions have had far less. In 1978, for example, congressional campaign contributions by labor Political Action Committees were on par with corporate PAC contributions. But since 1980, corporate PAC giving has grown at a much faster clip, and today the gulf is huge. It is no coincidence that all three branches of the federal government, as well as most state governments, have become more “business-friendly” and less “worker-friendly” than at any time since the 1920s. As I’ve noted, Congress recently slashed the corporate tax rate from 35% to 21%. Meanwhile, John Roberts’ supreme court has more often sided with business interests in cases involving labor, the environment, or consumers than has any supreme court since the mid-1930s. Over the past year it not only ruled against public employee unions but also decided that workers cannot join together in class action suits when their employment contract calls for mandatory arbitration. The federal minimum wage has not been increased since 2009, and is now about where it was in 1950 when adjusted for inflation. Trump’s labor department is busily repealing many rules and regulations designed to protect workers.
The combination of high corporate profits and growing corporate political power has created a vicious cycle: higher profits have generated more political influence, which has altered the rules of the game through legislative, congressional, and judicial action – enabling corporations to extract even more profit. The biggest losers, from whom most profits have been extracted, have been average workers. America’s shift from farm to factory was accompanied by decades of bloody labor conflict. The shift from factory to office and other sedentary jobs created other social upheaval. The more recent shift in bargaining power from workers to large corporations – and consequentially, the dramatic widening of inequalities of income, wealth, and political power – has had a more unfortunate and, I fear, more lasting consequence: an angry working class vulnerable to demagogues peddling authoritarianism, racism, and xenophobia.
Taking the Wrong Lessons from a Temporarily Strong Quarterly GDP Growth Number
Trump boasted he has accomplished an “economic turnaround of historic proportions!” Huh? Maybe he misspoke & meant to say we’ll have persistent annualized trillion dollar deficits of historic proportions. We actually had stronger quarterly GDP growth in the middle of 2014, but Obama didn’t brag about it as if it were some kind of economic miracle. It’s because there is no miracle, since the same old problems persist, with a lack of wage growth & too many Americans not in the workforce: our-mass-delusion-of-american-
President Trump on Friday morning held a press event that amounted to a victory lap for the Gross Domestic Product growing by 4.1 percent in the second quarter of this year. Trump gave himself all the credit for economic growth, while discrediting the record of his predecessor, Barack Obama. “We have accomplished an economic turnaround of historic proportions,” Trump said. “Once again we are the economic envy of the entire world.” Trump went on to tout jobs numbers in particular. “We have added 3.7 million new jobs since the election,” Trump said. “A number that is unthinkable if you go back to the campaign. Nobody would have said it. Nobody would have even in an optimistic way projected it.” Trump was fibbing. Though he claimed to have “added 3.7 million new jobs since the election,” 3.2 million jobs have been created since his inauguration.
And it is simply not the case that Trump’s jobs record would have been “unthinkable” during the campaign. In fact, Obama’s jobs record during the final 17 months of his administration — a period of time encompassing Trump’s campaign — outperformed Trump’s during his first 17 months. While Trump attempted to gaslight people, his eldest son touted the GDP number with a brazen lie. “Incredible numbers,” Donald Trump Jr. tweeted. “I remember when ‘the experts’ laughed about breaking 3%. Just because Obama never broke 2% doesn’t mean that someone with great policies can’t. Let’s keep this going.” In fact, under Obama, quarterly GDP growth “broke 2%” 16 times, hit 3 percent or higher eight times, hit 4 percent or higher four times, and even exceeded 5 percent once.
Meanwhile, Brad Parscale, Trump’s 2020 campaign director, reacted to the GDP news by exclaiming that the economy “has surged into the ‘impossible’ zone. This President is delivering the best economy in decades. Job opportunity is like almost no time before. Take advantage! 4.1!!!” Parscale’s claim that 4.1 growth is in the “impossible” zone is belied by the fact that quarterly GDP growth under Obama exceeded that number on three separate occasions. While Parscale characterized 4.1 percent GDP growth as “impossible,” the White House’s official Twitter account touted the number with a tweet suggesting the rate is sustainable. That “if” in the White House’s tweet is doing a lot of work. Prior to 4.1 percent growth in this year’s second quarter, quarterly GDP growth under Trump hadn’t exceeded 3.2 percent.
So before we pop the champagne over rosy quarterly GDP growth, there were one-time factors that spiked the numbers which aren’t likely to be repeated: hole-trump-economy. A big wildcard going forward will be what Trump’s tariffs ultimately lead to, be it escalating trade wars or new trade deals that are fairer by leveling the playing field. So the range of possibilities the tariffs could spark go from disastrous to wonderful. See chinas-tariffs-soybeans-
The United States just had its strongest quarter of economic growth since 2014. Between the start of April and the end of June, America’s GDP grew at a 4.1 percent annual rate; during his failed presidential bid, Jeb Bush promised to deliver a mere 4.o. President Trump touted the “GREAT GDP numbers” in the Commerce Department’s report Friday morning — and predicted that “we’re going to go a lot higher than these numbers” in the months to come. But most economists and financial analysts disagree. And their reasoning is simple: That 4.1 percent growth rate is partially the product of temporary distortions in patterns of trade, and an ephemeral uptick in government spending.
When American producers increase their exports, GDP goes up. And, ironically, Trump’s various protectionist measures spurred a boom for U.S. exporters — because foreign buyers were eager to stock up on American goods before their governments slapped retaliatory tariffs on such products. Thus, the U.S. exported 50 percent more soybeans in May 2018 than it had in May 2017. And since this increase was driven by trade-war fears (as opposed to an explosion in global demand for tofu), soybean exports will likely fall dramatically in the coming months — and bring U.S. GDP down a bit with them. Similarly, Congress’s budget deal increased federal outlays by 3.5 percent in the second quarter, which also provided a short-term boost to GDP. Elevated levels of government spending should continue for a while longer, but economists expect its impact on growth to peak later this year. Meanwhile, private investment actually fell over the second quarter — a development that contradicts the GOP’s economic promises. When Republicans passed their multitrillion-dollar corporate-tax cut last winter, they insisted that the legislation would stimulate capital investment, and thus innovation, and thus growth. But this spring, business investment in equipment was sluggish, chugging along at its slowest pace since late 2016. At the same time, residential investment fell for the fourth time in five quarters. A slowdown in housing construction contributed to that decline. Historically, the weakening of America’s housing market has augured poorly for the broader economy.
So, there’s reason to believe that 4.1 percent GDP growth is not sustainable — and even it it were, some analysts think that might not be high enough to sustain the stock market’s post-Trump boom. As Bloomberg’s Stephen Gandel and Brian Chappatta write: Stocks soared after the election, and more recently interest rates began climbing, apparently on the assumption that Trump, with deregulation and tax cuts, would create a fundamental shift in the economy. Both rates and stocks have cooled recently, but stocks have leveled off at a range that anticipates an economy that will grow significantly faster than it has. The total value of all U.S. stocks is now equal to 154 percent of the annualized GDP. That’s above the 130 percent that the market has traditionally traded around and what many think indicates stocks are fully valued. For the market to get back to 130 percent, it would require a much more robust pace of growth.
Trump’s short-term vision & unethical behavior will produce a long-term negative: democracys-under-attack-but-
Workers are shouldering a rising share of federal revenue, while tax payments by businesses are plunging toward record lows. Treasury Department data for the first half of 2018 show individual income tax receipts rose 8.1%, to $915 billion. Corporate income tax receipts fell 32.4%, to $100 billion. The sharp decline in corporate tax revenue is largely a result of the tax cuts President Trump signed into law at the end of 2017, which cut the top corporate rate from 35% to 21%. The drop in corporate tax payments isn’t surprising, since that’s exactly what the Trump tax cuts were designed to do: leave more after-tax income in corporate coffers to spur more investment. Workers got tax cuts too, but they were relatively modest. Here are the numbers:
And as we see from the conclusion to why-one-quarters-growth-tells-
This, however, says nothing at all about whether the economy can achieve 3 or 4 percent growth over a longer period, say a decade. That would require evidence of an acceleration in the growth of capacity. So does 2nd quarter growth say anything at all about the Trump economic agenda? The tax cut probably helped give the economy a bit of a bump: massive deficit spending will do that. (Obama could have presided over a much more rapid recovery if Republicans hadn’t insisted that deficits and debt are vast evils – but only when a Democrat is in the White House.) But deficit-based Keynesian stimulus wasn’t how the tax cut was sold, and isn’t a basis for sustained growth. In short, one quarter’s growth is a nothingburger. The real news is that we’re still waiting for both the investment surge and the wage gains the tax cutters promised; as far as we can tell, they’re never coming.
Answers Are Complicated
Admittedly, globalization is complicated & fixing the situation is even more complicated: city-of-london-
Viable & constructive suggestions are encouraged in here: time-to-reinforce-the-
Income inequality is a growing problem in the United States. The richest Americans have reaped a disproportional amount of economic growth while worker wages have failed to keep pace. And the $1.5-trillion Republican-passed tax cuts from December stand to make the situation worse. One chart from the 2018 World Inequality Report highlights the unique nature of income inequality in the US compared to other developed regions — namely, Western Europe. And the contrast is stark. From 1980 to 2016, the poorest half of the US population has seen its share of income steadily decline, and the top 1 percent have grabbed more. In Europe, the same trend can’t be observed. In 1980, the top 1 percent’s share of income was about 10 percent in both Western Europe and the US, but since then, the two have severely diverged. In 2016, the top 1 percent in Western Europe had about a 12-percent share of income, compared to 20 percent in the United States. And in the US, the bottom 50 percent’s income share fell from more than 20 percent in 1980 to 13 percent in 2016.
To be sure, wealth inequality is a global problem, and ranked among all nations, the United States does better than dozens of countries. But the visualization of how much the switch has flipped on the richest and poorest Americans over the past two decades is stunning. Vox’s Dylan Matthews in 2017 highlighted research from Pikkety, Saez, and Zucman — three of the researchers behind the World Inequality Report — also examining how much income gains have gone to the super-rich in recent decades instead of the middle and lower class. From 1946 to 1980, the middle class and poor were actually seeing their pay growth outpace that of the rich. But since then, the trend has moved sharply in the opposite direction.
The economists behind the World Inequality Report explain the divergence between the US and Europe, but there are a number of factors that could be driving income inequality in the US more broadly. Still, it’s unlikely that the GOP tax bill will help. Passed in December, the legislation reduced the corporate tax rate to 21 percent from 35 percent and disproportionately benefits businesses and the wealthy. According to estimates from the Center on Budget and Policy Priorities, the top fifth of earners get 70 percent of the bill’s benefits, and the top 1 percent get 34 percent. The new tax treatment for “pass-through” entities — companies organized as sole proprietorships, partnerships, LLCs, or S corporations — will mean an estimated $17 billion in tax savings for millionaires in 2018. American corporations are showering their shareholders with stock buybacks, thanks in part to their tax savings, and have returned nearly $700 billion to investors this year. Taxes aren’t the only matter in play in income inequality, but they’re part of it. And the tax cuts aren’t helping.
A Timeless Speech For Perspective
David Hogg posted a portion of a speech from Robert Kennedy 50 years ago, pertinent for today that GDP is not the be all, end all measure of our nation’s economic aspirations. Taken from David-Hogg-Posts-Great-
“Even if we act to erase material poverty, there is another greater task, it is to confront the poverty of satisfaction – purpose and dignity – that afflicts us all. Too much and for too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things. Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product – if we judge the United States of America by that – that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman’s rifle and Speck’s knife, and the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans. If this is true here at home, so it is true elsewhere in world.”
Senseless Shutdown Talk
Go ahead, I dare you. To orchestrate a government shutdown over the border wall just before the midterms could ensure the Dems capture the House AND Senate: trump-government-
The economies of rural areas have been lagging behind. The key to their vitality is supporting the factors for the formation & vitality of small businesses. That includes access to capital as seen in excerpts inside rural-america-is-ripe-with-
Investment in venture-backed companies in the United States reached $57 billion in almost 4,000 deals in the first half of 2018. Yet, only a fraction of those dollars found their way to funds and companies based in rural America. This capital deficit is starving innovative and valuable growth opportunities across rural communities. Many people think immediately of agriculture when focused on rural communities, yet it only makes up 6 percent of today’s rural economy. Small businesses are the lifeblood of rural economies, and will continue to be the single biggest opportunity for growth for small communities. Without crucial access to capital, job growth and rural economic development will continue to lag the rise in prosperity of the rest of the country.
Given the economic and geographic disparities that rural communities face, it is imperative to find ways to share best practices from across the country to ensure there is a community of practice that allows rural entrepreneurs and those striving to create opportunity for those entrepreneurs to learn from one another, advocate with a collective voice and push for more capital to flow to rural opportunities. Together, we have embarked on an effort to increase investment from the private sector in rural America, a geography that is more than 95 percent of the country’s land area and less than 20 percent of its population. It is well established that small business and particularly new small businesses are the greatest source of job growth. Yet, these new businesses lack access to a critical source of capital. There are several issues that lead to this gap, including: a lack of awareness, issues of scale and development of funds.
Here is a link to an article comparing Trump’s heartless immigration policies & abduction of children to another shameful time in our nation’s history, that of slavery: trumps-views-on-due-process-
When Will A Political Party Stand Up?
Since the radical nature of what the GOP has become under the cult of Trump has shifted far away from the ideals of us rational center-righters, we may have to align with the Dems to defeat the scourge of demagoguery which has infiltrated our former party. Women can lead the way: the-wave-thats-building-for-
I’m Dizzy Just Listening To Rudy
After hearing the conflicting versions of Rudy’s legal arguments on the cable talk shows the past couple days, complete with totally illogical explanations, it left the show hosts’ heads spinning even on Fox: watch_giuliani_leave_fox_news_