Sunday, July 07, 2019
A Tale of Two Economies
By The Editorial Board | The Wall Street Journal
Former President Barack Obama and President Donald Trump
PHOTO: BILL PUGLIANO/GETTY IMAGES; NICHOLAS KAMM/AGENCE FRANCE-PRESSE/GETTY IMAGES
Trump’s policies are helping workers more than Obama’s did.
Judging from last week’s debate, Democrats running for President see America as a Dickensian nightmare of inequality. It’s the best of times for millionaires and billionaires, and the worst of times for everybody else.
Time to wake up from the Barack Obama economy, folks, and admit how many more Americans are prospering from the faster economic growth and tighter labor market after the policy changes of 2017.
“Who is this economy really working for? It’s doing great for a thinner and thinner slice at the top,” Massachusetts Sen. Elizabeth Warren declared at the debate. “When you’ve got a government, when you’ve got an economy that does great for those with money and isn’t doing great for everyone else, that is corruption, pure and simple.”
Sen. Cory Booker, who hails from high-tax New Jersey, moaned that “I live in a low-income black and brown community. I see every single day that this economy is not working for average Americans.”
California Sen. Kamala Harris added: “You ask [the President], how are you measuring the greatness of this economy of yours? And they point to the jobless numbers.”
So job numbers and other economic evidence are fake news? Hardly. The reality is that wages are rising at the fastest rate in a decade for lower-skilled workers, and unemployment among less-educated Americans and minorities is near a record low. Democrats want Americans to believe the fictions they spin rather than what they see with their own eyes.
The press this week has noted that the economic expansion reached its 10th anniversary, the longest on record. But the accounts ignore that the last two years have been far different than the first eight in economic policies and results. We’re long enough into the Trump era to track the differences.
Start with Mr. Booker’s claim that minorities are being left behind.
Really? The jobless rate for blacks is 6.2%, which is only 2.9 percentage-points higher than for whites versus a 4.6 percentage-point difference before the start of the 2008 recession. Unemployment has fallen twice as much among blacks as whites since December 2016.
Nearly one million more blacks and two million more Hispanics are employed than when Barack Obama left office, and minorities account for more than half of all new jobs created during the Trump Presidency.
Unemployment among black women has hovered near 5% for the last six months, the lowest since 1972, and a mere 3.5% of high school graduates are unemployed.
But what about Senator Harris’s assertion that folks are stringing together jobs to make ends meet? About 5% of Americans hold more than one job, and this rate has held relatively constant since 2010.
Yet there are now 1.3 million fewer Americans working part-time for economic reasons than at the end of the Obama Presidency.
A tighter job market is also pushing up wages for the average Cory or Kamala.
Average hourly earnings for production-level manufacturing workers have grown at an annual rate of 2.8% during the Trump Presidency compared to 1.9% during Barack Obama’s second term. Production-level manufacturing wages have accelerated even faster in Pennsylvania, Michigan and Indiana.
While parts of Appalachia continue to struggle from a decline in coal mining, shale-gas drilling has created thousands of jobs including downstream in pipeline construction and petrochemicals—all of which Democrats want to kill.
Private worker wage growth in West Virginia has averaged 5.1% annually during the Trump Presidency versus 1.2% in the second Obama term.
Mining and manufacturing have especially benefited from the Trump Administration’s deregulation, but wages have been growing faster for production-line workers across industries.
Productivity growth spurred by capital investment and tax reform increased markedly last year, which should lift wages over time even if job growth weakens.
Democrats are trying to woo folks in swing states who have been harmed by President Trump’s trade brawls.
But per capita incomes have grown at significantly faster rates under President Trump than they did under Barack Obama in Pennsylvania, Ohio, Nevada, Wisconsin and even Iowa despite retaliatory tariffs on American exports.
The disparity between middle-America and coastal bastions of affluence has also shrunk. Incomes in Maryland, Massachusetts and Hawaii grew faster than the national average during the second Obama term but have since tracked lower. While New York State has become wealthier, its finance income over the last two years has declined.
And here is the great paradox of the Barack Obama economy. The Federal Reserve’s bond purchases and near-zero interest rates for eight years drove up asset values and let corporations borrow cheaply while the Administration’s punishing regulations bred business uncertainty that depressed investment in human and physical capital. Those with financial assets prospered more than middle-class wage earners.
The Obama Democrats talked constantly about inequality rather than growth, and the result was less growth and more inequality.
The Trump Administration has for the most part focused on growth. Its policy mix of deregulation and tax reform has unleashed more private investment and job creation that has lifted productivity and wages for the non-affluent. The result has been faster growth and less inequality.
Corporate profits have grown four times as much during President Trump’s first two years than during Mr. Obama’s second term. Yet investor dividend payments increased more during the Obama Presidency as businesses pulled back on investing in equipment, buildings and workers.
There are no guarantees this growth will continue, and bad trade and monetary policy could derail it.
But the Democrats now running for President want to return to the Obama policy mix of high taxes, willy-nilly regulation and income redistribution, and more of it.
To win the economic argument they have to deny the reality that Donald Trump’s policies are helping the Americans that Democratic policies left behind.