Tag Archives: economy

Consuming doesn’t produce wealth, production does.

Our favorite economist, Brian Wesbury of First Trust just published and article discussing the Christmas shopping season and “Consumer Fundamentals.”  We changed his headline because there is something fundamentally more important in his comments, and it’s this:  consuming doesn’t make people wealthy, producing does.  No one ever got rich by sitting around consuming; people producing stuff is what makes communities, nations and cultures rich.

Now on to Brian’s commentary on the economy:

Now that Black Friday has come and gone and Cyber Monday is upon us, you’re going to hear a blizzard of numbers and reports about the US consumer. So far, these numbers show blowout on-line sales and a mild decline in foot traffic at brick-and-mortar stores. Both are better than expected given the ongoing transformation of the retail sector.

But Black Friday isn’t all that it used to be. Sales are starting earlier in November and have become more spread out over the full Christmas shopping season, so the facts and figures we hear about sales over the past several days are not quite as important as they were in previous years. Add to that the fact that this year’s shopping season is longer than usual due to an early Thanksgiving holiday.

But all this focus on the consumer is a mistake. It’s backward thinking. We think the supply side – innovators, entrepreneurs, and workers, combined – generates the material wealth that makes consumer demand possible in the first place. The reason we produce is so we can consume. Consuming doesn’t produce wealth, production does.

Either way, we expect very good sales for November and December combined. Payrolls are up 2 million from a year ago. Meanwhile, total earnings by workers (excluding irregular bonuses/commissions as well as fringe benefits) are up 4.1%.

Some will dismiss the growth as “the rich getting richer,” but the facts say otherwise. Usual weekly earnings for full-time workers at the bottom 10% are up 4.6% versus a year ago; earnings for those at the bottom 25% are up 5.3% from a year ago. By contrast, usual weekly earnings for the median worker are up 3.9% while earnings for those at the top 25% and top 10% are up less than 2%.

Yes, that’s right, incomes are growing faster at the bottom of the income spectrum than at the top. A higher economic tide is lifting all boats and helping those with the smallest boats the most. This is not a recipe for stagnating sales.

And so the voices of pessimism have had to pivot their story lately. Just a short while ago, they were still saying the economy really wasn’t improving at all. Now some are saying it’s a consumer debt-fueled bubble.

It is true that total household debt is at a new record high. But debts relative to assets are much lower than before the Great Recession. Debts were 19.4% of household assets when Lehman Brothers went bust; now they’re 13.7%, one of the lowest levels in the past generation. Meanwhile, for the past four years the financial obligations ratio – debt payments plus the cost of car leases, rents, and other monthly payments relative to incomes – has been hovering near the lowest levels since the early 1980s.

Yes, auto and student loan delinquencies are rising. But total serious (90+ day) delinquencies, including not only autos and student loans, but also mortgages, home equity loans, and credit cards are down 61% from the peak in 2010.

The bottom line is that investors should be less worried about consumer debt today than at any time in recent decades. Some think this could change if the Fed continues to raise interest rates, while selling off its bond portfolio. But interest rates are still well below normal levels and the U.S. banking system is sitting on trillions in excess reserves.

The US economy is less leveraged and looking better in recent quarters than it has in years. And better tax and regulatory policies are on the way. The Plow Horse is picking up its pace and consumer spending is in great shape.

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Monday Morning Outlook

Our favorite economist Brian Wesbury on the Economy:

GDP Growth Looking Good 

Brian S. Wesbury, Chief Economist
Robert Stein, Deputy Chief Economist
Date: 10/16/2017
Next week, government statisticians will release the first estimate for third quarter real GDP growth. In spite of hurricanes, and continued negativity by conventional wisdom, we expect 2.8% growth.

If we’re right about the third quarter, real GDP will be up 2.2% from a year ago, which is exactly equal to the growth rate since the beginning of this recovery back in 2009. Looking at these four-quarter or eight-year growth rates, many people argue that the economy is still stuck in the mud.

But, we think looking in the rearview mirror misses positive developments. The economy hasn’t turned into a thoroughbred, but the plowing is easier. Regulations are being reduced, federal employment growth has slowed (even declined) and monetary policy remains extremely loose with some evidence that a more friendly business environment is lifting monetary velocity.

Early signs suggest solid near 3% growth in the fourth quarter as well. Put it all together and we may be seeing an acceleration toward the 2.5 – 3.0% range for underlying trend economic growth. Less government interference frees up entrepreneurship and productivity growth powered by new technology. Yes, the Fed is starting to normalize policy and, yes, Congress can’t seem to legislate itself out of a paper bag, but fiscal and monetary policy together are still pointing toward a good environment for growth.

Here’s how we get to 2.8% for Q3.

Consumption: Automakers reported car and light truck sales rose at a 7.6% annual rate in Q3. “Real” (inflation-adjusted) retail sales outside the auto sector grew at a 2% rate, and growth in services was moderate. Our models suggest real personal consumption of goods and services, combined, grew at a 2.3% annual rate in Q3, contributing 1.6 points to the real GDP growth rate (2.3 times the consumption share of GDP, which is 69%, equals 1.6).

Business Investment: Looks like another quarter of growth in overall business investment in Q3, with investment in equipment growing at about a 9% annual rate, investment in intellectual property growing at a trend rate of 5%, but with commercial constriction declining for the first time this year. Combined, it looks like they grew at a 4.9% rate, which should add 0.6 points to the real GDP growth. (4.9 times the 13% business investment share of GDP equals 0.6).

Home Building: Home building was likely hurt by the major storms in Q3 and should bounce back in the fourth quarter and remain on an upward trend for at least the next couple of years. In the meantime, we anticipate a drop at a 2.6% annual rate in Q3, which would subtract from the real GDP growth rate. (-2.6 times the home building share of GDP, which is 4%, equals -0.1).

Government: Military spending was up in Q3 but public construction projects were soft for the quarter. On net, we’re estimating that real government purchases were down at a 1.2% annual rate in Q3, which would subtract 0.2 points from the real GDP growth rate. (1.2 times the government purchase share of GDP, which is 17%, equals -0.2).

Trade: At this point, we only have trade data through August. Based on what we’ve seen so far, it looks like net exports should subtract 0.2 points from the real GDP growth rate in Q3.

Inventories: We have even less information on inventories than we do on trade, but what we have so far suggests companies are stocking shelves and showrooms at a much faster pace in Q3 than they were in Q2, which should add 1.1 points to the real GDP growth rate.

More data this week – on industrial production, durable goods, trade deficits, and inventories – could change our forecast. But, for now, we get an estimate of 2.8%. Not bad at all.

I like the way he puts it: The economy hasn’t turned into a thoroughbred, but the plowing is easier.

 

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Hurricane Economics

With with the cleanup beginning from the effects of Hurricane Harvey and Hurricane Irma threatening the East Coast, We wanted to share the commentary of Brain Wesbury, Chief Economist at First Trust.

The hits keep coming. Hurricane Harvey left destruction in its wake, and now, Hurricane Irma has Florida in its sights.

It’s been five years since Hurricane Sandy, nine years since Ike and twelve years since Katrina. As with all major weather events, personal tragedy, pain, suffering, and loss are left in their wake. We have prayed, and continue to pray, for those affected. But at the same time, in our job as economists we look toward rebuilding and economic restoration. This is where investors often make two different mistakes about how these massive weather events will affect the economy and markets.

Some might think that, as did Nouriel Roubini after Katrina, the damage itself will cause a recession. Others take the opposite tack and think rebuilding efforts might actually help the economy. Neither are correct. By themselves, the storms will not push the economy off its Plow Horse path.

In the face of disasters we should all be thankful for the (mostly) free markets that help the U.S. respond. These markets allow accumulated wealth and know-how to focus on recovery. The losses will never be fully replaced, but the sheer size and flexibility of the U.S.’s capitalist system allows resources to be shifted and directed toward recovery. The price system makes this happen. While some think no profit should be made from a disaster, it is those profits which allow overall “economic” recovery to occur in relatively quick order.

Some estimate that damage from Harvey could be close to the $108 billion estimate for Katrina (2005), certainly above the $75 billion cost of Hurricane Sandy (2012).

Neither of these previous storms caused a recession, and at the same time, the data show no real acceleration in growth either. Real GDP grew 4.9% at an annual rate in the first quarter of 2006 after Katrina, but never accelerated above 3% in the first two quarters after Sandy. For six and nine month periods before and after these storms, growth rates were similar. In other words, it’s hard to separate the impact of Katrina or Sandy from normal statistical noise. The U.S. grew over 4% annualized in Q1 2005 and in Q3 2014, with no major weather impact.

But even if the bump in real GDP growth in the first quarter of 2006 was due to Katrina, that doesn’t mean it was good news. It would be what Henry Hazlitt in his book “Economics in One Lesson” called the “fallacy of the broken window” – which we recommend all investors read.

Hazlitt told a story about a vandal who broke a shopkeeper’s window, which caused a glassmaker to get an additional order. But the shopkeeper was planning on eventually using that same money to buy a new suit, so the tailor lost an order. In other words, even though rebuilding appears to create new economic activity, fixing things that have been destroyed actually robs an economy over time of the benefits of growth. Repairing physical capital does not generate new wealth, it only replaces old wealth.

Before Harvey, the market consensus was that automakers would sell cars and light trucks at a 16.6 million annual rate in August. Instead, automakers reported late on Friday that they only sold at a 16.1 million rate. Harvey hit an area that represents about 5% of US auto demand and it did so for about 20% of August. This suggests Harvey cut roughly 1% off of August sales nationwide, or that autos would have sold at a 16.3 million annual pace in the absence of the storm.

Automakers should make those sales back up in the next few months. In addition, reports suggest the storms destroyed about 500,000 autos, which will also generate additional sales in the months ahead.

These sales might help make the GDP numbers look better late this year or early next year, but it just represents demand that would have eventually appeared elsewhere in other sectors.

The lesson is that these disasters, while a tragedy in so many ways, do not shift the fundamental path of the U.S. economy. Some think socialist economies can respond better, but this is not true; markets are the most efficient system for guiding resources to areas in need. Free people that get hit with a disaster will overcome and reach new highs, because that’s what people do when they’re free, disaster or not. Godspeed to all those affected directly, and to those helping in recovery.

Our clients and friends in Texas were spared from the worst effects of hurricane Harvey.  Pray for those who lost their lives, their homes and their possessions.  And we applaud those who selflessly came to the rescue of their neighbors.  This showed the best of America.

 

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Good News on the Economic Front

Our favorite economist, Brian Wesbury of First Trust has a new note out that we wanted to share.

While the Sunday morning talk shows discuss the number of Civil War monuments that can dance on the head of a pin…and a rare Eclipse grabs focus…investors might be shocked at how the economy has accelerated.

Although we still have more than a month left in the third quarter, and many more pieces of data to come, as of August 16th the Atlanta Fed’s “GDP Now” model, which tracks and estimates real GDP growth, says the economy is expanding at a 3.8% annual rate in Q3.  If correct, that would be the fastest pace for any quarter since 2014.

We usually take forecasts this early with a grain of salt.  After all, a lot can happen over the remainder of the quarter.  And, on some prior occasions, the Atlanta Fed has projected rapid growth for a quarter mid-way through, only to ratchet back the forecast by quarter-end to a more pedestrian Plow Horse growth rate near 2%.  But, in this particular case, we think the pick-up is real.  In fact, our own internal forecast suggests the exact same growth rate of 3.8%.

One thing more pessimistic analysts are focusing on is that “inventories” are adding about 1% to the third quarter growth rate.  It looks like businesses are stocking shelves at a more normal pace after the lull in the first half of the year.  Excluding this inventory boost, First Trust models have real GDP growing at a 2.4% annual rate in Q3, while the Atlanta Fed model has it at 2.8%.

It’s hard to remember that the original report for Q1 real GDP was less than 1% growth.  That report worried many investors, and doom and gloom stories abounded.  But the foundation for continued economic growth remains in place.

It’s true that the US is unlikely to see tax cuts or real tax reform (or both!) anytime this year.  And this will make sustaining GDP growth at a 3.8% rate very difficult.  But we expect favorable changes in tax policy by early next year.  All that said, the best news is any threat of growth-harming tax hikes remains virtually nil.

Meanwhile, the one area of clear improvement in economic policy under President Trump has been regarding regulation.  The issuance of new rules that slow growth has basically stopped, while harmful old rules are getting rolled back or being reviewed for reform.  This alone can help push growth up by ¼ to ½ percentage point on an annual basis.

In addition, monetary policy remains very loose.  Short-term interest rates are still well below “normal” and there are over $2 trillion in excess reserves in the banking system.  We still expect another rate hike this year, and it seems clear that the Fed will begin slowly reducing the size of its bloated balance sheet.  Assuming the Fed starts balance sheet normalization on October 1st, their $4.4 trillion-dollar balance sheet would shrink by a measly 0.7% by year-end.  This takes the Fed from running a super-easy monetary policy to a very, very easy monetary policy.  In other words, any threat from tight money is remote.

Trade protectionism was the biggest threat to the economy as the new Trump Administration took office, but so far, there’s been a great deal more rhetoric than action on this front.  We remain confident that President Trump realizes a true lurch into protectionist policies would risk a drop in the stock market and would make it harder to meet his goal of faster economic growth.  Protectionist promises are much easier to break (or just ignore), when the unemployment rate is moving toward 4%.  Instead, expect the president to pivot toward trying to get better enforcement of intellectual property rights from China and an open market in oil and gas exports.

We constantly warn investors that one quarter, or one month, of economic data is meaningless.  So far, the Plow Horse has not morphed into a thoroughbred.  However, good news tends to lead to more good news and momentum is building.

Better economic growth means better profit growth and better profit growth will help push stocks higher.  Our 2017 end-of-year forecast of 2,700 for the S&P 500 and 23,500 for the Dow Jones Industrial Average remains in place.  Risks to growth remain low, and the chance of an acceleration remains positive as third quarter data is suggesting.

 

 

 

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The Trump Trade after three months.

The election of Donald Trump was followed by what many called “The Trump Trade.”  Based on the promises made by Trump during the campaign: to lower taxes and reduce regulations – two factors that inhibit economic growth – the stock market rose sharply.  But it’s going to take time and a lot of hard bargaining to actually get to the point where real economic benefits result.

Brian Wesbury, Chief Economist at First Trust:

As we wrote three months ago, it’s going to take much more than animal spirits to lift economic growth from the sluggish pace of the past several years. Measures of consumer and business confidence continue to perform much better than before the election. But where the economic rubber hits the road, in terms of actual production not so much.  It looks like real GDP growth will clock in at a 1.3% annual rate in the first quarter.

He says that we still have a “Plow Horse Economy” and it will take time to unhitch the plow and saddle up the “Racehorse.”

Trump has signed a number of executive orders that will have an impact on regulation, but the bureaucracy is still staffed with the last administration’s appointees and the pace of approving new appointments is glacially slow.

Waiting is the hardest part.

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Tectonic Shifts – Looking Ahead to 2017

The election has created tectonic shifts in government and promises to make bold changes in the economy.  We have been gathering consensus views from some leading financial analysts for 2017

  • Global interest rates are going up.
  • Global inflation is going up.
  • Global growth is going up.
  • Recession risk is going down.

A new consensus is also building.  The rise of nationalistic self-interest is upsetting the old order the world over.  For the past decade central bankers have been in control of economic policy throughout the world.  It has resulted in low or even negative interest rates in an effort to stimulate economic growth.  The result has been like pushing on a string.  Growth has been slow (the string as a whole hasn’t been moving) and the middle class in the developed world has seen their wages stagnate and their jobs disappear (the middle of the string) while those at the top (the far end of the string) have been virtually unaffected.  It’s part of the reason for the change in political leadership in the U.S. and the re-emergence of economic nationalism as evidenced by the Brexit vote in Britain.

As central bank leadership takes a back seat to aggressive fiscal policy, we can expect political leadership to focus on job growth and economic relief for the long-neglected middle class.  Domestically, here is what we expect to see:

Tax reform:  Trump’s campaign promised corporate tax reform.  To make American companies more competitive globally, he has proposed reducing corporate tax rates from 35% to 15%.  A special 10% rate is designed to repatriate corporate profits held offshore.

Individuals will be taxed at three rates depending on income: 12%, 25% and 33%.

Fiscal policy: The Trump administration wants to spend new money on infrastructure: transportation, clean water, the electric grid, telecommunications, security, and energy.

Health care: Trump wants to repeal and replace Obamacare.

Trade: The new administration has vowed to withdraw from TPP (Trans Pacific Partnership) and renegotiate NAFTA (North American Free Trade Agreement).  They also intend to challenge China regarding currency manipulation and unfair trade practices.

Immigration: President-elect Trump intends to establish new, tougher immigration controls to boost wages, build a wall along the U.S./Mexico border, deport criminal aliens and end sanctuary cities.

Economy: 25 million new jobs over the next decade is the goal of the incoming administration.  They aim to boost economic growth from 1.5% to 3.5% or 4.0% annually.

The Trump administration will focus on job creation, economic growth, infrastructure spending, reduced regulation, and energy independence while reducing governmental efforts to prevent climate change.  The people that Donald Trump has chosen for his cabinet are largely from the private sector; people that have backgrounds in running successful businesses and creating jobs.

These things are the primary reason that the stock market has reacted well to the election of Donald Trump.  Corporate earnings have been essentially flat for the past three years.  Professional investors see opportunities for renewed economic growth, which will increase corporate profits.  While we view this development with optimism, we always remain cautious.  We expect increased market volatility, especially if terrorist attacks continue throughout the globe.  We also expect interest rates to rise as the Federal Reserve brings rates to a more historically normal level.

We also see opportunities for the creation of new companies.  The number of publicly traded companies has dropped by nearly 50% since 2000.  At the same time, the number of companies that are held by private equity firms has grown explosively – by a factor of six!  This provides a great opportunity for privately held companies to go public and provide yet another opportunity for greater market growth.

As always, we remain cautious in keeping with our philosophy of preserving our clients’ capital.  Over the long term, we see the potential for a new American renaissance.

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The New Trump Economy

We have been talking about the “Plow Horse Economy” for quite a while now.  Low interest rates designed to spur economic growth have been offset by other government policies that have acted as a “Plow” holding the economy back.

Market watchers have assumed that the November election would see a continuation of those policies.  The general prediction was for slow growth, falling corporate profits, a possible deflationary spiral, and flat yield curves.

What a difference a week makes.  The market shocked political prognosticators by standing those expectations on their heads.

Bank of America surveyed 177 fund managers in the week following the elections who say they’re putting cash to work this month at the fastest pace since August 2009.

The U.S. election result is “seen as unambiguously positive for nominal GDP,” writes Bank of America Merrill Lynch Chief Investment Strategist Michael Hartnett, in a note accompanying the monthly survey. 

The stock market has reached several new all-time highs, moving the DJIA to a record 18,924 on November 15th, up 3.6% in one week.

Interest rates on the benchmark 10-year US Treasury bond have risen from 1.83% on November 7th to 2.25% today (November 17th), a 23% increase.  Expectations for the yield curve to steepen — in other words, for the gap between short and long-term rates to widen — saw their biggest monthly jump on record.

 WealthManagement.com says that

Global growth and inflation expectations are also tracking the ascent of Trump. The net share of fund managers expecting a stronger economy nearly doubled from last month’s reading, while those surveyed are the most bullish on the prospect of a pick-up in inflation since June 2004.

Investors are now also more optimistic about profit growth than they have been in 15 months.

Whether this new-found optimism is justified is something that only time will tell.  In the meantime to US market is reacting well to Trump’s plans for tax cuts and infrastructure spending.  Spending on roads, bridges and other parts of the infrastructure has been part of Trump’s platform since he entered the race for President.  It’s the tax reform that could be the key to a new economic stimulus.

According to CNBC American corporations are holding $2.5 trillion dollars in cash overseas. That’s equal to 14% of the US gross domestic product.  If companies bring that back to the US it would be taxed at the current corporate tax rate of 35%.  The US has the highest corporate tax rate in the world.  The promise of lower corporate tax rates – Trump has spoken of 15% – could spur the repatriation of that cash to the US, giving a big boost to a slow growth US economy.

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The Election is Over. Now What?

The general election is over and the people have spoken.  Donald Trump will be the 45th President of the United States.

The run-up to November 8th has shown that our country is sharply divided politically.  Some people will be happy and others disappointed by the result.  However, it’s important to avoid letting your personal political beliefs and emotions cloud your long-term investment decisions.

Our job as your financial advisor is to help you navigate your way through the upcoming economic and political changes.  Forecasters can be wrong, and we have seen that pollsters can be too.  We avoid making big bets based on crystal ball gazing.  So how do we see the future?

As students of history we think that countries that keep their governments relatively small, in terms of spending, regulation, and tax rates, will provide their residents with an advantage in pursuing financial prosperity.  Regardless of who won this year’s election, we think that economic growth in the U.S. will generally continue, even with the policy mistakes the winner may make.

Since 2009, we have experienced what we’ve been referring to as a “Plow Horse Economy.”  That means that the macro-economy has gradually recovered even as many people have not seen much of an improvement in their individual economic lives.  The overall economy has grown despite the fact that debt, regulation and political turmoil have acted as a “Plow” holding the economy back.  Despite this drag, the major U.S. stock indexes are up almost 50% over the past four years.

We remain constructive on the economy and the markets.  With the election in the rear view mirror, we expect the Federal Reserve to begin its long, slow walk to raising interest rates from today’s near-zero percent.  We expect those moves to be very gradual and to have little long-term effect on the market.

One other statistic makes us optimistic for the future.  Consumer spending is said to account for 70% of the U.S. economy.  Unfortunately, that vast middle class that we think of as the “average consumer” has not seen much in the way of a fatter wallet over the last few decades.  That was one reason for the popularity of Trump’s message to the middle class that he would restore good paying middle class jobs.  We believe that if he is able to follow through on this promise, a resurgence of earnings growth by the middle class will be a positive for the American economy, and hope that he is able to implement feasible policies to promote such growth.

 

 

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Exploding health care costs

Here are some scary projections about the cost of health care for retirees:

 The average lifetime retirement health care premium costs for a 65-year-old healthy couple retiring this year and covered by Medicare Parts B, D, and a supplemental insurance policy will be $266,589. (It is assumed in this report that Medicare subscribers paid Medicare taxes while employed, and therefore will not be responsible for Medicare Part A premiums.)

If we were to include the couple’s total health care (dental, vision, co-pays, and all out-of-pockets), their costs would rise to $394,954. For a 55-year-old couple retiring in 10 years, total lifetime health care costs would be $463,849.

These projections come from Health View Services.

“Obamacare” enrollment has just begun for the coming year and premiums are increasing an average of 22% even as deductibles have increased to $6,000 for the “Bronze” plan before insurance actually pays anything.   The number of companies offering health insurance to individuals is shrinking and some of the larger companies have stopped offering individual policies altogether.

Many people tell us that health care is one of their top concerns in retirement, right up there with running out of money.  Unfortunately the majority has not even begun to put money aside for retirement and those who have underestimate the cost of doctors, hospitals and drugs during their retirement years.

No matter where you are in your life cycle, you should take action now to get to know a knowledgeable financial advisor, preferable a fee-only Registered Investment Advisor (RIA) who specializes in retirement and who can provide guidance on these issues.

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Economic Growth Does Not Kill People – The Opposite is the Case

Brian Wesbury, Chief Economist at First Trust, noted that members of the elite press are telling the people that they had better get used to slow growth.  That economic growth actually kills people.

Two weekend articles, in major US newspapers, left us shaking our heads. The Washington Post wrote that “economic growth actually kills people,” while The Wall Street Journal published a piece saying, ironically, we should get used to slow growth – it’s normal.

Both are ridiculous.

First, The Washington Post cited statistical studies that blame premature death on economic growth (more pollution, more work and more risk).

The statisticians found that pollution and alcohol were the #1 and #2 causes of death as economic growth accelerated. We couldn’t help but think about the Soviet Union, where pollution and alcoholism were rampant in the 1970s and 1980s, but economic growth was non-existent. Economic growth does not cause pollution; to say it does is a red herring. The air in Boston was much worse in the 1800s when wood-burning fireplaces were used to heat homes. Public health was a serious problem before sewage systems and water purification.

 

 The articles in the Post and the Wall Street Journal try to make the case that Americans need to forget about growth.  Rather, the government should focus on making the social safety net bigger, on rule-making, and making everyone more “equal.”  In fact, we are told that growth is a killer.

Evidence of the opposite exists.  Stagnating wages and loss of jobs in this country has been followed by alcoholism and rampant use of heavy-duty drugs like heroin, leading to an increase in premature deaths in America’s heartland.

There is no reason why the American economic engine cannot be revved up to the benefit of all.

Roughly 70% of the US economy depends on consumer spending.  The return of good paying jobs to communities thoroughly the country would result in a significant surge of economic growth.  And by good paying jobs we are not referring to the jobs created by the internet economy on the East or West Coasts.  The jobs produced by companies like Google, Facebook, Twitter and other Internet based “infotainment” companies produce great wealth for their creators but no actual consumer product.  What has surprised many economists – but should not have – is that they have not produced nearly the number of jobs that were predicted.  Meanwhile, industries that produce actual goods that people need to live – food, clothing, housing, fuel, medicine, cars – industries that once produced good paying jobs – are being outsourced or automated.

The country needs to focus on this issue or face increasing unrest among people who feel disrespected and marginalized.  Reviving American industries – in America – can be the spark that leads to a better future for everyone.

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