(This is the second of two parts.)
When Trump and Harris talk about the “economy” at next Tuesday’s debate, they will be trying to articulate how they will alleviate the widespread anxiety about the cost of every day stuff like food, gas, health care and housing.
To economists these are known as microeconomic factors, and they are hard to make out from the 30,000-foot level of Air Force One, let alone fix.
One policy idea that periodically surfaces — price controls — was tried in the Nixon years and proved to be a disaster. They were a political success in the short term, but an economic catastrophe for bringing on the 1973–1975 recession, stagflation, and the instability of floating currencies.
Executive branch policy operates much more on the macroeconomic level, and here too their influence is debatable. Presidents can’t set interest rates — the Federal Reserve handles that. Presidents also cannot create jobs or boost productivity in the private sector.
So what about inflation? That’s a big issue right now.
An excellent analysis is available from Kiplinger called, “Can a President Fix Inflation?” The short answer is “not really.”
They can do something, however, about government spending, which contributes to inflation, job growth, and innovation. But of course Congress has to go along with the White House, which can be a major problem as we’ve seen with repeated threats by Republicans since the Newt Gingrich era to precipitate government shutdowns in disputes over the size of the federal budget.
Of course, size matters when it comes to the federal budget. Government spending is an important factor in the overall economy. Sometimes it can even help pull the country out of a recession, as during the Obama administration. But that, in turn, may boost both the rate of inflation and the size of the federal deficit.
Another issue that Republicans and Democrats usually end up differing over is whether government regulation helps or hinders the economy, which is an exceedingly complicated matter best characterized by the phrase, “it does both.”
Smart regulation improves economic performance in the long term by addressing some of the externalities, like damage to the environment, climate change, the mental health crisis, addiction, homelessness and gross inequities in personal wealth that result from unfettered free-market capitalism.
Only when these “social costs” are factored in can we accurately assess the full profit/loss balance that activities like mining, drilling and fracking have on our society. Suffice it to say the benefits go to the energy companies while the rest us pick up the tab.
Then again, our energy needs are growing so unless and until clean energy technologies become standard, that tab is unsustainable.
Voters should especially beware of candidates who suggest “anti-regulation” proposals, because they inevitably seek to cut the budgets for the EPA, FDA, CPSC, OSHA, etc. — the very agencies that address the most critical externalities. (Check out Trump’s Project 2025.)
So finally, of course, we come to the main battleground between the parties — tax policy. I can’t get into in in detail here, other to say that it always seems to boil down to a debate between “trickle-down” economics vs. “tax the rich.” Take your pick. The former increases inequality, the latter tries to reduce it. A reasonable tax policy cuts taxes for the middle class, enforces higher tax on the very rich, and does both of these things while not stifling innovation. After all, small business is where job growth happens.
From a business perspective, trying to manage the U.S. government is like serving as CEO of the largest, most chaotic corporation in history, with 330 million people, half of whom work, that generates $27 trillion a year, by far the most of any nation on earth. And that corporation is in one hell of a complicated, inefficient mess by any impartial analysis. In this context, Trump’s idea for an “efficiency czar” or some such job is intriguing, but alas, his choice for the guy to do job — Elon Musk — is downright frightening.
Consider what Musk has done to Twitter (X).
I’ll close with a parting thought. If you feel yourself starting to fall asleep during the upcoming debate when the subject of the economy comes up, try to shake yourself back awake because James Carville was right.
It’s the economy, stupid!
HEADLINES:
Government Regulations: Do They Help Businesses? (Investopedia)
Can a President Fix Inflation? (Kiplinger)
Does the President Have Control Over Inflation? (New Yorker)
What Are Externalities? (IMF)
Project 2025 Explained (ACLU)
Sluggish US jobs report clears the way for Federal Reserve to cut interest rates (AP)
Elon Musk May Finally Face Consequences for Wrecking Twitter (TNR)
IRS has collected $1.3 billion from wealthy taxpayers by ramping up enforcement (CNN)
New poll shows Florida, Texas within margin of error in Harris-Trump race (The Hill)
How the electorate has changed in key states and what it could mean this election (NPR)
Dick Cheney says he’s voting for Harris in November and Trump ‘can never be trusted with power again’ (CNN)
The decline of local news has become a campaign problem (CJR)
U.S. news leaders sound alarm on press freedom (Axios)
Harris team worried she’ll be ‘handcuffed’ by debate rules set by Biden (Politico)
Trump hush money sentencing postponed past Election Day, judge rules (CNBC)
Why economists and voters clash over immigration (Economist)
For second year in a row, most U.S. cities see declines in homicides, violent crime (WP)
Georgia high school shooting suspect referenced Parkland massacre in writings found in his bedroom, source says (CNN)
JD Vance calls reality of school shootings a bleak ‘fact of life’ (WP)
School shootings are a sad "fact of life," so the country should harden security to prevent more carnage, Republican vice presidential nominee JD Vance said Thursday. "If these psychos are going to go after our kids we’ve got to be prepared for it," he added. [AP]
Texas Attorney General Ken Paxton (R) is using search warrants, undercover operations and more to target racial minorities and sideline political rivals, organizers said. [HuffPost]
American-Turkish woman shot dead at anti-settler protest in West Bank (Guardian)
Afghan women raise their voices in song in online protests against Taliban's bid to silence them (CBS)
Berkeley Non-Profit Works To Counter AI Election Disinformation (Patch)
Ilya Sutskever's AI startup raises more than $1 billion (Axios)
Meet the new, most powerful open source AI model in the world: HyperWrite’s Reflection 70B (VentureBeat)
Amazon’s Alexa favored Harris over Trump after AI upgrade (WP)
How Machines Learned to Discover Drugs (New Yorker)
OpenAI, Still Haunted by Its Chaotic Past, Is Trying to Grow Up (NYT)
Aides Concerned Trump’s Mental Health Declining After President Admits He May Not Be Omnipotent Living God (The Onion)
No comments:
Post a Comment