IS Trump Using Tariffs To "Strong Arm" The Fed Into Cutting Rates? The Nasty Meme (And Truth) Is Now Afoot

On Thursday Trump squealed in a deranged tweet:

"One would think I would be thrilled with our very strong dollar. I am not!  The Fed's high interest rate level, in comparison to other countries, is keeping the dollar high, making it more difficult for our great manufacturers to compete."

Anyone who knows the extent of Trump's chronic derangement knows he'd be all too happy to pursue a sordid policy of dollar debasement to try to get a few market brownie points.  Also, they'd know what's making life more difficult for manufacturers - as well as farmers (and soon U.S. consumers) - are Trump's idiotic tariffs, which are really a tax on domestic interests.  But the malicious buffoon is savvy enough - in a twisted sense- to grasp he can use tariffs to pressure the Fed to lower rates.

It's a fair bet that few,  if any,  citizens are aware of the appalling degree to which American farmers are being put through the economic wringer for Trump.  The tariffs he's now increased on China - causing it to retaliate- will have devastating consequences on farmers as they are unable to sell hogs to the biggest pork consumers, or soybeans.

Less likely is that many would have seen what I read a few days ago in the Business & Finance section of The Wall Street Journal (p. B14,  Aug. 7) i.e.  that many economics experts and finance mavens now believe our nutso occupant of the Oval Office is using tariffs to "strongarm the Fed"  into cutting interest rates.

Look, we already know Tyrant Trump has been on Fed Chair Jerome Powell's case the past year to cut rates.  We know the swine has berated the Fed incessantly about lowering rates,  going so far as  to try to tilt the Federal Reserve Board with two unqualified lackeys: Herman Cain and Stephen Moore.  Fortunately, after much media heat centered on their woeful and clown -like backgrounds both backed out. 

But Donnie Dumpsterfire  never let up on his Fed attacks and search for leverage so pushed a new toady - Judy Shelton  (see photo above)- who, wait for it:   Yearns for the resurrection of the gold standard.   As a recent (July 3rd) Reuters report  described her:

"She has long advocated a return to the gold standard for the U.S. dollar, something most economists regard as a deflationary regime that would curb the Fed’s ability to respond to an economic downturn. She has also criticized the central bank’s post-crisis policies of zero interest rates and bond buying.

She has changed her tune in recent weeks, arguing that the Fed should be cutting rates to allow the administration’s tax cuts and deregulation to benefit the economy. That seems expedient, perhaps indicating that Shelton will in fact reflect the president’s views at the Fed."

Well, we all ought to worry if she succeeds in getting  a place on the Federal Reserve board, especially if this vapid virago still believes the gold standard is an answer. And also if she practices the financial philosophy of "political winds' directions", i.e. criticizing Fed near zero interest rates when Obama was president, but now ready to go against them with Dotard having seized the office with the Russkies' help and an archaic Electoral college. 

But the percipient will see her as yet another Trump pawn to try to push the Fed to fulfill his will, i.e. to lower interest rates to try to stimulate the economy when it doesn't need it. The increased tariffs (up to 10 % on all Chinese goods now)  are an even more potent force in this direction, because they tend to create weakened economic conditions for the U.S. which need addressing and for which few other options exist. The problem is that they are destroying the livelihood and  financial stability of the nation's ordinary (non-corporate) farmers. See e.g.

https://www.cnbc.com/2019/08/10/trump-is-ruining-our-markets-farmers-lose-a-huge-customer-to-trade-war----china.html


Key takeaways from the piece:

• U.S. farmers lost their fourth largest customer this week after China officially cancelled all purchases of U.S. agricultural products, a retaliatory move following President Donald Trump’s pledge to slap 10% tariffs on $300 billion of Chinese imports.
• China’s exit piles on to a devastating year for farmers, who’ve struggled through record flooding and droughts that destroyed crop yields, and trade war escalations that have lowered prices and profits this year.
• “It’s really, really getting bad out here,” Bob Kuylen, a farmer of 35 years in North Dakota, told CNBC.
• “There’s no incentive to keep farming, except that I’ve invested everything I have in farming, and it’s hard to walk away.”

Process that, and then the meme that Trump is using tariffs to strong arm the Fed.  They are not mutually exclusive. Indeed, in the WSJ Op-ed 'A Fed Reversal Will Store Up Trouble' (July 30, p. A17) we learned:

"The escalating U.S. - China trade war had led bond markets to price almost three rate cuts by the end of 2019 at one point, signaling the Federal Reserve will do whatever it takes to maintain GDP growth"

This after already observing (ibid.), the action has been spawned by "Trump's increasing criticism and calling for rate cuts and another round of quantitative easing."    Put the two together and what do you get?  Well,  that Trump is stoking the trade war with his escalating tariffs and will continue to do so to try to strong arm Powell's Fed into giving rate cuts.    But as the authors (Danny Yong and Nikhil Srinivasan)  also warn:

"By folding to these external pressures and cutting interest rates while U.S. equity markets are at all time highs and unemployment is at multi-decade lows the Fed is putting its credibility at stake."

Worse, the meme is out that a prime Trump Toady, Peter Navarro, in league with Trump, will trigger another recession with this madness. (cf.  WSJ, 'A Navarro Recession?',  Aug. 8, p. A14).  The Journal editors had a clear warning for Trump, writing:

"The irony, and a dangerous one, is that Mr. Trump doesn't seem to understand that his trade policy is contributing to exchange rate instability and a rising dollar."

Which is interesting given that Dotard - from his tweeting rant (see top quote)- accused the Fed and Powell of the rising dollar.  It's clear even the WSJ perceives he really is the dumbass we all suspected, certainly  in terms of  his inane  economic policies. The editors go on:

"When he slaps tariffs on China he reduces the demand for Chinese yuan. He also encourages capital flight to safe havens like the dollar, which encourages more capital into dollar instruments and the U.S."

In other words, Trump is acting the part of a mentally deficient kid playing with matches near a gas stove. The moron has no conception of cause and effect- i.e. between his tariffs and the flight to the dollar (raising the greenback's value).  As the editors conclude:

"If Mr. Trump can't strike  a broader trade deal with China before the election, he should at least call a trade truce to reduce the damage...Trump's willy-nilly trade offensive could be the mistake that turns a slow down into the Navarro recession'"

Let's also note that in an earlier editorial ('The Confusing Federal Reserve', July 30, p. A16) the WSJ editors were alarmed enough by the Fed's quixotic moves re: rate cuts that they noted: "This contributes to the suspicion in markets that the Fed is really trying to accommodate Mr. Trump's public demand for rate cuts."

In other words, Powell and the Fed have shown - and likely will further show  - even with rate cuts into negative interest territory they they are at the beck and call of the narcissistic autocrat in the White House.

This elicits the question: Does Powell even know that he and his compadres are being strong armed into rate cuts?   To quote the WSJ editors (ibid.):

"We'd like to think that's not true and it's dangerous for the Fed's credibility if it is.  But as long as the Fed bounces from tightening to easing based on inconsistent logic, the suspicion will persist."


See also:

China | Donald Trump | Trade

Trump’s Sudden Surrender in His Trade War with China Shows He Still Has No Idea What He’s Doing

Why Social Security Privatization Cannot Be The Solution To Economic Inequality

With the roaring Bull going past ten years now it was only a matter of time before  one once again beheld the siren song of the Social Security privatization nabobs.

Sure enough, a definite snake oil pair (Jeff Yass and Stephen Moore) recently emerged with their misinformational op-ed 'Conquer Inequality With Private Social Security Accounts' (WSJ, July 26, p. A15)

As usual, and ever since this misbegotten idea was first touted by Gee Dumbya Bush, the two current hucksters promise it will relieve or solve all current and possible future financial ills - and there's no doubt their pitch is to the Millennial demographic.  After all, it is this group which has been told over and over that their wages are subject to FICA taxes to help support those "greedy Boomers".  So why not have their own money in their own accounts? Well, plenty of reasons.

The biggest lie is that accepting such a scheme will ensure that "workers will become owners".  Nothing is further from the truth.  You will no more "own" your money than you own your 401 (k), meaning you cannot do whatever the hell you want with it without penalties.  There will inevitably be a Wall Street outfit that controls your funds so you are only under an illusion of ownership.

Just as 401(k)s have misled millions into believing they are really finance mavens and savvy investors, so Messrs. Moore and Yass seek to have you  believe just having a private Social Security account will pave the way to wealth.  As they put it:

"Each individual account (would take 10 % of payroll taxes)  be invested in a low fee index fund of roughly two thirds stocks and one third bonds and would mature at the federal retirement age.   This way every working American  - from the minimum wage waiter to the truck driver to the store manager-  would become a genuine owner building real wealth for himself and his family with each paycheck."

Not so fast there, buckeroos!  First, as the authors of The Great 401k Hoax (Wlliam Wolman and Anne Colamosca) have observed: 401ks were never set up to be investment vehicles, but savings vehicles!  Ditto for Social Security monies.  They were never ever intended to be  paycheck "seed corn" to buy equities or gamble in Maul Street's casino but to supplement pensions in the retirement phase.  Financial specialist Steve Rattner, who I daresay has more educational heft than the two WSJ clowns, has put it best:  "Just as I would not be so kunckleheaded as to perform my own surgeries, I would not be so addled as to believe I can do my own investments. Not unless you are a skilled financial expert or planner:."  And from the annals of most Americans' saving experience and use of money 9 of 10 are not - finance mavens that is. Hence, they have no more business managing their Social Security FICA monies in investments, than they do for 401(k)s.    Certainly not putting money in stocks in any 'index funds" - or more fully managed funds.    Look, you can lose your ass with a bear market just as easily in the first as in the second.

Let's explore this aspect. Investment and finance specialist William J. Bernstein in a MONEY magazine interview in 2012 went through the biggest retirement investing mistakes - most of which violate life cycle investment principles. (MONEY, Sept., 2012, p.  97).  His rule of thumb which thorough research has validated is that the ordinary person needs "20 to 25 times the residual living expenses - the yearly shortfall you have to make up after Social Security and any pension".

So, let's say you do the math and find out on retirement - say at 67 - you will need  $3,500 in monthly living expenses, to pay utility bills, meds, groceries, Medicare supplement premiums, etc.  Then if you know Social Security will pay you $2,000 a month that leaves $1,500 to cover with savings, or safe investments. (Bernstein advises safe assets such as U.S. Treasury Inflation Protected Securities)  12 times that is 12 x   $1,500 = $18,000 per year.  And 20 times that 'magic number' is $360,000.  This is the yearly shortfall to make up  if, say at age 67,  you project the probability of living 20 more years.  The increased (5) factor, e.g. the yearly amt. by 25,  provides a greater safety margin. Hence, the more advisable saving total outside of Social Security is $450,000.

Bernstein is also adamant that the older the worker is the greater the need to pull back from equities.  The reason for that?  The closer you are to retirement, the more difficult it will be to make up the lost earnings - say if you find yourselves in a prolonged bear market, or a major stock crash. Yass and Moore take no account of this in their blather about "owning" private accounts.  The outcome if this is not taken into account?  "There's a significant chance you're going to be eating Alpo when you're 85." according to Bernstein.

WSJ letter writer Don B. Stuart, responding to the cockeyed nonsense of Moore and Yass (p. A14 yesterday) noted a similar concern:

"Is this plan only for those with 40-plus years remaining? What about those with only a decade left?  Their risk may be too high."

Which was exactly Bernstein's point and why the individual person's "life cycle" horizon must be reckoned in, else it's a pile of foolishness.

Do you really think Yass and Moore give a hoot if you're eating Alpo daily at 85? Of course not. They're merely interested in snatching FICA taxes to stuff into the maw of Maul Street to support a stock market investment scheme that has absolutely no assurance of avoiding losses.  Interestingly,  the WSJ authors dodge who will compensate you if a bear market comes along and you lose half of your invested money.   (Let's also bear in mind you'll need a 100 percent gain to get to breakeven after a 50 % loss.)

Letter writer Stuart also points out, reinforcing Steve Rattner's earlier observation about people not doing their own surgery either:

"Yes, wealth is created saving and investing over a long period of time. But this is hard for individuals on their own."

Especially in the stock investment sphere! Speaking for myself, I self-studied finance, stocks, mutual funds and bonds for over five years before investing in Janus Worldwide Fund once we left Barbados and moved to the U.S. in 1992.   This was in a 401(k) provided by the (then) radiotherapy software corporation for which I was a technical writer and regulatory specialist.  The insight provided by education paid off and this Janus fund racked up huge returns for the time I was in it (pulled out in 1996, before leaving the company) and as fate would have it, before the Fund earnings tanked.

The point is not everyone in a 401(k) will have the time or energy to study investment strategy, the ins and outs of mutual funds and their expense ratios, whether 'front loaded' or 'back loaded',  and the nature of P/E ratios. Hence, they won't be able to make an informed decision - as Mr. Bernstein puts it -  "To know when to take the money off the table".

Again, this is why the 401(k) was designed as a savings vehicle, not an investment one, and neither is Social Security.  Imagine, for example, if you're a truck driver at age 45 and could take the WSJ hucksters' advice of diverting your FICA taxes into a private account. What if a bear market or stock crash hits 5 years before you retire?  Think you will escape that Alpo at age 85? Think again.

The value of Social Security is precisely because it provides a stable income stream that will not go down the next month or the one after.  Retirees can make financial decisions precisely because they know what this income flow will be.  Indeed, a second WSJ writer (Robert J. Sartorius, an FCA) also takes issues with the authors noting:

"The 10 percent to which Messrs. Yass and Moore refer is simply not available to be saved and invested because Social Security is currently funded on a 'pay as you go' basis."

The writer adds that in order to make a stable transition to the private accounts scheme invoked by Yass and Moore, would require "an additional federal debt approximating $800 billion per year."

This would be needed "to pay current benefits no longer covered by the 10 percent of payroll being diverted."

Interestingly, this is a critical aspect  - the addition to the deficit - most of the snake oil salesmen ignore.   One therefore wonders if they just expect current retirees in the existing system to just suck salt....or eat Alpo.

In ending, may I also remind people, that  if they DO have 401(k) money in equities they are referred to as "dumb order flow" and "chickens to be plucked" by the Maul Street wizards, quants and casino operators? (Referenced in a WSJ piece from 2010). Like the 'Wizard' in the land of Oz, these folks never want you to see what actually goes on behind their curtains, including the high frequency trading (done by special algorithms) which triggered the "flash crash" of May 6, 2010.

How influential is flash or high frequency trading? According to a The Wall Street Journal   article from 9 years ago: ('Fast Traders Face Off with Big Investors over ‘Gaming’, June 30, 2010, p. C1) it accounted for two-thirds of total stock market volume. All other things being equal, that meant unless one had access to a flash trade system or algorithm himself, he had a 2 in 3 chance of being victimized by flash trade.  That probability is even higher now given the much greater extent to which HFT is used. 

Yass and Moore mention none of this, nada, they only expect the semi-educated and gullible  to take their word that they have the ticket to transcending inequality. 

Don't believe it for a nanosecond!

Powell's Fed Has NO Business Propping Up Trump Or The Markets - With Interest Rate Cuts

"Cripes, I don't know how to control this stupid asshole! I guess I'll just give in."


Barely 4 days ago, I was unable to believe my eyes as I read:

Web results

Fed Begins Debate on Whether to Cut Rate as Soon as June - WSJ

https://www.wsj.com/.../fed-faces-challenging-rate-decision-at-june-meeting-115598337...

Web resultThis was not a headline designed to inspire confidence among ordinary citizens - especially dedicated savers  not prepared to gamble their money in Maul Street's casinos.  Thus, we were not encouraged on reading (ibid.)Barel"A month ago, Fed Chairman Jerome Powell played down speculation of a rate cut this summer. Now officials at the central bank face a darker economic outlook and heightened trade tensions, making a rate cut possible—if not at their meeting on June 18-19, then in July or later."

"A month ago, Fed Chairman Jerome Powell played down speculation of a rate cut this summer. Now officials at the central bank face a darker economic outlook and heightened trade tensions, making a rate cut possible—if not at their meeting on June 18-19, then in July or later."

This was appalling news especially for dedicated savers. Worse, it portends an ill financial wind for all Americans if it helps to accelerate the economy toward recession rather than improve it. That happens as the Fed seeks to stimulate an economy already over leveraged (deeply in debt) and with employment near full capacity.   But the word is that Powell and others on the Fed Board are "puzzled as to why inflation hasn't risen more".  (Rising inflation would signal a need to raise interest rates.)  Well, there are two reasons: 1)Wages remain stagnant so the usual inflation driver of higher wages in flush times isn't there, and 2) The Fed continues to use an inflation index that's out of date, not factoring in food price increases or medical inflation, especially for meds.

 Barely two weeks earlier, one read ('Investors Expect Rates Cuts By Year's End Despite Data', WSJ, May 16, p. B 10):

"Federal funds futures suggest investors are more convinced than ever that the Federal Reserve will lower interest rates multiple times by the end of the year. Economic data suggest that is too drastic a bet."

Adding:

"Fed future data show the market pricing in a 26 percent chance of the Fed lowering rates twice by the end of 2019 and a 7.5 percent chance of the Fed doing it three times. That is up from 6.7%  and 0.3 % a month ago.

The numbers seems to stand at odds with economic data which overall have shown a strong labor market, inflation expectations that are tame, and modest profit growth well into the economic expansion.  After all, the last time the Fed cut rates was in 2008 - when policy makers were in the midst of grappling with the worst financial crisis since the Great Depression and financial markets were tumbling..

And more recently (June 10) our memories were refreshed (WSJ, 'Business and Finance', p. B8):  

"Then there was the Fed rate cut in September, 2007, which gave the DOW Jones Industrial Average its biggest one day percentage gain since 2003.  Fast forward one year and the U.S. was in the teeth of the financial crisis."


All of which shows me the Fed may be tempted to hit the 'chicken switch' before it's necessary and trigger what it's trying to avoid. Indeed, digging an unnecessary rate hole that may well be needed  (i.e. to really lower rates) if and when a recession does hit - as something like 70 percent of economists are forecasting now - by next year. 

Indeed, signs we're hurtling toward recession were amplified in the more recent article  ('Sluggish Jobs Data Push Treasury Yields Toward 2 Percent', WSJ,  June 8, p. A2) which ominously reported:

"Worries span the globe. The yield on 10 year German government debt Friday declined to record lows below negative  0.2 %.  Japanese government bonds of the same maturity traded below negative 0.1 %.  About $11 trillion of bonds around the world, concentrated in Europe and Japan, carry negative yields now accounting for about 20 percent of all debt world -wide according of Torsten Slok - chief economist at Deutsche Bank Securities."

This debt bogeyman is for real and people would do well not to minimize it.  Indeed, as far back as two years ago The Financial Times reported on the IMF's growing concern about exploding global debt (April 17, ('IMF Sounds Alarm On Excessive Global Borrowing') :

"The world's $164 trillion debt pile is bigger than at the height of the financial crisis a decade ago, the IMF has warned, sounding the alarm on excessive global borrowing.  The fund said the private and public sectors urgently need to cut debt levels to improve the resilience of the global economy, and provide greater firefighting ability it things go wrong.

Fiscal stimulus to support demand  is no longer the priority the IMF said Wednesday in a report published at its spring meetings in Washington. "


But instead of heeding that warning, the Fed appears hell bent on ignoring it to placate and feed investors' addictions to the already senescent BULL market while appeasing Trump.  This is the swine who's berated the Fed incessantly about lowering rates,  going so far as  to try to tilt the Federal Reserve Board with two unqualified lackeys: Herman Cain and Stephen Moore.  Fortunately, after much media heat centered on their woeful and clown -like backgrounds both backed out. But Dotard never let up on his Fed attacks, and in previous posts I worried about Fed Chairman Jerome Powell bending to the fake Fuhrer's will.  

We also are well aware here - as Trump likely is - the only way we may see the end of this orange fungal infection is if the economy crashes. It's now on the verge of doing that (via a potential recession) but any Fed intervention will try to interfere to halt that.  Will the Fed deliberately be trying to help Trump stay in office? Not likely, because there's no way in hell Powell is eager to take 4 more years of Trump's temper tantrums than the rest of us. No, he'd likely want to try to avert a recession - with the best of intentions - except that "the road to hell is paved with good intentions."

However,  the very act of the Fed interjecting with  lower rates may well preordain two hellish consequences: 1) a Trump re-election,  and 2) Ultimately a much worse recession especially if a re-elected Trump  returns to his tariff terrorism - which has already wrought untold havoc. (See e.g. today's lead WSJ Editorial, 'Paying for  Mexico's Wall', noting: "Trump's use of tariffs as a bludgeon on migrants has economic costs. The threat of 25 % tariffs on Mexican exports is gone for now, but businesses can't be sure it won't come back."  )

Never mind the last minute phony end to the Mexican tariffs.  Which we now know Mexico had agreed to months ago, so Dotard manufactured this latest tariff crisis on his own. As usual,  employing chaos and threats to advance his feral agenda, while keeping businesses and American consumers off balance.  Former Obama CIA official Ned Price has this scum pegged perfectly, noting in a recent (June 9)  NY Times piece:

 "He manufactures a crisis, galvanizes his base around the challenge, leaves the definition of success undefined, pretends to play hardball and, lo and behold, finds a solution that entails little more than window-dressing, if that. For Trump, it’s a win-win. But the loser tends to be the American people, oftentimes Trump’s base first and foremost,” 

Why doesn't Trump's base see they are his tackling dummies, used for sport whenever he feels the urge?  Well, because they believe they are "in on the secret" and hence accept whatever drubbing he delivers so long as they might get to see the 'snowflakes'  cry.   Call it schadenfreude but with a nasty blowback.

As for the stock market, Powell wouldn't be doing it or investors any favors by jazzing it up with a rate cut. While it will temporarily boost share prices, it will he at the expense of a mammoth asset bubble. Also, an asset bubble leveraged into being by massive debt, creating an even more unstable financial system.

To fix ideas, let's note here that "support demand" (see FT  quote) refers to support of  "aggregate demand", i.e. getting citizens to spend more - which was the basis for the Trump-GOP tax cuts. This was an incredibly bad play given how much the tax cuts have already added to the debt, and the deficits going forward.

Economist and former Clinton Treasury Secretary Robert Reich warned on 'All In' Friday:

"With all the ancillary damage from these tariffs, and threatened tariffs (against Mexico) you could find the economy in recession before the election."

Chris Hayes then asked if the threats are large enough to knock us from an expansion into a recession, i.e. what's the case if it could.  To which Reich responded:

"Well, it's the interaction between the tariffs and the slowdown that's almost inevitable given how long this recovery has gone.  I mean recoveries don't go forever, they eventually slow down. Also American companies and American individuals are deep in debt, which is another thing that's not talked about very much.

But that debt is also a problem. Then, you have that tax cut for big corporations and for the very wealthy that did not trickle down. it just added two trillion dollars over the next ten years to our debt.

Now put all of that together and you get an economy that is very, very vulnerable."


Reinforcing this take, as The Denver Post noted (June 9. p. A):

"Recessions typically result when the Federal Reserve tightens monetary policy to cool an overheating economy. ..The past two recessions came on the heels of financial excesses, a massive stock market bubble in the early 2000s and an unprecedented housing bubble that triggered the financial crisis in 2008."

Yet now Jerome Powell's Fed seems intent on producing an even bigger bubble, by juicing stocks using interest rate cuts.  Has he been intimidated by Trump into choosing this unwise route? We don't know but the signs are not good. Following the track of the last eight months - and Trump's numerous eruptions - it really does look like Powell has caved. Both to greedy Maul Street investors pressing for more cheap money crack,  and to Dotard.

The questions then become: a) Is it better to cut rates now and in so doing create an asset and debt bubble with even worse effects later, or b)  allow financial destiny to unfold as it will, which may mean a recession - but it will effectively help get rid of the disease called Trump.  I vote for the latter out of plain common sense.

I mean, as NY Times columnist Michelle Goldberg put it on the same 'All In' show, how much more can we take?  Millions of citizens are already tuning out, and despairing that nothing can remove the national disease emanating from the White House.  This is especially after Trump's despicable and dishonorable performance for the D-Day commemoration on Thursday (insulting a real warrior, former Marine Robert Mueller, as well as disparaging Nancy Pelosi - in the shadow of the grave markers at Normandy. This from a coward who used 'bone spurs' to escape from the draft at least 5 times.)

And then we learned in the aftermath that this preening orange, 2-legged maggot wants to insinuate himself into the Independence Day celebrations!  Where does it end? Has Dotard not yet learned Presidents are to be seen and only occasionally heard - generally in their State of the Union spiels?  Four more years of this fuck-turd! Give me a recession anytime!  We need a total disinfection and fumigation of the country. 

So no,  Fed chairman Powell, no rate cuts! Stay your hand and allow the course of history to do what it will. If it means Trump's lone re-election benefit has evaporated, so be it. If it means investors are crying in their beer, we can live with that.  


See also:

P.M. Carpenter

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Donald Trump | Mexico | Trade

Trump's Mexico/Tariff Scam

And:

Economic Policy | Foreign Policy | Trade

Trump’s Mexico Tariffs Are About White Nationalism, Not Trade

Yes, The GOP And Trump Want To Give Even Bigger Tax Cuts To The Already Rich

It seems clear with every move they make the GOOPs are determined to toss this country into history's dumpster, certainly financially - as well as in their protection of Traitor Trump. But it is the first that concerns us here.  Namely the news,
House Republicans Move to Extend Individuals' Tax Cuts - WSJ

The feckless GOP plans are now to extend the existing Trump tax cuts, despite massively growing  deficits .  Clearly these poltroons believe that at least making a show for an extension will win them the hearts and minds of their GOP base- who will then turn out in greater numbers for the midterms. But I have news for them: that base doesn't care one way or other, they are already complacent with the crumbs they've received and will not turn out like the Dems.

Meanwhile we learn (ibid.):

"On top of last year's $1.5 trillion tax cut, the new proposal would reduce federal revenue by $613 billion over the next decade, according to the nonpartisan Joint Committee on Taxation. Most of that cost is packed into the end of the  next decade and the cost beyond that would be much higher."

And bear in mind, that means your kids and grand kids will be paying the freight - mainly to support the lifestyles of the rich, the famous and the corporate - since they will reap the greatest rewards by the extension as they have the 2017 cuts. (Politifact has found that median income families received only about 6.6 percent of the $1.5 trillion tax cut, while 93.4% went to the corporations and top earners.)

In the words of Lloyd Bloggett, a Texas Dem quoted in the above piece:

"We have something that is truly disastrous headed our way and it's not just a hurricane."

What is it?  How bad? In a separate piece in the same issue ('Deficit Widens On More Spending'), we learn:

"The U.S.  federal deficit nearly doubled in August from a year ago, as government spending swelled and revenues decline".

And again, let us make note here the GOP's planned tax cut extension will starve revenues even more.

We also learn:

"The government ran a $214 billion deficit last month, compared with a $107.7 billion budget gap in August, 2017... the Treasury Department said Thursday."

So, even as the great jobs and growth narrative is spreading, we are being undermined by massive deficits, debt.    The biggest revenue -starving culprit?  The ill-advised cut in corporate income taxes.


As we further note (ibid.):

"Corporate income taxes in particular have dropped off. The Treasury said Thursday
gross corporate taxes have fallen 20 percent so far this fiscal year, while indiviudal
tax receipts are up 1 percent"

The loss in corporate tax revenue might  - in a stretch - be worth it - if the bastards paid decent wages to their workers, but as per my previous post, we know this isn't the case.  Worse, because the Congressional Budget Office now projects a total deficit of $793 billion for fiscal year 2018.

The "big picture" of U.S. debt isn't any better, as the CBO notes. As per a WSJ op-ed reveal (Sept. 15-16, p. A15):

"The U.S. owes $21.5 trillion of Treasury debt, the majority of which is scheduled to be refinanced in the next eight years. - disregarding the additional $1 trillion required by the 2017 tax reform and an estimated $100 trillion of unfunded entitlement spending ahead."

Incredibly, three days ago there we beheld one of the biggest tax cuts propagandists (Stephen Moore,  'The Corporate Tax Cut Is Paying For Itself', WSJ, p. A13) scribbling:

"Thanks to the magic of compounding the corporate tax cuts will yield more than $6 trillion in additional GDP over the next decade..."

But seems unable to reckon in that additional GDP growth doesn't translate to revenue growth, i. e. to pare back growing deficits as the CBO forecasts, though he does add:

"Perversely, because the economy is bigger now than expected, the CBO has revised upward  its estimated cost of the tax cut..."

Well, duh, of course they've revised it upward given - as pointed out above - corporate tax revenue has fallen off 20 percent this year, and will continue to fall off each year it's in effect.  In other words, never mind the GDP growth, it will not overtake the loss in revenue growth (including from individual income tax cuts).  But this is the sort of fantasy land we now inhabit where 'up' is down, and 'down is 'up'. Blame a lot of it on the lying landscape imparted by Trump and his pack of maggots,

Folks, let's not  accept bullshit or pretend: we are not swimming in a literal sea of red ink. In this environment the proposal of an extension of tax cuts borders on the derelict and criminal, and those pushing it need to have both their sanity and patriotism questioned.

See also:

Another Tax Scam for the Rich