Stock prices will inevitably reflect the fact that they’re stock prices. They have never just risen on and on indefinitely, and never will, because that’s impossible. They are already overvalued and a significant setback is inevitable in the near future.
Deserved or not, Trump will suffer for it.
He won’t be the only one. Nor will he accept any of the responsibility.
I agree with you that the bubble will burst. I don’t think the Fed will be the cause, though. We can’t predict what the cause will be.
I was fooled by you accusing the Fed of being inflatory. We guys have said that the Fed policies will not cause inflation, especially not right after the downturn, and we’ve been right.
You don’t recall the opposition to stimulus spending in 2009? You haven’t seen Republicans even today braying about the gigantic Obama deficits? True Republicans don’t care about deficits when they are associated with tax cuts, but they do seem to be opposed to them associated with government spending.
Keynsian economics says to decrease deficits during good times and increase them during downturns. Since Republican policy is to increase deficits during good times - Reagan, Bush and now, that means that the deficits will be bigger than they should be during downturns - and harder to get through.
You mean like solar energy investments that don’t pan out? A trivial amount, and as any VC can tell you, lots of bets don’t work. Infrastructure investments pay off also and are pretty well guaranteed to work. When I was commuting I enjoyed the benefits of them every day.
Saving the auto industry worked out pretty well also.
One thing that Obama did well (with advice from Sunstein I bet) was to give people more money by increasing their paychecks through cutting FICA payments. Behavioral economics has shown that this encourages spending more than giving people a check - which goes to debt repayment or savings. Usually a good thing, but not during a demand crunch.
Since these policies got us out of the worst downturn since the Depression and launched a long recovery, I think it is hard to say they didn’t work.
You’ll note that upthread I did give Trump credit, with no conditions or caveats.
I just also pointed out that the current meme on right-wing media – that Trump has “turned the economy around” – is nonsense. It’s based on Spicer-logic of “The numbers were fake before but they’re very real now” i.e. the main thing that has changed has been how some people choose to interpret the numbers.
It makes me sad to imagine people only watching those shows and believing that story, but what can you do?
Corporate taxes fall both on labor and capital, the fraction depends on the market for both. Since labor markets are tight and capital markets are not we should expect almost all of the recent corporate tax cut to go to workers like the OP.
I don’t quite follow.
The costs associated with employing someone are only tenuously linked to salaries. Salaries are mostly driven by supply and demand.
For example, I’m a software engineer. A significant expense of hiring more SEs used to be buying the big-ass computer monitors they required.
Nowadays big monitors are cheap as chips, so did every SE get a pay rise because of that? Of course not, because pay is set by market forces. Companies pocketed the difference, and that drop in expense will have contributed to the productivity figures.
This isn’t a rant, I’m just talking about some of the basic concepts of how labor markets work.
The tariffs Trump slapped on solar panels will conservatively cause a net loss of 25,000 jobs. Low guess. I wonder if Trump will mention that the next time he brags about the Foxconn thing he had nothing to do with.
Meanwhile, ten countries have signed onto the TPP (or whatever they call it now) and left the USA out. That will cost a few more American jobs.
With the boost in coal production this will cause, most of them can find good jobs in he coal mines of West Virginia.
Unfortunately the anti-dumping tariffs are too late to save Solyndra.
As you say wages are determined by supply and demand. When demand is high and supply low wages will go up as they are currently doing. However, when employers have more money the wages will go up quicker because there is more surplus to capture.
If a company wants to hire a software engineer, they have to pay them more than they are currently making. Since they have more money either due to cheap monitors or lower taxes they can offer the SE more. The more demand for SEs the more they have to pay to outbid the other employers. Given enough demand the SEs will capture all the savings and the company will get none of it. It just depends on the elasticity of supply and demand in the market for SEs.
In theory, all companies want to pay as much as possible, so as to be the most desirable employers and be able to hire the best employees and reduce turnover. But paying more costs money, obviously. So there are two forces in competition. If a company suddenly gets a financial windfall in the form of a favorable tax law, then they are able to pay more to get “better” labor. At that point, the point at which the costs of higher pay meet the benefits of higher pay moves slightly higher.
Conversely, a company which is swimming along and suddenly hits a bad financial setback is apt to hold the line on pay. Because for this company, short term profits and cash now command a higher premium and the point at which the benefits meets the costs is shifted downwards.
I don’t think that’s mostly it (to the extent that he gets any credit altogether). It’s more about attitude and expectations.
If you’re a company, and the administration currently in power is perceived as favoring other concerns - e.g. environment, race/gender/LGBT discrimination issues, union rights etc. etc. - when business interests are at stake, then you’re less likely to go out and invest big bucks to expand your business, because the expected return is not as high. If another administration takes over which is perceived as more sympathetic to business concerns (relative to other concerns), then your perception of possible returns is higher and you’re likely to invest more.
It’s not black and white, of course, and businesses invest and don’t under all administrations. But there’s more and less, and perceptions count. So I think a Trump administration is likely to have a positive impact which outstrips the actual actions that they’ve done, based on what those actions imply about attitude and potential future actions.
In the real world, pay for new employees is decoupled from pay for existing employees. This means that new employees in hot areas come in with as high or higher pay than existing employees with good performance and many years of seniority. I’ve seen this happen more than once over the decades. And I’ve done salary administration, so this is based on real numbers, not hearsay.
CEOs and CFOs are under pressure to maximize profits, and this does not involve giving raises when it is not necessary. Most people have a disincentive to leave a safe job, even when times are reasonably good. Turnover does cost, but the cost is hard to measure, and many execs see workers as cogs anyhow. I have heard HR people acknowledge - and not care about - pay policies causing higher turnover.
Companies also target their salary structure at a certain point in the industry structure - and that is seldom at the top.
Also, salaries are forever, so companies are more likely to share windfalls - if they share them at all - in the form of bonuses which can go away next year.
Companies in an industry downturn will freeze pay, but since it will be hard for employees to leave it won’t hurt. Companies individually screwing up might lose employees, but the bean counters will see payrolls going down and think this is a good thing.
Of course you lose the best people, but if you think that execs care about that, you must not have any experience with them. I’ve seen exactly this happen more than once.
You first agree that it’s about supply and demand but then switch to saying it’s about what employers can afford. Those things are not the same.
Playing devil’s advocate, perhaps there are some industries where staff costs are very high and margins low, such that some companies struggle to pay market rates for a time.
But that’s not most industries. In most cases, saying that you cannot afford to pay market rates for staff would be akin to saying you cannot afford to keep the lights on all day – it would be an admission that the business model no longer works and the company is likely to fold very soon.
A company like wal-mart of course could have afforded to pay it’s staff more at any time, but why would it? To stay in the analogy, it would be like them deciding to pay more for their electricity.
This tends to be true in professional-type jobs, where each salary is individually negotiated. Not so in places like Wal-Mart, where salaries tend to be based on established and publically-known formulas.
That’s true, but if the company just got a windfall, that eases up the pressure somewhat. This is especially so if competitors just got the same windfall, and many of those are also raising salaries or expected to.
But look at the economy. “The pressure” is the opposite of what’s happened: productivity is sky-high, the stock market recovered from the credit crunch back in 2012 and is in rude health now.
But salaries have remained fairly stagnant, because companies are not obliged to pass on cost savings, or increased profits, to their staff.
There are other factors that affect the labor market and drive salaries. Unemployment is low now, and that will definitely be having an effect. But a decrease in costs does *not *drive salaries.
As you say, “There are other factors that affect the labor market and drive salaries”. But corporate profits is also a factor. So if you hold everything else constant and increase profits, that would tend to promote higher salaries. Which is what happened when the tax plan was passed.
What I just said was that the data shows profits are not a factor that drive salaries, and that it’s other factors (than profits) that do.
So you can argue with the data, or the logic, but what you can’t do is concede the point, and then say “So anyway, profits directly lead to higher salaries”.
I think I can.
You may have said that the data shows that profits are not a factor that drives salaries (though it was not apparent from your post that you were saying this). But I don’t agree that the data shows this. What the data does show is that profits are not the only factor that drives salaries (which is what you seemed to be saying).
In any event, regardless of what you were or weren’t saying, I dispute that you’ve produced any data which shows that profits are not a factor which drives salaries. And therefore, I can continue to maintain that they are a factor. 
Are corporate profits what drives rent, utility, and commodity prices for a business as well?
If profits go up, do you pay more for those things? Why not?
OTOH, if your profits do not go up, but the cost of electricity does, you pay more for electricity, regardless of what that does to your profits.
In the final case, if your profits go up, and your electric bill also goes up, then you can’t say that you are paying more for electricity because you have more profits.
Yes, you do. You rent better space, and splurge more for utilities and commodities. Times are tough, you cut back on those things.
In the case of employees, paying higher salaries in the hope of attracting and maintaining better employees is the equivalent of paying higher rent for better office space.