Economy Section….
The separation between Wall St. & Main St. are now virtually complete, where having one side prosper doesn’t spill over to the other. The data has become unmistakable, that our capitalistic system has regretfully evolved to where capital reigns over labor. It won’t be easy & leadership would get tremendous pushback, but we must actively seek to swing the pendulum back towards more of an equilibrium. Such innovative policies to reverse trends would require ideas far different from the small-thinking, shortsighted plans coming out of DC these days. Trump is totally clueless & incompetent, but to be fair we can’t criticize absolutely everything he does. Some of his regulation cutbacks do help free up some businesses being needlessly strangled by them. Sure, the best part about the new tax plan was in raising the standard deductions, since that part targeted a bottoms-up approach, as opposed to the rest of it which was top-down & relies on the folly of trickle down. Plus higher standard deductions help incentivize people to get back to work with less reliance on government assistance.
But if we can in rapid-fire fashion add around $1.5 Trillion spending for the new budget, approximately $1.5 Trillion for infrastructure, after adding probably $1.5 Trillion to the deficits from the tax cuts, without firm commitments to offsetting cuts, it puts us into drunken sailor territory. The infrastructure figure he’s trying to push off most of the costs on cash-strapped states, which isn’t really feasible. But overall the tax cuts in conjunction with the new budget, with the additional hope of a big infrastructure bill, it’s a display of spending recklessness beyond comprehension, distorting budgets along with rattling confidence, plus shaking up the markets while passing the financial obligations onto the future. Since infrastructure upgrades are badly needed, along with some much-needed & important initiatives in the budget, so I blame the ill-conceived tax cut bill as the primary culprit behind the coming exploding deficits. And that debt gets even more expensive as interest rates rise. Trump acts like a kid in a candy store, unable to resist the goodies which taste so good now, but tomorrow comes with a hefty price. As a businessman he did say “I’m the king of debt, I love debt” & declared bankruptcy four times, so maybe that’s just what he has in mind for America. It looks like our national deficit & debt is poised to skyrocket.
As I’ve been pointing out from the moment the tax bill passed & even before that, the bonanza corporations enjoy from the huge tax cuts are going mostly to enrich themselves & shareholders, not so much employees. I’ve agreed all along the 35% corporate rate was far too high & made us less competitive on the world stage, but there was a belief the big cuts would be accompanied by reducing deductions & loopholes, making it closer to revenue neutral. Obviously, that never happened, so annual deficits are destined to run north of $1 Trillion for the foreseeable future. Is that any way to manage a federal budget? Looks like the GOP’s big donors won out again. Big time! Let’s also be leery of Trump’s proposed cuts to narrow the deficits in next year’s budget that could prove reckless. Here’s an excerpt providing perspective from buyback-boondoggle-beggar
Trump’s promise that corporations will use his giant new tax cut to make new investments and raise workers’ wages is proving to be about as truthful as his promise to release his tax returns. The results are coming in, and guess what? Almost all the extra money is going into stock buybacks. Since the tax cut became law, buybacks have surged to $88.6 billion. That’s more than double the amount of buybacks in the same period last year, according to data provided by Birinyi Associates. Compare this to the paltry $2.5 billion of employee bonuses corporations say they’ll dispense in response to the tax law, and you see the bonuses for what they are — a small fig leaf to disguise the big buybacks. If anything, the current tumult in the stock market will fuel even more buybacks.
This isn’t just unfair. It’s also bad for the economy as a whole. Corporations don’t invest because they get tax cuts. They invest because they expect that customers will buy more of their goods and services. This brings us to the underlying problem. Companies haven’t been investing — and have been using their profits to buy back their stock instead — because they doubt their investments will pay off in additional sales. That’s because most economic gains have been going to the wealthy, and the wealthy spend a far smaller percent of their income than the middle class and the poor. When most gains go to the top, there’s not enough demand to justify a lot of new investment. Which also means that as long as public policies are tilted to the benefit of those at the top — as is Trump’s tax cut, along with Reagan’s legalization of stock buybacks — we’re not going to see much economic growth. We’re just going to have more buybacks and more inequality.
In the next article survey-analysts-expect
A survey released this week shows that analysts expect only 13 percent of companies’ savings from the new tax law to go to workers in the form of bonuses, raises and employee benefits. Morgan Stanley analysts predict that 43 percent of the savings will end up in the hands of investors in the form of stock buybacks and dividends. The analysts’ prediction echoes one of critics’ main issues with the GOP tax-cut legislation signed into law by President Trump — that much of the savings for companies will not immediately be passed on to workers. According to data released by the White House earlier this month, more than 300 companies have already announced tax law-related bonuses, raises or improved employee benefits to be provided to more than 3.5 million American workers. Critics argue that this is still a small fraction of the 125.5 million Americans who are employed by a company.
The next link trump-jobs-manufacturing-
This next link is an important perspective again highlighting why trickle down is barely a trickle. The Trump tax cuts will increase deficits & likely produce economic growth as well, but it’s highly probable it doesn’t produce the type of shared growth our nation so badly needs. So we’re likely to see an acceleration of the unmistakable trend where wealth creation is going to the very top, afflicting the United States with perhaps the fastest growing & most glaring disparities in the entire world! I keep warning that I absolutely do not advocate socialism, but unless we can steer the free market system in a direction that reverses these widening income/wealth gaps, angry voters may well elect a Bernie-protege soon. These two paragraphs are from how-rich-are-the-rich-if-
There are several ways to measure inequality. One of the most popular is by income. That’s largely because there’s more data, and it’s a lot easier to measure. But this measure is a snapshot. Wealth, on the other hand, is an aggregation, affected not only by current income but earnings accumulated in previous years and by previous generations. Only by studying wealth inequality do scholars, policymakers and others get the deepest and broadest measure of the gap between the rich and everyone else. When we do look at the data on wealth inequality in the U.S., it’s stark and dwarfs that of the rest of the developed world. The conservative Hudson Institute in 2017 reported that the wealthiest 5 percent of American households held 62.5 percent of all assets in the U.S. in 2013, up from 54.1 percent 30 years earlier. As a consequence, the wealth of the other 95 percent declined from 45.9 percent to 37.5 percent. As a result, the median wealth of upper-income families (earning US$639,400 on average) was nearly seven times that of middle-income households ($96,500) in 2013, the widest gap in at least 30 years. More notably, inequality scholars Emmanuel Saez and Gabriel Zucman found that the top 0.01 percent controlled 22 percent of all wealth in 2012, up from just 7 percent in 1979. If you only looked at data on income inequality, however, you’d see a different picture. In 2013, for example, the top 5 percent of households earned just 30 percent of all U.S. income (compared with possessing nearly 63 percent of all wealth). While the U.S. is not the only developed country that has seen wealth inequality rise over the past three decades, it is an outlier. The wealthiest 5 percent of households in the U.S. have almost 91 times more wealth than the median American household, the widest gap among 18 of the world’s most developed countries. The next highest is the Netherlands, which has a ratio less than half that.
Lifting all boats?
The recently passed Tax Cuts and Jobs Act will make this problem a whole lot worse.
The main features of the law include doubling the standard deduction for individual taxpayers, a temporary reduction in the top marginal tax rate from 39.6 percent to 37 percent, a significant reduction of the number of families subject to the estate tax and slashing the top corporate rate from 35 percent to 21 percent. The main impact, however, is skewed to the wealthy. For example, the bottom 20 percent of households will see a lower tax bill of about $40 on average, compared with $5,420 for those in the top quintile. The richest 0.1 percent, meanwhile, will save $61,920. By 2025, the richest will see their benefit grow to $152,200, while everyone else won’t see much of a change. All the individual cuts are set to expire in 2026. Wealthier taxpayers will also gain from the other main features of the new law. For example, research shows most benefits of lowering business taxes go to the rich, and fewer estates subject to the inheritance tax means more wealth accumulation across generations. The tax law’s proponents claim that it won’t increase levels of inequality because the money that the rich will save will “trickle down” to other American households and lift their boats too. Empirical evidence, however, suggests otherwise. Specifically, channeling more money to the rich, via tax cuts, does not improve economic growth, worsens educational opportunities for poorer Americans and even reduces life expectancy, which declined for a second year in a row in 2017. Whatever happens, first things first, we need to know and understand just how bad wealth inequality in the U.S. has become. What we then choose to do about it is up to all of us.
With workers needing a voice which has been waning for decades, it’s Millennials who are unionizing far more than older workers, which is shown in this graphic from millennials-survived-the-
In the Big Deficits group, as we see in this excerpt from fraudulence-of-the-fiscal
This week Republicans, having just enacted a huge tax cut, cheerfully agreed to a budget deal that, according to independent experts, will push next year’s deficit up to around $1.15 trillion — bigger than in 2012. True, this won’t quite match 2012’s red ink as a percentage of G.D.P.; but this time none of the deficit will be a result of a depressed economy. Now Obama is gone, and suddenly deficits don’t matter. But let me not just bash Republicans. Let me also bash their enablers — all those who were duped into believing their claims to be deficit hawks, or pretended to believe them in order to appear balanced and bipartisan. Such people did America a great disservice. And they will continue to do a great disservice if they obscure what’s happening now. Please, let’s not talk about the wrongheadedness of fiscal policy — about imposing austerity in a depressed economy, then running up the deficit when we’re already near full employment — as a problem of “political dysfunction,” or assert that both parties are to blame. Democrats didn’t block stimulus when the economy needed it, or push a tax cut that will worsen inequality and explode the national debt. No, this is all about Republican bad faith. Everything they said about budgets, every step of the way, was fraudulent. And nobody should believe anything they say now.
From our-fast-growing-national
Trillion dollar deficits, once considered a temporary stimulative measure aimed at healing the wounds of the Great Recession, are becoming accepted as business as usual in Washington. As budget deals are hashed out and both parties reach common ground on issues that affect all Americans, talk of fiscal discipline is curiously absent. It appears we’ve reached a new bipartisan consensus that’s troubling for the taxpayers of tomorrow — in Beltway politics, deficits don’t matter anymore. As a 33-year-old, I’m one of those who ultimately will have to pay the price.
If we continue to ignore the consequences of our addiction to borrowed money, we’ll see an increasingly larger slice of our budget siphoned off just to pay interest on the debt. This is why deficits should matter: They eat up future revenue that we desperately need as the costs of already promised entitlements continue to spiral upward. Make no mistake: Persistent federal deficits will create politically difficult decisions down the road. As it stands, the lion’s share of our budget already is gobbled up by entitlements and military spending. That leaves little wiggle room for any other meaningful allocations without damaging our fiscal health. Even worse, if we encounter more economically turbulent times, the federal government likely will see its revenue drop precipitously.
Most Americans are fiscally conservative and would be aghast at the current state of affairs if they were in the know. Unfortunately, few people can truly grasp the gargantuan size, mathematically, of $1 trillion. Debt is an important part of a modern economy, and it should be a tool that our country uses to make strategic investments in our future. Trillion-dollar deficits shouldn’t be leveraged to secure short-lived, partisan budget deals that kick the can further down the road. Leaving a fiscal mess for tomorrow’s taxpayers is a toxic legacy that our elected leaders should avoid at all costs.
Another article the-era-of-fiscal-aust
The last seven weeks amount to a sea change in United States economic policy. The era of fiscal austerity is over, and the era of big deficits is back. The trillion dollar question is how it will affect the economy. In the short run, expect some of the strongest economic growth the country has experienced in years, and some subtle but real benefits from a higher supply of Treasury bonds in a world that is thirsty for them. In the medium run, there is now more risk of surging inflation and higher interest rates — fears that were behind a steep stock market sell-off in the last two weeks. In the long run, the United States risks two grave problems. It may find itself with less flexibility to combat the next recession or unexpected crisis. And higher interest payments could prove a burden on the federal Treasury and on economic growth. This is particularly true given that the ballooning debt comes at a time when the economy is already strong and the costs of paying retirement benefits for baby boomers is starting to mount. It’s hard to overstate how abrupt the shift has been. When the Congressional Budget Office last forecast the nation’s fiscal future in June, it projected a $689 billion budget deficit in the fiscal year that begins this coming fall. Analysts now think it will turn out to be about $1.2 trillion.
We’ll stay on that same theme of suffocating debt. It was always assumed flooding the economy with deficit spending was the fiscal strategy employed during recessions. We’ve always wanted DC to work together & get things done, but reckless policymaking does have consequences. Even before working on a robust infrastructure bill, the back-to-back passing of the tax & budget bills will provide another huge run-up of our national debt, as described in this excerpt here from trump-gop-at-new-crossroa
Congressional Republicans who for years breathed fire about fiscal restraint have opened the floodgates to spending, prompting criticism from GOP budget hawks and incredulity from outside groups worried about the nation’s spiraling level of debt. Congress sent President Trump a $1.5 trillion tax-cut bill in December, and on Friday approved a massive budget measure that would boost spending over the next decade by $300 billion, giving Republican leaders another legislative victory. The legislation eliminates budget ceilings put into place by a 2011 budget law agreed to by President Obama and former Speaker John Boehner, and allows federal funds to flow more freely to the Pentagon and a host of nondefense programs. Trump, GOP leaders in both chambers and a majority of Republicans in the House and Senate back the bill, but it has been fiercely criticized by its opponents within the party as a betrayal.
If the tax and budget laws are made permanent, it could add more than $2 trillion to the debt in that time, the analysis said. Bill Hoagland, a Capitol Hill budget veteran with the Bipartisan Policy Center, called the budget bill a “disaster as it relates to fiscal policy.” With the combination of the tax law and the new budget spending levels “we are really creating a terrible situation for future generations … imposing a tremendous burden of debt in the future,” he said. Hoagland said the biggest problem is that the legislation fails to address the major driver of the nation’s debt — entitlement programs, Medicare, Medicaid and Social Security.
Rubin always has valuable insights & she does again in forget-about-small-governme
Bizarre as it may seem, a fiscally irresponsible tax cut begat a huge spending bill, which eventually will require tax hikes. Democrats calling for taxes to pay for the spending Republicans demand now can rightly claim to be more fiscally serious than Republicans. Combined with the gargantuan gap between rich and poor and the wealth accumulation by the rich, the politically popular solution that Democrats might offer (albeit with some questionable math) is their own balanced budget (or more-balanced budget) with increased taxes on the rich. That is where we may be heading. At least it has the virtue of intellectual honesty: If we want big government, we have to pay for it.
In the volatile stock market we’ve seen, this opening comment from Why-prospect-of-higher-bu
The stock market may be firing off warning shots to the Trump administration and Congress about their plans to blow up the size of the federal deficit. The anxiety that has gripped the market this week appeared to escalate Thursday just as President Donald Trump and lawmakers were setting the government up for annual budget deficits that would routinely exceed $1 trillion. The higher that deficits rise, the more likely it is that interest rates will surge, too, and undercut corporate profits, stock prices, consumer spending and the overall economy.
In the group of links below we find articles on economic problems, infrastructure & the national deficit. At the bottom, the second-to-last article is outstanding im-still-
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