Why Isn’t the Tax Cut Bipartisan?

In previous posts we’ve talked about possibilities for bipartisan cooperation on the federal budget and the tax plan.   There were obvious possibilities for that to happen.   The biggest cuts after all are to the corporate income tax, and Obama already discussed his interest in that in the 2015 State of the Union.  Other Democrats talked to Trump about bipartisan options prior to the announcement of the tax plan.

Why didn’t that happen?  Let’s look at the primary provisions.

  1. The Corporate Tax Cut

First of all, as many have mentioned, the average effective corporate rate in the US is not 35% but more like 24%, which is not so far from the international average.   Real tax reform would bring the effective and nominal rates in closer line with each other–with the advantage of removing artificial lobbyist-created inequities in the tax plan.   That, with adjustments to assure parity with other countries, would not break the bank.  It would help the country and could have bipartisan support.

We have instead chosen to close few loopholes, insist on a nominal 20% corporate tax rate, and incur a massive revenue shortfall.  That choice gives us the deficit as well as the middle-class tax increases.  The connection to jobs is weak at best, so most of this additional corporate saving going to investors.   Since it isn’t a matter of competitive parity—why are we doing it?

  1. The Pass-Through tax cut

The stated target of this tax cut was small business, but in fact few small businesses would be helped.   Further, as was recognized early, this tax cut opens opportunities for wealthy people to avoid personal tax rates.   The current form of the tax cut has rules that attempt to limit that.  However many loopholes remain, and the rules are strangely targeted.   Manufacturing and real estate can benefit, but not services.

Since most of this money is going to people who can exploit the loopholes—not to the stated targets—why are we doing it?

  1. The Estate Tax cut

This is of course the most problematical of all.   Only rich people with estates over $10 million are involved, and the benefit increases with wealth.  It is worth emphasizing that we don’t just raise the tax-free limit, we completely abolish it and with no unpaid capital gains taxes on the heirs!

As to why we’re doing it, the explanation is the most transparent of self-serving nonsense—“making rich people richer is good for everyone”.

 

These tax cuts are not bipartisan, because their logic has nothing to do with the welfare of the country.   Donors are complaining they haven’t gotten what they paid for, so it’s time to get the job done.  Bipartisanship is not on the agenda.   These tax cuts are delivered as ordered.

It is important to recognize that there is nothing mysterious about the small, ultra-rich donor community (with the Koch organization as primary mover channeling money from others) and also nothing ambiguous about their demands—both money and power.  You might even argue—though it’s a stretch—that perhaps the stock market is rising not on business prospects, but on all that extra money the ultra-rich donors will have to invest somewhere!

And there’s another twist to this too.   Trump and the Koch brothers have much the same motives, but Trump is the President after all.  How can he get away with a tax program that has been precisely engineered for his own benefit?

Trump was born for this job.   He actually believes that whatever is good for him personally is by definition the best possible thing for the country.

So we are left with a philosophical quandary.   Is a crook who uses his office to pocket more than a billion dollars from the country excused if he is too self-intoxicated to realize what he’s doing?

 

 

Some History and Consequences of a Tax Cut

1929

In the years since the Great Depression economists of all stripes have come to a consensus about what happened.   Wild speculation produced a crash.   That led to intense stress on the banking system.   The Federal Reserve (as primary villain) was unwilling and unable (because of the gold standard) to provide support.   So the banks failed, and the rest of the economy collapsed.  National income was down a massive 60% by 1932.

The collapse originated in the US and was much worse here than elsewhere. Germany, still paying World War I reparations, was a special case and fared badly.  It is important to remember that without the 1929 crash, Hitler would have remained a curious side-show.

Recovery in the US took a full decade.  There was a serious blip in 1937-38 when Roosevelt dialed back on stimulus and a GDP slowdown followed.  International trade dwindled in the 30’s, as many countries instituted protectionist barriers.   The US wasn’t fully out of the depression until the second World War.

 

2008

Fast forward to the crash of 2008.   The banking system was again central, because mortgage-backed securities brokers had become unregulated de facto banks.  (Why should businesses earn nothing on cash when mortgage-backed securities paid real interest and were rated “just as safe”?)  When the deteriorating economy led to large-scale mortgage defaults, the mortgage-backed securities collapsed in value and trillions of dollars of supposedly safely-banked assets disappeared.

People running things had fortunately learned the lessons of 1929, and stepped in immediately to keep the banking system afloat and pump money into the economy to prevent a depression.  That stopped things going from bad to worse—very painful but not a depression.

 

Crisis and Recovery

Even at the beginning, however, something strange happened in this country.   At the very end of his presidency, George Bush did the right thing  (for once) and in the face of disaster introduced legislation to keep the banks afloat.  Despite advice of economists, his own party refused to support him—claiming to fight socialism.  However 172 Democrats and 91 Republicans did support the bill, and by a 263 to 171 vote helped pull the country back from the brink.

The episode seemed odd at the time.  But with the start of the Obama presidency and the new Congress, it quickly became clear what had happened.   That had been a transitional moment.  The old Republican party that at least cared (conservatively!) about the well-being of the country was no more.

The new Republican party, more and more a creature of the Koch machine, had only one goal—cutting taxes on the small group of ultra-rich backers who now owned the party.   That translated immediately to a surprising position.   Mitch McConnell (always quick to know which way the wind was blowing) later summarized it as “The single most important thing we want to achieve is for President Obama to be a one-term president.”  Private statements of position were even stronger. There would be no cooperation on anything—even on recovery from the recession.  Obama wouldn’t give them the tax cut, so it was scorched earth.  Republicans at the time trotted out ideological objections to stimulus—which the current Republican enthusiasm for both presents and deficits shows up for the hypocrisy it was.   Everything that kept the country going had to be passed over Republican opposition.

Even with a Democratic majority, that limited what could be done as stimulus.   At the same time the Kochs founded and funded the Tea Party as an apparently populist, anti-spending front group.  Slow growth plus anti-establishment rhetoric plus an unprecedented dose of Koch money (enabled by Citizens United) helped Republicans gain control of the House.  Keeping the country poorer was a rousing success!

After Obama was reelected Republicans doubled down on slowing the recovery and preserving the remaining pain.  Their ploy was a commitment to balanced-budgets (today of course demonstrated to be bogus), including even a proposal for a constitutional amendment.  On that basis they deliberately blocked any further stimulus or social programs (such as Obama’s State of the Union proposals for community colleges and daycare)—starving government to sow discontent for the election.   By 2016 they had held the country hostage to their tax cuts for the full six years they controlled Congress.

Trump wasn’t their chosen candidate—too much of a loose cannon—but he would do.   He was an even better populist front than the Tea Party.  He didn’t even notice the irony in his “slowest recovery” claims.  Pence was their guy all the way, and Trump picked a cabinet full of other Koch people.  On tax cuts there was no problem managing Trump.   He already believed anything good for himself was good for the country.  The tax cut plan is now here.   It is worth more than $1B for Trump himself, and is everything the rich donors could have hoped for.

You have to hand it to the Koch machine.  All the distributed power in the power in the American political system has now been centralized and controlled.  Local, state, Congress, the Presidency, the Supreme Court—the Koch organization has money in all of it.   More to spend than the Republican party itself, and all under strict control.  A few hundred fabulously wealthy people are running the USA for their benefit.

 

Now

That’s where we are.

For the tax cut, what’s on the table is an astonishing giveaway of the country to the richest few.   The asserted benefits to the middle class are nothing but after-the-fact propaganda.  There is no logical or historical justification for claiming that upper class tax cuts produce jobs.   Business tax cuts, while they sound good, are actually no better.   Businesses hire people because of opportunities, not cash on hand.  With today’s low interest rates the cost of capital is not a big barrier to new opportunities, so tax cuts will end up going to the investors.

This is not really a stimulus package, and it’s a myopic approach to our real problems in any case.  One reason the recovery hasn’t helped everyone is that the Republicans’ past financial lock-down has prevented whole categories of problems from being addressed.  The economy is changing and issues such as skills mismatch, automation, educational opportunity and even infrastructure aren’t addressed just by throwing money at the private sector.

There’s another problem too.   All that tax cut money will now be chasing investment—a dangerous invitation to speculation.   And we’re incurring new large deficits to pay for it at the wrong time in the business cycle.  The country is out of recession, and large deficits in good times are bad.   When our speculative bubble comes to an end, it will be all the harder to find the stimulus money to get up off the floor.

There is also a real question about who’s going to be around to help.  Remember the disastrous Federal Reserve behavior in 1929 and the unanimity it took to get back from 2008.   Janet Yellen may not be retained as Federal Reserve Chairman when her term expires next February.  One prominent candidate to replace her has no specialist background in economics and opposed all stimulus after 2008 out of an unsubstantiated fear of inflation.   Trump has not chosen his nominee, but it’s something to worry about.

Too many pieces from 1929 are coming back together. The ultra-rich are getting their tax cuts.   By all evidence there is little interest in learning from the past and even less in looking out for the lot of the rest of us.

This is it!

This is it!  Finally it’s here.

After six years of holding the country hostage (no question now about the meaning of “party of no”)—

After thousands of Fox News stories full of arrogant and nasty liberals—

After untold campaign contributions—

We finally have what we’ve waited for.   The dearly-bought gift—the tax cut, our tax cut has arrived in Congress!

 

Think about what we’ve done to get here.  First some of the ground work:

– Republican Supreme Court justices Roberts, Thomas, Alito, Gorsuch.

– Citizen’s United—liberating our money as protected free speech.

– The unprecedented Koch organization—funded by billionaires and with a staff of 1600 and billion-dollar budgets to control state and federal legislatures.

– A full complement of Koch people (e.g. Pence, Pruitt) in Trump’s government.

 

Then our messaging with Fox News and Rupert Murdoch leading the way:

– First one fabulous job of divide and conquer.  We’ve made “liberals” even more detestable than “welfare queens”.   What a line we’ve got: “They’re laughing at us and think we’re stupid.   They’re stealing our jobs and our money.  Can’t believe a word they say.  Our team will bash their heads in when we win!”  We’ve even got real liberals apologizing for our stereotypes!  And then there’s racism…

– Next the subtler part—governments can do nothing, everything they offer is either worthless or for someone else.  There’s quite a list of things governments can’t do:  education, social services, medical care, even police (we just need “good people with guns”).  Funny thing about all those wastes of taxpayer money—they’re things we’re already doing for ourselves.

– Finally a bit of warm and fuzzy nonsense.  Jobs are gifts from corporations and rich people.   Make us rich and we’ll take care of you!

Sounds like a tax plan.

 

And look now at what we’ve got.  Let’s count the tax cuts:

– Estate tax.  Only helps families with at least $10 M to pass on.  Worth $1 B for Trump himself.   Just for us.

– Tax rates.  The top bracket is down to 35%, but that’s just the beginning.  We’ll really get 25% with the new passthrough loophole (our lawyers will certainly take care of any fine print).

– Corporate tax rates.   We’ve got the clout to get most of this as dividends or stock repurchases.

– Deficits.   That’s a particularly good one.   Those nonsensical growth predictions are just one more piece of the pie.  The deficits will mean cuts in services and correspondingly lower taxes going forward!

It’s actually marvelous how this has worked out.   We’ve got a tax cut before there’s even a budget!  Exactly the way the world should be.

 

Where is all this going?  Funny you should ask.   There’s an article in today’s NY Times talking about it.   It seems Mexico is actually doing something right.   They’re not wasting money on parasites.   People like us live in walled communities with their own security and service.  Some of it they pay for, and the state does the rest. And they pay practically no taxes!  The world as God created it!

 

The tax cut has come.   We are saved.

Living with the Dark Side

There has been a lot of talk recently about possible Democratic cooperation with Trump.   There is of course little basis to that yet, but it is interesting how quickly we’ve gone from hoping the Republican Party would save us from Trump to the other way around!  With that as motivation it is worth thinking a little more about the players and issues in this game.

First about the choice of evils:

On one hand we have the Republican Party:

– This has become largely a Koch brothers organization.  Low taxes for the very rich is the only real objective.

– Opposed to all social programs (no accident they couldn’t do healthcare).

– Pro-business, but perhaps not completely nuts on economic issues.

– Can find individuals to work with.

On the other hand we have Trump, with two sometimes contradictory impulses:

  1.  Sees everything as though he were still managing his own businesses

– Cut taxes on businesses and rich people

– No interest in unemployed people or other “losers”

– All regulations are bad; anything of value happens in the private sector

  1.  Sold himself as a “populist” and wants to believe he is delivering on it

– Primary focus is jobs via tax cuts and tariffs.  Not much has actually happened.

– Support for coal miners, abandonment of Paris Agreement, killing DACA

– Not much else yet; AHCA would not have been a winner

The business side of Trump is only subtly different from the Koch brothers agenda, and separating Trump’s two sides is tricky.  His speech on exiting the Paris Agreements was all about the populist side, but everything behind it was driven by Koch brothers people (Pruitt, Pence).  Similarly, AHCA was nominally populist, but really an excuse to cut taxes for rich people.

Thus far Trump hasn’t done much for the populist side, but he keeps talking about it.   That’s actually what has thus far stopped healthcare.  Republicans spent six years repealing ACA with no worries about who would lose coverage–but that became an obvious issue now.  Even though Trump supports AHCA, it’s not so easy for Congress just to laugh off the coverage.

Ideally that is an opening to find Democratic proposals of obvious benefit to Trump’s core constituency that are somehow salable to Trump.  We have to accept these will only get mileage if they are presented as Trump’s initiatives.  If it all fails, that will at least point out the hypocrisy of the populism.

There are some obvious possibilities:

  1. Healthcare

Anything here is conditional on Republicans really giving up on the AHCA nightmare. If that happens Trump will need something.  That could conceivably be whatever comes out of the bipartisan work on ACA, but Trump may want something really different to put his name on.

It should be pointed that this is not just an issue for the Trump core.  Business needs it too, even more than the tax cut if you if you believe Warren Buffett.  A good solution here could incorporate elements of a single payer system into a public option based on Medicare.  For that it is important to realize that the existing Medicare infrastructure is actually administrated by the private sector.

This is a low probability, but you never know–he might bite if it really does save money for business.

  1. Infrastructure

Trump has said he wants to do this, but a pure private sector approach won’t work for poor areas.  Appalachia is not going to benefit without some kind of compromise approach.

  1. Transitional job assistance (retraining and support)

Thus far Trump has put all his eggs in the “growth = jobs” basket.  His target budget killed any assistance programs, including a successful one in Appalachia.   However, it is now clear things are going to take longer than he expected.  If this is viewed as transitional, we may actually be able to help people.

  1. Early childhood education; cost of college

All polls I’ve seen of Trump’s base say that they want something better for their children.  Paul Ryan Republicans have been disastrous for such programs.  These would be clear benefits for the working class.

  1. Tax reform

Trump likes to talk about reducing the current 35% corporate income tax.   However, the average effective rate is more like 24 %, in large part because of special provisions delivered by lobbyists for particular corporations.  A lot of Trump support is from small businesses who aren’t so lucky.   A fair system may not appeal to Paul Ryan, but there is more reason for it to appeal to Trump.   No one is supporting 15%, but 25% with real tax reform would not break the bank and would recall an achievement under Reagan.

  1. Promoting American jobs

Trump has made high tariffs the miracle solution to all problems for everyone.   That’s not true, but it doesn’t mean there is nothing sensible to do.   Trump probably doesn’t know anything else.   We may be able to help.  This is not the Republicans’ area of expertise.

  1. Climate Change

This is so crazy it’s hard to give up, even if it means fighting the Koch brothers directly. There’s both a carrot and a stick involved here, with recent developments for both:

– Harvey is the most recent example of what worsening weather can mean.  As noted in the previous post, no reasonable business faced with such a large potential risk would choose just to ignore it.

– The reality of climate change will create enormous business opportunities—wholesale migration to electric cars is just one.  With current policies we could very well cede all that to the Chinese.  This would not be the only time that a first mover like Tesla would lose out in the end.

In all these areas, in contrast to the Republican healthcare fiasco, Democrats should be able to offer real proposals.  So you never know….

For Sanity on North Korea

This note is in part a response to an article in yesterday’s New York Times pointing out correctly that no one understands what the North Koreans are after.

What is most disturbing about the current situation is that no one seems to be trying to find out.  Two things, however, are clear:

  1. Kim Jong-un is trying very hard to provoke a hysterical response from the US.
  2. We are doing an excellent job of giving him exactly the response he wants.

So the conclusion is that he wants something from us.  Based on past behavior of the North Koreans, it can even be that he wants money (and security to spend it).  There is nothing in Kim’s past that says that he is either suicidal or stupid.  He is undoubtedly happy with our behavior thus far, since he can assume we’re too scared to walk away from the bargaining table.

So we should stop playing his game and cool it.  And above all let’s find out he wants and deal with it.  He gains nothing by an actual attack.  His bargaining position is based 100% on our hysteria.  The longer we postpone this, the better for him.

In the current situation any military action by the US is an unjustifiable atrocity.

Minding the Store

It has been a long time since there was someone interested in governing the United States of America.  For now we are specializing in promotional stunts (essentially all of foreign policy) or deliveries to electoral constituencies (climate change, ACA repeal, white supremacist racism).

Now that we can have no delusions about what Trump represents (pardoning Arpaio was a last straw), the country is in dire need of a way to get through the next 3 ½ years.

So it is worth remembering that there is actually a group in government trying to do something positive for the country.  That is the bipartisan group of senators working to fix problems with Obamacare (e.g. number of plans offered).  Not only is that a laudable activity for itself (whether or not the results get quashed), but it makes you think about other things a bipartisan group could do.   Here is one short list.

– Supreme Court nominees

At this point you don’t have to be a Democrat to recognize that democracy in this country is under threat.  We need to decide that a next Supreme Court justice cannot use the war powers clause or anything else to promote legal tyranny.  That applies to the role of Congress, to delaying or otherwise manipulating elections, and to Presidential pardons.

– Jobs program subsidies

During the election both candidates spoke about a government role in promoting employment in under-served areas (Appalachia, inner cities, etc.).  More recently, Republicans have promoted a deal with Foxcomm that was very heavily subsidized by the state of Wisconsin.

This needs to be a federal program because not all states can do it themselves, because it needs to be planned at a national level, and because a federal program could reduce the leverage employers have in playing off states against each other.

– Infrastructure

This is another area promoted by both candidates in the election.  There are of course significant differences in approach.  But it seems that issues such as selection of projects, rules and roles for private investment, and protection against corruption can be solved if there is a will to do it.

– Taxes

This a controversial area, and Trump’s so-called tax reform is not helpful.   But there is agreement on at least a couple of points:

  1. Real tax reform means eliminating the current maze of special gifts to create a more equitable system and a correspondingly lower basic tax rate. That kind of reform was achieved as a bipartisan effort under Reagan.   It has little to do with proposals currently on the table, but that doesn’t mean it can’t be done.
  2. As part of that effort, there is agreement that the basic corporate tax rate is too high. So that seems a good place to start–when accompanied by item #1.

– Education

Education is one of the most important services provided by government.  Even if De Vos vouchers turn out to be off-limits, there are at least two areas where bipartisan work is possible:

  1. The student loan crisis is a huge burden on a whole generation. This is not because students have suddenly become wasteful in their habits, but because costs of college have risen rapidly even in state institutions.  Government needs to help out.
  2. Government needs to help students and states to navigate the costs and benefits of educational programs. This is not just a matter of fraudulent institutions and sweetheart deals to vendors (although there is plenty of that).   Students need the information to choose for their futures.  And we as a country need to decide what equality of opportunity means for the cost of college.

– Foreign Policy

The only foreign policy we currently have is a disdain for employees of the State Department and a desire to exploit foreign issues for chest-beating electoral gestures.  It is tough to do foreign policy by committee, but we don’t really have a choice.

 

This is by no means a complete list, but we have to recognize that government is in crisis and needs a bipartisan effort even to mind the store.

A Modest Proposal on Healthcare

Seems like we’re making things too hard on healthcare.

Both sides should remember what they really care about:

Republicans have already amply proven that the only part of ACA they care about is the surtax.   They don’t have to keep proving it anymore.  They’d also like to save some money if they can.  They only make a mess when they pretend they want to do healthcare.

Democrats either want ACA to continue in its current form or they want it to evolve to a single payer system.

Further Trump has made this simpler in two ways:

  • His tax proposal greatly diminishes the need for rich people to pay for any part of the federal budget.
  • His budget goes far beyond anything Dick Cheney dreamed of when he said deficits don’t matter.

So the solution is right there before our eyes:

Keep ACA.   If you want to pay for some part of it, put it in the general budget, so rich people get a huge break in any case.

And if you want to save money, go to single payer.

All done.  Everyone can go home happy!

The President of China

There has been a lot of talk recently about China’s growing presence on the world stage and how the US as predominant power should react to it.  With that in mind we go to China, just outside the Forbidden City, where the Chinese are planning their strategy…

Xi Jinping: There are many factors we need to consider, economic and political.  Today we are an economic servant to the West, building their iPhones and other toys.  We need to learn to take their place.

Planner: The Americans have many advantages.  They have excellent universities and their pick of talent from all over the world.  They have an interlocking system of university, government, and private research labs.  It’s hard enough to catch up, much less to lead.

Xi: We have to go step by step.  I’ve heard that many of their new companies are led by foreigners.  We can cut into that and certainly lure our own people home–a little xenophobia would help.   As for education and research, we know that government money is critical both in government labs and in the universities.  We have to find a way to slow down that money and then duplicate their system here.

Planner: Sounds like a lot of work, but we’ll start on it.  They’ve been working for decades to get where they are.

Xi: We need to get more specific now.  What are the lead technologies we can use to establish our dominance?

Planner: It’s hard to answer that question.  Software is always there; the particular new twist seems to be Artifical Intelligence.  That ties in with robotics.  Biotech.  Probably the biggest thing is energy–climate change means the whole world will have to convert.

Xi: The Americans are big players in all of those, but progress is very international.  If we can get them to isolate their people we can win.  Energy is too big–we need to limit their role.

Planner: They were a driving force behind the Paris Climate Agreement.  Maybe we can sabotage that.

Xi: Great.  Good first step!

Xi: The next subject is politics.  The Americans have been leading the so-called ‘free world’ forever.  Everybody works with them; no country wants to be left out.  All major international agreements of any kind go through them.  They’ve done very well that way–they are the richest, most dominant country in the world.  Our economy is tiny compared to theirs–how can we match their influence?

Planner: The only way I can think of is to get them just to quit. Get out of our way so we can take over.

Xi: I don’t understand.

Planner: It seems that over the years the Americans have come to believe their own propaganda–that all of their international agreements and institutions were setup out of pure beneficence!  Nothing to do with remaining the richest, most dominant country in the world.  They even think that about foreign aid.

Xi: You’ve got to be kidding.  No one else thinks that.

Planner: All we’ve got to do is push them over the brink:  No international institutions, no foreign aid–all unaffordable charity and a foreign plot.

Xi: You really think you can pull that off??

Planner: Well, just a minute.  We need some kind of slogan.  Something catchy…

Planner: I’ve got it!!  AMERICA FIRST.

Xi: Welcome to the Chinese Century.

 

Trump and Jobs

No one should ever underestimate Trump’s skill as a salesman. He has made a lot of money with that talent, but it’s hard to imagine anything that ranks with his sale of the promised land of jobs.

Start with the basics:
– Trump is opposed to unions and any increase in the historically low minimum wage .
– In his own enterprises he has used foreign manufacture and imported foreign employees on a continuing basis
– His treatment of contractors and investors in his huge bankruptcies was both devastating and deliberate.
– He is opposed to regulatory protections for working conditions.
– In his budget he has proposed a complete dismantling of the safety net to protect people who lose jobs.

All told one can say without exaggeration that Trump’s attitude toward workers is that government should do everything possible to weaken their position in dealing with management.

The promised land of new jobs is supposed to counterbalance that.

What stands behind all those jobs? Only two items:

– Removing any regulation that any businessman doesn’t like.
– Cutting taxes on corporations and rich people.

The only thing that is guaranteed about those items is that they will make people like Trump richer. The connection to jobs is so problematical that it is hard to believe that he ever cared enough to look at it:

– Reducing personal income taxes on rich people has a long track record of failure to produce growth.
– Deficit-based stimulation at this stage of the business cycle is at best risky. The most likely scenario is inflation leading to job losses, but it even invites another 2008-like crash.
– Neither corporate tax cuts nor deregulation has a history of increasing jobs. Corporate tax cuts tend to get passed through to investors.  Level of regulation is not necessarily even correlated with jobs.   One can even argue that states with more regulation perform better economically.

– We are moving ever faster into a two-tiered society with participants and (increasingly many) non-participants in the technology-driven economy–none of which is addressed or even recognized in this picture.

 

Trump’s jobs proposal isn’t one–it’s just a shopping list of what’s good for him.

Trump is the same Trump he has always been: lead salesman for his businesses.  The most you can say is that he probably believes that what’s good for himself is good for everyone–but that’s as far as the thought goes.

Six bankruptcies (among other things) have shown the consequences of believing him.

But he’s sure a hell of a salesman!

This is the Richest Country in the World

The title of this piece is a fact.  By itself the statement is not controversial, but it shows the deliberate misinformation we’re surrounded by every day.

There is a good example from Trump’s speech exiting the Paris Accords: “cash-strapped cities cannot hire enough police officers or fix vile infrastructure.”  The statement is perfectly true, and there is a reason why that statement is true for the richest country in the world.   It is that Trump himself and people like him have taken more and more of that wealth for themselves–and out of the public sector.

For the past six years the Republican Congress has blocked essentially all new expenditures for the public good.  And Trump’s proposed budget will make that a full-scale assault on states and cities.   He is both reducing current aid and also pushing more and more responsibilities for services their way.  The story also includes the Republican-led scandal of education, where reduced state government support for education since the 2008 crisis has contributed to a whole generation trapped with student debt.  (In Trump’s budget the coming DeVos nightmare is its own story–since there is no guarantee what will be paid for by voucher, good education will be sold to the bidder in the brave new world.)

This is the richest country in the world, but the fact that many people don’t feel it doesn’t mean there is no money.   The money has been taken out of the system for the benefit of people like Trump, and they are now proposing to take more of it.

Trump says he is preparing an economic nirvana, where all those who are currently left out will be saved.  More on that pipe dream in a minute, but focus on the explicit reality first:  upper-income tax payers like Trump will make trillions of dollars on it.   There is even a brand new big “pass-through” loophole for rich tax payers like Trump personally. There will be scant benefit for the middle class, and even that may be eaten up by the added costs imposed on the states.  The poor will be slammed on all fronts.

As to the nirvana:

  1. The economy is close to full employment in the sense that good new jobs require specific skills, so most of the current unemployment is structural—due to skill mismatch, not the level of economic activity.  Job training programs are actually cut in Trump’s budget.
  2. Few economists believe that anything close to Trump’s proclaimed 3-4 % growth is going to happen, or even that such growth would prevent a deficit. The deficit itself is inflationary, and would ultimately cause job loss rather than growth.
  3. Stimulus deficit spending at this stage in the business cycle is so foolhardy, that no previous President–Republican or Democrat–has ever wanted to do it. At the very least it invites inflation and the possibility of another 2008-like crash.

This is not Trump’s “genius” at work, it is something far simpler.   Trump believes what he is says, because he is still Trump the salesman looking out for himself:  taxes are bad, regulations are bad, unions are bad, minimum wage is bad, research is a waste.  As a salesman Trump has always had a particular gift for believing what he sells.   And what he is selling is simple:

“What’s good for me is what’s good for the country.   Stop bothering my companies and cut my taxes and everything will be just great. “

There is nothing else here but that.

As the saying goes: if you want to know what is going on–follow the money.  And it is clear where it is going in the richest country in the world.