They will be fine when the economy goes down but we won't
Wilbur Ross is so rich he doesn't even know where all his money is. Workers in Detroit make less than they did in 1914.
|Jan 27, 2019|
All things come to an end. Good things, bad things, in-between things. Things end and then new things replace them. For the better part of the last 10 years we’ve been doing pretty well, economically speaking. Eventually, it has to end. The only question now is when.
Trump won’t see it coming because, like a lot of rich people, he will be immune to the negative consequences of the next economic downturn. This is why you hear people like Trump’s Commerce Secretary Wilbur Ross say with honest-to-goodness confusion that he doesn’t understand why some federal workers resorted to going to food banks during the government shutdown.
Trump and every member of his cabinet — which is the richest in history — will be perfectly fine when the economy takes a turn for the worse. That’s why I’m sure they’re already making moves to secure their own wealth while telling us everything is fine. While we don’t know everything about the money moves being made by Trump and his cabinet we can get a glimpse through annual financial disclosures and periodic transaction reports.
Ross, for example, is so rich that he can’t even keep track of all his investments and has had to update his periodic transaction reports — which detail the movement of tens of millions of dollars — several times because he didn’t even realize he still held certain investments.
This is why you can hear earnest bewilderment in his voice when talking about federal workers going to food banks.
In June, Ross sold between $50,001 and $100,000 in stock in a company that leases commercial aircraft. Under ethics guidance, I assume, he had previously sold off his other shares in the company, Air Lease Corporation, which he held through an entity called American Stock and Transfer Company (AST). Then, after receiving a check for dividends, he realized he had another account of shares in the company, this one in an account that contained his middle initial, L.
“Unbeknownst to me AST also had 1,631 shares in a separate account labeled Wilbur L. Ross. When I had called them last year seeking share information they never told me about this separate account,” Ross or more likely someone who works for him wrote on the periodic transaction report. “The way I learned about it was just recently when they sent me a check for less than $200 representing dividend payments that had gone unclaimed. I had no record of receiving these payments and had no prior record of these shares. Upon becoming aware of them, I promptly sold the Air Lease shares and filed this Transaction Report.”
The discovery of a single letter made Ross more money than I make in a year and as much as double the average American’s annual income, if the transaction approached $100,000. That is an insane sentence to write but there it is, and it is true.
So while Ross and others tell us everything is great and Trump’s policies are the reason for it, maybe we should check in with ourselves, because it’s pretty clear that men like Trump and Ross don’t understand what the average, $50,000-a-year American is going through. (Which is why Trump says insane things like grocery stores and mortgage lenders will “work along” with furloughed federal workers, the barter system I think we’re all familiar with and have used many times when going to a store without any money.)
In Detroit, Charlie LeDuff checks in with average Americans every day. Long a bellwether for the economic health of the working-class, Detroit is once again primed to provide a vision of the future for millions of Americans, Charlie says. Will it be home to a revival of manufacturing jobs, which Trump has promised to bring back? Or will it be a place where some combination of tech work and the creative class turns the city into something far different than it’s been for the last 100 years? Regardless, like a lot of places in the Midwest, Detroit is a good place to check in with folks to see how the economy is doing on a micro level.
I caught up with Charlie recently to see where he thinks things are going. Normally, this would be a Q&A, except I really only asked one question — where does the economy go from here — then Charlie and I just talked. Here’s a rough transcript of his end of the conversation, with some clarifying notes from me in between.
CL: Well, all I know is that GM is laying off 15,000, Ford is a mess, we’re closing factories, and on a macroeconomic level real wages have done nothing. If you take out the financial sector, which has done pretty well for itself, you take out inflation, people aren’t making any more money than they were 10 years ago, and probably a lot longer than that. We also know more people are in apartments than ever before, personal debt is at an all time high, and now they’re doing subprime auto loans.
JG: The use of subprime auto loans have increased in recent years, with some warning that the practice is simply creating another bubble similar to the subprime home mortgage crisis that led to the 2008 recession. One company in Irving, just outside Dallas, is planning to go public because it believes it can capitalize on a subprime auto loan market that is worth about $400 million. If this bubble bursts we can all look back to stories like this one — in which a subprime auto loan company discusses its use of artificial intelligence to expand the number of lendees — as a pretty obvious sign that things weren’t going well.
CL: My best weathervane are people. Even though they say consumer confidence is at an all time, I don't know who they're talking to. Do you feel confident? They talk about corporate profits, but corporate profits don’t filter to the average man. What did the [Trump] tax cuts get anybody? It got stock buybacks. All it did was blow a hole in the budget. It’ll lead to inflation, poor schools, bad roads. I don’t mean to sound like a Bolshevik but it was wealth redistribution. You get cheap goods and that’s supposed to be considered a raise.
JG: Even Marco Rubio has criticized the practices of corporate America following the massive tax cuts he and other Republicans gave them, writing in an op-ed for the Atlantic that buying back stock to pay off their shareholders wasn’t what he had hoped for. “The question workers face going forward isn’t whether tax cuts will bring capital back to the United States; it’s where that capital will go once it’s here,” Rubio wrote. “Wall St is a much more savvy motherfucker than Marco Rubio,” Charlie says.
CL: Student loan debt is over a trillion dollars — none of the fundamentals point to good health. Household debt, wages, savings... we’re looking at jobs numbers but you gotta look at real wages.
JG: What wages have done, Charlie argues, is drop for the average worker in Detroit from the pivotal announcement by Henry Ford in 1914 that he’d pay his workers $5 a day. In 2018 dollars, that amounts to $627.77 a week. In recent years, the second-tier of workers at factories for the Big Three top out at $20 an hour, or about $800 a week.
CL: Aren’t these supposed to be the greatest of times? Ok, I don’t see a lot of new cars. That’s where I look and I don’t see people with shiny new wheels. In fact car sales are going down, except for the subprime loans. People don’t like socialism, but guess what, here it comes. But it’s coming in a different form. It’s not going to be the government telling you what to do but all of our device distractions. All the entertainment you can watch — Netflix, reality TV, sports — it’s all cheap and easy to get on your phone. They’ll make sure we have just enough money to keep those things going so we’re fat and happy. But we won’t be going anywhere, and we won’t be getting any richer.
P.S. Both photos on this post are mine. The first was taken at an abandoned motel somewhere in northern Indiana on my way to the Republican National Convention in 2016. The second was taken in Washington D.C. in January, 2018. If you like this newsletter, please consider telling your friends, co-workers, family and strangers on the street about it, and have them subscribe. Each new subscriber gets me a little closer to not having to worry about the next economic downturn that will cause another massive blow to the struggling journalism industry.