Right now, the economy is strong. Unemployment recently fell to 3.7%, the lowest since 1969. GDP growth in the most recent quarter was revised upward to 4.2%. Disabled workers have made major job gains.
But there are storm clouds on the horizon. The economy faces major risks if the Democrats retake control of Congress or the Presidency, and smaller risks from trade policies currently being pursued by the White House.
Democratic politicians, and most of the Democratic Party’s base, have completely abandoned support for a free-market economy. As Jerome Woehrle pointed out earlier, socialism appears to be the “future of the Democratic Party“:
Democrats are now replacing veteran legislators with avowed socialists in primary elections, choosing to nominate socialists precisely because of their radicalism. Writing in The New York Times, Bari Weiss notes that Brooklyn Democrats overwhelmingly voted for avowed socialist Julia Salazar despite her very public history of lying about basic things like her background, origins, and past political positions. As Weiss puts it, Julia Salazar is “the left’s post-truth politician.” This “socialist lied. And lied. And lied. Then she won handily in Brooklyn.”
Socialism is popular among Democrats, more than ever before. According to a Gallup survey, 57% of Democrats have a positive view of socialism, while most don’t have a positive view of capitalism. Former President Obama recently endorsed self-proclaimed “Democratic Socialist” Alexandra Ocasio-Cortez for Congress. But even a liberal-leaning web site admits that her economic proposals would cost the country $42 trillion. That would bankrupt America.
Democrats support costly measures even when they know those measures will wipe out jobs and harm the economy. That is illustrated by a recent poll of California’s Democratic-leaning electorate. The liberal Los Angeles Times reports that “Californians strongly back the state’s minimum wage increase to $15,” even “though they believe the wage hike will hurt their pocketbooks and the state’s economy,” and “high percentages of those surveyed expected negative consequences, including layoffs and business relocations to states with lower minimum wages. Almost 90% of respondents believed that prices for consumers would rise because of the wage hike.”
The vast majority of economists say that a $15 minimum wage is a bad idea, one that will increase unemployment, especially among young people, and harm businesses, especially small businesses (the economists who believe it is a bad idea include even labor economists who are liberal on social issues and tend to vote for Democrats). An economist at Moody’s calculated that up to 160,000 jobs will be lost in California’s manufacturing sector alone from the increase to $15.
A sharp increase in the minimum wage in left-leaning Venezuela recently caused 40% of that nation’s stores to close, resulting in many employees becoming jobless. In 2016, the Democratic Party platform proposed increasing the minimum wage to $15 — even though such an increase would wipe out many jobs, as Hillary Clinton once admitted. As a website that preferred her to her opponents put it, “Hillary Clinton knows a national $15 minimum wage is a bad idea. She endorsed it anyway.”
The New York Times, a consistently Democratic-leaning newspaper that has not endorsed a Republican for President in over 50 years, used to oppose minimum wage increases because they eliminate jobs and harm the poor. But now it supports large increases, part of a larger repudiation of the free market by that paper and its preferred political party.
To a lesser extent, the White House is creating risks to the economy as well, through its trade policies. Its attempts to renegotiate longstanding trade treaties are not worth the risk of trade wars and the resulting lost jobs. Protectionism is a bad thing: Freer trade has been critical in reducing costs to consumers and reducing global poverty.
It has also boosted economic growth in the U.S., allowing manufacturers to obtain needed raw materials and components more cheaply, and thus preserve their overall competitiveness in selling airplanes and other manufactured goods that require such raw materials and components. Attempting to renegotiate trade agreements antagonizes other countries and makes them less likely to cooperate with the U.S. in other spheres (such as enforcing sanctions against North Korea). Other countries feel like “a deal is a deal” and resent attempts to renegotiate what they previously agreed to. People are less likely to enter into an agreement with the U.S. to begin with, if they fear the U.S. may try to renegotiate it later.
Welshing on a deal reached by a prior administration can have negative consequences for America’s ability to reach mutually beneficial deals with foreign countries. After the vicious Libyan dictator Gaddafi mellowed somewhat, and agreed to give up his weapons programs during the Bush Administration, the U.S. later helped overthrow him under the Obama administration, leading to his death at the hands of Libyan rebels. Ironically, the U.S. would not have felt free to overthrow Gaddafi if he had not largely disarmed and given up his ability to use weapons of mass destruction against the U.S.
Gaddafi’s overthrow led not to a peaceful democracy but to a devastating civil war and the seizure of parts of the country by anti-American Islamic extremists. It also caused massive distress in impoverished neighboring countries that sent migrant workers to Libya. Gaddafi’s overthrow led to widespread hunger in Niger, Libya’s southwestern neighbor, and it may have indirectly contributed to the civil war in Mali, the country west of Niger
Other nations perceived Obama’s treatment of Gaddafi as a double cross; as Wikipedia notes, many speculated “that NATO’s 2011 intervention in Libya (which led to Gaddafi’s overthrow and killing at the hands of the Libyan rebels) would make Iran, North Korea, and possibly other countries more reluctant to give up their nuclear programs and/or nuclear weapons due to the risk of being weakened and/or double-crossed as a result.”
As law professor Ilya Somin, no fan of Gaddafi, pointed out at the time of the U.S.’s intervention in Libya to remove Gaddafi:
[I]t’s important to remember that the US and Britain cut a deal with Gadhafi in 2003, under which he agreed to give up his nuclear weapons program and stop supporting terrorism, while we agreed to normalize relations and [implicitly to] forego efforts to overthrow him. … Gadhafi has upheld his side of the bargain, whereas the US and Britain have just massively violated theirs…Our blatant reneging will make it harder to make similar agreements with other dictators in the future. If forswearing nuclear weapons and terrorism will lead to your overthrow in a US-supported revolt, any dictator would be a fool to make the deal – or at least to live up to its terms. This point has surely not been lost on Iran, North Korea, and others. The damage to our credibility might have been acceptable if Gadhafi were a large-scale mass murderer or a serious threat to the US. But he was neither.