Former United States presidential aspirant Hillary Clinton referred to them as a "basket of deplorables". It was her pejorative caricature of the archetypal Trump supporter, poorly educated, typically from low socio-economic backgrounds who reside at the bottom of America’s employment food chain.
It’s this cohort that’s placing all its bets on U.S. President Donald Trump's reengineered trickle-down economics to increase their standard of living and create better-paid jobs.
However, there’s a growing chorus of economists who argue that not only does Trump’s economic theory – tariffs and all - make no sense, but it will leave all Americans even worse off than they are now.
What we see within Trump’s economic narrative, explains Richard D Wolff professor of economics at the University of Massachusetts is the traditional Republican pitch - as the party is against taxes and small government - but it carries much further.
He said while there used to be a grain of truth to Republican economics - which helps companies boost profits and provides tax cuts – in the hope that it will trickle down to a good job for workers - there isn’t any more.
“The American empire is over. We peaked about 12-15 years ago,” said Wolff.
“We are on the way down and it’s very hard for the American people to get their heads around that.”
Trouble with trickle down
The problem with the trickle-down approach, adds Wolff is that while there may be more jobs, they will be created in China, Brazil and India, and not in the U.S.
He says the current round of unprecedented cost cutting measures by the U.S. federal government – including wholesale job cuts - are being made in desperation.
“The U.S. has got the greatest level of corporate debt and the greatest level of personal debt this country has ever seen,” said Wolff.
“The U.S. also has the greatest level of government debt which is now trillions of dollars greater than its annual output, which was not the case in the 20th century.”
What we’re seeing now, explains Wolff is desperation politics, which is highlighted by a wave of recent decisions that characterise the Trump phenomenon.
For example, he says the recent decision to kiss the war in Ukraine goodbye reflects the reality that the U.S. can no longer afford to fund it.
“All of these measures are signs of a country that is in trouble and is now turning on its friends – because it can - to save itself,” says Wolff.
Following the bouncing ball
“But let’s now follow the bouncing ball. Every company in Asia, Africa and Latin America that competes with an American company – which has to buy a truck as part of its business – will go to China and buy the best truck at the lowest price.”
No American company that competes with them will do that, adds Wolff, which means those companies will be able to charge a lower price because they’ve got lower inputs than an American company that doesn’t.
In the long run, he suspects that American jobs will be lost because U.S. companies are outcompeted by the rest of the world that can buy BYD trucks in China for half the price.
Through Trump’s tariff measures Wolff says, America is shooting itself in the foot.
“It may be great politics for Mr. Trump, but what he’s doing is diminishing the capability of the U.S. to hold on at a time when its footprint in the world is shrinking,” says Wolff.
What’s also often overlooked, notes Wolff is that the total GDP of the U.S. and its G7 allies (28%) – traditionally the dominant block – is now lower than the GDP of China and its allies, Brazil, Russia and India – the BRICs (35%).
What’s also now evident, notes Wolff is that the G7 is no longer the world’s wealthiest block; it’s number two and that this new dynamic changes everything.
For example, every country in Asia and Latin America looking to figure out who to borrow money from or cut a deal with went to London, Washington and Paris.
Now they’re heading to Sao Paulo, New Delhi and Beijing and what they get, adds Wolff, are better deals.
“That’s not going to stop. You can rattle your sabres all over the world and put the seventh fleet in the South China Sea but that isn’t going to change anything,” Wolff reminds investors.
“You’ve got to come to terms with that, but we are led by people who don’t want to do that, because nobody wants to be the politician who has to explain to the people that it's over…”
