You probably missed it unless you are closely tracking the predations of late stage vulture capitalism as it continues to suck the marrow out of the bones of America’s working class who under Trump are just sinking, like the Federal government itself, deeper and deeper into debt. The good news is, if you came out of your house to go to work recently and found your car was gone because it was repossessed, you are not alone. You are part of growing cohort of millions of other Americans for whom life sucks, even though they seem to be working all the time. In the midst of the never-ending Trump border wall sandstorm it was easy to miss the alarming report that we just set a new record for the number of Americans who have fallen at least three months behind in their car payments.
That’s right, in the midst of Trump’s so-called great economy, seven million Americans, a record number, have fallen into that 90-day abyss where quite literally the wheels have come off their household finances. This bad news came in an analysis of America’s deepening swamp of household debt done by the New York Federal Reserve. The previous record was set in 2010, just as Obama was triaging the Great Recession and building his arc for Wall Street. Now, there’s a million more American households at risk of losing their wheels because they can’t make enough money to keep their car, pay rent, feed their families, see the doctor, and in many cases keep their student loans current. This is just one more deliverable from the policies pursued by the Don in the White House and his pinstriped corporatists that he’s placed in high government positions who have been blocking and tackling on behalf of predatory payday lenders. In the last two years these wise guys have tried to disappear the consumer protections put in place after the great Wall Street heist. That was when the predator class, that make money with money, got away with and even prospered by robbing Americans of $20 trillion in household wealth.
For the vulture capitalists that Trump serves, the Consumer Financial Protection Bureau (CFPB), under the passionate leadership of Richard Cordray, actually worked as designed. In just the few years that it was allowed to function it returned $12 billion dollars to a small army of active duty military, car buyers, credit cardholders who all had been victimized by “abusive, deceptive and predatory practices” according to the New York Times editorial board. In the Trump-Mnuchin-Ross worldview that is capital that’s going in the WRONG direction, downward to the masses, who are often less likely to contribute to political campaigns. The wealthiest among us put those guys in those jobs and they need their tools to deliver and make sure the conveyor belt is always running ever upward, from the bottom where the worker bees hang. Meanwhile, all the honey flows up to the tippy, tippy top of the great American wealth pyramid from where the oligarchs perch surveying their prey. Remember, this is the crew that teamed up with former Speaker Paul Ryan and Majority Leader Mitch McConnell that gave us the Tax Cuts and Jobs Act (TCJA) which was disguised as a tax cut for Main Street. In reality, it was a $1.5 trillion K Street hustle that cut taxes for the wealthiest people and corporations and substituted that lost tax revenue with massive borrowing we are all on the hook for. And there’s more. This tax season, as millions of working class Americans are already finding out, there’s a pretty good chance that you won’t be getting a tax refund this year but that you will be writing Uncle Sam a check. This is particularly true for folks living in high-cost ‘blue states’ like New York or California, whose Federal income tax deductions for other taxes imposed at the state, county or municipal level is now capped at $10,000.
Those national unemployment numbers that showed such progress from the dark days of the Great Recession where abstract aggregate data points. No one lives or votes in the aggregate and a lot of counties never saw a recovery and still have not. The corporate news media is doing it all over again — still equating aggregate national unemployment data and a robust stock market with a strong economy. And they have developed the face saving construct that Trump won only because the Russians stole the election, not because the media missed the slow motion collapse of capitalism that Trump exploited by convincing just enough people he had a magical time machine that could transport us all back to those halcyon days when the middle class was expanding. Just as in 2016, the actual economic conditions of the American people will be the defining issue for 2020. Ignoring it, or giving Trump a pass on the economy, will permit him to make the campaign about everything and anything else.
Fix the Rigged Tax Code
We need a complete do-over on the Trump/GOP tax bill. There’s several ideas floating around out there. Bill Gates has his thoughts on how more progressive taxation should be structured, as overall this is a discussion we need to get serious about: finance/streettalk/
The big picture: When Trump cut taxes in 2017, the White House also cut the amount that workers saw withheld from their paychecks. The result was an immediate pay hike — that went largely unnoticed. The whole purpose of income tax withholding was to make taxes less salient — to make workers notice them less. According to a Harris poll for Axios, less than half of American workers know exactly how much their take-home pay will be. When that pay went up at the beginning of 2018, they probably noticed for a week or two — and then forgot. When Obama cut taxes for 95% of workers in the wake of the financial crisis, most of them didn’t notice. It was implemented via the withholding system, by design, to ensure that the extra disposable income was spent immediately to boost the economy, rather than being saved. This year, refunds are generally lower than they were previously. Increasingly they’re zero; sometimes they’re negative, and extra tax payments are owed. The average refund was $1,865 as of Feb. 1 — down 8.4% from $2,035 a year ago. The bottom line: Most of Trump’s tax cut went to corporations rather than individuals, and many families, especially in coastal blue states, saw their total tax bill rise. By reducing withholding, the Trump administration probably thought it was making the tax cut immediate. Instead, that had the effect of making a tax cut feel more like a tax hike.
In politics, the most cynical predictions can be the most accurate; if you say “The public is too smart to buy that line of bull,” you’re often going to be wrong. But not always. And right now, the Republican Party is facing a problem. It sold the public a bill of goods on its 2017 tax cut but didn’t do enough thinking about how the cut would be implemented and what the effects might be (hey, policymaking is hard). And as a result, a law that was already unpopular is going to get even more so. The real problem may be that Republicans bought their own baloney. The immediate problem has to do with the relationship between withholding and tax refunds, namely that lots of people who were used to getting refunds every tax season are now finding out that either their refunds are smaller than they expected or they actually owe money. Since the bill made a bunch of complex changes affecting how much people should have withheld and how your federal taxes relate to your state taxes, it was impossible for most people to know whether they’d be paying more or less. And many people ended up with a small boost to every week’s paycheck, only to find out that they’ll have to give most or all of it back in a lump sum. Which is producing lots of news stories about horrified people getting unexpected tax bills.
You probably know the top line of the GOP’s tax bill: While many taxpayers got some kind of cut, the bulk of the benefits went to the wealthy and corporations. Republicans seemed to think that while there was nothing they could do about that — I mean, what were they going to do, not give most of the benefits to the wealthy and corporations? What are you, crazy? — in the end the law would still be popular because lots of ordinary people would get something. So they didn’t put much thought into convincing the public to love the tax cut, beyond putting out the usual line about how cutting taxes for those at the top would cause an explosion of economic growth so overwhelming that it would deliver all of us to a future of limitless prosperity. Perhaps they should have looked back at the past for a model. When President George W. Bush signed a tax cut aimed at the wealthy in 2001, he didn’t just throw in a tax cut for the proletariat in the form of a few extra bucks in their paychecks. He had the IRS send a letter to every household in America informing them that due to the beneficence of their heroic president, they’d soon be getting a check for $300. Then he sent them the check. Now that’s PR.
Nine years later, President Barack Obama did just the opposite: After economists convinced him that people would be more likely to spend a tax cut rather than save if it showed up in their paychecks than if they got it in a lump sum, he negotiated a tax cut that almost no one noticed. The idea was that getting the money quickly injected into the economy to help mitigate the Great Recession was the priority. Good policy, bad politics. The 2017 tax cut, on the other hand, is looking more and more like both bad policy and bad politics. It hasn’t delivered economic nirvana, it didn’t pay for itself, it didn’t trickle down to the masses, and corporations used their windfall mostly for stock buybacks. Somehow, the public never got the message of just how terrific the tax cuts were, and Republican hopes that in the midterm elections the voters’ appreciation would overcome their disgruntlement with President Trump didn’t quite pan out.
The One Thing the Tax Cuts Did Effectively: Raise Deficits!
The numbers prove Trump & his supply-side/trickle-down economic advisers were just blowing smoke when they said their tax bill would pay for itself: putting-the-trump-tax-
News reports last week that the federal government’s debt hit a new milestone, topping $22 trillion, understandably generated a lot of attention — as they should have. During the 25 months of the Trump presidency, the federal debt has risen over $2 trillion, despite the president’s campaign assertion that he would reduce and eventually eliminate the debt. Every indication is that continuing budget deficits will drive the federal debt substantially higher, even with the economy running at full employment. The federal debt has two components: The first is debt held by the public (including the Federal Reserve System), which currently is $15.6 trillion. The second component is the $6.4 trillion of debt held by various federal agencies, including the Social Security Trust Fund ($2.8 trillion) and several federal employee and military retirement funds ($2 trillion).
Debt held by the public must be continually marketed to investors, across the globe, both to fund the continuing deficits as well as to pay off maturing debt; it also is debt on which interest must be paid, which adds to the annual deficit. Critical to any government’s ability to prudently manage its debt is maintaining a reasonable relationship between outstanding debt held by the public and the size of the country’s economy, which essentially is the tax base that supports that debt. That is why so much attention is focused on a country’s debt-to-GDP ratio. At the end of last year, federal debt held by the public was approximately 74 percent of U.S. GDP. Annual budget deficits, in turn, are manageable, or at least tolerable, if the interest rate required to sell new debt is seen as the riskless rate of interest; i.e., there is no investor fear of a debt default.
What level a debt-to-GDP ratio must hit before the possibility of a debt default begins to concern investors cannot be stated with any certainty, but the steadily rising U.S. debt-to-GDP ratio may soon spark that concern. An analysis of the Congressional Budget Office’s January 2019 Budget and Economic Outlook prepared by the Committee for a Responsible Federal Budget (CRFB) is very troubling. CBO’s baseline forecast projects annual budget deficits as a percent of GDP that range from 4.1 percent of GDP to 4.8 percent over the 2019 to 2029 period. An “alternative fiscal scenario,” a worst-case projection over that 10-year period, which assumes the continuation of “various tax and spending provisions,” projected higher annual budget deficits, ranging from 4.6 percent to 7.1 percent of GDP.
Under either scenario, the ratio of debt held by the public to GDP continues to rise, reaching 92.7 percent of GDP in 2029 under the baseline scenario and 105.1 percent of GDP under the more pessimistic alternative scenario. So much for economic growth eventually producing budget surpluses. These percentages are in the range of peak debt-to-GDP ratios reached in the 1945-47 period as World War II was ending and the U.S. economy was transitioning to peacetime. The debt-to-GDP ratio then declined to a low of 23.1 percent in 1974 before rising to 47.8 percent in 1993 and then dropping to 31.4 percent in 2001. This ratio then jumped in the aftermath of the 2008 financial crisis, doubling from 35.2 percent in 2007 to 70.4 percent in 2012 and continuing to rise after that.
Yet when the next recession hits, the federal government’s fiscal position will be worse than ever, and that is not even taking into account the massive entitlement challenges, notably Social Security and Medicare, that Congress eventually must address. Battles over raising the debt ceiling amid threats of another government shutdown will erupt more frequently. The time has come for Congress and the Trump administration to confront the very damaging consequences of the federal government continuing to run enormous budget deficits during a full-employment economy. If they do not, then when the next economic downturn hits, the pain — political as well as economic — will likely be extremely severe. The Republican Party could suffer catastrophic election losses as a consequence when that fiscal day of reckoning finally arrives.
Heading Towards a Game-Changing Default?
I smell a disaster coming. With a bitterly divided Congress & a White House in chaos, it looks more likely than ever before they’ll bungle this coming debt-ceiling fight. It might end in a catastrophic default. America’s full faith & credit along with our economy could collapse downward into a death-spiral, spinning out of control to where recovery becomes impossible & our nation’s reputation is forever tarnished on the world stage. Gridlock-Teddy Cruz almost caused our vehicle to cruise over a cliff by nearly orchestrating a debt default back in October 2013. With such a real possibility of permanent damage, we should plead with our lawmakers that we do not want to take the chance of finding out what a default would do. The current status over the debt ceiling is explained in this article from debt-ceiling-deal-
The next trillion-dollar fight concerns the debt ceiling. Global markets freak out any time members of Congress or White House officials float anything other than a drama-free debt-ceiling hike. The state of play: As a House conservative, acting White House chief of staff Mick Mulvaney pushed to use the debt ceiling as a lever to cut spending. And as Trump’s budget director, he favored the concept of “debt prioritization” — an idea that thrills some in the conservative movement but horrifies the markets, the Treasury secretary and the leadership of both parties. It seems unlikely, though, that Mulvaney will put much effort into advocating for debt prioritization in his current role as chief of staff. He’s told colleagues he thinks the administration will get more leverage out of the threat of spending cuts than it will by using the debt ceiling. The Trump administration is so internally divided over the debt ceiling that many in Congress wouldn’t believe the White House if they threatened to hold it hostage.
Behind the scenes: Before a recent Cabinet meeting, Mulvaney and Treasury Secretary Steven Mnuchin chatted about the debt ceiling, per a senior White House official. According to that official and another source briefed on the chat, Mnuchin said, “Democrats will give us a clean debt ceiling.” Mulvaney “sort of giggled,” according the senior official. “Steven, no they won’t,” he added. Mnuchin said Democrats wanted a clean hike last time; Mulvaney retorted that Democrats weren’t in charge then. “Now they’re going to end up tying one of their priorities to the debt ceiling increase,” Mulvaney predicted to Mnuchin, according to the official. “You cannot assume that because they wanted something the last time, it’s exactly the same thing they want this time. … There’s not much consistency when it comes to this in politics.” A source familiar with Mnuchin’s thinking told me, “The secretary is focused on raising the debt ceiling, but hasn’t expressed a strong preference for how it’s done. That’s up to Congress.”
So what’s debt prioritization? Before the Tea Party, Congress routinely raised the debt ceiling (the limit on how much the Treasury can borrow) with every annual budget. But after 2010, House conservatives argued that this shouldn’t happen without concessions to the right, such as cuts in how much the government spends. To make that happen, they advocated for debt prioritization, the idea that the U.S. government could pay creditors on time (e.g., interest on the national debt) but delay paying other bills. It’s a type of brinkmanship. Last February, Trump signed a bill suspending the debt ceiling until March 1, 2019. As soon as this week, the Treasury Department is expected to start issuing guidance for “extraordinary measures” — a term of art to describe actions the Treasury secretary can take to delay the U.S. government from defaulting on its debts. Experts who monitor this issue say they think Mnuchin will probably be able to use extraordinary measures to delay a debt crisis until at least late summer, giving Congress about six extra months to deliberate.
Behind the scenes: Mnuchin is expected to make it clear — as he did the last time the Trump administration bumped into the debt ceiling — that he won’t mess around with the full faith and credit of the U.S. government. He calmed markets last time by saying he wanted Congress to pass a clean debt ceiling increase and that he thought prioritizing debt payments “doesn’t make much sense.” But a senior White House official told me that “elements within the administration,” including Mulvaney, will be “encouraging the president to consider the possibility of prioritization of payments.” “We will certainly raise, for the president, the options that we have going into the next round of negotiations. Certainly the debt ceiling will be part of that.”
Perhaps Our Biggest Problem & On That Point Most of Us Can Agree
DC is so polarized & bitterly divided, big/important things aren’t getting done! It’s hard to argue this is our nation’s most pressing concern, which this article posted from record-number-cite-poor-
More than a third of Americans say that poor leadership is the greatest problem facing America, the highest percentage ever recorded to say so, according to a poll released Monday. A Gallup poll released on Presidents Day found that 35 percent of respondents say that poor leadership ranks as the most important problem in the country, edging out immigration or gun violence. The percentage is the highest ever recorded by Gallup and is a 2-point increase from the previous record set in 2013 during that year’s government shutdown. The number has been steadily increasing since President Trump took office in 2017, the pollsters noted, and ranked as Americans’ top concern all but two months last year.
Much of the increase has been among Republicans, where Gallup says there was a 14-point increase in the frequency of mentioning the government as the most important problem facing the U.S. Both parties are about equally as likely now to name the government as America’s top issue, according to the poll, while independents were slightly less likely to name it as their top issue. Thirty-one percent of independents named government as the most pressing issue facing the U.S., compared to 37 percent of Democrats and 36 percent of Republicans. Gallup’s poll contacted 1,016 adults living in all 50 U.S. states and Washington, D.C., for the poll, for which the margin of error is plus or minus 4 percentage points.
Suffocating Student Loans
It’s difficult to start off on life’s journey when young people are drowning in college debt, delaying marriage, children & homes. See here the full article from us-student-debt-in-
Student-loan delinquencies surged last year, hitting consecutive records of $166.3 billion in the third quarter and $166.4 billion in the fourth. Bloomberg calculated the dollar amounts from the Federal Reserve Bank of New York’s quarterly household-debt report, which includes only the total owed and the percentage delinquent at least 90 days or in default. That percentage has remained around 11 percent since mid-2012, but the total increased to a record $1.46 trillion by December 2018, and unpaid student debt also rose to the highest ever.
Delinquencies continued to climb even as the unemployment rate fell below 4 percent, suggesting the strong U.S. job market hasn’t generated enough wage growth to help some people manage their outstanding obligations. Income levels for graduates “are not necessarily high enough for debt payments overall,” said Ira Jersey, Bloomberg Intelligence interest-rate strategist. “If you have a choice to pay your student loan or for food or housing, which do you choose?”
The delinquencies also have broader implications. Because most of the loans are government-sponsored, they probably won’t hurt the economy the way mortgage debt did in 2007, Jersey said. “But incrementally, it does mean higher federal deficits if the loans are not repaid.” The total in arrears is about twice the amount the U.S. Treasury provided to bail out the auto industry during the last recession. Loans at least 90 days past due are considered to be in “serious delinquency.’’ The age group transitioning into this category at the fastest pace is 40-to-49 year olds; that’s partly because of parents borrowing to pay their children’s expenses.
The cost of higher education has roughly doubled in the past 20 years, and the Federal Reserve Bank of St. Louis recently posted a blog entry asking “Is College Still Worth It?’’ The answer was not a definitive yes. One of the conclusions: “In terms of wealth accumulation, college is not paying off for recent college graduates on average — at least, not yet.’’ Some schools have taken note, providing more support. The percentage increase in tuition at Cornell for the 2019-2020 academic year “is the lowest it has been in decades, and we are budgeting for a significant increase in financial aid,’’ the university said on Feb. 11. And 2019-2020 will be the seventh consecutive year Purdue University hasn’t boosted room and board rates. Still, in-state tuition and fees at public four-year institutions rose at an average rate of 3.1 percent a year beyond inflation in the past decade, according to the College Board.
This would make for a wise & much-needed public investment, if only DC leadership could responsibly do their jobs. It’s a nagging huge weight stifling our economic growth. See here the opening to the article crumbling-
The need for reinvestment in infrastructure is great. The cost could be as high as $4.5 trillion. But we can do better than fix what is broken. Improving infrastructure could unlock enormous growth in productivity and could reduce the hidden tax on our lives from aggravating delays at airports and on the rails and long commutes to work. Improvements could make the distribution of electricity more resilient in the face of natural and possibly human-made disruptions; it could bring robust broadband internet services to more rural areas creating new possibilities for economic and employment growth in those areas, and it could make the water serving millions safer. The magnitude of the annual hidden tax of inaction is estimated at $3,400 per family in a study by the American Society of Civil Engineers. The impact will only grow, threatening U.S. economic vitality and America’s future. Infrastructure appears to be one of the few areas where the prospect of bipartisan cooperation might be realistic. The most significant barrier is finding a way to finance the costs, particularly considering the exploding deficit.
Compared to past presidents with ethical integrity who could always prioritize what was best for the people, Trump fails to have any greater vision since he can’t see beyond himself & his own selfish interests: usatoday.com/story/
Big money corrupts government: dailykos.com/
China has been a trade cheat for decades: ourfuture.org/
Take the Money & Run
The big donors & corporate big wigs wanted those tax cuts, so with their allies in Trump & the GOP pushing it through, they got it. So now they’re blissfully singing their tune, more than happy to take the money & run: