Donald Trump got voter support in 2016 because he successfully blamed President Clinton and the Democratic Party for the North American Free Trade Agreement. President Clinton had decided he needed to compromise with congressional Republicans if he were to get their cooperation. The most disastrous concession he made was to abandon his party’s opposition to unregulated free trade and get NAFTA, a Republican legislation, ratified by Congress.
By blaming Clinton and Democrats for NAFTA, Trump not only got the support of investors and the wealthy, he got the support of workers, the middle class and poor because, almost overnight, NAFTA had devastating effects on them. In a 1992 debate, presidential candidate H. Ross Perot correctly argued that “there will be a giant sucking sound going south.”
Many members of the Republican Party admit that Trump is a boorish narcissist who lies and was a dishonest businessman and womanizer. But they’ll still vote for him because they claim he’s given us a good economy. We have a low 3.5% unemployment rate, high stock and real estate markets, and income is increasing for a large numbers of workers.
That scenario ignores two realities. First, Trump repeated where we were in October 1929. The unemployment rate was just 3.2%, the stock and real estate markets were at their highs, and workers’ incomes were increasing. But it was the end of the “Roaring Twenties.” There had been four tax breaks, mostly for the wealthy, the number of millionaires tripled, and the average worker couldn’t support a family of four above the poverty line. Then, the Great Depression.
The second reality was described on a recent CNN “State of the Union” program by Sen. Bernie Sanders. He defended President Biden’s successful two year economic and foreign policy performance. However, he also warned about the problem of “… the massive levels of income and wealth inequality that we see today.”
Fact is, wealth is a zero-sum activity at the front end, when income is distributed, and the back end, when income is spent. The fiction that it doesn’t make any difference to you how much income and wealth others have ignores the obvious.
At all levels, when rich persons buy things they make them more expensive for those lower on the wealth scale. Caribbean islands become more expensive for mere millionaires. Mansions get priced out of range for those formally defined as rich. And, of course, those in the middle and bottom of the income scale find they can no longer afford to buy or rent decent housing near where they work, especially in a desirable area (clean air, low crime, good local schools).
Many lower income Americans can no longer afford things necessary for a decent standard of living, such as a good education for their children, adequate health care, a quality diet, or more free time from work.
When people wealthier than you buy things, they create inflation that hurts your standard of living. The obvious truth is that the more money workers make, the less profit investors make. Corporate profits = income minus expenses (including labor). Subtract one side of the equation from the other and the answer is always zero. Zero-sum. And the more CEOs and investors control government and influence its legislation, the better they can minimize labor costs.
We live in a world of auction markets. So, at the back end, when we spend money for products in short supply, we compete with others. Sure, money is unlimited and it can multiply like crazy, and devalued money does trickle down. But our earth has finite resources — land, water and air — and our nation is limited in its ability to produce products and services, especially the most desirable ones.
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Some argue that even poor people are better off today than they have ever been, because they have low cost television sets, microwaves, cell phones, etc. This was the result of unprecedented technological advances that created huge advances in productivity — not the result of good governmental economic policies. Also, the financiers and developers of technology get the lion’s share of productivity’s benefits. Workers proportionate share, as wages, is at a historic low.
Progressives must heed Sen. Sanders warning. The economy is ripe for a talented demagogue to win the support of the wealthy who want lower taxes and less government spending. Unfortunately, many frustrated workers, the middle class and poor will also support a demagogue who promises better results than Democrats have produced.
Fairview’s Chuck Kelly is author of “Why capitalism thrives—and how it self-destructs.” He can be reached at kellycm2@bellsouth.net
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