From this day forward
it's going to be only
"America first,
America first."
It's always hard to know
what the economic legacy of a president is.
You don't know till the curtain falls.
If you've had success early
but failed later, people remember that
and vice versa.
Long term regulatory legacy
is to be determined,
but fiscal policy doesn't
run in reverse.
He will be seen as someone
who poured kerosene
on an already
overblown corporate debt
bubble,
and possibly will be responsible
for the next recession.
Instead of beating
the drum for innovation, he's trying
to protect people
and preserve the kind of dull, boring,
steady state.
Stationary state.
I think the economic legacy is trivial
compared with the assault
on democracy.
In 2016,
the Nobel laureate economist Paul Krugman
predicted that Donald Trump's election would
trigger the next global recession.
He wasn't the only one.
Many economists,
both before and after the 2016
election, feared Trump's America
First agenda of trade protectionism,
immigration restrictions,
and rejection of multilateralism
would send the economy into a tailspin.
So far those fears haven't
been borne out.
On the contrary,
since President Trump's inauguration in
January 2017,
the US has enjoyed strong growth,
a surging stock market,
increases in consumer spending,
and the lowest unemployment in a generation.
But in the run-up to the midterm congressional
elections,
many are asking to what extent the
Trump economy is really former
President Barack Obama's.
Is it Trump
or is it Obama?
I would actually raise a third possibility
and say it was Janet Yellen
and Jay Powell,
now, although we'll see what he does.
But really,
I would say that where we are has
a lot to do with the central bankers of the world
and in particular the Fed,
which led the last ten
years of quantitative easing,
keeping interest rates low.
I mean, that's why I think most
major economists agree we didn't end up in
a Great Depression.
I look at things a little different.
I think that the recovery is over.
We've recovered,
fully recovered.
Sure, there are some structural changes
that have occurred that we don't like
to see, but is not something
that Obama has anything to do
with it.
I don't think that Obama's policies
have opened up possibilities
for Trump,
nor closed possibilities.
Trump is on his own.
Trump can be credited
with having some
positive impact on
business confidence,
although I think analysis
of that coming out of the White House recently
has been exaggerated.
Almost immediately upon election,
the stock market
went up, was supposed to have gone down,
it actually went up substantially.
It's up substantially today.
And more important,
business leaders' expectations
shifted to the point where business people
I talked to had a spring in their step they
hadn't had before.
Of course, all of that requires
actual policy
and performance to continue.
But growth has been good.
But I think mainly what we've seen is
a cyclical recovery.
It takes time
for economic policy to feed
through to the economy.
So policies from
one to two years ago are showing
up in stronger economic growth now.
If the first two years offered surprise
and renewed confidence,
concerns over the future are mounting.
And also, one of the things that people talk about is
the stock market has gone up a lot.
But you know the stock market is in part
a symptom of what I worry about
that if you redistribute income
from workers to capital,
the stock market is gonna go up.
So you know to some it's
a measure of great economic success,
for some of us it's a measure
of just the opposite.
You know this is not the time to
do what President Trump has done,
which is to give a huge tax cut to corporations.
That is why we're seeing this kind of
turbo growth for the
last few quarters.
But to me that's very much a saccharine
sugar high that is eventually
going to end in a collapse.
Now, the only question that
I think the president cares about is,
is that before or after the midterms
and 2020?
There's no basis for thinking
that Trump has opened up
a new
decade of
significantly more
rapid growth.
There's there's no evidence
so far of anything
like that.
But I think the thing that worries me most about
Trump is that he doesn't understand
that growth
and good jobs are
all about the dynamism
of the economy.
We need a dynamic economy
in order to have innovation,
in order to have challenge
and change.
And Trump doesn't understand that,
and he's done nothing in that
direction.
So I'm afraid
the economy is going to go on
without any good
direction, without any good
policy sense.
So while you're making minimum wage,
while you're making not enough money, you're paying taxes.
The US
economy may have recovered from the crisis
a decade ago,
but that recovery was anything
but equal.
A significant missing piece continues
to be wage growth.
The benefits of overall economic growth
have gone overwhelmingly to shareholders
and senior corporate managers,
not to the poor
and middle class.
Despite polls showing that more Americans
feel confident about the economy,
most households are simply not
seeing a noticeable rise in their standard
of living.
In fact, average inflation-adjusted
wages are at roughly the same level
they were 40 years ago.
The Trump administration claims that its policies
will benefit workers, not just
the already wealthy.
The tax bill Republicans passed at
the end of 2017,
for example,
was sold as a benefit for the middle class.
In the years since,
however,
proof of that is weak.
Has the Trump administration sold a bill
of goods to Americans,
including many who were desperate to believe
in the candidate in 2016?
Well, several points: One,
I do think the corporate tax
bill was good tax policy.
I think it improved the
climate for investment,
for productivity,
and wages and we are seeing wages pick up.
Part of that is,
of course, a tight labor market,
which is also very good for workers.
But to my mind, the administration is missing
an opportunity for low-skilled
workers, many of whom may well
have voted for President Trump.
We need to do more in the country,
a) to help people prepare
for and keep work,
and second to support work.
In the former,
I'm thinking about much better
support for community colleges
and training programs.
And second,
much stronger Earned Income Tax
Credit or wage supports.
We need to,
as my colleague Ned Phelps,
often says, reward work.
We need some new leadership,
need a bunch of people
who want to encourage people
to try to recapture
and rekindle the
era in the United States when there
was a tremendous amount of innovation.
People think, "Oh,
new leadership,
maybe something good is
going to come out of this." And so
you see a
more optimistic level of investment.
But you're not showing,
but you don't see any real
effects of that in terms
of productivity
or real wage rates.
Part of the issue in productivity is less
about tax policy
and more about how long it takes general
purpose technologies to work through the economy.
Nobel Prize winner Bob Solow once
famously said,
"you see productivity everywhere except
the productivity statistics,"
but then almost immediately upon his saying
that, productivity soared for
almost a decade.
When you have general purpose technologies,
it can take 25 to 40
years. We saw this
with electrification,
internal combustion engine,
mainframe computing.
Today of course we're thinking
artificial intelligence,
big data, things like that.
It's always hard when economists
say, "be patient,"
but I'm going to say,
"be patient." It will
show up in the productivity
statistics.
In the meantime,
however,
we have to do more as a country to help
low wage work.
The FT had an estimate that Apple got
$59 billion out of the tax
bill.
It's not clear to me why Apple,
that doesn't really employ anyone
as far as I can see, is going to
create jobs
and raise wages because
of this.
Also if you look at median wages
or median incomes,
you're not looking at the people who are really
being hurt.
So.
You know median wages have stagnated for
50 years or depending on how you take the numbers.
But if you look at people,
the median wages of people who do
not have a BA,
for instance,
those have been falling steadily for 15
years.
So it's not just stagnation.
It's actually losing stuff
and they're worse off than their parents were
and they see their children possibly being
worse off than they are.
You know, they see no
redemption.
Now I have no idea
why the tax bill
is going to help those people.
So I think a big question for
wage growth is,
"are these policies sustainable?
And
will the expansion continue?" And
it is clear that we don't know.
If you look at what's
really driving wage compression,
globalization,
technology-based disruption,
and bifurcation in the economy.
So you have a lot
of very big firms that are productive,
producing fewer numbers of jobs.
You have the most labor-heavy
parts of the economy: manufacturing,
healthcare, education,
lagging behind in productivity gains.
You don't see the kind of real
Main Street investments in education
and worker training
and in all the kinds of productive
CapEx that would actually,
over time, not immediately,
but over time, allow those industries to become
more competitive
and eventually wages to rise.
We didn't do that. We developed a very consumer-oriented,
low-cost,
outsource-the-jobs,
reward-Wall-Street kind of approach
and we're now seeing the fruit of that.
Presidents have historically had more influence
on long-term economic trends than
on short-term fluctuations.
Many economists believe that the stimulus
from last year's tax cut was mistimed.
That means that the higher demand stemming
from the tax cut,
as well as from increases in purchases
ahead of import tariffs, will not
continue.
Focus has instead shifted to the administration's
drive to deregulate much of the US
economy.
But will root-and-branch deregulation
boost long-term growth prospects,
or merely set America up for another
crash?
What we want is not regulation
or deregulation,
but smart regulation.
We want regulations that correct
market failures
and imperfections.
If what you want is to encourage capital
spending in the short run,
then removing
regulation wherever you find it might be
the right thing to do.
But if you want to create an economy that
is resilient to
crises,
whether they be hurricanes
or the failure of Lehman Brothers,
if you want an economy
where you have
the equitable distribution of
income and resources,
then you're going to want to have a tax policy
that advances
those goals.
You're going to want to have regulatory policies
that do the same.
I mean the thing that worries me most about Mr.
Trump is just that he seems
the...He's the president
for rent-seekers.
I mean he promised to drain the swamp.
But all he's done is inviting every swamp
creature in.
So you know if you're a coal miner
or a coal-mining president
or whatever,
obviously you like the deregulation,
but these deregulations are going to kill people.
So you know they were not arbitrary
deregulation,
arbitrary regulations that were there
to stop the economy growing.
They were to stop people killing
people.
If you look at the pharmaceutical industry,
which is killing people in droves,
you know,
life expectancy is falling.
It's now fallen three years in a row for whites
in America, life expectancy at birth.
That's not happened since the First
World War and the flu epidemic.
And that's because of, you
know, gross profit
seeking by
drug corporations,
especially places like
Purdue Pharmaceutical.
Trump is never going to stop that in
a million years.
I think that the deregulation strategy
is really dangerous.
In part not just because
I think, particularly in the financial sector,
deregulation at the end of
a long recovery cycle is
exactly what you don't want.
Right? I mean a lot of financial
institutions are looking for yield.
You have growing concentration of power.
You have monopoly issues that many
economists feel is having
a dampening effect on the economy.
That's not the time to deregulate.
Okay, but let's put that aside.
Let's say that you could make a case
for some forms of deregulation.
This administration has no 360-
degree view.
You know, I was, I was interested.
One of the things that I was actually somewhat
bullish on when
Trump came into power was the idea,
"All right are we going to have some kind of industrial
strategy for the Rust Belt?"
There was some talk,
if you remember, in the beginning about connecting
education, vocational training programs,
to factories.
He had a manufacturing council.
Well, of course that blew up.
And I have never in all my reporting gotten
any sense that folks in
Labor, Education,
Treasury, you know,
any of the different departments are speaking to one
another,
or that anyone at the top that's
advising the president economically has
a 360-degree view.
This isn't China.
There is no industrial policy.
There's no plan.
And so what we're getting is a haphazard
series of measures,
some of which cancel each other out.
We have to clean up the country.
Our country is a mess.
While it may be too soon to say what
President Trump's economic legacy will be,
the challenges await.
Economic recovery cycles tend to last
between eight and 11 years.
And this cycle has been marked by a series
of unprecedented monetary policies.
Quantitative easing may have helped right
a sinking ship in the immediate aftermath
of the 2008 crisis,
but breakneck growth in central banks
balance sheets
and years of ultra-low interest rates
have left policymakers
with few tools to counter a downturn.
When the next recession hits,
will we be ready?
Another crisis,
nothing like the
2008-2009 crisis,
but certainly a
cyclical downturn is
in prospect.
I think unemployment is at unsustainable
levels
and
I think investment,
after being buoyed up by
a rush of confidence,
I think that investment is at
levels that will not be sustained.
A lot of people,
myself included, are very worried about
the Fed
and other central banks being out of ammo.
I mean, if you look at how much money
globally the major central
banks have been holding,
about 15 trillion on their balance
sheets. I mean, it is a money
dump of unprecedented proportions
and we're already seeing the ripple effects of that
start to play out,
with the trouble that we've had in the emerging markets
recently.
There's a huge debt bubble in China.
You know, the political economy there
may prevent it bursting
in a sort of Lehman Brothers type way,
but that's going to have a dampening effect
on growth no matter what.
So I don't think we're getting out of this easy.
This is not the economy we're worried about. It's
an assault on democracy
and that assault on democracy
and the deregulation,
you know, turning over the legal system
to pro-corporate interests
is going to make the people who voted
for Trump way, way worse off.
And I hate to think what they'll be doing
in 10 years. They're not going to go away.
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