The American economy continues to perform well by measures such as employment, GDP, and financial markets. Recovery from the 2007-2008 Bush recession has continued under eight years of the Obama administration and the one-plus years of the Trump Administration.

While employment and GDP are important, they mask serious underlying problems in the economy. The Obama economy was criticized for prosperity not shared throughout the economy — virtually all benefits of growth going to the nation’s wealthiest corporations and individuals. The increased employment was largely in low-wage jobs. Real wages that had remained stagnant for decades continued to stagnate.

Candidate Trump capitalized on this deficiency during his campaign, citing vast numbers of underemployed — those working at jobs beneath their capability. Trump even insisted that statistics compiled by the Bureau of Labor Statistics were phony, not to be believed.

Even as Trump inherited the improving economy from the Obama administration, he now hails the high employment, GDP, and strong financial markets as his own accomplishment. He even now relies upon, and cites, the previously “phony” numbers compiled by the BLS.

Overlooked is the fact that previous deficiencies of the economy, stagnant wage growth and income inequality, still exist. Indeed, income inequality, so criticized by Trump, is worse, and will continue to worsen under the recently enacted Trump/Republican tax bill that disproportionately favors the wealthiest of the nation’s citizens.

The Keynesian solution of counter-cyclical fiscal policy is most effective in dealing with fluctuations of the business cycle. Increased government spending and higher federal deficits during recession, along with constrained spending and reducing deficits during prosperity, when allowed to function, is economically effective. But it has political constraints. Increased government spending during times of reduced tax collections is counterintuitive and generally opposed by fiscal conservatives. During prosperity with increased tax revenue, the political imperative is to “give it back to taxpayers” as tax cuts, rather than paying down the public debt. 

Nevertheless, Keynesian strategy is effective if, however half-heartedly, it is allowed to work. It was instrumental in getting the economy out of the Bush Recession. However, dealing with long term structural problems is more difficult and requires stronger medicine than the standard Keynesian solution.

The growing gap of income and wealth between a few of the nation’s wealthiest and everybody else, including the middle class and the working poor, persists under the Trump administration. Candidate Trump and Senator Sanders both made this issue central to their campaigns. It is not too alarmist to suggest that the failure of the system to work for the prosperity of all is the greatest threat to American Capitalism as we know it.

This failure of the system to spread the rewards gained through technological advance, increased labor productivity and gains through international trade, is not going to be automatically solved through an unfettered free market system. American capitalism operates under a set of laws, public policy, and institutions. Income distribution is affected by public policy and can be changed through public policy.

Of course, changing laws and public policy, and dealing with institutions that affect income distribution, is easier said than done, and fraught with political controversy. This broad issue of income and wealth that affects the entire population is tied in with international trade, affordable access to health care, immigration issues, access to education, and much else. It cannot be solved by vapid slogans laced with phony explanations for the problem. It cannot be solved by engaging in tariff wars. And it cannot be solved by demagoguery of immigrants.

Some American jobs have been lost through international trade and offshoring of manufacturing. American capitalism has been largely unsuccessful in compensating or sharing the gains from trade with those who pay the price through lost employment. Totally neglected in trade negotiations is the compensation of labor in low wage countries. This would be a step toward increasing worldwide demand for goods, as well as improving the competitiveness of American labor and industry.

While some jobs are lost through trade, the vast majority of lost manufacturing jobs have been due to technological changes that reduce demand for labor. Those manufacturing jobs throughout the vast Midwestern industrial belt in cities such as Akron, Youngstown, and Flint, are gone forever. And with it, the route to middle class for millions of blue collar American workers. There is nothing on the horizon to replace this broad route to Middle Class America.

Lost coal mining jobs have nothing to do with “ambitious environmental regulations.” Reduced cost of natural gas is the explanation. We don’t expect politicians to recommend increased energy prices. However disingenuous, it’s easier to blame environmentalists.

Affordable health care would benefit all, especially low-income citizens. It’s not “socialism” to insist the world’s largest, richest world economy make a basic affordable health care package available to all of its citizens.

Immigration issues have too often been blamed for “lost American jobs.” Who is staffing our meat packing plants, and harvesting our fruits and vegetables? These often-dangerous, backbreaking jobs are not being taken away from Americans who will not do this work at any conceivable wage. 

Back in the 1950s milk was produced by small- and middle-sized farms, the cows milked by farmers assisted by kids like me and my readers. Now dairy production is largely through large-scale enterprises, with over half the nation’s dairy farm and factory labor performed by hard working foreign nationals.

Many of the increased jobs during the decade-long recovery have been in low wage jobs such as food service, child care and care for the elderly. These are essential, productive jobs essential to society. But they are low wage with little prospects of career advancement. 

There are clear public policy steps that would, however modestly, reward Middle Class and low wage workers. However, they are all fraught with political controversy.

The task of making American capitalism work for all remains the central economic — and political — challenge of our time.

— John Waelti of Monroe, a retired professor of economics, can be reached at jjwaelti1@tds.net. His column appears Saturdays in the Monroe Times.