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Donald Trump’s Popularity is Steadily Increasing

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Like many things about Donald Trump, his approval ratings are contradictory and misleading. The Wall Street Journal reports that:

  • Only 44% of Americans currently approve of President Trump’s job performance (while 48% disapprove) which is historically low for a new President.capture107
  • On the other hand, the percentage of Americans who have positive feelings about him has been steadily increasing ever since he declared his candidacy in June of 2015, and has now reached a high of 43% (see chart). Since his State of the Union speech was generally well received, this rating is likely to go even higher.

Here is my own perspective. As I have said many times on this blog, I believe our country’s two biggest and most urgent problems are:

  • Slow economic growth, averaging just 2% per year since the end of the Great Recession in June 2009. This means fewer jobs, smaller raises for workers and less tax revenue to spend on important national initiatives.
  • Massive Debt, now standing at 77% of GDP (for the $14 trillion public debt on which we pay interest), the highest since right after WWII. The Congressional Budget Office predicts that this debt level will keep on steadily getting worse, without big changes in current policy. It is therefore a huge threat to our national security and prosperity.

I have great confidence that the Trump administration and Congressional allies will put a high priority on faster growth and are likely to be able to achieve it. I can’t yet tell if Trump understands the seriousness of our massive debt.  But the Tea Party and Freedom Caucus members in the House of Representatives do very strongly understand this problem and will insist on addressing it.  I believe that they will be able to persuade the President to support them in doing this.

Conclusion. At this point I am a supporter of President Trump because I think that our national government is moving in the right direction.

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Is 3% Economic Growth Possible?

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Donald Trump was elected President because of strong support from blue-collar workers in the battleground states such as Wisconsin, Michigan, Pennsylvania and Ohio. The American Enterprise Institute scholar, Nicholas Eberstadt, has explained clearly why this happened.  It is largely a result of a slowdown in economic growth in recent years which has hit blue-collar workers especially hard.

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Can this recent slow growth trend be reversed?  The economist, Edward Lazear, has a positive answer to this question in today’s Wall Street Journal.  According to Mr. Lazear:

  • 3% growth is the long term norm. The annual growth rate in the 30 years preceding the 2007 recession was 3.1%. It has averaged just 2% annually since the end of the recession in June 2009.
  • GDP growth is the sum of two components: growth in productivity and in labor hours. Historically productivity has grown at a rate of about 2% per year and labor at about 1%.
  • Nonfarm labor productivity rose by a total of 7% between 2009 and 2016 which amounts to only 1% per year. It rose 18% between 2001 and 2008 or 2.3% per year.
  • Both President Trump and the House Republicans advocate business expensing (immediate tax write-offs for new investment) as an important part of tax reform. It has been estimated that just this one change in policy will induce an increase in GDP of from 5% to 9% over ten years. This would raise GDP from the current 2% annual growth to between 2.5% and 2.9% annually.
  • The Social Security Administration predicts no increase in the U.S. population age 20 to age 64 between 2020 and 2030.
  • But note that the labor participation rate fell during the recession by 2% among Americans between ages 25 and 54, the prime working age. Two drivers of this loss of workers are: 1) a large increase of the disability rolls and 2) the fact that the ACA will likely reduce the number of hours worked by about 2% between 2017 and 2024.
  • Eliminating burdensome business regulations will also help significantly.

Conclusion. There is clearly much that can be done to speed up both labor productivity and the number of hours worked by Americans. President Trump and the Republican Congress have a good shot at increasing economic growth to 3% annually.

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The Origins of Trumpism II. A National Crisis for Working Men

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The American Enterprise Institute’s Nicholas Eberstadt has performed a valuable national service with two recent publications: “Men without Work” and “Our Miserable 21st Century”  These works lay out in great detail what has gone wrong in our country in the past 16 years:

  • Overall household wealth has doubled as a result of a surging stock market fed by the Federal Reserve policy of quantitative easing.
  • The recovery from the crash of 2008 has been singularly slow and weak compared to the 1947 – 2007 trend line.
  • The work rate for Americans aged 20 and older has declined by 4% from 66% to 62%.
  • Half of all prime working age male labor-force dropouts take opioid medication on a daily basis paid for by Medicaid. 57% of this population class is collecting disability benefits.
  • 17 million male ex-prisoners and convicted felons are now in our midst and largely unable to find the employment which would lead to productive lives.

Here is Mr. Eberstadt’s initial prescription for addressing this very serious social problem:

  • Revitalize American business and its job-generating capacities. According to the Brooking Institution’s Ian Hathaway and Robert Litan, “business deaths now exceed business births for the first time in the thirty-plus-year history of our data.”capture63
  • Reducing the immense and perverse disincentives against male work embedded in our social welfare programs. For example, U.S. disability programs are subject to widespread abuse and gaming. Social welfare programs should emphasize a “work first” principle emphasizing training and education, job placement, and tax credits, etc.
  • Drawing men with a criminal record back into productive work life. Note that the huge increase in America’s ex-prisoner and ex-felon population in recent years coincides with a dramatic drop in rates for both violent crime and property crime. This suggests that former criminals do not pose a continuing danger to society.

Conclusion. For the future prosperity and social cohesion of our country addressing this problem should be a very high priority. Let’s hope that President Trump gets the message.

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The Origins of Trumpism

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Everyone is trying to figure out what Donald Trump is all about and I am no exception. My last two posts, here and here, compare his positives and negatives and what he is doing well so far and also not so well.
The American Enterprise Institute’s political economist, Nicholas Eberstadt, has an article in the current issue of Commentary, “Our Miserable 21st Century,” describing very cogently the economic and social conditions which have led to the election of Donald Trump as President of the United States. Says Mr. Eberstadt:

  • The year 2000 marks a grim historical milestone for our nation. The warning lights have been flashing for 15 years and now these signals are impossible to ignore.
  • First of all, the estimated net worth of American households has more than doubled between 2000 and 2016, from $44 trillion to $88 trillion (see below).capture103
  • At the same time the recovery from the crash of 2008 has been singularly slow and weak. By late 2016 per capita output was just 4% higher than in late 2007. In effect the American economy has suffered something close to a lost decade (see below).capture104
  • Then there is the employment situation. Between 2000 and 2016 the work rate for Americans aged 20 and older declined by 4% from 66% to 62%. To put this in different words: if our nation’s work rate today were back up to its start-of-the-century highs, 10 million more Americans would currently have paying jobs (see below).capture105
  • Half of all prime working-age male labor-force dropouts (totaling 7 million men) take opioid medication on a daily basis, typically paid for by Medicaid. In fact, 53% of prime-age males not in the labor force are enrolled in Medicaid.
  • Of the entire un-working prime-age male Anglo population in 2013, 57% were collecting disability benefits.
  • Currently 17 million men in America have a felony conviction somewhere in there past. This amounts to one of every eight adult males in the country. It is difficult for felons to find work and therefore to become productive members of society.

Concludes Mr. Eberstadt, “The abstraction of inequality doesn’t matter a lot to ordinary Americans. The reality of economic insecurity does.  The Great American Escalator is broken – and it badly needs to be fixed.  With the election of 2016, Americans within the bubble (of affluence) finally learned that the 21st century has gotten off to a very bad start in America.  Welcome to the reality.  We have a lot of work to do together to turn this around.”

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

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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.

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 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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A Tale of Two Trumps

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I have mixed feelings about Donald Trump. I didn’t vote for him because of his crude and sleazy behavior.  But I like some of the things he is doing.  Barron’s frames the issue well in its cover story this week, ”A Tale of Two Trumps,” by John Kimelman.

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On the positive side he has:

  • Been a successful real estate developer and serial entrepreneur who favors lower taxes and fewer regulations for many industries, especially energy, financial services and healthcare.
  • Made many good appointments such as Mnuchin for Treasury, Tillerson for State, Pruit for EPA, Price for HHS, Cohn for Chief Economic Advisor, Ross for Commerce, etc.

But on the negative side he has:

  • Issued a badly executed travel ban on immigrants from seven Mideast nations which has now been withdrawn.
  • Belittled the leaders of Mexico and Australia.
  • Torn up the Trans Pacific Partnership negotiated by President Obama
  • Threatened to withdraw from NAFTA which supports hundreds of thousands of jobs in the U.S.

On the other hand he has dialed back some of his extreme rhetoric by

  • Meeting with President Obama after the election.
  • Deferred to Defense Secretary Matson on the undesirability of waterboarding.
  • Accepted the “One China” policy in a telephone conversation with Chinese Premier Xi Jinping.

What remains to be seen is whether or not he can:

  • Make better trade deals with Mexico and China without starting a trade war which would badly hurt our economy.
  • Enact tax rate cuts and a $1 trillion infrastructure program without making deficits worse than they already are.
  • Work with his deficit hawk Budget Director Mulvaney to establish a plan to eventually achieve a balanced budget.

Conclusion. I personally remain optimistic that his good instincts will lead to faster economic growth and that his disruptive instincts will be sufficiently restrained by Congress and the courts so that they will not do major harm.

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Nebraska Senator Deb Fischer Is a Big Spender

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Senator Fischer is up for re-election in 2018 and she starts out a recent fund raising letter (see below) as follows: “My goals are clear: stronger national defense, safer roads and bridges, healthcare that is accessible and affordable, protection of our fundamental liberties, less government, and a fairer, simpler tax code.” Here’s the breakdown:

  • First, and most important: national security.
  • Second, our roads and bridges must be repaired and rebuilt.
  • Third, Obamacare must be repealed and replaced.
  • Fourth, our fundamental liberties must be protected.
  • Fifth, government must shrink and the tax code must be simpler and fairer.

I don’t disagree with the specifics of any of these five goals but rather where the emphasis is placed. Her first two goals are to greatly increase spending for both the military and for infrastructure projects.  Her last goal is to shrink the federal government which is a good idea but very hard to accomplish in practice.

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Here is the basic problem our national debt (the public part on which we pay interest) is now at 77% of GDP, the highest it has been since right after WWII, and steadily getting worse.  Right now this approximately $14 trillion debt is essentially “free” money because interest rates are so low.  But when interest rates inevitably rise to more normal levels, interest payments on the debt will soar by hundreds of billions of dollars per year and eat much more deeply into tax revenue.
It should be a very high priority for Congress to establish a plan to bring government spending more closely in line with tax revenue.  I have previously described how this could be accomplished over a ten year period without cutting hardly anything but simply using restraint for spending increases.

Conclusion. If Senator Fisher feels that it is necessary to make big spending increases in areas such as national defense and infrastructure repair, then she should be equally adamant about the need to hold down the growth of government spending overall.

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Donald Trump and Foreign Policy

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“Speak softly and carry a big stick”              President Theodore Roosevelt, 1858 – 1919

Donald Trump was elected President because of his strong support from white blue-collar workers who feel left behind in the modern world of globalization and rapid technological change. While the President has to work with Congress to implement new economic and fiscal policies, he has almost free rein in conducting foreign policy.

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There are major international issues that President Trump will have to deal with such as:

  • Rapid Chinese economic growth and assertion of power in Southeast Asia. Also currency manipulation and over-protection of domestic industry against foreign imports.
  • Russian assertion of power in Eastern Europe and the Middle East make it a dangerous adversary. All the more so since the Russian population is in decline and its economy is stalled under Putin.
  • Iran’s nuclear ambitions are only temporarily halted under the Iranian nuclear deal of 2015. Iran continues to support terrorism in Syria and elsewhere in the Middle East.
  • The defeat of ISIS and the containment of terrorism all around the world but especially in the Middle East.
  • Support of our democratic allies in hotspots around the world such as Japan and South Korea in Asia as well as our NATO allies in Europe.

Ever since WWII when the U.S. emerged as the sole superpower, the world has benefitted from overwhelming U.S. economic and military strength. The resulting “Pax Americana” has resulted in a long lasting period of relative peace and stability. But U.S. military strength is not automatic nor does it occur in a vacuum.  It depends fundamentally on the underlying strength of the U.S. economy which has been growing at the very slow rate of 2% annually since the end of the Great Recession in June 2009.

Conclusion. If we want continued peace and stability around the world, then we need faster economic growth to better support the U.S. effort to project strength.

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What Donald Trump Is Doing Right

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Amid the steady and intense criticism of President Trump, he is actually doing a lot of things right, as pointed out by the Hudson Institute’s Christopher DeMuth:

  • He has picked highly qualified and independent-minded assistants such as Jim Mattis for Defense (who considers Russia to be a threat), Rex Tillerson for State (who has urged action on climate change) and Mike Mulvaney for Budget Director (who wants entitlement reform). Mr. Trump has tweeted that “I want them to be themselves and express their own thoughts, not mine.”

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  • For a president to have strong willed assistants is in the best American tradition: Washington (with Jefferson, Madison and Hamilton), Lincoln (with Chase, Seward and Stanton), Roosevelt (with Acheson, Marshall and Stimson), and Reagan ( with Baker, Shultz and Weinberger) all wanted their cabinet members to engage in vigorous discussion about fundamental policy.
  • Trump forgoes ideology for simple cross-partisan principles such as America First, safety from terrorism and violent crime and better jobs and schools for the poor and working class, and defiance of self-serving elites.
  • He is comfortable with controversy and dissent and often incites it to advantage. His tweets and pronouncements can be outrageous and overstated but they demonstrate a healthy skepticism toward ossified orthodoxy and are designed to stimulate debate rather than to close it down.
  • His biggest mistake so far, the ill-advised travel ban for immigrants put on hold by a judicial Temporary Restraining Order, has been taken in stride by his administration while they reconsider how to proceed.

Conclusion. Ever since Mr. Trump’s election to the presidency, I have been saying  that his ultimate success in office depends on whether or not he can address our country’s two biggest problems: 1) slow growth and 2) massive debt.  At this point I am optimistic that he will succeed in doing these things.

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Why America Needs Charter Schools

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“We are the last generation, fighting the last big battle to make true on that – that a child born anywhere in America, from any parents, a child no matter what their race or religion or socio-economic status should have that pathway, should have that equal opportunity, and there is nothing more fundamental to that than education. That is the great liberation.”
U.S. Senator Cory Booker (D, NJ), May 2016
Two days ago Senator Booker voted no on confirming charter school advocate, Betsy DeVos, for Secretary of Education.

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Charter schools are flourishing because poor inner city black parents are desperate to have their children attend a good school and the big city public schools are often very poor quality.
Stanford University recently conducted a study of charter schools in 41 regions around the country and found that:

  • Urban charter schools in the aggregate provide significantly higher levels of annual growth in both math and reading compared to their traditional public school peers.
  • Learning gains for charter school students are larger by significant amounts for Black, Hispanic, low-income and special education students in both math and reading.
  • Despite the overall positive learning impacts, there are urban communities in which the majority of the charter schools lag the learning gains of their traditional public school counterparts, some to distressingly large degrees.

For example, charter schools are very successful in New York City and especially so for African-American and Hispanic students (see chart below).

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Conclusion.  Charter schools work well when they are done right.  They work especially well for minority children in large urban areas.  These are generally the high-risk kids from low-income families who will benefit the most from a little extra help.

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