So is Trumponomics working? With one significant caveat, the answer is no. For one thing, Trump’s trade policy is turning out to be worse than expected. For another, the growth surge mostly reflects a temporary sugar high from last December’s tax cut. Economists are already penciling in a recession for 2020.
.. At a time of toxic inequality and declining intergenerational mobility, inheritance taxes ought to be increased, but Trump cut them. However, the reduction in the corporate tax rate, coupled with incentives for businesses to invest more, has boosted spending on R&D, information technology and other machinery. Extra investment should make workers more productive. It might even shift U.S. growth to a higher trajectory.
.. you can’t rule out the possibility that the Trump investment incentives are hitting the economy just as a new wave of IT innovations is ripe for deployment.
.. The question is whether the expected productivity boost will outweigh the drag from the tax cut’s other consequence: a huge rise in federal debt.
.. The extra $1 trillion or so of federal debt will have to be serviced: Today’s sugary tax cuts imply tax hikes in the future. Likewise, the corporate investment incentives are temporary: They may simply bring investment forward, depriving tomorrow’s economy of its tech caffeine jolt.
.. many Wall Streeters expect a recession once the sugar high dissipates. The Tax Policy Center estimates that gross domestic product in 2027 will be the same as it would have been without the tax cut.
.. There will be no growth to compensate for extra inequality and debt.
.. And that is without considering the harm from Trump’s trade wars. In Europe, Trump has browbeaten U.S. allies and reserves the right to beat them up further; the only “gain” is a discussion of a new trade deal that was on offer anyway before Trump’s election. In the Americas, Trump has arm-twisted Mexico into accepting a new version of NAFTA that is worse than the old one, and demands that Canada sign on.
.. But the greatest damage stems from Trump’s trade war with China. His opening demand — that China abandon its subsidies for strategic high-tech industries — was never going to be met by a nationalistic dictatorship committed to industrial policy.
.. His bet that tariffs will drive companies to shift production to the United States is equally forlorn. If manufacturers pull out of China, they are more likely to go elsewhere in Asia.
And even if some manufacturing does come to the United States, this gain will be outweighed by the job losses stemming from Trump’s tariffs, which raise costs for industries that use Chinese inputs.
.. In short, Trump isn’t helping the American workers he claims to speak for. Instead, he is battering the rules-based international system that offers the best chance of constraining China.
.. do not be surprised if the populists are temporarily popular: Popularity is what they crave most, after all. But recall that, everywhere and throughout history, the populists’ folly is unmasked in the end.
Honda once used staff technicians to design new technologies ranging from engines to the shape of the suspension arms. Today, Honda believes rapid shifts in technology mean it can no longer afford to keep pace working solely on its own.
That is raising hackles among some within the company who complain about “PowerPoint engineering”—where engineers assemble slides showing how they will patch together others’ technology rather than build it themselves.
.. Car makers around the world are under stress from the huge investments needed to develop new technologies used in electric vehiclesand autonomous driving. To trim costs, most are leaning on megasuppliers such as Bosch, Continental AG and Denso Corp. , as well as smaller companies with cutting-edge technology such as IntelCorp. subsidiary Mobileye.
.. Honda, which prides itself above all on its engines, is farming out the development of an electric motor. Hitachi Ltd.’s auto-parts division has the majority stake in a joint venture with Honda that will make electric motors for Honda cars by March 2021. By 2030, two-thirds of its cars will be partially or fully electric
.. Honda also said it would buy electric-car batteries from General Motors Co.
SpaceX works because a lot of people want to put satellites in orbit. In a time of unprecedented peace, how many navy ships do we realistically want to be building?
$4.25B/ship is the wrong way to frame it. Think of it as $23B to keep our shipbuilding expertise current, to make sure we have the capability to build navy ships that incorporate a bunch of cutting-edge technologies (some of which have worked out and some of which haven’t, as is the nature of cutting-edge technologies). If a shooting war started to look likely we’d be building a lot more than 3 of them and the unit cost would come way down.
.. It seems you should be able to bring down a 4 billion ship with a swarm of thousand drones for maybe 1 million each for the total cost of 1 billion. Same for aircraft carriers.
.. The lack of a missile defense system on the Zumwalts has more or less made them pointless beyond research/development testbeds.
too many parts of society are oriented towards bottom line activities of mistake avoidance instead of top line activities of taking risk and creating value.
.. “You can think of this book as detailing the social roots of the resulting slow growth outcome and explaining why that economic and technological stagnation has lasted so long.”
.. Cowen identifies a country that very much has a cheerful, can-do spirit: China. “I have visited China many times over the past five years, for a different book project, and what I’ve observed there has made America’s social stagnation increasingly clear to me. That was one reason I came to write this book.”
.. Thinking about that point makes me wonder if economists are poorly-equipped to measure how an optimistic vision can propel growth.
.. “We are using the acceleration of information transmission to decelerate changes in our physical world.” Must our imaginations be limited by the screen? That would be a shame.
.. Maybe it can push forward nuclear fusion; it’s already been reported that American thorium scientists who could no longer develop the technology in the United States have taken their designs to China, which is happy to encourage their work.
.. One doesn’t have to admire Steve Bannon’s policy views to see that he’s lived a unique life. The recitation of his career path (born in Norfolk; Virginia Tech; HBS; officer in the Navy; Goldman; etc.) doesn’t sufficiently convey the diversity of his experiences. He has been involved with Seinfeld; Biosphere 2; the rescue effort of the Iran hostage crisis; a World of Warcraft virtual gold mining company; Titus (the Shakespeare adaptation featuring Anthony Hopkins); Breitbart; the White House; and surely other interesting ventures I’ve never read about.
.. He contracted Hepatitis C from a trip to Xinjiang in his 20’s; ongoing treatment has required his heart to be stopped over 100 times.
.. Let me take this opportunity to register a complaint with the term “open-minded,” which is increasingly praised as an important virtue.
I’ve started to dislike the term. First of all, it’s unobjectionable—who would profess he is not open-minded? More importantly, it’s not always clear what the term refers to, and this is worth thinking through. It might indicate the state of being “soft-minded,” in which one would readily be swayed by better arguments. But often it tends to connote “empty-minded,” in which one accepts anything and retains little. Many people are indeed open to different cultures and ideas, but they’re not necessarily conceptualizing their experience, nor active in seeking new experiences out.
.. I would like for everyone to be “hungry-minded,” in which one realizes that there is so much to know. A hungry-minded person senses that he is expert in so few areas of knowledge; that terrible gaps plague even his supposed areas of expertise; that there are important areas of knowledge of whose existence he is barely even aware; and that he should be fixing these deficiencies, now and ravenously. My favorite people to talk to are those who look for new experiences, think about them in an analytic way, and are eager to share their thoughts.
.. I’m slightly skeptical of thinking that we can save the world with indeterminate policies like looser monetary policy or housing reform. Are so many companies waiting to make things happen if only we’d cut interest rates by 0.25 percent? Will so many excellent service jobs be created if rents in Manhattan and the Mission were only cheaper by $250? To me these are policies worth advocating for, but I must say that they feel so marginal.
.. The most striking thing I learned from Harford is that the most success-oriented teams are usually the most miserable teams. For example, the amateur investment clubs that generate the highest returns are usually composed of people who don’t know each other well—it’s the only way to generate pushback on ideas that aren’t well thought through. Clubs composed of friends will find it more important to keep friendships intact rather than focus on returns.
.. Living a life that’s not so well-ordered can improve skill-acquisition.
.. It’s odd to me that a country that hasn’t experienced warfare for centuries would maintain such a militarized culture. The book makes it feel that being Swiss is the civic religion of Switzerland, and the service in the army is the annual demonstration of faith.
.. The biggest objections to this book will come from those who haven’t been steeped in Thielian arguments for techno-pessimism.
.. Maybe we can lay the blame for complacency at the feet of Carter, who again and again entreated Americans to lower their expectations. He’s the president who encouraged people to carpool, who put on a sweater and asked people to lower their thermostats, and oversaw repeated crises.
.. The chapter never explicitly mentions pot, except in the title. By introducing little oddities in the text, Cowen makes room for claims that are too difficult to baldly state; in other cases, watch for occasions in which he’s offering commentary on something other than what he’s directly writing about.