In this issue, Trump and economic anxiety, Amazon and gig economy carnage, the women reforming corporate governance, and the "wolves of Wall Street" as regulators.
This week marked the passing of the baton from outgoing President Barack Obama to his successor Donald Trump. Let's start with a cartoon from U.S. News and World Report:
This set of charts looks at some of Trump's economic starting lines. In his inaugural address, our new president on economic issues, decried "poverty in the inner city" and the woes of the Rust Belt. He pledged the "carnage" would stop:
From this moment on, it’s going to be America First. Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families.
We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs. Protection will lead to great prosperity and strength...
We will bring back our jobs. We will bring back our borders. We will bring back our wealth. And we will bring back our dreams. We will build new roads, and highways, and bridges, and airports, and tunnels, and railways all across our wonderful nation. We will get our people off of welfare and back to work – rebuilding our country with American hands and American labor.
The New York Times argued that Trump's assessment of the economy was reasons for not delivering value to workers is at odds with experts:
He spoke of “rusted-out factories scattered like tombstones,” and of a middle class whose wealth “has been ripped from their homes and then redistributed all across the world.”...
But it is a misleading diagnosis of the reasons for the decline of factory work.
There were more than 17 million factory workers in the United States two decades ago; now there are slightly more than 12 million. Some kinds of manufacturing, like textiles and furniture, have largely disappeared. And increased foreign trade did play a role in the decline. But most economists agree that technological progress is the primary cause. The value of America’s industrial output is at the highest level in history, but those goods are produced by fewer workers, a trend that cannot be reversed by changes in trade policy.
Others talk of trends that kill jobs such as automation and centralization. Market Watch's Rex Nutting says that Amazon will likely kill more jobs than outsourcing to China:
[F]or retail workers, Amazon is a grave threat. Just ask the 10,100 workers who are losing their jobs at Macy’s. M, +0.85% Or the 4,000 at The Limited. Or the thousands of workers at Sears SHLD, +4.36% and Kmart, which just announced 150 stores will be closing. Or the 125,000 retail workers who’ve been laid off over the past two years...
At the end of 2016, the retail sector employed 16.5 million workers, and the restaurant industry employed another 11.4 million. Together, that’s nearly one out of every five workers in America, the same share of employment accounted for by the manufacturing sector in 1982.
Many of those jobs are threatened by Amazon’s incredible growth. But some are relatively safe: Most of the 11.4 million restaurant jobs are safe from online competition, for instance, because people still love going out to eat, and someone has to cook and wash the dishes. The 1.3 million working at car dealerships probably won’t be affected anytime soon, and neither will the 925,000 at gas stations, or the 1.1 million working at building materials stores. You won’t buy a new car, or a gallon of gas, or 50 sheets of drywall online.
Also killing the worker soul may be the rise of mommy apps, creating glorification of "the side hustle", writes Matt Ruby:
[What] has happened to our culture when we just take it as fact that everyone needs to have multiple jobs and work as a cab driver and rent out every square inch of space in their apartment and be a task rabbit gopher who waits in line for tickets when they’re not walking dogs or temping and we all just chalk it up to “progress”??? In the old days, this meant your life was falling apart. Now it just means you’re part of “the sharing economy.”...
Remember when technology was gonna save us? All these time-saving devices will lead to more efficiency so huzzah, right? And yet everyone is out there relentlessly complaining about how busy they are. Technology didn’t save us. It’s eating us alive. We don’t get any time back, it gets sucked up. Unfettered capitalism doesn’t give you time back or freedom or relaxation.
Over at the Wall Street Journal, we have discussion of the workers' anxiety that fueled the Trump victory and their hopes for jobs. "As Mr. Trump prepares to assume the presidency Friday, angry working-class voters in places ranging from mill towns like Mr. Golomb’s to the coal fields of Wyoming to the ranch lands of Nevada are hoping the wealthy New York businessman and former casino owner can deliver on his promises to breathe life back into their communities and their battered economies." Over at Shelterforce, we have a looks at policies for underserved communities such as local hire:
These measures, which are sometimes part of a broader set of community benefits, ensure that public investment in economic development has a positive impact on those who need it the most. It works like this: as cities and developers invest in major projects, a percentage of the jobs created are reserved for a defined group of people. Local hire policies reserve jobs for individuals that reside in a particular geographic area. Policies can focus on a variety of geographies including cities, counties, and school districts for example. Ultimately the goal is to ensure that residents who live near a given project have access to the jobs it creates. In some cases, geography-based hiring requirements on their own are not enough to ensure that disadvantaged residents are hired. For example, a countywide local hire policy may not be the most effective way to ensure that low-income residents are hired. In such cases, cities can also utilize non-geographic yet targeted hiring measures to direct job opportunities to disadvantaged communities, especially those living in areas of concentrated poverty and unemployment, including people of color, low-income workers, women, and the formerly incarcerated. By combining targeted and local hire strategies, cities can ensure that jobs are directed to residents who need them the most.
Over at the blog Strong Towns Charles Marohn says less affluent communities make the best investment opportunities:
[T]he type of investments that these neighborhoods need in order to experience consistent 3-5% returns over time are very small and low risk. We're talking about things like putting in street trees, painting crosswalks, patching sidewalks, and making changes to zoning regulations to provide more flexibility for neighborhood businesses, accessory apartments and parking. If we try some things and they don't work, we don't lose much because they don't cost much. We learn from our small failures and try something else. This is the approach we described in our Neighborhoods First report, a way of building we've now seen repeated in cities like Austin, Memphis and Pittsburgh. We also shared some other ideas last week in Five Low Cost Ideas to Make Your City Wealthier.
American cities can make low risk, high returning investments while improving the quality of life for people, particularly those who have not benefited from the current approach.
You know what else seems to be a good investment, "working class colleges", which cater to nearby students, reports the New York Times' David Leonardt:
Because the elite colleges aren’t fulfilling that responsibility, working-class colleges have become vastly larger engines of social mobility. The new data shows, for example, that the City University of New York system propelled almost six times as many low-income students into the middle class and beyond as all eight Ivy League campuses, plus Duke, M.I.T., Stanford and Chicago, combined...
The share of lower-income students at many public colleges has fallen somewhat over the last 15 years. The reason is clear. State funding for higher education has plummeted. It’s down 18 percent per student, adjusted for inflation, since 2008, according to the Center on Budget and Policy Priorities. The financial crisis pinched state budgets, and facing a pinch, some states decided education wasn’t a top priority.
Elite colleges also can provide mobility, but the Upshot also notes that elite colleges seem to be more focused on affordability rather than expanding opportunity to attend.
Meanwhile, Alexandra Stevenson and Leslie Pickler report on women in finance looking to make a difference in corporate governance:
Women hold the top positions in corporate governance at many of the biggest mutual funds and pension funds — deciding which way to vote on the directors of a company board. They make decisions on behalf of teachers, government workers, doctors and most people in the United States who have a 401(k). The corporate governance heads at seven of the 10 largest institutional investors in stocks are now women, according to data compiled by The New York Times. Those investors oversee $14 trillion in assets.
Corporate governance is playing a growing role within the broader ecosystem of corporate America. Each spring, publicly traded companies hold shareholder meetings and outline business strategy for the coming year. Shareholders like BlackRock, T. Rowe Price and State Street vote on corporate strategy and issues including company board appointments and compensation.
The Heritage Foundation's Stephen Moore says Trumps is expected to end "job killing" regulatory barriers:
Stacks of job-killing Executive Orders and regulations from the Obama era need to be repealed or rolled back. At the top of the stack is the Clean Power Plan, which has put tens of thousands of American coal miners out of work. In addition, federal regulations have forced manufacturing companies to pay more than $19,000 per employee in order to remain in compliance with the rules, according to the National Association of Manufacturers. Imagine the growth that will ensue when business owners are released from these shackles.
The Washington Post's Steven Pearlstein meanwhile looks at whether the "wolves of Wall Street" are being put in charge of America's henhouse under Trump:
In announcing the appointment of Carl Icahn as his new adviser on regulatory reform, President-elect Donald Trump characterized the Wall Street legend as “one of the world’s great businessmen.” By Trump standards, it was a minor mischaracterization, one that confused the Main Street world of business, where value-adding goods and services are created and sold, with the trading, dealmaking world of finance on Wall Street.
Such confusion is understandable. For if anything has come to characterize American capitalism over the past 30 years, it has been the financialization of business. Whereas top executives of America’s biggest corporations once spent their time worrying about products, customers, employees and the communities in which they operated, today they focus on maximizing shareholder returns through clever feats of financial engineering. Executives who embrace this financialization are handsomely rewarded with tens of millions of dollars in bonuses and stock grants. Those who don’t are fired...
In short, they have little in common with small-business owners trying to create and protect a market niche from the predations of corporate giants, or the high-tech entrepreneurs desperate for engineering talent and second-stage funding or the community banker in Dubuque. In large part, the way they have gotten rich has been by diverting wealth from Main Street businesses and investors. Yet they harbor no doubts that the money they have made exceeds the value of their economic and social contribution, and are dismissive of those who do.
According to Salon's Matt Rozsa, Trump's plan hinges on tax reductions for the wealthy and increases for the middle class:
If you’re lucky enough to be a family earning over a million dollars, your average tax cut would be about $317,000, which is more than 14 percent of your income. So as a share of your income, the tax cut for millionaires is about 18 times larger. But there are also millions of individual families who would see their taxes go up under his plan. Single-parent families would face a tax increase if their income’s between $20,000 and $200,000 according to the Tax Policy Center.”
In terms of the specific implications of Trump’s tax policy, it is expected that most married couples with three or more children will see their taxes go up. Middle-class families in general will experience tax cuts around 2 percent, although this is nothing compared to the 13.5 percent cut for America’s wealthiest 1 percent. Moreover, 7.9 million families with children — including 5.8 million that only have a single parent — will see their taxes increase.
“Right now, a single parent with $75,000 in income and two children can claim a head of household deduction of $9,300, plus three personal exemptions,” explains Christopher S. Rugaber of the Associated Press. “Those steps would reduce the household’s taxable income by $21,450, to $53,550.”
You also might be interested this Fiscal Times piece on how repealing Obamacare might be a tax boon for the wealthy.