FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.

posted on 12 November 2016

The Most Important Take-Away From The US Election

by Elliott Morss, Morss Global Finance


Much will be written about the bitter US election pitting two unpopular candidates against one another. In my view, who won is of secondary significance. For the most part, lobbies control most of what happens in DC: the US has lousy health and education systems, the banks are still dangerous, and the defense lobbyists continue to find reasons for the US to be at war.

What really hits home is the Democratic Party's loss of blue collar workers' support. Below, I discuss why and how this happened.

Changing Political Coalitions

Changing coalitions are not new. The Democrats used to have the support of Southern conservatives. This all ended when Johnson used his political muscle to get the Civil Rights bill through Congress. And going back in time, you can see numerous other examples of changes. But in recent history, the Republicans have been the party of the wealthy while the Democrats have been the party of the working class and the poor.

Trump (and Sanders) Support Base

Trump, at least for now, has the support of the relatively uneducated, disenfranchised American workers. The working class was formerly represented by the Democratic Party. How did this all happen?

As Table 1 indicates, employment in manufacturing has fallen by almost 28%. And on top of this, the union share of private sector workers has plummeted. It appears that only in the public sector has the union share grown. What are the reasons for these changes? In manufacturing, was it attributable to jobs going overseas? No. As the McKinsey Global Institute and I have documented, only 20% of the manufacturing jobs lost were the result of jobs going overseas. And these losses were largely offset by foreign direct investment creating jobs in the US.

Table 1. - US Employment, Union Share, 1973-2015


1Starting date 1983

Source: US Bureau of Labor Statistics

As I have written, the vast majority of jobs lost in manufacturing and all other sectors resulted from labor-saving automation. Huge numbers of middle class and lower jobs in services as well as production sectors have disappeared. Trump's win was a plea for help from the displaced workers. And the Fed's policy of keeping interest rates so low contributed to Trump's victory. The low rates wiped out the bond income many retirees had hoped to live on.

Will Trump's Economic Policies Work?

Consider first how Trump views the economic problem. He started by talking about all those jobs lost overseas (to China and Mexico). Wrong diagnosis. His solution? Tax US imports from China and Mexico heavily, actions that would be in violation of World Trade Organization rules. Perhaps more importantly, such actions would probably start a global trade war, reducing incomes worldwide.

Next, Trump said he would reduce taxes to spur growth. He claims the economic growth generated will make up the revenues lost by the tax cut. Most hardheaded analysis - including from those sympathetic ideologically - suggests this is nonsense. The conservative-leaning Tax Foundation, for example, estimates that Mr. Trump's tax plan would reduce federal revenue by about $12 trillion over the next decade, and faster growth would offset only about $2 trillion of that.

Mark Zandi, chief economist at Moody's Analytics, said that Mr. Trump's policies would increase the deficit from 3.5 percent of G.D.P. this year to more than 10 percent by the end of Mr. Trump's term. He said this would cause the Federal Reserve to raise interest rates above 6 percent in 2018 to prevent inflation.

One also has to wonder if such tax cuts could get through Congress. There are many Republicans (and Democrats) who feel the government deficit should be reduced and not raised.


Trump has promised to bring jobs back to make America great again. Nothing he has said makes me think he can deliver on this promise. In fairness to Trump, I have not seen anything said or written yet to deal comprehensively with labor-saving automation. The Democrats suggested making education cheaper. This would certainly help. But labor-saving automation is a global problem and nobody knows just how far the automation will go.

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical Opinion Post Listing

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.

Econintersect Opinion


Print this page or create a PDF file of this page
Print Friendly and PDF

The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.

Take a look at what is going on inside of
Main Home
Analysis Blog
Was Marx Right?
Angst in America, Part 5: The Crisis We Can’t Muddle Through
News Blog
Wiping Out Jobs Growth With Robotics
This Fantastic Idea For A Circular Runway Is Sadly Going Nowhere
Research Check: Are Aussie Women Ageing Up To 20 Years Faster Than US Women?
UFO Sightings Are At Record Heights
What We Read Today 28 April 2017
Kim Jong Un Pretends To Fly An Airplane
21 April 2017: ECRI's WLI Growth Index Continues to Slow
Final April 2017 Michigan Consumer Sentiment Continues Positive Trend
April 2017 Chicago Purchasing Managers Barometer New Orders Close To Three-Year High
Advance Estimate 1Q2017 GDP Quarter-over-Quarter Growth at 0.7 Percent.
Rail Week Ending 22 April 2017: Marginally Slower Week
March 2017 Median Household Income Not Significantly Different
Infographic Of The Day: The Largest Company Headquartered In Each State
Investing Blog
The Last Time Weekly Wrap-Up 28 April 2017
Opinion Blog
New 'Gaullism' Rises In France
Blockchain: A Technology Whose Time Has Come
Precious Metals Blog
A New Age For Gold
Live Markets
28Apr2017 Market Close: Wall Street Closed Mostly Down On News The U.S. Economy Grew At Its Weakest Pace In Three Years, WTI Crude Settles In The Low 49 Handle
Amazon Books & More

.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Middle East / Africa
USA Government



Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2017 Econintersect LLC - all rights reserved