Over consecutive days, the Dow Jones Industrial Average, the index that tracks 30 of the largest publicly traded corporations in the United States, has risen to soaring new heights. The index is often touted as an indicator of American financial health, not too long ago being used by the Obama regime as a sign of success, which prompted then candidate Trump to rightly call it one “big, fat, ugly bubble”. Now, the rising level of the index is being touted by the Trump regime in the pursuit of claiming political success.
While the health of the Dow Jones Industrial Average offers a clue as to how economic growth is progressing in the country, it does not give a full picture, specially with growth at the grassroots. The DJIA is inhabited by massive corporations of the likes of Goldman Sachs, JP Morgan Chase, United Healthcare, General Electric and Boeing, all known for their cronyism. These companies have all been massive beneficiaries of the demand side zero interest credit stimulus policies of the Obama regime, and the availability of cheap, easy credit has massively boosted their bottom lines, their reinvestment efforts, and the payouts to their stockholders. The near zero interest rate loans that were being handed out by the federal reserve to banks like Goldman Sachs ensured the easy availability of credit to other large, “blue chip” corporations, like GE. This has led to one of the most massive expansions in wealth at the top tier of business and society. In essence the demand stimulated “big fat ugly bubble” that candidate Trump described, has driven this. Post election, the promise of tax cuts and deregulation, despite much needed central bank interest rate hikes has continued growth for big business.
But what is going on with Main St? What is the situation with the very forgotten men and women that Obama ignored, the ones who mounted Tea Parties, who Candidate Trump promised to give a voice to? The answer is a mix of cautious optimism and righteous anger. While working with small manufacturers, I have seen how some of the Obama era regulations being rolled back have given some of these manufacturers and small business people a little bit of respite from the crushing compliance and paperwork they had to deal with, which a big corporation with an army of lawyers could deal with easily. Apart from federal regulations, these mom and pop shops often have to deal with the whims of busybodies in city and state governments, that keep adding to their regulatory and compliance woes, often resulting from cronyist lobbying. Aside from that, the mom and pop shop looking to expand has little to no local credit avenues possible, with community banks getting bought out by the bigger banks (exactly the opposite of what should happen) or dying out, post Dodd-Frank, the banking and finance regulations championed by the progressive left. The current administration’s rhetoric of tax reform and deregulation has given some of these people some hope of future success, which has led to them taking risks and investing some of their savings into upgrades and expansions, but the outlook for expansion is very cautious.
Considering that 42.9% of all payroll dollars, 2 out of every 3 new jobs created in the United States since 1995 comes from Small Business, a close look needs to be taken at what is affecting the climate of the grassroots economy. At one time (70’s and 80’s), over 70% of the entire workforce was employed by small business, at a time when “inequality” or the wealth disparity between the median income earners and the highest earners was much less. Burdensome regulation (with years of growth of the federal register), taxes and cronyism has shifted the fabric of the US economy, from that of the small business driven American Dream, where economic mobility was fairly easy, to the modern mega-corporate workforce, where economic mobility is not as easy.
This begs the question: Is the Trump administration doing the forgotten men and women of America justice, by constantly touting the inflated stock market as a sign of success? Or would they actually be glad to see their president work to enact tax reform, enhanced de-regulation, and replace Dodd-Frank with a more relevant version of Glass Steagall? Only the latter would truly bring them respite from years of hardship, and for once offer them a chance to thrive. Federal regulation reduction would take a huge burden off the average small business, but that would still leave so much more to be changed at the state and local levels, to truly unleash the grassroots bull.