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ECONOMIC POLICIES, ANALYSIS, AND RESOURCES

The Economic and Trade Policy Domain tracks and reports on policies that deal with budget, taxation, and finance issues. The domain tracks policies emanating from the White House, Congress, the Department of Commerce and the Department of Treasury. Our Principal Analyst is Ivy Perez who can be reached at ivy@usresistnews.org.

Latest Economic and Trade Policy Posts

Income Inequality under Donald Trump Indicates Superficiality of Current Economic Growth

Throughout his time in office, Donald Trump has never shied away from touting the economic growth that the country has seen during his presidency. He’s boasted about job growth and the healthy stock market and G.D.P. It doesn’t stop there, though Trump has continuously touted the benefits of the global trade war brought on by his administration’s tariffs, despite overwhelming evidence to the contrary.

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Federal Budget Deficit Rises Under Trump Administration’s Tax Cuts and Concerns

Tax cuts were one of the primary elements that Donald Trump used to garner voter support during his 2016 presidential campaign. He spoke of tax cuts that would improve the lives of citizens nation-wide, never alluding to the potentially negative effects that could also stem from such a maneuver. He pitched these tax cuts as if they were a solution that could easily fix the economic problems the U.S.

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Rapidly Climbing National Debt Poised to Hinder Growth of an Already Vulnerable Economy

Rapidly Climbing National Debt Poised to Hinder Growth of an Already Vulnerable Economy

Brief #26—Economic Policy

Policy Summary

During his 2016 presidential campaign, Donald Trump frequently touted the importance of balancing the national budget, promising to do exactly that.

The rally cry of “fix the debt” is hardly a new campaign bedrock for Republican party members. In the years since the National Debt Clock was placed on a New York City building in 1989 by real estate mogul Seymour Durst, GOP leaders have often used it as a tool in their campaigns. During the 2012 Presidential Election, Republican candidate Mitt Romney and his running mate Paul Ryan made use of a fake national debt clock to rouse voters. Donald Trump seemed be prioritizing the national debt problem during his campaign, promising to eliminate the budget deficit.

Like so many of the promises he made before being elected, though, no progress has been made in the area of reducing the debt or balancing the budget. Rather, we have seen the opposite outcome take shape. In the past fiscal year, the Trump administration has added $1.5 trillion to the national debt. A budget deficit is created when revenue is outpaced by government spending, a trend that has proven consistent for the U.S. Ultimately, such a trend will often lead to an increase in a country’s national debt, which occurs when a government borrows considerable funds to cover this deficit. Total gross debt today totals more than $21 trillion, coming out to roughly $65,000 for every citizen. When the National Debt Clock was erected, it was just below $3 trillion, which came out to $12,000 per person. It has been reported that by the end of 2018, the debt held by the public will have exceeded $127,000 per household.

All this adds up to an economic milestone. If things continue to progress in this way, the end of 2018 will see the U.S.’ debt held by individuals, financial, institutions, foreign countries and others   reach a number greater than the debt held by all American households. This includes all debt from student loans, credit cards and mortgages. Analysts at J.P. Morgan have reported that such a phenomenon would be the first in modern history.

Analysis

When it comes to the national debt, it is common for economists to focus on the debt held by the public.

This makes sense, as in the short-term, it is often easier to be concerned with the money that is owed to creditors by the U.S. government than the intergovernmental debt, which consists of funds owed to one government agency by another.  While both parts of the national debt are important,  the former effects the public more. In past times of sufficient economic growth, the government has found ways to reduce the national debt, as President Trump promised. His inability to do so, though, indicates that the economic growth he has touted so highly and claimed responsibility for is superficial and far from sustainable.

Many economists indicated the tax breaks that President Trump has given to those in the highest income bracket would give way to further fiscal problems. As recent events have showed us, all such predictions were correct. Despite the GOP claim that these tax breaks would increase spending by the private sector, that has not proven to be the case. Even before the tax breaks, though, most of the problems regarding the U.S. economy had more to do with revenue than spending, which holds true to this day. It should also be noted that this is not the first time tax cuts have proven problematic for the U.S. in matters regarding the national debt. During George W. Bush’s years in office, the tax cuts he implemented gave way to a spike in debt, as did the wars in Iraq and Afghanistan. When further poor fiscal policies sent the U.S. into the Great Recession of 2009, the national debt increased even more.

All of this, combined with the Trump administration’s increased military spending has led the U.S. to a place of extreme economic vulnerability. Recent years have seen the U.S. government continue its cycle of borrowing money but no system of borrowing can be sustainable in the longer-term. When it comes to fiscal matters, borrowed money tends to amount to borrowed time. Ultimately, this will likely force the U.S government to consider scaling back safety-net programs such as Social Security and Medicare. While this approach is often favored by the Republicans, Democrats often seek to resolve monetary and budget related matters by increasing taxes on America’s wealthiest citizens and corporations. The people who will pay the price for the poorly designed fiscal policies of the Trump administration will likely depend on who holds office when the current debt bubble bursts.

The last time economists became concerned with a debt bubble, the U.S. saw the stock market crash and the Great Recession begin. The cost of debt is high for both investors and consumers and as a nation, we cannot to ignore it.

Resistance Resources:

Photo by Ruth Enyedi

Trump Administration Reaches Compromise with Canada as NAFTA is Rebranded USMCA

Trump Administration Reaches Compromise with Canada as NAFTA is Rebranded USMCA

Brief #25—Economy

Policy Summary
Almost one week ago, the events of an emerging US instigated  trade war took an interesting turn as it was announced that the U.S. and Canada had settled on a compromise in their long-standing and complicated negotiations regarding the North American Free Trade Agreement (NAFTA). As previously reported, the U.S. reached an agreement with Mexico over a month ago. Canada made no immediate move to pander to President Trump’s proposed threats regarding auto manufacturing tariffs that could affect their economy. The negotiations on the part of the Trump administration, though, finally reached a breakthrough when Canadian officials accepted a counteroffer from the U.S. government to a detailed proposal that they had previously submitted.

This new trade pact that all three nations have reached will be called the United States Mexico Canada Agreement (USMCA).  As of now, the result seems to be that President Trump’s aggressive means of negotiating, by way of imposing tariffs and making threats aimed at scaring other nations into compromising, has worked to a small degree. One of the primary things that President Trump sought to gain from his attempts to strong-arm the Canadian government was access to their dairy market. This new trade pact grants him a modest opening, similar to the one his negotiations granted the U.S. in the Mexican auto manufacturing market. All this leads us to the glaring notion that as far as policy goes, all that he has truly accomplished is gaining what Brookings Institute’s Geoffrey Gertz describes as “modest concessions.” It should not be forgotten that all three nations have enjoyed the substantial economic benefits that stemmed from NAFTA.  As of now, it cannot be determined whether all such benefits will continue USMCA, a trade pact that has so far swung in the direction that the U.S. wanted and away from the directions that Mexico and Canada initially hoped it would.

Analysis
Apart from its new name, how will this new trade pact differ from NAFTA? Analysts have indicated that for the most part, the primary changes are on the surface. While the concessions on the parts of Mexico and Canada have resulted in  rule-of-origin changes for the auto manufacturing industry and an increase in U.S. access to Canada’s dairy market, there aren’t likely to be any dramatic changes for the typical American consumer in their everyday life.

That is not to say that we shouldn’t be concerned about the possible long term effects of this deal. From a macro perspective, it is easy to see that there could easily be problems ahead that President Trump has not considered. While it is true that Canada and Mexico did take steps to cater to the demands of the U.S, it should be noted that both their economies depend considerably more upon the U.S. than the latter’s does on theirs. Mexican officials were likely  to appease President Trump’s demands because they knew that being further alienated from U.S. markets could have significant effects on their nation’s economic system.

We should absolutely not take these instances as an indication that President Trump has been justified in his negotiation tactics and use of tariff policies. Through it all, he has been continuously running the risk of undermining his nation’s long-term interests and influence on a global scale. The U.S’s technique of exerting ‘soft power’ to convince other countries that their interests run parallel with America’s has worked well for the purpose of growing a global order based on open markets and mutual respect. Canada and Mexico could easily interpret the recent process of renegotiating and rebranding NAFTA as a sign it would be in their best interests to be less inviting of U.S. power as all three nations move forward. Other nations who have been watching these events play out will likely take heed of the same lesson–a nation that has treated two of its closest allies and trading partners badly will not hesitate to do the same to others. It will be significantly difficult for these policies not to undermine  U.S. global influence, possibly throughout the years after President Trump has left office.

On the whole, it would appear as though the renegotiations that have led to the drafting of the USMCA can be classified partially as an exercise in rebranding and partially as a power grab on the part of President Trump. Despite his clear condemnations of NAFTA both on the campaign trail and after taking office, he has ended up with a deal that looks remarkably similar to what he once called “the worst trade deal in history.” While he has done everything in his power to rebrand the new deal as his own, most of changes do not differ that greatly from the NAFTA agreement, and according to many analysts, the means by which he went about it do not justify the end product.

The new trade pact has yet to be ratified, though, and will need congressional approval before being signed into law. The midterm elections are swiftly approaching and their results will likely have a significant effect on the signing of the USMCA.  Congressional Democrats are unlikely to endorse such a deal and if more are elected, the result could easily swing in the direction against President Trump’s new trade deal.. 

Resistance Resources:

  • The Institute for Policy Studies is a progressive think tank that conducts research on matters that include economic policy and economic justice.
  • The Center for Economic and Policy Research is a non-profit research association that works to promote democratic debate on important economic and social matters.
  • The World Economic Forum is a research foundation dedicated to engaging business and political leaders to help shape regional agendas, both reginal and global.

 

This Brief was submitted by USRESIST NEWS Analst Sam O’Brient:  Contact sam@usresustnews.org

Photo by unsplash-logoHermes Rivera

Does the Administration’s  Tax Cuts and Job Act Mean Trouble for GOP in Upcoming Election?

Does the Administration’s Tax Cuts and Job Act Mean Trouble for GOP in Upcoming Election?

Brief #24—Economics

Policy Summary
With the midterm elections quickly approaching, speculation continues to mount as to how much of an impact the Trump administration’s policy will have on the impending elections. Of these policies, few have raised more eyebrows that the Tax Cuts and Jobs Act (TCJA), signed by President Trump on December 22nd, 2017. Many people on both sides of the aisle considered the piece of legislature to have been passed prematurely, as it was pushed through Congress in the span of less than two months.  Prior to being signed into law, it received the support of only 32% of American voters.

The presidential administration was not without their reasons for wanting to push the legislature through Congress so quickly. Facing criticism from the right for failing to make good on the promise to “repeal and replace” the Affordable Care Act, they found themselves in need of a quick legislative change that could potentially shift national focus onto their successes rather than their failures. It is also worth noting that the quicker the bill was passed, the less time its critics would have to build arguments against it. Were the bill signed into law in time for the 2018 tax year, there was the possibility that voters would respond positively when they saw an increase in their take-home pay as well as further economic growth stemming from the tax cuts extended to corporations.  In the months since, though, this prediction has not come to pass. Rather, the opposite has taken shape.

Analysis
Does the bill’s reception serve to indicate that conservative candidates may have cause for concern in impending election? Many people seem to think so. Washington D.C. think tank Brookings Institute recently published a study discussing exactly that topic. In the study, Governance Fellow Vanessa Williamson argues that the implementation of the TCJA less than a year before a congressional election could be considered contradictory to the GOP principles —tax cuts are often an area that Republican candidates lean on in times when voter turnout is low.

The decision to implement these tax cuts, however, is misguided for several reasons. It is a policy changed fueled by poorly calculated political and economic assumptions. For many voters, the difference in take-home pay was likely difficult to notice, as the tax cuts that affected them were small. According to the Urban-Brookings Tax Policy Center, a joint venture of Brookings Institute and fellow think tank The Urban Institute, voters in the middle-income bracket will be seeing tax savings that total less than $20 per week.

It also seems apparent that the Trump administration has failed to take recent history into account. The tax cuts implemented by President George W. Bush benefited roughly three-quarters of American voters but in the year that followed, only one in every five Americans remembered it.  A few years later, the 2008-2009 tax cuts implemented by President Barack Obama caused taxes to decrease for eight out of every ten voters though it was reported that only 10% were able to take note. Despite the constant controversy over tax cuts, American voters have displayed significantly short memories when the actual policies are implemented.

Recent history has also proven that enthusiastic voters tend to look to their own party leaders for political cues, particularly in our current state that Forbes’ Howard Gleckman calls a “hyper-partisan atmosphere.’ While it is certainly possible that the GOP could have taken time to build up support for the legislation among their grassroots supporters, rushing it through Congress cost them exactly that opportunity.

We should also not forget the other element of the bill that contradicts a core belief among conservative voters. According to the study, many conservatives stand by the principle that tax cuts should not favor corporations and high-income households. The TCJA, though, did exactly that. By that logic, it does not seem like a policy change that middle and working-class conservatives should be in favor of.

The implementation of this controversial piece of legislature could serve as a valuable tool for campaigning Democrats to use to their advantage as election day draws near. As of now, it does not seem as though they are making an aggressive effort to do this–were they to treat it the way conservatives treated the ACA, the results could swing significantly in their favor.

The TCJA was a misguided policy from the start and it is not likely to prove a boon to the Republican Party in November, as voters will probably either have forgotten about the meager benefits extended to them or still be standing against the policy.

Resistance Resources:

  • The Urban-Brookings Tax Policy Center is a nonpartisan think tank that provides independent analysis on current and long-term tax-related matters.
  • The Urban Institute is a think tank dedicated to social and economic research, dedicated to improving the “well-being of people and places.”
  • FairVote is a non-partisan organization that works to give voters a stronger and help shape a representative democracy that benefits all Americans.

This Brief was submitted by USRESIST NEWS Analyst Samuel O’Brient Brief, Contact Sam@usresistnews.org

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As Chinese Import Tariffs Threaten Technology Sector, Trump Offers Manufacturing Proposal

As Chinese Import Tariffs Threaten Technology Sector, Trump Offers Manufacturing Proposal

Brief #24—Economics

Policy Summary
The Trump administration’s tariffs on Chinese imported goods have been problematic for both U.S. manufacturers and consumers. These policies have been numerous, adding up to billions of dollars’ worth of Chinese manufactured goods that U.S. companies depend on being severely affected. They’ve also prompted China to implement retaliatory tariffs of their own. When President Trump threatened to add an additional $200 billion in tariffs on other Chinese imports, one of the U. S’s largest companies panicked.

On September 5th, Apple penned a letter to United States Trade Representative Robert Lighthizer voicing its concerns regarding the proposed tariffs. According to them, these further tariffs on imported Chinese goods will cause a significant increase in prices of products such as the Apple Watch, the Apple Pencil, and the Airpod headphones. Computing devices would also be affected, as would various chargers, cables, and adapters. Apple provided a detailed list of the goods and company operations that would be affected by these tariffs, going so far as to provide the exact tariff codes that accompany each category.

“Our concern with these tariffs is that the U.S. will be hardest hit, and that will result in lower U.S. growth and competitiveness and higher prices for U.S. consumers” the letter stated.

President Trump was quick to respond to Apple’s concerns with a proposed solution. He tweeted “Apple prices may increase because of the massive tariffs we may be imposing on China – but there is an easy solution where there would be ZERO tax, and indeed a tax incentive. Make your products in the United States instead of China. Start building new plants now. Exciting!”

As of now, Apple has issued no direct response to Trump’s statements.

It should also be noted Apple is not the only American company to express their discomfort with the Trump administration’s tariffs on goods imported from China. Automobile manufacturing giant Ford recently announced that it would be abandoning previous plans to ship their Focus Active, a hatchback-style vehicle, to the U.S. from China. The reason for this change in operation was attributed to the Trump administration’s tariffs.

Trump tweeted a response to Ford’s announcement that echoed the same sentiment he had expressed to Apple –” Ford has abruptly killed a plan to sell a Chinese-made small vehicle in the U.S. because of the prospect of higher U.S. Tariffs. CNBC.  This is just the beginning. This car can now be BUILT IN THE U.S.A. and Ford will pay no tariffs!”

Ford did not agree with this, though. They responded that manufacturing the Focus Active in the U.S. would not make economic sense, as it would not be profitable.

Analysis
In their letter, Apple also brought up the subject of economic benefit, arguing that these impending tariffs could “ultimately reduce the economic benefit” that they generate for the U.S.

Their concern is certainly valid, and applies to other companies as well. Apple is not the only technology company that would feel the effects of such policy shifts. The hearings conducted on the subject this past August on Capitol Hill saw over 300 companies testify that these tariffs would likely be dangerous not just for them, but for their entire industry. Were they to be implemented, many prominent companies within the technology sector would be forced to raise the costs of their products when the parts that they imported from China became more expensive.

When the tariffs on aluminum and steel that sparked the trade war were first implemented, Trump made the claim that they would generate further manufacturing jobs. The opposite quickly proved to be true, however, as many American companies either shifted their operations overseas, such as Harley Davidson, or were forced to lay off numerous workers, such as the Mid Continent Nail Corporation. If we have learned anything from the early stages of the trade war, it is that tariffs do not create American jobs.

As the trade war has progressed, it has become increasingly clear that Donald Trump either does not understand the continuously negative effects his tariff policies have had on his country’s jobs or simply does not care. They have also crushed innovation which stands to happen again if these further tariffs on Chinese imports are implemented.  The early tariff policies that wreaked havoc on the solar panel industry spelled the end of many startups that could no longer afford to import parts that they depended on. The looming further tariffs on Chinese imported goods is poised to produce the same effect on the many startups in the technology sector, one of the fastest growing and most innovative industries in the U.S.

While switching manufacturing operations to the U.S. would also mean a significant increase in labor costs, companies seem considerably more concerned about the prospect of rising production costs. Analysts have indicated that were all iPhones to be built in the U.S, each individual phone could cost as much as $1,000. While it may be the best-selling consumer device in the country, it seems a safe assumption that significantly fewer Americans would be able to spend that much money on a mobile phone alone, ultimately leading to declines in profit, which as we have seen throughout the trade war, often ends in workers being laid off.

While the prospect of more manufacturing jobs in the U.S is certainly appealing and a prospect our government should focus on, attempting to strong arm companies into moving entire operations to American soil out of fear does not seem to be the way of bringing back the jobs that Donald Trump has boasted about since before taking office. If he wants to bring jobs back to the U.S., he should start by lifting the tariffs implemented by his administration and letting American corporations expand their operations through increased production, research and development. When industry experts speak out on such an important subject, he should listen.

Resistance Resources:

This brief was written by USRESIST NEWS Economic Policy Analyst Samuel O’Brient: Contact  sam@usresistnews.org

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Trump Progresses with NAFTA Re-Negotiations–Could Leave Canada Out of New Deal

Trump Progresses with NAFTA Re-Negotiations–Could Leave Canada Out of New Deal

Brief #23—Economic Policy

Policy Summary
Donald Trump has made no secret of his feelings regarding the North American Free Trade Agreement (NAFTA). He’s described it as the “worst trade deal in history” despite the numerous benefits that the U.S. has enjoyed since the trilateral trade agreement was signed in 1994, such as a consistent annual increase in economic output.

Recently, Congress was notified that Trump’s administration plans to enter a new trade agreement that includes Mexico. This proposed deal has been described by the administration as a “preliminary agreement in principle.” Since the impending agreement was announced, there has been no official confirmation as to Canada’s plans to enter into the deal. As it stands now, though, Trump’s renegotiated deal poses several changes to the trade policies of the current NAFTA.

One area that would be significantly affected would be auto manufacturing. If this new deal passes, the amount of car components manufactured in either the U.S. or Mexico would be increased from 62.5 percent to 75%, although sources indicate that most manufacturing would take place in the U.S. This new deal also dictates that more of these auto parts must be made in factories where workers are paid at least $16 per hour.

Manufacturing isn’t the only area that will feel these effects, though. The current NAFTA was created before the rise of the modern digital age and as such, it contains little literature on how copyright violations should be dealt, primarily in regards to digital matters. Under this new deal, protections for U.S. copyright holders would be strengthened. In addition, this new pact with Mexico means that producers of certain drugs would be given ten years of data copyright protection.

Crystia Freeland, Canada’s foreign minister, initially implied that Canada was intentionally removing itself from early trade discussions between the U.S. and Canada in order to let the two nations resolve some crucial trade disagreements. President Trump, though, threatened to implement auto tariffs aimed at Canada if they did not negotiate in a way that he considers fair. He also told reporters that if Canada were to be involved in any trade deal with the U.S it would be completely on the terms of the U.S. Before these comments, it was expected that Canada would join the trade deal but little has been said on the matter since then. Freeland’s secretary stated, though, that Canada would not sign any deal that would not benefit its middle class.

Analysis
President Trump has displayed a clear willingness to move forward in the signing of this trade deal, even if Canada is not part of it. This notion is concerning, as such a maneuver could have severe repercussions for all three nations. The trade markets between all three are crucial to each nation’s economy as they contribute to the competitive manufacturing that drives many companies and keeps many workers employed.  International trade systems, such as NAFTA, allow many goods to be moved between the three nations, helping keep each economy healthy. It is not hard to see why a trilateral trade agreement between the U.S, Canada, and Mexico was needed in the first place, especially when we look at the clear economic growth and increased trade revenues that directly resulted from NAFTA being signed.

While Mexican President Enrique Pena Nieto made it clear that his nation wanted Canada to be included in this new trade deal, it was later indicated that they might be willing to compromise.

It is not surprising that Mexico would not want to risk alienating the U.S. on a matter such as this, particularly given President Trump’s reputation for lashing out at  leaders who do not go along with what he wants. Not having a deal with the U.S. on trade related matters could put the Mexican economy at considerable risk, as millions of its job are dependent on access to U.S. markets.

The prospect of a new trade deal that does not include Canada has proven concerning for both lawmakers and industry groups alike. Congress granted the Trump administration clearance to renegotiate NAFTA as a trilateral agreement and his failure to do so will likely result in considerable opposition, as well as complicated legal challenges.

Resistance Resources:

This Brief was submitted by USRESIST NEWS Analyst Samuel O’Brient; Contact Sam@usresistnews.org

Photo by Guillaume Jaillet

Executive Order Issued by President Trump Indicates His Stance on Federal Unions

Executive Order Issued by President Trump Indicates His Stance on Federal Unions

Brief #22—Economic Policy

Policy Summary
Donald Trump’s 2016 presidential campaign was filled with promises that involved helping restore union-dense industries such as coal and manufacturing. With these in mind, as well as his promises regarding infrastructure, it is hardly surprising that his support among union members was quite high. According to the Democracy Journal, the number of union members that voted for Trump was higher than it had been for a Republican presidential nominee since 1984 when Ronald Regan was running.

As has been the case for many of Trump’s campaign promises, though, his alleged commitment to helping unions has proven to be false. His administration has clearly demonstrated its stance on unions through their budget, specifically in its commitment to the two government agencies whose primary purpose is to regulate labor movements. The Office of Labor-Management Standards (OLMS), a division of the Department of Labor that exists to hold unions accountable for their actions saw their budget increased by $8 million. The National Labor Regulations Board, an agency concerned with accountability on the part of worker employers, on the other hand, saw theirs slashed by $16 million.

May 2018 saw President Trump take a direct aim at federal labor unions when he issued multiple executive orders to strip away the protections issued to federal workers when the 1978 Civil Service Reform Act was passed.  The benefits for federal union workers provided by this piece of this legislature included support for union representatives whose jobs involved helping union members file concerns, gain protection when necessary and address problems within the workplace. It was intended to help federal union members organize and bargain as well as have their say in matters involving labor that concerned them.

Prior to President Trump issuing this order, U.S. Office of Personnel Management Director Jeff Pon announced a plan on behalf of the agency’s administration that was intended to slash federal employee compensation by as much as $143 billion. This reduction would be made through considerable changes to the current retirement system.  It would mean the elimination of all supplements issued to Federal Employee Retirement System (FERS) members receiving any sort of annuity who retired before becoming eligible for social security.   The average number of years on which federal pension plans are based would also be altered and switched from three years to five.

These instances, though, are not the only examples of the Trump administration taking aim at federal employees.  This past year also saw the U.S. Department of Education issue a new labor contract that included the elimination of paid time off or union ‘official time.’

Federal unions, though, enjoyed a victory this past Friday when U.S District Judge Ketanji Brown Jackson ruled that President Trump’s executive orders exceeded his authority.


Analysis

President Trump’s attempts at curtailing the power of federal unions can likely be traced back to a statement he made during his 2018 State of the Union address. While discussing the importance of accountability, he stated “I call on Congress to empower every Cabinet Secretary with the authority to reward good workers and to remove federal employees who undermine the public trust or fail the American people.”

Given Trump’s blatant attack on federal unions, we are forced to wonder what workers were being rewarded in that case. If his executive is passed, workers would see their already diminished power further stripped away while the corporations that employ them benefit further.  These orders would will also make it easier for corporations to exploit the people that work for them and ignore their concerns and complaints, even with their union status. There can be no doubt that such an order would only hurt federal unions and ultimately, the national economy in general. Strong unions have proven a vital component of any healthy economic system but as President Trump has demonstrated multiple times, his commitment is to corporations, not workers.

Trump’s stance on unions could not be clearer. Everything, from the priorities indicated in his administration’s budget to his attempts to reduce union power continuously prove that he will not prioritize anything that helps give power back to America’s workers, despite his many early promises.

Resistance Resources

 

This Brief was submitted by USRESIST NEWS Anakyst Samuel O’Brient. Contact Sam@usresistnews.org

Photo by Anthony Ginsbrook

Income Inequality under Donald Trump Indicates Superficiality of Current Economic Growth

Income Inequality under Donald Trump Indicates Superficiality of Current Economic Growth

Brief #21—Economic Policy

Policy Summary
Throughout his time in office, Donald Trump has never shied away from touting the economic growth that the country has seen during his presidency. He’s boasted about job growth and the healthy stock market and G.D.P. It doesn’t stop there, though Trump has continuously touted the benefits of the global trade war brought on by his administration’s tariffs, despite overwhelming evidence to the contrary.

The numbers and statistics that Trump hasn’t been touting, though, tell a different story. Income inequality, according to reports, has reached its highest point since the 1920’s. The Economic Policy Institute, a liberal think tank recently published a report that found that the CEO of a typical large American company is paid a salary roughly 312 times larger than that of its typical worker. While the average pay of the CEOs of the 350 largest firms in the U.S. increased by 17.6% this past year, that of their workers increased by only 0.3%.

Further data published by the Bureau of Employment Statistics indicates that the past fiscal year has brought a clear slump in real wages for American workers. Between 2014 and 2015, during Barack Obama’s final years in office, wages rose considerably, a trend that continued through to 2016. Average inflation-adjusted hourly pay began to decrease early in Trump’s presidency, though and this past June saw wages hit their lowest point since 2013.

This data also indicated that the slight economic growth and decreasing unemployment rates have given rise to a slight increase in nominal wages, which have risen 2.7% during the past year. While it is not an inherently negative thing for them to have risen, it is not an indicator of sustainable economic growth, nor of future positive trends. Even with this increase, most American workers still are not receiving the share of economic output that they should be. It should also be noted that nominal wages by themselves cannot generate a higher standard of living for the workers receiving them. We are currently seeing the prices of goods and services rise at a higher rate than that of nominal wages, creating more problems for workers.

Analysis
All evidence and data presented by the EPI points to the conclusion that the increase in CEO pay is not due to an increase in productivity on the part of the executives benefitting. EPI co-founder and economist Robert Reich emphasizes this concept in his 2015 book Saving Capitalism, where he addresses the flawed concept that someone’s productivity level is dictated by their salary. Worker productivity may be increasing but if it is, American workers as a whole are not enjoying the benefits of the economic growth that they are helping generate but are being forced to watch excess profits be turned over to the CEOs of their companies. History has seen many policymakers, including those at the Federal Reserve, cite weak productivity as a primary reason for slow economic growth but considerable evidence points to the contrary, indicated that it is more likely due to the CEOs who use their power to set pay to grab more and more profits.

The central problem involving the slow growth of nominal wages is that when the prices of goods and services rise at a higher rate, workers have increasingly less buying power. The recent hike in prices is likely a further consequence of the trade war, which has resulted in the prices of many important goods being raised while more and more workers are laid off.

Furthermore, we have seen economic inflation give rise to a spike in oil prices which has only caused further problems for the workers whose wages aren’t rising quickly enough. The demand for oil continues to grow throughout the global economy, but the supply does not, primarily due to events in Russia, Venezuela and the Middle East. This hasn’t been helped by President Trump pulling the U.S. out of the Iran nuclear deal, which has led to further conflict and higher oil prices.

The current state of income inequality in the United States that has been dubbed the ‘Trump Slump’ can be summed up with a simple equation-when we combine an economy overwhelmed by steep inflation with nominal wages that are not rising quickly enough to keep pace, we are left with a workforce whose overall real wages are stagnate.

President Trump, so far, has implemented no policies to help spur wage growth or reduce inflation. All the while, corporations are gaining more and more power and influence while worker unions are losing theirs. All this points to the overwhelming conclusion that any economic growth that the United States has enjoyed Trump is not sustainable.

Resistance Resources

  • The Economic Policy Institute is a liberal think tank that researches and analyzes economic policies and proposals.
  • Strike Debt is an activist group that works to help citizens resist debt and fighting for economic justice.
  • Fight For $15 is a union-led group dedicated to increasing the minimum wage to $15 per hour.

 

This Brief was submitted by USRESIST NEWS Analyst Samuel O’Brient Contact Sam@usresistnews.org

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Federal Budget Deficit Rises Under Trump Administration’s Tax Cuts and Concerns

Federal Budget Deficit Rises Under Trump Administration’s Tax Cuts and Concerns

Brief #20—Economic Policy

Policy Summary
Tax cuts were one of the primary elements that Donald Trump used to garner voter support during his 2016 presidential campaign. He spoke of tax cuts that would improve the lives of citizens nation-wide, never alluding to the potentially negative effects that could also stem from such a maneuver. He pitched these tax cuts as if they were a solution that could easily fix the economic problems the U.S. was facing, particularly for America’s workers

Over a year into Trump’s presidency, the effects of the tax cuts are quickly becoming apparent, particularly their negative aspects that most of the nation is feeling. Already alarmingly high, the federal budget deficit is nearing $1 trillion.

The first six months of 2018 saw corporate taxes gathered by the federal government sink to some of the lowest levels history has seen. This is hardly surprising, as the tax cuts introduced by the Trump administration lowered the standard corporate tax rate from 35 percent to 21 percent. This is helped by the further component of the legislation that allows companies to deduct most new investments immediately.

As corporate tax funds have fallen, the federal budget deficit has continued to rise. While U.S. economists knew that the deficit would increase, most did not suspect that it would happen so quickly. At the time of the tax cuts, the Trump administration claimed that an initial decrease in tax revenue would not prove a problem for the deficit, as the increased revenue and spurred economic growth generated by the tax cut would cover any initial losses.  This has clearly proven to be false, but even the White House has noted that they did not expect the deficit to rise as quickly as it has.

The 1940’s saw the United States Department of Commerce begin to compile extensive data on the subject of corporate tax collection and revenue following a significant drop in revenue from corporate taxes. Current data tells us that it did not sink that low until 2009 when the Great Recession was running its turbulent course on the U.S. economy and the revenue generated by corporate tax collections dropped by roughly a third. In the near decade since, they have not fallen so low until this fiscal year when tax payments from corporations again dropped by a third.  Federal data indicates that as a share of the national economy, tax revenue had not fallen so far in 75 years.

It is true that most corporations have benefited from these tax cuts but as a share of the economy, their profits are still below the peak that they reached during President Barack Obama’s time in office.

Analysis

The rate at which the federal budget deficit is approaching $1 trillion is not something that we can afford to ignore. There are multiple reasons that the clear effects of the Trump administration’s tax cuts on the budget deficit are concerning and could easily prove problematic.

The current trade war caused by the administration’s tariffs has created the need for further government spending, at least from the perspective of the Trump administration. The recently proposed $12 billion in aid for America’s farmers will require even more federal aid and farmers are not the only group that has felt the negative effects of the trade war. Fisherman and various types of manufacturers could also require emergency relief aid which would require even more federal funds generated by taxpayer dollars.

As has been the case with the emergency relief aid promised to America’s farmers, this budget deficit increase is a distinct example of a policy change enacted by the Trump administration that many deemed unnecessary. Economists have clearly stated that had the U.S. tax system not been changed by the tax cuts, the country would not be experiencing this budget deficit rise.

Another parallel between the tax cut and the trade tariffs is that both were presented by the Trump administration as policies that would prove beneficial to the American workers. Before the tax bill was passed, the administration argued that it would allow corporations to take the funds they were saving from the tax cuts and reinvest them in expanding production, thereby creating jobs and helping their current workers when increased revenue tricked down into wage increases. It would be beneficial for everyone, they argued, because although the portion of tax revenue collected from each corporation would be smaller, it would ultimately  from a bigger pie.

Nonpartisan Washington D.C think tank the Center for American Progress recently published a report that clearly indicated that real average hourly earnings of the typical American worker have not changed in the past fiscal year. Over the same period, 80% of workers in production areas saw their wages dip by 0.2% while real median weekly earnings have dropped slightly as well. One economist from the institute stated that workers were “Not getting ahead in the Trump economy” and that certainly seems to be true.

This ‘Trump economy’ has fostered some economic growth but policy change results like those that have stemmed from the tax cuts are clear indicators that this growth may not be sustainable.  A rising federal budget deficit does not have the markings of being a harbinger of long-term economic prosperity. The trend of the unnaturally strong economy is often alarming for economists who have seen these superficial booms prove to be dangerous and this time is no exception.

Resistance Resources

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

Photo by Rick Tap

Trade, Not Aid: $12 Billion Aid Package for American Farmers Is Met with Mixed Responses

Trade, Not Aid: $12 Billion Aid Package for American Farmers Is Met with Mixed Responses

Brief #19—Economic Policy

Policy Summary
As the chaos and confusion of the trade war continue to prove problematic on both domestic and global levels, President Trump has attempted to offset the damage done to a critical part of the U.S. economy.

Last week, it was announced that the Trump administration would award $12 billion in federal aid for the American farmers who had been affected by the tariffs. The effects felt throughout the midwestern farming communities have been severe. Farmers across the rural midwest had been completely shut of the international markets that annually provide buyers for their crops, helping the U.S. economy to continue its healthy rates of productivity.

Trump ruled that such a maneuver was necessary without congressional vote. There is little question that these farmers are facing financial problems that are only going to get worse if the trade war continues. The response from the American people since the plan was announced, though has been primarily been less than enthusiastic.

It hasn’t only been the American taxpayers who aren’t happy about it. Speakers from many farming and agriculture driven communities across the midwest and southern parts of the U.S have also expressed fear and distain at the prospect of the bailout.

Even after it was announced that the European Union would begin purchasing more soybeans grown in the U.S, responses still remained primarily negative.

Policy Analysis
When we consider why American farmers have responded so negatively at the prospect of receiving government aid, there are several key factors that must be taken into account.

Firstly, it must be noted that the aid would not be needed if President Trump had not implemented tariffs that caused significant problems within the global agriculture markets in the first place. Products such as soybeans and grain as well as beef, pork, and chicken are often sold by American farmers through overseas markets. The retaliatory tariffs imposed by Canada and Mexico as well as Europe have resulted in them being shut out of these markets and the cost for the farmers doing the selling will likely be in the billions, as financial analysts have indicated.

The problems that Trump’s tariffs have caused within the agricultural commodities market cannot be overstated. For many of the farmers who operate small to mid size enterprises, the prospect of losing the market share of their crops and products is extremely frightening. Soybeans were among the first U.S. agricultural exports to be negatively effected by the trade war. According to the U.S. Chamber of Commerce, July 9th saw the price of soybeans fall to roughly $7.79 a bushel, the commodity’s lowest dip in almost a decade. Meanwhile in Brazil, soybean futures soared above those in the U.S. by $2.21 per bushel.

Commodity producers know just how difficult it is to recover a market share that has been lost. Soybean farmers saw something similar happen when President Richard Nixon imposed an embargo on American grown soybeans in 1978. Years later, in 1980, President Jimmy Carter imposed another on all U.S. goods being exported to the Soviet Union. Both policies proved problematic, negatively effecting the U.S. reputation as a reliable supplier within global trade markets, causing international buyers to quickly lose confidence in both American goods and producers.

Another problematic element of Trump’s plan to bailout America’s farmers is that it may cause problems within non-farming states.  In the American north, many citizens, both liberal and conservative have expressed great concern for their rail transportation system. The proposed Gateway rail project would keep the Amtrak line, the New Jersey Transit and most of the Boston-Washington rail corridor from suffering further damages. People throughout the Northeast have raised their eyebrows at the fact that the farming states that would receive the federal aid package are predominantly red, while their states are primarily blue. While the necessary aid is being provided for people in communities that voted for Trump, the pressing need in their part of the country is receiving neither aid not attention from their government. This is not helped by Trump’s previous tax bill which largely effected blue states such as New York and New Jersey, nor by the fact that the aid for the farmers was generated by their own tax dollars.

Farmers across American have posed similar responses to Trump’s proposed aid for them, though, and the verdict seems to be that they do not want it. They want their market share restored and to have the same free market access and free trade options that they enjoyed before Trump’s tariffs were implemented. Those systems proved beneficial to small farming communities across the country and therefore to the entire U.S. economy. Trump’s tariffs have had exactly the opposite effect.

American farmers understand what is best for their businesses and they know that it is not Trump’s federal aid bailout. Their cries have been and remain for “trade, not aid.”

Resistance Resources

  • Adopt-a-State is an organization dedicated to helping political activists and volunteers in blue states connect with each other.
  • Policy Link is a research institute dedicated to helping advance economic and social policy.
  • Organic Trade Association is a leading agricultural trade publication that provides resources for those within their community.

This brief was written by USRESIST NEWS Economic Policy Analyst Samuel O’Brient: Contact sam@usresistnews.org

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