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Oct. 19, 2019, 10:35 a.m. EDT

If the Democrats keep saying crazy things about the economy, Trump will win again

Getting the economy wrong means getting the policies — the politics —wrong

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By Tim Mullaney


SAUL LOEB/AFP via Getty Images
Elizabeth Warren and Andrew Yang exchange a high-five at the Democratic presidential candidates debate.

With felonies flying fast and furious at 1600 Pennsylvania Avenue this week, it may seem a curious time to write about how Democrats running for president are saying kind of crazy things.

But they are.

Because Andrew Yang, Bernie Sanders and (sometimes) Elizabeth Warren are radically misdiagnosing problems in the U.S. economy, they are off — often miles off — in prescriptions for reform.

The sheer amount of loose talk about how capitalism is failing is stunning. This myth-making scares workers in the present, and sparks proposals that should scare markets for the future.

Like, what?

Robot reaction

Begin with the worst: The notion that automation is robbing the economy of millions of jobs. Relying on a Brookings Institution study that says 61% of U.S. jobs face high or medium exposure to automation in coming decades, candidates are proposing everything from universal basic income to limitations on trade.

News: Trump bashes Pelosi, Democrats during Texas rally

Yang, who brandished the Brookings study, and Warren, who engaged Yang in a long argument about whether automation or trade was doing more to kill jobs in a nearly full-employment economy, the candidates tried to outdo each other, declaring the economy broken and vowing to spend, in some cases, trillions of dollars on badly targeted “cures.”

Wow. This is so untrue it basically hurts.

First, you know automation is happening when productivity rises. The point of automation is to raise the amount of output each worker can generate by supplementing their labor with machines. If productivity grows faster than sales of goods these workers make, fewer workers will be necessary. If sales rise faster than productivity, firms need fewer new hires to meet fresh demand, and will pocket more of the new revenue as profit.

If that sounds harsh, consider this: Productivity is where raises come from, as companies and workers divide these gains

But here’s the thing — growth has been terrible for the past decade or more. Business investment growth (which leads to productivity growth) has been spotty, too, as companies pulled back after the dot-com crash, again during the 2008 financial crisis, and more recently (and modestly) in reaction to President Donald Trump’s trade clashes with China and others.

Not happening

This means that the wave of job-killing automation hasn’t happened. The 3.5% unemployment rate might have been a clue.

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