After a week of self-inflicted political wounds, GOP presidential nominee Donald Trump managed to make headlines this week for his economic policy proposal. Over at the Hill, the Cato Institute's Alan Reynolds finds the plan "fiscally sound":
Imagine you were an economic czar trying to boost incentives for business investment and labor force participation. Would you raise tax rates or lower them? It’s not a trick question, or a hard one. Presidents Kennedy and Reagan answered that question by cutting marginal tax rates on income by 30 percent in 1964-65 and 23 percent in 1983-84. President Clinton cut the capital gains tax by 29 percent in 1997.
Similarly, Donald Trump would “work with” House Republicans’ tax reform plan “using the same brackets they have proposed: 12, 25 and 33 percent.” Capital gains would be taxed at half those rates. Trump would cut the corporate rate more deeply, to 15 percent rather than 20 percent, which could have more bang for very few more bucks.
But in Politico, investment advisor Zachary Karabell says the plan represents "magical economic thinking":
These tax proposals are straightforward. They are also fantastical. Yes, the United States taxes corporations more than most developed countries, and yes, corporations respond by domiciling trillions of dollars abroad and also making aggressive use of many loopholes in the tax code so that few companies end up paying that 35 percent rate. Finding a way to generate more revenue from U.S. corporations so that they contribute more meaningfully to the commons is imperative. Simply lowering the rate, however, will not achieve that...
An end to the estate tax (which he calls the “death tax”) affects only those with estates in excess of $5 million, and that holds true only from about 1 in 500 estates—which is another way of saying that only the very wealthy pay it. The promise to make childcare deductible is couched as family friendly, but it is only friendly to families who can afford thousands of dollars in childcare, which eliminates the tens of millions of families who need government subsidies. And while Trump promises to simplify the tax code so that the wealthy and well-off cannot game the tax system to pay less, the net result of these new brackets is still a substantial tax cut for the wealthy and for the higher end of the middle class.
Mrs. Clinton’s economic plan is not comprehensive. On corporate tax reform, for example, she has proposed piecemeal tax penalties to prevent corporations from moving abroad, as well as other measures to prevent corporate tax avoidance, but details on comprehensive change will probably depend on the composition of the next Congress. The plan Mrs. Clinton does have, however, is a good one. It is largely paid for. It is incremental, not sweeping, which is in keeping with political reality.
However, the Economist gave the plan a lukewarm review and said the best thing about it is that it wasn't Trump's plan:
Mrs Clinton’s own economic offering is not all that compelling. She shares Mr Trump’s pipe-dream of nurturing, in her words, a “manufacturing renaissance”. Granted, whereas Mr Trump extols the virtues of steelmaking, Mrs Clinton prefers building rockets and other such brainy work at which American workers can compete globally. But unskilled workers who lost out to competition from overseas are not about to morph into rocket-scientists. Ongoing productivity increases, driven by robotics, will limit job growth in high-tech manufacturing. Mrs Clinton knows this. She says that low-skilled workers have not reaped the benefits they were promised from past trade deals and that help from the government has been lacking. She is right on both points. The problem is that what she now pledges is unlikely to work for them either.
You may also be interested in this analysis by the New York Times' Neil Irwin on how Trump's plan compares to that of Democratic nominee Hillary Clinton. Also NPR offers this side-by-side audio comparison of both economic speeches on issues ranging from tax policy to child care and trade. Voters on both sides of the political spectrum are unhappy about trade deals, which are viewed as job killers, but Robert Samuelson notes this overlooks the increases in efficiency:
Though trade has helped reshape U.S. manufacturing, it is only one force of many. The appeal of making it the prime villain is political and psychological. We can blame manufacturing's problems and dislocations on foreigners and disloyal American multinational firms. If they behaved better, the American economy would improve. There is some truth to this, but it is hardly the whole truth -- as the case of steel shows.
Despite plummeting industry employment, U.S. steel production is roughly where it's been for decades, between 90 million and 120 million tons a year. Imports generally represent 20% to 25% of domestic consumption. True, dozens of steel plants have closed. But dozens of more efficient plants have opened. Productivity (aka, efficiency) has increased dramatically...In a recent study, economists Allan Collard-Wexler of Duke and Jan De Loecker of Princeton found that the spread of mini-mills -- with their greater efficiency -- explained most of the industry's job loss. Put differently: If there were no foreign trade in steel, most of those jobs would have vanished anyway.
And neither candidate seems to want to talk about issues facing poor people such as access to affordable housing, reports Binyamin Appelbaum in the New York Times:
The silence is particularly striking because the problem is growing. There is not a single state where a full-time worker earning the minimum wage can rent a market-rate one-bedroom apartment for 30 percent or less of their income, according to the National Low Income Housing Coalition. And more than 11 million households spend more than half of their income on rent.
Kathryn Edin, a professor of public health at Johns Hopkins University, said it was particularly important to focus on the plight of families without regular income. Federal benefits for workers, notably the earned-income tax credit, have steadily expanded in recent decades, improving the lives of those who have jobs...But Ms. Edin said the 1996 deal between the Clinton administration and congressional Republicans to curtail cash benefits for needy families had left those without jobs behind.
“When you can’t pay the utility bill, you can’t pay the rent and you can’t buy socks and underwear for your kids, how much does the fact that you have a Medicaid card really do for you?” asked Ms. Edin, who wrote about the plight of such families in her 2015 book, “$2.00 a Day: Living on Almost Nothing in America.”
There has been a lot of chatter about the book 'Hillbilly Elegy' by J.D. Vance, which was purported as a window into white working-class support for Donald Trump, by several articles on both sides of the political spectrum. Because Vance is a conservative, the book received lots of attention in places such as at the Weekly Standard, where Daniel Wiser wrote this:
In a book that is by turns hilarious and heart-wrenching, Vance recounts growing up poor in the Rust Belt community of Middletown, Ohio. His mother suffered from drug addiction, cycled through multiple husbands, and once threatened his life. But with the love and support of his grandparents and other family members and mentors, he never gave up on himself and eventually became a Marine and graduate of Yale Law School.
It is certainly true that residents of Appalachia and the Rust Belt often struggle with forces beyond their control, whether it's manufacturers that close up shop and move overseas or children who are born into families broken by drugs, divorce, and unemployment. But Vance identifies a disturbing fatalism among those he calls "hillbillies." From a young age, many are taught that the deck is stacked against them, that they should keep low expectations for themselves, and that there are larger forces at work that they are powerless to overcome. "We talk about the value of hard work," Vance writes, "but tell ourselves that the reason we're not working is some perceived unfairness: Obama shut down the coal mines, or all the jobs went to the Chinese. These are the lies we tell ourselves to solve the cognitive dissonance—the broken connection between the world we see and the values we preach."
In the National Review, Mona Charen essentially wags her finger at everyone:
The white working class has followed the black underclass and Native Americans not just into family disintegration, addiction, and other pathologies, but also perhaps into the most important self-sabotage of all, the crippling delusion that they cannot improve their lot by their own effort. This is where the rise of Trump becomes both understandable and deeply destructive. He ratifies every conspiracy theory in circulation and adds news ones. He encourages the tribal grievances of the white working class and promises that salvation will come — not through their own agency and sensible government reforms — but only through his head-knocking leadership.
But in this interview with the American Conservative, J.D. Vance offered up a more nuanced view of poverty facing both blacks and whites:
Obviously, the idea that there aren’t structural barriers facing both the white and black poor is ridiculous. Mamaw recognized that our lives were harder than rich white people, but she always tempered her recognition of the barriers with a hard-noses willfulness: “never be like those a–holes who think the deck is stacked against them.” In hindsight, she was this incredibly perceptive woman. She recognized the message my environment had for me, and she actively fought against it.
There’s good research on this stuff. Believing you have no control is incredibly destructive, and that may be especially true when you face unique barriers.
Speaking of unique barriers, it would take the average black family 228 years to amass the amount of wealth held by the average white family in the United States reports the Nation:
Conley, whose data did include things like cars and household goods, found that even white households hovering around the poverty line have a net worth of $10,000 to $15,000, but the typical black family at that income level will often be under water, with a negative net worth. In many cases, that means turning to usurious predatory lenders to stay afloat—an added expense of being poor.A truly perverse aspect of this story is that just as past public policies created the racial wealth gap, current policy continues to widen it. The federal government spends a fortune subsidizing wealth-building activities like paying for college, saving for retirement or buying a home, but most of those dollars go to people who already have wealth.
Want to know how the average worker stacks up to average CEO pay? Check out this chart from the Economic Policy Institute:
This fascinating article in Mother Jones looks at the large-scale farm business and philanthropy of Lynda and Stewart Resnick, who might essentially be California's water barons:
Having shrewdly maneuvered the backroom politics of California's byzantine water rules, they are now thought to consume more of the state's water than any other family, farm, or company. They control more of it in some years than what's used by the residents of Los Angeles and the entire San Francisco Bay Area combined.
Such an incredible stockpiling of the state's most precious natural resource might have attracted more criticism were it not for the Resnicks' progressive bona fides. Last year, the couple's political and charitable donations topped $48 million. They've spent $15 million on the 2,500 residents of Lost Hills—roughly 600 of whom work for the couple—funding everything from sidewalks, parks, and playing fields to affordable housing, a preschool, and a health clinic.
In the New York Times, a look at the company Managed by Q, which is providing gig economy jobs at living wages and full benefits:
The chief executive of Managed by Q, Dan Teran, wants to be clear: His company is not a charity. Its plan is to become enormous and highly profitable. A little more than two years old, the company now cleans more than 2.1 million square feet of office space in New York City. ...In addition to cleaning, the company offers a whole suite of other services to its clients — maintenance, I.T. support, security, supplies and others. It has expanded its operations to San Francisco, Chicago and Los Angeles, with the eventual goal of conquering every major city in the United States and, eventually, the world.
The company pays its staff, like Garcia, considerably more than prevailing market rates not solely because its founders want to be kind to them, but because Teran sees it as crucial to his business model. Teran believes that most American businesses, and especially fast-growing start-ups like Uber, have mistaken short-term gains for long-term value, undercutting the share of revenue that flows to workers in a way that will perversely hurt their bottom line. He believes, even more radically, that decades of rising inequality and stagnant wages in America are not an inevitable byproduct of capitalism; instead, they come from a simple misunderstanding about how best to deploy workers and recognize the value they bring to a company. The future of jobs in the United States would be very different if Teran’s ideas catch on. But first, of course, he has to prove that they actually work.
Also in the New York Times is a series on whether think tanks can be independent from their corporate sponsors, with special attention paid to the Brookings Institution. Over at the Washington Post, Daniel Drezner asks whether we learned anything new from the stories on the independence question:
The more serious charge of corporate pay-for-play in research is a complex case to parse out. In many of these instances, it is difficult to discern correlation (firm funds like-minded think tank) from causation (firm pays think tank expressly to get a result it expects).
There is also the question of where, exactly, think tanks should get their money if not from corporations. As I noted a few years ago, “In an ideal world, you would want think tanks to have sufficiently large and independent endowments to be independent of any one source. Most think tanks do not possess an endowment that large.” Which means they have to do their analysis with the resources they have available to them. Indeed, as Brookings President Strobe Talbott and Kimberley Churches noted in a Chronicle of Philanthropy article from earlier this year, even nonprofit foundations have their ways of trying to directly influence think tank research.