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The Trump Budget Won't Make America Great Again

The first reaction is all gut.  The budget, on its face, would represent a gigantic redistribution of resources from the poor to the rich.  To say that that is morally bankrupt is to understate the case.  There is no rational argument for such a policy.  

The administration makes three cases for its proposals.  The first is that tax breaks for the rich while robbing the poor to pay for the tax cuts will generate so much growth that the taxes on the increased income will more than pay for the tax relief.   That argument has been advanced again and again despite a continuing lack of evidence that it has ever actually worked out that way.  If you want to see the most visible and colossal evidence for the failure of this theory, you have only to look at Kansas, which has been virtually bankrupted by Governor Sam Brownback's determination to go down this rat hole. 

The second is that all the administration is doing is giving freeloaders an incentive to work.  That may be a masterpiece of propaganda, but not a masterpiece of reasoning.  Someone has to explain to me how taking away financial support to go to college from low-income high school graduates is going to give these "freeloaders" an incentive to work. I want to know how giant cuts to the National Institutes of Health research budget on life-saving drugs is giving freeloaders an incentive to work.

The third and last argument this administration has advanced for this budget is that the evidence that the programs they plan to terminate work is either weak or nonexistent.  Without conceding the strength of their evidence that they do not work—the evidence is at worst mixed—let's just look at the logic of the argument.  Almost all of these programs are intended to help vulnerable populations.  Surely, if they do not work, the responsibility of government is to replace them with stronger programs intended to accomplish the same objective.  Replacing them with nothing but "choice" suggests that the administration does not care what the question was as long as the answer is choice, which is the very definition of policy made on the basis not of evidence but of ideology.

When I say ideology, I am referring to the belief that something is true despite all the evidence to the contrary.  Does the President's Budget Director Mick Mulvaney actually believe, despite decades of evidence to the contrary and the counsel of most economists from both parties, that giant tax cuts will pay for themselves?  Or could it be that ideology is not really the problem here, that greed is the problem?   Are we looking at the result of a political system that has been captured in part by the very rich, people who spend their time on the golf course telling each other that it is really they who produce economic growth and are entitled to its benefits and who now happen to have the political power to enforce those views on the rest of us?  Or is it both?

That is my gut speaking, my gut honing in on the gigantic injustice that would be wreaked on the nation if this budget were in fact to become the United States government budget.  And then I relax a little bit.  It will not happen, I say to myself.  Ronald Reagan offered a budget like this to the Congress and the Congress virtually ignored it.  So it won't happen this time either, I say to myself.

And then I stand back a little further and ask myself what the budget would look like if it came from my computer, not theirs.

Would my budget simply be the same as last year's budget?  Well no, not exactly.  Let's for the moment leave the technicalities aside, the constraints of sequestration and the other leftovers from the grand compromise the two parties made to keep the government going a few years back. The question I want to raise here is the larger question of goals and strategy for our country.

First, we start with the recognition that most of the budget is for formula-driven social programs and the payment of interest on the national debt.  If you add to that the Department of Defense and allied security agencies, you have spent more than three quarters of the budget.

For years now, the baby boomers were in the workforce, contributing to the gross national product, paying into the social security fund and therefore paying the social security costs of the elderly, the retired and the disabled who were not in the workforce.  Now the baby boomers are themselves retiring and that changes everything.  The numbers of retired greatly increase and the number who are left to pay for their retirement greatly decrease (remember that when you draw down your social security account, that money does not come from your deposits, which disappeared a long time ago, but from the new deposits being made by people currently contributing to the fund).  Now add in the fact that, as outsourcing and automation wreaked their havoc on the economy, the rate at which destitute Americans applied for and got what amount to permanent disability payments sharply increased.  Now add in the fact that young people are delaying marriage and childbirth longer and having fewer children and you can see that, putting it all together, there will be many fewer people in the workforce trying to support many more people in retirement and on disability than we used to have.  This problem will get more, not less, severe as we plough forward.

Then look at medical care. There will be more old people and they will be living longer.  The cost of keeping them alive is going up steeply.  The biggest costs of medical care by far are incurred in the final months of life.  Put this all together and you will see that more people living longer on retirement and therefore without an income who require ever-greater and more acute health care services for which they have insufficient financial resources is a recipe for steadily ballooning health care costs.  The pressure for government to pay for most of those costs will be intense and will increase as the baby boomers pass from the workforce into the retirement force.

At the same time that these mostly demographic realities wind through the system, the dynamics of global economic change and the advance of automation and related technologies are likely to take an enormous toll on the workforce over the next 25 or 30 years. The reality is that a very large fraction—no one really knows how many—of the jobs now available for people with less than a four-year college degree—about two-thirds of our current workforce—will go up in smoke as cars and trucks drive themselves, malls and retail stores are replaced by e-retailers, waiters and waitresses are replaced by i-Pads at restaurant tables, short-order cooks are replaced by automated cookers and janitors are replaced by little R2-D2s scuttling across the floor and vacuuming up the corners.  The jobs that are in greatest danger are the jobs that can be done by people with a 7th or 8th grade level of literacy.  More than half of our high school graduates fall in to that category.  They are standing in front of a Mack truck now. If they cannot get decent jobs, if they cannot become full members of the middle class, then not only do they have to be deducted from a workforce that is getting smaller anyway, but they must be added to the number of people who must be supported by the workforce that is left.

So where does that leave us?  It leaves us with the question of what strategy would get us out of this jam.  In economists' terms, we have a giant productivity problem. If the challenge is to find a way to maintain our standard of living with a much bigger population of dependents and a much smaller proportion of working people to support them, and the cost of maintaining each dependent is going to go up, then it follows that each member of our future workforce will have to produce a lot more than each member of the current workforce—just to stay even. 

But the reality is that the U.S. is in the midst of a long-term productivity slump.  There is no agreement among economists as to why this has happened. My own guess is that there are two related causes.  The first is that we are running a dual economy.  One of those economies can be found in a number of our biggest cities, the ones with the leading universities, research centers and high-tech firms.  These are the high-rent districts, places flooded with big-bucks professionals and espresso coffee shops.  The other economy is all over the country, places where the paint is peeling off the houses, payday loan companies and pawn shops line Main Street and the factories shut down a couple of decades ago.  My guess is that the productivity growth figures in the first of these two Americas is pretty high and the productivity growth rate in the second and much larger set of communities is abysmally low.  My guess is that the other cause of the very poor productivity growth rates is that the steady rise in the educational attainment of the workforce stopped in the 1980s, and there has been no improvement in either the quantity of education the average member of our workforce has or in the quality of that education since then. 

Suppose I am right about that.  Suppose that productivity is the key problem and suppose further that we are not likely to weather the gathering storm unless we can find a way to greatly increase the productivity growth rate.  What does that have to do with the Trump budget?

What would it take to greatly increase the amount of goods and services each worker can produce?  The shortest answer to that question is better technology and better educated and trained workers. If we had both of those things going for us, it would be nice to have customers for those goods and services who have money in their pockets.  If we had enough great breakthrough technologies and a steadily growing team of highly educated, very well-trained people in our workforce, then watch out, because we would be unbeatable.  And all those people would have money in their pockets, and the whole economy, not just pockets of it, would be thriving.

So what would that take? Well, the shorthand for that is the opposite of everything the Trump budget is proposing.  We would have to be pouring money into research and development, for everything from environmental tech to new drugs to robotics to water technology and new forms of harnessing energy from biomass.  We would have to become the most attractive place in the world for the most brilliant students anywhere on the globe to emigrate to study in our universities and then stay to drive the next stage of high-tech entrepreneurship in our start-up firms.  Recognizing that it will not be long before the children of the people who are now minorities in our communities become the majority in our schools and then in our workforce, we would spend whatever it takes to make sure they get a world-class education, because we will all depend on them to fund our retirement, staff our hospitals and design the drugs on which we will depend in our old age.  We would create massive job training and retraining programs for the people whose current skills qualify them only for unemployment.

"Ah, yes," the administration will say, "We've got you covered on that.  We are going to savage the funds now going to disadvantaged students in every corner of the land in order to provide choices among schools to parents.  Don't worry, those disadvantaged students don't really need the food stamps we are taking away from them, the Medicaid that is their only lifeline to medical care, the tuition assistance they were relying on to have some chance of going to college, or the job training programs we are planning to shut down.  No, they don't need any of that.  What they need is choice.  What did you say?  You asked whether they asked for these choices?  You are reminding me that the organizations that represent them in Washington said that choice was not on their agenda.  What does that have to do with it?  We know what they need, even if they don't.  And you asked about the evidence that choice policies of the sort we are advocating can produce the kinds of gains in student performance you say are needed?  Well, we're sure there must be some evidence somewhere.  Don't worry, we'll get back to you on that." 

The truth is that the administration's budget will make enormous cuts in exactly the kind of research and development that is the key to our economic future, will cripple the universities that have driven the development of our best technologies decade after decade, will kneecap the disadvantaged students on whom the future of all of us now depends.  My whole argument hinges on the idea that our people are our future and our future depends on giving our people, all of them, a world-class education and training to match.  And what is the administration's strategy for that?  It is to cut the education and job training budget to ribbons and offer us choice as its sole strategy for improving student achievement.  Choice well done can help at the margins, but what I just described is not a weight that choice can bear.

The budget is a prism that casts a shining beam on who we are as a nation, what we believe in and what kind of nation we want to be.  I would argue that the budget we need is neither the budget the administration has offered nor the budget we have.  The Democrats will have to acknowledge that the imperative is not to keep all the social programs we have and start adding more (yes, it is true that some are not working as well as they should and it is also true that some are there not to provide needed services but to earn political support) and the Republicans will have to give up tax reduction as the holy grail of national politics (even if that costs them the open pockets of some of their richest contributors).  The question we all have to ask is, in a very constrained economic environment, how much can we afford to spend on the current needs of our people while making the investments we have to make now to enjoy broadly shared prosperity tomorrow?

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