[MARCH 23, 2017 – FROM THEATLANTIC.COM]
President Donald Trump might be consumed by half-truths and conspiracy theories, but during the campaign he brought attention to a very real phenomenon: regional inequality. He promised not only a proper swamp-draining in Washington, D.C., but also a renaissance for the Rust Belt, Appalachia, and America’s blighted heartland.
Even when his prognoses were fantasies—neither trade wars nor border walls will ever bring back 1950s-level manufacturing employment—the underlying diagnosis was pretty much right. For much of the 20th century, productivity in America’s poorest regions actually grew faster than in rich metros. But decades of convergence have come to a screeching halt in the 2000s. Rich coastal cities have left the rest of the country behind. In 1980, the typical New York City worker earned 80 percent more than the national average. By 2013, he earned 172 percent more.
Trump racked up huge margins in Appalachia, the Rust Belt, and rural areas across the country. But his promises to improve these places have evaporated on contact with the presidency. In the current budget blueprint and health-care bill—not to mention a forthcoming tax overhaul—the losers under Trump are the same people who were promised a long-awaited win (political theater surrounding the Carrier deal notwithstanding).
Trump ran on a promise to transfer political power back to the forgotten and the downtrodden, but he is presiding over an effort to transfer economic power from the lower- and middle-classes to the rich.
Regional inequality is a thorny problem. Inequality at the household level has some obvious fixes, such as taxing the rich and redistributing the wealth to the poor with tax credits and benefits like health care. But, while there is no unified economic consensus as to how to solve deindustrialization and regional blight, there are three broad ideas: government investments in local industry; investments in local colleges and research centers, which can also boost local innovation; and income transfers to the residents, whether in the form of tax credits or something more targeted, like moving vouchers.
So far, Trump’s answer to this multiple choice question has been “none of the above.” His policies don’t merely ignore these ideas. They move swiftly in the opposite direction.
First, Trump’s budget blueprint abolishes several programs that have directly helped the same regions he’s promised to support. The federal government has relatively few economic programs that specifically help the Rust Belt and Appalachia, but they include the Manufacturing Extension Partnership, which helps small- and medium-sized manufacturing companies; the Economic Development Administration, which provides bridge loans and other support for infrastructure in poor regions; and the Appalachian Regional Commission, which supports jobs in 13 states (of which Trump won 10). Under Trump’s skinny budget, all three programs would be canceled. This has already elicited deep concerns, or even direct criticism from the governors of Kentucky, Alabama, Arkansas, and Maryland.
“A core piece of Trump’s message was that he would have the backs of workers in struggling regions, in struggling industries, specifically in the Rust Belt and the Midwest,” said Mark Muro, senior fellow and policy director at the Metropolitan Policy Program at the Brookings Institution. “But here, three programs directly relevant to that are zeroed out.” As a candidate, Trump promised convergence; as president, he’s entrenching divergence.
Second, America’s research universities are critical for productivity and job growth in many small and medium-sized cities away from the coastal behemoths. According to Muro, the metro areas with the fastest-growing productivity outside of tech hubs like San Jose and Seattle are anchored by major research universities, like Ames, Iowa, Blacksburg, Virginia, and State College, Pennsylvania. But Trump’s policies would starve these areas for both resources and talent, a needless and counter-productive double-whammy. The White House proposal guts federal science funding, including a nearly 20 percent cut at the National Institutes of Health, which funds billions of dollars of research at universities and hospitals across the country. What’s more, Trump’s antagonism to immigration might dissuade the world’s smartest people from conducting their research at American universities.
Third, these cuts to community investment and scientific research are making way for tax cuts that will go the rich. According to analysis by the Tax Policy Center, the tax changes in the Republican replacement bill would be “very regressive.” Low-income people in their early 60s could see their premiums rise by more than $10,000 and all households making less than $50,000 would be net losers under the plan. Meanwhile, families making more than $200,000 would save an average of $5,000, on average. (Note: This article was written before any budget analysis of the latest House bill.) If you don’t believe the TPC, just ask Trump. Told that this bill would hurt older Americans, particularly those living in rural areas, Trump responded, “Oh, I know.”
What’s remarkable, however, is that this might just be the start. The tax cuts in the health-care bill are nothing compared to the cuts featured in both House Speaker Paul Ryan’s budget and Trump’s campaign proposals. In the president’s most recent tax plan, the richest 7 percent of the country would get 70 percent of the tax benefits.
Some economists argue that expensive efforts to reverse economic decline in areas like the Rust Belt are a waste, and the money would be better spent to just pay people to move to better areas. That is, to invest in people, not places.
But taken together, Trump’s first 60 days do the opposite—disinvesting in Appalachia, starving research universities of the funds that often power local innovation, and redirecting money from health benefits for the poor and middle class toward tax cuts for the rich. To be fair, Trump is not abandoning all of his campaign’s proposals targeted at the white working class. As pledged, he is cracking down on immigration, especially from Muslim-majority countries, and striking down financial and environmental regulations that he says have constrained job creation. But as several economists have pointed out, deregulation alone won’t be a windfall for manufacturing jobs. What’s more, discouraging immigration could backfire for the U.S. economy, by constraining the growth of the labor force and keeping out the world’s most entrepreneurial people. That these policies probably won’t do much to promote regional convergence doesn’t seem to matter to Trump supporters—yet. Trump’s approval rating within his own party is still higher than 80 percent.
Fully addressing regional inequality is beyond the power of any one man, even the president. It may require a national effort to increase housing supply in productive cities, moving vouchers for low-income families trapped in generational poverty in the heartland, and an appetite for funding risky projects in struggling regions that may turn out to be losing investments. One could argue that Trump’s proposed military expansion may create jobs. But we don’t know enough about the details to know whether it will go to, say, struggling Kentucky areas or simply enrich contractors in Arlington and Norfolk, Virginia.
It is tedious, perhaps, to say so again and again, but in a news cycle that feels like a permanent state of attention whiplash, it can take a bit of brute repetition to entrench a simple truth: Trump ran on a promise to transfer political power back to the forgotten and the downtrodden, but he is presiding over an effort to transfer economic power from the lower- and middle-classes to the rich. Populism might be an elastic term. But Trump has tugged, turned, and twisted the word until it has come to mean its opposite, or perhaps nothing at all.