Let’s Visit Economics

The intense distraction swirling around Donald masks economic reality. Mariner has gathered some insights from expert observers of the economy who pretty much are not swayed by the soap opera involving Donald and Congress, Donald and Russia, Donald’s cabinet secretaries, Donald’s White House staff, Donald’s racism, and Donald’s petty tweets.

To provide some parameters, what is important over the next ten years is growth in the Gross Domestic Product (GDP) – the dollar value of all US production. Also important is the 19 trillion dollar national debt – especially as it relates to growth in GDP. The third parameter is government income, that is, the tax structure and whether it is fair and sufficient.

Finally, as an indicator, the trade balance between nations is changing. We are accustomed to measuring plus and minus trade balances between each nation. For example, Donald cites trade balances between the US and Mexico or Canada or China. The future will be driven by global economics instead of national economics. This means that trade balances will be relative to global markets and how the trade balance is distributed among nations participating in a given global market. In principle, the Trans-Pacific Partnership (TPP) between nine nations is an example of how trade agreements will be developed in a world of global markets; one of the key negotiations is how to distribute each nation’s role among other participating nations to assure a viable trade balance for each nation.

So we know the ways to measure US economic health going forward: Establish policies that encourage growth in US production, establish policies that constrain further indebtedness as a ratio to the growth of GDP, restructure taxes to underwrite the costs of future growth, and restructure US trade agreements to accommodate global participation.

What are the issues that interfere with the goals implied above?

The single largest block to improving GDP is the US demographic profile. Like Europe and Canada, the US population is aging rapidly. 60 percent of the workforce will be retired by 2030. Retirees do not contribute to GDP; rather, they become a drain on resources needed to grow GDP. The solution is an aggressive immigration policy. As long as our government pursues a nationalist policy of racial isolationism, we are cutting off our nose to spite our face.

Next in importance is something called monetary policy. Basically, this means we allow the Federal Reserve to control interest rates and the cost to banks for borrowing money. This practice protects the US economy from recessions but it also limits the amount of money available to encourage growth in GDP. If the US is to underwrite an improvement in infrastructure, Congress must set legislation in place to allow private industry to borrow against future growth. The political issue is on whom tax increases will be imposed to create the funds.

Associated with the tax issue is to find a way to increase profit margins in small businesses. The problem now is that large corporate entities want in on this deal. Hence the desire of the GOP to impose massive tax cuts to the most profitable sector of the US. Also associated is a need to close tax loopholes and offshore avoidance of taxes.

Easily addressed in this post, the politics of achieving economic goals is massive. The importance of the 2018 election cannot be overstated. Our antiquated Congress is not prepared for economic success.

Ancient Mariner