Below is simply the latest self-congratulatory twitter post by forty-five. And, I have to admit that those job numbers are nice to see. Wish they were jobs that could support a working family; but, hey, you can’t have everything. Right? There is only one problem. Forty-five has had nothing to do with this so-called “boom.” If anything, his policies are sure to kill it.Adam Smith — he of Wealth of Nations (1776) fame — already noted that:
When the landlord, annuitant, or monied man, has a greater revenue than what he judges sufficient to maintain his own family, he employs either the whole or a part of the surplus in maintaining one or more menial servants. Increase this surplus, and he will naturally increase the number of those servants.
When an independent workman, such as a weaver or shoe-maker, has got more stock than what is sufficient to purchase the materials of his own work, and to maintain himself till he can dispose of it, he naturally employs one or more journeymen with the surplus, in order to make a profit by their work. Increase this surplus, and he will naturally increase the number of his journeymen (Chapter 8, ¶¶19-20).
Paragraph 19 is the tax plan for which forty-five claims responsibility (it was in fact authored by the recently departed Gary Cohn); paragraph 20 was President Obama’s idea (strenuously resisted by Republican so-called “fiscal conservatives”).
It makes sense. If I am a developer or hedge fund manager I am less likely to spend my windfall hiring more employees, “journeymen,” who will bring growth to the economy. Instead I will hire “servants” to serve my own personal needs. How else can we describe Mitch Mcconnell or Paul Ryan other than “menial servants” of David and Chuck Koch? Why is Betsy de Vos Secretary of Education if not to spread the wonders of private education and to ruin the public education system? Adam Smith’s point is well taken: give money to a worker and she will hire more workers. Give money to Betsy de Vos and she will use it to paper her dining room.
Which is why the credit forty-five takes for the current economic boom is so spurious. Even by the Wall Street Journal’s standards, splashed across the front page of their Weekend edition, recovery from the Bush Recession began well before 2016. And just as Adam Smith predicted targeting the middle and bottom of the income hierarchy — not the top — is what gives rise to economic growth.
To be sure, job growth does not necessarily translate into economic growth. This is clear from the sluggishness of hourly earnings.
But, just as Adam Smith predicted (what John Maynard Keynes theorized and World War II confirmed) throw a lot of money into the economy at the bottom and your economy will grow. Throw it at the top? Meh.
So let me hazard the prediction that if not before, then certainly by February 2021 the bottom will once again fall out of this economy.
The “Trump” Boom? Actually we should call it the Obama Boom. And the future recession? You can bet that it will be blamed, that’s right, on Hilary and Barack.