Messaging the Economy

Forgetting about whatever the stock market is doing today (please look at long-term trends), the economy has been doing pretty well over the last few years. Not amazing, but pretty well (Remember: The stock market is not the economy).  This was tough for Team Obama to message: probably because they sucked at messaging (see: ObamaCare). And, nothing highlights this more than how easy it has been for Team Trump, who can do nothing else right, to message the exact same economy. Which begs the question: how would I message the economy if I were a  Democratic message guru?

1) Inequality is skyrocketing: if the economy goes up $1, but the richest 1% get $2, than the other 99% are left with -$1. Great, the economy is getting better, but is that what you really want? No, that is not what you really want because everyone measures themselves relatively to other people.

2) American Dream is in peril: inequality kills Equality of Opportunity. The Trump economy is great for people who are already rich, but creates permanent under-class. Progressive social safety net: healthcare, shelter, food subsidies allow people to be productive, free people to get education and work, allow people to live the American Dream. Let's rebuild the American Dream.

3) Republicans/Trump are creating risk of another meltdown: Unregulated markets can lead to bubbles, can lead to disastrous consequences Americans had to endure twice in the previous decade alone. The potential of economic disasters wiping out savings of thousands of American families remains too high.

4) Economy is doing fine: Democrats are fighting an asymmetric fight. Republicans looked at the same economy and declared it a disaster, but Democrats should rise above that. The economy is doing fine, not great, but not terrible.

Now, a little background on terms that float around the subject:

Thanking Obama will NOT work: By the time the 2018 election happens Trump would have been president-elect and then president for two years. It is nice to thank Obama and Former Chair of the Federal Reserve Janet Yellen for their stewardship of the economy; for what is worth, they did a good job. It is also feasible to remind people that Republicans spiked efforts to provide much needed stimulus at the nadir of the Great Recession, making everything worse. But, no one will care. Even though he has limited control, by Election Day 2018 the American people will treat the economy as the Trump economy.

Stock market is return to capital, not labor, but people do think it is a forward indicator of the economy: Most Americans have little to no money in the stock market. The stock market actually hates wage growth, as it may lead to inflation and higher interest rates and is an indication of increased workers' bargaining power. Yet, we have asked people over and over, and they believe that a higher stock market helps everyone and that it is a leading indicator of the economy. Thus, it is important to put the stock market into perceptive for people. It has been moving up at about the same rate as it did in the last few years of President Obama, and about the same rate as other major markets. Most critical, cuts to regulations, especially to banks and financial firms, paired with de-fanging the Consumer Financial Protection Bureau, have left the economy more vulnerable to over-pricing of risky assets with "too-big-to-fail" moral hazards. Basically, the Trump adminstration is taking away every safeguard that was created in the aftermath of the Great Recession. To be clear, any signs for a bubble are less dramatic then in 2000 (dot-com) or 2006 (housing), but this time around risks for a market bubble are double-barreled: long-term bonds and real estate, as well as stocks.

S&P500

Job growth critical: economists follow changes in non-farm payroll, not unemployment. There are many reason for this, but the most important is that it eliminates the denominator of how many people are looking for work and focuses on the numerator of jobs. It has been good, but flat. There are more people of working age in the US each year, but there are also much less people looking for jobs as the economy recovers. I will keep updating this chart each month:

Jobs20180202

Wage growth critical: this ticked up a bit in January, but otherwise did not budget in 2017. It has been flat for years. This chart shows wage growth through January 2018.

Wages20180202

Inequality: this is skyrocketing. This chart shows how the share of wealth controlled by top 1% continues to grow while the share of wealth by the bottom 90% continues to plummet.

wealth-06-1 (1)

Equality of Opportunity: this is cratering. This chart shows how the probability of making more than your parents (in real terms) has fallen to 50 percent. Only half of Americans will earn more than their parents. This is falling way behind comparable nations. Plus, social mobility in the US is trailing mobility in comparable countries. Among OECD countries, nowhere is  the influence of parental background on student achievement in secondary education higher than in the US.

EqualityOfOpporutnity1

Tax Cuts made the rich richer at the expense of everyone else: by time bill is fully implemented (1)  over 50 percent of households will get a tax INCREASE (2) 82 percent of savings will go to households with income >$1,000,000 (top 1%) (3) new $1.5 trillion (or more) in debt over 10 years will likely lead to larger cuts on social safety net (I do not care about debt as much as the misuse of the debt: would prefer infrastructure or healthcare, rather than massive payment to rich people) (4) estimated that only about 20 percent of value will trickle down to workers. How does that square with all of the bonuses you heard about on State Media? (1) Bonuses were generally graduated by years of service, with few getting the salient values you hear about (2) Much bigger bonuses and wage increases for executives (3) stock buy-backs and dividends massive (4) we have seen a lot of layoffs around tax cuts, but no evidence of job growth. As a reminder, here is Speaker of the House Paul Ryan bragging that a secretary will get an extra $1.50 per week with her tax cut. And, next to it is what I noted in response:

Ryan20180203aRothschildTweet20180202