Despite the Bureau of Labor Statistics’ rosy unemployment numbers of 4.9 percent, the economy is not growing fast enough to raise middle-class incomes. A panel of economists recently estimated a paltry 1.8 percent GDP growth for 2016. That should be a cause for concern, even when for the first time since the dot-com boom was in full swing, all three major U.S. stock indices reached new records on the same day – August 11, 2016.
A confluence of factors has brought us here. The availability of easy money from the central banks since the Great Recession, domestically and globally, has kept the markets afloat. The central banks had hoped that corporations would use that money to invest in new plants and equipment. Instead, most of that borrowed money was used to buy back stock and acquire other companies.
The challenge now is that those central banks have run out of additional ammunition to boost the economy because interest rates are at rock bottom; and in some markets internationally, they are negative. Equities, as opposed to bonds, appear extremely attractive to international and domestic investors, especially in the U.S. stock market. The cycle feeds on itself. The chief beneficiaries in this climate have been people in the top one percent — exacerbating income inequality.
Given the state of our economy, I believe we need a fresh approach. As a Congressional candidate challenging the establishment in November, I offer an approach not based on dogma or ideology but on analysis. I believe our national economy requires regional and local focus on innovation and productivity. To date, I have not only proposed an economic plan to jump-start the local economy, I have also engaged our local institutions (business and educational) to begin workforce development. This includes the creation of an incubator with private funding to help small businesses grow. And, it includes a strong drive to create opportunities for entrepreneurs.
Further, I would advocate for policy changes to allow multinational companies to bring their profits back to the U.S. at much more attractive tax rates. This incentive-driven policy would be tied to business capital spending focused on new jobs, productivity, wage-growth, and investments in plant and equipment.
Do not be fooled by the market’s exuberance of late, especially considering the high level of political uncertainty in the U.S., and the uncharted territory of negative interest rates in Europe. The trajectory is simply not sustainable. The last time all three indices jointly closed at records was Dec. 31, 1999. Some of us remember the bust and pain that followed.
Derickson K. Lawrence, a longtime community activist and district leader in Mount Vernon, is running for Congress, 16th District, on the “People’s Choice” line.