InsideSources

President Donald Trump promises to reform the tax code and decrease the trade deficit, but the two policy goals might actually contradict each other.

The trade deficit is an international measure used to show when a country’s imports exceed its exports. The United States currently has a trade deficit of $42.4 billion. Trump has said he hopes to reduce the trade deficit by renegotiating international trade agreements. He also hopes to accomplish tax reform—by slashing rates and simplifying the tax code.

Congressional Republicans hinted at the final form their tax bill might take when they released a framework for reform September 27. They called for rate reductions for wealthy and middle-income individuals, along with businesses. But those proposed rate cuts stand to increase the deficit substantially, given that government revenue mostly comes from taxes.

“It does depend a lot on what happens to tax policy,” Joe Gagnon, a senior fellow at the Peterson Institute for International Economics, told InsideSources. “If Congress and the president pass a significant tax cut that raises the deficit going forward, I would predict that would start to push the dollar up again, which would make the trade deficit worse.”

The U.S. dollar has strengthened over the last few years thanks to policy changes, tightened currency production, and foreign fluctuations. As the dollar strengthens, its value increases relative to other currencies. A strong dollar means that exports become more expensive for foreign buyers. The current strengthening of the dollar and weak demand overseas have likely already deepened the trade deficit.

“The big risk to the trade deficit is having a big tax cut that pushes the dollar up, pushes interest rates up, and makes the trade deficit keep growing,” Gagnon said. “The interesting paradox is the more they do on tax policy, the more it could make the deficit worse, which they don’t want.”

Lawmakers should work to get the dollar closer to its true value, Gagnon adds. Some economists believe that the dollar is overvalued relative to its actual demand. The true value of the dollar hinges on how much it’s in demand, according to factors like exchange rates and demand for Treasury notes.

Republicans hope their tax plan will reduce the federal deficit by spurring economic growth. Employers will have more money to presumably invest back into their businesses and employees. But tax cuts alone are not enough to get businesses to invest into their operations, counters Robert Scott, an economist with the Economic Policy Institute.

“In some ways it could make things worse,” Scott told InsideSources. “It’s not going to lead to investment. Businesses don’t invest on the basis of taxes, they invest when they think there’s going to be growing demand for their products. This doesn’t generate any demand. But what it will do is increase federal borrowing, and that will push up interest rates, and when the interest rate goes up, the dollar rises, and so it will lead to a growing trade deficit. I think that’s a serious and unintended consequence.”

Economists and tax policy experts don’t agree on the economic implications of the framework. The Business Roundtable found in a survey that business owners would begin investing more back into their companies and employees if the tax system were reformed successfully.

The Institute on Taxation and Economic Policy found Oct. 4 that the plan would primarily benefit the wealthy with less relief for middle and lower income earners. The White House Council of Economic Advisers found in an Oct. 16 analysis that the plan’s corporate rate reductions would lead to an increase in average household income by $4,000 annually.

Scott at EPI doubts that the tax plan will help stimulate the economy. But even if the plan succeeds, he adds, it could still increase the trade deficit by causing the value of the dollar to rise. Republicans may very well stand to undermine their deficit goals, in other words, whether their tax reform plan is successful or not.

Senate Republicans recently passed a budget resolution, an essential step toward implementing tax reform. Their resolution set in place a streamlined process to pass their tax reform bill, and left lawmakers the flexibility to increase the deficit by $1.5 trillion over 10 years.

Senate Majority Leader Mitch McConnell insisted on October 22 that Republicans still aim to pass a tax bill that won’t reduce revenue. But, as the Tax Policy Center (TPC) found in a recent analysis, the tax framework could add to the deficit—by reducing federal revenue by $2.4 trillion over ten years.

Republican leadership can still find a way to avoid deficit increases brought on by tax reform. They originally hoped to use a border adjustment tax—a value-added tax levied on goods produced in a foreign land but sold domestically—but the idea proved too contentious.

The country has faced a growing trade deficit since last year, following some improvements. It generally trended around the $40 billion range before it suddenly dropped around the last recession in 2009. The trade deficit was approaching $70 billion before the economic downturn. It dropped to $25 billion before settling around its current average.

Gagnon expects deficit growth will likely slow in the coming year, absent tax cuts—the dollar’s strengthening has slowed already. A more balanced dollar will make American exports less expensive for foreign buyers. Demand for domestic products might also increase in nascent and growing economies across the globe.

Congressional Republicans are expected to reveal their tax reform bill this week. Per CNN, the legislation could come as early as Wednesday.

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A top White House economic adviser testified on how lawmakers can improve economic growth Wednesday during a congressional hearing.

Kevin Hassett is an economist who currently serves as the chairman of the Council of Economic Advisers (CEA). The executive office agency advises the president on economic policy. The Congressional Joint Economic Committee (JEC) convened a hearing to ask him where the economy is headed and how can it be improved.

President Donald Trump has made the workforce and economy central themes throughout his administration. The economy has been generally trending in a positive direction over the past couple of years, but there are still some notable problems. Hassett says the administration is looking to address the problems that still persist.

“The economy is growing by heightened expectations right now, and it’s growing at a solid and sustainable pace with low unemployment and low inflation,” Hassett testified during the hearing. “Markets appear to recognize the likelihood of continued growth with low inflation, with the major stock indices up substantially in the past year.”

The Gross Domestic Product (GDP) has also picked up significantly over the past year. It tracks the total dollar value of all goods and services produced over a specific time period. The Bureau of Economic Analysis (BEA) estimates that economic growth increased at an annual rate of 3.1 percent in the second quarter of this year.

“The Trump administration is not satisfied with business as usual, nor with the pace of real output and income growth over the past several years,” Hassett said. “We put forth a program designed to boost the rate of real GDP growth. I’m happy to report the economy is doing well so far in 2017.”

Hassett does add that there are still problems throughout the economy that must be addressed. Workers have suffered from stagnant wages for years. Last month saw average wage growth improve slightly at 12 cents. The sluggish wage growth is contradictory to past trends which showed wages improved when there are less available people out of work.

“Looking back at the last few years it appears like real potential GDP growth is growing at about only a two percent annual rate,” Hassett said. “And real wage growth in America has stagnated. Over the last eight years, real median household income in the United States rose by an average of only six-tenths of a percent per year.”

Republicans have made tax reform their top priority following their earlier healthcare reform failure. They released a tax reform framework Sept. 27 highlighting their main tax reform objectives. Hassett notes that tax reform will play a critical role in helping to fix wage stagnation and improve economic growth.

“The relationship between corporate profits and worker compensations really broke down in the 1980s before any recent policy had the chance to interrupt that,” Hassett said. “That deteriorating relationship between the wages of American workers and U.S. corporate profits reflects the state of international tax competition more than anything else, I believe.”

The CEA found in an analysis Oct. 16 that the tax framework would increase average household income by $4,000 annually. The report notes those savings would come from the corporate rate reductions. The Institute on Taxation and Economic Policy countered in an earlier report that the plan would primarily benefit the wealthy while doing little for everyone else.

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Republicans recently released their framework for tax reform in a notable step towards eventually drafting legislation aimed at fundamentally reforming the tax code.

The Unified Framework for Fixing Our Broken Tax Code gave a glimpse into the direction lawmakers are taking the tax reform discussion when it was released Sept. 27. Republicans began laying the groundwork for the current tax reform push nearly two years ago. They have made simplification and rate reductions a central focus since the start.

The tax framework has been rigorously scrutinized by economists and tax policy experts to determine its likely impact. Some have found it will simultaneously help companies and everyday people by boosting economic growth. Others find a likelihood that it will only really benefit the wealthy and large corporations.

The tax framework provides a good look into how the eventual bill is likely to look when it is finally drafted. But there are still many details to work out, and aspects of the framework might change as lawmakers continue to negotiate. Here is what the framework tell us about how tax reform is unfolding, and what it means for everyday Americans.

 

1.) How We Got Here 

The federal tax code has not been reformed in any comprehensive way since 1986. It has gone through minor changes that have focused more on specific reforms like rate reductions. Lawmakers across the political spectrum have discussed the need for tax reform with the conversation becoming more prevalent in recent years.

Congressional Republicans began formulating a plan in the last couple of years with the aim of accomplishing comprehensive tax reform. President Donald Trump winning the election provided a pathway to reaching their goals. The president has made economic issues a cornerstone of his administration with the promise of a pro-growth tax plan becoming a critical part of that.

House Speaker Paul Ryan and Rep. Kevin Brady outlined their earlier policy goals in a tax reform blueprint June 2016. Trump later released a summary plan April 26 of this year outlining similar policy goals. Republican leaders have also held hearings over the past year, launched informational campaigns, and held internal discussions to work out the various details within their plan.

Republican leadership spent the week leading up to the release of the tax framework ensuring party members had the chance to weigh in. Republicans held a two-day private retreat so that they could discuss details openly. Trump discussed the new framework shortly after it was released Sept. 27 during a speech in Indianapolis, Indiana.

Republicans have since worked to advocate for their tax reform plan during speeches, interviews, and congressional hearings. They have also fought back against critics who warn the tax plan primarily helps the wealthy. House Speaker Paul Ryan said Oct. 24 that he hopes to pass a tax bill by Thanksgiving.

 

2.) What the Framework Tells Us

Republicans have made simplification and rate reductions central themes throughout the process. They hope to simplify the tax code by reducing the seven current income brackets down to three and by eliminating some deductions. They also plan to reduce corporate and individual rates to decrease the tax burden and spur economic growth.

The framework reduces the top individual tax rate from 39.6 percent down to 35 percent. The framework also taxes middle-income earners at 25 percent, and lower-income earners could see a slightly higher rate at 12 percent. It does leave room for lawmakers to add an additional rate for top earners.

The framework promises to provide simplicity and fairness by eliminating many itemized deductions that primarily benefit the wealthy. At the same time, it retains tax incentives for home mortgage interest, charitable contributions, work, higher education, and retirement security.

The framework also promises to help the middle-class in a few notable ways. It roughly doubles standard deductions and enhances the Child Tax Credit so that middle-class families can keep more of their paycheck. The framework will also implement what it refers to as a zero percent tax bracket for some lower-income taxpayers.

The framework includes a number of provisions for businesses with the aim of spurring economic growth. It promises to limit the maximum tax rate for small and family-owned businesses to 25 percent. The framework reduces the corporate tax rate to 20 percent. The current top rate for corporations is 35 percent.

The framework also repeals the death tax and Alternative Minimum Tax.

The plan allows businesses to immediately write off the cost of new investments for at least five years. It also imposes a one-time tax on offshore wealth. The goal is to incentivize companies to invest more in the country instead of avoiding taxes outside the country.

 

3.) Simplification and Rate Reduction

Republicans have debated among themselves what the final tax reform bill should eventually look like. But the overarching themes have tended to remain consistent. Their main objective is to do something comprehensive, simplify the tax code, and reduce rates for both individuals and businesses.

The National Taxpayers Union (NTU), a conservative tax policy advocate, found in a 2015 study that the economy loses $233.8 billion and 6.1 billion hours of productivity annually because of the complex tax code. The Government Accountability Office found in a 2014 study that the tax code is so complex that very few professional tax preparers are able to calculate the correct tax refund.

“Overall I think it’s an extremely encouraging starting point for tax reform,” NTU executive vice president Brandon Arnold told InsideSources. “I think it hits a number of key elements including simplicity for families, lower rates for individuals, it also makes our corporate tax code far more competitive which is going to stimulate job growth and economic expansion. I think it strikes a nice balance. It hits all those elements.”

The Institute on Taxation and Economic Policy (ITEP), a liberal research nonprofit, has been less optimistic over whether the framework helps to achieve those goals. Its research found Oct. 4 that the plan would primarily benefit the wealthy while doing little for middle and lower income earners. ITEP senior policy analyst Richard Phillips notes the plan is also prone to new complications.

“I think that the two biggest areas where it actually causes a substantial amount of more complications is on the business pass-through and corporation side,” Phillips told InsideSources. “Right now if you’re a pass-through business you’re taxed through your normal tax code.”

Phillips adds the lower rate could incentivize wealthier individuals to abuse the pass-through rate. They could potentially pass ordinary income through a pass-through entity to avoid the top rate. Phillips also expressed concern that the framework only includes the promise of critical rules to prevent abuse.

 

4.) Details Still Need to Be Worked Out

Republicans still have to work out a lot of various details before they are ready to draft a final bill. The framework excluded critical components like what the three income brackets will be placed at. They also haven’t fully detailed what standard deductions they will eliminate. ITEP filled in some of the gaps by drawing from earlier iterations of the plan like the blueprint.

“We’re still waiting on some critical details with this plan,” Phillips said. “You could see some different changes, depending on what the brackets are. They leave a lot of big pieces unfilled out. They say, for example, they’re going to put some sort of limit on the net interest deductions, but give no details. So that could be a pretty small provision, but that could be a trillion dollars.”

Republicans have been hinting at how the discussions have been going since the release of their plans. CNN reported Oct. 23 that lawmakers have been considering reducing the amount of money that could be invested tax-free in retirement accounts to offset deficit increases. Those discussions have reportedly included the 401(k) deduction. Trump addressed the concerns on social media by promising there will be no change to those plans.

 

5.) Global Competitiveness 

The framework promises to help companies better compete in the global economy. American businesses have become increasingly less competitive in the global economy since the last major tax reform nearly three decades ago. The Congressional Budget Office found in an analysis that the current tax code is becoming increasingly less competitive worldwide.

Republicans hope to achieve those goals by lowering the top tax rate on corporations and small businesses. Employers would potentially have more funds to invest back into their businesses and employees. It will also include provisions to disincentivize businesses from shipping jobs overseas like the one-time tax on offshore funds.

 

6.) The Hope For Economic Growth 

Republicans hope to reform the tax code in a way that helps stimulate economic growth. The framework reduces rates for corporations down to 20 percent. The top rate for corporations is currently one of the highest in the world at 35 percent. The high tax rate likely encourages corporations to move their operations out of the country.

The overall economy did start to show notable gains roughly two years ago after a slow economic recovery. Trump won in large part by appealing to middle-class workers who felt left behind in that recovery. The Business Roundtable found in a survey that business owners would begin investing more back into their companies and employees if the tax system was improved.

“All Americans will be winners because we will get stronger economic growth and everyone’s wages will rise,” Chris Edwards, the director of tax policy studies at the libertarian Cato Institute, told InsideSources. “The tens of millions of Americans who work for big businesses will be huge winners because their companies will become more competitive in the global economy.”

The Council of Economic Advisers (CEA) found in an analysis Oct. 16 that the plan would increase average household income by $4,000 annually. The report notes those savings would come from the corporate rate reductions. The CEA is an agency within the executive office, which advises the president on economic policy.

The Tax Policy Center (TPC), a liberal-leaning tax policy nonprofit, found in an analysis that the tax framework would add to the deficit by reducing federal revenue by $2.4 trillion over ten years. It also found that by next year all income groups would see their average taxes fall, but some taxpayers in each group will see more taxes. It notes the very highest income earners would receive the biggest tax cuts.

“Business tax cuts–that can help grow the economy,” TPC senior fellow Howard Gleckman told InsideSources. “There’s no question that if you cut tax rates, cut business taxes, business will invest more, and that will be good for the economy. But that’s in isolation, you also have to look at the other side of it. If you have a big tax cut that is not financed, either with offsetting tax increases, or spending cuts, and there’s no evidence of either one of those at this point, the only way the government can provide these tax cuts, is to borrow the money.”

 

7.) But What About The Deficit?

The United States has a growing deficit that has added trillions to the national debt. Tax reform that includes rate reductions could increase the deficit substantially since government revenue is primarily from taxes. Republicans have a few approaches to explore that would help them to control deficit increases caused by their tax reform plan. But those potential solutions also come with their own political obstacles.

“If Republicans don’t constrain spending, the deficit is going up,” Edwards said. “So one of the issues is the sustainability of the tax cuts. George Bush pursued tax cuts, but because Republicans didn’t control spending, deficits went up, which ultimately provided them an excuse to repeal some of the Bush tax cuts.”

Republicans have still not unveiled specifically how they hope to fund the rate reductions. It is possible they’ll look to make up some lost revenue when eliminating deductions, but it’s unclear how exactly that will look in the end. They are also looking towards revenue gains through economic growth.

“The first thing is it’s a very big business tax cut, and depending on how you measure it, a lot of increases in individual tax rates overall, which is interesting,” Gleckman said. “Another thing that I think is worth noting is that we found it adds almost two and a half trillion dollars to the debt over the next 10 years, which means it doesn’t even come close to paying for itself.”

Republican Leadership originally hoped to have a border adjustment tax, but it prompted too much infighting. It is a value-added tax levied on imported goods. It is applied when a product is produced in a foreign country but sold domestically. A border adjustment tax prioritizes domestic production by lowering the tax rate for exports while increasing the rate for imports.

 

8.) The Budget Is Key

Senate Republicans took a major step towards implementing tax reform Oct. 19 by approving a budget resolution for 2018. The budget resolution sets up a process that makes it easier to pass their tax reform bill. It also leaves lawmakers the flexibility to increase the deficit by $1.5 trillion over 10 years.

CNBC reports that the president personally urged lawmakers Oct. 22 to quickly adopt a budget. The House passed its own budget previously that differs in some notable ways which means they cannot yet be enacted. The two budgets must eventually be reworked so they are identical.

The House budget is most notably different in how it treats tax reform costs. Roll Call reports that budget contains reconciliation instructions requiring the eventual tax bill to be deficit-neutral. House Republicans hinted that they might simply accept the Senate plan to avoid delay.

“I think cutting the budget would also cause problems because a lot of the things we invest in are public goods that are really critical for the economy, as well,” Phillips, whose research has focused on corporate tax policy and refundable credits, said. “So sure you could help eliminate the deficit by cutting funding for infrastructure programs. But in the long-term, that’s really going to hurt your growth because of the infrastructure program, all those roads and bridges, are also critical to economic growth.”

Senate Majority Leader Mitch McConnell insisted Oct. 22 that passing a bill that doesn’t reduce revenue is still an objective. He also reiterated the argument that the plan would help reduce the deficit through economic growth during an interview with CNN. He couldn’t guarantee tax reform would not add to the deficit.

 

9.) Republicans Face Roadblocks

Washington D.C. is also dealing with a lot of political tensions that are likely to interfere in the push for comprehensive tax reform. Republicans are facing infighting while the left is highly opposed to major parts of their reform efforts. President Trump and congressional leaders have also clashed on multiple occasions like when they failed to reform healthcare.

“There are a number of sticking points,” Arnold said. “I think the state and local tax (SALT) deduction is one. Republicans in blue states will be getting a lot of pressure, especially in the high taxed states, from constituents and perhaps the special interest groups to try to maintain as much of the SALT deduction as possible.”

Republicans will also face pressure from many different special interest groups who have varying viewpoints on how the tax system should look. Many groups benefit from the current tax code and are likely to fight to keep those benefits. Others might see the tax reform push as a means to get new benefits.

“The mortgage interest deduction is always a flash point,” Arnold said. “You can see the realtors and perhaps even the home builders, and other folks associated with the home building industry trying to put pressure on members of Congress to try to preserve that as much as they can.”

Democrats and others on the left have also been vocally opposed to the plan. New York Gov. Andrew Cuomo and Sen. Chuck Schumer have also teamed up against the tax plan. The New York Daily News reports that they are particularly focused on the elimination of state and local tax deductions which they argue would hurt states like New York.

Edwards is concerned that lawmakers have promised too much when it comes to tax reform. He notes there’s not much they can actually do on reducing middle-income taxes because the rates are typically fairly low already. He believes they should instead focus on the pro-growth aspects of the reform which could help everyone.

“I think that’s really problematic because, they’re setting themselves up, they’re putting themselves in a corner, sort of setting themselves up for failure,” Edwards, who also serves as the editor for DownsizingGovernment, said. “The middle-class hardly pays any income tax. This is not the 1980s. When Reagan did tax cuts, the cost burden was much more distributed among income groups and the middle-class paid a lot of taxes.”

Edwards detailed his concerns shortly after the tax framework was released on the Cato At Liberty blog. He warns lawmakers not to increase the refundable tax credits while reforming the tax code as a means of keeping their promise to middle-income earners.

 

10.) A Lesson Learned From Healthcare

Republican leadership seems determined to make tax reform a success after their healthcare debacle. Republicans were unable to keep one of their biggest political promises by failing to repeal and replace the Affordable Care Act. They would face two major legislative failures since securing the presidency earlier this year if tax reform also fails.

“I think this one is taking a very different course,” Arnold said. “It’s become a much more bottom-up approach. So members from across the conference are having a much larger role in influencing the bill. I think going forward they’ll have a much larger role now that we have the framework. They have the rough sketch of what this painting will look like and now they’re filling in the colors and adding more detail.”

Republicans appear to be making more of an effort to include party members in the tax reform push. The approach may help them avoid problems that caused their healthcare reform efforts to falter. Arnold doubts they will get much support on the left with the possible exception of a few Democrats if the bill looks like it’s already going to pass. Being the deciding vote could be riskier politically.

 

11.) Who Wins Under This Framework 

The tax framework promises to help people across the country through simplicity and rate reductions. But tax policy experts have come to varying conclusions on who actually benefits under this plan. Arnold argues that generally, people across the board will benefit with few exceptions.

“I’m sure there are a lot of special interests groups out there that say they stand to lose tremendously,” Arnold, who has regularly testified on fiscal policy during congressional hearings, said. “I think a simpler and fairer code is going to benefit everybody, even if some groups aren’t benefiting as much as others.”

Phillips counters that the framework would primarily benefit the wealthy while doing little for lower and middle-income earners. He notes its clearly a giant tax cut for the rich because it lowers their top rate, cuts businesses taxes, cuts the pass-through rate, and eliminates the death and alternative minimum taxes.

“I think overall when you look at the lower and middle-income classes, what they’ll typically see is a very small haircut,” Phillips said. “But I think one of the striking things is about the framework is they put out is that within these different groups, we might actually see a substantial number of these people have tax increases.”

 

12.) Alternative Minimum and Death Tax

The framework repeals what is known as the death tax and Alternative Minimum Tax (AMT). The death tax, technically known as the estate tax, is applied to the estate of a deceased person when it is transferred in their will. The AMT requires an additional income tax rate for certain individuals, corporations, and other groups that have special exemptions.

The framework argues that the AMT is unfair because it essentially requires some taxpayers to do their taxes twice while no longer serving its intended purpose. The Internal Revenue Service (IRS) has recommended repealing the AMT. The Tax Policy Center notes it was originally intended to prevent perceived abuses by a handful of very wealthy individuals, but now impacts roughly five million people.

 

13.) The Zero Tax Bracket

The framework promises to essentially provide a zero percent tax bracket for some Americans. It plans on doing this by consolidating standard deductions and personal exemptions at an increased amount. The changes are aimed at creating a zero tax bracket by eliminating taxes on the first $24,000 of income earned by a married couple, and $12,000 earned by individuals.

“One issue that has gotten a lot of confusion, I think, is the so-called zero-rate policy,” Arnold said. “There is a lot of concern that Republicans are raising that zero percent rate up to 12 percent. We’ll know the exact details when we see where the bracket thresholds are drawn. But all indications suggest that 10 percent rate is actually becoming a zero percent rate.”

The tax framework does increase the lowest tax rate for taxpayers from 10 percent to 12 percent. But the income levels for each bracket were not included in the framework. The zero percent rate might essentially become a fourth bracket for lower-income earners.

 

14.) Pass-Through Businesses 

The tax framework limits the top tax rate applied to owners of sole proprietorships, partnerships, and S corporations down to 25 percent. Those businesses are known as pass-through entities and are often small and family-owned. The owners and investors are directly taxed on their income instead of having a corporate rate applied to their business. The taxes are essentially passed on to the owners.

Republicans hope the approach will help lessen the tax burden many small businesses face. But not every pass-through business is small and family-owned, which has prompted concern among critics. They believe the system could be abused by wealthy individuals who want to avoid paying the top personal income tax rate.

“So the major pieces of it are the special rate, for what is called pass-through income,” Chuck Marr, director of federal tax policy at the Center on Budget and Policy Priorities, told InsideSources. “That’s law firms, hedge funds, accounting firms, real estate investors, high-income people having money in partnerships. This says, well, you don’t have to pay the top rate, you get a special rate.”

The framework does promise to include measures designed to prevent abuse. Those protections could prevent the recharacterization of personal income into business income by wealthy individuals trying to pay a lower rate. The framework does not reveal exactly what those protections will be.

 

15.) How Americans Feel About Tax Reform

Americans have increasingly become more interested in tax reform over the past year. Fox News found in a poll August 30 that 49 percent of voters feel it is important to pass tax reform legislation this year. But the same poll found that only 14 percent think it’s going to be accomplished.

A Politico-Harvard T.H. Chan School of Public Health poll found Sept. 21 that people are more interested in other issues like lowering prescription drug costs, increasing the minimum wage, and infrastructure spending. A CNN poll Oct. 19 found that a slim majority oppose the GOP plan at 52 percent.

“With unemployment very low, the biggest economic problem facing the United States is that people who didn’t go to college, their wages have been stagnant for decades,” Marr said. “There needs to be something. There needs to be a focus or a priority on raising their incomes, and that crosses different policy areas. But when we’re talking about taxes, we’re going to move around trillions of dollars; we should do something for those people.”

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President Donald Trump has seen black unemployment drop significantly since entering office earlier this year, but the question of who should get credit is still up for debate.

Trump was able to win the presidency with a platform geared towards helping workers. The president has been particularly focused on job growth as he has worked to implement his economic agenda. He has turned towards regulatory and tax reform as pathways to accomplishing his goals.

The Bureau of Labor Statistics (BLS) has shown that black unemployment has seen a notable drop since Trump entered office. The most recent monthly jobs report found that black unemployment went from 8.3 percent to 7.0 percent over the past year. It is now at a 17 year low. Black unemployment is down from a modern high of 16.8 percent in March 2010.

“In just 10 months you are seeing large numbers of black Americans, particularly men, finding themselves with new job opportunities,” Project 21 co-chairman Horace Cooper told InsideSources. “There are things that having your own job and own income can provide that the federal government just can’t replace.”

Project 21 was started to provide a platform for black conservatives who have an entrepreneurial spirit, dedication to family, and commitment to individual responsibility. The National Center for Public Policy Research started the initiative, arguing the civil rights establishment usually isn’t open to those views.

Project 21 also highlights how the unemployment gap between black and white workers has also been steadily decreasing. The unemployment rate for black teens has decreased even more significantly, as well. The unemployment rate for black teens decreased from 28.1 percent a year ago to 22.4 percent currently.

But not everyone agrees that the president should be the one getting the credit. Economic Policy Institute analyst Janelle Jones argues that the policies he is advocating aren’t actually helpful to workers, especially black workers. She counters that employment was already starting to trend in a positive direction before he entered office.

“Even if nothing else happened, just based on pure inertia, we were going to be moving toward lower unemployment rates,” Jones said. “Even without direct intervention by the Trump administration, this is where we were headed. We were basically headed toward full employment.”

Former President Barack Obama entered office during a severe economic downturn known as the Great Recession. The economic recovery that followed proved to be unusually prolonged. Many black Americans found themselves in a particularly tough position during those years. Cooper argues that his policies were actually bad for black workers.

“More black Americans saw the dream of owning a home was out of reach,” Cooper said. “More black Americans realized that sending their kids to great colleges and universities was an unattainable dream, unemployment spiked, and the differential between blacks and whites in terms of who was employed reached unprecedented levels.”

The Great Recession was caused by the subprime mortgage crisis and the financial crisis of 2007. The recovery didn’t really start seeing notable gains until just the last few years. But employment and the economy did start trending in a positive direction when Obama was still president.

“I think it’s hard to assign credit to a president that hasn’t been in office that long,” Jones said. “But if I had to assign credit I would say it was the Obama administration that pulled us out of the worst recession we’ve seen since the Great Depression, and really kept an eye on inflation rates. It was about infrastructure. It was about putting money into federal programs that bring people back into the workforce.”

Jones adds his administration implemented policies to make the recovery as robust as it could be. Cooper counters that it was those very reforms that caused the recovery to become so sluggish. He adds having healthcare and housing are important, but it takes more than that to help black workers and everyone else.

“At the end of the day, the kind of things that make us Americans, and what many black American men are interested in, is the freedom that comes when you have your own resources and you can use them in the way you want,” Cooper said. “We are looking at a 17-year record in terms of how low unemployment is among blacks, and it is sharply down among black men, and it is dropping perceptually among teenagers.”

Cooper adds the last administration hurt employment by disincentivizing investment with its approach to taxes and regulations. He pointed to past recessions, which typically only took months to recover. Former President George W. Bush faced a recession at the beginning of his term, but the recovery only took nine months.

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Labor Secretary Alexander Acosta discussed why education and job training needs to be reformed during a conference Monday on fixing the skills gap.

The U.S. Chamber of Commerce Foundation for America Working Forward hosted the day-long event to explore potential solutions to the skills gap problem. The conference brought together employers, training providers, and policymakers who discussed the problem while offering thoughts on how to address it.

The Bureau of Labor Statistics (BLS) recently reported that job openings currently stand at 6.1 million. The monthly report saw a slight decrease from the previous month. At the same time, there are millions of working-age adults without work. Acosta highlighted how reforming the education system and expanding apprenticeship programs can help to bridge that gap.

“Our mission is quite clear, and it is to close the skills gap,” Acosta told the conference. “Now before we can solve a problem we need to define it. We have 6.1 million open jobs in this nation. This is almost the highest its ever been since the Bureau of Labor Statistics started tracking this figure. It was 6.2 last month. Other than that it is the highest figure ever of open jobs.”

Economists have proposed various solutions to potentially address the skills gap problem. Some have even doubted whether it is actually a problem. Some believe the skills gap is occurring because people are not being provided needed skills through school and training. Others assert the issue is the result of certain industries not paying adequate wages to attract skilled talent.

Acosta notes the education system needs to be reformed so that students have more career paths to explore. High schools typically prepare students for college, but Acosta warns that while a liberal arts education can be beneficial to many students, it might not always be the best for everyone.

“Before we can address the skills gap we need to acknowledge an underlying problem in how we educate our students,” Acosta said. “Those students are not presented a full and accurate range of career options during their secondary education. The student who loves building things in shop class might prefer to become a carpenter, and that could be a great career. The art student who has a passion for welding might decide that’s the career path for her.”

Acosta adds that schools need to provide students more career options while helping them to develop those skills. He warns that schools are currently defining success on whether they can prepare students for a narrowly focused set of career paths, and that the approach does a disservice to students who have an interest that could develop into a successful career elsewhere.

President Donald Trump has been particularly focused on apprenticeships as a potential solution. He signed an executive order June 15 aimed at increasing the number of apprenticeship programs by reducing regulations so it’s easier for companies, unions, and industry groups to create them.

“Apprenticeships are one way of incorporating demand-driven education into high schools, colleges, and nontraditional educational programs,” Acosta said. “Our research and discussions with American workers, job seekers, and job creators leads us to this; America is ready for the apprenticeship model to be spread across all industries. But it’s very important that one size does not fit all.”

Trump also implemented a task force Monday to explore ways in which the apprenticeship model can be expanded. The task force brings together government officials, unions, and industry associations like the National Restaurant Association (NRA). Acosta added that it is important to have different groups working together on the problem.

“We are honored to represent the restaurant and hospitality industry as a member of Secretary Acosta’s Apprenticeship Task Force,” NRA President Dawn Sweeney said in a statement provided to InsideSources. “Apprenticeships offer career development opportunities that are vital to growing our economy and training America’s workforce. We look forward to streamlining and expanding the apprenticeship program to open additional pathways to achieve the American Dream.”

The Government Accountability Office (GAO) found in a 2011 report that the federal government spends about $18 billion annually on job training programs. Former President Barack Obama, for instance, invested $90 million into a federal program focused exclusively on apprenticeships.

The BLS also found in a 2015 report that the country is projected to produce one million fewer technical workers than are needed over the next decade. PNC Financial Services found in a report last year that the demand for STEM skills is going to explode over the next few years. The report also found that 38 percent of global manufacturers are having difficulty finding workers.

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Republican leadership has released a tax framework that promises to address the burden small businesses face. But the potential impact has been a source of debate among experts.

Republicans have long been advocates for tax reform as a means of spurring economic growth. The tax framework provided some details into the direction they were taking their latest reform effort when it was released Sept. 27. Republicans hope to significantly reform the tax code in a way that hasn’t been done since 1986.

Republican President Donald Trump and other party leaders have stressed how much the plan will help small businesses.  Economists and tax policy experts have carefully reviewed the framework to understand what the likely impact will actually be. Some have found that small businesses will be helped while others see the plan doing much more to help the rich.

“We are going to protect small business owners and their families so they can continue to run their companies with dedication and with love,” Trump said Oct. 11 during a speech in Harrisburg, Pennsylvania. “The more than 30 million Americans who have small businesses will see, listen to this, a 40 percent cut in their marginal tax rate.”

The framework promises to limit the maximum tax rate for small and family-owned businesses to 25 percent. The reduced rate will specifically apply to owners of sole proprietorships, partnerships, and S corporations. Those businesses are known as pass-through entities and are often small and family-owned.

“I think the biggest thing they’re going to get out of this is a major rate reduction,” Brandon Arnold, the executive vice president of the National Taxpayers Union, told InsideSources. “If they’re paying at the top marginal rate, and some are, they’re going to see a 15 percentage point cut. Getting from 40 percent to 25 percent. That’s huge.”

Pass-through businesses are structured in a way that helps them to avoid a higher corporate tax. The owners and investors are directly taxed on their income instead of having the corporate rate applied to their business. Republicans hope the approach will lessen the tax burden many small businesses face.

“Some smaller businesses are further down in lower brackets,” Arnold said. “But those brackets are likely to be cut as well. So I think we’re going to see a quick infusion of resources because their tax liability going forward is going to be significantly lower.”

But the tax framework also faces a debate over who actually benefits from the plan. Not every pass-through business is small and family-owned which has prompted concern among critics. The Institute on Taxation and Economic Policy (ITEP) found that wealthy individuals could use the pass-through structure to avoid paying higher taxes.

“By creating a 25 percent lower rate, they’re really creating what’s going to be a complicated problem,” ITEP senior policy analyst Richard Phillips told InsideSources. “If you’re a millionaire and you’re receiving your income as wage income, and there’s a much lower rate on pass-through income then you’re going to want to become a pass-through business.”

The ITEP analysis also estimates that 87 percent of the benefits of this change would go to the richest one percent of taxpayers by 2018. The framework does promise to include measures designed to prevent abuse, but does not yet reveal exactly what those protections will be.

Republicans are also making simplification a primary policy goal in their tax reform push. They argue that many businesses and individuals face an unnecessary burden in just complying with the tax code. They hope that reducing the income brackets and reforming deductions will help to make the process of actually doing taxes easier.

“Having a simpler, easier-to-comply-with tax code will reduce the stress, the heartburn, associated with filing taxes and all the tax requirements small businesses have to face,” Arnold said. “I think if you were to poll business people, you’d see many of them are frustrated, not just with how much they pay, but also with the time and effort they have to dedicate to tax compliance every year.”

The Government Accountability Office found in a 2014 study that the tax code is so complex that very few professional tax preparers are able to calculate the correct tax refund. The National Taxpayers Union found in a 2015 study that the economy loses $233.8 billion and 6.1 billion hours of lost productivity annually because of the complex tax code.

“I think they are facing an excessive burden right now,” Arnold, who has regularly testified on fiscal policy during congressional hearings, said. “There’s just a lot of frustration there because many of them, the small businesses, don’t have a sophisticated team of lawyers and accountants to help them with that process.”

The business community has been highly supportive of the tax reform push throughout the process. The framework has been applauded by industry associations and business leaders for helping to reduce the burden businesses face. The Job Creator Network led a coalition letter from 60 political and industry leaders arguing the plan would be a huge boost for small businesses.

The International Franchise Association (IFA) was one of the industry associations that signed onto the letter. The IFA has been a major advocate for comprehensiveness tax reform since the start. IFA President Robert Cresanti notes that the plan would leave employers more money to invest back into their employees and business.

“For years, the burdensome and complex tax code has held back small business owners and stifled new investments,” Cresanti said in a statement. “Simply put, the framework laid out by congressional leaders and the administration to lower taxes across the board and to eliminate the estate tax will supercharge our economy.”

Small businesses aren’t the only focus of the plan which promises to lower rates and simplify the tax code. The framework is also looking to lower rates for upper and middle-income earners. It reduces the top individual tax rate from 39.6 percent down to 35 percent. It also lowers the corporate rate to 20 percent.

Congress is also continuing to seek input from the business community as it pursues tax reform. The House Small Business Committee held a panel from the small business community Oct. 4 to discuss what matters most to small business owners.

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Labor unions took to social media and Capitol Hill Wednesday to demand that lawmakers end a free trade agreement which critics claim has hurt domestic workers.

Labor unions have long argued that domestic workers have been unfairly disadvantaged by the North American Free Trade Agreement (NAFTA). President Donald Trump has also been highly critical of the deal and is now looking to renegotiate it. The free-trade deal was first implemented in 1994 between Canada, Mexico, and the United States.

Trump and the labor movement don’t agree on much despite both being focused on helping workers. International trade is one of the few areas they have some common ground. Labor unions furthered their opposition campaign Wednesday by taking to social media and delivering 400,000 petitions to congressional lawmakers.

The Replace NAFTA campaign helped organize the demonstration against the trade agreement. The campaign is supported by Public Citizen, Citizen’s Trade Campaign, and the Sierra Club. The AFL-CIO, which is the largest federation of labor unions in the country, also supports the effort.

The Replace NAFTA campaign also hopes to eliminate what is known as the Investor-State Dispute Settlement (ISDS) system. The ISDS is a function of international law included in many trade agreements including NAFTA. It is a mechanism for using neutral arbitration to resolve investment disputes between companies and countries.

Trump broke with many others on the right by criticizing current trade policy during the campaign. He has already started the process of renegotiating NAFTA. The fourth round of negotiations started Wednesday with a meeting at the White House between the president and Canadian Prime Minister Justin Trudeau.

Labor unions used the opportunity to demand that the trade deal be replaced with something that helps workers. The AFL-CIO and the American Federation of Teachers (AFT) were among the unions that delivered 400,000 petitions to lawmakers. The unions have also launched informational campaigns and participated in protest against the trade agreement over the years.

The AFL-CIO has often argued that international trade agreements have been used to benefit large corporations at the expense of workers. NAFTA has become the main target for unions and many other critics. The AFL-CIO suggested earlier in the year that the trade deal be reformed to include new labor and procurement rules, consumer protections, and protections against currency misalignment and tax dodging.

Trump has made working-class issues a cornerstone of his administration. Immigration and international trade became major components of his agenda with concern cheap foreign labor is undercutting domestic workers. He has also expressed concern over currency manipulation by countries like China.

U.S. Trade Ambassador Robert Lighthizer detailed what the president hopes to accomplish June 22 during a congressional hearing. The administration plans to renegotiate trade deals to be fairer and more efficient, enforce trade deals more aggressively, and increase domestic exports.

Trump has already delivered on one major campaign promise by withdrawing from the Trans-Pacific Partnership (TPP). The agreement would have been the largest regional trade deal in history at roughly 39 percent of global GDP. Former President Barack Obama was unable to get much support from fellow Democrats when trying to get the deal implemented.

CNN reported that the trade negotiations might soon be facing challenges. President Trump, according to the reports, has made several proposals that threaten to undermine negotiations. Trump may then have an excuse to scrap the trade deal entirely and start from scratch.

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President Donald Trump has promised to fix the country’s growing trade deficit since the election last year. But what’s often lost in the conversation is how complex the issue actually is.

The trade deficit is used in international trade to measure when a country imports more goods than it exports. The United States currently has a trade deficit of $42.4 billion. Trump hopes to reduce the trade deficit by renegotiating international trade agreements. But that approach may overlook other ways that might actually be better for addressing the trade imbalance.

The North American Free Trade Agreement (NAFTA) has become the main target as the administration looks to reintegrate current trade deals. NAFTA was implemented 1994 as a free trade agreement between North American countries. Trump has argued on numerous occasions that NAFTA and other trade deals have put American workers at an unfair disadvantage against foreign competitors.

The trade deficit is determined by other factors beyond what trade agreements the country has. A widening trade deficit might actually be a good thing depending on what underlying economic conditions are causing it. American Enterprise Institute scholar Claude Barfield believes a better approach would be looking at trends within the economy that are likely impacting how exports perform in international markets.

“Ultimately, your trade balance, whatever it is, is determined by macroeconomic factors,” Barfield told InsideSources. “That gets to such things as taxes, getting a handle on entitlements, federal budget questions, things like that, and not, as the administration keeps saying, the reason we have a trade deficit is because of bad trade agreements. They don’t have much of an effect one way or another.”

The U.S. Bureau of Economic Analysis and the U.S. Census Bureau released numbers Thursday which showed the trade deficit decreased in August. It went from $43.6 billion in July down to $42.4 billion for the month. Barfield notes that the monthly numbers won’t provide much information because they tend to fluctuate.

“The trade deficit went down a little,” Barfield, a former consultant to the office of the U.S. Trade Representative, said. “I would say first that monthly figures are not ultimately very important. It’s not very important on its own whether the trade deficit goes up or it goes down. That varies in terms of working conditions, business cycle, in terms of the U.S. dollar.”

The country has faced a growing trade deficit since last year following some improvements. It has generally trended around the $40 billion range since it suddenly dropped around the last recession in 2009. The trade deficit was approaching $70 billion before the economic downturn. It dropped to $25 billion before settling around its current average.

“You really don’t want to pay attention to the ups and downs for the month to month,” Joe Gagnon, a senior fellow at the Peterson Institute for International Economics, told InsideSources. “I think the bigger picture is the trade deficit has been slowly growing. If you look back over the last 12 months it’s been going up, it’s been getting larger. That’s because the dollar has been strong for a while, ever since like late 2014.”

The U.S. dollar has strengthened over the last few years because of several economic factors. The dollar strength is measured by how it’s valued relative to other currencies. A strong dollar means that exports become more expensive for foreign buyers. The current strengthening of the dollar and weak demand overseas has likely contributed to the increased trade deficit.

“The trade deficit has been growing slowly and steadily over the last couple of years,” Economic Policy Institute economist Robert Scott told InsideSources. “That follows a sharp jump that happened in 2015. I think that due to some long-running trends in the economy, the most important of which is we’ve had a sharp jump in the value of the dollar beginning in late 2013. And that has affected the lag on the trade deficit.”

Gagnon believes that a good approach would be to get the dollar closer to its true value. The value of the dollar is determined by how much it’s in demand which is measured by factors like the exchange rate and demand for treasury notes. Some economists believe that the dollar is overvalued relative to how much it’s actually in demand.

“From the U.S. point of view, the strong dollar, over the past three years now, has been a drag on growth,” Gagnon, a former associate director at the U.S. Federal Reserve Board, said. “It’s actually been holding back growth by about a half a percentage point a year, and that probably will diminish. It won’t turn positive, but it will be smaller. The best it could be would be neutral on growth. But I suspect it might just slowdown.”

The trade deficit might not necessarily be a sign that the economy is doing poorly either. A strengthening economy could cause the trade deficit to widen as consumer demands increase. The U.S. economy could also see an increase in the trade deficit because of foreign investments. Barfield notes the last time we got the trade deficit down was during the last recession because there was less economic activity.

“If the U.S. economy seems to gain strength in a more rapid fashion later in the year, the Fed is likely to raise interest rates, which will have the impact ultimately of raising the value of the dollar, which would put a dampening effect on exports to some degree,” Barfield said. “That would not be, however, a sign the U.S. is losing competitiveness. It would be a sign the economy is doing quite well.”

Scott counters that the trade deficit is a huge problem because it likely shows structural problems within the economy. He notes one issue is good traditional jobs like manufacturing are being replaced with low-wage jobs in retail trade and restaurants. Those jobs tend to contribute less to how much the country is exporting.

“Now other economists will tell you the trade deficit tends to be cyclical,” Scott, who serves as the director of trade and manufacturing policy, said. “It goes up when the economy is growing fast, and goes down when the economy shrinks. Now that may be true, but we’ve had significant trade deficits for more than two decades now. That, to me, is a fundamental problem.”

Gagnon expects the growing trade deficit will likely slow in the coming year because the dollar has stopped strengthening as much. A more balanced dollar will mean exported products will become less expensive to foreign buyers. Demand for domestic products might also increase because of improving and emerging economies across the globe.

“The U.S. economy has been doing pretty well, but other countries have been catching up,” Gagnon said. “Going forward I would say the trade deficit might widen a little bit, but not as much going forward in the next year as it did in the last couple of years. The reason is the dollar has fallen back a bit from its peak over the past couple of months.”

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Employers from across the country have struggled to find workers with the right skills to fill open positions. A problem made increasingly worse by how younger adults are being trained.

The millennial generation is in a unique position in its economic history. These workers started entering the workforce while the country was struggling to recover from a severe economic downturn. They were also raised in a period which highly encouraged four-year liberal arts degrees over other types of education and training.

The economy, as a result, now has a younger workforce that is unable to fill many good and well-paid jobs. Employers are in increasing need of technical skills like science, technology, engineering, and mathematics (STEM). They also need workers with bachelor and post-secondary degrees in business and healthcare.

“That’s where we’re seeing the biggest job growth, and the most value for the major,” Georgetown University researcher Andrew Hanson told InsideSources. “All those fields with narrow specializations like healthcare and business, for example, there’s just been enormous growth there. And there hasn’t been enough talent that we’ve developed in order to keep up with that.”

Hanson adds that younger adults who get trained in those fields can expect competitive wages, as well. The lack of skilled workers in those industries means companies have to provide higher wages to attract talent away from competitors. More students are actually being trained in those fields even though the gap has been widening.

“We have increased the supply of higher skilled workers, but the demand for those skills has increased even more,” Hanson said. “Employers are willing to pay a lot more than they used to in order to attract that talent. For various reasons that have been occurring in the education system, we haven’t been able to keep up with that demand.”

The skills gap issue doesn’t seem to be an isolated occurrence either. The Manpower Group, a human resources consultancy, found in its annual talent shortage survey that 40 percent of employers worldwide reported a lack of workers with needed skills. The shortage of skilled labor has increased steadily since 2010.

PNC Financial Services found in a report last year that the demand for STEM skills is going to explode over the next few years. The report also found that 38 percent of global manufacturers are having difficulty finding workers with the skills they need to fill vacant positions.

The Bureau of Labor Statistics (BLS) recently reported that job openings had increased to six million. At the same time, new hires decreased. The BLS also found in a 2015 report that the country is projected to produce one million fewer technical workers than are needed over the next decade.

Mercatus Center research fellow Michael Farren notes that the issue primarily stems from the growing need for specialized skills as opposed to more traditional schooling like a liberal arts degrees. Industries are in increasing need of very particular skill sets that can be as narrowly focused on an industry or single company.

“There’s been some recent academic research regarding this,” Farren told InsideSources. “What it seems to indicate is that the skills gap is more a unique skills gap to a particular company or industry in terms of its workers not having the exact right skills.”

The economy also has a growing need for workers who are able to handle blue collar positions. The issue isn’t necessarily that there is a growing demand for these types of jobs like there is for technical skills. Instead, the issue is that workers with those skills tend to be older which means they are leaving positions open when they retire.

“The number of blue-collar jobs overall is going down mostly because of automation in the manufacturing sector that is leading to significant employment declines,” Hanson, who also serves as a senior research analyst at The Georgetown Center on Education and the Workforce, said. “But there are still a significant number of good jobs in those fields, and there’s a lot of turnover because the baby boomers are reaching retirement age.”

Hanson adds that the trend is particularly evident with manual jobs which become harder to do at an older age. He also notes that blue collar skills aren’t emphasized enough in schools. Students are instead setup and often pushed into four-year degrees which result in a useless skill set.

“We’re just funneling people into four-year colleges that have a liberal arts education,” Hanson said. “Those blue collar fields just aren’t emphasized through most of our education system from high school through college.”

Farren notes that a four-year degree can still be very beneficial for students. The issue is ensuring there are other avenues to help make sure students are able to pursue skills that are in demand. Training that is specific to a particular industry, for instance, can help meet the need for specialized skill sets.

Many community colleges have programs specifically aimed at developing technical skill sets. These programs are designed so students can study and practice their skills in real world circumstances. Hanson notes community colleges alone just don’t have the ability to train enough students to meet the market demand.

“The community technical colleges that do offer those programs typically don’t have the capacity to train as many workers as we need to fill those jobs because they tend to be more expensive,” Hanson said. “They require hands on experience. The system really isn’t designed for classroom based learning.”

President Donald Trump has looked towards apprenticeships as a potential solution. He signed an executive order June 15 aimed at increasing the number of apprenticeship programs. The executive order rolls back regulations so that companies, unions, and industry groups alike can more easily create their own apprenticeship programs.

Trump has also received criticism for supposedly undercutting job training elsewhere. His proposed budget May 23 would cut some established federal job training programs significantly. CNN and a number of other news outlets highlighted the apparent inconsistency.

“Apprenticeship programs are something people are trying to expand,” Hanson said. “There’s a lot of work being done to expand those, but at the moment they’re really not at the capacity we need to fill all the job openings that are available.”

The Government Accountability Office (GAO) found in a 2011 report that the federal government spends about $18 billion annually on job training programs. Former President Barack Obama, for instance, invested $90 million into a federal program focused exclusively on apprenticeships.

“I think that’s a good way forward because you’re not just learning these specialized skills that the employers themselves need, you’re also gaining workforce experience at the same time,” said Farren.

He adds that apprenticeship programs also provide real world experience. The programs can help to develop both technical skills and what is known as soft skills. Soft skills refer to those basic habits and behaviors that are generally expected of all workers, such as knowing how to deal with customers and bosses.

“The education system has gotten more and more specialized turning out graduates with higher and higher skills,” Farren said. “If we spend more time in school, as the millennial generation has, then we have less time to gain workplace experience. That might contribute to some of the gaps in soft skill that many employers have noted.”

Many businesses have internal job training programs to ensure their employees have the skills they need. These programs have the added benefit of providing the skills employers actually need. Farren notes that government should make it easier for companies and other to setup job training programs.

“What we should be focusing on as a holistic, sustainable solution to the skills gap is to lower the cost of acquiring new skills,” Farren said. “We start treating training, particularly training for new jobs, as investments in human capital.”

Keiser University chancellor Arthur Keiser notes that students also have to take more responsibility for themselves. He adds that they have to do their research to figure out which field to study in order to get a job. The hope would be that students who are more deliberate with their studying will have a more fruitful career.

“Education is still a very good value for those who take advantage of it,” Keiser said. “At the same time, the student has to be responsible for understanding what they’re getting themselves into. The disclosures that we are required to make, part of the rules, we make all kinds of disclosures.”

Hanson adds that another pathway to potentially addressing the skills gap issue is to start moving everybody towards a post-secondary credential. He also notes that we should do more to expose students to possible career pathways while they are in middle school.

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