Tag: economy
I regret to report the economic anxiety theory of Trumpism is back
“the best evidence typically points toward identity-based explanations: Racial and cultural conflicts are far, far more important than the kind of economic alienation Brooks wants to highlight. This is true not only in the United States but in other countries facing similar challenges from far-right populist movements — important comparison points that Brooks entirely leaves out.
Brooks’s column makes some important points, particularly about the flaws in the American economic model. But it’s one thing to point out those flaws, and another thing to posit that (as a matter of fact) they are behind the great divides in our politics — when in fact they are not.”
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“A 2022 paper by two political scientists, Kristin Lunz Trujillo and Zack Crowley, examined this theory explicitly: testing a sense of political and cultural alienation (what they call “symbolic” concerns) versus a sense of economic deprivation in predicting rural voter support for Trump.
They found that “only the symbolic subdimensions of rural consciousness positively and significantly correlate with Trump support.” If anything, they found, rural voters who feel more economically deprived are less likely to vote for Trump than their peers.
Similarly, a 2020 paper found that Trump supporters in poorer areas tend to be the “locally affluent whites:” people whose incomes might not put them in the national one percent, but who are doing a fair sight better than others in the same zip code. Think plumbers and auto dealers, not laid-off factory workers.”
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“Let me propose an alternative theory — one that aligns much better with the available evidence than the economic anxiety idea.
This story starts with the late 20th-century revolution in social values: the end of segregation, mass nonwhite immigration, feminist challenges to patriarchy, a decline in traditional Christianity, and the rise of the LGBTQ movement. This revolution has transformed America at fundamental levels: the kinds of people who hold positions of power, the ideas that command cultural respect, and even the kinds of food Americans eat and languages they speak in public.
For millions of Americans, these changes made them feel unmoored from their country— “strangers in their own land,” as the sociologist Arlie Hochschild put it. Whether because of pure bigotry or a more diffuse sense of cultural alienation from the mainstream, a large number of Americans came to believe that they are losing America. For historical reasons owing largely to the legacy of the civil rights movement, these voters became concentrated in the Republican party — forming at least a plurality of its primary electorate. The election of Barack Obama, a self-described “Black man with a funny name,” pushed their sense of social alienation to the breaking point.
This cultural anxiety created room for Trump, who rode this group’s collective resentments to control of the Republican party. It is not the only reason he won the presidency — in a close election like 2016, a million different things likely made the difference — but it is the most important reason why he has maintained a lock on the Republican party for the better part of a decade.
We know this, primarily, because social scientists have been testing the theory since 2016 — and comparing it with Brooks’s preferred explanations rooted in resentment at a rigged economic game. Again and again, the cultural theory has won out.”
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“in 2018, a trio of scholars used survey data to compare explanations of Trump support based on racism, sexism, and a sense of economic alienation. The former two are far more powerful predictors than the latter, almost entirely explaining Trump’s surge in support among white non-college voters. “Controlling for racism and sexism effectively restores the education gap among whites to what it had been in every election since 2000,” they write.
A 2018 report from the Voter Study Group, authored by pollster Robert Griffin and political scientist John Sides, tested what they called the “prevailing narrative” of the 2016 election that “focused heavily on the economic concerns of [the white working class].” They found that typical methods of measuring economic distress were flawed and that more precise measurements show little effect on the 2016 outcome. “Instead,” they write, “attitudes about race and ethnicity were more strongly related to how people voted.”
A 2018 paper by Alan Abramowitz and Jennifer McCoy, two leading political scientists, tested correlations between white voters’ favorable views of Hillary Clinton and Trump and a battery of different variables. What they found, at this point, shouldn’t surprise you.
“After party identification, racial/ethnic resentment was by far the strongest predictor of relative ratings of Trump and Clinton — the higher the score on the racial/ethnic resentment scale, the more favorably white voters rated Trump relative to Clinton,” they write. “The impact of the racial/ethnic resentment scale was much stronger than that of any of the economic variables included in the analysis, including opinions about free trade deals and economic mobility.”
These are three studies from a single year. There are dozens of other papers, reports, and even entire books coming to similar conclusions. These studies don’t explain everything about Trump or Republican support — such as the party’s recent gains among Black and especially Latino voters — but they do an excellent job answering the question that Brooks poses in his column: Why does Trump maintain such a hard core of support despite everything that he’s done?”
When it comes to the economy, everything’s great and no one’s happy
“wages aren’t as fluid as, say, gas prices, which seem to jump up or down in an instant. There are reasons for this. Gas prices are easily observed and easily changed, and people will happily switch stations to save a few cents per gallon. Labor markets aren’t like this at all. Switching jobs takes time and effort, and many workers are reluctant to give up the devil they know for the devil they don’t. Employers capitalize on this situation by adjusting wages slowly, if at all.”
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“High inflation, combined with slow wage adjustment, drives purchasing power down. And this is true not just for the US. Canada’s post-Covid pay has followed the same trajectory as ours, and it is not alone.”
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“To climb out of this hole, real wages will have to start growing again. The good news is that they already have. Annual real wage changes turned positive in February; month-on-month changes turned positive late last year. In this respect, we are doing well. Most European economies still haven’t seen real wage growth.
Furthermore, this hole is shallower than it may seem. Since late 2020, real wage reductions have cost households a little less than $1 trillion. That is a lot, without a doubt, but it is less than half of what households received in Covid-related transfers — stimulus payments, expanded unemployment insurance, child care credits, and the like — which amounted to $2 trillion. That puts them well ahead of where they were in March 2020, which is why people report that their own finances are doing just fine, even while they trash the state of the economy.”
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“What we need to free ourselves from is the preconception that low unemployment alone makes a good labor market. Where we actually are is simple to understand. Dollar wages adjust slowly to price increases. Inflation has raised prices a lot, reducing purchasing power. As a result, the public is not happy about the economy.”
Taiwanese Company Demands U.S. Taxpayers Cover the Higher Costs of Making Semiconductors in Arizona
“The largest semiconductor manufacturer on the planet agreed to open factories in the U.S. instead of abroad. The company wants the government to pick up the tab for the difference in cost, even as it postpones production.”
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“In a January 2023 earnings call, TSMC Chief Financial Officer Wendell Huang said that while he couldn’t give an exact number for the financial discrepancy between building in the U.S. and Taiwan, “the major reason for the cost gap is the construction cost of building and facilities, which can be 4 to 5x greater” in the U.S.
Of course, part of that gap can be explained by factors like the difference in the cost of living—by one estimate, over twice as much in the U.S. as in Taiwan. But in November 2022, a month before Biden announced the project, TSMC wrote in a public response to questions from the Commerce Department that it doesn’t “see access to capital as a significant barrier to growth in the US”—rather, specific factors making the project more expensive included “federal regulatory requirements that increase project scope and cost.”
Rather than forking over billions of dollars to a single company, the Biden administration should take steps to ease regulatory burdens on expanding companies. Similarly, plenty of firms could benefit from a greater number of high-skilled workers, like those proficient in science, technology, engineering, and mathematics (STEM) fields. And yet foreign nationals who graduate in STEM fields from American universities face near-impossible challenges to stay in the country and most end up going elsewhere. Congress could help that situation by raising the number of green cards that can be issued annually.
With TSMC’s delay, Biden and Congress have an opportunity. TSMC admits that its issues are bureaucratic, not financial, so there’s no need to shovel more money at a wealthy company. Instead, lawmakers should get rid of cumbersome regulations and create a more welcoming environment for both businesses and workers.”
Industrial Policy Isn’t About Creating Jobs
“Government favoritism in the form of subsidies, tariffs, and other interventions allocates resources (labor and capital) differently than the way resources are allocated by consumers spending their own money. Ordinarily, businesses—spending their investors’ money—compete for these consumer dollars. Industrial policy rests on the assumption that such market outcomes don’t adequately support higher causes such as national security. If that’s true, it’s all the justification industrial policy needs. Nothing needs to be said about jobs.”
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“As Noah Smith reminded his readers in a recent blog post, “Most of the actual production work will be done by robots, because we are a rich country with very high labor costs and lots of abundant capital and technology. Automated manufacturing is what we specialize in, not labor-intensive manufacturing.””
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“Be wary of those who push industrial policy as a means of job creation. It’s a short-sighted approach that distracts us from the more important question, which is whether hindering the market allocation of resources is truly justified for national security or other valid reasons.”
Book Launch: Beijing Rules: How China Weaponized Its Economy to Confront the World
Biden Escalates Trade War With China
“Biden declared a new national emergency and immediately used it as the justification for creating a new screening system that will limit Americans’ ability to invest overseas.
The new rules, which have been in development since last year, will prohibit private equity and venture capital firms from investing in China-based businesses working in a variety of high-tech fields”
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“Narrow or not, this is the first time that the U.S. government has targeted outgoing investments in such a manner.”
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“There are only two other countries—South Korea and Taiwan—that have outbound investment screening systems”
The U.S. Credit Rating Just Dropped. It’s Time for Radical Budget Reform.
“Fitch Ratings..downgraded the U.S. government’s credit rating due in part to Congress’ erosion in governance. Indeed, year after year, we see the same political theater unfold: last-minute deals, deficits, and, all too often, the passage of gigantic omnibus spending bills without proper scrutiny, along with repeated debt ceiling fights and threats of shutdown.
But these are just symptoms of a budget-making process that remains in desperate need of reform. With legislators chronically delinquent about following their own rules, the change may need to be as much cultural as procedural. No matter how good the rules are, they’re useless if politicians ignore them. And in a world where politicians are rarely told no when it comes to creating or expanding programs, most simply refuse to have their hands tied or behave as responsible stewards of your dollars.”
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“What we need is a comprehensive budget process under which programs like Social Security, Medicare, and Medicaid are no longer permitted to grow without meaningful oversight. Combined with other mandatory, more-or-less automatic spending items, they make up more than 70 percent of the budget. Thus, they must be included in the regular budget process and subjected to regular review. Only then will our elected representatives be forced to stop ignoring the side of the budget that requires their attention the most.”
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“Enter a “Base Closure and Realignment Commission (BRAC)”-style fiscal commission, an idea promoted by the Cato Institute’s Romina Boccia. This commission would be staffed with independent experts appointed by the president. It would be “tasked with a clear and attainable objective, such as stabilizing the growth in the debt at no more than the GDP of the country, and empowered with fast-track authority, such that its recommendations become self-executing upon presidential approval, without Congress having to affirmatively vote on their enactment,” Boccia explains.
I’m uneasy about delegating the president power to appoint “experts.” Unfortunately, Congress has proven they will never seriously address the problem unless forced to. The idea is not unprecedented. Congress has already delegated a lot of its legislative power to administrative agencies and the executive branch. It’s also how the political class dealt with the closures of military facilities after the Cold War—another set of hard choices they refused to make on their own.
What’s more, Congress would retain some veto power. If they disapprove of the proposal, the House and Senate can reject it through a joint resolution within a specified period. Whether it’s the best solution to address our fiscal problems remains to be seen, but it’s worth considering.”
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“Making continuing appropriations automatic in case of a lapse could remove the threat of shutdowns.”