The Trump/Republican Economy: A Realty Check

Bob Sheak

Sept 9, 2020

Trump has long claimed that he inherited a wrecked economy from Obama. But then he says he overcame this and, prior to the Covid-19 pandemic, made the US economy the “greatest” it has ever been. While it has been, in his view, temporarily derailed by the coronavirus pandemic, the economy, under his management, will bounce back even greater once the virus is defeated or we learn to live with it – “it is what it is.”

Trump’s narrative also plainly says that “he” is responsible for whatever is good about the economy and “others” are responsible for what is bad. Trump’s claims about his alleged impact on the US economy are central to his reelection campaign. It’s important to emphasize that his economic policies are grounded in neoliberal assumptions and practices that go back to the efforts of the Republican Party over the last forty or more years to shrink selectively much of what the federal government does through tax cuts, unprecedented deregulation, the appointment of pro-Trump people to decision-making positions in all parts of the executive branch, and advancing policy through executive action.

Despite Trump’s claims, the evidence does not support his views on the economy in the post-Great-Recession years of the Obama administration.

ONE: The economic policies of Trump and the Republicans prior to the pandemic

This post disputes three of Trump’s central economic claims. One, the economy that Trump inherited from Obama was a “mess”? Two, assessing the economy under Trump prior to the pandemic reveals serious problems? Three, Trump and his right-wing allies made the economic problems accompanying the Covid-19 pandemic worse they might have been.

Obama inherited the worst economic recession since the Great Depression of the 1930s

Josh Bivens provides an apt summary.

“In February 2009, the first full month of the Obama administration, the economy had been in recession for 13 months, and the severity of the economic crisis was accelerating. In the six months ending in February 2009, the economy lost 650,000 jobs each month on average.

“In short, the Obama administration inherited the worst economic crisis since the Great Depression. Even if it had been the most effective and wage-focused administration in history, the actual performance of wage growth over the following years would have still likely been sub-par.” As it turns out, it was better than this.

“The political context is equally important. A concrete example makes the point best: while the administration inherited a horrible recession, the recovery from the recession, even years and years after it ended, was historically slow. How much of this is the fault of the administration? Not much. The cause of the agonizingly slow recovery is clear as day: fiscal austerity at all levels of government. This austerity was the result of state-level decisions that were out of the administration’s hands, as well as demands for steep spending cuts issued by congressional Republicans as a condition for increasing the nation’s statutory debt ceiling in the summer of 2011. The annual budget proposals issued by the Obama administration routinely called for far more fiscal stimulus than a Republican-controlled Congress ever ended up passing. Could the administration have played the politics better and gotten different policy outcomes? Possibly. But, their publicly-stated policy preference (more fiscal support for recovery) would have worked, and that’s what they should get credit or blame for.”

Republican obstruction in Congress during the Obama presidency

Steven Benen provides an impressive analysis in his book The Imposters: How Republicans Quit Governing and Seized American Politics of how Republicans did their best to obstruct most policy initiatives by the Obama administration or congressional Democrats during the eight years of Obama’s presidency. Their central goal was to undermine Obama’s presidency and to keep the president and congressional Democrats from having any success, except when they gave the Republicans steep concessions. He documents his thesis in chapters on economic policy, health care, climate change and energy policy, foreign policy, immigration policy, the federal budget, gun control, civil rights, reproductive rights, and government shutdowns and debt-ceiling crises. Here, I’ll focus on some of what he writes about economic policy.

Overcoming opposition to the “Recovery Act” During the Great Recession

In November, 2008, the month Obama was elected, “the American economy lost 727,000 jobs” (p. 21). In January, 2009, the economy lost another 783,000 jobs. The seeds of the economic collapse of the 2007-2009 Great Recession were planted by the Bush administration and Republicans in the US Congress, and caused by tax cuts, illegal and costly wars in Afghanistan and Iraq, and the lack of regulation of the financial sector. In response to this economic calamity, on the sixth day of Obama’s presidency, House Democrats “introduced economic-stimulus legislation called the American Recovery and Reinvestment Act of 2009, or simply the Recovery Act, calling for $1 trillion of spending. The new president reached out to the Republicans, “organizing a series of policy discussions intended to secure broad backing, only to find that the Republican economic agenda amounted to little more than demanding tax breaks and opposing government investment of any kind. The Democrats controlled the House and Senate, but, in the Senate, “Republicans not only opposed the economic recovery plan for reasons they strained to explain, but they also refused to allow the majority to even vote on the Recovery Act unless Democrats could overcome a legislative filibuster.” Benen notes: “Obama’s party had fifty-seven votes in the hundred-member chamber at the time, but they’d need sixty in order to put the rescue plan into effect” (p.22).

Eventually “three GOP centrists ultimately agreed to support the White House’s economic plan,” though only when they were given significant concessions, such as, reducing the budget for the legislation to $800 million, an arbitrary number never explained (p. 23). Nevertheless, the reduced Recovery Act had an almost immediate and positive economic impact: “economic growth and hiring improved nationwide, and the Great Recession officially ended four months after Obama put the plan into action.” Benen continues: “By early 2010, the domestic economy was adding jobs again, and the longest economic recovery in US history got under way.” A 2011 report by the nonpartisan Congressional Budget Office “found that this one piece of legislation delivered what the nation needed when it needed it, creating up to 4.6 million jobs and adding as much as 3.1 percent to American’s overall economic growth rate” (p. 28). Another benefit: “the deficit shrank significantly during the Obama presidency” (p. 29). There were problems with this legislation. For example, it didn’t reduce the power of the banking sector or offer assistance to many people who had lost their homes due to fraudulent mortgages. Of course, Trump and the Republicans have little interest in rectifying these problems, as was true all along.

Saving the auto industry

Benen writes that “Obama tapped funds from the Bush administration’s Wall Street bailout to restructure General Motors and Chrysler.” Republicans opposed this initiative. In the end, however, “Obama’s policy worked beautifully, salvaged the industry, and, as a bonus, turned a tidy $15 billion profit for American taxpayers, just six years after the initial investment” (p. 30). Moreover: “The Big Three automakers turned a profit in 2011, the first time since 2004 (p. 31). Even so, Republicans continued to condemn it. Benen gives a quote from GOP Senate leader Mitch McConnell that “US automakers ‘should have been allowed to reorganize or fail’ without the benefit of federal intervention.” At the same time, this was a missed opportunity for Obama and the Democrats to insist on a re-purposing of the industry to focus on manufacturing solar panels, and wind generators. The Republicans would, of course, have opposed such an option.

The American Jobs Act

With the unemployment was down from the 10 percent rate in October of 2009, but still high at 9 percent in September 2011, Obama “unveiled a $450 billion plan to boost domestic hiring with a policy blue-print he called the American Jobs Act.” The Congressional Budget Office “concluded that the Democratic plan would sharply improve employment, and, thanks to a proposed modest surtax on millionaires and billionaires, the plan actually would have reduced the deficit.” There were other “independent economic analyses” that found that “White House’s blueprint would create nearly two million jobs and shave a full percentage point off the nation’s unemployment rate fairly quickly (p. 33).

Republicans in the Senate then unveiled a Republican Alternative, the Jobs Through Growth Act, “a combination of unspecified spending cuts and deregulation ideas, eliminating the Affordable Care Act, and a constitutional amendment to prohibit deficits. They said that the legislation would create five million jobs, but “made no effort to explain how they arrived at the figure” and “never submitted [it] for an independent analysis.” They would not compromise (p. 34). So, when “Democrats pushed a stripped-down measure – a $35 billion proposal to save or create roughly four hundred thousand jobs for teachers, police officers, and fire fighters – the GOP killed that, too”

The implications of the Republican obstructions

Benen considers other examples as well as they ones above. Overall, they exemplify “a decade of GOP nihilism on economic policy making, which was guided by no discernible governing vision,” except to do what they could to prevent Obama and the congressional Democrats from advancing constructive legislation. He elaborates his point as follows. “They executed a plan involving opposition to all forms of economic stimulus, fighting tooth and nail to take capital out of the economy through spending cuts; rejecting simulative social-insurance programs such as extended unemployment benefits; undermining economic confidence through a pointless debt ceiling crisis; deliberately trying to make unemployment worse; prioritizing austerity and deficit reduction over growth; and pleading with the Federal Reserve… to raise interest rates” (pp. 35-36).

Nonetheless, the economy grew during the Obama years

Benen provides this striking examples. “In realty, quarterly economic growth [in some quarters] topped 3 percent in 2009, 2010, 2011, 2013, 2014, and 2015” (p. 41). Brooks Jackson offers a look at “Obama’s Final Numbers,” in an article on FactCheck.org (https://www.factcheck.org/2017/09/obamas-final-numbers). Here’s one: “The economy gained a net 11.6 million jobs. The unemployment rate dropped to below the historical norm.” Christian E. Weiler and Brendan Duke off the following summary.

“The economy improved markedly under former President Barack Obama, from the start of 2009 through the end of 2016. Faced with the specter of another Great Depression in winter 2009, President Obama enacted a series of policies that helped the economy avoid that fate. The economy was growing again by the second half of 2009, and jobs followed suit by early 2010. Economic growth continued apace for the rest of President Obama’s time in office, and job growth logged its longest expansion on record by early 2017, dating back to 1939.1 Employment opportunities improved, the unemployment rate fell…and household debt dropped sharply” (https://www.americanprogress.org/issues/economy/reports/2017/06/01/432923/obamas-legacy-economy-anything-mess).

Two – The Trump/Republican economic policies and their effects prior to the pandemic

Trump’s pre-Covid-19 years (the first three years) evinced the continuing decline of the officially estimated unemployment rate, a slow rise in average wages, a stock market trending up, a huge tax cut, large increases in the military budget, and a revised trade agreement with Canada and Mexico. However, there were problems. Inequality soared, corporate CEOs and the rich captured a disproportionate share of the tax-cut benefits, from the CARES Act, from the Federal Reserve, and from a rising stock market, little of which trickled down to most Americans.

In-depth analyses of even the employment data painted a much less impressive picture of the job situation for many workers. Trump’s specific promises to improve the nation’s infrastructure went unfulfilled. Few good-paying manufacturing jobs returned from abroad. His energy policy, which focused on maximizing the growth of fossil fuels, was fraught with contradictions and with little regard for the increasingly dire environmental effects. Moreover, he and the Republicans in the US Congress failed to replace Obama’s Affordable Health Care program or offer an alternative health care plan, failed to keep health care costs or prescription drug prices from rising, and let the number of Americans without health insurance increase year by year.

A mixed appraisal

In an article for the Washington Post printed on February 4, 2020, prior to the impact of Covid-19, Heather Long addressed Trump’s touting of “his economy as ‘the best it has ever been,’ but stresses that the data did not support the president’s claim (https://washingtonpost.com/business/2020/02/04/trump-touts-his-economy-best-ever-is-more-mixed). In his State of the Union address, Trump “had a lengthy section celebrating the U.S. economy as suddenly improving. However, as pointed out above, the economy had been growing since 2009.

Long agrees with Trump “in a number of ways,” writing: “the current economy [prior to February 2020] is [in some ways] the best the nation has seen since the late 1990s. Unemployment is at a 50-year low, economic growth is steady, inflation is tame, and consumer confidence is high. This situation is helping many Americans get jobs and pay raises after years of struggles. Any president would be touting an economy like this, with record low unemployment rates for African AmericansHispanics and people with less than a high school diploma.” Average wages did not rise under Obama,, but they began to rise in 2018, climbing for nonsupervisory workers “as high as 3.6 percent in October, a level not seen since the crisis, according to the Labor Department, though the rate has since fallen.”

According a Gallup poll cited by Long, consumer confidence had risen considerably from 46 percent of Americans who expressed satisfaction with the state of the economy in January 2017 to 68 percent in January 2020. Long explains this increase to a “combination of higher wage gains in recent month and Trump’s tax cuts [that] have helped most Americans feel richer, even though many still worry about how to pay for health care, child care, and college.”

However, Long disagrees that “this economy is the best ever.” Trump goes too far when he asserts that he inherited a wrecked economy from Obama. His tax cuts may have helped to keep the economy growing but it “also inflected pain.” On his trade policy, Trump’s “tariffs have hurt U.S. manufacturing and agriculture. Long illustrates her point on tariffs: “The tariffs caused companies to drastically scale back spending and pushed U.S. manufacturing into a mild recession in 2019. The tariffs have hit the hardest on parts used to make cars, washing machines and other products, raising costs for U.S. companies. A widely watched gauge of the health of the manufacturing sector — a survey of purchasing managers from the Institute for Supply Management — fell in December to its lowest level since the Great Recession.”

And, moreover, Trump’s tax cuts and increased government spending have added substantially to the national debt.” In addition, the US economy grew 2.3 percent in 2019, which is “well below the 4 percent level Trump promised. In the pre-pandemic years of Trump’s administration, Trump’s term, economic growth averaged 2.5 percent. That’s higher than under Presidents Barack Obama or George W. Bush, but much slower than the averages for Clinton and Ronald Reagan.”

The Republican/Trump tax cut had little positive effect on economic trends

Annie Lowrey takes up this issue in a February 2020 article printed in the Atlantic Monthly magazine. She argues that “the low unemployment rate, decent wage growth, and solid corporate earnings are all artifacts of a long expansion, not signs that the [self-proclaimed] very stable genius in the White House has unleashed American enterprise” (https://theatlantic.com/ideas/archive/2020/02/trump-didnt-make-this-economy/606115).

Reporting on Trump’s 2020 State of the Union address, she quotes Trump’s triumphant claims: “Three years ago, we launched the great American comeback. Tonight, I stand before you to share the incredible results. The years of economic decay are over.” The economy “is the best it has ever been.” And it is all happening thanks to Republicans.

From Lowrey’s viewpoint, “The White House had far less control over the economy than generally assumed. And Trump’s signature economic legislation, the 2017 Tax Cuts and Jobs Act (TCJA), has not provided anything like the economic ‘rocket fuel’ the Republican White House promised, particularly not for blue-collar workers in the heartland.”

Indeed, the economy remained on pretty much the exact same growth path it had taken for the past decade: There was no inflection point around the time of the 2016 election or the late-2017 passage of the TCJA, or any inflection point at all. Growth has plodded along at 2.5 percent a year, give or take. The unemployment rate has been falling consistently. Not much has changed. Lowrey reminds us that that tax cuts were aimed at the wealthy and did “so little that most households did not notice the effect.” And, citing the right-of-center American Enterprise, the tax cuts produced “no discernible break in trend” in business investment” and that “[m]any economists think that the TCJA provided only a minor boost to the economy, a boost that seems to have already faded.”

Moreover, manufacturing had not much revived, as Trump promised. Lowrey writes: “In the past year [2019], employment gains in construction and manufacturing have slowed down, with mining firms actually shedding jobs. The White House’s trade war has hit blue-collar firms hard, leading to layoffs, farm closures, and the need for billions of dollars in bailouts. Factory activity has hit the lowest point in a decade. Rural areas continue to lag high-cost cities in terms of job creation, productivity gains, and wealth creation.”

More on Failing to bring back manufacturing jobs

Economist Dean Baker takes up this issue (https://counterpunch.org/2020/08/28/the-comeback-of-manufacturing-jobs-maga-land-and-the-real-world). When Trump campaigned in Midwestern swing states in 2016, states that “had been hard hit by the loss of manufacturing jobs due to trade,” Trump “insisted that he would bring back these jobs as a result of his great skills as a deal maker. He would negotiate new trade deals so that we would get back the jobs we had lost.”

Baker cites evidence that Trump failed in this regard. He considers the “picture as of January 2020,” prior to when “the pandemic began to have an impact on the economy.” He focuses on five states: Michigan, Minnesota, Ohio, Pennsylvania, and Wisconsin and compares the manufacturing job numbers for the last three years of the Obama administration with the first three years of Trump’s.

Baker’s general finding is that there were more manufacturing jobs created in Michigan, Minnesota, and Ohio during the Obama years than during the relevant Trump years. For example, he writes: “The largest difference by far is in Michigan, where the state added 59,800 manufacturing jobs in the last three years of the Obama administration, compared to 11,600 jobs in the first three years of the Trump administration.” The opposite is true in Pennsylvania and Wisconsin: “Pennsylvania lost 5,800 manufacturing jobs in the last three years of the Obama administration but gained 13,100 manufacturing jobs in the first three years of the Trump administration. In Wisconsin, the performance under Trump is 15,500 new manufacturing jobs, compared to 5,000 manufacturing jobs in the last three years of the Obama administration.” The gains in these two states, though, hardly made up for the 308,000 manufacturing jobs lost in Pennsylvania between 2000 and 2010, or the 172,000 manufacturing jobs lost in Wisconsin.

Baker concludes: “The basic story is that Trump may have rebuilt our manufacturing base and brought back the jobs lost to trade in his head, but he did not do it in the real world.”

The rising trade deficits

Jake Johnson helps us recollect that Trump “pledged to eliminate the trade deficit and end job outsourcing” during his presidential campaign in 2016 and he would do this rapidly and better than any previous president” (https://www.commondreams.org/news/2020/09/04/trump-fraud-exhibit-one-billion-trade-deficit-soars-12-year-high-despite-presidents).

Johnson points out that the most recent figures for July 2020 from the Commerce Department “show that the trade deficit soared to a 12-year high in July due in large part to a surge in imports, bringing the total negative trade balance in the first seven months of 2020 to $340 billion.” In addition, the Labor Department “has certified more than 300,000 American jobs were lost to outsourcing and imports during his presidency.” The large growth in the trade deficit is especially notable, according to Lori Wallach, director of Public Citizen’s Global Trade Watch, “given that trade flows have declined overall because of the global Covid-19 crisis.”

Johnson cites other sources. He refers to an Associated Press article published on Thursday, September 3, reporting that “the new Commerce Department statistics show that ‘despite a number of high-profile trade battles and a renegotiation of the North American Free Trade Agreement with Canada and Mexico, America’s trade deficits have remained stubbornly high’ throughout Trump’s presidency.” The AP report also notes that in July 2020, “the deficit with China in goods totaled $31.6 billion, an 11.5% increase from the June imbalance,” while the “goods deficit with Mexico hit a record high of $10.6 in July… The United States ran a deficit in goods trade of $80.1 billion in July, the highest on record.”

The Economic Policy Institute (EPI) reports that despite Trump’s repeated vows to “bring back” U.S. manufacturing jobs, the president’s first-term trade agenda and disastrous handling of the coronavirus pandemic have “wiped out much of the last decade’s job gains in U.S. manufacturing.” Robert Scott, senior economist and director of trade and manufacturing research at EPI, said: “”Nearly 1,800 factories have disappeared under Trump between 2016 and 2018,” and rose significantly in 2019. This is before the emergence of Covid-19 and includes the first three years of Trump’s administration. Scott added that the trade deficits reduced economic growth “by roughly 0.25% annually over the past three years.”

Three – Dealing with the economic chaos accompanying the pandemic

The Republicans kill the CARES Act (the Coronavirus Aid, Relief and Economic Security Act)

One of Trump’s most repeated claims is that, under his leadership, the economy will generate more good jobs than ever. Of course, this was hardly the case after the Covid-19 pandemic spread. We should remember that his mishandling of the rise and spread of Covid-19 made the economic effects as well as the health effects worse than they could have been.

One beneficial, though short-lived, government action – “Trump Had One Good Response to Covid-19. His Party Killed It.”

Economist Paul Krugman draws our attention to the passage of the CARES Act in March by Congress and signed by Trump (https://nytimes.com/2020/08/31/opinion/trump-coronavirus-economy.html).

He considers “that in important ways [it] was just what America needed” and “something for almost everyone.” For example: “Small businesses got loans that they could convert into grants if they used the money to maintain payrolls. Big businesses got loans, too. Most adults got stimulus checks, typically $1,200, in the hope that they would spend the money and hence support consumer demand…. But the really crucial element of the CARES Act was expanded aid to the unemployed. Benefits were expanded to people like gig workers who had previously fallen through the cracks, and everyone receiving benefits got an extra $600 a week…. This expansion of aid to the unemployed did double duty. It alleviated hardship, letting laid-off workers continue to pay rent and put food on the table. And it supported overall spending much more effectively than those stimulus checks, most of which were probably just saved.”

However, there is an important detail that is usually overlooked. Krugman observes that the “crucial unemployment provisions” in the CARES Act “were devised largely by Senator Ron Wyden, Democrat of Oregon, and the most you can say about [Steven] Mnuchin [Treasury Secretary] and Trump is that “they didn’t reject Democratic demands that these provisions be included.” Republicans came to hate that $600 supplement, “insisting – with no evidence – that it discouraged workers from taking jobs.” McConnell and the Republicans in the Senate and the House refused to extend this aid “or make a good-faith counteroffer. Consequently the supplement expired at the end of July, “even though we’re still down 13 million jobs from where we were in February.”

Trump’s executive action to offer $300 for some workers for a few weeks is not the answer. In the meantime, Krugman expects some hard times for millions of Americans, writing:  “It may take some time before we see the full effects of this abandonment of American workers, but it’s a good bet that we’ll see slowing growth, a surge in evictions and, in general, the kind of mass suffering we managed to avoid in the first round of the Covid-19 crisis.”

The Unemployed –

Limited assistance

Jessica Corbett reports on the effects of the GOP’s failure to continue the $600 per-week boost to federal unemployment insurance benefits that ended at the end of July. She cites a poll by Morning Consult that found that, as a consequence, the “number of unemployed people struggling to cover basic needs has doubled” by the end of August, involving 8.3 million Americans and up from 27 percent in July(https://commondreams.org/news/2020/09/01/poll-shows-number-unemployed-people-struggling-cover-basic-needs-has-already-doubled).

The $600 supplement was included as one part of the Covid-19 relief package, which Congress passed and Trump signed this spring, as the number of people losing jobs or out of work soared. However, as Corbett reports, “Republican lawmakers and the president have resisted attempts by Democrats to continue the expansion—clinging to their debunked claim that the temporary relief was deterring people from returning to work.” Corbett notes as well that “the GOP-controlled Senate [refused] to vote on the House-approved Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES) Act, despite millions of Americans struggling to afford housing, utilities, food, healthcare, and other essentials during the pandemic.”

Amid the Republican-created impasse, “Trump took [tepid] executive action in August to use [existing] disaster relief money to increase UI benefits by $300 per week—with states contributing another $100,” though “funds are limited and the rollout has been slow.” Corbett cites the statement made by Heidi Shierholz, senior economist and director of policy at the Economic Policy Institute: “The president’s executive memorandum is a nothing burger and a false promise that actually does more harm than good because it diverts attention from the desperate need for the real relief that can only come through legislation.” Meanwhile, “new polling from Gallup and West Health revealed that 50% of Americans are concerned a major health event could lead to bankruptcy, a five-point increase from a survey last year.”

The situation is dire for tens of millions of Americans. Corbett quotes Michael Linden, Groundwork Collaborative executive director, who says: “Not only is it unconscionable that the Trump administration cut the incomes of 30 million unemployed workers during a pandemic and eliminated key lifelines and support for families across the country…but over the past month we’ve seen the impact of his inaction ripple through the already-fragile economy and make this crisis so much worse than it needed to be.” There is a real danger that the recession will become a full-blown depression.

The August report on unemployment

Ben Casselman reports for The New York Times that “unemployment fell to 8.4% in August, but the gain of 1.4 million jobs was the weakest in months” (https://www.nytimes.com/2020/09/04/business/economy/jobs-report.html).

Additionally, the end of federal aid programs is casting a shadow.” He writes:

“All told, less than half of the 22 million jobs lost early in the pandemic have been recovered. But the unemployment rate has fallen much faster than most forecasters expected, from 10.2 percent in July and 14.7 percent in April. And the labor force grew in August, an indication that jobless workers are not yet giving up their searches as many did during the last recession a decade ago. Some sectors that were dealt a blow by the pandemic, such as the retail industry, continued to post strong job gains.” Gains in real estate were strong, but not so much in other sectors.

Casselman also reports: “Economists said the slowdown was a worrying sign that the low-hanging fruit of the recovery — the rehiring of millions of furloughed restaurant, hotel and entertainment workers — could be largely gone….“Just 174,000 jobs were added last month in leisure and hospitality, a disappointing gain for an industry that lost more than eight million to the pandemic and has recovered only half. And as companies reopen, many are discovering that with demand still weak, they don’t need or can’t afford as many workers as before the pandemic.”

There is also concern about the future jobs situation, given that the federal unemployment supplement and other aid programs are gone.” Casselman cites “Julia Pollak, a labor economist for the employment site ZipRecruiter, [who] said many businesses were facing similar decisions heading into the winter season, which is a challenge for many small businesses in the best of times….[and] “Widespread business failures, Ms. Pollak said, ‘could have a cascading effect on those local economies.’ That is especially true of Black neighborhoods that often struggle to draw investment from large corporations.”

———————

Also reporting in The New York Times, Eduardo Porter writes: “With 11.5 million jobs lost since February and the government’s monthly report Friday [August 4] showing a slowdown in hiring, stories like this have become painfully common. When companies dispatched office staff to work remotely from home, cut business trips and canceled business lunches, they also eliminated the jobs cleaning their offices and hotel rooms, driving them around town and serving them meals…. For this army of service workers across urban America, the pandemic risks becoming more than a short-term economic shock. If white-collar America doesn’t return to the office, service workers will be left with nobody to serve” (https://www.nytimes.com/2020/09/04/business/economy/service-economy-workers.html).

Porter continues: “The worry is particularly acute in cities, which for decades have sustained tens of millions of jobs for workers without a college education. Now remote work is adding to other pressures that have stunted opportunities. The collapse of retailers like J.C. Penney and Neiman Marcus has wiped out many low-wage jobs. The implosion of tourism in cities like New York and San Francisco will end many more.’

She includes specific examples in the article to highlight her report, including the following ones. “Consider Nike’s decision in the spring to allow most employees at its headquarters in the Portland area to work remotely. Aramark, which runs the cafeteria and catering at Nike, furloughed many of its workers. With no need for full services anticipated “for an undefined period,” Aramark says, 378 employees — waiters, cooks, cashiers and others — now face permanent layoff on Sept. 25….The question is whether dislocations like this will be only temporary. About one-fifth of adults of working age who do not have a college degree live in the biggest metropolitan areas — in the top quarter by population density — according to estimates by David Autor of the Massachusetts Institute of Technology. Most are in service industries that cater to the needs of an affluent class of “knowledge workers” who have flocked to cities in search of cool amenities and high pay.” Additionally: “Jonathan Dingel and Brent Neiman of the University of Chicago have calculated that 37 percent of jobs can be done entirely from home. Those jobs tend to be highly paid, in fields like legal services, computer programming and financial services. And they tend to concentrate in affluent areas like San Francisco; Stamford, Conn.; and Raleigh, N.C.”

Other examples. Intel, headquartered in Portland, Oregon, “employs 20,000 mostly well-paid people there. It is a pillar of a high-tech cluster known as the Silicon Forest stretching between Hillsboro and Beaverton on the western edge of the city. And it supports a network of contractors and subcontractors whose income trickles down through the area’s economy…. Only about 40 percent of Intel’s employees are working on site — those indispensable to its vast chip-making plants — and remote work is set to continue until at least next June. Even after that, said Darcy Ortiz, Intel’s vice president for corporate services, ‘there will be more flexibility in the way we work’…. For businesses that rely on Intel’s footprint, that may not be great news. ‘Intel has sustained us,’ said Rick Van Beveren, a member of the Hillsboro City Council who owns a cafe and a catering business that remain mostly shuttered. ‘We cater to a constellation of businesses around Intel.’”

“The same type of decision is being made around the country. Scott Rechler, chief executive of RXR Realty, which owns over 20 million square feet of office space in New York City, estimates that every office worker sustains five service jobs, from the shoeshine booth to the coffee shop. Yet only about 12 percent of his tenants are in the office.”

—————————

The headline of Aimee Picchi’s article for CBS News is eye-catching: “Labor Day celebrates workers. But this year, 1 in 5 are unemployed” (http://www.cbsnews.com/news/american-workforce-unemployed-economy-labor-day-weekend-2020).

“Although 11 million people have since been rehired as states reopened their economies, the progress has tapered off, economists say. Notably, there are still 11.5 million fewer jobs now than prior to the pandemic…. That’s a staggering reversal of fortune from February, when the nation’s workers were enjoying one of the best job markets in history. That helped boost wages as well as bolstered the efforts of union-backed labor movements such as the Fight for $15. But much of that momentum has since vanished, with 28 million workers — one in five — currently drawing unemployment benefits….’The state of the labor market is an F,’ said Heidi Shierholz, senior economist at the left-leaning Economic Policy Institute and the former chief economist at the U.S. Department of Labor. ‘We have fewer jobs than we had at any time during the Great Recession. There is no way you could give this economy a passing grade.’” 

The road to recovery is likely to be measured in years, not months. “Federal Reserve of Chicago President Charles Evans said in a speech this week that he doesn’t expect the economy to recover to pre-pandemic levels until late 2022.” “On Friday [August 4], the Labor Department said the unemployment rate fell below 10% for the first time since March. But the rate of hiring is slowing, with employers adding fewer workers to their payrolls for each successive month this summer.” In the meantime, “28 million workers are receiving unemployment benefits — that’s 1 out of every 5 people in the workforce.”

—————————–

Robbing the Social Security system to win votes – while potentially bankrupting it

Trump promised to protect Social Security during his presidential campaign. So much for another of his whimsical, insincere promises. Now, in desperation, he is about the undermine this very popular and long-standing program by signing “a memorandum that,” as Igor Derysh reports, “would temporarily stop the collection of payroll taxes, which is a 12.4% tax split evenly between employees and employers that funds the Social Security and Medicare trust funds” (https://truthout.org/articles/social-security-would-be-depleted-in-3-years-if-trump-kills-the-payroll-tax).

Trump is gambling that by reducing the Social Security wage tax and putting some extra money in the pockets of workers he will win some of their votes.

Derysh reminds us that the president cannot cut taxes, which means that any payroll tax savings would “have to be repaid by next year’s deadline – though Trump says, if reelected, he will “push to forgive the deferred taxes.” Then the president “went a step further earlier this month, vowing not just to forgive this year’s payroll tax but eliminate it entirely.” This is what Trump said during a news conference at his Bedminster, N.J., golf course: “If I’m victorious on November 3rd, I plan to forgive these taxes and make permanent cuts to the payroll tax. I’m going to make them all permanent,” he said during a news conference at his Bedminster, N.J. golf course. “…In other words, I’ll extend beyond the end of the year and terminate the tax. And so we’ll see what happens.”

 Democrats in the Senate and House oppose such actions. Sen. Bernie Sanders, I-Vt, responded as follows: “The Social Security Administration has made it clear: eliminating the payroll tax, as Trump has proposed, would bankrupt Social Security and prevent seniors and people with disabilities from receiving the benefits they have earned. Defunding Social Security may make sense to the billionaires at President Trump’s country club, but it makes zero sense to me. Instead of dismantling Social Security, we must expand it so that every senior can retire with the dignity they deserve.” Even Republicans in the Congress are opposed to Trump’s initiative. Derysh refers to a NBC News report in July that found that a “majority of Senate Republicans didn’t want a payroll tax cut.” 

In line with his practice, Trump paid little attention to how his proposal would be implemented. His “memorandum called for the Treasury Department to start deferring taxes starting on September 1, but that appears highly unlikely since the department has not produced guidelines for employers or payroll processors to defer the taxes.”

Tony Romm reports on the lack of clarity in Trump’s proposal and that it is meeting with confusion among tax experts and resistance from some big employers (https://www.washingtonpost/com/us-policy/2020/08/28/trump-payroll-tax-irs). He writes:

“The administration’s guidance perplexed tax experts, who said it could frustrate workers and add to the burden facing businesses, which may be deterred from implementing Trump’s order at all. Last week, automakers, restaurateurs, retailers and a torrent of top employers signaled that possibility, when they joined with the U.S. Chamber of Commerce in calling the president’s plan “unworkable.” Their opposition means that many workers may see no change to their pay — and the economy may see few of the gains Trump has touted.”

“Businesses fretted about the difficulties they’d face updating their payroll systems on a short time frame, and tax experts felt workers might struggle to repay the sums they owe, which could reach into the thousands of dollars depending on their incomes. Many, however, feared the future effects on Social Security and Medicare, particularly as Trump vowed to “terminate” the tax. AARP, the powerful senior’s lobby, sharply rebuked the White House earlier this month out of concern that the president’s plan could threaten future benefits, even as senior administration officials promised to protect retirees.”

In an article for Common Dreams, Nancy J. Altman, considers the potential consequences of Trump’s rash actions (https://www.commondreams.org/views/2020/09/07/labor-day-social-security-future-hangs-balance). Altman is president of Social Security Works and chair of the Strengthen Social Security coalition. She has a 40-year background in the areas of Social Security and private pensions. Her latest book is The Truth About Social Security. She is also the author of The Battle for Social Security and co-author of Social Security Works! She refers to a letter released by Stephen Goss, “the independent Chief Actuary of Social Security’ on “Trump’s plan to ‘terminate’ Social Security’s dedicated funding if he is reelected.” In the letter, “Goss states that if Social Security’s funding were terminated, the Disability Insurance (DI) Trust Fund would be exhausted by 2021 and the Old Age and Survivors Insurance (OASI) Trust Fund would be exhausted by 2023 ‘with no ability to pay benefits thereafter.’”

If this should happen, “one out of two seniors would be left impoverished. So would millions of people with disabilities and millions of children who have lost parents.” The big deal is that, without Social Security, one out of two seniors would be left impoverished. So would millions of people with disabilities and millions of children who have lost parents. Like the military, the free press, our fair elections, and our postal service, Social Security is a vital institution. The choice this election could not be clearer.”

She points out that, in contrast, “Joe Biden wants to protect and expand Social Security” and “understands that expanding Social Security’s modest benefits is a solution.” Altman continues: “It is a solution to our nation’s looming retirement income crisis, where too many of today’s workers will not be able to retire without a drastic decline in their standards of living. It is a solution to rising income and wealth inequality, made worse by the pandemic. He supports expanding Social Security while requiring those earning over $400,000 to pay more.” Biden is also “championing a proposal—originally from Sens. Elizabeth Warren (D-MA), Chuck Schumer (D-NY), and Ron Wyden (D-OR)—to increase Social Security benefits by $200 a month for the duration of the crisis.”

The stock market – no trickle down to most Americans

“Stocks Are Soaring. So Is Misery.” This is the thrust of Paul Krugman’s argument in a column for The New York Times (https://nytimes.com/2020/08/20/opinion/stock-market-unemployment.html). The crux of his article is captured in his following sentences. “On Tuesday, the S&P 500 stock index hit a record high. The next day, Apple became the first U.S. company in history to be valued at more than $2 trillion. Donald Trump is, of course, touting the stock market as proof that the economy has recovered from the coronavirus; too bad about those 173,000 dead Americans [up to 188,000 by Sept. 4 and rising] – but as he says, “It is what it is.” Krugman elaborates on the rising “misery that “is.”

Millions of workers have not gotten their jobs back and have now seen their unemployment benefits slashed. Food insecurity is increasing and “the number of parents reporting that they were having trouble giving their children enough to eat was rising rapidly.” Krugman expects “to see a huge surge in national misery.”

Moreover, the conditions of most Americans, who have no or very little investments in the stock market, has nothing to do with the stock market. He writes: “The truth is that stock prices have never been closely tied to the state of the economy. As an old economists’ joke has it, the market has predicted nine of the last five recessions.” Investors in stocks are counting on gains in the future and will, if they are lucky, benefit from low taxes on the capital gains they get when they  cash in their stocks. Investors care about profiting on their investments, not on what’s happening to most people. But that’s where the rising misery is.” In short, a rising stock market does not readily translate into economic well-being for most Americans.

Concluding thoughts

Trump’s basic assumption is that the rich and powerful will save the economy if they are unimpeded by government politics and bureaucrats. In the event that this morally hollow, win-at-whatever-the-costs, man is re-elected, the outcome will be dire. He has provided inconsistent and weak leadership on the Covid-19 pandemic. His actions have demonstrated that he much favors opening the economy without safeguards whatever the health consequences. And, to twist the dagger, deeply flawed economic policies.

If Trump is re-elected as a result of vast voter suppression, the gutting of the US Postal Service, and disinformation, a majority of Americans will suffer, the economy will become ever more unequal, democracy will shrivel, the “culture” will be dominated by far-right “populous” values and interests, including the impact of extreme evangelical influence, along with the consolidation of influence of white supremacist, racist, xenophobic, homophobic, anti-abortion groups. And, without a doubt, the Trump/Republican climate deniers will squelch scientific voices on the existential climate crisis and its myriad effects and do their utmost to advance fossil-fuel interests and sideline solar and wind energy.

The alternative? No one know whether Joe Biden and Kamala Harris will win in November or whether there will be a “blue” wave of victories in races for the Senate, House, and state offices around the country. However, Biden has put out his plans for job creation with environmental concerns taken into account. He has a detailed plan for creating “10 million clean energy jobs” (https://joebiden.com/climate-labor-fact-sheet), a plan for “building a modern, sustainable infrastructure” (https://joebiden.com/clean-energy), a “buy American” plan (https://www.cnbc.com/2020/07/09/biden-proposes-a-700-plus-buy-american-campaign.html), and promises to create 3 million jobs in caregiving and early education (https://abcnews.com/Politics/biden-launch-3rd-pillar-economic-plan-touting-million/story?id=71889055).

There will be opposition from the rich and powerful, from the extreme right-wing base, from FoxNews and the right-wing media, but Biden and the Democrats give democracy a chance to survive if not thrive and give the economy an opportunity to become more responsive to the needs and interests of the majority of Americans, whereas Trump and his enablers and supporters do the opposite.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s