Wednesday Edition: Your Money and Trump
Plus: Immigration rhetoric matters.
Bubba
24 Jul
1. Trump’s Impact on Your Money
What are the financial upsides and downsides of a potential Donald Trump presidency? (Genuine Impact)
Chart: Genuine Impact
Prices: Inflation would spike by around 3.6% under Trump, according to projections from Moody’s, the influential financial services and credit rating firm.
Trump’s tariff policies and immigration restrictions could cause prices to go up due to a tighter labor market and higher costs of goods.
Purchasing power: The strength of the U.S. dollar improved in the immediate aftermath of Trump’s 2016 presidential victory, and we could see a similar phenomenon if he wins in 2024.
Chart: Genuine Impact
Stocks: Trump’s deregulatory policies are expected to benefit banking, healthcare, cryptocurrency and oil stocks, in particular.
Big picture: Following an interview with Trump earlier this month, Bloomberg reporters summed up his “unorthodox” economic agenda as “tax cuts, more oil, less regulation, higher tariffs and fewer foreign financial commitments.”
The former president himself described “Trumponomics” as “low interest rates and tax cuts.”
Bloomberg:
It’s “tremendous incentive to get things done and to bring business back to our country.” Trump would drill more and regulate less. He’d shut the Southern border. He’d squeeze enemies and allies alike for better trade terms. He’d unleash the crypto industry and rein in reckless Big Tech companies. In short, he’d make the economy great again.
Bubba’s Two Cents
Maybe he’s just tailoring his message for the audience, but Trump's chat with Bloomberg doesn't exactly match the narrative that the GOP is now a worker’s party taking a more adversarial stance toward Big Business. But then again, Trump has always been a tangle of contradictions. Tax cuts and tariffs. Deregulation and Big Tech crackdowns.
2. More Funding Isn’t Always the Answer
A three-year basic income study involving 3,000 participants found that giving Americans $1,000 per month leads to them working fewer hours and making less money. (Business Insider)
A new National Bureau of Economic Research study: Recipients and their partners worked approximately 1.4 hours less per week and their individual incomes declined by $1,500 per year relative to the control group.
For every dollar received, total household income excluding transfers fell by at least 21 cents, and total individual income fell by at least 12 cents.
More, from Business Insider:
"We do see significant reductions in stress, mental distress, and food insecurity during the first year, but those effects fade out by the second and third years of the program," the report said, noting that $1,000 a month could only do so much. "Cash alone cannot address challenges such as chronic health conditions, lack of childcare, or the high cost of housing."
Related: A basic income program for homeless people in Denver, which cost $9.5 million and involved 800 participants, has had similarly lackluster results (Group C in the chart below is the control group, which received just $50 monthly and yet had comparable outcomes to groups receiving $1,000 per month).
A take from journalist Noah Smith: “This is a really disappointing result for basic income. $1000 a month is a lot of money, and the apparent effect on homelessness, relative to the control group, was slim to none.”
Bubba’s Two Cents
In all sorts of policy areas, one of the first things people jump to is a need for more funding. But often if you dig into it, you find that simply throwing out more cash doesn’t solve much. Whether it’s education (where America spends more than virtually any other country) or healthcare (the U.S. has one of the most expensive systems on the planet), money is usually not the problem.
Wealth inequality has been a major theme in politics, but the gap has narrowed, at least when it comes to wages. (USA Today)
The latest: According to the latest Bureau of Labor Statistics data, average hourly wages rose 3.9% from June 2023 to June 2024, outpacing inflation.
Since the pandemic began, hourly earnings have grown by 22.3%, surpassing the 20.8% increase in the Consumer Price Index.
According to a Bankrate survey, 66% of Americans saw wage increases, 38% got a raise and 16% found better-paying jobs between 2022 and 2023.
The trend: Low-wage workers’ earnings grew faster than those of high- and middle-wage earners for years (although nowadays the growth rates are about even).
Chart: Indeed
Derek Thompson, staff writer at The Atlantic, discussing wage growth in 2019 (before the pandemic, which made it more complicated to analyze):
[A] tight labor market and state-by-state minimum wage hikes have combined to push up wage growth for the poorest workers. The sluggishness of overall wage growth is concealing the fact that the labor market has done wonderful things for wages at the low end.
Related: According to a new analysis by economist Ernie Tedeschi, the wage gap between high and low earners has narrowed since 2014.
Tedeschi:
The strong labor market of the late Great Recession recovery and the last few years, interrupted temporarily by the sharp but relatively rapid pandemic shock, appears to have sustained persistent wage pressures for low-income workers.
Bubba’s Two Cents
I’ve got two thoughts here —
1) On a societal level, it may not be a bad idea to try to narrow the wage inequality gap, if only because it seems to be contributing to a lot of the resentment in American life.
2) There are likely to be tradeoffs to policies that try to achieve this.
Case in point: A recent New York Federal Reserve study, which we covered in Monday’s edition of Bubba News, showed higher wages for grocery stores workers have been driving up food prices.
Chart: New York Federal Reserve
4. Immigration Rhetoric Matters
A migrant caravan is making its way to the U.S. as would-be asylum seekers race to get into the country ahead of a potential Donald Trump presidency. (AP)
Associated Press correspondent Edgar Clemente:
Some of the members of the group said they hoped to make it to the U.S. border before elections are held in November, because they fear that if Donald Trump wins, he will follow through on a promise to close the border to asylum-seekers.
Deja vu: Four years ago, asylum seekers expressed similar sentiments prior to the 2020 election between Trump and Joe Biden, who campaigned on rolling back his predecessor’s restrictive immigration policies.
What Alexander Perez de Corcho, a Cuban asylum seeker, told Al Jazeera in 2020: “We know it’s just a campaign, but we have hope that [Biden] will help us.”
The results: 70,000 migrants were detained or arrested at the border in each of the first four months of Biden's presidency, and immigration levels would continue to surge throughout much of his term.
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