The Quandary of Cause vs. Solution

Donald Trump rightly saw the economic distress of a large swatch of American workers as the opportunity to build a base for his eventual election. Workers had been suffering with no real wage increases for 40 years, ever since Reagan. And neither Democratic nor Republican Presidents had even slowed the steady advance of inequality. Inequality was approaching the level of the Robber Baron era of the 1920, and inequality has subsequently increased under Trump. Inequality in the US is the highest among developed countries.

Trump put his energy into excoriating immigrants and foreign countries as the cause of the economic woes of the working class. They were the “cause” in his hundreds of speeches. The workers were hungry for identifying a cause, culprits, and they bought it. It was simple (too simple), easy to understand. It gave them opponents to focus on, to rail against. Thus, all the working class support for the wall. This, notwithstanding extensive economic analysis showing only rarely do immigrants reduce wages, and as a whole they make a huge positive contribution to our economy, far in excess of any government assistance they may receive.

We have dramatically and tragically witnessed how easy it was to identify tangible culprits, and how easy to sell simple causes to a generation of economic woes for our workers. Regrettably, these were not the real causes. These were fake causes. It was not immigrants who caused the problem. It was not Mexico or China, or any other of our trade partners. Every legitimate economist took great exception with the trade wars. Peter Navarro was ridiculed by Larry Summers of Harvard and others who explained that the trade deficit is a fake cause and “fixing it” is a fake solution.

As an example of the problem: I took a class under Summers and Robert Lawrence, who spent several sessions carefully walking us through the workings of the global economy, explaining why the trade deficit is a fake problem and that fixing it is a fake solution. It’s not simple, but it’s absolutely clear when explained. With the cost of education as it is, with wages as they are, how many of our workers have the opportunity or even the time to take such an economics class? No wonder they’re vulnerable to simple solutions offered by a President who appears to have little understanding of economics.

Properly identifying the causes is complex and challenging. Voters need opportunity and information and education to get to a decent understanding.

But here’s my main point today: Identifying the causes is not nearly as important as offering a good solution. That’s really complex. Otherwise, how is it that every President since Reagan, regardless of your political affiliation, failed to arrest the advance of inequality, failed to fix the income tragedy of our workers? It wasn’t because none of them cared. It is complex!

Trump’s solution was to kill or punish the identified fake culprits. How has that worked? Wages are up 3% after 40 years of no real wage increases. Is that success? No. Probably just the result of a global recovery which is now slowing. Our gdp is now back to a sluggish 2%.

What’s the real solution? Well, it would take a huge study, a great collaborative effort to design it, and it wouldn’t fit into anyone’s blog post.

Here’s what it’s not:

  • It’s not reducing immigration or fighting trade wars. None of that is going to bring back manufacturing, as promised by Trump.
  • It’s not as simple as universal basic income alone, or taxing the wealthy and corporations, or wealth taxes, or free health care or free education, any of these taken alone. These are possible components, but not a comprehensive solution.
  • It is not a solution built primarily around increased welfare to the working class.

Here’s what the solution must include:

  • A steady reduction in inequality to a more moderate and sustainable level.
  • The realistic achievable of living wages for the vast majority of workers–in a generation.
  • Engagement of all stakeholders to make this happen: citizens, communities and states, corporations, educational institutions, and our federal government.

This is our opportunity and our necessity. Let’s get to it!

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