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Brief #30—Economic Policy

This past week saw automotive giant General Motors (GM) announce it would be closing its Lordstown Ohio plant, as well as four others, in an effort to reduce costs. The effects of this decision will include the loss of 15% of the company’s salaried workforce, totaling over 14,000 manufacturing jobs. The workers who will be left unemployed likely remember the promises that President Trump made to the workers of their industry, specifically that no automobile manufacturing jobs would be lost and rather, more would be created. Like so many of his promises, though, it has been proven hollow.

In spite of all this, it would appear that the workers being outed from the Lordstown plant are remaining steadfast in their support of Trump. According to multiple sources, GM county is seeing numerous workers blaming “corporate greed” for the layoffs and refusing to consider any Trumpian policies. The evidence that his administration’s tariffs have had negative effects on all of America’s leading auto manufacturers is undeniable but many GM workers have refused to consider them as a possible nail in the coffin of their factory jobs. GM has tried to attribute the drastic cost-cutting measures to changing consumer demand and while that has certainly played a part in it, the increased production  costs that stemmed from Trump’s tariffs on aluminum and steel cannot be ignored. More than ever, the consumer voters of the rustbelt region of the midwest have demonstrated their commitment to the President they voted for.

During the recent Midterm elections, multiple Democratic Senatorial candidates in red states attempted to leverage the effects of President Trump’s trade war as a method to sway his supporters. This tactic made sense, particularly as in many red states, the economy is likely driven either by agriculture or manufacturing. It is not surprising that Democrats would express concern for the state economies who have felt the effects of the trade war in worse ways that those in urban areas. These candidates included Senators Claire McCaskil of Missouri, Joe Donnelly of Indiana, and Heidi Heitkamp of North Dakota. Both Heitkamp and Donnelly cited the certain tariffs that kept their state’s farmers out of important global trade markets while McCaskil raised the popular example of the Mid Continent Nail Co. in Poplar Bluffs Missouri, a factory about to be forced to close its doors due to Trump’s tariffs on aluminum and steel, the same policies that have wreaked havoc on the automotive industry.

All three candidates, though, were defeated by fairly large margins. These regions included plenty of voters whose jobs have been lost since the start of the trade war but remain unmoved by the evidence against their president’s role in the loss of their jobs.

Analysis
Since the start of the trade war, Trump has pushed the notion that any pain the American people have been feeling in the short-term will ultimately give way to longer-term economic gains. It is more clear than ever that his supporters are willing to suffer through the considerable economic turbulence caused by tariff after tariff despite the evidence that there are no long-term economic gains in sight. Everything from the recent declines in the stock market to the numerous factories closing their doors and cutting low and semi-skilled jobs has indicated that the U.S. economy is far from healthy.

Those with careers in the industry of agriculture should know this better than anyone, particularly those whose chief export is soybeans. Farmers in North Dakota have reported considerable declines in demand for soybeans on the part of the Chinese, one of their primary consumer markets. Even so, 93 percent of the state still supports Trump, who did not hesitate to emphasize the problems caused for farmers by the retaliatory tariffs implemented by China, despite the fact that they were prompted by his own policies.

As problematic as the trade war has proven for red states across the American South and Midwest, it is not the only factor contributing to their economic difficulties. Regional economies across areas such as the rust belt region of the Midwest were struggling for decades before Trump took office. His policies have done plenty accelerate already problematic elements, though, particularly job loss in rural areas. Politico has dubbed this phenomenon the “geography of opportunity,” referring to the trend of people with resources fleeting rural areas and migrating to more urban ones in search of economic opportunity. This migration has caused  coveted opportunity and innovation to stay confined to cities and already prosperous suburban areas.

This trend is problematic for a number of reasons, particularly for the overall economic prosperity of our nation. President Trump has done little to help and what he has done, such as doling out $12 billion in government aid to farmers affected by the trade war, has not yielded the necessary results. There are several key policies, though, that might help spur innovation and economic development in rural areas.

Firstly, we should focus on expanding funding for startups and finding new ways to incentivize entrepreneurs and capitalists to build companies in less populated areas. Perhaps a tax break for new companies built in such areas would be more effective than the tax cuts that President Trump granted prominent corporations who are doing more to eliminate American jobs than to create more. A tax break such as the one proposed would likely help draw investment capital to struggling rural and areas and ultimately spur the economic development that such places need.

We should also be rethinking our policies regarding infrastructure. Healthy infrastructure and transportation systems can greatly benefit both public health and regional economies which both contribute to a healthy U.S. economy. The only national focus on infrastructure, though, seems to be in urban areas and densely populated cities. Any solutions that have worked in New York, Los Angeles or Chicago will likely not work throughout the rustbelt region or similarly rural areas. Another problem has been the nature of infrastructure discussion has often swung towards prioritizing special interest groups without giving thought to the real problem of workers who are often unable to relocate to a different area in search of better work. Discussions on infrastructure should cast an eye toward restructuring policy around the needs of America’s workers. In the struggling communities in these areas, though, we often see resources that are not completely developed. All this calls for the need for policies to spur economic development in such places. The right sort of legislature could bring both jobs and positive changes in infrastructure.

The conservative strongholds of the midwest and deep south are seeing even less economic development than their northern counterparts, despite their seemingly undying faith in a leader who has failed to deliver on his promises to them. The economic solutions that their communities need to thrive again are not out of reach by any means but until they refocus their priorities and recognize what is necessary, nothing is likely to change.

Resistance Resources:

  • Our Ohio Renewal is a nonprofit organization created to help promoting discussion on matters including economic development in rural Ohio.
  • The International Economic Development Council is a nonprofit organization dedicated to helping economic developers and promoting development projects.
  • The Appalachian Regional Commission is a United States federal-state partnership that works  with people of the Appalachian regions to create opportunities for self-sustaining economic development and improved quality of life

This Brief was submitted by USRESIST NEWS Analyst Samuel O’Brient:  Contact: sam@climatescorecard.org

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