Democratic presidential candidate Michael Bloomberg just wrote an op-ed piece to tell us that in spite of what President Trump says, the economy is broken and he wants to fix it.
It is not uncommon for politicians or prospective ones to try to twist things around to suit their political ambitions. Former NYC mayor, mega-billionaire, and Democratic presidential candidate Michael Bloomberg has just stepped up to the mic to tell us that Trump is wrong and the economy is broken.
It is pretty much a given that someone from another party who has different political ideals will disagree with a potential opponent on the issues. We do need to hold something like this responsible for committing fallacies of reasoning though, such as the equivocation that Bloomberg’s argument here depends upon.
It’s fine to say that someone hasn’t done much for the economy and they want to do more, provided that we are using a correct definition of the economy. We aren’t entitled to just make up our own definition of what it is, and then claim that our private definition of the economy isn’t being promoted, whereby we create a divergence which we are more than happy to correct.
When we speak of a country’s economy, we are actually talking about the actual economy, but in order to do that sensibly, you have to know what the economy is and use that as your starting point. If you want to disagree with the definition, you at least have to provide a clear alternative definition first and then successfully argue that yours is more correct.
Given that President Trump actually has the real economy at the forefront of his political ambitions, and the Democrats clearly do not and oppose efforts to build an even support the economy, it is ironic that Bloomberg would even dare to attack Trump on this issue. However, when you can just make up your own definition of it, that no doubt will serve to embolden you.
The first thing we need to realize is that whenever we speak of the economy in a macroeconomic setting, which includes any references to the U.S. economy, we are viewing it in the aggregate. The data here speaks for itself when we do this, whether we are looking at the money supply, GDP growth, employment levels, or what have you. You cannot argue with facts.
All of these factors are clearly in the green right now. Whether or not someone might want to argue that economic distribution is not to their liking is a completely different matter, whether or not certain demographic groups have benefited more or less from economic prosperity for instance, but you can’t just turn your displeasure upon the entire economy, because we’re dealing with two different things here.
Trump is claiming credit for our current prosperity, and not undeservingly, by way of his pushing through the Tax Cuts and Jobs Act. This isn’t his act by any means, as it takes co-operation from Congress to pass laws, but he has made this his own and has certainly been its biggest champion.
This act has become the whipping boy of Democratic presidential candidates, who are chomping at the bit to rid us of all its benefits in addition to whatever other ideas that they hold individually to further harm our economy. We at least need to be using a standard definition of what the economy is though so we’re at least speaking the same language.
What Bloomberg is trying to do, instead, is to redefine what the economy means, to not only deflect the progress that we are making with it, but to prepare the ground for the soiling that it will take if he or one of his brothers or sisters get to sit on the pulpit and give the real economy a big thumbs down.
The Stock Market is Actually a Very Good Indicator of the Economy
He starts out by claiming that we cannot just look at how the stock market is doing to get a sense of how the economy is doing, because less than half of Americans hold stocks. This does not take away anything from the fact that the stock market is indeed indicative of the health of the economy, even if every share was held by a single individual.
This is not about who made what but what the market is saying about the economy, and the stock market is actually a very good barometer to use here. The slightest worry will bring the price of stocks down, and we’re at all-time highs here. The economy and the stock market survive this spurious and confused attack completely unscathed.
Aside from being used as a means to measure our economic prosperity or lack of it, we cannot ignore the fact that this less than half of people who own stocks have benefited a lot, and that’s a whole lot of people helped with no evidence of anyone being harmed by this. This brings into play, among others, all the people who are saving up for retirement. Seeing their fortunes improve is no small matter, and this should be especially important for someone who claims to be more of a champion of the people.
Our employment numbers are particularly stellar, with unemployment being at historic lows, which is obviously something that we want and is actually a more fundamental indicator than GDP or the stock market. This is the part of the economy that does take distribution into account, where we look to see how our healthier economy is being spread around.
As big of a challenge as it would be to argue against this, Bloomberg is up for it, because he can use his secret weapon of equivocation against this one as well. He tells us that the percentage of the share of the pie among workers is going down, where the issue now becomes twisted to one of economic distribution, one that is entirely outside the discussion of the economy in the aggregate that he is supposed to be attacking.
It is entirely natural and expected that, when an economy grows, the growth will not be equally distributed. Those who have more capital will benefit more, as they enjoy the fruits of their labor plus the fruits of their investments, whereas one without capital will be down to just the fruits of their labor.
There is also the reality of those with more talent seeing their fates improve faster during expansion, due to the greater degree of price sensitivity involved. The supply of these workers is more limited, and when the labor market expands, they can command a greater proportional share. This is similar to sports teams having more to spend and giving a larger share of it to their best players because they command more of it in the market. This is a reality that we cannot escape from unless we want to cap wages, which everyone understands would be a terrible idea.
When we do not have this unequal distribution according to capital, we are actually in trouble, as when capital does not grow enough, this impacts us all, those who have it as well as those who do not. This is where we get into problems such as unemployment rising, the economy shrinking, and so on. This is a beef of his that we cannot correct effectively by economic means, nor should we ever want to, as this is both healthy and necessary.
This is the extent of his attack on Trump and today’s economic prosperity, which doesn’t just fizzle, it fails miserably. However, this is not a fight that even can be won, and if you want to criticize, you at least need to confine your criticisms to what at least has a chance of making sense, such as complaints about inequality of wealth.
This is the real issue for Bloomberg, as it is for Democrats generally, and he of course does refer to this in his article. This gets back to the labor and capital discussion though, and while we may enjoy spending time in fantasy land where we both have a robust economy and what we see as a fair distribution of wealth, you need a magic wand to make this happen.
Whether or not we allow ourselves to become so engrossed in our fantasies that we think we have the power of a wizard, there has to be a time where we step back and wonder how we could ever make this happen in the real world, but people who instead look to escape reality do not want to think very much of these things, because this risks their having to abandon their dreams.
Wealth inequality does not happen by our direction, and in fact we fight back pretty hard against it with things like our inequality of taxation. This is more than progressive tax rates, as if we charge everyone the same rate, people with a lot more will pay a lot more because we’re using the rate against larger amounts.
There are different distributions of both talent and resources out there, and we can’t just do a do-over and take everyone’s wealth away and distribute it equally, like we might want to do if we had the power of a mighty wizard. Even if we did do this though, we’d still gravitate to wealth inequality as this wealth would be used more or less effectively and those who invested well would be set on a path to distance themselves more and more from those who do not have the same means.
We cannot afford to dwell on fantasy though, and the real-world version of this Disney movie involves just looking to take people’s wealth away from them, where we end up harming not only them, but everyone in turn, including the economy.
If You Wish to Reform the Economy, You Need to Understand it First
Bloomberg then turns on what is almost universally seen as Trump’s tax cuts, which Bloomberg claims only benefits the wealthy like himself and not the common people. He does not explain how he came to this conclusion, but he hasn’t looked at the facts.
Some have though, and it turns out that we all do benefit from this, as would be expected if we cared to think about this even a little. This tax cut is saving a typical family of four $2000 per year, and is helping everyone regardless of income or wealth. The reason is that it this lower corporate tax allows companies to sell things at a lower cost to us, and since we all buy things made by companies, the benefits extend from the top to the very bottom.
Conversely, if this is seen to need to go, this is going to place a burden upon everyone, including the poor. Bloomberg infamously spoke about his being in favor of raising taxes for even the poor, as a general sentiment, and his opposition to these tax cuts does put his plan into action, unwittingly or not. Everyone pays corporate taxes, and when we want to raise everyone’s, this doesn’t just trickle down to the poor, it impacts them directly by making everything cost more.
By promoting increases in income and spending, these cuts not only help all Americans, they also help the economy, and even the stock market, which again is a way to measure economic prosperity overall. Repealing this will set us on a course in the opposite direction of prosperity, where we will see growth slow further, unemployment rise, as well as less income in the pockets of all of us.
If we want to reduce the income of the more prosperous because we think that the gap between those who have more and those who have less is too great, and we instead punish everyone, the approach fails miserably. If we are concerned about improving the fate of those on the bottom rung, this actually requires that we compare the before and after, and if the after is worse, we have even failed to achieve our objective, and have instead made things worse.
The key thing to realize about this is that while we got by just fine before these tax cuts, times have changed and we need this additional economic stimulus to keep the boat afloat right now. The economy moves in cycles and we’re on the brink of a down cycle, which these cuts have protected us against as it turned out. Taking them off of the table will release the air out of the balloon and send us on a path toward the ground, which is most certainly not good for the economy or for anyone.
Bloomberg then tells us what he has in mind, after he gets to boast about how many jobs he created when he was mayor. We have enough jobs though, and we actually have a surplus of them, where unemployment is below natural levels of full employment. His speech looks more like a New Deal approach, but there’s no need for a new deal because the deal right now is already as good as we may reasonably expect.
His wanting to spend $100 billion on state sponsored research and development is at least somewhat sensible, as this is where the economic strength of the country resides, and we are being outdone lately by countries like China, who are much more eager to spend on such things.
There are many who actually want to see the economy preserved that are in favor of such a thing, and while we may normally wish to have private industry drive this, we also need to be aware that we may need to help them compete with Chinese companies who are receiving these benefits in far greater amounts than our companies are. We still have a lead, but China is catching up, and we might want to address that.
Bloomberg takes this a step too far when he speaks of his job factories, which takes the role of government from being a supporter to playing the more active role that centralized governments do. This is also something that China does, but this is simply not an efficient method, especially when we are at full employment and the need is not even there.
If it was, there is another way to stimulate these things, and that’s to allow companies to expand by allowing them to keep more of their money and not give so much away in taxation. We actually did that, come to think of it, and it actually worked, and is continuing to work.
We should not try to fix something that is not broken, especially with a way that actually is broken.
Bloomberg speaks a lot about what he calls “good” jobs. A robust economy has a variety of jobs that need to be done, some better than others, but all necessary. The labor market itself determines such things by way of supply and demand, where more skilled tasks command better compensation. The less skilled ones need to be filled as well though, regardless of the skill of the applicants, and we can’t just make these jobs go away in favor of ones that we consider to be good.
Someone will need to cook our burgers though, check us out at the supermarket, and perform a host of other tasks that fall into the range of what some of us might not consider to be good. We may wave our magic wands all we like, but we aren’t going to wish away these lesser paying jobs because they are critical to our economy and way of life.
It is OK to want to dream, but those who fancy themselves as President need to not substantially rely on dreams, as we need them to open their eyes and do a much better job of perceiving reality than this.
We are at a critical junction here, where we are doing very well in spite of Bloomberg’s misunderstandings, and it’s not even that easy to imagine what we could do to help ourselves very much here, other than cutting corporate taxes even more should we need to. What we do not want to do is undo the progress that this has caused by repealing these benefits, and especially not make things worse than they were before.
We can only hope that this does not happen, as this will be far from the fix that Bloomberg believes. As much as some people dislike Trump, and he certainly has his faults, those who actually do know what the economy is and understand that significantly constricting it and bringing down the level of the water for everyone surely isn’t a good idea surely will see that he is the only option in 2020.
The average person on the street doesn’t have much of an idea of this and many get easily railed into populist ideas like the ones coming out of the Democratic camp, and the promotion of misunderstanding that Bloomberg’s op-ed piece accomplishes will only serve to make the matter worse and increase the risk of economic deterioration.
Bloomberg has no chance of winning, but he does have the opportunity to take off one of his shoes, and it still makes a sound when banged upon the table. He has shown us pretty clearly that he has a terrible understanding of the economy, even to the point where he doesn’t even know the meaning of the word. There is too much at stake to ever want to be led by such an amateur.