economic philosophies of Democrats and Republicans are drastically
different. While neither party is interested in dismantling the
predatory capitalism that extracts surplus value from workers,
Republicans are more interested in reinforcing predatory capitalism
and “free markets”, while Democrats are more interested
in ameliorating the effects of predatory capitalism and regulating
markets in ways that produce somewhat more equitable results than
so-called free markets.
are more likely to protect and support workers, while Republicans are
more likely to oppress them. Thus, many Democrats have advocated for
an increased minimum wage, while Republicans have opposed it. There
are generalizations here. Conservative Democrats are likely to be
supportive of Republican “free market” rhetoric. Once
upon a time there were liberal Republicans (I think they are now
extinct) that would side with Democrats on some issues.
can expect Republicans in the House and Senate to eliminate
regulations, lower taxes, and support the “business climate”.
The stock market, which was predicted to lose momentum in case of a
Trump election, has actually gained. Is this sustainable? Economist
and former Harvard President Lawrence Summers, acknowledges that the
Republican approach to the economy might “drive major increases
in investment and hiring, setting off a virtuous circle of economic
growth and rising confidence.” But he says the Trump
administration will face enough challenges that we should “hope
for the best and plan for the worst”.
International Monetary Fund (IMF) predicted world economic growth at
3.4 percent, with US growth at about 2 percent, and far more robust
growth in China and India, where growth is likely to exceed 6
percent. But the IMF cautions that restrictions on global trade
will also constrain global growth. In both the UK and the United
States, there has been resistance to globalization, and an eagerness
to renegotiate trade treaties.
will benefit from this increased growth? Certainly not the folks at
the bottom. Indeed one might attribute the Trump Electoral College
victory to the fact that macroeconomic growth indicators have not
quite trickled down. The heavily pro-business Republican leadership
is counting on the trickle down to create jobs for the 99 percent.
They can’t force capitalists to use the proceeds from their tax
cuts to create jobs. Indeed, when banks were bailed out, they held
onto the money that politicians hoped they would loan to small
businesses to stimulate growth and economic expansion.
Americans with moderate incomes (the average African American family
income is about $35,000), others who a similarly situated,
lower-income people, and the economically vulnerable are not likely
to gain in the “new economy”. Businesses, however, are
likely to do very well. Is America made “great again” if
economic vulnerability increases? I think not!
is likely to be tension between the Trump Administration and the
Federal Reserve. How quickly will the interest rate be increased,
and what impact will it have on the “average” American.
Millennials who have been saving to purchase a home (those who have
paid off their student loans) will need to save even more (as much as
$30,000 for each percentage point increase in the interest rate) to
accumulate a down payment. And Ben Carson, who is likely to be
Secretary of HUD, is not likely to do anything to make their quest
for home ownership any easier.
Obama was able to stabilize the economy. The unemployment rate is
below 5 percent (although labor force participation is lower than it
should be), growth has been stable, and the stock market has been
strong. The benefits of this strong economy were not evenly
distributed, though. It is even less likely that the benefits of the
growth that the IMF predicts will be evenly distributed. Markets
don’t distribute benefits fairly. Political will is a factor
in fair and even distribution.
know that Republican “free market” economic philosophies
suggest that there is no political will for fairness. We will
experience macroeconomic ecstasy and microeconomic angst, with
economic indicators looking strong, and individual experiences
looking far more troubled.
next for the economy? The one percent will benefit, and the rest of
us will experience increased vulnerability. As Summers says, “hope
for the best, plan for the worst”.