Two-Track Economy

Guest Opinion

By Tom Gutowski | May 25, 2019

There’s no denying that by traditional measures, the economy is doing fine. As of this writing, the Dow Jones Industrial Average is well over 25,000, unemployment remains very low, wages have begun rising, estimated GDP growth in the first quarter was 3.2% (though it’s expected to be revised slightly downward), neither inflation nor deflation are a problem, and personal bankruptcy filings are low. What’s not to love?
 
Plenty. Forty million Americans, including one in five children, live in poverty.On any one night there are more than a half-million homeless people sleeping in public places or shelters in the U.S. In Michigan, according to the United Way, 61% of jobs pay less than $20 an hour, and 1.66 million households, comprising 43% of the population, can’t afford basic household necessities.
 
Personal bankruptcies are down in part because the Affordable Care Act brought health insurance to millions. Obviously, that’s good. But Republicans are still trying to kill the ACA; if successful, they’ll throw millions of people off of health insurance, which will cause bankruptcy rates to rise again. Another reason personal bankruptcies are down is that a 2005 law made it harder to file; it appears that some who are insolvent don’t have enough assets to bother protecting them, can’t afford the fees and costs, or don’t know how to navigate the process.
 
Young people are staggering under a cumulative $1.5 trillion of student loan debt. Life expectancies are decreasing, largely because of the increase in “deaths of despair” — drug overdoses, suicide, and liver disease from alcohol use. People live in fear of incurring prescription drug bills not sufficiently covered by their insurance. People have died while trying to ration their supply of insulin.
 
Farm income dropped substantially in the first quarter. Trump’s tariffs destroyed markets for some U.S. farmers while simultaneously raising the cost of farm machinery. Current immigration policies have contributed to a shortage of farm labor. More family farms are going bankrupt and being bought up by big agribusiness.
 
More of the recent corporate tax cut was used to finance stock buybacks, rather than for capital investment or job creation; that raised stock prices, providing a kind of sugar high that we can’t afford to maintain. The Trump tax bill also contributed to what by 2020 will be an annual deficit of over a trillion dollars. If a major correction or recession happens soon, we won’t be able to afford the stimulus spending we might need to get the economy back on track. Meanwhile, our infrastructure is falling apart.
 
And perhaps worst of all, economic mobility in America has been slowing for some time now. The days when you could expect your kids to do better than you seem to be over for mainstream America. For many, the American Dream is slipping out of reach.
 
Of course the ultra-wealthy are doing fine. While some amount of economic inequality is normal, what we have now is over the top. Reportedly the top one percent have as much wealth as the bottom 90 percent. Many CEOs make hundreds of times what their employees make. Some get huge bonuses and “golden parachutes,” even when the companies they lead are laying off workers or failing. We have become a two-track economy: the very rich, and everyone else.
 
This state of affairs isnotthe result of the natural workings of a free market. The ultra-wealthy are ultra-influential, and they use their influence to write the rules for their own benefit, while the rest of us lack sufficient representation in Washington. Some billionaire hedge-fund managers pay taxes at the same rate as their secretaries. How does that make sense? In 2008, when the economy collapsed, who got bailed out? Homeowners? Nah. Big banks. Middle-class folks got a tiny tax cut in 2018, while the Koch brothers picked up a billion dollars a year. If you paidanyfederal income tax at all in 2018, you paid more than Amazon did. 
 
What can we do? Give the middle class a real tax cut, and raise taxes on the wealthy. Raise the minimum wage. Create an infrastructure modernization program, including development of renewable energy, because we need it, and because it could generate thousands of good paying jobs. Move toward universal health insurance by beefing up the ACA or gradually phasing in some version of Medicare For All. Give Medicare the ability to negotiate drug prices. Invest more in early childhood education and public schools, to give all kids a better chance at success. Invest in job training. Raise the income limit on Social Security tax to keep the program solvent. Rein in corporate welfare. And so on.
 
To get much of this sort of thing done — if we are to again have a government that pays more attention to the needs of ordinary citizens than to the demands of big donors — we’ll have to get big money out of politics, end gerrymandering, and protect every citizen’s right to vote. Not easy tasks, but doable if enough people stand up for a revival of grass roots democracy in America.
 
Tom Gutowski earned degrees in economics and history before entering the insurance industry, from which he retired after 36 years.