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Why Trump will find it hard to make American economy greater

  • ASSOCIATED PRESS

    President Donald Trump speaks during a White House senior staff swearing-in ceremony in the East Room of the White House, in Washington.

WASHINGTON >> President Donald Trump’s economic plans are nothing if not ambitious: Annual growth of 4 percent — or more. A diminished trade gap. The creation of 25 million jobs over 10 years, including the return of good-paying factory positions.

It all adds up to an immense challenge, one that Trump aims to achieve mostly by cutting taxes, loosening regulations, boosting infrastructure spending and renegotiating or withdrawing from trade deals. At the top of his agenda: Pulling out of the 12-nation Pacific trade agreement, a move Trump initiated Monday, his first full weekday in office. He has also said he will rewrite the North American Free Trade Agreement to better serve the United States.

Yet to come anywhere near his goals, economists say Trump would have to surmount at least a handful of major hurdles that have long defied solutions.

He may yet succeed. But he faces deep-rooted obstacles that have bedeviled presidents from both parties for years.

Among the challenges are these:

A SHIFT TOWARD AUTOMATION

Trump’s goal of vastly expanding manufacturing would require at least the partial reversal of a decades-long trend toward a service-oriented economy and away from factory work. Former President Barack Obama sought to add 1 million manufacturing jobs in his second term but came up two-thirds short.

Even if Trump could return factory production to its heyday by toughening trade deals and threatening to slap tariffs on America’s trading partners, a surge of new jobs wouldn’t necessarily follow. The increased use of robots and automation has allowed factories to make more goods with fewer workers. Research shows that automation has been a bigger factor than trade in the loss of U.S. factory jobs.

The trend is spreading outside factory gates. Uber is experimenting with self-driving cars. Restaurant chains like Eatsa can now serve meals through an automated order-and-payment system. No cashiers or servers are needed.

“You cannot just slap tariffs on and hope that will bring back middle class jobs,” says Daron Acemoglu, an economist at MIT. “The jobs that went to China would come back to robots rather than people.”

A SHORTAGE OF SKILLED WORKERS

Jobs that can’t be automated typically require education beyond high school. Yet not everyone can or wants to attend college. Many analysts say the economy needs better and more widely available post-high school education and training, whether through community colleges, vocational schools or boot camps offering technology training.

Such a boot camp is how Sharnie Ivery managed to move beyond the retail and sales jobs he’d held right after high school. In 2013, Ivery began a six-month computer coding boot camp at Flatiron School in New York through which he obtained internships. Last year, he began working as a software developer at Spotify, the music streaming service. “There weren’t many opportunities for a career in technology” without training and experience, Ivery, 24, said.

Last year, the Obama administration opened some financial aid programs to Flatiron and other boot camps. But such efforts remain in an experimental phase, and any widespread successes from those programs are likely years away.

A lack of technological skills isn’t an issue only for the tech industry itself. Modern manufacturing work increasingly requires high-tech know-how requiring some education or training beyond high school. Since the economic recovery began in 2009, only 12 percent of manufacturing jobs have gone to workers with no more than a high school degree, according to research by Georgetown University’s Center for Education and the Workforce.

SLUGGISH WORKER PRODUCTIVITY

In the past decade, the growth of American workers’ productivity — the amount they produce per hour worked — has slumped to roughly half its long-term average.

That slowdown has imposed a dead weight on the economy. When employees become less efficient, it slows economic growth, and companies can’t raise pay without boosting prices. A faster expansion needs a combination of more people working and more efficient workers.

Trump’s proposals might help somewhat. He favors expanded tax breaks for companies that invest in new machinery and equipment, which typically make workers more productive. And he’s vowed to build more roads, tunnels and other infrastructure, which can save on shipping and commuting costs.

Douglas Holtz-Eakin, president of the conservative American Action Forum, says Trump’s push to loosen regulations might also lead to more startup companies, which could prod established businesses to become more efficient.

Still, many economists, like Robert Gordon of Northwestern University, argue that today’s innovations — in mobile communications and biotechnology, for example — aren’t transformative enough to fuel the explosive productivity growth that resulted from inventions like the automobile, telephone and computer.

INCOME INEQUALITY

Economic growth since the recession ended has been both slow and uneven: It’s benefited wealthier Americans far more than low- and middle-income households. Trump’s nominee for Treasury secretary, Steven Mnuchin, noted this concern at a confirmation hearing last week: “The average American worker has gotten nowhere,” he said.

The tepid gains for low- and middle-income families have slowed the economy because those groups typically spend more of their income than do affluent households, and consumer spending is the economy’s primary fuel. Against that backdrop, Trump’s goal of 4 percent annual economic growth — a formidable one under any circumstances — might be next to impossible.

Mnuchin said the administration’s proposals to cut taxes for individuals and businesses would shore up families’ finances and encourage companies to hire more. Yet America’s wealth gap has widened even as previous presidents have cut individual taxes.

And there’s no way to know how companies would use their tax cuts. Many large companies return profits to shareholders by boosting dividend payments and share buybacks, rather than by expanding investment and raising employee pay.

A SLOW-GROWING WORKFORCE

Trump has pledged to add 25 million jobs over the next decade. But with fewer people looking for work now than just a few years ago, it’s unclear where all those extra workers would come from.

The president’s pledge will run up against a long-standing trend: A decline in the proportion of Americans either working or seeking work. That’s largely a reflection of an aging population. Roughly 10,000 baby boomers turn 65 every day, and many retire. The Congressional Budget Office forecasts that the proportion of Americans working or looking for will keep dropping to 61.5 percent by the end of 2020.

Mark Lashinske of Tempe, Arizona-based Modern Industries, which makes machine tools, says he’s struggling to fill 14 machinists’ positions. He blames the steady loss of manufacturing jobs since 1980 for discouraging an entire generation from factory work. His company is expanding its efforts to find younger job applicants.

The company has established an internship program and is working with a nonprofit group to encourage disadvantaged high school students to consider manufacturing careers.

“We’ve been looking for quite a while,” he says. “We have such a shortage.”

Most economists argue that encouraging more legal immigration could help counter an otherwise slow-growing workforce and might help accelerate economic growth. Yet Trump campaigned on tightening immigration restrictions.

“In the absence of immigration, we shrink the size of our population and our economy and our global influence,” Holtz-Eakin says.

STRONG DOLLAR

Through renegotiating treaties like NAFTA and pushing companies to keep more jobs at home, Trump hopes to reduce — or even eliminate — the trade deficit, a measure of how much more America imports than exports. The U.S. has run trade deficits since 1975.

Yet if Trump’s policies accelerate growth, the Federal Reserve would be more likely to raise the short-term interest rate it controls to keep inflation in check. Faster growth and higher rates, in turn, would attract more investors to the dollar, raising its value compared with other currencies.

The catch? A stronger dollar makes U.S. exports costlier and imports cheaper — a recipe for an even wider trade deficit and a headwind for growth.

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    • Trump looks confused, dazed and silly on the first day. Bring the intellectually and morally superior Obama back now! This clown won’t even last 4 years.

        • Who is Allie to say No to and why? And what lack of knowledge has Allie shown? Can you be specific?

      • If you partied as hard as he did after the swearing in, you might be a bit dazed too. lol

        Sadly Obama cannot come back. Would take a constitutional amendment to do it.

        While the Donald could end up being a surprise and actually doing something good, I agree that he probably won’t last more than 2 years.

        • Boots, don’t answer your own questions. Leave it to Ahi or Allie to address the why’s.
          I am sure she already knew 2 term max

    • IRT Skins66, fully agree with your post. This morning President Trump met with the Construction trade unions and tomorrow with the Auto Industry unions to provide support for them. The Private Sector Unions provide a huge number of trained and middleclass workers in the Construction industry. Think about it, the approval and go ahead of the pipe lines, including Keystone and all the infrastructure and related work. President Trump has started the movement to improve the American economy, the American economy that our former Hawaii born President failed for eight years.

      • Time will tell if the Donald can come close to Obama. More likely he will match the record of the prior republican president. If only republican presidents could fail as much as Obama. Stock market rose over a thousand points, unemployment is down, and many months of positive growh not to mention the reduction of a budget deficit by well over 50%. As for ignoring global warming does not mean it does not exist as many in Florida are learning.

      • Yes Trump is pushing for the Exxon Mobil, and the oil and gas industries, to increase their sales and make huge profits, at the expense of the American consumer, and to the detriment of the environment and the climate. More fossil fuel burning to pollute the planet’s air, water, land, and more warming of planet, melting of the ice caps, warming of the oceans,the killing off of coral reefs and destruction of ocean ecologist and species, and the intensifying of global warming related floods, droughts, hurricanes, rising sea levels and destruction of sea coasts

    • May be a crappy newspaper but why is the article one sided? What specifically do you find wrong with it? Can you be specific? I think it raised a number of good points. It is going to take more than the Donald waving a magic wand to create jobs.

  • yes the challenges he faces will be herculean, but the right man is in the job to accomplish most of these issues.
    in fact, he probably is the only man that can improve our sluggish economy with his leadership, action and business acumen by cutting through the red tape of government bureaucracy and snail pace methods.
    watch how he rolls!!
    imua mr president!

  • The DOE/BOE in Hawaii has fail miserably. They have push for everyone to go to college which is NOT for everyone. The DOE/BOE has disbanded/closed a large percentage of middle and high school vocational programs (i.e.: wood shop, autos shop, electronics, graphic arts, metal shop, architectural drawing. They have turned shops into regular classrooms an disposed of all tools and equipments. This is one of the main reasons for a lack of trained skilled labor in the islands. INCOMPETENT PEOPLE IN CHARGE MAKING POOR DECISIONS =DISASTER.

  • The reason Trump would fail, and I’m not betting on it, is because of left wing biased media outlets like the star-advertiser. Your positive stories about the man are very few and far between. People read the negative stories you and others like you print and after awhile start believing it. It’s not a secret that’s your goal. Why don’t you try some positive articles once in a while. Heck, even allie might start believing.

    • Snow, I agree some media have been focusing on the negative. Let me offer some positives. His wife is gorgeous. His hair is something. His children are pretty. Mar-a-lago is stunning. Trump Tower was the tallest building in Manhattan on Sept 12, 2001. The catchphrase “you’re fired!” Brilliant. Never spoken by anyone before Donald. Let’s give him a chance to build on is many successes.

  • This article is a good description of our current state. It says nothing of how we got here yet denies any successful attempts to get us out. So what is the message? Do absofknlutely nuthin pout, protest, and daydream? The status quo is not cutting it. Life is a gamble and so is innovation. So called experts do not have a crystal ball and are biased with their own personal agendas.

  • This article is a good description of our current state. It says nothing of how we got here yet denies any successful attempts to get us out. So what is the message? Do absolutely nothing pout, protest, and daydream? The status quo is not cutting it. Life is a gamble and so is innovation. So called experts do not have a crystal ball and are biased with their own personal agendas.

  • It’s going to be a challenge no matter who is in the White House. The key issue mentioned above, I believe, is automation. Robots and computers will take over basic “low skill” jobs in manufacturing and yes, places like fast-food restaurants and stores that need a “cashier” or counter person. There will be lots of jobs in high tech to build and maintain the technology, but that will require higher education or vocational school at the very least. The MIT economist said it all about manufacturing: “The jobs that went to China would come back to robots rather than people.”

    • Here is the problem, true automation and technology may and has eliminated many jobs. So the US will reach a critical point where for a large percentage of people, there are no jobs. And since the point of automation and technology is to eliminated jobs (higher profits), even if the unemployed had tech training, the majority could still not find work. So now the consumer market falls as many people do not have incomes, and social security suffers as the number of workers paying into the systems falls. Not really sure what the answer is, but the more jobs in the US the better, and at least that is what Trump is trying to do. At least try something, and if that doesn’t work, try something else.

  • Those illegals, supposed millions according to repugs, will be deported thus freeing up millions of jobs. Food cooks,hotel room cleaning engineers, general sanitary positionary, all new jobs freed up for Americans.

    • I know you’re being facetious. This AP article brings up the point I’ve been making for years. A high school diploma alone means hardly anything today, perhaps it will help in getting one of those minimum wage cleaning engineer (janitor) jobs. Unless one has the ambition and opportunity to become a skilled worker in demand, either in the trades or through college, there is little hope. Be very careful what you apprentice or major in. Ask yourself “Where is the demand today and in the foreseeable future”? Taking the easy nonsense courses and getting skill sets in the wrong profession will be demoralizing upon finishing. Nothing comes easy today. Takes a lot of thinking and smart action.

  • two biggest road bumps to growing the u.s. economy is a shrinking population and a shortage of college educated workers.

    demographics show population contracting after the baby boomers and that affects available workers as baby boomers retire. legal immigration can grow america’s population. legal immigration.

    education needs to be recommitted to providing well educated citizens prepared to contribute to america’s growth as a society and its economy. current practice of reducing education to progressive indoctrination and propaganda has reduced america’s working force and increased america’s welfare dependents.

    trump will find it very difficult to resolve these two issues.

  • Never understand companies that say “we cannot find skilled workers”. Well if you can not find them, hire a smart, motivated kid out of high school (and there are many), pay them a living wage, and train them. Most of these “skilled jobs” could have someone trained and working productively in less than a year and in a few years be at full productivity. Thus instead of wasting time looking for that perfect skilled worker, train the worker to your desires and needs. No sense in spending years at college or community school when you are not going to learn the skills for the job. Give Trump a chance. What we have done over the last 25 years has not worked out so well for 1/2 or more of the US population. Maybe time to try something different. Friend used to say “do what you always did and you get what your always got”. And to the press remember, your are wrong about many things, especially your projection as to who would win the 2016 election…

  • AP another Non-Credible news agency. Fake News.

    “On The Economy”. Of course the liberal Mainstream media will pretty much paint their own picture & diss our POTUS as an impossible task. They forget one thing in comparing their past economic models with Politicians.Who controlled our government or Obama for that matter,who btw…had a dismal 3% average GDP growth. (Yes that right! AVERAGE! It was only the last quarter he had a 4%.growth) They forget Trump is Not a Politician. An All Talk and No Action politician he is not. He’s a Mover and a Shaker. He will makes things happen . Just be Patient & it will happen. Relax & Just remember. Think how much Obama did in his first 4 days in office,now compare that to President Trump. IMUA.

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