What are the odds of an American child earning more as an adult than his or her parents earned at the same age? Researchers say that rising income inequality explains 70% of the steady decline in absolute mobility from the baby boom generation to the millennials. Earnings for typical Americans have stagnated while those for the richest Americans have soared. The remaining 30% is down to slow economic growth. Barely 2 in 5 men born in the mid-1980s grew up to earn as much, at 30, as their fathers did at 30, according to a group of economists and sociologists from Harvard and the Univ of Calif, Berkeley. Anything Trump does will not only not improve this situation. Indeed, his proposed tax changes would benefit high earners disproportionately.
Meanwhile new research by Thomas Pickety and Emmanuel Saez shows that the bottom 50% of US income earners only gained 1% in earnings from 1962 to 2014, after adjusting for inflation. From 1980 to 2014 nearly 70% of income gains went to the top 10%
This is extraordinarily bad for the societal future of the United States. The political instability that Trump has ushered in, and the lack of anyone of any note on the Democratic side to counter the damage, make the future gloomy. The idea of the American Dream is not yet dead, but Trump, entertainer of the masses and closet clincher of the oligarchy, will surely not turn things round.
Well, do you think he ever intended to?
Comment
Donald Trump is now surrounding himself with a team of plutocrats. Just look at the wealth of his picks so far. For education secretary, he has nominated Betsy DeVos, whose family is worth of $5.1bn; for commerce secretary, he has picked Wilbur Ross, who is worth $2.5bn; for deputy commerce, Todd Ricketts, whose family fortune is also around $5bn. Thus Trump’s cabinet is on track to contain at least four billionaires, including himself. And most of the rest look set to be multi-millionaires. Trump’s choice for treasury secretary, Steven Mnuchin, is worth about $40m; his health secretary pick, Tom Price, has a fortune of $13.6m. During his campaign, Trump regularly targeted Goldman Sachs, holding the bank up as the epitome of the corrupt establishment. Yet he’s now stacking his administration with “masters of the universe”: Mnuchin made millions working for Goldmans, as did Stephen K. Bannon, Trump’s chief White House strategist. So much for taking on the elite. “When will Trump’s supporters realise they’ve been conned?” (Inae Oh, Mother Jones, reproduced in The Week 10 December 2016)
I’m quite sceptical of the research Piketty and Saez have done. They look at households, not individuals. Its true that since the 1970s, household income has stagnated. But that’s because the average size of a household has declined. If you look at individual per capita income, it has increased by roughly 50% (http://www.census.gov/data/tables/time-series/demo/income-poverty/historical-income-people.html). Piketty and Saez also fail to account for extra-monetary benefits, which have vastly increased in generosity since the 1970s. These include but are not restricted to: 401K payouts, employer provided healthcare and dental insurance and employee stock ownership plans. So had Clinton won the presidential race, I wouldn’t be anywhere near this pessimistic.
But as we all know, Trump won. Now I don’t think that the economy is on the verge of collapse- if it does collapse, it won’t be because of Trump. Its very unlikely that the protectionism and job repatriation promised during the campaign will actually happen, partly because the GOP establishment are largely opposed to it, and partly because such plans were hopelessly utopian and economically illiterate. What is more likely, is that Republican orthodoxy vis a vis fiscal policy will prevail. As you point out, the wealthy will benefit disproportionately from his tax cuts. Now to an extent in theory, this isn’t necessarily bad, as wealthy people nearly always disproportionately benefit from tax cuts because they pay far more in taxes. But the way Trump and the Republicans plan to cut taxes, cuts them not just across the board like Bush did, but cuts them more for the rich. This will deprive the government of revenue relative to what it would have otherwise received- the effects of the Laffer Curve are totally overblown. The result will be either a higher deficit (the opposite of what Republicans say they want), lower quality public services (which disproportionately effects the poor), or some combination of the two.