I recently attended an educational session for board members of private companies. Common themes included uncertainty, confusion, building costly redundancy in supply chains, and the need for agility. But not once did the CEOs and directors mention a significant root cause behind these trends: the Trump administration and its policies. In private, Trump is frequently criticized, as evidenced by the reporting from a Yale University meeting of CEOs. · His tariff policy has been costly, according to 2/3 of the businesses in attendance. · Uncertainty is reducing investments. · They are concerned about Trump’s shift toward state-sponsored capitalism, as reported in The Wall Street Journal. · On net, Trump is bad for business, Forbes summarizes from the meeting. Yet publicly, the business community and its leaders have remained silent or conciliatory. Why the silence? It is a whole new world, and a scary…
Relearn Economics 101 to Judge Trump Policies
Call it the Big Beautiful Bill. Or view it as the Big Bad Betrayal. Trade Liberation Day or Disaster. Whatever your political leanings, make sure you remember basic economic principles when formulating your opinion about them. A principle is a foundational truth that drives economic behavior, e.g., people choose a product based on its perceived functional and emotional value. In this blog, I’ll review five fundamental economic principles that are central to understanding the impact of the BBB and tariff policy on our economic growth. Opportunity Cost When making purchasing decisions, we assess the value of the product or service. We also compare this value to what else the money could have been spent on, i.e., its opportunity cost. One opportunity cost of a purchase is lower savings. Another is forgoing a different purchase. If the perceived opportunity cost is higher than the…
If federal government spending bloated? The facts will surprise you.
Is our federal government bloated?
Let’s Keep Federal Government Functions Nonpartisan
I flew home to San Diego from visiting family in Baltimore last week. The view out my window over Houston, my connecting city, was crystal clear. The picture reminded me of my first plane ride late in my teenage years. How, I wondered at the time, did everything work together to create what, from the air, looked so harmonious? I had not the faintest idea. The question led me to study economics, first at Penn State and then at MIT, where I earned a doctorate after mastering, among other concepts, Adam Smith’s “invisible hand.” It explains the order I sought to understand. As I observed Houston from the air, my age now decades older, the importance of interstate roads was obvious. Without them, I’d see the minor roads jam-packed. The private airport we flew over could never handle the traffic at Houston’s IAH,…
Debunking three myths about immigration to the US
Immigration is a top issue in voters’ minds. I want to share some facts about immigration so that we can all be more informed voters. As business leaders, work force trends matter, and immigration helps drive these trends. Deficits also concern us. Did you know that the US Congressional Budget Act predicts the 2021-2026 immigrant population is expected to pay close to a trillion dollars more in taxes than consumed in government benefits? Myth: The immigration system is out of control. Truth: Parts, but not all of it, are broken. There are three ways non-residents enter and legally remain as permanent residents of the US. One is the Visa System, which offers lawful permanent residence. Who gets these? There are three subgroups here: First are immediate relatives of US citizens. There is no limit on the number of spouses, minor unmarried children, and…
Healthcare Costs Part One: Who Benefits from our Broken System?
To solve a problem, some say, look to who makes money from its existence. So, who benefits from the high cost of healthcare in the U.S.? At a minimum, looking at the beneficiaries will help us identify those who will impose barriers to changing the status quo. (In the next blog, I’ll look at root causes of the cost problem and worthy solutions.) High Cost U.S. healthcare costs exceed those of other developed countries according to several key metrics: as a percent of our GDP, cost per family, and cost of procedures and hospital stays, among others. Self-insured employers reported to MedCity News that the average per-person cost of healthcare would be $17,201 in 2023, a $1,339 increase (or 7.8%) from 2022. By way of comparison, median annual income was $69,021 in 2021. No wonder a significant lifetime achievement is securing a job…
Why are US voters so pessimistic about the American economy?
Economists (of which I am one) are cheering about recent economic measures for our nation. Inflation rates are falling without the high levels of unemployment expected to produce disinflation. Real wages have risen. Hard-to-employ groups are finding jobs as employers drop prior credential requirements. Indeed, the soft landing the US Federal Reserve Bank is shooting for may be achievable (underscore “may,” as so much uncertainty remains). So why does most of the nation (7 in 10 according to a March 2023 CNN poll) believe the economy is still bad? One hypothesis is that people are upset because, although the inflation rate is falling, prices remain significantly higher. They feel they need to spend a larger percentage of their income on meeting their needs. Yes, prices are up. And, higher prices make them worse off. But incomes are also rising. If incomes increase more…
Bidenomics vs Trickle Down – It Depends
US President Joe Biden and his team are traveling the country spouting the success of his economic policies. The package is called “Bidenomics.” It’s best understood as a contrast (which I’ll get to shortly) to traditional GOP economic policy recommendations. The latter argues for lower taxes, less government regulation, and minimizing social welfare spending. The fear underlying GOP dismissal of Bidenomics is that we will become a “socialist” nation. Think of Scandinavian nations with high taxes and high social spending. (The fact that these nations do not engage in socialism – a system where the government owns the means of production, distribution, and exchange – is beside the point. But discussing that would be a digression here.) The GOP policy prescription is based on core assumptions such as: The private sector can spend money more efficiently than the government. Low taxes on corporations…
Effective policy demands flexibility that politicians lack
Our two political parties each champion a set of recommended economic policies. For the GOP, tax cuts are always helpful. For the Democrats, not so much—but government spending can solve a lot of problems. As an economist, the rigidity of political views – not just among the politicians but their distinct tribes of voters – dismays me. Why? Because different contexts demand different solutions. In early 2009, Captain Sullenberger went against traditional thinking when he safely landed an Airbus A320 on the Hudson Bay after it hit a flock of birds, cutting off all engine power. He didn’t follow standard procedures because he and co-pilot, Jeffrey Skiles, recognized the uniqueness of the situation. An economy is a far more complex system than a plane and its interaction with air. With any complex system, physics proves that starting conditions matter for what you do…
Build ??? Back Better
With a COVID vaccine in sight, economic recovery in 2021 is a reasonable expectation. But is there a way to build a better economy, not merely a larger one? It is a promise of the incoming Biden administration. Some elements economists would include in creating a better economy are listed below. Raise the standard of living for non-college-educated workers. It’s fallen by a lot. The result is worsening health statistics and growing family food insecurity, issues that existed even before the pandemic. Raising the minimum wage, rural development strategies and investments, and more affordable healthcare and housing are critical strategies for accomplishing this objective. Democrats propose changes to the tax system as the best way to achieve this aim. CEOs like Mark Benioff of Salesforce, on the other hand, argue that business and job creation is a better strategy, and there is truth…