Is Trump Country Really Better Off Under Trump? No. It’s Falling Further Behind.

If you’ve been wondering what I’ve been working on lately, here is an excerpt of my research from my new post on the Washington Post site:

Two years have passed since Donald Trump made his famous campaign promise in disaffected regions across the country: “We are going to start winning again!” For many voters who felt that they had lost ground in recent decades, the candidate argued, a vote for him would be rewarded with renewed prosperity and prominence.

It was a classic campaign promise, overly ambitious and cleverly vague. What exactly did “winning” mean? Certainly, many reporters believed voters perceived the promise as an economic one. So let’s measure the promise’s success that way. How have Trump voters fared economically, compared with Hillary Clinton voters?

Not noticeably better, according to the data. By most measures, my latest research shows, Trump counties — and especially counties with higher proportions of Trump voters — continue to fall farther behind the rest of the country economically. The story of our economy, like the story of our politics, continues to be a story of division and divergence.

To read the rest, click here and check it out. Or if you really want to dig into the numbers, click here and read the whole paper!

Our American Discourse, Ep. 26: The Risky, Rocky Ride of Today’s Economy…and the Central Bankers Who Keep Watch

Just when you thought the economy was the only good news you could count on, the stock market took a dive on the heels of Janet Yellen’s exit from the Federal Reserve. Suddenly, Americans everywhere wondered whether the volatility and uncertainty in Washington had finally caught up with the long, steady recovery stretching from those dark days in 2009. Should we be worried? Who’s looking out for the economy? And do they have a plan for the risks that await us in 2018 and beyond?

In this episode, USC Price School Dean Jack H. Knott interviews Atlanta Fed President Raphael W. Bostic on the state of the economy and the forces that keep it humming along.

Continue reading “Our American Discourse, Ep. 26: The Risky, Rocky Ride of Today’s Economy…and the Central Bankers Who Keep Watch”

Letter to a Trump Supporter #9: Donald Trump’s Character

This is the ninth and last in my series of “Letters to a Trump Supporter,” from correspondence with a family friend who supports Mr. Trump.

Yesterday, I addressed Hillary Clinton’s character. Today, I will address Donald Trump’s.

It’s hard to know where to begin. I have received so many defenses of Mr. Trump’s character, and not one of them makes a bit of sense.

Below is a compilation of my responses.

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Dear Mr. ——,

There are so many negative stories about Donald Trump that it’s mind-boggling how such a person could be allowed to reach a position of importance in our society. Here are just a few of these stories:

Importantly, we knew all of these horrible things long before over a dozen women accused him of sexual assault and rape.

And, contrary to what Trump supporters have told me, this isn’t just about his private morality. It’s about his public morality. He doesn’t just say vulgar things behind the scenes. He says them on the national stage, and he doesn’t regret it. He insults millions of Americans everyday. He’s not fit to be the leader of our people, and we’ve known it from the very beginning. Hillary Clinton would never, ever have implied that most Mexican immigrants were rapists and murderers. Donald Trump did it on day one of his campaign. That’s the difference.

Consider the following public utterances:

  1. He called one woman “a disgusting person inside and out” and a “slob” with a “fat, ugly face,” and he called her “a big, fat pig” and a “disgusting pig.”
  2. He called another woman “a dog.”
  3. He said another woman had the “face of a dog.”
  4. On national television, he told a woman it would be a “pretty picture” to see her on her knees.
  5. He called another woman “grotesque.”
  6. He said it was “disgusting” that a mother had to breastfeed her child.
  7. He said, referring to one specific woman, that he likes “girls that are 5-foot-1” because they “come up to you know where.”
  8. He said one woman’s breasts looked “like two lightbulbs coming out of her body.”
  9. He said it doesn’t matter “if a girl can play a violin like the greatest violinist in the world. You want to know what does she look like.”
  10. And of course, there was the moment when he implied, with absolutely zero evidence, that Ted Cruz’s wife was cheating on him.

Now, the thing I have trouble understanding is why Trump supporters are more appalled by anything Hillary Clinton has said than they are by these comments. More specifically, should you and I allow Donald Trump to talk to women that way? Should we support him calling our mothers and daughters and wives and girlfriends slobs and pigs and dogs and fat and disgusting?

What would you do if a man said that to your mother? What if he said it to your wife?

You wouldn’t want that man to be your friend. That’s for damn sure. And you wouldn’t want him to be president either.

But that doesn’t seem to matter. Because you think the country is falling apart, and he’s the only one who can save us. “It’s Trump, or it’s the end of America.“ That’s what you’ve told me.

Well, I’m not sure what America you’re living in. Because it doesn’t sound anything like the America I know.

The America I know has the highest economic output of any country in the world, 70 percent more than the next largest economy.

The America I know has over 40 percent of the world’s wealth, four times the next richest country.

The America I know has outpaced the rest of the developed world in economic growth and job growth since Barack Obama took office in the depths of the Great Recession.

The America I know has historically low inflationlow unemployment, and stable growth.

The America I know has cut violent crime and murder rates in half since the early 1990s.

The America I know has the world’s largest military, equivalent to the next seven largest countries combined.

The America I know is widely viewed more positively overseas than it was eight years ago.

The America I know exists in a world where violence has been declining dramatically for centuries.

The America I know is doing so well that over half of its citizens approve of their current president’s job performance, higher than Ronald Reagan’s approval at the end of his presidency.

The bottom line is that we live in the safest, richest, most powerful country in the history of the world. It would be unfathomably irresponsible to overthrow a system that has worked so well for so many for so long.

What should concern you is the fact that Trump supporters are now saying that they’re going to intimidate voters the way white Americans used to intimidate black voters in the South during the Jim Crow era. They’re saying they’re going to start a violent revolution.

They’re calling for Hillary Clinton to be murdered.

This is literally what they’ve been saying at Trump rallies.

And that’s because they’ve been told, by Donald Trump, that minority voters are “rigging the election” (which is basically impossible, by the way).

This is dangerous.

This is anti-democratic.

This is un-American.

And it should scare us all that Mr. Trump is threatening our lives with this rhetoric.

Donald Trump is playing a word association game designed to make you scared and angry, and he’s hoping you won’t notice that he’s completely full of crap. He regularly changes his policy positions, even on the issues that seem to be most important to him. Here’s a list to give you a sense of how often he goes back on his word.

Even by the typical standards of American politics, this is extreme. I don’t know of any politician who changes their policy positions this often. It’s literally impossible to know what, if anything, Donald Trump actually believes.

But when you read all those stories about his character and his behavior, it makes complete sense that he doesn’t have any policy positions that he really believes in. After all, he doesn’t actually know much about public policy, and he doesn’t seem to care about anything but his own ego. He just says whatever gets him attention.

As someone who’s dedicated his career to public policy, I am continually astonished that voters are willing to elect people with little, if any, understanding of public policy. We wouldn’t want a brain surgeon operating on us if they don’t know anything about medicine, and we shouldn’t elect a policymaker who doesn’t know anything about public policy.

Our government is full of smart, kind, brave men and women who have dedicated their lives to making this country a better place, and I am tired of ignorant malcontents like Donald Trump treating them with such petty, unsubstantiated, arrogant disrespect.

We have real problems in this country, and Donald Trump hasn’t proposed a workable solution to any of them. Hillary Clinton has offered long, detailed, well-researched, carefully-considered plans to address the challenges we face, and Donald Trump has replied with mocking, belittling, rambling, and zero concrete, politically feasible ideas.

If you were an investor and you were considering their “business plans” side-by-side, there wouldn’t even be a contest. As a businessman, you know that you would never bet on someone with no experience and no plan. As a voter, I beg you to apply the same standard.

Best regards,
Anthony

Saving Capitalism From a Painful Demise

Below is my new article in the Winter 2015 issue of the Wharton Magazine. Thanks to editor Matt Brodsky for allowing me to reprint it here!

Retailers Need Consumers

American business leaders rallied around Franklin Delano Roosevelt in 1932 during his candidacy for the presidency, after which he immediately embarked on the most progressive legislative agenda in U.S. history to tackle the Great Depression. From today’s vantage point, it may seem surprising that titans of industry, executives from General Electric to Standard Oil to IBM, not only contributed to Roosevelt’s campaign but helped author many of his famous New Deal reforms. To the men who ran these companies, it was a simple matter of fiduciary responsibility — to current shareholders and to future ones — that they should ensure a more equitable distribution of prosperity, lest their own wealth be dashed to bits on the jagged rocks of a shrinking economy.

Today, we face a similar predicament. The great challenge of business in our time is reversing the destabilizing threat of inequality. While at first this may seem anathema to our profit-maximizing mission, distribution of income lies at the very heart of sustainable capitalism.

For this reason, today’s titans of industry have stepped forward to protest the growing distance between them and the rest of the country. Warren Buffett, Lloyd Blankfein, Stanley Druckenmiller, Bill Gross — legends whose lives and words are studied and idolized at the Wharton School — have all gone public with the wise advice that we steer away from those jagged rocks.

They are not alone in their concern. According to a recent analysis by the Center for American Progress, 68 of the top 100 retailers cite the flat or falling wages of the average American household as a risk to their business — a number that has doubled in the past eight years. A recent poll of small businesses similarly found a strong majority of them in favor of raising the minimum wage.

These business leaders sense an essential truth about our capitalism: Workers are consumers. They spend what they earn — or what they borrow. While the latter may work for awhile, it has limits — and calamitous risks. The only sure way to grow the economy in the long run is to grow consumer spending — and that means growing worker incomes.

In recent decades, workers’ incomes have not grown much, on average. Since the beginning of the Great Recession, the average household has lost 8 percent of its income, after adjusting for inflation. All the growth — and then some — has gone to the richest 10 percent of Americans. And most of that growth — 95 percent of total growth, to be precise — has gone to the richest 1 percent. And most of that growth has gone to the richest 0.1 percent. And so on.

Unsurprisingly, economic growth has been slower since the advent of this new trend. From 1950 to 1980, real GDP grew 3.8 percent per year, versus only 2.7 percent from 1980 to 2010. On the rare occasions when it has approached its previous faster rate, it was fueled by unsustainable borrowing. This is no coincidence. Recent work by economists Özlem Onaran and Giorgos Galanis has shown that most developed countries experience lower growth when the share of their income going to wages (as opposed to profits) declines. In the United States, for example, every 10 percent decline in the wage share causes the economy to shrink by 9.2 percent. In fact, that has been the experience of the global economy as well.

High wages are what economists refer to as a “positive externality.” They generate “spillover effects” that benefit the people who don’t pay for them. When workers receive high wages, they invest more in health and education, increasing their productivity and reducing the costs we all pay for a sicker, less-informed population. They motivate firms to invest in advanced technologies to reduce labor costs, making them more innovative and globally competitive. Workers who receive high wages are less likely to go out on strike, vote against free trade and immigration, protest in the streets, shirk on the job and commit crimes. That’s why, in an analysis of 19 developed nations from 1960 to 2004, economists Robert Vergeer and Alfred Kleinknect found that higher wage growth consistently led to higher productivity growth.

In other words, low wages may be good for one firm, but high wages are better for all firms. Yet many businesses would like to raise wages, but they fear losing ground to their competitors.

The only solution is collective action.

Economists have a collective action for precisely this sort of “coordination failure”: taxing the negative externality and subsidizing the positive. It is time that we recognize inequality for the negative externality that it is, slowing our productivity growth, roiling our markets with volatility, gridlocking our political system, and starving our economy of willing and able consumers. Inequality is a risk to our businesses, and it ought to be treated as such.

We should therefore see taxes not as penalties but as investments in a better, more equitable, more sustainable system. We should strive to prevent a “race to the bottom” in workers’ incomes; if we don’t, the day will come when no one will be left to pay the profits our shareholders demand. Business schools should teach courses about this issue, and business leaders should address it in their boardrooms. It is not merely a political issue. It is very clearly the business of Business.

Joseph Kennedy thought so when he went to work for President Roosevelt. As one of the nation’s most notorious stock manipulators, Kennedy might have been the last person we’d expect to join Roosevelt’s crew, but when Roosevelt named Kennedy as the first chairman of the Securities and Exchange Commission, he saw it as an opportunity to save the market from itself.

“We of the SEC do not regard ourselves as coroners sitting on the corpse of financial enterprise,” said Kennedy in a radio address to the nation. “On the contrary, we think of ourselves as the means of bringing new life into the body of the security business.”

As Wharton graduates, let us think of ourselves in the same manner, and act accordingly.