September 28, 2016


A conservative case against Trump's apocalyptic view of America (James Pethokoukis Sep 28, 2016, Vox)

I'm a conservative who finds the self-described billionaire businessman wildly unfit to be the next American president. Trump's bigotry and boorishness are morally offensive. His apparently willful ignorance of domestic and foreign affairs is alarming. But also deeply troubling is the apocalyptic picture Trump paints of the American project in 2016, one that may frighten voters into supporting him but is totally at odds with the facts. [...]

[T]he stubborn facts, both from within and outside government, paint a much different picture than that presented by the apocalyptarians. The data doesn't support the gloom. Sure, the recovery has been slow, at least the slowest since World War II, maybe in American history. But get in line. Great Britain's recovery is perhaps the slowest in nearly two centuries, and the UK even has the low, low corporate tax rate conservatives lust after.

Perhaps what is wrong with the US economy in recent years isn't mainly Obamacare or Dodd-Frank or the higher corporate tax rate or a withering of some intrinsic Americanness. Perhaps what's wrong is something that affected both the US and UK, and the rest of the global economy.

How about this alternate theory: Recessions accompanied by systemic shocks to the banking and housing systems tend to be followed by miserably slow recoveries. At least that's the view of economists Carmen Reinhart and Kenneth Rogoff. Their research suggests such anemic rebounds are characterized by "very sluggish U-shaped recovery" in incomes, Rogoff wrote last year, and persistently high unemployment. Sound familiar?

The deep financial shock of the Great Recession differentiates it from the nasty Reagan-era recession of 1981-'82, which was followed by a famously robust recovery. Looking at things that way, as the Goldman Sachs economics team recently noted, "the post-2008 U.S. recovery has not been unusually weak or prolonged relative to other financial crisis episodes, and in fact has been notably stronger when judged from a labor market perspective."

More than 15 million private sector jobs have been generated during the recovery. And over the past year the jobless rate has dropped to 4.9 percent from 5.1 percent, even as the labor force has grown by 2.4 million. Also encouraging has been the rise in total earnings -- higher hourly wages combined with hours worked -- by 3.5 percent during the past year years, economist Brian Wesbury of First Trust Advisors has noted. That's pretty decent, especially with inflation so low.

America was not a poor country before the Great Recession, nor is it now. Its per capita GDP is 20 percent or more higher than other large rich nations such as France, Germany, Japan, and the UK. American households have a net worth of nearly $90 trillion, according to the Federal Reserve, a total that doesn't even include intangible assets such as patents and copyrights ($15 trillion).

And while one can argue the merits of gradually reducing government debt as a share of the economy, there's no indication investors think Uncle Sam is near his borrowing capacity -- not with America a comparatively low-tax country and running the world's reserve currency. [...]

Another way of gauging America's ability to create high-value entrepreneurship is by how many people get really rich that way relative to what happens in other nations. And no big, rich country translates entrepreneurial daring into wealth the way the United States does.

Europe and Asia would love to have economies as entrepreneurially dynamic as America's. A study last year found that the cumulative value of all European billion-dollar tech startups -- the so-called unicorns -- created since 2000 was only a third of Facebook. Instead of creating the next Apple, Google, or Netflix, Europe sues the existing American ones. This dynamism is perhaps one reason why other advanced economies, according to Pew Research, say the US remains as important and powerful a world leader as it was a decade ago.

Here's another weird thing about the "Flight 93" critique: It's kind of moldy and outdated. The number of unauthorized immigrants in the US has been stable for nearly a decade, according to Pew. Moreover, immigrants from Asia, mostly China and India, are now outpacing those from Mexico -- yet the complaints focus on Mexicans. And a new economic literature review from the National Academies of Sciences, Engineering, and Medicine finds immigration "has an overall positive impact on long-run economic growth in the U.S."

Likewise, concerns about trade -- the subject at the very heart of the Trump campaign -- overstates the case. The China trade disruption to particular regions of the country is a yesterday challenge, not a tomorrow one.

In their paper "The China Shock," economists David Autor, David Dorn, and Gordon Hanson conclude, "The great China trade experiment may soon be over, if it is not already. The country is moving beyond the period of catch-up associated with its market transition and becoming a middle-income nation. Rapidly rising real wages indicate that the end of cheap labor in China is at hand." A more forward-looking critique of the US economy would look at the labor market challenges posed by automation. But one would not know this listening to Trump. once again rejecting a Bush we've left it to a Clinton to reap the rewards of a Peace Dividend.  Hillary, like the UR, can't avoid having a successful presidency.

Posted by at September 28, 2016 2:07 PM