The economic philosophies of Democrats and Republicans are drastically different. While neither party is interested in dismantling the predatory capitalism that extracts surplus value from workers, Republicans are more interested in reinforcing predatory capitalism and “free markets”, while Democrats are more interested in ameliorating the effects of predatory capitalism and regulating markets in ways that produce somewhat more equitable results than so-called free markets.
Democrats are more likely to protect and support workers, while Republicans are more likely to oppress them. Thus, many Democrats have advocated for an increased minimum wage, while Republicans have opposed it. There are generalizations here. Conservative Democrats are likely to be supportive of Republican “free market” rhetoric. Once upon a time there were liberal Republicans (I think they are now extinct) that would side with Democrats on some issues.
We can expect Republicans in the House and Senate to eliminate regulations, lower taxes, and support the “business climate”. The stock market, which was predicted to lose momentum in case of a Trump election, has actually gained. Is this sustainable? Economist and former Harvard President Lawrence Summers, acknowledges that the Republican approach to the economy might “drive major increases in investment and hiring, setting off a virtuous circle of economic growth and rising confidence.” But he says the Trump administration will face enough challenges that we should “hope for the best and plan for the worst”.
The International Monetary Fund (IMF) predicted world economic growth at 3.4 percent, with US growth at about 2 percent, and far more robust growth in China and India, where growth is likely to exceed 6 percent. But the IMF cautions that restrictions on global trade will also constrain global growth. In both the UK and the United States, there has been resistance to globalization, and an eagerness to renegotiate trade treaties.
Who will benefit from this increased growth? Certainly not the folks at the bottom. Indeed one might attribute the Trump Electoral College victory to the fact that macroeconomic growth indicators have not quite trickled down. The heavily pro-business Republican leadership is counting on the trickle down to create jobs for the 99 percent. They can’t force capitalists to use the proceeds from their tax cuts to create jobs. Indeed, when banks were bailed out, they held onto the money that politicians hoped they would loan to small businesses to stimulate growth and economic expansion.
African Americans with moderate incomes (the average African American family income is about $35,000), others who a similarly situated, lower-income people, and the economically vulnerable are not likely to gain in the “new economy”. Businesses, however, are likely to do very well. Is America made “great again” if economic vulnerability increases? I think not!
There is likely to be tension between the Trump Administration and the Federal Reserve. How quickly will the interest rate be increased, and what impact will it have on the “average” American. Millennials who have been saving to purchase a home (those who have paid off their student loans) will need to save even more (as much as $30,000 for each percentage point increase in the interest rate) to accumulate a down payment. And Ben Carson, who is likely to be Secretary of HUD, is not likely to do anything to make their quest for homeownership any easier.
President Obama was able to stabilize the economy. The unemployment rate is below 5 percent (although labor force participation is lower than it should be), growth has been stable, and the stock market has been strong. The benefits of this strong economy were not evenly distributed, though. It is even less likely that the benefits of the growth that the IMF predicts will be evenly distributed. Markets don’t distribute benefits fairly. Political will is a factor in fair and even distribution.
We know that Republican “free market” economic philosophies suggest that there is no political will for fairness. We will experience macroeconomic ecstasy and microeconomic angst, with economic indicators looking strong, and individual experiences looking far more troubled.
What’s next for the economy? The one percent will benefit, and the rest of us will experience increased vulnerability. As Summers says, “hope for the best, plan for the worst”.
