Paul Krugman Was Wrong

Paul Krugman, if you are not familiar with him, is a brilliant man. He is a Nobel Prize winner in economics. More important to me, he is a columnist for the New York Times, where his columns over the years have taught me almost everything I know about economics. That is a remarkable accomplishment for a writer, taking a complex topic and making it comprehensible to a lay reader such as myself. Having said that, in a recent column, Paul Krugman was wrong.

Krugman was offering an explanation for why the Republicans are finding that their tax bill, their only major accomplishment under Trump, is so unpopular. It is a terrible bill, but so were the Bush tax cuts, and they polled much better. Krugman said that the American people have finally woken up, and realized that this bill cheats them. He said that Americans understand that Donald Trump can not be trusted, and therefore they are feeling a healthy skepticism for anything related to him. I wish I could believe that. In Donald Trump, we have a man who employs a fixer to make problems go away. We expect mob bosses to do that, not presidents. But Americans, even when they tell pollsters that their dislike and even distrust of Congress is at an all time high, want to believe that their government is at least trying to act in their best interests. That is exactly why the Bush tax cuts were popular. The reason the Trump tax cuts are unpopular is much simpler than Krugman realizes. It has to do with a variation on a question once made famous by a Republican: are you better off than you were a year ago?

Krugman probably is better off than he was. He is, deservedly, well compensated for what he does, and so his tax cut probably gave him more cash on hand than he had last year. But Paul Krugman, for all of his brilliance, does not live in my world. I am not dirt poor. I have a good job that pays me well above the poverty level, even as the sole bread winner for a family of four. But I am not better off than I was a year ago, and neither are most Americans. There are two main reasons for this, both of which completely consumed my tax cut before I ever got it. First, I live in area that is very poorly served by public transportation, so gas prices are a key part of my budget. They are much higher than they were a year ago. On top of that, I have had medical benefits most of the time through my employer since 1999, and I have never seen the cost of them jump as much as they did this year. Even without the cost of gas, that consumed my tax cut and more. Most Americans are feeling the bite of these two issues, and they blame their government for their plight. In the face of this, they regard their tax cut as a cruel joke. They understand that the tax cut only helped people richer than themselves. They don’t own the tax cut, because they can not see that it helped.

In light of all of this, it is worth asking if Americans are being fair. Are the rises in gas prices and healthcare the Republicans’ fault? Are they Trump’s fault? Let’s talk about healthcare first. This one is pretty clear cut. Last year, Donald Trump tried to get the Republicans in Congress to keep a long standing promise to get rid of Obamacare. He failed, because voters let their Representatives and Senators know that they had come to depend on the protections embedded in the Affordable Care Act. But Trump, with the blessings of Republicans in both Houses, did everything he could to destabilize the insurance market. Premiums are higher this year because the uncertainty and instability this created, and that was the plan. Trump and his allies hoped to create enough pain to justify getting rid of the ACA at some point in the future. The tax cut bill itself also repealed the individual mandate in the ACA, which will only make things worse going forward.

Oil prices are harder to pin down. Barack Obama does not get enough credit for getting oil prices down to the levels they were at by the end of his presidency. He did this by continuing, and even expanding, a program started by George W Bush to promote domestic production. The Trump administration and its allies are, if anything, even friendlier to oil producers. Trump is willing to abandon any environmental concerns in the name of the all mighty dollar, and that certainly applies to the oil industry. But there were two other important reasons why gas prices fell so much under Obama. Obama did everything he could to pursue peace in the Middle East. Some specific conflicts were intractable, and they remain volatile now. But Obama used a shrewd combination of diplomacy and military force as a last resort, to get and keep oil flowing from places like Iraq and Syria. In contrast, Trump has not even hired ambassadors to some oil producing nations, and his bellicose manner in international affairs has threatened to jeopardize the flow of oil. Until last week, however, it was hard to point to anything specific that Trump had done that made oil more expensive. Breaking the nuclear treaty with Iran and threatening new economic sanctions changed that, and there was an immediate reaction in the price of oil futures worldwide. The other Obama initiative that helped tame gas prices was an aggressive push to promote alternative energy sources. Trump brought that to a screeching halt almost as soon as he took office.

Now you might think that things can’t possibly be as bad as I say. After all, the economy continues to expand. Unemployment is at a historic low. Where are the signs of the distress that I allege makes people dislike the tax cut bill so much? Actually, the signs are there for any who care to read them, and they are getting clearer. Yes, the April jobs report showed that unemployment fell below 4% for the first time since 2000. But job creation was actually pretty weak; unemployment fell because 236,000 people dropped out of the workforce. In addition, the stocks of casual dining companies have been down all year, because people are eating out less. And there have been 11 bankruptcies in the retail sector this year. That is a record for this time of year, and includes the demise of Toys R Us. All of this will translate over time into job losses, and will further strain the economy. The stock market can continue to defy gravity for some time, as corporations continue to use their tax cuts to buy back shares, instead of raising wages as the Republicans promised. Wealthy individuals will continue to need someplace to put their tax cut loot to work, and it won’t be any place that increases consumer spending or creates jobs. But the stock market is not the economy, and there will have to be a reckoning at some point.

So there you have it. Americans reject the tax cut bill not because of some great awakening in consciousness, but simply because they have less money now than before they got their tax cut. I wish Paul Krugman was right, but I don’t see it.

Wandering

I usually try to keep up with the news all week, and try to organize my thoughts around a single topic for these posts. This week, however, I am going to take off from two items, and wander in several directions, to see where I wind up. I hope you enjoy the ride.

Generally speaking, the jobs report is released on the first Friday of every month. A positive report, such as we had this week, is an occasion for a sitting president and his allies to crow about how well they are doing, and Donald Trump is not one to pass on such an opportunity. The opposition has the task of trying to punch holes in the report, to explain why a positive report is really not so positive after all. In fact, all of the jobs reports since Trump took office, taken as a whole, present a pretty solid case that the economy is doing well. So I propose that we stop trying to find negatives in each report, and instead ask a simple question: what action or actions Trump has taken can explain the strength of the economy? Put another way, what has he done to deserve any credit for this? Because the simplest explanation is that the strong economy is the direct result of the continuation of Obama policies that Trump has been unable to eliminate or change yet. Most significantly, the federal government is still operating under President Obama’s last budget. Beyond that, we have Trump’s brainless executive order that two regulations must be eliminated each time one new one is created. This is largely political theater, since the laws Congress passes mandate that the executive branch must come up with regulations to enforce these laws. With that in mind, it can not be so easy to simply do away with a regulation, and doing so could be challenged on constitutional grounds. In any case, I have not heard of any specific regulation Trump has eliminated that has had any economic impact.

So, if Trump has not contributed to our economy through deregulation, as he would like us to think, what has he done? That brings me to the second event from this week that I wanted to talk about. Trump’s greatest impact so far has been on immigration. His directives regarding immigration enforcement have created an atmosphere of fear for both legal and illegal immigrants in this country. The threat of deportation has had a chilling effect on industries such as agriculture that are highly dependent on immigrant labor. The jobs impacted by this are ones that most native-born Americans refuse to do. Yet Trump continues to blather on about how he is keeping illegal immigrants from taking jobs away from Americans. His announcement of a new green card policy this week is deliciously ironic. He seeks to limit green cards to those entering this country who speak English well and have demonstrable job skills. Put another way, he wants to only let in those who actually will compete with native-born Americans for jobs. I wish CNN’s Jim Acosta, in his now infamous exchange with White House spokesman Stephen Miller, had not bothered arguing about the history of the Statue of Liberty, and had pursued this instead.

Acosta also had another line of questioning open two him that could have been very powerful. He could have asked Miller if he thought Acosta’s family should be in the United States. Jim Acosta’s father came to the US as a refugee from Fidel Castro’s brand of communism. Jim Acosta, in his choice of journalism as a career, represents perfectly the special American freedoms his father was seeking when he came here. It might not have been considered “journalistic” to talk about immigration policy in such a personal way, but this is one of the most personal issues we face, and I wish someone would say so in a highly public forum.

I work as a customer service representative. It is part of my job to talk to whoever comes up on the call list, and that includes people whose English is not the best, to say the least. These people are still our customers, and we must treat them accordingly. On the other hand, we are evaluated in large part by the volume of calls we take, and calls where we have to use an interpreter really slow us down. So you might think that I would be in favor of limiting green cards to those who speak English well. But I remember where I came from. Just this week, a coworker was venting about customers who don’t seem to learn English despite how long they may have been in this country. I reminded him of the Jewish heritage that he and I share. Did he have a relative who arrived here speaking only Yiddish, as I do? It turns out that my coworker had a grandfather who lived in the United States for 60 years and never learned English. That was possible because immigrants often live in communities where most neighbors share their heritage, and they work and shop in businesses that serve those communities. These communities are largely self-sustaining, but they also represent unique pockets of economic activity that Trump wants to get rid of. Go into any bodega today, and you will see products on the shelves from both Goya and Kelloggs. Those products represent American jobs.

Immigration is also a vital part of American culture. The melding of cultures to achieve something wonderful and new can be clearly heard in the song Bei Mir Bist Du Schoen. The title phrase is Yiddish, but the song is unmistakably jazz. Klezmer musicians arrived here as Jewish immigrants, and heard jazz for the first time. It influenced their music to the extent that any klezmer you hear nowadays includes this jazz influence, but it was a two way street. That is how jazz legends like Bennie Goodman and Artie Shaw made the clarinet a jazz instrument. I can think of no better way to celebrate the melding of cultures in our country than a video of Bei Mir Bist Du Schoen set in New York City’s subways: