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.
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On January 15th Trump signed a Phase One trade agreement with China which would ease some of the tension between the two countries resulting largely from his earlier severe stance with regard to tariffs and regulations. The initial program reflects the intention to open more China markets to US companies; increase farm and energy exports; and protect American technology and trade secrets. China also agreed to bolster its protections for intellectual property. The agreement is the culmination of two years of negotiation and the administration is hoping that it can avoid an escalation in the hostilities between the nations from his earlier position.
Per the agreement, China will buy an additional $200 billion of American goods and services by 2021, an increase of more than 50% from 2017 levels. The $360 billion dollars of earlier US tariffs on Chinese good remain though in December the administration passed reductions, from 15% to 7.5% of tariffs on consumer goods. The 25% tariff imposed on components US factories import to assemble finished products remains at that level. Trump asserts that these costs are born by China but analysts suggest the cost really accrues to American importers.
Trump claims a major victory with this Phase 1 calling it a “major sea change in international trade.” Though it does portend a shift in trade policy its benefits are questionable and have been criticized by multiple analysts. Instead of lowering tariffs, Phase 1 maintains record high tariffs and comes at the trade issue by forcing China to purchase a fixed amount of goods. Some experts do not feel that China can achieve the level of purchase in the agreement and suggest that enforcement is tricky.
It also is suggested that the manner of the agreement increases state control of the Chinese economy, a position counter to past administrations’ approaches to trade. Critics fear that the global trade dynamic will be compromised as a consequence of increased Chinese purchases from the US resulting in decreases elsewhere. It is projected that this will reduce outsourcing and lost jobs and loss of industries. China will gain economic stability and a boosted market by being guaranteed a certain level of trade from the agreement and the hope that future tariff reductions will be included in Phase Two.
Critics question this assertion that Phase 2 will include tariff reductions and suggest that the timing of the signing of the Phase 1 agreement was calculated to offset the negative press regarding the impeachment issue. The future of Phase 2 is in question. It is probable that it will not be completed till after the 2020 presidential election as it is like to target the more complex problem of China’s subsidies to its companies. In the meantime, Trump can tout the initial agreement as a boost to the American economy and as a reversal of reduced purchases of US goods and job losses wrought by his escalated trade policies in his first two years in office.
http://americansforfreetrade.com/ A broad coalition of business, trade unions, and workers against tariffs.
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In a rare alliance, the Democrats worked to support revisions to Trump’s United States Mexico Canada Trade Agreement. The current bill, passed by the House in mid-December and expected to succeed in the Senate early in the New Year, represents significant changes to the original 2017 bill. This bill essentially replaces the highly unpopular NAFTA (the 1994 Clinton era North American Free Trade Agreement). Trump, as well as many other political and labor entities, belives that NAFTA has had dire consequences on American manufacturing. The new agreement, hailed by the Democrats as a win, provides for more worker right, environmental protections, and eliminating a ten year mandate extending patents for drugs. The bill also addresses intellectual property rights, protects US manufacturing by providing for zero tariffs for parts made in the US, and establishes significant oversight for the Mexican authorities should they fail to institute the terms of the agreement. The agreement affects 1.2 trillion dollars in North American merchandise trade. The Mexican government passed the agreement in June and is expected to do so for the amendments in the New Year. Canada is also expected to pass the agreement though Trudeau’s party requires the support of one other party to obtain the needed votes.
The Democrats are embracing this revised agreement as a win, particularly for gaining ten years of de-regulation of prescription drug patents allowing for the sale of generics; workers’ benefits, right to establish independent unions, and government accountability for these; intellectual property protection; and the opening of the Canadian milk market to US farmers. Presidential candidate Bernie Sanders says he will not vote for the bill. He suggested that is it was only a moderate improvement over NAFTA, which he also did not vote for, and that it did not address climate control or prevent companies from opening factories overseas. Although the Democrats failed to stop the legal protection for companies’ internet content, a win for big tech, all in all they are climbing success with the revised agreement. The section in question provides a legal shield which protects companies from liability for their internet content. The general sentiment among Republicans is dismay with the concessions Trump made. Generally, labor is supportive with the AFL-CIO endorsing the agreement even as a subsidiary, the International Association of Machinists and Aerospace Workers dissented claiming a failure to stem the flow of jobs to Mexico. Although the USMCA is widely seen as a significant improvement over the original proposal, the Democrats fear this will align Trump with more support from workers. The overall impact on trade and jobs will be revealed in the future but it is bound to be an improvement over the 1994 NAFTA, which proved almost universally unpopular once it was implemented.
- https://aflcio.org/about-us/our-unions-and-allies A labor union website that describes union positions on international trade agreements.
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In spite of generally positive economic indicators there are worrisome trends emanating from the Midwest, particularly in five essential swing states. Manufacturing and agriculture have been impacted by the tariff wars and there is every indication that even if the tariffs are rolled back the affected regions will not bounce back until after the election.
More specifically, job growth has decelerated almost to stagnation in Michigan, Wisconsin, Minnesota, Ohio, and Pennsylvania. There is evidence that the repercussions of the decrease in trade has extended to the movement and shipping of goods. Trump’s reduction in tariffs, announced December 13, was touted as a new beginning for the regionb but such declarations often have given was to false hopes of real continuity and relief. These trends to not bode well for working people in these areas.
Trump has boasted of the excellent economic indicators which he attributes to his administration. Attitudes towards the effectiveness of economic policies are good indicators of the electorate’s sentiments. Moody’s Analytics economists are predicting a Trump re-election, as are other entities using different models. Most draw on unemployment data, gas prices, basic economic indicators, approval ratings, and voter turnout in various combinations. Unemployment is at an all-time 50 year low and predicted to improve in 2020 along with the easing of the trade war. Major metropolitan areas are booming but the “rust belt” is suffering job losses.
Currently, there is a significant chasm between the macro indicators signifying a strong economy and the subjective feeling of “everyday” Americans. Democrats suggest that though 401Ks are doing well they are offset by increases in cost of living particularly in education, healthcare, daycare, and retirement. Pew surveys indicate that 49% percent of Americans are worried about their immediate finances with another 25% worried about the future.
These fears pre-date Trump but are exacerbated by fears surrounding the corrosion of the Affordable Care Act. Satisfaction with the economic situation has fallen 8% between May and October though 52% of poll respondents still approve of Trump’s handling of the economy. Pew surveys shows that 58% feel the economy is hurting the middle class and 64% say it hurts the poor while 69% suggest it is helping the wealthy. There is a general feeling, shown by Democratic PACs, that the candidates really need to focus very strongly on the day-to-day help they can offer to working Americans. Highlighting broken promises made by Trump can support this effort. For example, Trump’s claim that an Ohio auto plant would “come back,” actually was in contradiction to the eventual closing of the plant.
A person’s view of the economy is strongly tied to their partisan identification. Republican views of the economy rose with Trump’s election. Seventy five percent of Republicans assess the economy as excellent or good while 41% of Democrats do the same. Notable is the fact that Trump’s approval rating remains consistent at about 41.7%. The Democrats must be targeted when they criticize the overall indicators and their impact on “average” Americans.
- https://www.wsj.com/articles/small-donors-get-creative-to-give-over-and-over-to-2020-candidates-11572001202 An article on how to make multiple small donations to campaigns.
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President Trump has threatened to impose tariffs on steel and aluminum coming from Brazil and Argentina. In March of 2018 he exempted these countries from a new tariff and, despite a negotiated settlement in May, in which Brazil and Argentina agreed to cap shipments to the US to avoid the imposition of putative actions by Trump, he has chosen to void that May 2018 agreement.
President Trump stated that Brazil and Argentina deliberately manipulated their economies to weaken their currencies. He claimed that the depressed currencies pose a threat to US farmers. Economists suggest that the weakened currencies were not deliberate but a result of economic slowdowns and government policies in these countries. Trump likely was reacting to the contraction of US manufacturing, in the last four months, especially in the output of real estate, industrial, and technological companies.
As a result of US tariffs imposed against China, that country has shifted much of its purchases to Argentina and Brazil. These South American countries have been experiencing severe economic and political instability. Argentina has experienced rampant inflation, increased indebtedness, and severe poverty under President Mauricio Macri who was voted out of office in October. Trump’s threats also indicate a shift in relations with President Jair Bolsonaro who had tried to strengthen his ties to the US and President Trump.
Trump’s new tariffs have precipitated the largest drop in American stocks since early October. A trade group of Brazil’s steel manufacturers warns that the tariffs would damage the industry in the US as well as in Brazil. So far Trump’s threats have not been implemented and experts suggest there are legal limits to how much he can increase the tariffs (see Section 232 of the US Tariff Expansion Act) They suggest that, if implemented, the tariffs will be legally challenged, e.g. y the World Trade Organization). In the meantime, Trump’s threats have resulted in instability in relations with Brazil and Argentina.
- http://americansforfreetrade.com/ Source of a broad coalition of organizations against tariffs.
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A 2018 large scale survey of college students found that overall 36% of college students are food and housing insecure while 9% were homeless for at least one day in the past month. Eighteen percent of community college student s, and 14% of four year college students, faced homelessness within the past year. Students regularly couch surf or sleep in their cars. Other data from the study show that 46% had difficulty paying for housing and utilities. The situation for community colleges, disproportionately attended by students from lower income households, affected 37% of students who had insufficient food on a regular basis. The comparable data showed 29% of 4 year college students also suffered insufficient food supplies. These issues are spreading from the low income students to middle class students whose financial aid might cover tuition but leaves them without funds to cover living expenses.
For many student loans provide for some of the gap between financial aid and actual life expenses. Total US student debt amounts to 1.5 trillion dollars. Those students with the least ability to pay back loans borrow the most. Many of these students fail to finish their programs and/or make low incomes and default on their loans. Forty percent of students who borrow money for two year profit college programs default, while 32% in for four year profit school programs default. Pubic community college students have a default rate of 25% in five years of after payments are due. Twenty percent of all borrowers owe less than $40,000 while half of borrowers at for profit schools owe more than $40,000. One fourth of the people with loan debt borrowed the funds for graduate school and that group is the least likely to default.
The majority of student debt is driven by insufficient funds and financial aid to live while attending college. This problem is spreading to the middle class as households struggle to pay for housing, education, and healthcare. Ample evidence suggests that more mid-income households are relying on community and public colleges to educate their children and still accruing debt. Most of the Democratic candidates have programs to forgive or reduce loan payment. Under the Obama administration regulations were passed to monitor student lending and to provide loan forgiveness to profit colleges which practiced illegal and deceptive advertising. Those colleges boast unrealistic salaries and job opportunities and frequently provide unsubsidized student loans. In October 2019, Betsy DeVos, US Secretary of Education, was found guilty of contempt of court for failing to forgive loans to students from the Corinthian colleges which were closed in 2015 for breaking the law passed by the Obama administration. It is widely agreed that those students who attend two year programs and many four year frequently have insufficient funds to live as students and, even if they complete their programs, do not make sufficient money to cover their student debt and live a responsible life style. These students require relief form student debt, either by loan forgiveness or reduction. Some of the community colleges, public institutions, as well as private schools are now developing programs to help with living expenses, especially during holidays and intersessions where sutents are shut out of cafeteria and dorms.
- Explains the causes of college related homelessness and provides information about resources.
- Provides information on the positions of Democratic candidates regarding college laon forgiveness.
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The concept of social class has been amorphous and remains so. Most economists suggest it is the middle 3 quintiles of the American population (or people at 21-80 percent of the population in household income). Others suggest it would be households at 2/3s of the median household income, now at $61,372, to double the median income. While the upper end of that is reasonable, a household income of $41,119 does not seem to provide for the comfort and security associated with middle class. Juxtapose such a definition with a recent report from the Brookings Institute on low wage workers. Their analysis shows that 44% of workers ages 18-64 are in the low wage category and more than half of these individuals are the sole or primary breadwinners in their families. There are 53 million Americans who are the “working poor;” individuals with jobs but unable to meet basic financial stability. These people are at risk of food insecurity and homelessness. Given this data, it is hard to believe that the bulk of households in the second quintile of US households are actually living middle class. In most areas, people making less than the median (49% of households), would not be living a comfortable middle-class quality of life.
This data provides a counter argument to those made in recent articles saying that the middle class is thriving under Trump. It can be extrapolated from all the data on jobs, wages, and income that this statement applies only to the part of the middle class making the upper end of what economists designate as middle class. Research shows that most low wage workers have not benefited from the increases in wages and manufacturing jobs which have been expanded under Trump. It is “factual” that, under Trump, the median US Household income increased by 1.8% and that wages grew by 3.3% (2018) instead of the more common figures of 2.5-2.7% for 2016-2017. But what is equally true is that these data are more characteristic of the better paid wage workers, leaving the lower paid workers stagnant at best and worse off when considering the costs of housing, daycare, and medical expenses in the average household.
Analysis: The Trump administration can claim that the “middle class” or “workers” are better off but more careful analysis shows that middle class, as currently defined, incorporates a substantial group of households which are stretching their budgets and barely making it, or not. The lower end wage workers have incomes which have stagnated or decreased, largely due to lack of permanent employment as well as depressed wages. Any discussion of material alluding to the middle class should be taken with a critical examination as the lower segment of the “middle class,” clearly is not.
Learn More References:
http://livingwagecampaign.org/ An organization preparing material for activists committed to instituting a living wage.
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It might surprise Trump supporters that they enjoy a greater portion of federal expenditures to states than the population in the Blue states, particularly in view of the tax contributions of citizens in each set of states. In fact, Citizens in Blue states appear to occupy different economic worlds than those in Red states, and the data show the Red state participants are experiencing more of economic strain in the current administration. Red states are also less racially diverse than blue states with an average of 27% non-white compared to 50% of residents who are non-white in Blue states. Yet Red state are more of a drain on the federal government accounting for a bigger portion of benefits in federal aid programs—including food assistance, housing, disabilities, and Medicaid the return is more substantial in the red states which typically get a return of $1.71 – $2.13 on dollars contributed compared to blue state which generally get between 74-83 cents on the dollar. Red states, with high dependency on the federal government, 13 of the 15 highest utilizing states, voted for Trump white 10 of the 15 states least dependent on federal aid went for Clinton in 2016. Red states also receive more support in their share of federal jobs and the portion of federal funds comprising state revenues. Red counties which voted for Trump have seen an increase in job growth of 2.6% in 2017-18, while the growth rate in blue counties going for Clinton was 2.1%. The issue is that these red state areas have had sluggish economic growth and the wages are low and the jobs ripe for automation. Blue states also fare better in quality of life studies which include, among other things, employment, job growth, economic development, cost of living, government solvency, and livability.
Contrary to what the media might suggest, especially conservative media, the largest gap between Red and Blue states lies in economic deficiencies not in racial differences. In fact, Blue states have a greater share of non-whites and a smaller share of aid from the federal government. They also have higher education levels in their population, with 35% of their population possessing college degrees compared with 28% in Red states. The Blue states are more economically productive with output averaging 22% per worker compared to 15% for red states. Blue state workers are also less likely to be working in manufacturing. In the first year of Trump’s administration, disparities between Blue and Red states grew with blue states having greater rates of labor force participation and job creation.
https://www.rockthevote.org/action-center/volunteer/ An organization working to get voters registered and engaged. The best way for the Democrats to win is to show up in large numbers.
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Economists contest Trump’s boastful statements regarding his economic policies declaring tariffs a boon to manufacturers, workers and consumers. Tariffs operate like taxes and increase prices to consumers while simultaneously sacrificing the creation of new jobs. They are not, as Trump has declared, paid by the exporting companies or countries. Trump’s tariffs in China, and subsequently in the EU, have had extensive negative impacts and questionable small positive consequences. Though six manufacturing areas have seen some job growth the other 14 categories have not. Machinery and metal industries have had accelerated job growth but more negative impacts on other industries have resulted. Farmers have been impacted by tariffs on soybeans to China.
Beginning this Spring, Trump increased the China tariffs on another 100 billion dollars worth of goods in mid-September and proposed another 200 billion dollar increase in December. The total cost of tariffs, including proposed extensions to the end of the year, is 196.7 billion dollars. It is estimated that current tariffs have cost 300,000 jobs to be sacrificed and the number is projected to rise to 450,000 by the end of the year. In retaliation for the tariffs imposed on China that nation has increased duties on 75 billion dollars worth of US goods. Trump then extended tariff reform to the EU and Canada costing jobs and imports. The EU then responded in ways that have affected the sales of American products. Some examples are a 25% increased tariff of Kentucky Bourbon has decreased overseas sales in the industry which has depended on foreign imports for much of its growth. Harley Davidson has contracted as a result of EU taxes causing the company to shift production to Thailand and to reduce its US workforce.
Uncertainty in business causes distress resulting in suspending plans for expansion and spending. Trump touted the tariffs as a way to compensate for the trade deficit, where the US imports more goods than it exports, but it has not accomplished that. US exports account for 12% of the GDP and many industries depend on cheap imports, so the tariffs will negatively impact both prices to the consumer and new jobs.
A loophole in the trade law allows for packages under $800 in value to cross the borders from Canada or Mexico without any extra cost as long as they are mailed to individuals. To avoid the duties more goods are being shipped over the borders and mailed by disbursement centers into the US. The delivery of small packages jumped by 46% in 2018 with much of this growth likely attributable to the trade wars.
Not only have prices gone up, and job creation stalled, but wages have not increased and any tax benefit which might have been realized from the 2017 reform has been eliminated by increased consumer good prices. The groups absorbing the biggest hit are those that generally suffer from slowed economic conditions such as decreased jobs; low wages; and high unemployment. These struggling groups, most of them low wage earners, are bearing the brunt of the trade wars.
- https://tariffshurt.com/ A website supporting a national campaign to resist the tariffs featuring articles, charts, and figures to demonstrate the cost of these policies.
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In a time of almost unprecedented high levels of employment it is of interest that African Americans are not enjoying an equivalent gain. The average unemployment rate for blacks is 6% which is at least twice as high as for whites. This holds true when controlling for education and other factors such as length of unemployment. Even that data does not tell the whole story since when majority black cities are considered (cities with 50% or more Black populations including those of “mixed” race”), the data show a much more dramatic chasm. In cities such as Newark, NJ; Detroit; and Flint the unemployment rates for Blacks are 15.8%, 17.4%, and 25%+. When wealth is studied, a bigger divide is demonstrated where white wealth is more than 10 times the average wealth of Black households. The gap actually has increased in the post-recession period. Trump takes much of the credit for the overall employment gains but data indicate the trend began in 2009 with the largest gain occurring between March 2010 and Jan 2017. The drop in Black wealth also signifies a downward trend begun in the recession and sustained in the Trump administration.
Part of the explanation for Black unemployment rates can be attributed to the geographic regions inhabited by predominantly Black communities but it is certainly not the whole picture. African Americans are clustered in metropolitan areas which are less likely to be centers of new jobs such as in the tech industries. The McKinsey & Company study, where the above data is drawn from, indicates that Black unemployment is double that of whites even when other factors are controlled. The report also suggests that Black workers are at greater risk of future job loss due to their concentration in jobs vulnerable to automation such as truck driving, food service and clerical support. Non-degreed, young black males are especially at risk since they inhabit this demographic more than any other group. Trump’s policies affecting taxes and home ownership are also likely to further impede the progress of Black family affluence. The McKinsey authors suggest that this trajectory can be diminished but it will necessitate attention to specific social policies regarding jobs skills training, education, and support of local economies none of which appears to be a priority in the current administration.
- https://www.huffpost.com/entry/28-organizations-that-are-empowering-black-communities_n_58a730fde4b045cd34c13d9a This article, subtitled “The resistance Starts here” lists multiple organizations advocating for economic progress, civil rights, and LGBTQ rights for African American communities.
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One in four persons 65 and over is working and many are doing so because they need to. Older Americans are the fastest growing group of workers in the country. Longevity means, for some, many more years or work than anticipated earlier in life. Few private sector jobs provide a defined benefit (pension). One half of private sector workers have no retirement benefits and those with 401Ks lost 1/3 of their account value during the recession. This was particularly devastating to workers close to anticipated retirement, many of whom consequently have kept working. Fifty percent of older Americans still help support adult children and many provide caretaking services either to grandchildren, ill children, and/or even older parents. The median baby boomer savings is $150,000 –not nearly sufficient for a potential 30 year retirement. Single mothers, many who worked multiple jobs to make ends meet, find that even with social security and food stamps they cannot make it. Many of these women were likely to work full time, and more, but made relatively low wages and frequently had no benefits. They are relying on food banks to survive. It has been well documented that many seniors go without necessary meds, or cut meds, to make ends meet. Women of color, and individuals in the LGBTQ community, also face similar situations. More affluent older people volunteer at community agencies. Volunteer work provides purpose and increases the physical and mental health of its incumbents and just as significantly contributes 73 billion dollars of value to the economy.
Although poverty among seniors has decreased over the past few decades it stands at 10% of all seniors and 12.1% of women seniors when utilizing the official poverty level. If the supplemental poverty level is incorporated, a measure which takes into consideration the real cost of basic services, 12.2% of senior men and 15.6% of women are poor and even that statistic may underestimate the actual need. One in twelve seniors faced food insufficiency in 2017. Women 60-64 were twice as likely to be food insecure than those over 80,perhaps in part because they are unlikely to be collecting social security and are not yet eligible for Medicare to help with healthcare. Trump has made multiple moves to cut SNAP (federal food supplement program formerly referred to as food stamps). In October his proposed cut amounted to 4.5 billion dollars, affecting one in five families. Though Congress has not made the requested cuts in the Department of Agriculture, the agency governing food stamps, Trump has made cuts by executive order and is likely to commit to more cuts.
Although the portion of older people who are officially impoverished has decreased there are still many seniors struggling and many who are not counted because they make over the poverty level and/or are working into their “senior” years because they cannot afford to quit. Many maintain grueling schedules in physically demanding work for which they are ill suited. Single women, especially those who supported children, are likely to be working longer and also to have been unable to save since they were paying for childcare and other basic needs on a single income. The proposed SNAP cuts would refigure eligibility by incorporating state standards for other expenses such as utilities, housing, and first time access to the internet. Although a small group would gain an average of 13 dollars per month more would lose an average of 31 a month. Northern legislators are against the cuts because of the pressure to protect their constituencies’ benefits while rural representatives are worried about saving programs where the government buys farm products. In the midst of these political squabbles the elderly are suffering, many of whom are relying on standing in queues to receive food bank assistance. In any case, SNAP and social security are not meeting the needs of elderly and the impoverished population of nonelderly is now lower than the senior rate. Seniors have not made any economic gains under the Trump administration’s policies. The US has no guaranteed basic income as seen in other countries and maintains a large bureaucracy, fragmented and inefficient, to provide for a reasonable standard of living.
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