The US economy has not been working for most Americans, whose incomes have been stagnating – or worse – for decades. These adverse trends are reflected in declining life expectancy. The Trump tax bill made matters worse by compounding the problem of decaying infrastructure, weakening the ability of the more progressive states to support education, depriving millions more people of health insurance, and, when fully implemented, leading to an increase in taxes for middle-income Americans, worsening their plight.Here's a simple report on conditions:
Redistribution from the bottom to the top – the hallmark not only of Trump’s presidency, but also of preceding Republican administrations – reduces aggregate demand, because those at the top spend a smaller fraction of their income than those below. This weakens the economy in a way that cannot be offset even by a massive giveaway to corporations and billionaires.
Monthly reports on the number of new jobs and the unemployment rate can drown out important trends like these two: After four decades of worsening, wage inequality has started shrinking. And in a twist, America’s blue-collar workers are playing the biggest role in driving that reversal.Now, if 'aggregate demand' is the problem, raising taxes on the rich and redistributing to the working class is taken to be the solution. But what about cutting taxes on the rich, combined with raising the wages of the working class? In principle that should lead to inflation, as there will be more dollars across the board. But these dollars aren't chasing the same things, which is what causes price inflation. The richer are going to spend their dollars chasing things they've been putting off; things like building a second home, or re-roofing their first home, or buying a luxury car, or higher-end foods. The working class are going to be spending their increased wealth on better used cars, mid-range foodstuffs, etc.
This may come as a surprise, because education is classically seen as a ladder up the income scale. Despite blue-collar workers often lacking college degrees, their wages have been accelerating faster than those of their white-collar counterparts.
Meanwhile, the low unemployment levels mean that wages have to keep rising -- at least as long as we can avoid any new globalization agreements, or any amnesty deals that legalize vast sectors of new labor for domestic concerns. In other words, the Trump agenda seems to be arranged around attacking the same basic concern that the first article describes as undermining the economy.
The author of the first piece was "Joseph E. Stiglitz, a Nobel laureate in economics, is University Professor at Columbia University and Chief Economist at the Roosevelt Institute." He's the kind of guy who should understand if anyone does, at least if credentials matter. Economics is so complex, though, I doubt that anyone does. I've touched on just one way in which the fundamentals seem to be shifting in defiance of theory; but that's only one small part of the economy as a whole. Trade wars with China, for example, pose another set of challenges. The national debt poses another, though exactly what sort of challenge it poses is a subject of fundamental disagreement even among theorists. Some seem to think we can print money past Doomsday; others, that debt is going to destroy the whole thing. Both have arguments. Which are right?
