Helping Our Own

June 9, 2025  | 934 words | Economics, Politics

The ICE raids on restaurants and other small businesses around the country to arrest illegal immigrants and those whose visas have expired, with an eye toward deporting them, are of a piece with telling Harvard it can no longer admit large numbers of foreign students.

The stated aim is to preserve employment and educational opportunities for those born and raised here.

The harsh manner in which these policies are being implemented lead many Americans to see the Trump administration as an authoritarian regime, with its actions signaling the end of democracy as we know it.  But what of those other Americans, the ones who still think of Donald Trump as their guy, even now, after all this.  What could possibly be their rationale?  Apart from outright xenophobia, of course.

There are a variety of explanations for this phenomenon, which our leading political and cultural commentators continue to explore.  Here is my own modest contribution to the discussion, a broad-stroke take on one aspect of how we got to where we are.

There are many in our country who feel they are losing ground and falling behind financially, despite their best efforts.  To them the script has flipped.  They don’t know what they did wrong and are at a loss as to how to right their ship.  Their quiet desperation is such that their discernment has been addled.   In dire need of a helping hand, they have accepted the Trump presidency warts and all, because they have come to believe somebody in charge is finally looking out for them.

The rich will always support a Republican president who cuts taxes or at least keeps a lid on them.   But Mr. Trump’s singular achievement is how he has captured the hearts and minds of Democrats who are decidedly not-so-rich, whether we describe this coalition as middle class, working class, or blue collar.

This new-found support is the key to Mr. Trump’s hold on Republican members of Congress.  He has reconnected with that voting bloc previously referred to as Reagan Democrats, the ones who first jumped ship and reoriented themselves politically over the issue of abortion.

Those folks have been hanging on for dear life these last forty years, as Republicans have enacted one ‘pro-growth’ fiscal policy after another, opening the flood gates to mergers and acquisitions that slashed jobs and lowered wages of the jobs that remained.  The take-over and consolidation formula has been pursued relentlessly, juicing up the bottom line of financial wizards who operate far above the fray.

This predatory economic behavior was officially sanctioned back in 1987 when our hard-won anti-trust legislation of a half century before was rolled back on the promise such mergers would yield lower prices for consumers.

Lower consumer prices were delivered as promised, but came at a cost: loss of job security and the birth of the no-benefits gig economy.  This late 20th century twist was just the latest iteration of an age-old problem: exploitation of those with no economic leverage.  

Throughout our history the use of an immigrant workforce to undermine the established wage structure has been a tried-and-true technique employed by the entrepreneurial class to keep expenses down.  It is natural, therefore, for some of our citizens to be wary of what they believe might be an influx of immigrants.

Until our movers and shakers in the business world make a concerted effort to stabilize wages among the workforce, native-born and immigrant alike it, there will always be populist cries for economic reform via government mandates of one kind or another.  This populist fervor has cycled up in our country’s history on a regular basis.

Donald Trump may be the unlikeliest populist imaginable, given his background as a real estate developer/exploiter of various contractors and suppliers.  But as someone who wanted to be president at any cost, he stumbled upon a winning message that resonates with everyday folks, and is now playing that card for all it’s worth.

Mr. Trump’s bombastic carnival act may strike some of us as transparently transactional in the extreme, but his particular genius has proven to be selling himself to Democrats as a man of the people while holding onto to the upper crust “no new taxes” Republican base.

J.D. Vance, on the other hand, strikes me as more sincere in his populist musings, having emerged from the middle class-working class-blue collar world.  As Trump’s young lieutenant Mr. Vance is being called on from time-to-time to broadcast a “common good /helping our own” ideological underpinning for the current administration’s most egregious excesses when it comes to immigration policy enforcement.

By leaning into such a restrictive policy Vance is missing the point.  It is Republican fiscal policy that has eroded the middle class over these last forty years – not an overabundance of legal immigrants taking employment and educational opportunities away from those born and raised here.

But blaming immigrants is an easy sell to a weary working-class population, and provides cover for the shortfalls being registered throughout society by the inconsiderate way the entrepreneurial class has chosen to conduct its business.

In the broadest sense these shortfalls result from an almost complete abandonment of what used to be called the “social contract,” and a fevered embrace of Milton Friedman’s 1962 proclamation that a corporation has only one social responsibility: making a profit.

How ironic that Mr. Trump, currently starring in the role of The Great Populist, is still very much a member in good standing of the entrepreneurial class, practicing his real estate developer art of the deal shtick, now as a side hustle from his perch in the Oval Office. 

Robert J. Cavanaugh, Jr.

www.robertjcavanaughjr.com

bobcavjr@gmail.com

Does America Need a Supply-Side Comeback?

May 27, 2025  | 806 words | Economic Policy

A couple of things in the paper caught my eye over the weekend.  One was an interview in the Wall Street Journal with supply-side economist Arthur Laffer who lent a hand back in the Reagan administration.  Now 84 years old, Mr. Laffer has always believed lowering taxes spurs economic growth.  This interview makes clear, though, that he does not think lowering taxes will ipso facto increase government revenue, which is how critics frequently mischaracterize and debunk the supply-side approach.

Instead, the well-known Laffer Curve depicts the proposition that tax revenue rises with marginal tax rates only up to a point – beyond which revenue actually starts to decline.  This is a fascinating observation and suggests to me more effort should be put into identifying what that tipping point is, on maybe a regular basis.  Though I am not sure how adjusting the marginal tax rate each year would go over with the electorate. Or with the Internal Revenue Service, which by all accounts is already overburdened.

In any event, Mr. Laffer is not interested in such accounting adjustments, for he has boiled everything down to one, simple proscription: “lower taxes.”   This singular policy will accomplish every worthy objective:  increase opportunity and growth, create a larger tax base which will result in higher government revenues, all while generating higher wages and an increase in living standards.

But higher wages and an increase in living standards for whom, exactly?

At one point in the interview, citing the burgeoning car manufacturing in his home state of Tennessee, he tells us rust-belt states like Ohio, Michigan, Pennsylvania, Illinois and Wisconsin drove those manufacturing jobs away with high taxes and “other policies that raise business costs.”

In a glib bit of analysis, he then notes how manufacturing jobs have increased in Southern states like Florida, Georgia, and Texas.

Is there anyone reading this interview who is not able to immediately recognize that auto manufacturers have moved away from a unionized work force at the first opportunity, in favor of a cheaper, non-union workforce?   How does this move substantiate Mr. Laffer’s claim that higher wages are a natural by-product of spurring economic growth through lowering taxes?

To point out as Laffer does that when taxes go up the rich report less income, either because they use tax dodges that Congress has allowed, or because they work and invest less, says more about the mindset of our richest citizens, rather than identifying a flaw in the concept of marginal tax rates.  

This, then, is where I must politely part company with the supply-siders.  While I am four-square in favor of spurring economic growth, I am not nearly as convinced as Mr. Laffer that the benefits of such growth have ever been or will ever be spread around in any sort of equitable manner.  The benefits always seem to coalesce at the top, or near the top.   

The only thing a successful corporation seeks out more than lowering/eliminating its tax liability, is lowering/keeping a lid on its labor costs.  It may offer rich compensation packages to top talent where the market forces it to.  Everyone else in these organizations remain expendable, little more than an interchangeable part.

In the same paper on the same day, Senator Pat Toomey of Pennsylvania (2011-2023) wrote in to the Opinion page of the WSJ to sing the praises of the work he and his colleagues did in 2017, when Congress lowered the top corporate income tax rate from 35% to 21%.  

“We recognized that increasing capital expenditures on technology and equipment would lead to productivity gains and higher worker pay.  We thus reduced the after-tax costs of capital expenditures by allowing full expensing in the year in which it occurred rather than depreciating the costs over many years.  Investment and workers’ pay surged.”

I, too, happen to think full expensing of a capital expenditure in the year it occurs is a great idea.  I just take issue with how Mr. Toomey causally invokes the claim that workers’ pay surged.  And I wonder if readers of The Wall Street Journal are too quick to take such statements at face value, in order to reassure themselves that all is right with the world.

In short, I do not have a serious argument with either Arthur Laffer or Pat Toomey since I am convinced both men have a handle on an important piece of the economic puzzle:  how to spur economic growth – growth that obviously benefits all of society.  

I just wish they and other supply-side advocates like them would spend more time thinking about the other important piece of the economic puzzle:  how to move beyond ‘trickle down’ to achieve a more equitable distribution of the fruits of our country’s dynamic economic growth, among those with no ownership stake in the enterprise, and no leverage at the bargaining table.

Robert J. Cavanaugh, Jr.

www.robertjcavanaughjr.com

bobcavjr@gmail.com

Pomp and Plainness

May 22, 2025 | 329 words | Papal Politics, World Economics

The Catholic Church just selected a new Pope, amid much pomp and circumstance.  Some 133 old guys who had achieved the rank of “Cardinal” cast their votes in the Sistine Chapel, one of the world’s most intricately decorated sacred spaces, while dressed in flowing red vestments and matching caps.

Once the ‘winner’ was announced all the participants changed into flowing white vestments with pointy white hats, to formally acknowledge the elevation of one of their own into this new, very demanding role, leading an organization with 1.3 billion members.  As it did for many people around the world, this announcement and the accompanying ceremony brought tears to my eyes.

But the Catholic right in the United States responded with fear and alarm, as reported by Kathryn Joyce in Vanity Fair magazine.  She quotes a variety of ‘traditionalist’ pod casters who are not fooled by Leo XIV’s decision to wear the formal vestments Francis shunned when greeting the multitudes for the first time as Pope from the balcony in St. Peter’s Square.  They don’t care if he will be more amenable to the Latin Mass that Francis was trying to quell near the end of his papacy,

Instead they ruminate about what they feel is a new liberal status quo.  They sense Leo will follow what for them is a heretical path, where the word ‘ecumenicism’ is hijacked to mean all religions will get you to heaven.  They brood over the continued implementation of Amoris Laetitia, Francis’s 2016 apostolic exhortation that opened the door for divorced and remarried Catholics to receive communion.

Meanwhile, far away from both the majesty of the Sistine Chapel and the strain of traditionalist complaint, much of the world’s Catholic population contents itself to worship in quite modest structures, amid a daily struggle for one or more of life’s necessities – food, clothing, and shelter.  Things the most ardent conservative podcasters here in the privileged United States already have in abundance, and therefore take for granted.

Robert J. Cavanaugh, Jr.

www.robertjcavanaughjr.com

bobcavjr@gmail.com