Trickle Down Tax Cuts Aren’t Working….We have plenty of articles here showing that! More on the folly of trickle-down is below, but first a big-picture overview. The whole premise for Trumpeter fandom is faulty. The thing we should be most angry about & seek to dismantle is not necessarily the establishment itself, although Trump’s base may be in the right church but wrong pews. They want to blow up some vague definition of the establishment, or the deep state, or drain the swamp. If there’s one thing that should be blown up, it’s the cozy relationships & influence special interests, big donors, & big corporate interests have over the establishment.
In our crony capitalist environment, the people lack a strong voice, with the working class largely being ignored or drowned out by the powerful wealthy influencers. A big part of the problem is the divisiveness & polarization among the population, so we elect equally divided & polarized politicians who are being dragged too far to the extremes. If Americans left & right can ever agree on our common problems, such as struggling middle-class families being stressed out every month hoping their paychecks can cover the bills, only then can we send a consistent message to DC leadership what to most focus on.
I think we get so wrapped up in sideline issues, we’re taking our eye off the ball. Sure, these peripheral issues are important, such as health care, immigration, abortion, gun laws, trade & any number of issues that are important. But I fear on most of these, we can only agree to disagree, while as Americans we should really join together on the economic issues we can agree on, that of economic growth that provides an opportunity to lift all Americans. Our comments & posting links to articles are intended to crystallize in people’s minds what the real economic problems are, so together we can pressure DC politicians to leave their partisan comfort zones behind, & finally get to work on solving these most important economic concerns for the common good.
We now have about six months of macroeconomic data since the passage of the 2017 tax cut, reform, scam, or whatever you want to call it — since the “Tax Cut and Jobs Act” name was removed in the amendment process. What do these data tell us about whether or not the tax cut is working? The data support the hypothesis that policy is boosting short-run economic performance but do not give us any reason to expect this growth boost to persist. Moreover, the data are at odds with one of the arguments made by supporters of the tax cut — that it would lead to an immediate boost in wages. The macroeconomic data has been excellent. The economy grew at a 2.8 percent annual rate in the first quarter (according to my preferred measure of growth) and tracking estimates expect second-quarter growth to be about 4 percent. Remarkably, the pace of job growth has picked up from 182,000 per month last year to 215,000 per month so far this year, an unusual development this late in the cycle that is boosting the labor force participation rate. Business fixed investment was up a 10.4 percent annual rate in the first quarter, although the latest data indicate the pace may slow considerably in the second quarter. Just about the only complaint — and it is a major one — is that real wage growth has been slow, in fact much slower than it was from 2012-16.
As the tax cuts went from uncertain to a legislated reality, the Survey of Professional Forecasters boosted its 2018 growth forecast by 0.4 percentage points but lowered its growth forecast for the next decade by 0.3 percentage points. Finally, one of the main arguments for the tax cuts was that corporations would pass the tax cuts through to higher wages for workers. So far, at least, the data are reasonably clear that this not happening. In the first quarter of this year, after-tax profits grew at a 39 percent annual rate while compensation grew at only a 5 percent annual rate. The bonuses the administration frequently touts seem both relatively small compared to overall compensation and in many cases unrelated to the tax law. The corporate tax cut could eventually raise wages, but so far, the corporate tax cut appears to have gone to corporations. The United States needs higher growth, especially of wages, in the medium and long run. The data so far show that a large fiscal expansion may be helping with higher GDP growth in the short run but give us no reason to believe that the tax changes are going to make a meaningful difference for American workers over time — beyond leaving them with a large bill that they will eventually have to repay.
Households in the top fifth of income levels have received 65 percent of the value of tax changes enacted since 2000, according to a report released Wednesday by the left-leaning Institute on Taxation and Economic Policy (ITEP). The report looked at significant tax cuts and increases enacted during the administrations of George W. Bush, Barack Obama and Donald Trump. These include the Bush tax cuts and the permanent extension of most of them, expansions of the earned income tax credit and child tax credit, ObamaCare taxes on high earners and Trump’s tax law passed last year. “Anyone who is concerned about working Americans — the people who are at the bottom and the middle — would have to conclude that tax policy has not been geared to help them, particularly in the Bush years and the Trump years,” Steve Wamhoff, one of the study’s authors, told The Hill. ITEP found that from 2001 through 2018, the tax changes have reduced federal revenue by $5.1 trillion, and by the end of 2025, they will have reduced federal revenue by $10.6 trillion. Including interest payments, the tax changes are projected to add $13.6 trillion to the deficit from 2001 through 2025, according to the study. In 2018, the wealthiest again see the biggest tax cut as a percentage of income due to the Trump tax cuts, according to the report.
It’s not a surprise that the tax cuts are tilted to favor the wealthy; that’s largely how the Bush tax cuts and the 2017 GOP tax bill were designed. The argument made by proponents of such legislation is that rich Americans and corporations (the other big winner under this scenarios), will inject more money into the economy to grow it with their tax savings. But researchers at the Federal Reserve Bank of San Francisco this week warned that might not be the case, especially right now. Economists Tim Mahedy and Dan Wilson said in a letter released on Monday that the $1.5 trillion tax cuts passed by the Republican-dominated Congress in 2017 will likely boost the economy less than some predicted, and the trims might not do anything at all. The explanation: The cuts came at a time when the US economy was already strong and in its eighth year of expansion. Mahedy and Wilson cite a collection of recent research that shows that if a fiscal stimulus takes place when the economy is firing on all cylinders, it tends to not do much. “The [2017 tax bill] is in essence a large, mostly temporary tax cut hitting a hot economy,” Mahedy and Wilson wrote. “For the people who look at our estimates on the distribution of these tax cuts and say, ‘Well, none of this matters, it’s going to grow the economy,’ the Fed is telling us, ‘Actually, no, it’s not,’” said Wamhoff, from the Institute on Taxation and Economic and Policy. “If that’s your argument in favor of these tax cuts, no, it doesn’t work.”
To keep emphasizing that same point, see the graph from this link guess-who-benefits-from-
Another interesting graph comes from goldman-sachs-warns-that-
The excerpts from this next link trump-republicans-tax-cuts-
First, let’s try a little thought experiment: Whenever President Trump starts talking about NATO, imagine what Vladimir Putin would wantTrump to say. Then compare it to what Trump actually says. The two are often frighteningly similar. The pattern continued yesterday and today, with Trump disparaging NATO members on Twitter, on his way out of Washington and again when arriving at the NATO summit in Europe. Why is Trump doing this? I don’t know. But I do know the effect it’s having. Defying his own aides and senators from both parties, the president of the United States is jeopardizing the Western alliance that has done so much good over the past seven decades — and he is comforting Western Europe’s biggest modern enemy, Putin’s Russia.
Federal tax policy in the 21st century has been like a tug of war. Thanks to President Trump, the rich are winning it once again. The top-earning 1 percent of households — those earning more than $607,000 a year — will pay a combined $111 billion less this year in federal taxes than they would have if the laws had remained unchanged since 2000. That’s an enormous windfall. It’s more, in total dollars, than the tax cut received over the same period by the entire bottom 60 percent of earners, according to an analysis being published today. Think of it this way: Income inequality has soared in recent decades, with the wealthy pulling away from everyone else and the upper-middle-class doing better than the working class or poor. Yet our federal government has responded by aggravating these trends. It has handed huge tax cuts to the small segment of Americans who need those tax cuts the least. “Most Americans would look at that and say ‘That’s not fair, and that’s not the result that we wanted from our lawmakers,’ ” says Steve Wamhoff of the Institute on Taxation and Economic Policy, a Washington research group that conducted the new study. Polls support his argument. The Trump tax cut still isn’t popular with voters.
Both parties are doing a dismal job of expressing & addressing the current middle class malaise, but if the Dems are looking for a blue wave in November, a main talking point should be solutions for the ongoing lack of wage growth: labor-market-shows-signs-of-
Aside from the tax cuts being poorly targeted so the benefits go mostly to the top & exacerbate income inequality, plus reducing revenues to the government increases deficits, there are other flaws in this badly conceived tax cut which need fixed:the-gop-tax-bill-rewards-
The anxiety of parents like me — educated professionals without many assets to show for it — animates Alissa Quart’s new book, “Squeezed,” a dispiriting survey of the economic stress felt by families who belong to the “Middle Precariat,” as Quart calls the new middle class. As her coinage suggests, this once large swath of the population is narrowing, its members finding their financial situation increasingly tenuous. Much that middle-class professionals took for granted in previous generations, including homeownership, decent health care, a comfortable retirement, is now out of reach. Over the past 20 years, the cost of housing has risen dramatically. The price of health care and college has almost doubled. Meanwhile, wages have stagnated, unions have nearly vanished and, in some sectors, technology has replaced human workers. Many people find themselves carrying school and credit-card debt, and working low-paid, temporary or part-time jobs. Those in certain industries, like tech or finance, are forced to work long hours as a matter of course; others supplement jobs that once upon a time would have been considered full time, such as teaching, with temporary gigs such as driving an Uber. The reasons for the falling birthrate are no doubt complex, but the gap between desired and “completed” family size (as the lingo has it) suggests a grim and cleareyed sense of reality. Rage, grief, refusal: These are appropriate reactions to a broken economic order.
The official, on-the-books federal debt is currently about $21.2 trillion, according to the US National Debt Clock. $21.2T is the face amount of all outstanding Treasury paper, including so-called “internal” debt. This is about 105% of GDP and it’s only the federal government. If you add in state and local debt, that adds another $3.1 trillion to bring total government debt in the US to $24.3 trillion or more than 120% of GDP. Then there’s corporate debt, home mortgages, credit cards, student loans, and more. Add it all together and total debt is about 330% of GDP, according to the IIF data I cited in Debt Clock Ticking. We are in hock up to our ears.
It’s Actually Worse Than That!: In calculating debt, however, we don’t factor in Social Security and Medicare. These aren’t yet debt because they have dedicated revenue streams: payroll taxes. Most Medicare recipients also pay premiums. To date, these revenue sources have covered current expenditures and more, allowing the programs to build up reserves. But that’s about to change. As of this year, both programs are in negative cash flow, meaning Congress must provide additional cash to pay the promised benefits. It will get worse, too. The so-called “trust funds” are going to run dry sooner or later, and it may be sooner. This month’s annual trustee report estimated Social Security will run out of reserves in 2034, and the hospitalization part of Medicare will go dry in 2026.
Just for the record, those “trust funds” don’t exist except as an accounting fiction. It is like you saving $100,000 for your child’s education and then borrowing all the money from your child’s education fund. You can pretend that you have set aside $100,000 for your child’s future education, but when it comes time to make those payments, you’ll have to pull it out of current income or liquidate other assets. The US government has borrowed (or used or whatever euphemism you want to apply) all the money in those trust funds. So, talking about running out of reserves in 2034 or 2026 is rather meaningless. We’ve already run out of reserves. Any time a politician talks about putting a “lock box” around Social Security or Medicare trust funds, he or she is either staggeringly ignorant or lying.
Another $50 Trillion in Debt!: For what it’s worth, Social Security says it has a $13.2 trillion unfunded liability over the next 75 years. That’s the benefits they expect to pay minus the revenue they expect to receive. (For the record, these estimates of when the trust funds run out depend on a slew of assumptions. A small deviation in any of those can have huge long-term consequences.) Medicare projections require even more assumptions: what kind of treatments the program will cover, how much treatment senior citizens will need, and what those treatments will cost. All these could vary wildly but the “official” assumptions put Medicare’s 75-year unfunded liability at $37 trillion.
It could be vastly more or, if we all get healthier and healthcare costs drop, could be less. This being the government, I think the safe course is to assume their numbers are the best case, resembling reality only if everything goes exactly right. And of course, it won’t. So, at a minimum, we can probably assume Social Security and Medicare are at least another $50 trillion in debt on top of the $21.2 trillion (and growing) on-budget federal debt. And then you come to the scary part. This doesn’t include civil service or military retirement obligations, or federal backing for some private pensions via the Pension Benefit Guaranty Corporation, or open-ended guarantees like FDIC, Fannie Mae, and on and on.
Capitalism has lost some of its luster in the U.S. The percent of Americans aged 18 to 29 who say they support capitalism checks in at only 39 percent: Other polls find similar results, and anecdotes seem to support the story. Meanwhile, openly socialist candidates are winning primary elections in the Democratic Party. Why is this happening? The fading memory of the Cold War might be part of it. Young people also might simply be more idealistic than adults, and less accustomed to the business world. And who knows — today’s socialist youth might grow up to become tomorrow’s defenders of the status quo. But there are also big changes in the economy that might be undermining support for the market system. One of these, of course, is rising inequality. But another, related trend might be subtly and corrosively undermining faith in capitalism — the decline of small business.
U.S. industries are getting much more concentrated, with a few big players dominating markets: As big companies become more powerful, fewer new companies are being started: Some of that decline comes from fewer tech startups. But tech makes up only a minor share of small businesses, so most of the decline must come from a drop in non-tech business formation. This also can be seen in the aging of the small business-owner population — from 2007 to 2012, the share of small business owners less than age 50 fell by 4.9 percent. The same thing is happening in other rich countries.
Nothing is more emblematic of the decline in small business than the struggles of the family-owned store. In a 2016 paper about the decline in business dynamism, economists Ryan Decker, John Haltiwanger, Ron Jarmin and Javier Miranda wrote: In the Retail Trade sector…the shift has been away from single unit establishment firms (“Mom and Pop” firms) to large national and multinational chains. The latter have taken advantage of IT and globalization to build efficient distribution and supply chain networks. In the modern economy, mom-and-pops have little chance against chains like Wal-Mart. As a result, the decline in dynamism has been especially severe among retail and service businesses.
This trend isn’t just a function of the internet; it’s been happening since the 1980s. But retail isn’t the only area where so-called superstar companies have been pulling away from the competition. Economists David Autor, David Dorn, Lawrence Katz, Christina Patterson and John Van Reenen believe that the big companies are dominating sector after sector because they’re so much more productive than others. That seems to be supported by data showing that a few companies on the frontier of productivity are pulling away from the pack. If smaller and less productive businesses are driven out of business by bigger, more productive ones, is that bad for the economy? Maybe, maybe not. But it could have profound social and political effects that are hard to measure.
For centuries, small business has been a route to the middle class and the upper-middle class for the enterprising and the self-reliant. Merchants and craftspeople made up much of the urban middle class in pre-industrial Britain and France — the people Karl Marx labeled the “bourgeoisie.” This group benefitted enormously from the advent of modern capitalism, and in communist countries like the Soviet Union they often suffered severely. As might therefore be expected, small businesspeople make up one of capitalism’s core constituencies. They lean strongly toward the Republican Party, and are opposed to high taxes. And there are a surprising number of them; the number of small businesses was estimated at around 28 million in 2010.
What happens when this class shrinks? What happens when business ownership stops being something anyone can do because access to capital isn’t something normal people have, but something that only huge mega-corporations control? A possible answer is that capitalism will probably lose some of its broad appeal. Smart, self-reliant young people will be forced to dream not of starting their own business, but of securing a good job at Alphabet (Google) or Wal-Mart or Exxon or JPMorgan Chase. And once in the mindset of relying on a large organization for their future, what’s to stop them from turning to an even mightier patron — the government? In other words, declining business opportunity may be pushing Americans toward socialism. Of course, that might not be a bad thing; socialism, of the democratic kind practiced in Western Europe, has much to recommend it. But anyone who wants to preserve capitalism needs to grapple with the issue of big business dominance. They should be thinking very hard about policies to help small businesses compete with the big boys. That could mean stronger antitrust enforcement, lowering the barriers to starting a company, or directly supporting small businesses against their larger rivals.
The spiraling costs of college are a strain on the whole family: student-loan-max-parents-
On trade, the United States have had our pockets picked for years (actually decades) as millions of good-paying factory jobs have vanished, but Trump’s tactics are risky. From soybean farmers to any manufacturing requiring steel & aluminum in their raw materials, it’s starting to become a rocky road, so trade negotiations had better produce some fruit soon. Articles we pulled from the newsfeeds are trump-trade-war-china-
The asylum process is not designed to automatically dismiss every family that crosses the border as criminals. Many have faced brutal violence or the threat of violence in their home countries & are literally fleeing for their lives, which the system that was previously in place had done a reasonably effective job of identifying the border crossers who really were in danger. As for the Trump administration’s performance on the kidnapped kids, this is beyond incompetent….IT”S DESPICABLE!!!:US:-Nearly-half-of-youngest-
Trump is about to meet with his buddy Putin, coming on the heels of attacking NATO which was doing Putin’s bidding. The Russian dictator is a thug who murders his opponents, while he has also attacked our American democracy by tainting our election. In light of this enormous threat to our nation & the world, this song encapsulates the true feelings Trump has for his pal Putin:
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