The U.S. economy is stuck in low gear—well-paying jobs remain scarce and the middle class is shrinking.
Friday, the Labor Department is expected to report the economy added 210,000 jobs in March— those numbers will be in line with numbers from the last several months but it’s hardly enough to push up workers’ wages.
When family incomes were rising during the Reagan era, employment advanced at twice the rate accomplished by President Obama, because the Gipper’s recovery notched 4.6 percent annual GDP growth whereas Obama’s only 2.1 percent.
Going forward, most forecasters don’t expect much improvement.
At all levels of government, social engineers who promote free trade and creeping statism have successfully created a world of diminished expectations.
Trade with China has decimated American manufacturing and is responsible for a significant loss of high-paying factory jobs.
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Beijing cynically undervalues its currency, subsidizes production and throws up big barriers to competitive U.S. exports. Americans get cheap coffee makers but also lots of unemployment and debts to pay off by selling prized assets.
Manufacturing finances a good deal of U.S. industrial RD, and trade deficits slice off enough of that spending—and hammer down adult labor force participation— to account for a significant share of the growth gap between the Reagan and Obama eras.
Prime age men, who once worked in those gritty factories, are now offered free health care, food stamps, bogus disability benefits and other government incentives to opt out of working, while increasingly women take full-time but temporary jobs in health care and other parts of the burgeoning service economy. Those “gigs” increasingly require sophisticated skills but offer lower wages, fewer benefits and much less job security than permanent employment.
Sadly, too many men and women don’t qualify for those temp-jobs, thanks to the liberals that run America’s largely government-subsidized and regulated educational establishment.
Four in ten college graduates lack the critical thinking and reasoning skills required for entry level professional or managerial positions, and only about 40 percent of high school graduates are prepared to do college work in the first place.
Big cities are the creative hubs for the new service economy supported by continuous breakthroughs in digital technology, medicine and the like. However, too many workers are stranded in smaller towns that once supported factories. That’s because state and local governments have imposed onerous land use regulations and employment licensing requirements that push up apartment rents and make worker relocation and jobs creation more expensive and often too difficult to accomplish.
Similarly, urban planners have happily promoted policies to relocate the working poor to suburban jurisdictions—out of sight for the liberal youth culture that dominates the new service economy but where transportation to employment opportunities are prohibitively costly and cumbersome.
Bernie Sanders—an avowed socialist—and Donald Trump and Ted Cruz—easily among the most polarizing personalities to run for president in recent memory—have accomplished so much political traction, because Hillary Clinton, Jeb Bush and the other establishment Republicans so fantastically represent (or represented) more of the same failed policies.
The Clintons are against free trade now that Hillary is seeking the presidency but they were among its most ardent supporters once inside the Oval Office—Bill campaigned against NAFTA but pushed it through Congress once he was elected, and he negotiated the terribly flawed deal to admit China into the WTO. And Hillary remains a champion of incremental statism—she campaigns on a platform of more government benefits and business regulations to keep happy her base of government-dependent minorities and middle-aged feminists.
Establishment GOP candidates are for free trade all the time but for rolling back government only when running for office.
It’s the kind of duplicity and dysfunction that made the Roman Empire what it is today—a constant focus of veneration for its glories but now extinct.
Peter Morici served as Chief Economist at the U.S. International Trade Commission from 1993 to 1995. He is an economist and professor at the Smith School of Business, University of Maryland, and a widely published columnist. He is the five time winner of the MarketWatch best forecaster award. Follow him on Twitter @PMorici1.