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Trump And Clinton Have Little To Say About Slow Economic Growth

This is In Real Terms, a weekly column analyzing the latest economic news. Comments? Criticisms? Ideas for future columns? Email me, or drop a note in the comments.


The U.S. economy grew at a rate of 1.4 percent in the second quarter of the year, the Bureau of Economic Analysis said Friday. That’s a bit better than the BEA initially reported (Friday’s data was a regularly scheduled revision), but it’s not by any measure good. That’s been a distressingly consistent pattern in recent years: With the exception of a strong quarter here and there, economic growth has been resoundingly, stubbornly disappointing ever since the recession ended in mid-2009. Growth in U.S. gross domestic product has averaged 2.1 percent during the six-year recovery; by comparison, growth averaged 4.6 percent over the first six years after the recession of the early 1980s.

The problem goes beyond the current recovery — and beyond the U.S. For most of the 21st century, the rich world — the U.S., Japan and Western Europe — has been stuck in a pattern of slow economic growth. In the U.S., the boom of the late 1990s ended with the bursting of the dot-com bubble; the recession that followed was relatively mild, but the recovery was weak, and it took another bubble, this time in housing, to get the economy moving again. We all know how that ended.

Economists aren’t sure what’s behind the slowdown. Aging populations almost certainly play a significant role — more retirees means fewer people working, which, all else equal, means less economic growth. But that isn’t the full story. Even setting aside retirees, fewer adults are working. And among those who are working, productivity — essentially, how much value people produce for each hour they work — has been growing more slowly. Some economists, most prominently Northwestern University economist Robert Gordon, argue that the internet and other recent technological advancements haven’t boosted the economy as much as past innovations such as electricity and air travel. (Other experts, particularly those in Silicon Valley, aren’t buying it.)

But whatever the explanation, a growing number of economists are convinced the trend is here to stay. In a 2013 speech at the International Monetary Fund, former Treasury Secretary Larry Summers became perhaps the first prominent economist to talk about “secular stagnation,” the wonky term for the idea that low-growth is a long-term trend, not a short-term effect of the recession. Since then, the idea has gone mainstream. In August, John Williams, the president of the Federal Reserve Bank of San Francisco, wrote an essay looking at what policymakers can do in a world of sustained low interest rates. (In the world of monetary policy, low interest rates and low economic growth are deeply intertwined.) Later that month, Fed leaders partly dedicated their annual retreat in Jackson Hole, Wyoming, to similar issues. In a sense, the Fed is playing catch-up: Growth has consistently fallen short of policymakers’ expectations during the recovery.

This is far more than an academic debate. If the underlying growth rate of the economy has slowed, that means it will take less to push the U.S. into a recession, and it will be harder for policymakers to pull it out. And there are consequences even outside of recessions: Slow economic growth generally means weak wage growth, which is why many Americans saw little benefit from the recovery until it was already five years old. Japan and Western Europe have fared even worse. Japan has been locked in a generation-long slump; Europe has never seen a meaningful recovery after the global financial crisis. In Europe especially, the prolonged downturn has created a generation of young people who can’t find work and of older workers who can’t afford to retire.

Despite the potentially dire consequences, however, the slowdown in growth has gotten relatively little attention on the campaign trail this year, even as candidates have put economic issues front and center in their appeal to voters. Hillary Clinton has proposed boosting infrastructure spending, investing in scientific research and expanding access to higher education, all policies that some economists think could help boost growth over the long term. But she rarely frames her plans in those terms, preferring instead to focus on how the economic pie should be divided.

Donald Trump, meanwhile, has a plan to boost growth — but it is one that most economists, even on the right, find laughable. Last week, his campaign released a report by campaign advisers Peter Navarro, an economist, and Wilbur Ross, an investor, that purported to explain how Trump’s plans would boost the economy and offset the multitrillion-dollar tax cuts he has proposed. The report drew immediate derision for a footnote saying that “‘Nominal’ refers to inflation-adjusted” (the two terms are usually opposites), but it didn’t take long for more substantive critiques to emerge. The Peterson Institute for International Economics, a normally staid Washington think tank, described the report’s logic as “magical realism.” “Maybe it reads better in Spanish,” Peterson economist Marcus Roland wrote in a blog post.

There are plenty of problems with the campaign’s report, but the biggest is that it assumes the U.S. could get a huge economic boost just by reducing its trade deficit. Trump’s plans to accomplish that goal are themselves dubious — he wants to punish China for keeping its currency artificially low, even though most experts agree China is no longer doing so — but his real mistake is more fundamental. As Matt Yglesias of Vox wrote Friday, if closing the trade deficit could by itself boost growth, the U.S. could revive its economy simply by banning oil imports. Basic economic logic makes clear that wouldn’t work: Lower oil supply would lead to higher prices, which would ripple through the economy in complex — but almost certainly negative — ways.

There’s a good reason the candidates are reluctant to talk seriously about boosting economic growth: There isn’t much they can do about it in the short term, and policies that might help in the long term won’t do them much good politically right now. But whoever wins in November will come face-to-face with the consequences of a low-growth world — and they will need more than Latin American fiction to address those challenges.

Women at work

When Sheryl Sandberg published “Lean In” in 2013, one of her most-discussed pieces of advice was that women should negotiate on salary. Men, she wrote, take an initial salary offer as a starting point for discussion; women more often see it as an end point. If women don’t negotiate, Sandberg wrote, citing her own experience when she joined Facebook, they will never make as much as men.

Three years later, women seem to be listening — but the results aren’t always what they or Sandberg hoped. According to a new report sponsored by Lean In.org, the nonprofit Sandberg started to promote workplace equality, women are now about as likely as men to negotiate on pay, ask for a raise or lobby for a promotion. And when they do ask for more money, they are more likely to get it. But according to a survey of 34,000 U.S. employees conducted as part of the study, women who negotiated were also more likely to be branded “bossy,” “aggressive” or “intimidating.” (Men who asked for raises were less likely than women to receive such feedback.) And while women are asking for promotions at the same rate as men, they still aren’t getting promoted as often.

The finding isn’t necessarily a surprise. Multiple studies dating back more than a decade have found that women often face a backlash when they negotiate, something that Sandberg acknowledged in her book.

But the negotiation dilemma is just one of many examples in the new study of how achieving gender equality in the workplace defies simple solutions. Women make up less than a fifth of top executives, for example, which means that more junior women have fewer role models or mentors than men. And even when women do reach the senior level, it is often in support roles — human resources, legal, information technology — rather than the kind of operational roles that tend to lead to the corner office. Then there are cultural norms: According to the Lean In study, women are less likely than men to want to rise to the senior ranks.

As I wrote a few months back, progress on the gender-pay gap has stalled in recent years. That’s partly because some of the lowest-hanging fruit — such as rules barring women from certain jobs and explicit discrimination on pay — has already been picked. As the Lean In study shows, the next steps toward equality will be much harder.

Oil slick

Oil prices shot up last week on news that OPEC planned to curb production in response to a long-lasting supply glut. The cartel tolerated low prices for a while in the hopes they would force U.S. oil producers to stop drilling. In one sense, it worked: American companies pulled back. But it wasn’t enough to ease the glut. Now OPEC members are ready to pump less oil in order to drive prices back up.

Well, they say they are ready. But OPEC’s much-touted “understanding” lacked a crucial element: an actual agreement on who would cut production. There’s reason to think such an agreement will be hard to reach. Either Saudi Arabia or Iran would probably have to take the lead, and the two countries aren’t exactly friends right now. And even if there is an agreement, OPEC’s record of sticking to its quotas is spotty at best. Don’t bet on a big drop in production anytime soon.

The week ahead

The second-to-last jobs report before Election Day comes out on Friday, and it’s the last with much chance of making a real difference. (November’s jobs report will come out on Nov. 4, four days before voters head to the polls.) Last month’s report gave both Trump and Clinton plenty to talk about, with hiring slowing but remaining solid and unemployment holding steady at 4.9 percent. Economists expect more of the same this month, which would probably keep the economy as a more or less neutral factor in the election.

Last week on FiveThirtyEight

Last Monday’s presidential debate was full of economic talk. Catch up with our pre-debate briefing book on policy issues and my post-debate wrapup of what happened. Or relive the whole night with our live blog.

Voters say they’re angry about the economy. But separate surveys of consumers paint a very different picture, Tim Mullaney writes.

Elsewhere

The anti-trade backlash has gone global, as even workers who once benefited from trade are now worrying about its consequences, Peter S. Goodman reports in The New York Times.

On the other hand, Americans don’t hate trade as much as the political narrative sometimes makes it seem, argues Noah Smith in Bloomberg View.

Amazon is one of FedEx and UPS’s biggest customers. But now it may be poised to become a competitor, Greg Bensinger and Laura Stevens report in The Wall Street Journal.

Ben Casselman is a senior editor and the chief economics writer for FiveThirtyEight.

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