Map of life expectancy at birth from Global Education Project.

Sunday, January 19, 2020

Checking up on the economy

I am continually amused by the claims of Trumpistas that the U.S. is experiencing an economic resurgence and utopia, for which of course the vulgarian in chief deserves all the credit. Joseph Stiglitz, who unlike them and me has won a Nobel Memorial Prize in economics (it's not a real Nobel prize, economists added it later because they wanted one too) knows otherwise.

This is a fairly dense essay which it's difficult to summarize without quoting, but I'll try. Meanwhile one pull quote:

Two years ago, a few rare corporate leaders were concerned about climate change, or upset at Trump’s misogyny and bigotry. Most, however, were celebrating the president’s tax cuts for billionaires and corporations and looking forward to his efforts to deregulate the economy. That would allow businesses to pollute the air more, get more Americans hooked on opioids, entice more children to eat their diabetes-inducing foods, and engage in the sort of financial shenanigans that brought on the 2008 crisis.Today, many corporate bosses are still talking about the continued GDP growth and record stock prices. But neither GDP nor the Dow is a good measure of economic performance.
I actually think even less of GDP as an indicator of anything we should necessarily feel happy about than does Stiglitz, whose critique includes the observation that it is actually growing slowly. That doesn't necessarily bother me, but these facts do:

U.S. life expectancy is actually falling. We haven't seen that in an economically developed nation since, well, the collapse of the Soviet Union.

This is because a) millions of people have lost their health insurance as the Administration has worked assiduously to sabotage the Affordable Care Act and b) people are dying at unprecedented rates from suicide, alcoholism, and drug addiction.

The 2017 tax act cut taxes for the very wealthiest people but it will actually raise taxes on middle income people. Since Orange Julius took office, the median household income has been stagnant. It rose a bit in the first year, continuing the momentum of the Obama years, then stopped. And earnings for Black men continue to be 3/4 of white men's earnings. And the tax cuts didn't spur investment at all -- instead they spurred $800 million in stock buy-backs, which benefits shareholders obviously, but not workers. Oh yeah -- the trade deficit is higher than when OJ took office, including the deficit with China, which has increased by 25%. The pace of job creation is lower than during the Obama years, and the percentage of the working age population which is employed has also grown more slowly. Then of course there is the gutting of environmental regulations which will mean more people are poisoned by air and water pollution, among other unpleasant consequences.

So no, economic conditions do not favor the incumbent.

Update: And you don't have to take my word for it. "A 70% majority of Americans view the economy as unfairly favoring those with power, and large majorities also say politicians, giant corporations, and wealthy individuals wield too much power over the economy, according to Pew Research Center. Also, real wages were completely stagnant in 2019.


Dr Porkenheimer said...

After looking at Professor Stiglitz's past publications, I can that HE agrees with YOU so it's no surprise that you might offer up him as some 'evidence' that the economy is not doing well. Stiglitz continually cites health statistics as a harbinger of the economy. Few economists have made that assertion. Most economists look to standard leading indicators.

This is the same guy that praised the economic policies of Hugo Chavez promoting the idea that universal healthcare and redistribution of wealth would solve all their economic woes. As we know, it didn't go well.

He sounds pretty much like a socialist at best.

What do you think?

Cervantes said...

No, he's not a socialist -- although as I have said before, that's just a word and I don't consider it a term of abuse. I don't offer him up as evidence, I offer up the evidence that he cites. Everything he says is true, so the question of who said it is irrelevant.

Chavez did start out proposing good policies. Unfortunately he became autocratic and mismanaged the economy.

As for how economists measure economic well-being, Stiglitz is among a large number -- probably a majority actually although I haven't taken a poll -- who argue that GDP is not a useful measure of welfare. Here's one useful introduction to the subject.