A lot has been written on the dynamic energy of our current economy. Conservatives claim this is the direct result of lesser regulations and lower taxation. Liberals/progressives think just the opposite and fear the economy is headed for a crash landing. Moderates think there is both good and bad hiding in plain sight. The moderates enjoy the good but warn of the bad. I think they have the story right.
The Right Economic conditions: dropping unemployment, emerging new industries, growing household incomes, expanded economic activity and performance, strong stock market values.
The Wrong Economic conditions: full employment, no broadening standard of living for the masses, rising crime and violence, disconnected older workers whose careers evaporate, less access to appropriate housing markets, waning interest in higher education and occupational training. Also, a feeling of stagnation among the people of America. A lot of fight and struggle to live normal lives with a lot of pressures beating them down. Not getting ahead in way they had hoped; yet still OK; just not good enough. To cap it all off, there is little or no investment in: job training; affordable housing; integration of all age groups into the social fabric of our nation [elder dumping is one major issue]; education and research at the nexus of emerging new industries and careers.
Not to put too much shade on it, the sleeping giant among us is the enormous growth of national debt fueled by massive spending during breathtaking tax reductions. Debt is out of control at the federal level of governance. Trade imbalances among global trading partners is a delicate game of balances, but the national debt is something completely different. It also has its own dynamic effect on everything we each do.
Billionaires are doing well. So are millionaires. Their numbers are growing astronomically. However, those are short-term results with long-term costs. The largest such cost: shrinking middle class. This is a key element for the future. The great creator of goods, services and wealth is the labor pool of the masses. They gain good household incomes for their efforts, but little wealth. Their standard of living is good, but they invest in the future for their kids – education, first home purchase help, weddings, and more. All of this activity fuels significant economic activity that feeds more levels of entrepreneurs and workers. At the top of the economic pyramid owners earn huge rewards. At the bottom of the pyramid are the scrap chasers.
All of my training and experience in economics is warning me of an economy built on a ‘house of cards.’ One good gust of wind will take it down. All of it. That’s why economists are usually careful and light handed on economic policy. Too heavy a hand creates too much reaction and disruption that harms people and families. A light touch provides stimulus and dampening action keeping the economy in smooth transition from one phase to another.
Such is not the current situation. Volatility is the word of the day in economic circles. That should give us all pause. Something is happening that is not fully understood. The vibes are not good.
I am unsettled with the economy. It is not about my not trusting the current White House occupant. It is knowing that the occupant doesn’t understand the macroeconomic facts of life. He does understand microeconomics. The difference between the two looms large if care is not taken.
Care is not a watchword of this administration. So my feelings of gloom are well-earned.
Beware.
March 26, 2019
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