SUBSCRIBE NOW
$5 for 3 months. Save 83%.
SUBSCRIBE NOW
$5 for 3 months. Save 83%.

Obstacles to Trump’s economic ambitions

CHRISTOPHER S. RUGABER
The Associated Press

WASHINGTON — President Donald Trump’s economic plans are

nothing if not ambitious: Annual growth of 4 percent — or more. A diminished trade gap. The creation of 25 million jobs over 10 years, including the return of good-paying factory positions.

It adds up to an

immense challenge, one Trump aims to achieve mostly by cutting taxes, loosening regulations, boosting infrastructure spending and renegotiating or withdrawing from trade deals. At the top of his agenda: Pulling out of the 12-nation Pacific trade agreement, a move Trump initiated Monday, his first full weekday in office. He has also said he will rewrite the North American Free Trade Agreement to better serve the United States.

Yet to come anywhere near his goals, economists say Trump would have to surmount major hurdles that have long defied solutions. He may yet succeed. But he faces deep-rooted obstacles that have bedeviled presidents from both parties for years.

Among the challenges:

Automation: Trump’s goal of vastly expanding manufacturing would require at least the partial reversal of a decades-long trend toward a service-oriented economy and away from factory work. Former President Barack Obama sought to add

1 million manufacturing jobs in his second term but came up two-thirds short.

Even if Trump could return factory production to its heyday by toughening trade deals and threatening to slap tariffs on America’s trading partners, a surge of new jobs wouldn’t necessarily follow. The increased use of robots and automation has allowed factories to make more goods with fewer workers. Research shows that automation has been a bigger factor than trade in the loss of U.S. factory jobs.

The trend is spreading outside factory gates. Uber is experimenting with self-driving cars. Restaurant chains like Eatsa can now serve meals through an automated order-and-payment system. No cashiers or servers are needed.

“You cannot just slap tariffs on and hope that will bring back middle-class jobs,” says Daron Acemoglu, an economist at MIT. “The jobs that went to China would come back to robots rather than people.”

Skills shortage: Jobs that can’t be automated typically require education beyond high school. Many analysts say the economy needs better and more widely available post-high school education and training, whether through community colleges, vocational schools or boot camps offering technology training.

A lack of technological skills isn’t an issue only for the tech industry itself. Modern manufacturing work increasingly requires high-tech know-how requiring some education or training beyond high school. Since the economic recovery

began in 2009, only

12 percent of manufacturing jobs have gone to workers with no more than a high school

degree, according to research by Georgetown University’s Center for Education and the Workforce.

FILE - In this Monday, Sept. 12, 2016, file photo, a group of self-driving Uber vehicles position themselves to take journalists on rides during a media preview at Uber's Advanced Technologies Center in Pittsburgh. U.S. President Donald Trump’s economic plans are nothing if not ambitious, including his vision of creating 25 million jobs over 10 years. However, the widespread use of robots and automation by companies has increasingly allowed businesses to operate with fewer workers. For example, Uber is experimenting with self-driving cars, and restaurant chains like Eatsa can now serve lunch and dinner through an automated order-and-payment system, and no cashiers or servers are necessary. (AP Photo/Gene J. Puskar, File)

Productivity: In the past decade, the growth of American workers’ productivity — the amount they produce per hour worked — has slumped to roughly half its long-term average.

That slowdown has imposed a dead weight on the economy. When employees become less efficient, it slows economic growth, and companies can’t raise pay without boosting prices. A faster expansion needs a combination of more people working and more efficient workers.

Trump’s proposals might help somewhat. He favors expanded tax breaks for companies that invest in new machinery and equipment, which typically make workers more productive. And he’s vowed to build more roads, tunnels and other infrastructure, which can save on shipping and commuting costs.

Douglas Holtz-Eakin, president of the conservative American Action Forum, says Trump’s push to loosen regulations might lead to more startup companies, which could prod established businesses to become more efficient.

Still, many economists, such as Robert Gordon of Northwestern University, argue that today’s innovations — in mobile communications and biotechnology, for example — aren’t transformative enough to fuel the explosive productivity growth that resulted from inventions such as the automobile, telephone and computer.

Inequality: Eco­nomic growth since the recession ended has been both slow and uneven: It’s benefited wealthier Americans far more than low- and middle-income households. Trump’s nominee for Treasury secretary, Steven Mnuchin, noted this concern at a confirmation hearing: “The average American worker has gotten nowhere,” he said.

The tepid gains for low- and middle-income families have slowed the economy because those groups typically spend more of their income than do affluent households, and consumer spending is the economy’s primary fuel. Against that backdrop, Trump’s goal of 4 percent annual economic growth might be next to impossible.

Mnuchin said the administration’s proposals to cut taxes for individuals and businesses would shore up families’ finances and encourage companies to hire more. Yet America’s wealth gap has widened even as previous presidents have cut individual taxes.

Tthere’s no way to know how companies would use their tax cuts. Many large companies return profits to shareholders by boosting dividend payments and share buybacks rather than expanding investment and raising employee pay.

People wait for their lunch orders at Eatsa in San Francisco, which features automated ordering and a tech-forward interior. The widespread use of robots and automation by companies has increasingly allowed businesses to operate with fewer workers.

Trump names FCC chief

President Donald Trump has picked a fierce critic of the Obama-era “net neutrality” rules to be chief regulator of the nation’s airwaves and internet connections. In a statement Monday, Ajit Pai said he was grateful to the president for choosing him as the next chairman of the Federal Communications Commission. Pai had been one of the two Republican commissioners on a five-member panel that regulates the country’s communications infrastructure, including TV, phone and internet service.

There are currently just three members on the panel. The Republicans’ new majority at the FCC, along with their control of Congress and the White House, is expected to help them roll back policies applauded by consumer advocates that upset many phone and cable industry groups, including net neutrality rules that bar internet service providers from favoring some websites over others.

Security risks at Trump properties

Businesses around the world bearing U.S. President Donald Trump’s name face an increased risk now that he is in the White House, security experts warn, especially as several are in areas previously targeted by violence. As Trump remains a brand overseas, criminal gangs or militants could target buildings bearing his name in gold, abduct workers associated with his enterprises for ransom or worse, they say.

“They may kidnap a Trump worker and not even want to negotiate,” aiming for publicity instead, said Colin P. Clarke, a political scientist with the Rand Corp. who studies terrorism and international criminal networks. U.S. brands have been targeted in overseas violence before, but they never belonged to a president. Trump becoming America’s 45th president presents a unique challenge given the range of his international business interests.

Asked about security issues, the Trump Organization said in a statement it has “extensive protocols in place at our Trump-owned and -managed properties” in the United States and abroad.