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ECONOMIC GROWTH AND POLICY

March 18, 2018

ECONOMIC GROWTH AND POLICY

One of the reasons why we have had wage inequality for almost four decades is that libertarians and Republicans have implanted right to work laws in formerly industrialized northern states while hollowing out such industries by their export to China and elsewhere, a double whammy to our economy. As one of the results, positive for American multinational corporations and their handmaiden Wall Street bankers but negative for ordinary Americans, our economy has lagged in growth behind that of the world average for several years as workers do not have the wherewithal to stoke aggregate demand, the sole arbiter of economic growth, resulting in trillions in losses to our economy in productivity and the consequent loss of income and wealth our economy could have engendered but for such demand-deadening policies.

Without unions as a countervailing force to corporate employers, I do not look for substantial improvement in economic growth, and Republican fantasies that you can borrow your way into economic growth by a tax bill our grandchildren will be paying for strains reason. Tax cuts with borrowed money paid to the wrong people will not enhance economic growth, the Dow is irrelevant, and as the toxic effects of Trump’s tax bill take hold, I am predicting a recession either this year or next with final timing dependent upon externalities which have not yet come into view, such as geopolitics involving Putin, Trump et al., which could hasten or delay the coming downturn.

Contrary to Republican predictions of trickle down success for our future (when eminent economist Joseph E. Stiglitz writes repeatedly that  trickle down economics  “has never worked in a large economy” – and ours is large), it is clear to me that increased employment and chump change increases in wages will be eaten up by interest rate increases and inflation and that we are set to shortly experience economic contraction rather than economic growth due, as usual, to lack of aggregate demand occasioned by demand-deadening policies. The proper policy, of course, is one that provides for robust increases in median wages which would in turn stoke aggregate demand which would, in turn and perhaps surprisingly, increase profits for the rich and corporate class who have been resisting increases in median wages for almost forty years . However, I’m not holding my breath waiting for such an enlightened economic proposal to find its way through the legislative maze and land on Trump’s desk.      GERALD       E

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