“There is no excuse for supporting a racist, sexist, xenophobic buffoon like Donald Trump,” says Dean Baker. “But we should be clear; the workers who turn to him do have real grievances. The system has been rigged against them. And it is a bit hypocritical of those who have benefited from this rigging to be mocking the poor judgment of its victims.”
Baker, who will turn fifty-eight in mid-July, is a macroeconomist and the co-author of Getting Back to Full Employment: A Better Bargain for Working People, among other books. He has written for publications including The Atlantic, The Washington Post, and the Financial Times.
In 1999, he co-founded the Center for Economic and Policy Research in Washington, D.C., whose goal is “to promote democratic debate on the most important economic and social issues that affect people’s lives.”
I recently spoke to Baker about the presidential election, the Federal Reserve, and the Donald.
Q: On the Democratic side, there has been a lot of talk about Wall Street reform. Sanders wants to break up the banks. Clinton wants to crack down on “shadow banking.” Is there anything being left out of this reform agenda?
Dean Baker: I think a financial transaction tax is far and away the most important reform we can have on Wall Street, because it would downsize the industry enormously and hugely affect inequality. Many of the highest paid people in the country are running hedge funds, traders at big banks. You would basically cut $100 billion to $150 billion a year in revenue for a narrowly defined section of the financial sector—securities and commodities trading—which is basically just a waste, a drag on the economy. This money could be productively employed elsewhere. It makes the financial sector more efficient by reducing the amount of resources going there, and it is a huge step forward in promoting equality. Sanders has sponsored a bill to implement a financial transaction tax. Clinton has proposed a tax on high frequency trading, which is significantly different.
Q: You have written a number of books on the Federal Reserve. There is not much talk about the Fed on the campaign trail. Does that concern you?
Baker: Very much so, especially since it seems likely that the Fed will raise rates some time over the summer. They say the labor market is getting too strong. But I, and others who oppose the rate hike, say: First, wage growth continues to be very weak and, secondly, we want to see somewhat stronger wage growth. Workers lost a lot. There was a big redistribution from wages to profits in the downturn. We should expect to see redistribution in the other direction so workers can get back what they lost.
Let’s be clear here, any individual rate hike is not a big deal. If they do raise rates a quarter point in June and July, that is not a big deal. What is a big deal is a sequence of rate hikes, and that is what they are talking about. That will slow the economy and keep people from getting jobs.
What I find absurd is candidates talking about this great jobs program—we are going to have infrastructure, we are going to have training. But if the Fed doesn’t want people to have jobs, they won’t have jobs. And it’s just unfortunate that we have this norm that politicians aren’t supposed to talk about the Fed because that is where most of the action is.
Q: What can politicians do to influence the Fed?
Baker: A couple things. The next President will be in the position to appoint several members of the board of governors. There are two vacancies right off the bat. Janet Yellen comes up for reappointment in the first year of the next President’s term. Ideally, they will appoint people who are committed to expanding the economy and expanding employment.
Action could also be taken on the twelve regional bank presidents. These are people essentially appointed by the banks in each district and who also have a voice in interest rates. Why on earth do we allow the banks to have a direct voice in setting interest rates? Envision giving Comcast one or two of the seats on the Federal Communications Commission. We don’t give seats to the industry itself and that is effectively what we have done to the Federal Reserve Board as it is structured now. So it would be great to see someone push to change that structure.
Bernie Sanders has proposed bills over the years that would make the Federal Reserve Board a fully public institution. Secretary Clinton has also indicated she would support that, although I don’t know of any specific proposal from her.
Q: What is the most concerning thing to you about Trump’s economic notions? Do you see anything positive in his rhetoric?
Baker: In terms of economics, Trump really is all over the place. He has said he wants a big tax cut that would be directed primarily toward the wealthy. I am certainly not a fan of that. On immigration, it is a terrible policy in terms of throwing people out of the country, and really bad economic policy if he actually means it. So those are pretty bad stories.
The good signs are he has said he is against cuts to Social Security and Medicare. Who knows what he would end up doing if he were elected, but I was really happy to see a Republican come out strongly in public against cuts. He has said he favors a pro-growth interest rate policy. He said he liked what Yellen has done but he would not appoint her again because she’s a Democrat. Well, whatever.
Q: What about on trade?
Baker: Again, he’s all over the place. We do have a big problem with the trade deficit. But from my view it is more General Electric than China. The big issue is currency. We need to get China to raise the value of its currency against the dollar. One of the reasons why we have not been able to do that is because we have a lot of American companies in China shipping to the United States that are not interested in seeing it raise the value of its currency.
GE, for example, is producing a lot of goods in China and exporting them to the United States. They don’t want to see their advantage whittled away by having the yuan rise against the dollar. Walmart has set up low-cost supply chains in China; they don’t want to see their advantage whittled away by having the yuan rise against the dollar.
Trying to do something about the trade deficit is a very good thing, but how he proposes going about doing it is a bit off the wall.
Mary Bottari is the deputy director of the Center for Media and Democracy.