Donald Trump owes his election, in significant part, to the failure of his predecessors, Democrats and Republicans, to serve as good stewards of America’s manufacturing legacy, and the workers, communities and regions which depended upon it. Through both trade and tax policy the last four Administrations tilted towards a financial, service and commodity based U.S. future — and by election day 2016 had managed to destroy 30 percent of manufacturing jobs, 6 million in all. Trump campaigned as the rescuer who would bring back those blue-collar factory jobs. Instead he is poised to destroy what remains of that legacy, perhaps unwittingly, perhaps uncaringly, but with devastating thoroughness. Last week Bloomberg News called out “Detroit’s Worst Day” since the 2008 bankruptcies, as Ford joined GM and Chrysler in dramatically lowering its profits projections. Ford said it would be cutting $11 billion in expenses, only days after the entire auto industry (with a slight dissent from the UAW) desperately tried to get the Trump administration to drop its plans to launch a tariff driven trade war over imported autos.
The companies are already hurting because steel and aluminum tariffs have driven up their costs and domestic auto sales are flattening out. Ford has already been hurt in China by the fact that its model line is aging and outdated. Meanwhile, ongoing trade disputes are cutting foreign sales and raising domestic costs, not only for autos but for a wide range of U.S. manufacturers. The mammoth corporate tax cuts sped through Congress by Trump and the Republican leadership spectacularly ignored the powerful tax code incentives for companies to shift operations overseas. Predictably, the promised avalanche of jobs coming back to the U.S. has not materialized, cornering Trump using tariffs as a bludgeon to deliver on his promise. Everyone in manufacturing has told him that this mania ignores the complexity of global supply chains and, in isolation, will simply weaken — and is already sapping — the sector. For the auto industry, historically the heart of a manufacturing economy, Trump has worse news in store. Globally, autos face a technology revolution unprecedented since the early 20th century. How to modernize an industry in which domestic profit margins have rested on tariff protected, technology sluggish SUV’s and light trucks bedeviled the Clinton, the Bush and the Obama administrations. All, however, understood that modernization and progress were essential for the industry’s future. Not so Trump. Asked by the industry to marginally soften the emission standards agreed to under Obama for the years 2021-2025, Trump instead launched an all-out war against the very concept of using regulation to ensure that the U.S. makers kept up with innovations in the rapidly growing, and furiously innovating, Asian markets.
The number of people who live in their vehicles because they can’t find affordable housing is on the rise, even though the practice is illegal in many U.S. cities. The number of people residing in campers and other vehicles surged 46 percent over the past year, a recent homeless census in Seattle’s King County, Washington found. The problem is “exploding” in cities with expensive housing markets, including Los Angeles, Portland and San Francisco, according to Governing magazine. The problem of vehicle residency is national in scope, although its impact may be more “acutely felt in urban areas where space is more limited,” said Sara Rankin, an assistant professor law at Seattle University and the director of Homeless Rights Advocacy Project, in an email to CBS MoneyWatch. Challenges abound for people who live in their vehicles, ranging from racking up parking tickets to finding a safe place to park and shower, advocates say. A recent survey by the National Law Center on Homelessness and Poverty (NLCHP), which tracks policies in 187 cities, found the number of prohibitions against vehicle residency has more than doubled during the last decade.
Homelessness rose last year, marking its first increase since 2010, according to the U.S. Department of Housing and Urban Development. About one-third of the homeless population was described as “unsheltered,” which includes people living on the streets and in their vehicles. HUD’s data doesn’t provide more specific information. A fair number of the “vehicular homeless” in Silicon Valley are employed but are unable to find affordable housing, as the Associated Press noted last year. Lines of RVs can be found near the headquarters of tech heavyweights such as Apple, Google and Hewlett-Packard. Nationwide, extremely low-income renters are facing a shortage of 7.2 million rental homes, according to the National Low Income Housing Coalition. “A lot of times, once you lose your home it can spiral downwards from there,” said Megan Hustings, interim director of the National Coalition for the Homeless, in an interview. “We have seen people living in their cars anywhere from a couple of weeks to months to years.
The average outstanding balance for student loan borrowers is $34,144. The average student loan debt for the class that graduated from college in 2017 was about $39,400. And over time, the resultant stress takes a toll on relationships. “According to a study by Student Loan Hero, a website for managing education debt, more than a third of borrowers said college loans and other money factors contributed to their divorce,” Jen Rogers explained on the Final Round. “In fact, 13% of divorcees blamed student loans, specifically, for ending their relationship.” “I’m surprised it’s not higher,” Jared Blikre responded. “Because when I looked into this report, it’s amazing. It says the average outstanding balance is currently $34,000. That’s up 62% over the last decade. In addition, the percentage of borrowers who owe $50,000 or more has tripled over the same period. The cost of college is just out of control.”
A previous survey of more than 1,000 borrowers founds that 43% of respondents said they fight about money “somewhat often” with their partner. Others take a nondisclosure route: 24 percent of those surveyed said they’ve kept their student loans a secret from their partner, and 18 percent said it’s okay to lie to a partner about money. Ironically, borrowers who do end up taking the divorce route end up incurring more debt to cover the costs. The average cost of a divorce is between $12,500 and $19,200 as proceedings can include fees for lawyers, appraisals, custody assessments, and courts. And those who are saddled with student loans can end up paying about $2,000 more than their loan-free counterparts.
These examples are typical, Graeber argues, of jobs generated naturally out of the corporate managerial struggle for influence, status and control of resources. This is a long way from true capitalism, as Graeber notes, and actually looks more like classic medieval feudalism. Much within the modern corporation is less about making things or solving problems and more about the political process of gaining control over the flows of resources. The result is a proliferation of jobs that actually serve very little if any economic function, and only make sense from the perspective of rent seeking and power relations. Many like to laugh at the absurd inefficiencies of the Soviet Union, where so many people only pretended to do useful work, yet this may be significantly true in Western economies as well (only in the West they actually get paid for it). From this perspective, maybe we’ve been thinking about the modern business world in completely the wrong way. And perhaps slowing productivity shouldn’t be a surprise. They may only reflect an approach based solely on profit maximization, rather than an authentic effort to solve human problems.
According to President Trump, we are living in “the greatest economy in the HISTORY of America and the best time EVER to look for a job.” The details reveal something a little different. While unemployment may be low, workers are experiencing historically low wage growth, while companies are responding to Trump’s recent tax cut by routing their profits predominantly to top executives and big shareholders in the form of stock buybacks. A Wall Street Journal analysis of how 1,111 companies pay their workers released Wednesday morning illustrates this in stark terms. While “median pay lies between about $44,000 and $95,000 for about half of the 1,111 companies in the S&P 1,500 index that have disclosed median employee pay,” zooming into specific large companies that have been actively padding the wallets of their largest shareholders through stock buyback programs reveals that the true priority here is not sustainable long-term raises for middle-class workers.
The Journal’s Theo Francis and Yaryna Serkez found that “employing low-wage workers directly drags median pay down. Median pay at McDonald’s was much lower, at $7,017, in part because McDonald’s directly employs hourly servers at more of its restaurants.” The low median pay at McDonald’s comes as the fast-food behemoth bought back $1.6 billion in stock in the first quarter of 2018 alone. Gap’s very low median pay of $5,375 per year coincided with the company buying back $100 million in stock last quarter. The median pay at Chipotle was $13,582 — last year it offered a $100 million stock buyback program. They did it again in April. Yum Brands, the parent company of brands like Taco Bell, KFC, and Pizza Hut, paid its workers a median yearly wage of $9,111. Late last year they offered a $1.5 billion stock buyback program, and recently reporting $528 million in buybacks in the first quarter of 2018 alone.
Overall, however, this is what weak wage growth looks like. This is also how corporate America works. A study from the National Employment Law Project and the Roosevelt Institute, released Tuesday, found that between 2015 and 2017, “companies spent almost 60 percent of net profits on buybacks.” They do this instead of investing in worker pay. In fact, the restaurant industry spent more money on stock buybacks than they actually earned in profits, fueling the buybacks with debt and existing cash reserves. “Companies in the retail and food manufacturing industries spent 79.2 percent and 58.2 percent, respectively, of their net profits on share buybacks,” the report’s authors found. This was the state of play just before the tax cut, passed late last year, caused an even higher surge of buybacks — which reveals the priorities of these companies, and the politicians who fought so hard to cut corporate taxes. If McDonald’s had spent the money it poured into stock buybacks between 2015 and 2017, it could have given raises of $4,000 per year to its 1.9 million workers, according to the new study. The effort to make the nation’s wealthiest investors even richer doesn’t stop with tax cuts and stock buybacks — the Trump administration is also considering a ploy to bypass Congress and let people who sell their assets pay even less in capital gains, which would mean a $100 billion tax cut for the rich.
Donald Trump loves to cut taxes, particularly on the rich. Donald Trump also loves to do things without Congress’ permission, like start trade wars. Now, the White House appears to be contemplating a proposal that would combine our president’s two great loves into one, by using a legally questionable regulatory move to enact a $100 billion tax cut for the wealthy without bothering to pass a pesky bill through Capitol Hill first. In an interview reported Monday by the New York Times, Treasury Secretary Steve Mnuchin said his department is looking into whether it can unilaterally alter the rules Americans use to calculate their capital gains taxes in order to account for inflation when they sell assets like stocks and bonds, a technical tweak that would result in a huge windfall for investors. “If it can’t get done through a legislation process, we will look at what tools at Treasury we have to do it on our own and we’ll consider that,” Mnuchin told the Times. He added that Treasury was still “studying” whether it could make the change on its own.
This change would be both expensive and deeply regressive. In March, analysts at the Penn-Wharton Budget Model estimated that indexing capital gains taxes to inflation would cost the federal government $102 billion over a decade in lost revenue. Leonard Burman of the Tax Policy Center believes it could be even more of a money suck; based on data from 2012, he’s ballparked the cost at $10 billion to $20 billion per year. (To put that in a little perspective, the feds spend $16.5 billion annually on Temporary Assistance for Needy Families, aka the entire system of cash welfare and work supports that’s supposed to help the poor.) The benefits would largely go to the very wealthy: According to the Tax Policy Center, almost 77 percent of capital gains taxes are paid by households earning more than $1 million per year. You might think there would be some vaguely plausible policy justification for all of this other than handing out another extravagant tax cut to families pulling down seven figures. If so, you would be wrong. It would be a pure smash-and-grab on behalf of the rich. What could be more Trumpian?
It seems that last year’s $1.5 trillion tax-cut package, despite heavily favoring affluent investors and corporate titans over workers of modest means, was insufficiently generous to the wealthy to satisfy certain members of the Trump administration. So now Treasury Secretary Steven Mnuchin offers an exciting plan to award an additional $100 billion tax cut to the richest Americans. Specifically, Mr. Mnuchin has directed his department to explore allowing investors to take inflation into account when calculating their capital gains tax bill. So in rough dollar terms, the administration is looking to hand $66 billion-plus to the ultrarich like — just to name a few — Mr. Mnuchin, who did very, very well during his years at Goldman Sachs (and already has a net worth estimated at $252 million); Wilbur Ross, the loaded secretary of commerce (estimated net worth: $506.5 million); Betsy DeVos, the even richer secretary of education (about $1.1 billion); and, of course, the extended Trump-Kushner clan. (To be sure, Ivanka Trump could use a financial pick-me-up to help take the sting out of having to close down her clothing brand.) Thus die the final vestiges of this president’s pretty little narrative about being a populist hero.
Beyond pure greed and a desire to suck up to the 0.1 percent, it’s hard to see any real-world logic behind this move. As political messaging goes, it seems flat-out bonkers to position Republicans as the party of the superrich — especially during a critical midterm election campaign with control of both houses of Congress on the line. But at this point, President Trump may have decided that it doesn’t much matter what economic policies he pursues so long as he can keep the base distracted and fired up with his relentless culture warring. (Build the wall! Lock her up! Gorsuch! Kavanaugh! Stand for the anthem or be fired!) In early 2016, candidate Trump famously boasted that he “could stand in the middle of Fifth Avenue and shoot somebody” and not lose any voters. Since becoming president, he has been given little cause by his base — or by Republicans in Congress — to doubt his political infallibility. As such, with Mr. Mnuchin’s proposal, as with so many other moves undertaken by this administration, Mr. Trump’s thinking may boil down to little more than, “Why the heck not?” This may strike some as a depressingly cynical reading of what is being proposed. What, you thought their motives were pure?
While many in conservative circles hailed the latest jump in economic growth, there was little talk of a long-term fiscal challenge which, left unaddressed, will wreak havoc on our economy and the world’s — our skyrocketing national debt that could become unmanageable in coming decades. The numbers don’t lie. While recent tax cuts seem to have at least partially fueled strong economic growth, projections by the Congressional Budget Office (CBO) for this year forecast an $890 billion deficit, up from $438 Billion in 2015. If current CBO projections hold, next year the deficit will surpass $1 trillion. The last time that happened was during the great recession. And, according to most experts, unless drastic actions are taken, trillion-dollar deficits will become the new normal — a greater threat to our nation than anything Russia, China, North Korea or Iran could ever dream up.
How much money America owes its creditors is truly shocking. Total U.S. debt stands at more than $20 trillion. To understand the size and scope of how large this is, that’s more than the total amount of goods and services — what’s commonly referred to as gross domestic product (GDP) — that our nation produces every year. Perhaps worst of all, we pay nothing on the principal, paying only interest on that debt, a staggering estimate of $310 billion for fiscal 2018 alone. That equals the total GDP of many mid-sized economies, such as Colombia or the Philippines. From here, if you can imagine it, things could get even worse. As the economy gets stronger, interest rates will rise, forcing the federal government to pay more money on interest payments. One could easily imagine a scenario where interest rates keep rising for several years, along with debt that is never repaid, creating a one-two punch that can only spell doom for America’s economic future.
So, what can be done to stop what seems to be a looming financial crisis, since America seems obsessed with spending more and more money, no matter which party is in power? “Increasing the retirement age would be a start,” explains Samuel Rines, chief economist at Avalon Advisors in Houston, Texas. “One of the major issues is that much of our deficit spending will be difficult to contain. The revenue side is where much of the solution likely exists — in the form of higher individual tax rates.” Others agree that reforms could make a difference — but a change in attitude that our nation is a sort of giant credit card is required first. “Reforming Social Security and entitlements would help, as they make up the largest parts of the annual budget,” says MacDonald with Smith’s. “But we as a nation need to start prioritizing what we are spending our taxes on. We are, in a much-used phrase, living beyond our means.”
When the men on the chessboard get up and tell you where to go
And you’ve just had some kind of mushroom, and your mind is moving low
Go ask Alice, I think she’ll know
When logic and proportion have fallen sloppy dead
And the white knight is talking backwards
And the red queen’s off with her head
Remember what the dormouse said
Feed your head, feed your head
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