Preventing Youth Suicide Requires Active Parental Involvement

Vijay K. Mathur

“Everything depends upon upbringing”.

Leo Tolstoy

Young adults in Utah and throughout the US are increasingly suffering from social pathologies such as drug abuse, depression, suicide and/or suicidal thoughts.  The Salt Lake Tribune, April 5, 2018, reported on a CDC study, finding that during 2011- 2015 the Utah suicide rate doubled, “growing four times faster annually than the national average.”  News reports show that suicides among teens at Harriman High School have reached crisis level.  

Henry J. Kaiser Family Foundation reports that opioid use deaths in Utah from the age of 0-24 years increased from 2014 to 2016.  Utah Department of Health reports that suicide rate among Utah youth aged 10 to 17 exceed US rate since 1999, is the leading cause of death and has been increasing since 2007.

School authorities, teachers, health and psychological experts are in a quandary about how to get a handle on these pathologies. Since a large percentage of suicides are committed with the use of firearms, CDC blames easy access to firearms.  But access to firearms does not address preventive causes of suicide. 

I recognize that there are various causes of stress and depression among young adults and the resultant tendency to commit suicide.  However, the most important factor that is lost in the discussion, that gets only cursory attention from experts and policy makers, is the role parents play in the lives of their children. 

Numerous studies find a very significant role of parents in the emotional well being of their children.   T. Holms and R. Rahe reported in their study in the Journal of Psychosomatic Research(1967), that out of 10 stressors on a psychological stress test for young people, 8 are parent related.  Parental attention for the emotional well being of children requires parental time.  When both parents are working or a single mother has to work and raise the family, it becomes all the more important to allocate scarce time efficiently to address stress and other emotional issues confronting their children.

A large scale study by F. Van Wel, H. Linssen and R. Abm in the Journal of Youth Adolescence(2000) found that parental bonding improves psychological well being, as measured by stress and suicidal thoughts, in a sample of 1688 Dutch adolescents /young adults from 12 to 24 years of age. 

I am sure parents love their children. However, bonding and parenting time must compliment love.  Children should feel open and comfortable to unload their emotional stress on their parents as well as share their joyous moments, relationships with friends and other concerns.

The macro study by myself and Donald Freeman, Health Economics(2002), examined the role of income and parenting time in predicting adolescent suicide rates, using a sample of 48 states of the continental US from 1970-1997.  This study used per capita wage income in the statistical analysis to explain adolescent suicide rates, after controlling for other contributing factors such as alcohol use, divorce rates, large family size and unemployment.  

Wage income affects youth suicide through two components.  Increase in wage income of parents decreases suicide rates as it relieves some of the familial emotional stress associated with lack of income, but it also increases incentive to increase work time, hence decreasing parenting time.  Lack of parenting time increases suicide rates.  However, the good news is that the effect of income dominates the effect of parenting time on suicide; higher wage income and parenting time have positive social value.

Professor James Heckman argues in Economic Inquiry(2008), that parental attention to their children is necessary to develop cognitive (analytical) skills and non-cognitive skills such as self-esteem, motivation and self-control.  Studies also show that more educated working mothers, as opposed to less educated, devote more time to childcare to develop cognitive and non-cognitive skills.  

Thus income security with living wage to less educated and low-income parents matters for healthy family lifestyle.  However, serious consideration must also be given to provide parenting skills to such families so that they are able to raise children with cognitive and non-cognitive skills.  Churches, schools and other non-profit organizations could help.  

Mathur is former chair and professor of economics, now professor emeritus, Department of Economics, Cleveland State University, Cleveland, Ohio.  He resides in Ogden, Utah.

Rent Seeking Plutocrats Undermine Capitalism and Democracy

Vijay K. Mathur

Doubts are often raised about capitalism and its corollary free enterprise system.  Karl Marx recognized that capitalism is one of the stages of development of a society.  But he argued that capitalism would eventually end up with a class structure of bourgeoisie (capitalists) and proletariat (wage earners). Conflict of economic interest between these classes would breed the destruction of capitalism.

According to Martin Spechler inPerspectives In Economic Thought(1990) Marx theorized that, in the class conflict, the most important organization that supports the bourgeoisie is the state.  Capitalists primarily accumulate capital by suppressing wages of the proletariat class.  Reform and laws enacted by the state often popularized to benefit workers are mainly aimed at keeping capitalists’ control of the economic system.  

These arguments of Marx are prophetic. Any impartial observer of the US economy today would notice economic hardships of the middle and low income working class and enrichment of wealthy, many of whom are rent seeking plutocrats.  Even though the concept of rent as surplus in the value of a factor of production in fixed supply was fully developed by English economist David Ricardo in 18^thcentury England, it has now been generally applied to other activities, including political favors to lobbyists and their clients with deep pockets. Mercantilists in 18^thcentury Europe used royal favors to gain economic benefits at the cost of the rest of the citizens.  Following Mercantilist footsteps, rent seeking behavior in the current political context arises when any entity earns income or rewards from the political system without undertaking any productive effort.  

Ideally in a democracy, all citizens are supposed to have the same political influence in the enactment of rules, regulations, and tax and expenditure policies.  However, political inequality complemented by income inequality breeds a class of political elitists and rich plutocrats who have undue influence on the political system to gain more economic favors. These favors are called rents.  Professor Joseph Stiglitz states that rents could also arise when businesses charge above market prices for products sold to government, monopolies charge prices higher than competitive market prices, and financial advisors and/or banks extract higher prices and commissions from those less informed about financial matters.  

Let me provide a few examples of rents. The recent Congressional bill meant to lighten the regulatory burden of small banks under Dodd-Frank Act of 2010, after the Great Recession, will also end up increasing profitability of large banks, such as Bank of New York Mellon and State Street  (The Wall Street Journal, March 15, 2018). Other examples are the use of tax breaks for land conservation by syndicated conservation easements (The Wall Street Journal, March, 15, 2018), reduction in the cost of pollution control of coal mining companies by relaxing environmental regulations and reducing the size of Bears Ears and Grand Staircase-Escalante National Monuments by the Trump administration for the benefit of oil, gas and uranium companies.  

The Salt Lake Tribune (SLT), January 22, 2018, reported that in Utah 92 percent of the money raised by legislators in 2017 came from special interest groups. TheSLT, March17, 2018, also reported that UtahRepresentative Mike Noel stands to reap substantial gains in the value of his land and water rights if he succeeds in his efforts in the construction of the taxpayer-funded 140-mile Lake Powell Pipeline, that brings Colorado River water to Southern Utah.  It is also well known that Senator Orrin Hatch is a great benefactor of the pharmaceutical industry, as well as a receiver of large campaign contributions from that industry.  It seems politicians at state and local levels are not immune to this behavior. 

  

Government intervention is required if competition fails to regulate market forces in the provision of goods and services. However, it is problematic for the sustainable functioning of the private enterprise system and democracy when the government implements rules, regulations, tax, and expenditure laws to promote the economic interest of a minority of rent seeking wealthy capitalists. Historian Walter Scheidel cogently argues in The Great Leveler(2017), that historically states, usually monarchies, have always openly bestowed economic favors on the wealthy and even made them an integral part of their rule.   History has repeated itself in the Trump administration.  However, extreme income and wealth inequality with explicit or implicit support of the government, in a private enterprise system, cannot sustain a dynamic and vibrant private enterprise in a democracy in the long run. 

Frustration of middle and lower income Americans with the loss of economic status, wealth, diminished hopes of future well being and lack of influence on the political system is not a recipe for a peaceful and thriving populist democracy. A survey in The Wall Street Journal, December 7, 2017, reveals increasing acceptance of socialism among Millennials.  Hopefully, politicians pay attention to the economic plight of middle and lower income Americans for the preservation of capitalism, private enterprise and democracy.

Mathur is former chair and professor of economics, now professor emeritus, Department of Economics, Cleveland State University, Cleveland, OH.  He resides in Ogden.

Educational Divide, Emerging White Underclass and Desperation

Vijay K. Mathur

On January 13, 2016, I published a blog in The Huffington Post, where I pointed out that an increasing proportion of families and “their future generations” are ending up in the bottom of the income distribution and hence are trapped in the cycle of poverty.  Poverty rates vary among racial groups.  Blacks and Hispanics face twice the poverty rates of Asians and Whites.  In August 29, 1997, Time magazine’s lead article termed poor Blacks as an Underclass, as they were entrapped in the cycle of psychological and material deprivation even after 20 years of civil rights and anti-poverty programs.

Nobel Laureate Economist Angus Deaton, (http://knowledge.wharton.upenn.edu/article/despair-and-the-white-working-class/, in a conversation at Knowledge@Wharton, April 6, 2017, is raising a similar issue, with a slightly different twist, pertaining to the effect of material deprivation and lack of economic opportunities on working class middle age White undereducated Americans.  Most economists have also been pointing out that, in the emerging technologically sophisticated economy, the role of higher education and skills beyond high school will play a significant role in determining the success of job seekers in the labor market and their economic well-being.   

Professor Deaton argues that the mortality rate among Non-Hispanic Whites in their early 50’s,  “after 100 years of declining had turned the wrong way or at least flattened out.”  (See source above).  This is happening to both men and women, and not to Hispanics and African-Americans, and not in other rich countries.  Most deaths are due to alcohol consumption, drug overdose and suicides.  Deaton has argued in his book, The Great Escape (2013), that well-being is primarily based upon income and health. 

In this age of rapid technological change, job opportunities open up for those who have acquired human capital that complements physical capital with advanced technologies. The Wall Street Journal, November 30, 2017, reports a study by McKinsey Global Institute that predicts that around the world close to 375 million workers, displaced by new technologies, will have to find new occupations by 2030.  Public policy makers and businesses have to equip workers with new skills and technical training to minimize labor market disruptions of automation.  The US is not alone in facing this challenge.  In fact, even now, manufacturers in the US have been complaining about the problem of finding technologically skilled workers (The Wall Street Journal, December 1, 2017).

Those with less education are facing desperate times in finding job opportunities that will create a sense of income security and economic well-being.  The Trump administration and Republican Congressional members are derelict in providing sufficient support to Americans who need new skills, job training and education to meet challenges of automation in the labor market.  Job uncertainty, income insecurity and inadequate health care of this group of Americans create a sense of anxiety, despair and depression compounded by the lack of family ties, and public and community support.   Unhealthy and depressed workers cannot be productive members of society.

Deaton argues in his book (p. 207) that despite the belief in the American dream, the US is not  “particularly good at actually delivering equal opportunities.” This is supported by high correlation between fathers’ earnings and sons’ earnings in the US, highest among OECD countries of Europe and only lower than China and some Latin American countries.

Deaton states that this problem among Non-Hispanic Whites with low levels of education has arisen due to “...a cumulative disadvantage over life in the labor market, in marriage, in child outcomes and in health triggered by progressively worsening labor opportunities at a time of entry…”(See source above).  A study by John F. Helliwell and Hafang Huang (HH), Economic Enquiry, October 2014, using subjective well-being (SWB) data covering life evaluations and emotional experiences reports, finds that SWB increases with income, education, and marriages, and diminishes with increase in unemployment rates. Unemployment rate increase also affects emotional well-being of employed, since it threatens workplace downsizing --  hence their job security.  HH also find, for those who are employed, that a one percent increase in unemployment rate is equivalent to a 4 percent decline in household income. 

A labor market that creates employment and occupational growth for skilled and highly educated workers and dries up job opportunities, occupational growth and economic well- being of less skilled and educated workers is bound to be disruptive to households and the nation.   It would also lead to increasing levels of income inequality that we experience today in the US as opposed to other advanced nations. And as Deaton would argue, income inequality is harmful to the nation and its economic system when rent seeking (special favors from government by lobbying) rich affect public policy that deprives lower income people of services, such as education and health care to enrich themselves.  In fact that is what the Congressional Republican’s tax law will do.  

I hope that the Trump administration and some Republican Congressmen will be bold enough to realize that just enacting a tax law to make a political point is not an achievement for the well-being of Americans.

Enacting tax and spending laws that benefit all current and future generations of Americans to meet challenges of advanced technologies and competitive forces in the global market would be a laudable legacy.  As Justice Sonia Sotomayor has stated, “Until we get equality in education, we won’t have an equal society.”

Mathur is former chair and professor of economics, now professor emeritus, Department of Economics, Cleveland State University, Cleveland, Ohio.  He resides in Ogden, Utah.

GOP Tax Policies in Shambles

Vijay K. Mathur

A brief history informs us that GOP political identity is defined by their political policy stand for tax cuts, with only lip service to reducing budget deficits and national debt.   The Reagan administration cut taxes that primarily benefitted the rich, but the increasing deficits forced the administration to pass tax increases.

George H.W. Bush stated “read my lips-no new taxes” in the GOP primaries, but gave up on that promise due to the reality of more deficits.   As president he signed the budget deal to raise taxes.  George W. Bush’s administration cut taxes in 2001 and 2003.  However, more spending, low real growth rate, rising unemployment rates, more deficits and debt, and the great recession of 2007-08 did not accomplish what was promised.

The GOP is obsessed with tax cuts as a policy tool to stimulate growth and employment.  And even though the rhetoric of tax cuts is buttressed by high growth and claims of reduced budget deficits, those claims seldom materialize.  In addition, tax cut during times of economic expansion is counter to any economic logic.  It makes it harder to implement any tax stimulant in case of economic downturns. But it seems logic of any kind escapes Republicans in the Congress. 

In the Trump administration there was a clarion call to reduce corporate and other taxes. The GOP marketing campaign to sell their tax plan as a middle class tax cut was a sideshow without much tax benefit to middle class taxpayers.  GOP Congressmen emphasized that corporate tax cuts will boost profits, investment, growth, employment and high wages for the middle class. They are oblivious to the fact that, historically, economic growth is declining over time despite reductions in corporate taxes.  However, the Congress passed the tax cut under the "Tax Cuts and Jobs Act" with a slim majority. 

Thomas L. Hungerford of Economic Policy Institute (EPI), June 4, 2013, finds that during 1950-1960 annual average economic growth was 3.9 percent when the statutory corporate tax rate was above 50 percent.  However, during 2000-2010 statutory corporate tax rate was 35 percent while the annual average growth rate was 1.8 percent.  In fact, from 1948-2010 there is a positive relationship between higher real growth rates and higher statutory corporate tax rates. 

GOP Congressmen are dreaming if they think that cutting statutory marginal tax rate for corporations from 35 percent to 21 percent will create a flood of repatriated profits to the US from tax havens, where tax rates are next to nothing or much below the proposed rate.  As EPI authors Josh Bivens and Hunter Blair state, October 3, 2017, multinational corporations are waiting for another tax holiday, such as in 2004, when they paid 5.25 percent on repatriated profits.

There is an emerging consensus among many experts, including Congress’ Joint Committee on Taxation, that the tax proposal favors the wealthy and rich over middle and low-income Americans.  Even though the tax cut proposal reduces tax brackets from 7 to 4 with generally lower marginal tax rates, it either takes away or limits deductions for state and local taxes, mortgage interest, property taxes and medical expenses. 

Aside from the repeal of the estate tax, rich and very rich Americans, the tax law would benefit only certain businesses such as LLC's, S-corporations and partnerships with "pass through incomes.''  Pass -through incomes of businesses (close 40 million) are taxed at the individual tax rates than at the corporate tax rates. They could get close to 20 percent deductions in earnings. The law has made the tax for small businesses more complicated and confusing than before.  It has also excluded certain business services from tax benefits.  C-corporation do not gain much benefits. But the fact remains that tax cuts worsen income distribution, already skewed toward the rich, and increase national debt. Therefore I propose that if Democrats are in the majority in the Congress they should make some major changes in the tax law that will benefit all Americans.  

I propose the following:

1. To stimulate investment there should be targeted tax breaks for investment and saving in 401(k) type plans for all Americans irrespective of their employment status.  The Economist, July 29, 2017, reports on a study by German Gutierrez and Thomas Philippon, that found reduced investment since 2000 is due to an increase in business market power and decline of competition.  Hence, tax breaks for investment must be complemented by enhanced enforcement of Anti-Trust Laws.

  

In addition, to encourage innovations and entrepreneurship a tax cut for small businesses that employ 100 employees or less should be much more than the tax cut for large corporations.

 

2. Impose a carbon tax, and the revenue should be earmarked for infrastructure investment.

3. Capital gains, dividends and carried interest (akin to capital gains) when received should be treated as regular income for tax purposes.

4.  A progressive tax should be levied on earnings of all Americans to finance Medicare and Social Security programs.  States should be required to make a larger proportionate contribution to the Medicaid program.  Abuses in the disability insurance program must be prevented.

5. Keep the new corporate tax rate and lower tax rates for small businesses but all tax expenditures, loopholes and subsidies for businesses must be taken away.

These are some suggestions that would benefit the country and all Americans and put the budget deficits and national debt on a lower trajectory.  Bob Bryan of Business Insider, November 6, 2017, states that Penn-Wharton model predicts that the tax plan reduces Federal revenue by $1.75 trillion during the first decade.  In addition, over 22 years the plan reduces tax revenue by $4.4 trillion, thus contributing to substantial increase in national debt.  However, such predictions did not matter for the GOP in the Congress.     

I hope that GOP Representatives in the Congress start thinking about the country first rather than about the next election.  I also hope that they do not get the impression that all Americans in the middle class and at lower income levels are ignorant of the real intent of the Republicans in the Congress in passing the current tax law.  The majority of Americans do not favor the new tax law.  Hopefully they would  express their dislike in their votes in the upcoming elections.

Mathur is former chair and professor of economics, now professor emeritus, Department of Economics, Cleveland State University, Cleveland, Ohio.  He resides in Ogden, Utah.  

Economic and Non-Economic Consequences of Economic Growth

Vijay K. Mathur

Economic growth in any country is the most well understood and significant index of the economic wellbeing of the population.  It is usually measured as the percentage change in the gross domestic product (GDP).   However, it is not explicitly known to most that it may also spread a sense of happiness, hopefulness and tolerance, hence a sense of cohesiveness among people.  The divisiveness among people occurs when there are winners and losers, and the winners are reluctant to provide opportunities to losers to achieve a satisfying economic status and are self-centered in pursuing their own economic gains, even at the cost to others.

Professor Benjamin Friedman in his book “The Moral Consequences of Economic Growth”, provides some thought- provoking insights into the non-economic consequences of economic growth.  He states, “The value of rising standard of living lies not just in the concrete improvements it brings to how individuals live but in how it shapes the social, political, and ultimately the moral character of a people.” In his view, economic growth that lifts all boats “…fosters greater opportunity, tolerance of diversity, social mobility, commitment to fairness, and dedication to democracy”.  These attributes are also the hallmark of innovation and growth.  Fear of growth due to negative side effects of environmental damage, congestion and diminished biodiversity are unwarranted, since growth provides more resources to offset these effects. 

In a winner and loser society, where winners are relatively better off and the losers are relatively worse off against some benchmarks, economic and social divisiveness among people increases and perception of fairness falters.  Professor Friedman remarks, “ The central question is whether, when people see that they are doing well (in other words, enjoying ‘more’) compared to the benchmark of their own prior experience, or their parents’ – or when they believe that their children ‘s lives will be better still – they consequently feel less need to get ahead compared to other people.” If most people perceive that they are worse off as compared to these benchmarks, it creates a ripe environment for divisiveness, hostility and intolerance to economically well-off groups and other competing groups.   The opportunistic political leaders and their sympathizers use this rift for their own political, social and economic ends.   

President Trump constantly reminds his supporting base that winners, immigrants and international trade are responsible for their plight.  But, he is also telling them that he is working on policies to stimulate economic growth.   However, there are no visible signs of meaningful and sustainable high growth policies.  The economy is growing between the average annual rates of 2% to 3%, but as compared to historical standards, it has not trickled down in significant wage gains to workers severely affected by the deep economic recession of 2007-08.   

The Wall Street Journal, August 24, 2017, reported that world wide economic growth has picked up and forecasts for US are in the range of 2 to 3 percent per year.   This US growth forecast will not improve the economic predicament of most Americans in the lower rung of the income distribution without substantive policy initiatives to stimulate productive investment in human and physical capital and R&D. The Trump administration’s aspirations for higher economic growth are incongruous with their regressive budget and tax proposals and strategies to restrict international trade and immigration.  Former Congressman Jack Kemp once remarked,  “Economic growth doesn’t mean anything if it leaves people out.”      

NAFTA trade pact is in jeopardy since Mexico and Canada are not willing to agree with the stringent concessions the Trump administration wants in the trade agreement.  The President has already withdrawn from the Trans Pacific Partnership trade pact with countries in South East Asia, a burgeoning regional trade market.   Restricting trade could prove to be a severe blow to economic growth.

A great source of unhappiness and divisiveness among the general population is the increasing income and wealth gap. C.I. Jones of Stanford University shows in his study on growth that, since 1980, GDP per person grew at the average rate of 6.8% per year for the top 0.1%, while it grew at the rate of only 1.82% per year for the bottom 99.9%, thus widening the income gap over time.   This has created a perception of unfairness and has led to general intolerance, especially fueled by the rhetoric of the President against immigrants and so-called elites.   

The increasing income gap is accompanied by an increasing wealth gap.  The study by Daniel Carroll and Nicholas Hoffman, Economic Commentary, Cleveland FED, June 28, 2017, finds that wealth mobility has also decreased over the past three decades.  On average, household are more likely to stay within their wealth quintiles over a period of 10 years than in the past two decades.  

Some claim that income inequality is essential for economic growth, but the evidence for the US is at best murky.  However, evidence points out that any marginal growth effects of inequality may not be economically beneficial to most people in the lower income distribution.   Aspirations for high growth rates and its trickle down effects in the Trump administration should be tempered by the fact that during 1973-1995, 1995-2001 and 2001-2017 the average annual growth rates of GDP per person were 1.82%, 2.17% and 1.72% respectively (see C.I. Jones).  

Hopefully, President Trump and his team recognize that in a slow growth economy policies matter to make people feel economically secured, to bring harmony among people, and to promote a healthy and vibrant society.

Mathur is former chair and professor of economics, now professor emeritus, Department of Economics, Cleveland State University, Cleveland, Ohio.  He now lives in Ogden, Utah.    

Is Globalization Anti Nationalism?

Vijay K. Mathur

Greenspan did not like the word globalization, and George Orwell stated, “Nationalism is power hunger tempered by self deception.”   However, to me globalization implies interaction of people, exchange of goods and services, information and technology between countries.  Nationalism is loyalty to your own country and working for its welfare and prosperity.  This interaction between countries is no different than interaction between states, except with different currencies.  The prosperity of any state within the US is interlinked with others’ prosperity.  Similarly, US prosperity is affected by other countries’ prosperity through trade and interaction with other people, thus creating an environment for the transmission of information and technology.  This is in our national interest.

President Trump has spread the myth that US trade deficit is against our national interest.  This phobia against trade and trade deficit is misguided and exaggerated.  In 2016 the deficit in goods and service trade and income payments to foreign countries (current account) was merely 2.42 percent of GDP (gross dollar output of the economy).  The percentage of this deficit has not varied much since 2013.  Most of the trade deficit is due to deficit in the trade of goods.  We have had a surplus in service trade and income receipts from foreigners for some time.  However, it is not enough to offset deficit in goods trade.  In addition, most of our deficit is with European Union countries, followed by China.   Hence, it is perplexing to hear President Trump constantly blaming China for the deficit.  

President Trump must also note that in 2016 US exports and imports combined constituted 36 percent of the GDP (17 percent are exports), a very significant part of the total economy. Any protectionist policy, followed by retaliation from other countries in response, would have a devastating effect on the economy in terms of income, employment and growth; it would be contrary to the national interest.  Trade promotes competition and an efficient allocation of resources, such as labor and capital.  Support of industries that cannot compete in the world markets would deprive other competitive industries’ demand for scarce resources.  Efficient allocation of resources would promote innovation, technical change and productivity.     

National income accounting would show that trade deficit is partly home-made.  If private saving is not enough to finance private investment and government deficit, it would result in trade deficit.  Trade deficit implies borrowing from abroad to finance our demands.  In US, household saving rate ranges from 4 to 5 percent of disposable income, while in China it ranges from 30 to 35 percent (www.quora.com).  Even if private saving is enough to finance domestic private investment, trade deficit will arise when the government has a substantial fiscal deficit.  This is the twin deficit problem we face.  CBO’s baseline budget projections in June 2017 show government deficit was 3.4 percent of GDP in 2016 and is expected to increase in the next decade.  

If President wishes to pursue a nationalist agenda, he should consider the fact that trade deficit in goods is due to Americans’ consumption beyond output of goods.  Perhaps President Trump should go on a campaign to persuade Americans to save more and consume less output of goods to “make America great again”.

If Americans save more it could help reduce the trade deficit as well as the burden on government transfer payments.  Americans would also be wealthier to support their pensions in old age.   By providing tax incentives to increase saving among poor, low-income and middle-income Americans, President Trump’s budget could partly ameliorate the trade deficit problem and the burden on government assistance.  Giving tax breaks to the rich is futile and would lead to government deficits and trade deficits.  Obtaining some concessions in trade negotiations with EU and NAFTA countries would have only marginal effect on trade deficits, since they will be subject to WTO rules and regulations.

The catchiest argument President Trump advanced in his presidential campaign was that job losses in manufacturing were due to bad trade deals and outsourcing.  Mr. Matthew J. Slaughter, Dean of the Business School at Dartmouth College, cogently argues in his opinion page article, The Wall Street Journal, June 15, 2015, that trade and movement capital between countries is not a zero sum game. He shows that between 2004 and 2014, US parent multinational companies hired as many people as their foreign affiliates.  Their value added of and investment in parent companies grew faster than in foreign affiliates.  The parent companies also contributed more to exports, expenditure in R&D, employee compensation and stimulus to the supply chain.

President Trump’s slogan “make America great again”  lacks substance and is without merit.  National prosperity and economic dynamism require international trade and a well thought-out immigration policy.  Americans who were displaced from jobs should ask their lawmakers to provide resources and opportunities, so they can prepare themselves for the new competitive global environment.  This approach would assure a more prosperous future for them and their children.

It is worthwhile to remember the words of Mother Teresa

“Yesterday is gone.  Tomorrow is not yet come.  We have only today.  Let us begin.”

Mathur is former chair and professor of economics, now professor emeritus, Department of Economics, Cleveland State University, Cleveland, Ohio.  He resides in Ogden, Utah.    

Invisible Hands of Conservative Wealthy are Guiding Economic Policy

 Vijay K. Mathur

Before Adam Smith wrote his most well-read book, The Wealth of Nations, he wrote The Theory of Moral Sentiments in 1759.  In the latter book he argued that man (referring to a person) has the ability to make moral judgments even though he is naturally guided by self-interest. In their economic history book, Professors Robert Ekelund, Jr. and Robert Herbert argue that according to Adam Smith,  “…moral judgments are typically made by holding self-interest in abeyance and putting oneself in the position of a third person.” 

Adam Smith was an ardent advocate of property rights, division of labor and invisible hand of competitive market forces.  For him these institutional arrangements, guided by self-interest, would create self-regulating forces to bring about robust economic growth and improved wellbeing of the society.  Smith’s invisible hand proposition did not support the doctrine of merchant capitalists from 16^th to 18^th century Europe, called Mecantilists who, in alliance with the monarchy, were primarily interested in the accumulation of their wealth. Smith also promoted free trade and saw it as a vehicle for expanding markets.  Ekelund and Herbert state that Smith was concerned about accumulation of wealth and its influence in a civil society.

The Trump administration has not learned from Adam Smith’s critique of Mercantilist thought.  As Jane Mayer argues in her book, Dark Money, a selected group of ultra-conservative billionaires, headed by David and Charles Koch and their paid support network and surrogates, have been planning for decades to change the government to support their agenda; it consists of lower taxes for the rich and wealthy, lower expenditure for entitlement programs for the low income and poor, while maintaining business subsidies (akin to welfare payments for the wealthy) and less regulations of businesses. In order to support their wealth accumulation agenda, they have methodically followed a plan to change the political makeup of Congress and government institutions, including the Presidency. 

Jane Mayer shows that the efforts of these ultra-conservative billionaires are backed by tax-deductible donations used to create an interlocking network of charitable foundations, think tanks and academic institutes at universities, so that sources of donated money are hard to trace. That is the reason why Jane Mayer calls it Dark Money. 

This tax-deductible network of charitable foundations with ancillaries and surrogates works like invisible hands of the wealthy as automatic instruments to change the political and economic system that meet their agenda.

So far this wealthy group has succeeded in changing the political make-up of Congress, the Administration and many state governments friendly to their cause.  Economic policy is also in the process of change, as for example the health care bill AHCA, passed in the House of Representatives, which would primarily hurt lower income people and poor, and benefit the rich and wealthy.  In addition, the Administration’s tax reform proposal and regulatory changes, as in environment, and banking and finance, disproportionately enrich the wealthy and asset rich businesses and impoverish most other Americans.

The decision to withdraw the US from the trade pact TPP that would have opened US and Pacific Rim countries to more trade, and the threat to scuttle the trade pact NAFTA with Mexico and Canada is contrary to the free market doctrine and supports Mercantilist thought.  Free trade promotes more competition and innovation, and hence benefits consumers, workers and businesses in the long run.  Adam Smith’s invisible hand proposition works in a competitive market, therefore he abhorred monopoly power. The Administration’s nationalistic bent is contrary to the conservative stand on the virtues of free market and is supportive of monopoly power that is increasingly emerging in many sectors of the US economy.

We are also witnessing changes in K-12 public education, as envisaged by this select group of ultra-conservative wealthy billionaires that includes Betsy DeVos (Secretary of Education) and family.   In many states charter schools are emerging and more are planned. They are run by private businesses but are supported by tax dollars.  Secretary DeVos is a great supporter of tax dollar supported private schools. 

She would like a voucher program supported by tax dollars where students could go to any school, including any private school of their choice.  Such a program dismantles the main conceptual idea behind public education and the system of public schools that has successfully produced an educated citizenry and prepared the workforce for generations. Even Adam Smith recognized the usefulness of public educational institutions. 

Faulty accounting only counts the current cost but not the human capital benefits of public education that occur over a period of time. In addition, proposed budget cuts of $9.2 billion from K-12 through higher education and $1.1 billion from job-training programs are not only unproductive as they adversely affect human capital formation, but they especially deprive lower income and poor Americans of educational opportunities.

The sinister part of the strategy of the select group of ultra- conservative billionaires is to use tax dollars to create the perception among a significant number of Americans that their efforts to change economic policies are for the benefit of less wealthy and poor Americans.  It is hoped that soon their invisible hands and their hidden agenda see the light of day.     

Mathur is former chair and professor of economics, now professor emeritus, Department of Economics, Cleveland Sate University, Cleveland, Ohio.  He resides in Ogden, Utah.