Author: johncla

How did Donald Trump do in managing the economy? He ran for office as an outsider, boasting of his practical knowledge of what business needed. Between his inauguration and the beginning of the Covid pandemic in March, how well did he do? First, the big four metrics: GDP growth, unemployment, inflation, and the stock market.

GDP growth There were promises of great results from the tax cuts, and boasts later on about how wonderful the economy was. The actual results seem good, but don’t quite match the boasts. See the following graphic courtesy of the St Louis Fed. GDP growth continued, but was not dramatic. My uninformed guess is that business investment was not as great as expected, thus the tax cut didn’t help as much as hoped. My grade is a B minus.

Unemployment The current definition of full employment seems to be in the 4% range. Since 2016 the unemployment rate fell steadily, ending below 4% in early 2020. See the graphic below, courtesy of tradingeconomics.com, using BLS data. My grade is an A.

Inflation The Fed had this totally under control. The Fed Chairman and President seemed to disagree at times, but inflation remained in check. See the graphic courtesy of the St Louis Fed, showing CPI. What can you say? My grade is an A. I admit it was unearned, but it’s an A.

The stock market The stock market loves Donald Trump. Here’s a quote from a cnn.com article:

“Wall Street understands a President Joe Biden would not be good for capital. He would increase taxes on corporations and the wealthy by $4 trillion over the next decade. In June, Wall Street analysts warned clients a Biden win would be bearish for stocks.”

Above is a chart showing the Dow Jones index, courtesy of cnn.com. See the steady gains from early 2016 through early 2020. But…compared to what? Comparing Trump versus Obama is indeterminate. See the following quote from the Cleveland Plain Dealer.

“The Dow Jones Industrial Average increased 49% during Donald Trump’s first three years in office, topping the gains made during Barack Obama’s entire final term but falling short to-date of how much the Dow went up during Obama’s first term.”

I don’t quarrel with a market that delivers steady gains and expresses a clear preference for Trump to stay in office. If you prefer an up market versus a down market, you have to give him at least a B plus.

Income and poverty

Moving on to look at some other more-focused metrics, a Wall Street Journal editorial on 9/17/20 titled “The Higher Wages of Growth” made several assertions about the Trump economy. But it was an editorial. Exercising some skepticism I checked to see if the assertions could be verified, as follows:

1. Median household income grew 6.8%. True. See table A-1 on the US Census Bureau site “Income and Poverty in the United States: 2019”.

2. Median household incomes grew more among Hispanics, Blacks and Asians than among Whites. True. See table A-2 on the US Census Bureau site cited in #1 above. For the years 2017 – 2019:

Asian median income grew 15.6%
Black median income grew 10.6%
Hispanic median income grew 7.2%
White median income grew 6.7%

3. Median earnings increased more for women than for men. True. See table A-7 on the US Census Bureau site cited in #1 above. For the years 2017 – 2019, median earnings for males grew $1,767. For women it was $2,570.

4. Poverty fell, and fell more for minorities. True. See table B-5 on the US Census Bureau site cited in #1 above. For the years 2017 – 2019:

% Whites in poverty dropped 1.4%
% Asians in poverty dropped 2.4%
% Hispanics in poverty dropped 2.6%
% Blacks in poverty dropped 2.9%

5. The decline in childhood poverty was greater than in the Obama administration. True. See table B-6 on the US Census Bureau site cited in #1 above. For the years 2017 – 2019 childhood poverty dropped 3.0%. By contrast, for the years 2009 – 2016 it was 2.7%.

6. Income inequality declined. True, if you accept comparison of changes in top and bottom quintiles as a measure. See table A-4 on the US Census Bureau site cited in #1 above. For the years 2017 – 2019, under the heading “Shares of Household Income of Quintiles” the two top quintiles both DECLINED and the three bottom quintiles all INCREASED. The largest INCREASE was in the 2nd quintile from the bottom (8.1 to 8.3). The largest DECREASE was in the top quintile (52.3 to 51.9).

7. New business applications are higher under Trump. See the following chart, from the census.gov web site.

The Bottom Line

It’s hard to argue with success. From 2017 – 2019 Donald Trump got good results with the economy, whether you’re looking at overall metrics like GDP and unemployment, or on class, race, and gender inequality.
What about the pandemic? Once the lockdown began, economic performance was no longer a priority. All the traditional economic measures went out the window. You might compare economic results from similar countries; but how do you compare economic results from different lockdown strategies, for example Sweden vs Italy? Uncharted territory.

I often speculate on why countries are successful or not, and lately there has been some interesting research and writing on this topic.

Niall Ferguson; Civilization: The West and the Rest “Ferguson compared and contrasted how the West’s “killer apps” allowed the West to triumph over “the Rest” citing examples.”

Jared Diamond; Guns, Germs, and Steel “The book attempts to explain why Eurasian and North African civilizations have survived and conquered others, while arguing against the idea that Eurasian hegemony is due to any form of Eurasian intellectual, moral, or inherent genetic superiority. ”

Daron Acemoglu; Why Nations Fail: The Origins of Power, Prosperity, and Poverty “The book applies insights from institutional economics, development economics and economic history to understand why nations develop differently, with some succeeding in the accumulation of power and prosperity and others failing, via a wide range of historical case studies. ”

Joel Mokyr; A Culture of Growth “argues that political fragmentation (the presence of a large number of European states) made it possible for heterodox ideas to thrive, as entrepreneurs, innovators, ideologues, and heretics could easily flee to a neighbouring state in the event that the one state would try to suppress their ideas and activities. This is what set Europe apart from the technologically advanced, large unitary empires such as China and India.”

Why Nations Succeed Columbia University hosted a seminar in 2014 to examine the question “What are the social, economic and legal building blocks for success?”

Related to the topic of WHY is the question of what successful nations look like, by defining their values and then comparing across countries. Some really interesting research and writing centers around comparative metrics of national culture. Especially see the many web sites discussing Hofstede’s Cultural Dimensions Theory.

The Enlightenment
I’m here to assert that values and culture matter, and to point at a common heritage shared by many countries that we rank as “successful”. This shared cultural heritage is the intellectual and philosophical movement called The Enlightenment.

The Enlightenment’s ideas “centered on the sovereignty of reason and the evidence of the senses as the primary sources of knowledge and advanced ideals such as liberty, progress, toleration, fraternity, constitutional government and separation of church and state.”

The Enlightenment occurred chronologically between the Renaissance and the Industrial Revolution. It was a reaction to the first, and laid the foundations for the latter.

A quick and dirty metric of ‘geographic locale’ for The Enlightenment might go as follows: the Wikipedia article lists 13 “major figures” – 4 were British, 4 were French, there were 2 Germans, and one each from Italy, Netherlands and Switzerland; which puts the heart of the Enlightenment in NW Europe.

To repeat, Enlightenment values are: rationality and empiricism, separation of church and state, liberty, progress, toleration, fraternity, and constitutional government.

Now I suggest something you might think is mean-spirited, but it’s important and valuable – look at my list of shithole countries, which is Afghanistan, plus seven countries in Sub-Saharan Africa. Can you associate any of these countries with any one of the 8 Enlightenment values I just listed? Further, if I were to create a list which is the opposite of the shithole list (this would be countries that appear in the top 20 for both GDP per capita and ease of doing business), I bet most of the countries on that list will be rich in Enlightenment values.

The Enlightenment is a core cultural heritage shared by most nations in NW Europe. The degree to which those countries ‘drank the koolaid’ probably played a big role in their success. Germany, France and the UK were at the center, and they’ve done well. It’s also clear that The Enlightenment is a key piece of cultural heritage for Canada, Australia and the US as well; and we’re all doing OK too.

So what explains the relative success of the Asian Tigers? Good question. I don’t know.

One of my earlier posts is titled ‘Culture Matters‘, so this one gets the #2 modifier.

The Bottom Line
Culture matters. The Enlightenment seems forgotten, but it is an important part of our heritage and it is key to our success.

Have you felt that the press in America is increasingly partisan, that opinion has replaced facts, and that journalists now preach morality rather than document reality?

A recent article in the British journal The Economist documented this concern, and provided explanations. The article is titled ‘How objectivity in journalism became a matter of opinion‘ and appeared in the 7/16/2020 issue. The article is available online, but is pay-walled so you may not have easy access to it. The writer concludes that journalism now has a new goal: “Disenchanted with objectivity, some journalists have alighted on a new ideal: “moral clarity”. … The danger is that advocates of moral clarity slide self-righteously towards crude subjectivity.”

The Economist article provide 4 reasons why objectivity is now largely discarded by reporters.
1. “Donald Trump’s rise and the challenges it has posed to traditional reporting”
2. “the changing make-up of the American newsroom…has also made some wonder if the “objective” viewpoint is in fact a white, male one.”
3. “the rise of social media—has given dissenters a megaphone. … The division between news and comment, clear on paper in American journalism, dissolves on the internet. A study for the AP in 2018 found that 75% of Americans could easily tell news from opinion in their favoured outlet, but only 43% could on Twitter or Facebook.”
4. “The final reason for the turn against objectivity is commercial. The shift away from partisanship a century ago was driven partly by advertisers. Today, as ad revenues leak away to search engines and social networks, newspapers have come to rely more on paying readers. Unlike advertisers, readers love opinion. … The incentive to keep readers happy—and the penalty for failing—are greater than ever.”

I’ll add a fifth reason, related to number two above: objective scientific truth no longer exists, even mathematics is a false social construct! Or at least, that’s according to the Post-modernist philosophy current in American universities today. As an article on the National Association of Scholars web site puts it: “Postmodern relativism and cultural determinism—expressed through political correctness and identity politics—have permeated our culture and society as a whole, facilitated eagerly by our educational system, the media, and our cultural elites.” So, asking reporters to report the facts is fruitless, because they don’t agree there are any facts.

Is objectivity for dummies? Today’s journalist might answer “The smart money goes for moral clarity and opinions that please our audience and keep them coming back.”

One Example – Police Killings
It seems like every week brings a fresh example of a black person dying in a tussle with the police. Watching and reading the news, is it reasonable to assume that ALL police killings of civilians involve black people, and that they’re ALL egregious examples of police misbehavior?

Here’s the reality: there are probably about a thousand people killed by the police each year, and in 2019 only 25 of those were unarmed black men. Another reality – very few of these cases result in convictions of police. Remember Trayvon Martin? The admitted killer of Mr. Martin was acquitted. Remember Ferguson, MO? The prosecutor declined to prosecute. In view of the facts, pushing a narrative that says killing of unarmed black men is in any way common, and that police are typically guilty, is wrong.

Here’s a related question – how often do you hear about police killings involving Latino victims? The number of Latino victims is similar to the number of black victims, but we seldom hear about Latino victims. Why is that? Progressives, which likely include 90% of journalists, are simply not interested in crimes against Latinos, Native Americans, or Asians.

The broader point is that the press ignores the context surrounding police killings, and paints a picture that is grotesquely unbalanced. Black people are nowhere near even the majority of those killed by police; and police, if they’re even charged, usually avoid conviction.

A Second Example – Environmental Racism
Next, the New York Times. We’ve been here before – here and here. On Saturday 8/29 of this year the Times’ front page carried a graphic with the headline “Decades of racist housing policies worsen a climate crisis”. The related story on page A22 goes on to document the fact that the urban core of Richmond, Virginia is largely black, and the neighborhood is unpleasant. It alleges that this settlement pattern – black people in unpleasant neighborhoods – is a result of racism.

But the housing policies it refers to ended decades ago. Housing is a product, and black people today are just as free to choose a neighborhood as they are to choose a model and brand of automobile. I looked up the demographics of two ZIP codes near Richmond, but outside of the urban core to which the article claims black people are limited. ZIP code 23222 (Innisbrook CDP) has 7.1% “black or African American alone, percent”, ZIP code 23235 (Bon Air CDP) has 11.2%. Yes, black people in Richmond ARE free to move out of central city neighborhoods.

On a trivial note, my editor reflex says we should look again at the headline: “Decades of racist housing policies worsen a climate crisis“. Housing policies worsen the climate crisis? That’s actually the reverse of what the article claims – that the climate crisis worsens the impact of housing policies. This headline blooper just strengthens an impression of sloppy thinking, writing, and editing.

The NYT does have professional standards. The second sentence in the page headed “Our Duty to Our Readers” is this: “In print and online, we tell our readers the complete, unvarnished truth as best we can learn it.”

Actions speak louder than words.

The Bottom Line
I resent being preached at, and lied to.
Journalists feel moral clarity! That’s nice. I wish they felt more allegiance to professional ethics.