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What I’m Seeing in the Personal Economy

Posted in Uncategorized by EloiSVM42 on July 31, 2018

I wrote recently about the two economies: the macro economy, of interest only to students of economics, policy makers and fat cats; and the personal economy, of interest to people with daily lives. Several months ago, I began seeing something in town that I hadn’t seen in quite a while: Help Wanted signs in store windows. This was the first tangible evidence that the recovery from the Great Recession President Bush inflicted on us was finally being felt in the personal economy and not just the macro one.

Three byproducts associated with this increase in labor demand also became apparent.

First, sensing, I think, that the average consumer would see a little visible lift in his or her paycheck at the beginning of the year due to Trump’s tax cuts, many businesses took the opportunity to raise prices effective then. This happened with every one of my utility bills, for instance.

Second, wages began to rise, just perceptibly, not anything like what economists would predict at our current level of employment and this deep into a recovery.

This increase is due in part to some local and state government-mandated minimum wage increases. These increases to minimum wages are not very large, certainly not large enough to make a truly significant difference in people’s lives, but they were real and visible.

It’s understandable why wages haven’t risen as much as might be expected after this recovery. Most of the new jobs are low skilled ones, going to less educated workers. You can understand why employers would not want to pay such workers a lot for doing simple jobs.

This problem will remain intractable until we have more education and training of low skilled labor, and truly significant increases in minimum wages. Not the piss ant ones we have now, but something a person could actually live on.

I would like to see a graduated minimum wage, topping out to a family of four. Single people get one wage, married couples get more, a family with one child gets more still, and then minimum wage maxes out at two children. We don’t want to encourage too large families. (Maybe this will put pressure on the abortion debate.)

Third, the Fed, one of whose roles is to worry about inflation, has started raising interest rates. Trump doesn’t like this, and said so publicly, something a president  should never do, but he is wrong, if that’s not being redundant. (Trump speaks; he is wrong or he is lying.  Ergo, redundant.) Inflation steals buying power from paychecks. It should be controlled.

Another proven theft of buying power is tariffs. They are a tax on income in the form of higher prices, which hit hardest on the working classes. Trump is tossing tariffs around like Skittles at Angela Merkel.

It is just beginning to dawn on Midwestern farmers – particularly soybean growers and pork producers, but ultimately all of us – that Trump’s tariffs are threatening their livelihoods. And the idea of handing out (pitifully inadequate) welfare checks to compensate farmers for big losses they wouldn’t be experiencing if the tariffs hadn’t been imposed in the first place, is not only stupid, but can’t sit well with legislators who have to explain the logic of it to their constituents.

On the Macro Economy side, unemployment is low and GDP is growing. These are good things, but the distribution of benefits of them are inequitable, as Trump knew they would be. Despite his campaign promises, he deliberately gave all the money to his rich friends, who have tossed a little down to workers, as John D. Rockefeller tossed dimes to children in Detroit. A lot of people are looking at these numbers and thinking why are they not feeling any of this.

(One worrisome detail in the macro economy is that the vast majority of growth in stock market value is coming from fewer than 10 stocks, one of which – Facebook – is in investor doo doo. It’s a lot of eggs in very few baskets.)

The economy has been temporarily hyper-stimulated by Trump’s tax cuts, but even after benefits to the personal economy have run through the system, which economists say will occur sometime in late 2019, the overall economy should still be OK. However, Trump’s policies can undermine it some, and they sure as hell aren’t doing anything for the people he promised to help and who were dumb enough to believe him.

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