By Suzanne Thiele–

Regarding our deteriorated economic situation, one thing Trump and Clinton have in common is the populist deflective approach of blaming Wall Street.  This is political lip service for those of us middle class and below who make under $300,000 per year.

Virtually all of the post-Recession policy interventions have been monetary and have predominantly, if not exclusively, benefitted big banks. The Federal Reserve printed a ton of cash and kept interest rates at zero percent. Banks were bailed out and the financial sector emerged intact, yet growth has not returned.

Interest rates being so low have kept things stable at best, but could be fueling the next bubble at worst.  These measures have done little, if anything, to reduce unemployment.* Attacking Wall Street for greed is redundant; it is not the responsibility of the private sector to create jobs. Frankly, it cannot. Market forces alone cannot revive the economy in the wake of the Great Recession, at least not in the short term—and as famously quipped, in the long term we are all dead.

The two presidential candidates also have a shared delusion that America will become great (again) through manufacturing. They want to bring jobs back and keep them from being shipped abroad or across the border with different strategies.

However, this is the wrong approach to job growth. Those jobs are gone and they are not coming back, because of technological advancements and an inability to compete with the international economy’s cheap labor market –both of which are good things! The contenders for the presidency of the wealthiest most advanced nation are looking to the past, and at the wrong jobs. Economic growth in the United States is more than factories from now on. The truth is that these too are just political talking points engaging the many that were left jobless.

What both candidates are right about is that we need to create jobs in order to resuscitate our economy; in fact, it is the single most important way to do so. It is the responsibility of the federal government to get us recovered from recession (finally) through needed measures that will work to complement the efforts that have not yet brought us past 2007.

Both are right by wanting to invest in infrastructure, which is the number one foolproof, safe, and needed federal investment that caries over instantly and long-term into the private sector and growth.  They are also both right to want to make life easier for entrepreneurs and small businesses, which have gotten overlooked in recovery tactics thus far. But that is where their plans diverge.

In order to evaluate proposed solutions, it is important to understand what created this macroeconomic mess.

*The “unemployment rate” has returned to the pre-Recession rate—almost a decade later, finally—because it is measured in terms of those actively (within the past four weeks) seeking employment. Labor force participation, however is only 68%. At least 2% of adults over 26 want a job but cannot get one; therefore, it can be concluded that actual unemployment is still high, and those who have given up their search for employment or are underemployed are not captured in the reported unemployment rate. This coincides with the lack of growth in terms of GDP. Therefore, the term unemployment/rate will be used throughout this article despite the illusively measured “unemployment rate” being seemingly acceptable.  Besides, even if we were back to 2007’s normal, which was not awesome, why stop there? Come on let’s grow!

Our problem: Lessons from the Depression

            The exodus of manufacturing is not the first time our labor market’s landscape has changed almost completely. Leading up to the Great Depression, technological advancement made employment in agriculture decrease dramatically. (In 1930, agriculture accounted for 1/5 of all US jobs, and today it is only a couple percent.) Farming became almost obsolete as far as job shares are concerned, much like manufacturing today. The large number of people working on farms was replaced with the large number working in factories, but what caused that shift was industrial policy prompted by the entrance of the US into WWII. It took government intervention and huge investment into a new industry in order for the depression to end abruptly, and it was through employment.

The reason why we have been putting all our bets on monetary policy is because the Fed Chairman was a Depression scholar and economists always talk about inflation and markets, so the Great Depression is no different. There has been a belief that tightening the money supply, which would stifle inflation, could improve the economy in a depression or recession enough for the private sector to make the rest of the improvements. (Again, the real life problem was a massive lack of jobs, which happened before the market crashed.)

In absence of a profitable war—the current wars have put us back over a couple trillion dollars—this theory was tested now throughout and since the Great Recession. Monetary policy has been utilized to fix the unemployment rate, which the Fed is also required to keep track of, and yet here we are. High unemployment and underemployment have persisted with labor force participation including only 68% of all adults. Theory debunked. The good news is that we do not need a world war again, just a similar scale investment to meet the magnitude of our situation.

What to do now

In undergraduate economic principles classes, we are taught that industries die, and that is acceptable, because those jobs will be replaced by other jobs, usually somewhere else. Manufacturing jobs are shifting into the service sectors, of which the good-paying ones are in finance, real estate, health and education.  The first two were shocked by the Recession and the last two have lost a lot of federal funding because of austerity measures, or spending cuts. But that makes no sense. Taking money away from two huge employment sectors would only prevent growth, especially post-Recession. That natural evolution of an economy that we learn in college is taking too long this time, and action is needed beyond the monetary approaches already utilized with futility. A decade later and both candidates know we need to spur job creation, and their constituents know it. Jobs are also the only feasible way to generate growth, but each candidate has strawmen.

Trump focuses on debt being a huge problem resulting in our economic conundrum. But what caused the deficit were tax cuts, spending and monopolistic market practices. Since he will not raise taxes, and he has admitted that we owe veterans spending and other expenses like social security and Medicare (whose monopsony has no bargaining rights with pharmaceutical firms), the last option is to create jobs, a political win. Due to the severity of the problem, we need to invest beyond infrastructure in order to generate growth. However, what we do invest will have a higher multiplier, a greater return, because we have gone so long without it and are in such debt. Tax revenues from new jobs will quickly go towards balancing the budget.

Yet Trump has not voiced interest in additional investment of this sort, because of that same flawed theory that if we control fiscal or monetary policy, the market will correct itself. We are still waiting. He talks about GDP growth being so important because it is related to job creation. However, job growth is what we can use to cause GDP growth, not the other way around. Government investment in education and technology will only cause debt to decrease because of short and long-term returns creating high tax yields, which will raise GDP and therefore improve our debt ratio.  GDP is the sum of consumption, investment, government spending and net exports. Since there is that “balanced budget multiplier” effect on government investment in the right areas, even if everything else remains the same, consumption will increase, raising GDP.

Trump has also used the political bait of highlighting trade deals as a reason for job loss, and Clinton has tried to leverage this also. Except, not only do trade deals notoriously benefit US business interests the world over, but these negotiations are not the reason for factories relocating, they just eased the transition.  Trump has also gone so far as to name our nation’s spearheading international economic development as the catalyst for job and capital flight. This is also untrue as the US has been exploitative in its development practices even through international development organizations. These organizations have pushed market dominant agendas that benefit the already wealthy the most, namely our wealthiest citizens. He is under the flawed impression that we can get these jobs back, and that it can be done through negotiations and trade reform.

In fact, Trump’s seven steps to improve the economy either mention trade agreements or China. Essentially he is blaming other countries for the natural evolution of the international economy while chastising our own participation in it. Companies left because it is cheaper for their factors of production, and many left to multiple nations, not just one (or two), not just China or Mexico. To impose an exit tax now is too late…and beside the point. Yet both candidates support that.

Since tax reform is politically unlikely <link to my trump tax plan article> even though both candidates want to close loopholes, the more realistic way to generate revenue is by expanding the job market. Our deficit was caused by tax cuts we could not afford along with war and veteran expenditures, the latter of which are not even enough. Cutting spending in two of our biggest sectors of health and education was a mistake. Investing in employment and advancement of these areas is crucial.  Neither Trump nor Clinton’s plans mention investment in healthcare or education as sectors.  Instead, both candidates’ plans do highlight building up our energy capabilities. Trump’s plan focuses on existing energy enterprises like coal, natural gas and oil, while Clinton’s is geared toward investing in alternative energy sources like solar and wind power, which is forward-facing and has the potential to create more new jobs with investment in technology, and renewable energy is by definition sustainable. Alongside infrastructure there needs to be investment in technology and education. Only Clinton’s plan would do that.

Should the better plan win

Clinton has a lot more to her plan to begin with, and it does include investment at a scale that will create jobs that raise aggregate demand, increasing consumption, which will facilitate growth.  Hers is well laid out with specifics of how much and how money should be spent to stimulate the economy by investing in job creation. Her plan is thorough, especially compared with Trump’s. In addition to the already mentioned proposals her plan has in common with his, she outlines investment in education and technology. In some ways though, it goes a bit too far, making the jobs plan one of many bullet points equal to tax code and trade reform, which are almost happenstance, or import substitution which is illogical.  Creating jobs should be the priority. It seemingly being one of many priorities, and an equal mention to other subsidiary efforts and ideas, brings worry that it is unlikely to happen. Creating jobs through investment in infrastructure, technology and education should be the economic plan, not a small part of it.

Clinton’s plan puts at the forefront initiatives like free college and raising the minimum wage which, even if they were noble, are second to the initial investment that must take place. Investing in k-12 education will do a lot more to curb inequality for example, especially for the future. Clinton’s plan barely mentions k-12 education, but since Sanders’ exit, she has incorporated free college as a bullet point. Finally, the minimum wage has not increased with inflation or cost/standard of living, but the real reason there is now something of a revolution around want for a much higher minimum wage is because of the change in our job market. There are not enough good paying service sector jobs to replace losses in manufacturing, so more people are having to raise a family on minimum wage. This shift can be corrected in large part by the investment program. Raising minimum wage should be secondary, not at the forefront, as investment in creating better jobs can alleviate this problem as well.

Trump blames everything on job loss to China and Mexico. He proposes bringing jobs back, and if not the market will fix itself. But we need to do something in the short term. Investments in workers has been needed. Even before the Recession, such was the case. Clinton wants to overpromise perhaps, but her investment plan, if executed, is of a magnitude that will really generate economic growth and an increase in GDP that Trump talks about. Unfortunately, his plan holds little promise of delivering in the near future, especially during a presidential term. Growth is long overdue to make and keep us economically great again, and it is best achieved through real investment in creating jobs now to replace those lost.

Suzanne Thiele is a Marine Corps veteran who served in Iraq in 2004. She has a bachelor’s degree in economics and Middle Eastern studies from Pace University in New York. Recently she graduated from the London School of Economics with a Master of Science in Anthropology and Development, where she received distinction in her economic development.