The Democrats and the Economy


The Democratic Party is starting to wake up. Donald Trump was elected President because he was able to appeal to blue-collar workers who feel left behind in today’s high tech global economy.
Yesterday the Democratic Congressional leadership held a rally in rural Berryville, Virginia to lay out an economic program to try to appeal to these very same Trump voters.

Such a program, would, for example:

  • Increase people’s pay by lifting the national minimum wage to $15 per hour and also creating jobs with a $1 trillion infrastructure plan.
  • Reduce their everyday expenses by providing paid family and sick leave as well as breaking up large monopolies which can raise prices without restraint. Also empowering Medicare to negotiate lower drug prices for older Americans.
  • Provide workers with the tools they need for the 21st century economy by giving employers, especially small businesses, a large tax credit to train workers for unfilled jobs.

Unfortunately, there are problems with most of these ideas. In Seattle even a $13 per hour minimum wage has significantly reduced minimum wage work. The national minimum wage should be raised but to a more modest level.
There is no demonstrated need for a large-scale publicly funded infrastructure program and it would add hugely to the national debt.
A jobs program to maintain the employment rate for prime-age workers without a bachelor’s degree at the 2000 level of 79% and at a living wage of $15 per hour plus benefits would cost $158 billion per year.

Conclusion. Yes, blue-collar workers are hurting.  Yes, some of the ideas suggested above would help them get ahead.  But many would also increase already large deficit spending and therefore add dramatically to the national debt.  What is needed is a combination of free market initiatives and carefully targeted government programs.  Stay tuned!

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America’s Huge Challenge: Giving Blue-Collar Workers a Boost


The American economy has been stagnating since the end of the 20th century and has grown especially slowly (2% per year on average) since the end of the Great Recession in June 2009.  This slow growth has various unpleasant causes and consequences:

  • Men without Work. The political economist, Nicholas Eberstadt, has pointed out that the work rate for prime working age (25 – 54) men has dropped from 94.1% in 1948 to 84.3% in 2015. This translates into 9.5 million prime working age men who are not currently in the workforce.
  • Mortality Crisis. The economists, Anne Case and Angus Deaton, show that the mortality rate for working class whites in America, aged 45 – 54, has doubled since 1990, and that these new deaths are largely “deaths of despair.”
  • Complacency.  The economist, Tyler Cowen, makes a strong case that too many Americans are so comfortable in their own worlds that they have become complacent about the structural problems facing American society.
  • Segregation by Class The political scientist Charles Murray has described a separation of American society into a new Upper Class (20% of all Americans) and a new Lower Class (30% of all Americans) with the Upper Class enjoying the four deepest satisfactions of life: family, vocation, community and faith while the Lower Class is largely left out.

What can be done to improve the fortunes of America’s blue-collar workers? There are actually a lot of things:

  • Greatly improve vocational training for the millions of skilled jobs for which there aren’t enough qualified applicants.
  • Revitalize America’s job-generating capacities. More businesses have closed than opened each year since the Financial Crisis.
  • Reverse the perverse disincentives against male work embedded in our social welfare systems. The Earned Income Tax Credit should be extended to single adults without dependents. Eligibility for disability income should be tightened considerably.

  • Come to terms with the enormous challenge of bringing convicts and felons back into society. The huge increase in incarceration rates in recent years has coincided with a dramatic drop in rates for both violent crime and property crime.

Conclusion. It’s a scandal that so many blue-collar workers are struggling to live a fulfilling life. There are many different actions government can take to improve their lot.

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A Tale of Two Trumps II. Which Is the Real One?


From a reader of my blog:

One thing you should think about (very seriously) is whether Trump is set to become an autocrat and whether the institutions in the US are able to prevent this. There is the constitution, laws and norms (by which all Presidents or all Presidents for the vast majority) have conformed to. Trump is a master at recognizing the norms and blowing them off. The truth matters and when Trump says the press is the enemy of the people, you need to think about this. Very scary. Maybe, perhaps likely, our democracy is very fragile and not able to contain him. When I think of economic progress, my first thought is how long it took the Germans to overcome Hitler’s rule, 50-60 years. You seem to be willing to cut him a break, thinking our institutions will contain him. I think the German intelligentsia in the 30’s felt the same way about Hitler.


 My last post, “A Tale of Two Trumps,” compared what Trump is doing well with what he is doing poorly and how he has modified some of his extreme rhetoric. Of course the truth matters but the truth is highly subjective.  To say that the press is “an enemy of the people” is asinine but Trump has made a lot of outrageous statements and will surely continue to do so.  I simply ignore them.  He backs down when it matters.
I think it is farfetched (for the time being) to compare Trump to Hitler.  Hitler arose in a Germany devastated by WWI, with terrible economic conditions including extreme hyper-inflation.  The U.S. is still the world’s overwhelmingly dominant superpower and enjoys the highest level of prosperity in the world.
Trump was elected because this prosperity is enjoyed most prominently by the elite professional class.  He has convinced blue-collar workers that he will be able to improve their lot.  If he succeeds his grossness won’t matter.  In the meantime the courts will continue to slap him down when he steps out of line.

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