April 24, 2017

I grew up in the tobacco fields of North Carolina. I worked for my father on our small truck farm as a child. My first paid job was for a local tobacco farmer paying $.15 an hour. I was “handing” tobacco leaves to a woman who was a “stringer.” She would deftly grasp the 3 leaves in my 12 year old hand and quickly flip them to hang by string from a pole, which then went into a barn for heat “curing.” Then came mowing lawns, grocery store, filling station, and summer factory work. My wages went up to $.75 per hour when I worked in the library at college. When I got my first full time job, I had to ask my employer for an advance on salary so I could buy a suit and a pair of shoes acceptable for a young banker.

While I started poor, workers in my generation (“baby boomers”) found plenty of good jobs after school, both for college graduates like me and also for those who didn’t go to college. Wages advanced steadily. That was the 60’s and early 70s. We had millionaires, but their tax rates were high and that didn’t prevent them from investing.

It all began to change in the mid 70s, and has continually worsened since then.   The deteriorating state of jobs and wages since the 70s are the prime reasons for anger that motivated electing Trump. But this experience in incomes has not been the case for the top income brackets:

Donald Trump understood the justified anger of Americans living hand to mouth, paycheck to paycheck. He also saw an opportunity to use your anger and ride it to the Presidency. I compliment him for this astounding accomplishment. But now he has the obligation to do something about it. He also has the opportunity to  create a great legacy.

The legacy is to deliver on his promise to improve jobs and wages. What is President Trump proposing to improve the income of the lesser privileged of us? I can’t find anything yet. He’s not fighting for an increased minimum wage. He’s not offering to expand the Earned Income Tax Credit to low income men who do not have children, or increase the food stamps program. He hasn’t proposed to expand or even retain the Trade Assistance Program, which helps workers who are displaced. He’s not proposing the single payer health system, which he himself advocated only three years ago.

His only promise has been to bring back lost manufacturing jobs. In my earlier post I explained how foreign trade caused only about 15% of the lost manufacturing jobs. Technology is responsible for the rest. Technology will inevitably continue to reduce the number of workers needed in manufacturing. Our President must not understand this, since he has said nothing about it. This is where he needs to focus, if he wants to help with wages.

In order for us to realize a future with good jobs and rising wages, we must look forward. The United States, the most advanced economy of the world, needs to lead the way into the knowledge economy. To use Trump’s language, “we have no choice.” The future can be good for all of us, but there is work to do to make it so.

We need our President to understand that we can’t allow capitalism, based only on the profit motive, to run wild. Government is needed to control the excesses of business, which otherwise will inevitably shortchange workers for the benefit of stockholders. CEO’s of the top 350 US companies now make 296 times that of the production/non-supervisory employees. They made only about 20 times workers in the 1960s. What’s wrong with a limit for CEO pay of say 100 times the median of the employees, motivated by tax benefits, as just one example of something the government could do? For my former employer, Wells Fargo, that would mean the CEO would make about $7 million per year, instead of 3 times that. The difference could go to employees. Does anyone doubt an excellent CEO could be found for $7 million per year?

We also need a new way to reward and engage the communities in which businesses serve and which house and feed them. The President could propose that a minority share (perhaps 10%) of the ownership in all new ventures be granted to the community in which the business works or sells. The remainder would be enough to continue to motivate our smart entrepreneurs. This could be one way to start a process of sharing the benefits of our technological and other advances into the future. The communities can give back in return—build housing, create schools, and innovate new products with shared benefit for all.

We will need a much larger investment in skills training and education in very specific ways to better enable everyone in our work force to participate in the knowledge economy. President Trump has said nothing about this. Nothing. I’m willing to pay more taxes if it’s for these kinds of forward thinking advances, which move us to a future era where wages are once again adequate and prosperity is shared. I’m not willing to pay more taxes for a wall or expanded military.

Donald Trump still has a chance to be great President, but so far he is on the wrong track.

April 22, 2017

In my last post I apologized for failing to acknowledge what our new President got right. I talked about lost jobs, how he understood the anger over the disappearance of so many good jobs.

Another thing he got right was understanding the anger about government. He recognized that many Americans have lost confidence in government. Congress has become increasingly polarized and gridlocked. Important legislation dealing with immigration, health care, taxes, judicial appointments, infrastructure, and other matters seems to go nowhere. Soon we once again face a potential federal shutdown over budget disagreements.

People feel there are more failures of government agencies. The Veterans Administration is an example. Another is the inability to prevent occasional terrorist attacks. FEMA failed spectacularly with Hurricane Katrina. The war on drugs seems to have only gotten worse. We are falling behind in education.

The financial collapse of 2008 revealed our government’s inability to regulate our financial system. American families are still dealing with the aftermath of that crisis, in which many of lower incomes lost their homes. No relief was offered homeowners, but the big banks were bailed out. While everyone was hurt by the crash, the wealthy recovered nicely, but the middle class and the poor did not.

People are frustrated that we have engaged in a number of very expensive foreign wars and conflicts across the last few decades, and that none of them have helped America. It appears they haven’t even helped the people in those countries. Our foreign conflicts have heightened resentment of the US, terrorism, and immigration pressures. We can’t seem to grasp that the world is now multi-polar. We’re not the only leader.

A lot of the anger is toward the federal government, but people are also disappointed with state and local government. In my city of San Francisco, Board of Supervisors meetings are often a shouting match. The past governor of Illinois has gone to prison, as have three more of the last seven there.

Research shows politicians tend to listen more to the wealthiest in their districts, and that they often vote their elitist biases, instead of voting for what’s best for their constituents. This leaves the middle class and the poor without political influence.

Here’s are the findings of the unbiased Pew Research Center in 2015:

• Trust of government is very low. Of Republicans and Republican leaning Americans, only 11% trust government.
• 79% of Americans can be seen as frustrated or angry with government.
• 61% say the government is doing a bad job in helping people out of poverty.
• Only 29% say “honest” describes politicians well or fairly well.
• 74% say politicians don’t care what the people think.

There’s a feeling that anyone who has served in government for a few years has become part of the “establishment.” The establishment is seen as looking out only for the establishment, not the people.

So, Donald Trump understood this and he tapped into it. He promised to fix it—to “drain the swamp.”

There are two problems with his promise. The first is that he hasn’t drained the swamp. In fact, many people claim his Cabinet and selected appointees are more “establishment” than those of Presidents before him. Let’s hope that changes. He was good at firing on The Apprentice. Let’s see how he does as President.

But the second problem is far more important. It’s the idea that we don’t need government. Many people seem to think government is a threat to individual liberty. In reality, government is the protector of individual liberty. We can’t live without government. We don’t even need less of it, we just need better. By comparison to other large developed countries, we have less government than the average of the Euro area, even when we add in state and local spending. Take a look at this interactive OECD chart. Large advanced economies simply require strong institutions and a lot of them, to assure that everything works well. Government is critical to safely and sustainably growing our complex large economy and protecting our people.

The military is part of government, and our President wants to increase military spending, but cut services critical to workers. We don’t need more spent on military. We currently spend more on military than the next seven countries combined. We just need more sensible spending there. He’s cutting housing development for lower income citizens, cutting the health care budget, as well as education and environmental protection. Improving is not simply a matter of cutting, Mr. President. To the contrary. We need our new President to restore and improve critical government services.

Let’s help our President to turn his attention away from simply reducing government, without concern for improving quality. That’s not a strategy. That’s not management. Let’s ask him to focus on making government better. That’s how he can make America great(er) again. If he chooses that objective, I’m happy to pay more taxes.

He says he is a great manager, the best, he says. But he hasn’t revealed any plans to better manage government. I’m waiting, but it’s about time. We are at the 100 day mark.

I have not given enough recognition to the justified frustrations of the Trump voters. I want to apologize for that. I’m not thinking I was wrong to oppose Trump, but he is our President now and we all need to conquer our differences to move ahead.

Here’s where I admit I was wrong: He understood the anger of the people who have been left behind. He understood it better than his Republican colleagues and better than Hillary Clinton. He saw the anger and frustration and offered to do something about it. I think that’s why he got elected.

Loss of good jobs seemed to be the biggest frustration. My parents worked in a factory and provided a decent income for our family of six in High Point, NC. Both worked at Adams-Millis, a manufacturer of stockings and socks. This company grew to become the largest manufacturer of private label hosiery in the US at one time.

When competition heated up, my dad was asked to operate two large knitting machines instead of one. His health suffered. He had to quit in his 50s. Adams-Millis subsequently grew to 1,300 employees. Things began to change. Closures and layoffs began in the 90s and the last employees left in 2003.

In High Point, NC, the furniture and textile companies were the main employers. These industries were almost destroyed in the 90s by foreign competition, mainly from China. A lot of guys in their 50s, and 60s lost jobs and couldn’t find other work. Wives went to work to make ends meet. Some people took jobs at less pay and took a second job, or more recently, found a little work in the “gig” economy, like driving for Uber or Lyft.

The US lost 5.6 million manufacturing jobs between 2000 and 2010. That’s about 30% of our manufacturing jobs.  Trump really understood the anger of people in places like High Point. Did he understand the underlying reasons for the  problem? Is he on the right track?

Another thing was happening, something Donald Trump hasn’t talked about–something much more important than China–technology. Technology was accelerating across recent decades. While some towns like High Point lost jobs to China, jobs moving out of the US were only 15% of the total jobs lost across the US. 85% of the manufacturing jobs lost were due to technology. Everything in manufacturing that was repetitive was being automated. Robots calculated to cost only $8 per hour were replacing $25 per hour workers. Computers often operated the robots.

We have to ask ourselves, is manufacturing going the same way as agriculture? Agriculture provided 60% of US jobs in 1850. Now, agriculture only requires 3% of our workers. Technology is responsible for much of the reduced need in agriculture. Many other types of jobs are now at risk to technology. Scanners replace toll takers at bridge entrances. People are buying online, which means less stores and less clerks. Now we have driverless vehicles on the horizon. That’s potentially at least 4 million more jobs, counting taxis, Uber and Lyft, busses, and trucks. Then there’s 3D printing. And GE says their latest jet engines can diagnose themselves when something’s in need of repair. One study suggests 47% of all US jobs are eventually at risk to automation.

Trump understood the anger about loss of jobs, loss of good jobs and the pay that goes with that. Does he understand the real reasons? If he doesn’t know why we lost jobs, he can’t fix it. Manufacturing jobs cannot be brought back from China. Job loss is mostly about technology. The wall with Mexico is not going to bring back jobs. The buildup in military is not going to bring back jobs.

My father took pride in his skill at rabbit hunting with his dogs, down in Randolph County. He sometimes remarked “…that hound’s on a cold trail.” He could tell by the dog’s bark. Some hunters say they can’t be broke from it, get rid of them. Some say they can if you work with them. President Trump is on a cold trail.  If he can’t be broke from it, we’ll have to get rid of him. We must work together to get him onto a hot trail.