The Embassy Of Good Science

If Democrats Can’t Win The Economic Debate, Trump Will Win In 2020

• by: C.J. Polychroniou

Prof.dr. Robert Pollin

Pundits and economic models predict that if nothing changes in the next two years on the economic front, Donald Trump will be re-elected in 2020 by a bigger margin than in 2016. To be sure, the economy is usually the top priority for voters heading into a presidential election, and the U.S. economy appears on paper to be doing well since Trump moved into the White House. According to the Bureau of Economic Analysis, real gross domestic product (GDP) increased at an annual rate of 3.2 percent in the first quarter of 2019 (real GDP grew by 2.2 percent in the fourth quarter of 2018), and the national unemployment rate is at a low 3.8 percent, with applications for unemployment benefits having declined to a 49-year low.

Nonetheless, while the economy looks strong, the economic condition of most Americans is anything but rosy. And, according to a Federal Reserve’s “Report on the Economic Well-Being of U.S. Households in 2018,” roughly 40 percent of households would not be able to cover a $400 “unexpected expense.”

At the same time, the majority of Americans think that the economic system benefits mostly the wealthy, and want to see the government do something about this situation.

As such, the question is whether Democratic presidential candidates have the vision and the boldness to put structural economic reforms on top of their pre-election campaign. Bernie Sanders and Elizabeth Warren have already positioned themselves as the ideas candidates for fixing the economy, although Wall Street Democrats will clearly oppose both of them. In the absence of a plan to abolish capitalism, drastic reforms to make it more equitable are a necessary precondition for the economic well-being of the majority of people in the U.S. — reforms that would likely prove to be detrimental to the economic interests of the super-rich, who are intent on accumulating ever higher amounts of wealth. Yet, it is unclear what sort of reforms deserve top priority in today’s U.S. economy. To answer that question, we interviewed Robert Pollin, distinguished professor of economics and co-director of the Political Economy Research Institute at the University of Massachusetts-Amherst.

C.J. Polychroniou: Bob, the U.S. economy is said to be booming, although Democrats attribute this fact to the policies of the Obama administration. Firstly, is the U.S. economy in such a good shape as it appears to be on paper? Secondly, for how long can the Democrats go on giving credit to Obama for today’s signs of a strong economy?

Robert Pollin: First of all, based on the most standard measure of overall economic performance, the growth rate of Gross Domestic Product (GDP), the U.S. economy has not been booming under Trump. Indeed, over the two full years under Trump, 2017-18, real economic growth (adjusted for inflation) averaged 2.5 percent per year. This is no better than the average for the full eight years since the Great Recession officially ended in 2010. Over the 57-year period prior to the 2008 Great Recession (1950-2007), U.S. real economic growth averaged 3.4 percent per year. The Trump economy obviously hasn’t come close to reaching this long-term average growth trend.

It is true that the official unemployment rate is at a historic low, at 3.8 percent of the labor force. However, let’s also consider a broader official measure of unemployment coming from the U.S. Labor Department, one which includes both the “underemployed” — i.e., people in part-time positions but seeking full-time work — as well as people who have become discouraged from looking for a job due to lack of success. By this measure, the unemployment rate rises to 7.3 percent. If we also add in the roughly 5 million people who have dropped out of the labor market following the Great Recession, that would bring the unemployment rate to 10.3 percent. So while labor market conditions are indeed far better now than they were 10 years ago, as we were just coming out of the Great Recession, there is still a lot of distress among people trying to get jobs, much less good jobs.

The Obama administration, along with the Federal Reserve, does deserve credit for helping to avoid a total financial collapse in 2008 that could have led to a Depression as severe as the 1930s. Who knows where we would be today if, a decade ago, the unemployment rate had risen to, say 25 percent, as it did in the 1930s, versus 10 percent during the Great Recession.

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