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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

The Economic Aftermath of a Government Shutdown

Brief #33—Economic Policy Policy Summary After more the four long weeks, the longest government shutdown in the history of our nation has ended. This past Friday saw Donald Trump sign into a bill that would temporarily reopen the government and allow most furloughed...

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The Economic Consequences of a Government Shutdown

Brief #32—Economic Policy Policy Summary As the first week of 2019 comes to a close, the government shutdown shows no immediate signs of doing the same. Officially in its third week, the shutdown has progressed to the point that President Trump has stated that he may...

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Trump Mistakenly Credits Himself for Gains in the Economy

Brief #27---Economic Policy Policy Summary One of President Trump’s favorite things to tout has consistently been the economic growth that the United States has enjoyed during his presidency. The picture he paints is one of economic turnaround, often highlighting the...

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The Economic Aftermath of a Government Shutdown

The Economic Aftermath of a Government Shutdown

Brief #33—Economic Policy

Policy Summary
After more the four long weeks, the longest government shutdown in the history of our nation has ended. This past Friday saw Donald Trump sign into a bill that would temporarily reopen the government and allow most furloughed American workers to return to their jobs. Backing down from his initial demands for additional government funding for his desired border wall, he accepted a deal that offered no funds for the wall. When the shutdown went into effect on December 22nd, the pushback from political figureheads on both the left and right was monumental but it doesn’t compare to anger of the  800,000 federal employees who were most affected. Forced to work without pay with their wages frozen, they began the year facing an economic future steeped in tremendous uncertainty.

Now that the shutdown has  ended, at least on a temporary basis, the uncertainty hasn’t really subsided. Yes, plenty of federal employees are resuming working their positions but there’s still the possibility that in just a few weeks, the nightmare could continue. Democratic politicians refused to move forward with negotiations regarding the proposed wall unil the government had been reopened but as recent history has taught us, negotiations with our President can be unpredictable and erratic. It doesn’t help that multiple times, he threatened to declare a national state of emergency to procure the funding he claims to need. The most pressing economic concerns that have stemmed from the shutdown have little to do with funding for a wall and much more to do with the problems that arose from 800,000 employees being forced to work without pay, including members of the Coast Guard, Secret Service and air traffic controllers.

Policy Analysis
The financial woes that these federal employees encountered during the shutdown were well documented in the national media and not without reason. Thee many workers who saw their wages frozen were unable to spend on basic necessities, which quickly affected small businesses across the nation, particularly in industries such as food services and retail. A recent analysis from S&P Global Ratings indicates that the damage to our economy will add up to more than $6 billion in total, a larger sum the original $5 billion that Trump initially demanded for the wall’s construction. We should also not forget that when economic activity is severely reduced, as we saw during the shutdown, it can shave a significant amount off of a nation’s real GDP (gross domestic product) and this time is no exception. It has been estimated by the Congressional Budget Office that real GDP for the fourth quarter of 2018 has been reduced by up to $3 million.

The shutdown also resulted in another economic consequence that many news sources don’t seem to be paying as much attention. The payday loan industry has been steadily growing for years but during the shutdown, it saw a boom that should have worried everyone. Payday loans are essentially a debt trap. While they provide consumers with the quick cash that they need to take care of looming financial obligations, they ensnare them with interest rates that can be as high as 300% if not higher. This system may call to mind the subprime loan crisis in the early 2000’s when lenders prayed on low income borrowers with poor credit. Many financial advisors advised furloughed federal employees not to turn to these lenders during the shutdown, but for many workers struggling to make ends meet, they likely seemed to be the most sensible solution, particularly as for most of the shutdown, there was no clear end in sight, further adding to the aspect of economic uncertainty that continues to plague our nation.

Both consumers and markets share a mutual dislike of uncertainty in their economic forecasts. Now consumer confidence is down and with it, investor confidence. These two areas paired together are a dangerous combination for an economy that was already turbulent to begin with before the shutdown took hold. The shutdown may be over but the damage that it has caused will continue for the foreseeable future and likely for longer

Resistance Resources:

  • The Professional Services Council is an advocacy organization that has created a Government Shutdown Resource Center for furloughed federal employees.
  • The American Foreign Service Association is an association of workers created to represent members of the U.S. Foreign Service that is providing information and resources for workers affected by the shutdown.
  • The U.S. Office of Personnel Management (OPM) is an agency that provides resources and support to federal agencies and employees and is providing resources for furloughed workers.

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

Photo by Andy Feliciotti

The Economic Consequences of a Government Shutdown

The Economic Consequences of a Government Shutdown

Brief #32—Economic Policy

Policy Summary
As the first week of 2019 comes to a close, the government shutdown shows no immediate signs of doing the same. Officially in its third week, the shutdown has progressed to the point that President Trump has stated that he may “declare a national emergency” if it continues. While government officials have confirmed that he technically has this power, it has also been acknowledged that such a measure would be extreme and would likely lead to further complications, not guaranteeing it would yield the results that Trump has proven he is so desperate for. According to Democratic Rep. Adam Schiff, such a tactic is ultimately faulty, as Trump would be unable to build the wall through national emergency declaration.

Since the shutdown was enacted, Trump has clung to his strategy of blaming the Democratic leaders for all problems that transpired since. Despite the $1.5 billion that was previously allocated for the wall, Trump seems insistent on sticking to his guns on his demand for  $5 million plus. The general consensus among Democratic congressmen and women seems to be that the Wall is unnecessary and a waste of funds. As it stands now, the current state of our government can only be described as a standoff.

Analysis
Meanwhile, things are growing progressively worse for federal workers. According to NPR, the shutdown has affected over 800,000 workers, many of whom are either being forced to work without pay or out of work completely. These workers are spread out among major federal agencies and departments, such as Homeland Security, Urban Development, Housing, Agriculture, and the Department of Treasury, among others. They account for roughly 1/4th of the federal government’s employees.

In the early days of the shutdown, economists indicated that it would likely not be too big of a deal for federal workers, provided it ended quickly. So far, though, the opposite has come to pass and as workers in different federal agencies, such as TSA and the National Park Service, are beginning to express anger at not being paid over a 3 week period. The  affected workers are either working without pay or seeing their work time furloughed, amounting to many hours not being counted toward the country’s GDP. The suspended paychecks of federal workers across the nation are likely to stem further problems for the general economy. Things such as eating out, retail purchases, mortgage payments, doctors’ visits, and traveling are consumer purchases that help make the economy tick.

It doesn’t help that the government shutdown has come at a time when markets have been increasingly turbulent. Major stock indexes, such as NASDAQ, have seen dramatic declines. When combined with   decreased consumer spending (see above), we are presented with a recipe for dramatic declines in investor confidence. This, in turn, can lead to a downward trend in 2019 first quarter economic growth. It was estimated that economic growth would be slow before the shutdown but now things may be worse.

Resistance Resources:

This Brief was submitted by USRESIST NEWS Economic Po0licy Analyst Samuel.O. Brient:  contact Sam@usresistnews.org

Photo by Andy Feliciotti

Communities Most Affected by Trade War Remain Behind Trump, Ignoring Economic Policies They Need

Communities Most Affected by Trade War Remain Behind Trump, Ignoring Economic Policies They Need

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

Photo by chuttersnap

The Industry of Voting: How the Practice of Stealth Politics Serves to Undermine American Democracy

The Industry of Voting: How the Practice of Stealth Politics Serves to Undermine American Democracy

Brief #29—Economic Policy

Policy Summary
The recent midterm elections have cast a new light on an area of politics that has become increasingly more concerning since Donald Trump first took office in 2017–that of money in politics.

One week before the midterm elections, it was estimated that the amount spent on them would exceed $5.2 billion. Of that large sum, it has been well documented that hundreds of millions of dollars were donated by powerful families with net worth’s in the billions such as Sheldon and Miram Adelson and Charles and David Koch, two last names synonymous with highly conservative political ideals. The Adelsons have been hailed as “biggest political donors of 2018” with their donations to GOP Super PACs totaling roughly $87 million. Adelson, it should be noted, has made no secret of his support for Donald Trump and has made ample use of his direct line to the Oval Office. In the months leading up to November, the strong network of advocacy groups with ties to the Koch brothers pledged to donate to up to $400 million to the campaigns and policy initiatives of conservative candidates. Adding to the mix of conservative billionaire mega-donors are Richard and Elizabeth Uihlein, who made donations in the millions to multiple highly conservative Super PACs this election season, totaling roughly $39 million.

The Democratic party certainly has its share of mega-donors as well. Billionaire former hedge fund magnate Tom Steyer has been dubbed “the progressive answer to the Koch Brothers” for his work in democratic activism and fundraising. Steyer founded NextGen Climate Action, a Pac that supports candidates who prioritize combating climate change. During the midterms, he was reported to have donated roughly $50.7 million with over $40 million going to to it. Another business magnate who has made a name for himself as a democratic donor is Michael Bloomberg. The former New York City Mayor and current CEO of Bloomberg L.P. also has his own Super PAC. Independence USA PAC focuses on supporting candidates who prioritize gun control laws as well as environmental and education policy. Bloomberg’s personal contributions to it exceeded $7 million while his donations to the Democratic Senate Majority PAC were reached $20 million during this cycle alone. Another democratic mega-donor was hedge fund manager Donald Sussman, whose firm, Paloma Partners, was the top donor to Hillary Clinton’s 2016 Presidential campaign with $21.6 million. Like Bloomberg, he made a considerable donation to the Senate Majority PAC this midterm cycle, as well as many other Democratic Super PACs, with overall donations exceeding $22 million.

Current White House insiders received large checks from powerful corporate donors as well. Speaker of the House Paul Ryan collected more than $2.8 million in donor funds from companies in the Oil & Gasoline sector while Senate Majority Leader Mitch McConnell received close to $700,000 from the same corporations.

The rise of billionaires buying political influence through sizable campaign contributions can be traced back to the creation of the Super PAC or Independent Expenditures Only Committee (IEOC) itself. During the historic 2010 case of Citizens United v. Federal Election Commission, the United States Supreme Court ruled that corporations could be classified as people and could therefore not be legally prevented from contributing to political causes and campaigns. The majority vote held that it was not only free speech that was protected under the first amendment, but free speech as an act. The original logic was that if politicians did not have any direct contact with the Super PACS, the the system would never be corrupted.

As we have seen in the years since, such logic has proven a fallacy. The current system is set up in a way that is all too easily for special interests to take advantage of, given the lack of transparency surrounding the donations made to these organizations. Thanks to Citizens United, there is a legal basis for it. Unlike regular PACs, Super PACs cannot donate directly to candidates or political parties but they can spend unlimited amounts of money on matters that are seen as not directly linked to candidates. This does not mean, however, that the funds cannot ultimately be used to help the candidate or cause that the donor is in favor of. There is also no limit to how much money an individual can donate to a Super PAC. Given all this, it is not hard to see how such a system could easily be corrupted by those looking to advance certain political agendas.

Policy Analysis
The trend of wealthy individuals and corporations using donor checks to buy political influence was quick to catch on and has grown rapidly with each election since 2010. It has been dubbed “stealth politics” by the mainstream media, a term that refers to the practice of rarely making public statements on political matters but instead letting your donations speak for you when they sway politicians to either implement or block policies that could have affect your business interests.

When we take a look at the most prominent donors this election cycle, we are faced with a collection of billionaires, many of whom are known for promoting heavily conservative ideals and many of whom backed Donald Trump in 2016 and still support him to this day. Figures such as Sheldon Adelson and Charles and David Koch are exactly the types of business leaders who stood to benefit from Trump’s tax cuts and deregulatory policies. For people like Adelsons, maintaining the current political system heavily depended on the GOP staying in control of the House and Senate so their vested interest in helping conservative candidates through significant campaign donations is hardly surprising.

This growing trend of employing stealth politis as a technique to buy influence on Capitol Hill may not be surprising, but is concerning for anyone interested in preserving the values of American democracy. In this current system, we are seeing a clear disconnect between what is most beneficial for the people of each state and district and what is most beneficial for the politician elected to represent them. The ability to buy political influence has spread to affect every area that concerns American citizens, spanning not just oil and gas and financial regulation but also healthcare, education, and infrastructure. The larger these Super PAC donations become, the more incentive politicians will have to pass laws that benefit their wealthy donors, often at the expensive of those not in the economic 1%.

It is not hard to see how a system of wealthy individuals being able to buy influence over the politicians who govern our nation undermines American democracy. The power they hold far exceeds that of those with a net worth not in the billions. Those without the ability to buy political influence do not have voices that politicians will reach politicians in the same way–consider Sheldon Adelson’s direct phone line to Donald Trump. It is a system that can truly be described as legalized bribery where many elected leaders appear less like politicians and more like puppets that exist to pass legislation that helps grow the net worth of their most generous donors. As such, the general public’s trust of their leaders has been eroding as the political influence bubble has continued to grow. How can those who cannot buy influence trust their leaders to do the job they were elected to do and fight for what is best for everyone when these politicians have strong financial incentives to ignore them and listen to their donors? The way it looks from here, there are no clear answers.

Another problematic element to the culture of steal politics is that it is has created a higher barrier of entry for politics in general. Younger people who want to build careers in public service are finding it much more difficult to raise the funds necessary to run a successful campaign on the national scale. Even if they are able to build a successful grassroots campaign, they are often faced with competitors who are backed by powerful donors. Often, the only way to gain any traction on the campaign trail is to accept money from donors who only write checks to candidates who will end up beholden to them if they win.

Overall it is clear that stealth politics is truly a vicious circle of influence and there is nothing democratic about it. It is a practice that has been undermining the democratic principles on which American was founded, completely compromising the trust that citizens should feel for their elected leaders. No system with a small circle of winners whose victory comes at the expense of everyone else can be considered democratic.

Resistance Resources

  • End Citizens United is a political action committee dedicated to combating the effects of Citizens United and reforming campaign finance.
  • The Brennan Center for Justice is a non-partisan law and public policy institute that has provides extensive research on voting rights and elections.
  • The League of Women Voters is an American civil rights organization that works to “increase understanding of major public policy issues and influences public policy through education and advocacy.”
  • The Center for Public Integrity is an investigative journalism organization that seeks to “serve democracy by revealing abuses of power, corruption and betrayal of public trust by powerful public and private institutions, using the tools of investigative journalism.”

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

Photo by Element5 Digital

Recent Stock Market Declines Likely Spurred by Trump’s Economic Policies

Recent Stock Market Declines Likely Spurred by Trump’s Economic Policies

Brief #28—Economic Policy

Policy Summary
The patterns of the stock market since President Trump took office can only be described as turbulent. As his election shocked the nation, investors prepared for the unpredictable, only to have the market surge.

Throughout 2017, while the market consistently rose, Trump was quick to tout it as evidence of the effectiveness of his economic policies. The first trading day after his inauguration saw the market surge and the trend of growth continued throughout the year. While the Dow Jones Industrial average rose by 25 percent, the S&P 500 climbed 18 percent and the Nasdaq Composite 24. 2018, on the other hand, hasn’t produced the same consistent gains for the U.S. market.  We’ve seen the Dow fall by 0.1 percent and the S&P by 0.6 with the Nasdaq rising, though only by 3.8 percent. October was been a particularly turbulent month for the market. As the closing bell sounded on Wall Street at the close of last week, all three indexes had dropped, the Dow by 6.7 percent, the the S&P by 8.8, and the Nasdaq by 10.9 for the month.

Trump has neglected to comment on the recent market declines. While discussing markets under Trump, we should not forget that he took office in the midst of a thriving economy. When Barack Obama took office, the Dow Jones enjoyed steady growth, climbing by 41 percent between his inauguration and the final weeks before his first midterm election. We have reached that exact point in Trump’s presidency and the same index has only risen by 25 percent.

Analysis
The stock market bumps that helped shine a positive light on Trump’s proposed economic policies early in his presidency indicate a common market trend-anticipation of legislative changes that favor investors can easily spur quick market growth. Unfortunately for him, though, we are now seeing the other side of a trend. Quick market growth is often short lived and ultimately unsustainable.

While a market may bounce back, as we’ve seen during Trump’s presidency, such a trend can easily lead to significant drops, as we have also seen. This type of trend can easily raise concerns among economists and investors as to weather the market is headed for a significant correction. Many economists see a poorly performing market as an indication of financial troubles down the road that will affect more than just investors.

The third-quarter of this year has brought some GDP growth, but it is clear that it was spurred by considerable consumer spending. Any economic growth we have seen in 2018 has been overshadowed by recent declines both in capital expansion on the part of corporations and general business investment. Long-term economic growth could be powered by business investment in areas such as job training and company expansions but there are few signs that point to such trends taking place, despite Trump’s claims that the tax cuts would lead to exactly that.

Declines in investor confidence could also likely be linked to the continuing developments in the trade war caused by Trump’s tariffs. Talks to resolve trade difficulties between the U.S. and China have been halted for the time being, likely not a comforting phenomenon for the companies who have affected by the tariffs or their shareholders. Barron’s has reported that stocks of companies with direct ties to the trade war have been hit harder those of companies that are not. This month has seen declines in sectors such as industrial manufacturing, information technology and retail, all of which have manufacturing costs that are linked to Chinese imports. It is hard to see such a trend as a coincidence, especially given the uncertainty surrounding trade relations between the two countries.

These concerning economic elements are coming at what could be a costly time for the Republican party. Midterm elections are quickly approaching and many conservative candidates are faced with the reality that it will likely be difficult for voters to equate their party with economic prosperity. Republicans have longed clinged to the argument that their policies can undo the damage done to the economy by Democrats. While they touted the stock market gains as proof that Trump’s policies worked in the early stages of the election, any credibility that such an argument had is quickly disappearing. Despite the claim on Trump’s part that his tax cuts would benefit both workers and executives, that argument has been proven false. It is also likely that any points that the tax cuts may have earned the Republican party among voters have been canceled by the higher interest rates implemented by the Federal Reserve.

These recent trends regarding the stock market continue the trend of a lack of sustainability that has plagued almost all of Trump’s policies that have spurred any economic growth. Talk and anticipation do not create the kind of sustainability that power an economy to prosperity. What goes up must come down and Donald Trump has prove that.

Resistance Resources

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

Photo by unsplash-logorawpixel

Trump Mistakenly Credits Himself for Gains in the Economy

Trump Mistakenly Credits Himself for Gains in the Economy

Brief #27—Economic Policy

Policy Summary
One of President Trump’s favorite things to tout has consistently been the economic growth that the United States has enjoyed during his presidency. The picture he paints is one of economic turnaround, often highlighting the problematic elements of the U.S. economy before he took office. During his 2016 campaign, he described the U.S. economy as a “disaster.” Anyone keeping up with his statements (frequently made on Twitter) on economic growth will notice some common themes he frequently touts – job growth and employment, his tax cuts, and wages as well as overall GDP growth.

While it is true that the economy has been doing well raises the question of who should be credited for it. The quick economic growth that the U.S economy experienced in the early months of Trump’s presidency made it easy for him to take credit. Much of his campaign success was built on the promise of restoring economic growth through job creation and business investment. Despite the period of economic expansion that President Barack Obama presided over during Trump’s campaign, many voters believed that Trump’s promises were necessary for the restoration of economic prosperity.

A quick look at the facts and figures will show anyone a fairly robust economy that has been driven by recent growth. A further examination into the economic areas that Trump is so quick to boast about, though, reveals a trend that should not be ignored, one that he has neglected to mention-almost any area that has been strong under Trump can be traced back to the growth it experienced under Obama.

Analysis
Let’s take U.S. job growth as an example. Despite Trump’s claim that he has added 4 million jobs to the U.S. economy, the Bureau of Labor Statistics has produced data that would indicate otherwise. Their data indicates that only 2,188,000 jobs were added to the economy during in Trump’s first year in office, less than the number of jobs added during each year of Obama’s second term.

From job growth we move to the subject of employment and the people actively employed. Yes, the number of employed adults between the ages of 25 and 54 is on track to be the highest of the decade but again we see the trend of Trump enjoying growth that began during the Obama era. During Obama’s first year in office, the recession had brought about a low point in employment statistics, with the number at roughly 74.8 percent. By the time he left office, though, it had spiked to 77.9 percent. During Trump’s first year, it averaged 78.6 percent for the year. We are again presented with a president who has caught the wave of economic growth spurred by the policies of his predecessor.|

Another area that has seen steady growth since the Obama era is that of wages. The real median wages earned by America’s workers have been rising steadily since 2014, despite Trump’s claim that for the first time in “many years,” wages are rising under him. It is true that wages suffered some slight turbulence during the early days of Trump’s presidency but they were fairly quick to rebound. While it is technically true that wage growth has risen under Trump, it has likely not been because of any policies he enacted, but is simply continuing the trend set in motion by Obama.

No analysis of the economy under Trump would be complete without examining the deficit-to-GDP ratio, a figure that refers to the amount of money earned by a country vs. the amount it spends in return. Despite a boom in 2009 due to the recession, by 2016 it had been reduced to 3.1 percent. During Trump’s first year, the number rose to 3.4 percent. This might seem odd, given the robust economy, but many signs point to Trump’s tax cuts that he so highly touted and the effects that they had on government revenue.

This increase in the federal deficit has the potential to be dangerous. If another economic crisis should threaten the U.S. or global economy, the growing deficit could easily make it difficult for our government to address it. Economic recession often comes when a troubled economy is hit with a shock that pushes it in a way that forces it to contract, such as the housing bubble bursting in 2008. The current deficit is largely due to Trump’s tax cuts. If he wants to take credit for any impacts they have had on economic growth, he should be ready to shoulder the responsibility for the negative effects it has had.

Resistance Resources:


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

Photo by unsplash-logoJørgen Håland

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:

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

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 Analyst Sam O’Brient:  Contact sam@usresustnews.org

Photo by Hermes 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

Photo by rawpixel

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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