Mulvaney’s MAGAnomics Mix of Groundhog Day and Flat Out Lies

Dean Baker

Dean Baker Co-Director, Author, Center for Economic and Policy Research

Office of Management and Budget Director Mick Mulvaney had a Wall Street Journal column highlighting the benefits of “MAGAnomics.” The piece can best be described as a combination of Groundhog Day and outright lies.

In terms of Groundhog Day, we have actually tried MAGAnomics twice before and it didn’t work. We had huge cuts in taxes and regulation under both President Reagan and George W. Bush. In neither case, was there any huge uptick in growth and investment. In fact, the Bush years were striking for the weak growth in the economy and especially the labor market. We saw what was at the time the longest period without net job growth since the Great Depression. And of course, his policy of giving finance free rein gave us the housing bubble and the Great Recession.

The story of the 1980s was somewhat better but hardly follows the MAGAnomics script. The economy did bounce back in 1983, following a steep recession in 1981–1982. That is generally what economies do following steep recessions that were not caused by collapsed asset bubbles. Furthermore, the bounceback was based on increased consumption, not investment as the MAGAnomics folks claim. In fact, investment in the late 1980s fell to extraordinarily low levels. It is also worth pointing out that following both tax cuts, the deficit exploded, just as conventional economics predicts.

By contrast, Clinton raised taxes in 1993 and the economy subsequently soared. It would be silly to attribute the strong growth of the 1990s to the Clinton tax increase; other factors like an IT driven productivity boom and the stock bubble were the key factors, but obviously, the tax increase did not prevent strong growth.

The outright lies part stem from the comparison to prior periods’ growth rates. Mulvaney notes that the 2.0 percent growth rate projected for the next decade is markedly lower than the 3.5 percent rate that we had seen for most of the post-World War II era.This comparison doesn’t make sense.

We are now seeing very slow labor force growth due to the retirement of the baby boom cohort and the fact that the secular rise in the female labor force participation rate is largely at an end. MAGAnomics can do nothing about either of these facts. Slower labor force growth translates into slower overall growth.

Mulvaney also complains about government benefits keeping people from working. The idea that large numbers of people aren’t working because of the generosity of welfare benefits shows a startling degree of ignorance. The United States has the least generous welfare state of any wealthy country, yet we also have among the lowest labor force participation rates. The idea that we will get any substantial boost to the labor force from gutting benefits further is absurd on its face.

Mulvaney apparently missed the fact that energy prices have plummeted in the last three years. Oil had been over $100 a barrel, today it is less than $50. While it is always possible that it could fall still further, any boost to the economy from further declines will be trivial compared to what we have seen already. It would be amazing if Mulvaney was ignorant of the recent path in energy prices.

In short, there is nothing here at all. Mulvaney has given us absolutely zero reason that Trump’s policies will lead to anything other than larger deficits, fewer people with health care, more dangerous workplaces, and a dirtier environment.

***

Cross-posted by the Center for Economic and Policy Research

Dean Baker is author of the new book, “Plunder and Blunder: The Rise and Fall of the Bubble Economy,” PoliPoint Press, LLC. This piece was first published on the Center for Economic and Policy Research’s Jobs Byte. CEPR’s Jobs Byte is published each month upon release of the Bureau of Labor Statistics’ employment report. For more information or to subscribe by fax or email contact CEPR at 202-293-5380 ext. 102 or chinku@CEPR.net.

Posted In: Allied Approaches, From CEPR Co-Director Dean Baker

Union Matters

An Invitation to Sunny Miami. What Could Be Bad?

Sam Pizzigati

Sam Pizzigati Editor, Too Much online magazine

If a billionaire “invites” you somewhere, you’d better go. Or be prepared to suffer the consequences. This past May, hedge fund kingpin Carl Icahn announced in a letter to his New York-based staff of about 50 that he would be moving his business operations to Florida. But the 83-year-old Icahn assured his staffers they had no reason to worry: “My employees have always been very important to the company, so I’d like to invite you all to join me in Miami.” Those who go south, his letter added, would get a $50,000 relocation benefit “once you have established your permanent residence in Florida.” Those who stay put, the letter continued, can file for state unemployment benefits, a $450 weekly maximum that “you can receive for a total of 26 weeks.” What about severance from Icahn Enterprises? The New York Post reported last week that the two dozen employees who have chosen not to uproot their families and follow Icahn to Florida “will be let go without any severance” when the billionaire shutters his New York offices this coming March. Bloomberg currently puts Carl Icahn’s net worth at $20.5 billion.

***

More ...

Health Care Should Not Be A Bargaining Weapon

Health Care Should Not Be A Bargaining Weapon