If Economists Struggle with Economic Trends, How About the Rest of Us?

October 8th LA Times Projection of Trump’s Immigrant Deportation/Tariff plan

It’s so strange to watch as purportedly fiscal conservatives are voting to reduce economic growth, raise prices and eliminate low-cost labor from our manufacturing, construction and service sectors. Fighting hard to get elected, immigration has been hoisted as the main crime-creating, job-sapping and culture-eroding horrible for our nation. The numbers scream otherwise. On a macro basis, the United States is a mature marketplace. As 2.1 live births per woman is replacement value, the US is at 1.62. That contraction has been accommodated in the past with immigration, but the anti-immigration vector here will tank that relief valve, raising costs further (lowering discretionary income) with the loss of low-cost labor. Did I mention that the crime rates for nascent immigrants is actually lower than apply to the incumbent population?

This contraction pushes harder towards searching for growth markets overseas, even as other nations put barriers on foreign business in their countries. Pursuing raising tariffs, which is almost always a hidden sales tax paid only by consumers, as a panacea for job creation, neglects the retaliatory trade wars that benefit no one. This profound failure to understand how overall markets generate revenue growth has inevitable consequences for those who think they can legislate substitutes for genuine growth (especially, growth for all). Of course we can reshore manufacturing; we are a “can-do” nation with the ability to make the complex products of the future better, more efficiently, HERE. Look to the real job creator: education!!!!

Locking ourselves into rigid, now-archaic, practices that desperately need updating or replacement also undercuts the assumed model, valid in the 1930s through 1950s but fading fast after that, that funds Social Security: younger workers supporting older retirees. A graying nation with a contracting population absolutely needs to update its funding model. The existence of so many billionaires, even those transitioning to trillionaire status – disproportionate wealth and income inequality at a vast multiple of past wealth disparity – provides an obvious solution. Republicans cutting taxes that profoundly benefit only the rich can no longer be carried as the “tax cutting” party to attract… the rest of us.

To add additional cost vectors to this mess, we are paying for the ravages of climate change disasters… through the nose. Aside from the direct and visible destruction and the cost to “build and replace,” add the rising cost of electrical power (for AC) and insurance (from more natural disasters), and the pressure to contract consumer spending rises. Raising prices does not make up for policy failures. Expect seismic shifts in our overall economy. Undocumented workers have accounted for about $5T/year in economic flow. Exactly why are we so hell-bent on expelling these value creators from jobs Americans will not take and cutting a vast pool of consumers and taxpayers? Yes “taxpayers.” Economics are tough to understand, but…

Even as I present a GDP chart above – it’s the best estimating measure we have – GDP may be the worst "success metric" imaginable; the mega rich at the top are making so much money that the averages look good. So many are living in an economic/technology denial bubble, not understanding the overall reality vectors. In a contracting consumer base, the only way to make money is to take earnings away from someone else. As this contracts, growth no longer creates the escape value. When a consumer faces having to cut spending, where will the budget cuts land? Who loses? New quote: Those who do not understand economics are condemned to repeat its mistakes. Blaming political opponents for global economic realities, over which no one has simple control, may win elections… but the resulting required realpolitik to right the ship does not happen, making the problems that much worse as the horribles simply accumulate.

It’s understandable why few truly understand macroeconomics. Emotional reactions and global changes are hard to quantify even for the Federal Reserve. Writing an editorial for the October 8th Los Angeles Times, columnist Michael Hiltzik applies all this to the current election assumptions: “Long story short: Trump’s would be much worse in terms of increasing the federal debt than Harris’. According to the study issued Monday by the Committee for a Responsible Federal Budget, Harris’ policies would expand the debt by $3.5 trillion over 10 years, Trump’s by $7.5 trillion… These are eye-catching figures, to be sure. They’re also completely worthless for assessing the true economic effect of the candidates’ proposals, for several reasons.

“The disappearance of migrant workers...dries up local demand at grocery stories, leasing offices, and other nontraded services. The resulting blow to demand for all workers overwhelms the reduction in supply of foreign workers.

“One is the committee’s single-minded, indeed simple-minded, focus on the direct effect of the proposals on the federal deficit and national debt. That’s not surprising, because (as I’ve reported in the past) the CRFB was created to be a deficit scold, funded by the late hedge-fund billionaire Peter G. ‘Pete’ Peterson… For instance, the CRFB has been a consistent voice, as was Peterson, in campaigns to cut Social Security and Medicare benefits on the preposterous grounds that the U.S., the richest country on Earth, can’t afford the expense. (Peterson’s foundation still provides a significant portion of the committee’s budget.)”

But Americans love simple solutions to complex problems with catchy but profoundly misleading phrases, often based on totally false “alternative facts” and appealing “theories.” For example, the GOP “axiom” over supply-side, trickle-down economics – the “justification” given by the rich as to why they should have lower taxes – has NEVER worked. The rich do not take tax cuts and create lots of new, high paying jobs. They never have… and that’s clearly not how they got rich. Let me rephrase the common statement about that. “A rising tide floats all yachts.”

I’m Peter Dekom, and hard facts, from climate change to dollars-and-sense reality, can neither be wished or legislated away, regardless of repetition, passion or loud voices to the contrary.