Economy

Trump Can Bring Jobs to the Rust Belt by Relocating Federal Agencies

Kyle Sammin: “The exception to this is in the creation of jobs through actually hiring people to work for the federal government. Here a President can actually affect the number and, more importantly, the location of the jobs the federal government provides. The best way for Trump to enact a better federal employment program that is fiscally conservative enough to satisfy a Republican Congress, therefore, is not to create more federal jobs but to move existing ones away from the Washington area and out into the rest of the country, especially in those areas that have been hurt most by long-term unemployment.”

“The move would also save the federal government money in the long term. Federal workers in expensive areas—like Washington—are paid more, to make up for the higher cost of living there. A worker in D.C. makes over 10 percent more than one doing the same job in Youngstown. Move enough workers out of expensive areas, and the savings to the taxpayers start to add up. Government workers and their families would benefit, too: 90 percent of a D.C. salary goes much farther in Youngstown than 100 percent of it goes in Washington.”

Trump’s Pick for Secretary of State Argued Against One of the President-Elect’s Biggest Promises

Washington Post: “Trump denounced the TPP, President Obama’s signature deal, as a ‘potential disaster.’ He argued it was a terrible deal for American workers and said he would withdraw the United States from the deal on his first day in office. Republican congressional leaders have said they are unwilling to bring the deal to a vote in Obama’s remaining months in office, meaning the TPP is almost certainly dead.”

“Tillerson has maintained a very different stance. In a speech he gave to the Asia Society Global Forum on June 13, 2013, Tillerson talked about his support for the Trans-Pacific Partnership, which he said would provide the open markets that would allow the United States and countries in Asia and elsewhere to grow and progress.”

“‘We must embrace the free flow of energy, capital, and human talent across oceans and borders,’ Tillerson told the crowd.”

Toward a Rust Belt Powerhouse

Jim O’Neill: “Instead of accusing China of undermining US companies’ competitiveness, Trump should be focused on a genuine pro-growth strategy. Such a strategy could follow the British ‘northern powerhouse’ model – which I helped to create as a member of the government – focused on revitalizing the economies of the former heartland of British manufacturing.”

“…by linking together major cities – including Manchester, Sheffield, Leeds, and Liverpool – the north could become far more unified, with seven million people acting as a single regional economy, thereby providing many of the agglomeration benefits of major global cities.”

“The northern powerhouse strategy provides valuable lessons for other countries. Already, China is pursuing a similar regional development strategy, aimed at revitalizing its old northern industrial belt, thereby taking some of the pressure off its ultra-dynamic coastal cities. The US should follow suit, with a plan to revitalize the so-called Rust Belt that was integral to Trump’s victory.”

How Donald Trump Is Changing the Rules for American Business

The Economist: “Popular but problematic. The emerging Trump strategy towards business has some promising elements, but others that are deeply worrying. The promise lies in Mr Trump’s enthusiasm for corporate-tax reform, his embrace of infrastructure investment and in some parts of his deregulatory agenda. The dangers stem, first, from the muddled mercantilism that lies behind his attitude to business, and, second, in the tactics—buying off and attacking individual companies—that he uses to achieve his goals.”

“American capitalism has flourished thanks to the predictable application of rules. If, at the margin, that rules-based system is superseded by an ad hoc approach in which businessmen must take heed and pay homage to the whim of King Donald, the long-term damage to America’s economy will be grave.”

“Unlike the Depression, when Hoover and then Roosevelt got companies to act in what they (often wrongly) saw as the national interest; or 2009, when Mr Obama corralled the banks and bailed out Detroit, America today is not in crisis. Mr Trump’s meddling is thus likely to be the new normal. Worse, his penchant for unpredictable and often vindictive bullying is likely to be more corrosive than the handouts most politicians favour.”

What’s Really to Blame for the Productivity Slowdown?

Robert Samuelson: “Our thinking about productivity is cockeyed, according to a new economic report. We’re ignoring the real productivity problem: surging costs for health care, housing and education. We need to understand this argument, because it just might be correct.”

“The conventional solution is more innovation, driven by advances in science and technology. We need the equivalent of the invention of the computer chip or the Internet. Nope. That’s too simple, says economist Jonathan Rothwell, author of the report for Gallup, the polling firm.”

“A huge part of the productivity slowdown, Rothwell contends, is the poor performance of these three large sectors of the economy: health care, education and housing. These sectors have gotten bigger, he says, without getting more productive. As their costs escalate, they absorb more of families’ incomes, making it harder to satisfy other wants.”

Brace Yourself: The Most Disruptive Phase of Globalization Is Just Beginning

Economist Richard Baldwin, whose new book The Great Convergence: Information Technology and the New Globalization examines globalization’s undercurrents, spoke with Quartz about the future of globalization.

His argument in sum: “A better understanding of globalization is more urgent than ever, Baldwin says, because the third and most disruptive phase is still to come. Technology will bring globalization to the people-centric service sector, upending far more jobs in rich countries than the decline in manufacturing has in recent decades. (In the UK, the service sector accounts for almost 80% of the economy; less than 10% of US jobs are in manufacturing.) The disruption won’t come because people will move more freely across borders, but because technologies will provide ‘a substitute for being there,’ Baldwin says.”

Once this third phase hits, Baldwin predicts, “It will be disruptive in the G7, but instead of just in the manufacturing sector, it spreads to services. Only about 10-15% of the population works directly in manufacturing in the G7—the rest work in services. It will create great opportunities in many of the countries that have been left behind by earlier globalization, for instance almost all of sub-Saharan Africa and South America.”

The Constitutionalism of Trump’s Crony Capitalism

Greg Weiner: “As bad as the economics of the Carrier shakedown may be—and it is entirely unclear in which direction the shaking went down, except to note that a supply of rents tends to create a demand for them—the constitutional politics are far worse.”

“Presidential intimidation (threats of ‘consequences’) of individual companies is the very definition of coercion applied to an individual. Section 301 of the Trade Act of 1974 appears to authorize the President to take measures against countries that inhibit American commerce. Trump is threatening, here, to slap self-destructive 35 percent tariffs on individual companies that facilitate commerce.”

“The only apparent way the President could target individual companies would be by rewriting the 1974 statute by way of deliberate misinterpretation: in other words, presidential unilateralism. Consequently, this may well be the first test of Congress’ capacity to stand up for its own statutes against the other political branch.”

To “Save” 800 Jobs, Donald Trump Destroys Exponentially More

John Tamny: “If we forget for now the depressed economic outlook and high unemployment that is nearly always evident where politicians are most aggressively ‘saving’ jobs, Trump’s actions were not about a knight-in-shining-armor arriving to tell poorly treated businesses that ‘help is on the way.’ If the latter had even remotely informed what Trump did, then he would have simply given another well-publicized speech full of promises to greatly reduce the corporate tax burden, the regulatory burden, and any other barriers to profits that businesses face.”

“Instead, and this is what’s so shameful about some of the support on the right for Trump’s alleged ‘coup’, Trump’s actions vis-à-vis Carrier sent a strong signal that the U.S. will no longer be as hospitable a locale to the very investors who create all jobs.”

“Members of the right who should know better talk up the 800 jobs Trump allegedly ‘saved,’ but in their frightening willingness to excuse the most egregious acts of government so long as the person executing them has an R next to his name, they ignore the exponentially bigger number of jobs that will never be created in a United States that Trump is trying to turn into the proverbial Roach Motel. If investors can’t leave the U.S., they won’t enter the U.S.”

Why U.S. Coal Industry and Its Jobs Are Not Coming Back

James Van Nostrand: “As a candidate, and now as the incoming President of the United States, Trump has embraced the ‘war on coal’ narrative that has been a staple of political discourse in coal-dependent regions of the country for the past several years… It would seem to necessarily follow, then, that ending this ‘war on coal’ by electing a new president would result in a stirring revival of the nation’s coal industry.”

“Unfortunately, that is not likely to happen, and the reasons are straightforward: The economic, political, and geological forces aligned against coal — chief among them the increasing abundance of cheaper, cleaner, U.S.-produced natural gas — dwarf the impact that the federal government’s regulations have had on the coal industry.”

Want to Rev Up the Economy? Don’t Worry About the Trade Deficit 

N. Gregory Mankiw: “In recent years, American imports have exceeded exports by about $500 billion a year. Mr. Navarro and Mr. Ross argue that if better policies eliminated this ‘trade deficit drag,’ gross domestic product would be higher and more people would be employed.”

“But a fuller look at the macroeconomic effects of trade deficits suggests that things aren’t so simple.”

“…many of the policies proposed by Mr. Trump will increase the trade deficit rather than reduce it. He has proposed scaling back both burdensome business regulations and taxes on corporate and other business income. His tax cuts and infrastructure spending will most likely increase the government’s budget deficit, which tends to increase interest rates. These changes should attract even more international capital into the United States, leading to an even stronger dollar and larger trade deficits.”

“Rather than reflecting the failure of American economic policy, the trade deficit may be better viewed as a sign of success. The relative vibrancy and safety of the American economy is why so many investors around the world want to move their assets here. (And similarly, it is why so many workers want to immigrate here.)”

Is Our Economic Future Behind Us?

Joel Mokyr: “With the global economy yet to recover from the 2008 economic crisis, concern about the future – especially of the advanced economies – is intensifying. My Northwestern University colleague Robert J. Gordon captures the sentiment of many economists, arguing in his recent book The Rise and Fall of American Growth that the enormous productivity-enhancing innovations of the last century and a half cannot be equaled. If true, advanced economies should expect slow growth and stagnation in the coming years. But will the future really be so bleak?”

“Probably not… My optimism is based not on some generalized faith in the future, but on the way science (or ‘propositional knowledge’) and technology (‘prescriptive knowledge’) support each other. Just as scientific breakthroughs can facilitate technological innovation, technological advances enable scientific discovery, which drives more technological change. In other words, there is a positive feedback loop between scientific and technological progress.”

Americans Don’t Sleep Enough, and It’s Costing Us $411 Billion Every Year

Washington Post: “Lack of sleep exacts an economic toll of more than half a trillion dollars per year in the United States, the United Kingdom, Canada, Germany and Japan alone. The lack of sleep in these countries and across the globe affects work, business and, as a result, the world’s economy.”

“Using a large employer-employee dataset and data on sleep duration from the five countries, we were able to quantify the predicted economic effects from lack of sleep. Out of the five countries, Japan had the largest GDP loss as a result of lack of sleep (2.92 percent), closely followed by the United States (2.28 percent) and the United Kingdom (1.86 percent). Canada and Germany had the smallest GDP loss as a result of lack of sleep (1.35 and 1.56 percent, respectively).”

“While these percentage figures may seem small, they equate to net losses of hundreds of billions of dollar per year, $411 billion per year from the U.S. economy alone.”

Household Incomes Can Fall Even When Everyone’s Getting Richer 

R Street: “One of the politically hottest statistics right now is median household income, especially its slow growth. But there is a big problem with understanding what this statistic means, since it mixes up two different things: the changing composition of households and changes in incomes. If the makeup of households is altering dramatically, as it has in recent decades, median household income may be a quite misleading number.”

“For example, it is mathematically possible for everyone’s income to be rising, while the median household income is falling. How is that possible? The paradox is caused by counting by households, when the relationship between individuals and households keeps shifting.”

The New Workplace Is Agile, and Nonstop. Can You Keep Up? 

“Whether you like it or not, your boss may want you to start acting more like a programmer,” Quentin Hardy writes for The New York Times.

“No doubt, Silicon Valley has changed how we work, for better or worse. Our smartphones keep us connected to the office all the time while internet searches bring the world’s information to our fingertips. But people may not realize that it is the subtler aspects of how tech companies operate that often have a more lasting effect on other industries.”

“The ‘agile’ part of this increasingly popular management concept is simple: Rather than try to do giant projects that take months or even years, create small teams that do a bit at a time. This way, small problems don’t balloon into enormous ones hidden inside a huge bureaucracy. And progress can be measured in small steps — one little project at a time.”