Sunday, May 20, 2018

Trumpflation! Are You Ready to Get Your Pocket Picked?

Yes, it's here. Trumpflation: that combination of rising wages, rising interest rates, a border that's closed to low wage labor, a trade war with China, tensions with our European allies over economic sanctions, and a dropping fertility rate. 

What's it all add up to?

Well, it doesn't really add up, but the result will be rising prices, and wages that won't quite keep pace. Add in the nice gotcha that will hit many people's tax bills next April and you have a problem.
Of course, this is what can happen when you govern by chaos, ignorance and a commitment to making the wealthy wealthier.

Don't get me wrong; I'm all for a rising, healthy economy where anyone who wants a job can get one, and I believe that the economic expansion that began under Obama will continue to provide more employment and more money in the economy. Corporations have lots of cash on hand and many have committed to either building factories here or bringing production home from overseas. In and of itself, these would be positive developments and a wise president would leave this all alone, especially one who's told us repeatedly that he's a fan of laissez-faire economics.

The problems creep in when you poison the well with ideology. Isolating the country, threatening a trade war, slapping tariffs on goods that will harm American businesses and stoking a labor shortage because of short-sighted immigration policies will, I fear, stomp on this growth and lead to unintended, but decidedly visible, consequences.

Which we are already seeing. Gas prices are up. Food prices are up, even at my local warehouse store. Of course, the convenience of all of this is that when the government calculates inflation they exclude, you got it, gas an food prices. So while these are the components that affect people more directly, the real inflation rate will likely remain low while people scratch their heads about why goods cost so much more.

As for wages, I am glad to see that wages are rising somewhat, but they are not rising enough to cover the rising prices. The promise of the tax cut was that American corporations would create more high wage jobs and invest in new infrastructure. The reality is that most of the tax cut money is going into stock buybacks that do very little for workers.  The federal minimum wage has not moved, and this Congress will probably not raise it. Now add in rising interest rates and cars, homes and debt will cost that much more. Unless workers are going to get 4-5% increases, at some point they will start losing money.

With fewer people coming to the United States either because they've been barred or scared off by the administrations intolerance and hatred, the labor supply is in real jeopardy. Quite simply, our economy has grown over the years because of new workers who come to this country. The birthrate has slowed, and even has revered in the past year, and countries that cannot replace their populations run the real and documented risk of stifling economic growth.

But at least we'll get to test that old adage that immigrants are taking low wage jobs from Americans. With fewer immigrants, both legal and undocumented, we'll finally see if Americans flock to the fields to pick our fruits and vegetables and to the meat packing plants. If wages stay low, then I don't see this happening. If farm and meat producers begin to pay higher wages, guess who else will pay more at the store?

If we had a real populist in charge, then perhaps we could look forward to working people getting ahead and a tax cut that didn't penalize regular people who live in states that voted against him. But we don't have a real populist in charge. We have a president who would rather rule chaotically and unpredictably, although his unpredictability is becoming far more predictable, which creates uncertainly, volatility, and inequality.

Which is exactly what this country can look forward to.

For more, go to or Twitter @rigrundfest

No comments:

Post a Comment