Trump's 401(k) And Stock Market Blather Shows He's Out Of Touch With His Base

Trump at a recent rally in Pensacola bloviating about 401ks. Most of his base don't have one..

A question that comes to mind after a recent Dotard spiel about 401(k)s is whether he really knows his base, his indefatigable deplorables who appear prepared to suffer any insult on behalf of their little dolt messiah. For reference, a recent New Republic article ('It's the Culture, Stupid!', November, p. 14) provided this insight on his prime supporter:

"In last year's election, according to an analysis by political scientist Tim Wood, 61 percent of the poorest whites - those in the bottom third of income distribution - voted for Trump."

Sixty one percent of the poorest whites. That is, a demographic that likely would no more have a 401 (k) than they'd be able to afford an immediate annuity.  But it seems Trump,  aka Donnie Dotard, has no clue about their financial capacities, or he doesn't care. (After all, he did offer the disclaimer remark after being elected "You all knew I was a snake and you still put me in office!"   Well, not everyone, asshole .)

  As observed in a recent  Bloomberg report:  Trump has been trying out a new "campaign" slogan: “How’s your 401(k) doing?” The answer for more than half of Americans is that they don’t have one.  Having one means you are earning enough in a salary to salt money away in such a plan, i.e. you have disposable income. The problem is that most people in the bottom third of income don't have such disposable income. These are exactly the poor white Trumpies.

Alicia Munnell, director of the Center for Retirement Research at Boston College, commented in response:

"I’m not sure he understands that only a fraction of the population has 401(k)s, or he just may not realize that he’s speaking to the privileged few.”

Personally, I suspect he knows he's speaking to the privileged few and his supporters are either too dumb or brainwashed to give a shit.

The fact is only a third of workers contribute anything to their retirement accounts, according to a Census study released this year. Among workers in the bottom half of the income scale, less than 25 percent participate in a retirement program, according to the GAO.. With wages largely stagnant for most Americans in recent years, saving for retirement has been crowded out by other expenses. Student debt and auto loans are at record levels, according to Federal Reserve data released in February, and overall consumer debt is rising at the fastest pace in three years.

According to Douglas Holtz-Eakin, president of the American Action Forum, and former chief economist to the Council of Economic Advisers under George W. Bush:

“You can give people all the tax-deferred accounts you want, but if they don’t have enough money it’s not going to work,”

Despite that, Dotard has repeatedly tested out the line at a fundraiser, a campaign rally and in a White House meeting, predicting that the rising U.S. stock market will help him win re-election. But for his supporters to make that same error again, and I do believe when their healthcare is pared back from his tax cuts they will see it's an error, they'd need to have 401(k)s and be getting benefits from them. They don't and aren't.

The truth? Only about 45 percent of private-sector workers participate in any employer-sponsored retirement plan, and the lower-income workers in Trump’s political base are the least likely to hold money in such an account, according to the Government Accountability Office. Again, this isn't startling given their wages - assuming they have any - are likely so low they can barely afford their rents and utilities, far less groceries. So there's nothing left at the end of any given week to put into a retirement fund.

Donnie Dotard - in another disconnect  - also  mentions the stock market almost daily in tweets or public remarks. He intends to take direct credit for record highs by the Dow Jones Industrial Average and other indexes. He seems not to appreciate that had Obama not pushed for a $797 b stimulus package back in 2009 - passed by Dems - we'd likely still be in a great Depression.  All the financial indices and data that followed the great market meltdown in 2008 showed that without a stimulus - after the credit freeze - the recession would have morphed into depression. By now we'd likely still be in it, with 30 million or more unemployed.

Trump in his elitist, privileged mind, seems not to grasp that only about 14 percent of U.S. families directly own stocks, an asset class dominated by the country’s top earners, according to the Federal Reserve.  (This direct ownership definition directly contradicts Jill Schlesinger's claim on CBS nine days ago that 45 percent directly own stocks. But she was including those who have mutual funds in their 401ks, which is not direct ownership.)

Meanwhile, as Bloomberg reports, Dotard has  rolled back efforts to expand retirement savings options to more middle-class and low-income workers. This involves neutering the fiduciary rule.

For a dolt propelled into office by a sense of grievance - from poor whites who feel left behind economically - Dotard's continual references to the stock market and 401(k)s risk alienation.  This according to Austan Goolsbee, a former chairman of the White House Council of Economic Advisers under President Barack Obama.  Goolsbee,  in the aforementioned Bloomberg piece,  puts it thus:

“As a political slogan, ‘how is your 401(k) doing?’ suggests he’s most interested in the one-third of people who have a 401(k). The more you highlight how great that group of financial winners is doing, you at least run the risk of angering and irritating the very people who revolted against what they perceived as the financial and political elites in the first place.”


White House spokeswoman Lindsay Walters said Trump’s statements reflect “a strong economy” that is “good news for everyone.”  She added to this initial BS by claiming- in an email statement:

“For the Americans that don’t have the opportunity to invest in a 401(k) plan or who choose not to, the Trump agenda of lower taxes, higher wages, and better jobs allows them to save more on their own, and potentially have a better chance of finding a job in the future that provides those benefits,”


Of course this is codswallop that only the most gullible, uncritical thinker would swallow. No set of financial data supports it, period. The agenda of trickle down via lower taxes on the richest, indeed, has always been shown to curtail economic growth and jobs as well. A Financial Times analysis of the Bush tax cuts appearing in the FT issue of 9/15/10 showed precisely this.  Other analyses from the Reagan tax cuts in the 80s showed similar slow growth, coupled with exploding deficits. ( Deficits, by the way, which were later invoked to cut social services and even Social Security (by raising the retirement age.)

It also appears that at least some of Dotard's supporters may be wise to his con. An October Politico/Morning Consult poll found that only a third of voters think Trump “cares about people like me.” Trump’s tax overhaul is opposed by a two-to-one margin because independent analyses have found it largely benefits the wealthy, according to a Quinnipiac University poll released Dec. 13.

Trump also appears not to be aware that the 401(k) was never intended as an investment vehicle but rather as a saving vehicle. This was pointed out by William Wolman and Anne Colamosca, the authors of The Great 401k Hoax.   This saving dynamic was further reinforced and assisted by companies matching the savings of employees.   It was only after this matching diminished that risky investment strategies were emphasized for the 401(k).  But these stock-mutual fund investments were never originally envisaged for ordinary small fry investors with  little disposable income they could afford to lose. (As the stock crash showed in 2008).

Another huge theme of the authors is that labor is devalued precisely because we live in a "Judas Economy" where capital is revered over it.  Look at the abnormal degree to which companies opt for stock buybacks to inflate their stock P/E ratios rather than create enough new jobs.

One of the most disgusting indices as the authors note, is that productivity in relation to GDP has increased more than 40% in the interval since 1973 even as wages-salaries have remained almost stagnant. Of course, one major reason is how "greater productivity" is attained. Often by firing a number of workers and ditching their benefits, and making the remaining force do their work plus that of the downsized one.

The authors' primary advice for little guy would-be investors is to steer clear of the markets until and unless the balance between Maul Street and Main Street is restored. Mainly, that much higher wages emerge which specifically allow more disposable income  to invest so one can afford a measure of loss if such occurs. Otherwise, steer clear and go conservative - saving with a view to ultimately getting an immediate annuity to provide supplemental income as one ages.  A stock crash, meanwhile -  namely in the current bubble - will set millions of 401(k) ordinary investors back years, maybe decades. Hell, they may never get to retire.

Something someone ought to make clear to Trump's followers who praised his stock market and 401(k) speeches for making them believe one day they can strike it rich too. Yep, and pigs fly and I have a beach front acre on Barbados east coast to sell for a Bajan buck. (That's U.S. 50 cents).

Why Dems May Need To Go "Nuclear" To Stop The Repuke Tax Bill

"Hey, , the longer we can bamboozle the base, the better!"

"We got to get this thing passed. Otherwise, our base will fracture, people will stop writin' checks, and the party will crumble under its own weight." Lindsey Graham yesterday.

Let's not mince words: the GOP tax "reform" bill on offer is an unmitigated atrocity. For starters:

- The corporate tax cut is intended to be made permanent, and going from 35% to 20%

- The tax cut for average citizens has been designed to "sunset" in 10 years, so taxes will then increase.

- The tax cut benefit overall for those earning less than $75,000 a year, is $100. That benefit may well come at the cost of cutting Medicaid, Medicare benefits later.

- The overall tax benefit is allotted so that 62 percent of the takings go to the top 1 percent.

- Allows drilling in the Arctic National Wildlife Refuge.(ANWR)

- As reported by the NY Times there is also a plan to change from the Consumer Price Index to the Chained CPI, which move would essentially negate any future Social Security cost of living increases - certainly in a low inflation environment such as we have.

Last night this perfidy was at least temporarily stopped in its tracks,  even after the GOOPs grew giddy after John McCain reverted to sock puppet to back it.  However, a nonpartisan analysis released hours ahead of a planned vote projected the Republican tax plan would add $1 trillion to the federal deficit over the next decade.  Process that! ONE Trillion bucks! That's more than $200 b beyond the cost of the entire Obama stimulus package in 2009, which at least spared this nation from another Great Depression.

The other hit to the Reeps last night came by way of the nonpartisan Senate Parliamentarian who ruled they could not use the "trigger" sunset mechanism to try to contain the deficit explosion. This sent them right back to 'square one' scrambling for other ways to raise revenue,  including reinstating the AMT or Alternative Minimum Tax, and (GASP!) reducing the corporate tax cuts.

Recall the Republicans had contended the vast tax cuts enclosed in their plan would in effect pay for themselves through economic growth. But the analysis, released by the congressional Joint Committee on Taxation, forecasted the tax bill would balloon the deficit even after factoring in the economic growth the bill is expected to generate.  Of course, through U.S. economic history no tax cuts have come close to paying for themselves.

The other aspect of why this wouldn't happen is that corporate CEOs are not even on board with any job creation, despite the yammering of the GOP con men.  Most illuminating was White House economic advisor Gary Cohn's meeting with dozens of CEOs, and most of them giving thumbs down when he asked about potential jobs, e.g.

http://www.businessinsider.com/trump-gop-tax-plan-gary-cohn-bill-2017-11


The moderator (WSJ's John Bussey)  asked those in attendance whether they were planning to increase their business investment if the tax bill became law. The CEOs in attendance didn't seem to be on the same wavelength as Cohn.  While there was a smattering of raised hands in the auditorium, it was clear there were not as many as Cohn would have liked.  You see Cohn asking, almost embarrassed to be caught in the same room with these misfits:

"Why aren't the other hands up?"

Then, realizing he'd get no rational or decent answer, moving on to another question. So there you have it. These CEOs would rather put their tax cut benefit money into stock buybacks and paying out dividends than creating new jobs.

An even more cogent reason not to allow this sham to add to the deficit and destroy lives is that there isn't a scintilla of rational justification for it. At least when other tax cuts were implemented unemployment was high. That isn't the case now as Bruce Bartlett (former economic advisor to G.W. Bush) pointed out last night. We have virtually full employment so the only reason to hang this schlock on citizens is to attempt to spur growth using a ruse that will only be of benefit to corporations and explode the deficit. (The non-partisan CBO forecasts a maximal increase in growth rate of only 0.6%). But as I've noted before, in an environment in which the quality of energy is degraded (lower energy return on energy invested), low economic growth will be the byproduct. Short of creating more efficient energy - say like nuclear fusion - there is no solution for this.


To their credit,  Democrats seized on the report by the Joint Committee on Taxation as proof that the Republican tax is all hot air and flim flam, since it would not do what the Reeps claimed. Hocus Pocus. Voodoo economics, to use George Bush Sr.'s term.  Holding a copy of the report, Senator Ron Wyden, a Democrat from Oregon, said the analysis proved the bill was nothing more than a “holiday bonanza to multinational corporations and special interests."

Fair enough, but if this piece of toxic crap somehow rises from potential ashes today, the Dems need to do more. They need to use their leverage in possibly stopping a government shutdown to extract concessions.  If no concessions are forthcoming, then the Dems refuse to cooperate to avoid a gov't shutdown.   The $64 question: What do the 'pukes want more, their sham tax cuts, OR preventing a government shutdown next week?

Let's first note that the Republicans hold all the power needed to stop a government shutdown on December 8th. They have the numbers, they have control of all branches of government. They do not need the Dems to help them - IF  all their members (mainly in the House) were on board. But, they're not on board. There are just enough rebellious Repukes - mainly Tea Party hard cores / holdouts,  that a shutdown can't be prevented without Democratic votes to stop it.

But should the Dems cooperate? I say NO, unless the 'pukes deliver the following:

-  No spending cuts to try to make up for any unrealized economic growth. That means NO cuts to Medicare, and no cuts to Medicaid.

- NO drilling in the ANWR.

- Revocation of any tax provision to withdraw the ACA mandate  - which would affect 13 million now covered.

- . No use of "Chained CPI" or other means to cut Social Security to lower the deficits because of the tax cuts.

- $100 b allocated for reconstruction in Puerto Rico.

- DACA remains intact and no deportations of the 60,000 Haitians who've arrived since the Haitian earthquake in 2010. Repatriating them would send Haiti into total chaos since there are neither the resources or job opportunities to provide for them.

- Change  all the "permanent" Corporate tax cuts to temporary ones only. And make them fully contingent on the corporations creating jobs.  No jobs, no tax cuts.

Make no mistake that this is a draconian move but the toxic tax plan on offer from the Reptiles  has the potential to hurl this nation into permanent  third world status  - while dramatically increasing economic inequality.

It is also true that people will suffer in a shutdown, but as Lawrence O Donnell put it on his show two nights ago, "Sometimes principles and governance must take precedence."  That is the case now, when we have to look beyond immediate problems incurred with a shutdown  to the need to prevent more radical, widespread destruction and worse suffering in the future.

A Message From Sen. Bernie Sanders concerning this refuse:

The current Republican “tax cut” bill, paid for by the Koch brothers and other billionaire campaign contributors, continues the push to make the rich richer at the expense of everyone else. It would raise taxes on middle class families making $75,000 a year or less and would throw 13 million Americans off of health insurance. And it would do all of these things to provide permanent tax cuts to the wealthiest Americans and profitable corporations that ship American jobs to China while moving their American profits to the Cayman Islands.

But let's be clear. This legislation goes well beyond taxes. Its ultimate goal is to radically transform American society and the role that government plays in the lives of the working families of our country. This legislation will increase the deficit by at least $1.5 trillion over ten years. Mark my words. If passed, the Republicans will then rediscover the "deficit crisis," and push aggressively for massive cuts in Social Security, Medicare, Medicaid, education – higher education in particular – nutrition, affordable housing and more. They will seek to undo every major piece of legislation passed in the last 80 years designed to help working families, the elderly, the children, the sick and the poor.

This is the Republican plan. Huge tax breaks for the rich and powerful. Massive cuts to life and death programs for the middle class and working families of our country.

This is not moral. This is not what the American people want. This is not what our country and our pledge for "liberty and justice for all" is supposed to be about.

That is why I am going on the road this week to talk directly to working people in Kentucky, Ohio, and Pennsylvania about this disastrous piece of legislation. If we stand together – black, white, Latino, Asian American, Native American, male and female, young and old, gay and straight – we can defeat this horrific bill.

See also:

http://www.smirkingchimp.com/thread/greg-coleridge/76490/corporations-and-the-super-rich-tax-democracy


And:

http://www.smirkingchimp.com/thread/p-m-carpenter/76492/the-gops-utterly-uninformed-hasty-tax-bills

Has The Stock Market Dodged A "Bullet" In The "Unlucky Sevens" Streak? NOT If The Reep Tax Cuts Are Passed!

Graph showing the stock crashes for years ending in '7'. (From The Wall Street Journal, p. B18, Oct. 18)

Many headlines have been generated in the past nine months or so warning of an imminent stock market correction or even crash.  Such headlines have included:

'A Case For The Bulls Is Hard To Warrant' - James Mackintosh

E'verything Is Awesome! Now Is The Time To Sell Your Stock' - James Mackintosh

'Warning Signs Mount As Stocks Stumble'   WSJ,  'Business & Finance', Aug.. 21

'Crashes Are Inevitable But That Doesn't Mean Now'  (WSJ, Oct. 9)

Perhaps the pithiest advice offered in these assorted stories was by Mackintosh in his 'time to sell your stocks' piece, noting:

"Investors believe that bear markets only come with recessions, and so reassure themselves that there is no sign a recession is imminent, repeating the mantra that 'economic cycles don't die of old age'. Unfortunately, this is both wrong and useless.

First, 20 percent drops happen outside recessions, as in 1987 and 1966. Second, economic cycles can be killed by a financial crash, and as the late Hyman Minsky pointed out, the longer a financial cycle goes on, the more likely it is to turn to excess and end badly. Worse, there is no reliable method of forecasting a recession, so even if it were true that only a recession can end a bull market, that isn't a lot of use to investors."

Adding:

"When everything is awesome it is best to prepare for things being a little less awesome in the future, even at the cost of missing out on some of the gains."

A few months earlier, Mackintosh's column was preceded by one  ('Do You Have The Stomach For The Next Stock Crash? ) in The Denver Post Business Section, written by Charlie Farrell, the CEO of Northstar Investment Advisors LLC,  wherein he writes:

"For the past eight years, investors have enjoyed a steadily increasing stock market. Memories of the 2008 crisis have largely faded and many investors have forgotten that sinking feeling. But if you want to avoid the mistakes investors made during the last crisis, you should start thinking bad thoughts. Yes., bad thoughts. Start training your brain and your guts for the next stock market decline. Why? Because big stock market crashes and declines happen and they pose a big threat to your wealth."

Of course, Farrell is quite correct and it's been literally known since the birth of the stock market that  all bull markets end in veritable crashes, the purpose of which is a massive transfer of wealth to the upper crust . (See e.g. George P. Brockway,  'The End Of Economic Man'). 

SO there have been endless warnings, some of which have come to pass, i.e. such as those who were correct about the October, 1987 stock crash.   But what about the more recent one in 2008? Too many members of the "dismal science" missed it, perhaps because they didn't put 2 + 2 together to grasp that years of the Bush tax cuts - taking place during de facto 'war time' - preceded it.  Add to that the fact that a bubble had been created and you had all the elements necessary for a crash. All that was needed was a 'trigger' and that was provided by the infusion of financial toxic waste known as credit default swaps. These unstable instruments (buried in bonds) found their way into everything from collateralized mortgage obligations to pension fund investments and most were classified as 'AAA' despite the fact there was no basis to do so.

The failure of the credit agencies themselves to be onto the junk bond nature of CMOs and allowing the presence of fractions of  toxic  CDS bonds in each – then designating the whole AAA - led directly to the collapse of the credit markets in 2008. The realization of their presence across the financial spectrum triggered a credit freeze then crash. (See e.g. http://brane-space.blogspot.com/2008/12/financial-black-hole.html )

Fast forward now to the latest take: that the current market may well be on its way to defying a nasty "unlucky -sevens" trend (WSJ, 'Market's Unlucky -Sevens Streak In Danger', p. B18, Oct. 18). What ate we talking about? Basically, a pattern that has held for U.S. blue chip stocks for at least the last 130 years.

Specifically (ibid.):

"For the past 13 times that a year has ended in seven, going back to 1887, the Dow Jones Industrial Average or its predecessor has suffered a sharp downturn at some point between August and November. The average downturn has been a little over 13 percent according to the research firm Leuthold Group."

The piece by Spencer Jakab goes on to note:

"The most memorable of those drops was 30 years ago. The 1987 stock market crash sent the Dow tumbling 22.6 %, its worst single day percentage loss ever, including a selloff that began earlier and wiped 36 percent off the Dow's value."

So the gist of Jakab's piece is this unlucky streak is "in jeopardy".  But is it really?

The problem with all pattern -based reasoning or templates is that there is no bearing on actual causes, and causal relations. Theodore Moois, the author of the monograph 'Predictions', for example, (p. 156), observes that the factors that most impacted the 1987 crash were the energy oscillations at that time in terms of energy prices, relation to consumption, and lack of investment in new jobs. In particular "stock market plunges manifest themselves during the downward trend of the energy oscillation and hence correspond to a downturn in the economic cycle".

Let us also note in conjunction with this that the 1987 crash occurred after a major tax cut was enacted via the Economic Recovery Tax Act in 1981.  Included in the act was an across-the-board decrease in the marginal income tax rates in the United States by 25% over three years, with the top rate falling from 70% to 50% and the bottom rate dropping from 14% to 11%.  The cut itself may not have been as toxic, but Reagan also launched a $2.2 trillion defense spending spree - effectively burning the fiscal candle at both ends.  This, I believe, set the stage for the 1987 crash.

The 2008 crash occurred after years of the Bush tax cuts which drove the deficit even higher and also:  "The 2000s- that is the period immediately following the Bush tax cuts – were the weakest decade in U.S. postwar history for real, non-residential capital investment. Not only were the 2000s by far the weakest period but the tax cuts did not even curtail the secular slowdown in the growth of business structures."  (Financial Times analysis, in 9/15/10)

What one must conclude is that while the credit meltdown with CDS infusion was the proximate trigger for the 2008 crash, the Bush tax cuts were the effective distal cause - specifically on account of the lack of investment, which itself created an "energy sink" in terms of the transactions between workers-consumers and employers.  Because many workers barely benefitted from the cuts , millions had to go into credit card and other debt to make up for the dearth in earnings. Much of this was needed for health care, and utilities. The narrow vision of these tax cuts -  like the current ones on offer (giving those making over $5m /year a $200k cut) left the jobs-energy landscape as a wasteland. Also, the bubble created - including by selling millions of sub-prime mortgages to borrowers who couldn't really afford them, paved the way to a crash.

For reference, the top marginal tax rate during the Bush years (for income tax) was reduced to 36% from the 39.5% during the 1990s Clinton Years. Over the 1950s and into the 1960s (until about 1964) the top marginal rate was at 91%, going down to 65% by the mid -60s. The low level of 50 % wasn’t reached until Reagan arrived and passed his tax cuts in 1981. (And we note here that the debt as a percentage of GDP rose to nearly 30% during the Reagan years, caused by his tax cuts in conjunction with mind boggling military spending.)

Another telling statistic from the FT study is the growth rate for investment in equipment and software for business. They note that this ranged from 5.7% a year to 9.9% in earlier decades but was reduced to 1.9% during the 2000s.  Meanwhile, “average growth in non-residential structures ranged from 1.3% to 5.7% from the 1950s through the 1990s but declined 0.8% during the 2000s.”
A fair and timely question must be asked at this point:

Why do Republican tax cuts lead, counter-intuitively, to industrial decline, stagnant wages, and finally financial collapse? The fact is that high marginal tax rates strongly correlate with economic growth.  In December 2010 Mike Kimel examined the effects of cutting the top marginal tax rate:

….real GDP also grew faster under Bill Clinton, who raised taxes, than it did under Ronald Reagan. In fact, from 1981 to the present, the period in which Reagan’s philosophies have reigned triumphant, the correlation between the top marginal tax rate and the annual growth in real GDP has been positive. That is to say, higher top marginal tax rates have been associated with faster, not slower real economic growth. Conversely, lower top marginal tax rates have coincided with less economic growth.

The positive relationship between the top [higher] marginal tax rate and the growth in real GDP is very nearly bullet-proof. For instance, it extends all the way back to 1929, the first year for which the government computed GDP data. Additionally, higher marginal tax rates are not only correlated with faster increases in real GDP from one year to the next, but also with increases in real GDP over the subsequent two, three, or four years. This is as true going back to 1929 as it is for the period since Reagan became president. In fact, since the Reagan Revolution took hold, similar relationships have existed between the top marginal rate and several other important variables, like real median income, real private investment, consumer sentiment, the value of the dollar relative to other major currencies, and the S&P 500.  

Lower tax rates in any given year are associated with slower growth rates for each of these variables, whether those growth rates are measured over periods of one, two, three or four years.

What is the takeaway here? Although Treasury guy Steve Mnuchin predicts a stock market crash if the Reepo tax bill isn't passed, e.g.

http://www.businessinsider.com/stock-market-news-mnuchin-says-crash-if-no-trump-tax-reform-plan-2017-10

The fact is that all the historical evidence points to the opposite. I already referenced the lack of investment during the Reagan and Bush tax cut years, but less well known was what transpired before the 1929 stock market crash.  Calvin Coolidge signed into law the Revenue Act of 1924, which lowered personal income tax rates on the highest incomes from 73 percent to 46 percent.  Two years later, the Revenue Act of 1926 law further reduced inheritance and personal income taxes; eliminated  many excise imposts (luxury or nuisance taxes); and ended public access to federal income tax returns. The tax rate on the highest incomes was reduced to 25 percent.

The result was a speculative frenzy in the stock markets, especially the application of structured leverage in what were called at the time "investment trusts." In September 1929, this edifice of false prosperity began to wobble, and finally crashed spectacularly in October,  1929.

Again, I submit that energy oscillations - usually as liabilities  -are also tied to these tax cuts and lower tax rates. It takes energy, after all, to build new plant for labor or even less carbon -generating  energy infrastructure,  e.g. solar collectors, wind turbines.. But if corporations merely use the money to buy back shares as a form of tax avoidance, the energy goes nowhere useful. (As Joseph Stiglitz noted this morning on 'Morning Joe').  Lower tax rates  encourage taking wealth out of industrial companies; the wealth taken out must then be "put to work." That means more money chasing "investment opportunities" (instead of real investment in capital goods and employees), leading to price increases in financial capital or real estate or some other asset.  The end result? An energy use distortion in an environment of low aggregate demand and high deficits (set to get much higher) setting the stage for a deleterious energy oscillation leading to a crash later next year.

I predict that if this Repuke tax "reform" bill passes, then we will see a monster crash (up to 40 %)  by October  of next year.  You can make book on it.

See also:

http://www.smirkingchimp.com/thread/richard-eskow/76434/orrin-hatch-s-bullcrap-on-taxes-is-exactly-that

And:

http://www.smirkingchimp.com/thread/jack-lessenberry/76454/how-the-gop-tax-bill-would-ruin-michigan

And:

http://www.smirkingchimp.com/thread/steven-rosenfeld/76431/why-arent-dems-in-congress-raising-more-hell-to-oppose-the-worst-gop-tax-bill-ever

Ridiculous Memes Persist About JFK's Alleged "Supply Side" Tax Cutting

It is a sad but inescapable fact that U.S. recent history is too often given short shrift in the setting of modern American education. The result is that students later mutate into citizens who are ignorant of past policies of American presidents, and try to insinuate these misperceptions into the modern setting,

Perhaps no more egregious example has been the resurrection of the canard (mainly by the economic Right) that JFK was an exuberant supply side tax cutter. This first crept in at the time Bush Junior (aka Dumbya) was trying to get his tax cuts passed in 2001. Numerous useful idiots emerged in the press at the time,  including Charles Krauthammer,  who insisted Kennedy was even more of a supply side tax cutter than Bush.

Of course this is absolute nonsense, and merely discloses the extent to which Krauthammer (and others) sought to exploit Americans' lack of knowledge of JFK''s actual tax policies.  To this end, artful propaganda proved most useful, including to get the pathetic Senate Dems (under Tom Daschle) on board. In March, 2001, selected snippets -  carefully edited and cherry-picked from a JFK speech before the New York Economic Club in December, 1962  - were show in ads. The snippets-ads ran continuously in three conservative states in which Dem Senators were up for re-election: Louisiana, South Dakota, and Georgia. All three voted heavily for Bush the previous year.

JFK's speech endorsed a general tax cut, and let's bear in mind at the time that the top rate was 91%. JFK proposed lowering it to 65% for the wealthiest, still nearly two times what the current top rate is for them (after the Bush tax cuts). Seldom mentioned in conjunction with JFK's tax cut proposals were the other aspects he had in mind, including:

-the elimination of all tax breaks set up in the form of foreign investment operations or companies

- the repeal of all tax advantages by corporations operating in low tax countries, such as Switzerland

- the repeal of the 100% charitable contribution write-off by the wealthy

- Withholding tax on the investments, dividends and capital of the wealthy to ensure revenues could not be lost by too many shelters or at the 'end point'.

- Tax on investment dividends so that all those earning in excess of $180 k would pay a much higher rate.

-Devices that would prevent 'high bracket taxpayers' from concealing income from 'personal holding companies'.

- An anti-speculation provision that would ensure property or investments were kept at least one year - else no benefit from existing capital gains rates would apply

-The elimination of special 'gift' transfers as well as repeal of the $50 dividend exclusion and the 4% dividend credit.

(Source: 'Battling Wall Street - The Kennedy Presidency', by Donald Gibson, Sheridan Square Press, 1994, pp. 22-23)

In addition - again omitted by the conservo parrots - JFK targeted large oil and gas producers who had been manipulating a (1954) law to avoid taxes and gain an advantage over smaller producers. Sadly, most of his provisions didn't survive the compromises forced by congressional committees (which held JFK's original Medicare, and Civil rights legislation up for ransom.) These were later seized on by LBJ following the assassination he helped to orchestrate. LBJ understood that incorporating these into his "legacy" would further weaken the brains of later liberals who would write him up as  "good Prez" instead of a traitorous rat. We call this out as hagiography - writing fulsome revisionist crap to make a historical figure appear better than he really was. See e.g.

http://brane-space.blogspot.com/2015/01/hagiographers-masquerading-as.html

Kennedy absolutely wanted all these provisions included in any tax cuts, but he faced a rebellious congress which watered all of them down to the point of being essentially non-existent. The final bill that was passed, therefore, was barely a weak sister of what JFK actually wanted. Despite this setback, he never stopped fighting for economic justice via the tax code. Fortunately, the record in the reactionary media at the time supports this fully.

But don't take my word for it, just consult the financial press at the time, to see how they actually felt about JFK's proposed policies and initiatives. One of these, which appeared in Fortune accused him of an attempt to "manipulate the tax level against the business cycle". ('Activism in the White House', June, 1961, p. 117). Two years later, Fortune implored Congress to stop JFK from using tax policy "as instruments to manage the economy". ('The Dream Businessmen Are Losing', Sept. 1963, p. 91).

These aren't just fiction, but historical records of the press of the JFK era and what THEY actually thought of his tax proposals. They are available to anyone with the diligence to seek them out.

Along the same lines, the "central organ of finance capital" - The Wall Street Journal, launched various articles and diatribes accusing JFK of being a "statist" and other things. Some of those articles include:

- 8/6/62 'No Cause for Celebration'; p. 6;

- 3/26/63 'Too Much Money, Too Little Thought', p. 18;

- 8/15/63 'When Friends Become Foes', p. 8

Meanwhile, Henry Hazlitt, contributing editor at Newsweek (The Washington Post's sister publication) was airing many of the same complaints against JFK. These polemics, appearing regularly in Hazlitt's 'Business Tides', included taking JFK to task for his tax policies - including the proposed tax on U.S. business earnings abroad while he also chastised Kennedy for "welfare spending".

All this is germane now as we continue to see codswallop penned by ignorant screwballs, as in the Jan. 31 letters section of the WSJ:, to wit:

-"Kennedy understood 20-plus years before the Laffer curve that if you want more of something tax it less"  (Michael J. Perullo, CPA, Atlanta, GA)

- "JFK is primarily remembered for  Camelot and his tragic death and not for his too brief push for lower tax, pro-growth supply side economic policies" (William Hogan, Savannah, GA)

Both of which claims would have Henry Hazlitt and those early 1960s Fortune and WSJ authors rolling in the aisles laughing at the level of ignorance and gullibility of the two letter writers - if they could suddenly emerge from the past and read their arrant twaddle.

The Laffer-referenced BS by the CPA is especially choice. More of something so tax it less? That absurd supply side ploy was attempted in Barbados, in FY 1987. The usually democratic socialist state had just elected a new government (in 1986) that was determined to experiment for the first time with 'trickle down' supply side bunkum.   After all, it appeared to work with Reagan.

They were warned by the country's top economists (including Dr. Courtney Blackman) that it would lead to disaster, but they took no heed. Finding it more to their liking to pander to a naive (then!) populace to garner votes, they couldn't renege once in power, if they wanted re-election.

The supply side idiocy was implemented for tax year 1987 and beyond and five years later (and the loss of 35,000 (out of 105,000) jobs), with reserves barely at $11 million, the island had to go to the IMF for loans as its cash flow had evaporated. The IMF injected nasty medicine - in the form of across the board pay cuts- and higher taxes, though devaluation of the currency was avoided. The pain is still felt today, as succeeding governments have had to impose ever higher  VAT or value added taxes, including on foodstuffs.

More of something? Bajans learned they got less and less. But even an ordinary common American now is still plied with the tax-foolery analog that if you cut off a man's leg he can run faster.  JFK, of course, would have seen through this idiocy instantly which is why no supply side nonsense appeared until Arthur Laffer drew it out on a napkin for a Reagan economist.


What was the biggest irony of all? That one of Reagan's top professional economists, Martin Feldstein, actually pooh-poohed Laffer's curve. In a 1986 econ article Feldstein admitted he "never believed Laffer" and referred to his "curve proposition" as the "height of supply side hyperbole". The tragedy is that Feldstein's article was snuffed by the Reaganites, and Feldstein himself never broached it, especially after being given an office in the administration. Hey, a sellout is a sellout!

But JFK never was, and would have engendered one of the best tax policies of the 1960s had a bought out congress not forced compromises.

Fortunately, those of us invested in the facts are still around to correct the record and salvage it from these latter day PR and propaganda meisters- at least for those who will pay attention.

The Only Dem "Tax Fake Out" Is From Hillary

Megan McArdle of Bloomberg News claimed in a recent article ('The Democrats' Tax Fake Out', D. Post, Jan. 10),  that both Hillary Clinton and Bernie Sanders want to jump start new programs (worker training, free college, preschool care etc.) but "are probably not going to be able to pay for it with the piddly sums from raising higher taxes on the rich".  She goes on to claim:

"Yet both of them seem wedded to the idea that taxes should not rise significantly for anyone who makes less than $250,000 a year"

Of course, this has since been skewered as Bernie made it clear in a town hall meeting last night (and based on his tax plan released over a week ago) that the middle class WILL have to pay more in taxes, if they expect to reap the enhanced benefits he has proposed.  It is actually Hillary who's vowed middle class taxes won't go up, and even proposed tax cuts. But then she is also the Dem candidate who has indicated we can't afford to expand Social Security or offer free college to deserving kids. After all, you only get what you pay for...or don't!

McCardle cites Bryce Covert of Think Progress "who does a good job of making the case that Democratic priorities can't be funded without broader based taxes.".

McCardle then begs the question - based on Covert's lack of explanation - of why the Democrats are "avoiding this obvious arithmetic". But again, it's Hillary doing so, not Sen. Sanders. And the only reason to dodge higher taxes for the middle class is the same as it was after Obama got elected and the Bush tax cuts finally faced expiration: lower taxes could be used as political opportunism. But Hillary, like Obama, wouldn't inform voters it would mean cuts to their favorite program later. Hence, Obama's 2010-11 advocacy of Social Security cuts (via the chained CPI) and his "Debt Commission". Bait and switch anyone?

But this isn't some new revelation. As early as 2009-10, The Financial Times' Clive Crook warned that continuing the Bush tax cuts would be a serious error, and undermine Democratic -backed social programs.  He showed using carefully documented math - from stats parsed from the Government Accounting Office- that keeping the Bush tax cuts in place (which the Dems did for two years) would have serious repercussions. He was right, and we then saw the chained CPI appear as well as cuts to the SNAP (food stamps) program over two successive years.

I argued in several posts that Americans needed to stop falling for this horse shit and accept higher taxes like Europeans do,especially  if they wished to protect social insurance and other domestic benefits programs.

Last night,  in a Town Hall meeting response to a blunt question from CNN's Chris Cuomo -  on  wanting "big government back" -  Bernie correctly and deftly dodged the acceptance of the loaded language and instead vowed he'd protect the American middle class from further inequality. He also explained how this might translate - in the case of his single payer health program  - into maybe $5,000 a year higher taxes. But before the audience had a collective heart attack he reminded them this would be in place of paying higher private health care insurance premiums of say $10,000 - as many families are doing in exchanges and health coops under the ACA. (Or if they don't have the benefit of a federal subsidy under the ACA and hence have the option of only higher deductible plans).

So pick your damned poison. DO you want $5k higher taxes or $10k yearly premiums (likely to increase each year, as they are doing now - according to the WSJ - by an estimated 9.4%). Sanders also did the math for Cuomo and the audience noting the arithmetic results in a $5k savings.

Another woman asked about the high drug prescription costs and again, Bernie - as he did in Dem debate 2 - vowed to rein in the Big PhRmA price gougers.  His plan, again, is overhauling the entire PhRmA price gouging constellation and forcing them to simplify as well as rationalize drug prices. There is also no reason U.S. seniors have to pay so much more than those in other nations. Why should our seniors and other citizens foot the bill for others around the world? Well, because we allow it to happen!

Thus, the ACA was forged by crafting an $80b deal with PhRmA to disallow any import of cheaper drugs from Canada, as well as prohibiting Medicare from bargaining for lower drug prices like the VA. All of this would change under a Bernie Sanders' administration. The savings to Medicare alone, just to allow drug price bargaining like the VA - would save $200b over ten years.

Sanders' simplified drug plan, such as for Medicare, would also obviate the need for so many seniors to do twenty five hours of research each year to ensure they're not getting screwed over by keeping their current drug plan under Part D. (Which program originated under the Bushies' 'Medicare Modernization Act' - one of the biggest corporate giveaways ever.). In many cases while the senior finds the monthly premiums do go down, the tiers of the drugs he needs are changed so he still ends up paying more. Only careful research, consuming many hours of time, enables him to see another Part D plan may be better so he signs on - but then they may change tiers for their own drugs next time!

Bernie's solution would dispense with this smoke and mirrors BS as well as eliminate the notorious 'donut hole' once and for all.  The $64 question is whether Americans are grown up enough to accept higher taxes to solve these issues, or would they rather keep lower taxes - as well as sniff for tax cuts - but face cuts to their social programs later.

Time will tell, and the first look will be after the Iowa caucuses next week.

WHAT!? $680 Billion In Tax Cuts? What About the Damned Deficit?

The House Tax Cuts of more than $600b will only benefit special interests and blow another hole in the budget while adding to deficits.

On multiple occasions I've posted on the economic irrationality that pervades this country, which too few seem to process. For example, the daft two year interval during which the payroll tax (which supports Social Security),  was cut in half  - described as a "payroll tax holiday"  This despite the fact every manjack knew damned well the money was needed to support future retirees. But our politicos, including Dems, were more invested in near term political chicanery and pandering  than longer term fiscal rectitude. 

The same applies after the Dems helped to extend the Bush tax cuts multiple years,  tearing another hole in the budget and adding to the deficit - then leading to the same gaggle of Dems (and Reeps) calling for cuts to Social Security. (Recall the Obama "Deficit Commission" and the promotion of the "Chained CPI"). I argued at the time this was absolute nonsense, and was only done to appease the Neoliberal elites such as Alan Greenspan who years earlier had argued before a Senate Finance Committee it was more important to extend the Bush tax cuts than to protect Social Security from cuts.

I've also belabored - using the Sept. 15, 2010  Financial Times analysis of the Bush tax cuts -  that they don't improve the economy one damned bit. Indeed, they imposed a regressive effect, to wit, they unleashed:

"the weakest decade in U.S. postwar history for real, non-residential capital investment". 

Now, however, we learn (WSJ, 'House Poised to Approve $600b in Tax Cuts', Dec. 17, p. A10) that the Repuke -dominated House is all set to pass at least $600 billion in tax cuts:

"resulting in a bipartisan agreement to play down concerns about  budget deficits and ...construct a package of tax breaks so large most lawmakers will find something in it to love"


WTF! So, in other words a monumental pork package disguised as a tax bill, which "plays down concerns over deficits".  So let me get this straight: then all the hoopla and huff and puff over the deficit and needing to cut it is all contrived political bullshit. It doesn't really matter how big the deficits are, because as the illustrious Dick Cheney once put it when asked: "Deficits don't matter."

So we are all being played every time some asshole politician or "lawmaker" makes noises about having to cut Medicare or Social Security because of "exploding deficits" or "unfunded liabilities".  Or is it that they don't regard over a half trillion of added deficits as anything to fret over?

We also learn, get this (ibid.):

"The deal would take popular tax breaks that expired in 2014 and make them permanent".

Ok, so every damned year than we will see another $600b or so in tax cuts? That's how it seems from reading the passage.

We also learn "Democrats won several policy victories"  - but it looks to me like they had to sell their souls to the Repukes to get that. As Rep. Steven Israel put it 9ibid.):

"This tax bill provides too much to people who need it least.  It's an unfunded increase in the deficit that favors special interests."

Who are some of these interests?

- Medical device manufacturers (e.g. the guys that make da Vinci robots and are making a killing with the tens of thousands of (often) sloppy surgeries done each year (See e.g. 'The Great Prostate Hoax' )

- Multinational Banks

- Manufacturers in general

- Small businesses which can now write off a half million in capital "costs" each year instead of $25,000

Oh, low income families do catch a bone in a $1,000 child tax credit but the Dems couldn't get it indexed to inflation meaning it'll be next to useless in five years.

Nancy Pelosi,  to her credit,  denounced the deal as "practically an immorality"

Well, of course, it will translate to a genuine immorality if the swine who passed it later next year call for cuts to Social Security, Medicare or the VA administration. But for now I think most of us can agree it is a very evident immorality! (Since the deficits will always then be used as a cudgel over our heads for future cuts.)

The multi-national bank provision in particular isolates the lawmaker swine given:

"it benefits companies such as Citigroup, Inc. and Morgan -Stanley Group, Inc. along with manufacturers like Caterpillar Inc" . that offer customer financing often with sky high interest bordering on the usurious.

We also learn:

"After it passes the $622 billion tax cuts will be merged with a second measure  ...which contains another $58 billion in tax cuts."

That amounts to $680 billion total in unpaid for tax cuts which will come back to haunt us (ordinary folk) at a later stage, mark my words.

Of course, the economic debauchery is in the eyes of the beholder. According to former tax aide to Obama, Lily Batchelder,  quoted in the piece:

"The deal is a historic achievement...the Democrats basically got everything they want."

Really? At what price? If this "achievement"  includes  backdoor  (or front door) cuts to social programs (which deficit hawks call "entitlements")  later they didn't get dog shit. And we can say Batchelder's take is typical of  the Neoliberal codswallop circulated every time a new spending or tax bill is passed.

See also:

http://www.smirkingchimp.com/thread/dave-johnson/65604/the-game-pass-tax-cuts-then-whine-about-the-resulting-deficits

Hillary's Middle Class Tax Cut Plan Is A Non-Starter

In Europe, citizens of high benefits nations (Germany, France, Denmark, Norway, Sweden, Finland)  understand one doesn't get something for nothing and that higher taxes are the price paid for state social support. Thus, citizens need not worry about health care, higher education debt and daycare - like those in the U.S. 

However, in this country, people are baited again and again by "tax cuts"  when they ought to know by now they don't work and will only force cuts to their most desired social benefits later, e.g. Social Security, Medicare and VA health benefits.  That tax cuts, including middle class, don't work has already been proven by a detailed (Sept. 15, 2010) analysis appearing in the Financial Times.

That analysis (p. 24) showed the earlier Bush tax cuts engendered "the weakest decade in U.S. postwar history for real, non-residential capital investment".

The FT analysis also observed that “during each decade from the 1950s to the 1990s, growth in real gross non-residential investment averaged between 3.5 percent and 7.4 percent a decade. During the 2000s it averaged a mere 1%”

This is evidence enough that the Democrats have to stop playing politics with these god damned tax cuts!

Yet on reading The Wall Street Journal (Nov. 21-22, 'Clinton Proposes Middle Class Tax Cuts', p. A4) one sees Hillary is ready to pander again, hoping enough Americans are stupid enough to bite in order to give her their votes.

A Clinton campaign aide quoted in the piece insists her plan:

"would inject hundreds of billions of dollars into middle class households enabling them to better cope with expenses."

But this is total snake oil. As we've seen with the Bush tax cuts, later unwisely extended by Obama and Co., a huge push was initiated in 2010  to also cut Social Security under Obama's "Debt Commission". This was no coincidence. Obama's advisors knew something would have to give because the extension of those cuts - especially to the middle class (since on the rich alone they don't pay the freight) would otherwise create $1.2 trillion in deficits over the total time employed. The only way to offset them would be to cut "entitlements" - and the 'Chained CPI" was proposed  before Democratic forces inveighed against it forcing Obama-ites to back down.

Now, Hillary wants to resurrect this baloney, not telling Americans that if they accept these tax cuts they will pay the piper later - likely in future cuts to much more valuable Social Security and Medicare benefits. But Hillary is determined realizing that Bernie Sanders' plan for REAL benefits to the middle class, including free college, expansion of Social Security and single payer health care, can only be paid for by at least a nine percent increase in taxes (though at this level defense cuts will also have to be considered).

So, in order to further separate herself from Sanders, she proposes middle class tax cuts  The outfit behind this scurvy plan is likely the Third Way bunch which we (on the Left) like to call "Republican Lite".    This is because instead of pushing progressive values and populist economics, they call for welfare "reform," talk about how cutting Social Security, and support awful trade deals like NAFTA and the TPP. And if that wasn't bad enough, they also take in millions of dollars in donations from the fat cats on Wall Street, big Pharma and the so-called "defense" industry.

According to the WSJ piece "Third Way, a centrist think tank said Mrs. Clinton is outlining an approach that should lift sagging middle class fortunes".

But they don't say it would only be for a time. Then the hammer of other benefits cuts would fall on these middle class folks to avoid deficits busting the nation.

Anyone who can do math would instantly see, as Clive Cook pointed out some 6 years ago in an article in the Financial Times, that middle class tax cuts are insanity. You simply can't get enough revenue with tax on the wealthiest alone, even the upper one percent. He argued it needs to go as low as the upper 40 percent which includes the upper middle class and the "middle middle class".

Obama didn't heed the repeated warning, not just from the FT but elsewhere, so no surprise barely two years after extending the Bush cuts for the middle class he began proposing Social Security cuts.

Ultimately the backlash and outcry forced Obama to take stock and realize he was batting on a losing wicket, see e.g.

http://www.smirkingchimp.com/thread/richard-eskow/54446/yes-the-left-killed-the-chained-cpi

Excerpt:

“As for the president and his supporters, it is clear that the chained CPI is well-liked by both the White House's key economic players -- and by many of the commentators who support them. That's unfortunate, because it is inaccurate, unjust, and economically unwise. But like it, they do.

It appears that both the Republicans and the White House like it, but neither wants such a politically unpopular measure hung around their neck -- especially in an election year.”

Hillary, should she get elected next year and try to push her misbegotten tax cuts through,  will also get the same reaction if she subsequently tries to cut "entitlement" programs to offset the cost of  the tax cuts.

Hillary's middle class tax cut plan is bad for another reason. As reported in The Economist (Nov 24), such "expensive" tax cuts "would require a squeeze on public investment. That would sap productivity, especially given the shoddy state of America's infrastructure."

The article adds that the "burden of shoddy roads, airports and energy infrastructure will cost every household $3,100 a year according to the American Society of Civil Engineers".

That, along with later Social Security and Medicare cuts, ought to convince any sensible American not to bite on Hillary's tax cut snake oil. Bernie Sanders' proposed increase in taxes -including on the middle class- is the only one that makes mathematical or policy sense - if salvaging the middle class is a priority.

Bottom line: You can't get something for nothing!

4th REEPO Debate = Democratic Cause For Jubilation

If I were the Democratic front runner, I'd save a tape or DVD of the just completed Republican debate. The reason? It is chock full of material to slay any of these bozos in a 2016 general election showdown. Not only did their responses show their detachment from economic reality (this debate was on economics) but the "solutions" proffered are assured of inciting middle and working class outrage. All the Demos need do is exploit the 'gift' already there, which means integrating the cockeyed replies into assorted Demo ads come 2016.

Where to begin? Start with their reasons for not raising the minimum wage when hard working Americans are already - many of them (as in  Boulder and Frisco, CO) having to live in their cars because there is no affordable housing. How are you going to afford an apartment for $1900/month in Boulder or Frisco, CO when your pay is $9 an hour at Starbucks.

Do the Reepo goons have any solid answers for Ellie Reilly - living out of her Subaru because there aren't any affordable homes or apartments in Frisco, CO - where she works?

None of their stupid, ignorant solutions will help a hard worker like Ellie Reilly featured recently in a DPost article on workers in Colorado mountain towns having to live out of their cars because of the lack of affordable housing.  What happened? After the 2008 crash which was cause by their same ignorant tax cutting policies and rabid creation of credit default swaps, home builders simply created high end condos for tourists, pricing locals out. Home owners rented rooms and apartments but also mainly for tourists.  Teachers, cops and others - like Starbucks baristas - were priced out.

And please spare me the BS that those jobs (like Ellie's barista job) were "only meant to be entry level" when corporations - sitting on over $1.9 trillion, have ceased investing in higher pay jobs. For anyone who needs it spelled out, that translates into a fixed jobs 'pyramid' with only a few great paying jobs at the top, and only middling to low pay jobs making up the bulk. (Made worse by older workers refusing to leave and open up their jobs to the young, because they're still trying to make back the 401k money lost after the 2008 crash.)

The solution to move these folks to better jobs? Tax cuts (in the form of "flat" taxes like Cruz' idiotic 10 percent flat tax - he also wants to abolish the IRS). All the bozos on stage wanted cuts of some form, as well as to "entitlements" in order to also lower corporate taxes. The claim often repeated, especially by Trump, is that the U.S. is the "most highly taxed nation" in the world, which is baloney.

 Thus, Trump's, Fiorina's, Paul's, Carson's, Cruz's and Rubio's solutions of cutting taxes to quick start the economy falls under the header of fantasy. Cutting taxes (Rubio also wants to blow $1 trillion on increased defense spending - meaning he'd have to not only cut Medicare, Medicaid, but the military Tricare program too) is only going to increase the debt. (See my citation of the Financial Times analysis of the Bush tax cuts below). The way to more higher earning jobs and productivity is actually to increase taxes.

Authors James Medoff and Andrew Harless (The Indebted Society) indeed showed that as tax rates increase, aggregate demand is enhanced and job output and productivity grows. This is in direct opposition to the specious claims of the tax cutter fetishists like the goons on parade at this GOOPs debate.

At several points I had to even ask wifey if any of these lunatics knew how to do basic math. WIth all their giveaways to the rich (Jeb would give them an average $180k tax cut each) and Rubio and Trump lowering corporate taxes, they wouldn't have a fucking dime left to work with and in fact add trillions to the deficit. Especially Rubio, aka 'the Cisco Kid' , who wants to give a trillion bucks to the Pentagon when they "misplaced" a trillion back in the late 90s. (As former defense analyst Chuck Spinney pointed out to Bill Moyers on one of his 'NOW' PBS shows in 2002). With a chump like this, why would the brass at the Pentagon want anyone else as Prez?

I mean Jeebus Peace! Rubio can't even control his own outlandish spending on his GOP credit card - running it into the red - and he wants to take over the nation's budget? (The Miami Herald fact -checked his insistence he only used the card once. The Herald documented over $1,200 blown at a Miami steak house, plus $275 for one New Year's Eve fling and over $3,800 at assorted Miami gas stations. What? Cubans don't have their own credit cards? Did the punk expect the party to pay for his spending? If not, why not use your own card?

Rubio also blew it with his blurtation that "welders make more money than philosophy majors". But a fact check exploded that canard: welders earn an average of $37k a year and philosophers, $64 k.

This is all stuff the Dems can use to their maximum advantage and if it doesn't inspire class hatred and warfare I have to consign most of the American working class to the walking dead demographic.

Then there was Trump barking about sending 11 million "illegals"  back across the border. Kasich tried his best to temper this ntiwit's bombastic blathering - realizing he was handing Hillary or Bernie millions of potential Hispanic votes on a platter. Don't these goons grasp what this sort of rhetoric does and how it plays against their stupid elephant party?

I mean, after Trump then Carson, blurted their solutions for the nation's finances I had to recall JFK's words when he faced Tricky Dick Nixon in the 1960 campaign:

"I run against a candidate who reminds me of the symbol of his party, the circus elephant, with his head full of ivory, a long memory and no vision"

But I'd even question their collective memories, given none of these turkeys on stage in Milwaukee (my home town, btw) seem to have any recollection of what went down before Obama arrived. How Bush busted the budget with his tax cuts and wars of choice, as well as a massive giveaway program to Big PhrmA (in the Medicare Modernization Act of 2003). And then they all want to blame Obama for economic deterioration. WTF are they all blind too, as well as Alzheiumer's- level low on memory?

Any of these tools could have, prior to the debate, gotten hold of the CBO's data on how deficits have been lowered progressively since Obama was elected, including a clear graph, e.g.


What? They can't read graphs? Or maybe they don't want to because it means acknowledging what Obama has accomplished for the nation's economy which their own party and yahoos have failed to do.

Note after an initial spike the most significant lowering of deficits arrived AFTER the cessation of the Bush tax cuts (which the Dems had also unwisely extended for two years). But what it shows is that tax cuts do not work to help the economy. I don't know how much more clearly I can make this, except maybe to refer to the Financial Times own assessment of the Bush tax cuts. Its analysis of Sept. 15, 2010 showed:

"“The 2000s- that is the period immediately following the Bush tax cuts – were the weakest decade in U.S. postwar history for real, non-residential capital investment. Not only were the 2000s by far the weakest period but the tax cuts did not even curtail the secular slowdown in the growth of business structures. Rather the slowdown accelerated to a full decline”

Get that? A full decline! The fucking Bush cuts (which "Jeb!"  also wants to renew) did not even "curtail the secular slowdown in the growth of business structures". No - the slowdown "accelerated to a full decline"

And these goobers think THEIR cuts will do any better? What are they drinking? Hell, what are they smoking?

To put the capper on it, the FT analysis observed that:

“during each decade from the 1950s to the 1990s, growth in real gross non-residential investment averaged between 3.5 percent and 7.4 percent a decade. During the 2000s it averaged a mere 1%”

Read the preceding then do so again. And then tell me any of these would-be presidents has anything to offer the American public but more tax cut snake oil which never worked whenever it was tried before. (Note to those with short memories: Even Reagan had to raise taxes after his initial cut frenzy! But his added defense spending to the tune of $2.1 trillion is what converted the U.S. into a major debtor nation, with the largest deficits in history.)

Then there was Jeb Bush whining about the 2 percent growth which is becoming structural but which he believes he can jerk up to 4 percent. Does this moron even know WHY the growth remains at 2 percent?  And why no amount of is tax cuts will alter the situation?

The low growth is worldwide and has to do directly with the degradation of energy, meaning what we are getting is resulting in an overall loss or regression in useful net energy. The only thing that will change the outcome is a new form of intense energy (e.g. nuclear fusion) more efficient than the fossil fuels now being used. For more on this issue, see:

http://brane-space.blogspot.com/2013/09/44-trillion-in-deficits-by-2024-minus.html

I could go on and on, but it's just as well this is the last parade of clowns and idiots for at least a month. I really don't think most sane citizens would be able to withstand much more bullshit disguised  as sober debate.

For a sober debate I guess I will have to tune into the Dem debate on CBS  this Saturday!

See also:

http://www.salon.com/2015/11/11/the_gop_is_living_in_a_fantasy_world_every_single_republicans_economic_plan_is_made_of_wishes_and_fairy_dust/

It's Time To Increase Taxes!

As I listened and watched latest presidential contender Marco Rubio deliver his spiel, my head spun and began to ache. If elected - admittedly the chances of that are slim and none - he would decrease corporate taxes, banish the estate tax and expand the child tax credit. In other words, dig this nation into an even deeper income hole.

The child tax credit suggestion is especially galling.  Why, in a nation which is already overcrowded with 315 million people, do we need a child tax credit at all? One could justify it in the olden frontier days when more people were needed to settle the West, and homesteaders were required. But not now! Indeed, repealing the child tax credit can be rationalized as a back door carbon tax, since each American human leaves an enormous carbon footprint from the instant he’s got his first nappy and sippy cup. Such repeal then is a fair option if Americans refuse to accept an outright carbon tax - which most other industrial nations in Europe have, paid on top of their gasoline costs.

But Rubio's daft proposals fit right into the anti-tax neoliberal demand to reduce government and make it impossible to function except for the most well to do. It is, in effect, policy madness which will continue to hurl this country toward third world status.

And the inconsistencies of the jury-rigged tax code are beyond believable. For example, the new top rate of 39.6 percent is  historically low; with investment income still taxed at special low rates; and the heirs of multimillion-dollar estates face lower taxes than at almost any time in modern memory. Meanwhile, working people pay disproportionately higher taxes than market speculators as well as rich guys who can put money in trusts, or use charitable deductions. This simply makes no sense. It is an effect of insane neoliberal tax policies that show no sign of abating.

This is why we need to increase taxes. We cannot keep moping along on a super-luxury budget based on chickenfeed national income. I estimate the tax increases will need to be from 10- 15%, p.a. and ought to deal with several exigencies and past oversights:

- The under funding of wars and military operations, as well as those military toys (e.g. F35) for which there have already been monumental cost overruns.

- The desperate need to get cracking on repairing our crumbling infrastructure - including our antiquated power grids - before it gets any worse. Estimated cost by American Society of Civil Engineers? About $1.6 trillion just to get it up to minimal serviceability.

- Reinstating lost IRS funding - a third of a billion bucks at last count - which was removed by the Reepos in their latest budget cutting onslaught. This artificially created deficit was directly responsible for the IRS being unable to handle all the calls for assistance that poured in this past few weeks, including to do with refund issues and fraud problems. 

- We need to pay for all the past tax cuts - including the Bush tax cuts - that had not hitherto been paid for! The chart below makes this urgency clear;                                         

If unattended to, then, wars and previous tax cuts will account for nearly half of public debt by 2019. We cannot allow this any more than a family would allow interest on its unpaid credit card debt balloon to the point it would have to hock its own kids.

Now, logically, since the Repukes dug us into this debt hole by refusal to approve adequate revenue, for both their "wars" and tax cuts (as well as their insane 2003 prescription drug bill - more a giveaway to  Big PhRma), then it is logical that increased revenue must be the way to dig us out of the debt mess.  As a New York Times op-ed put it two years ago, the first major tax hits....errr....hikes.... must come from the hides of those who benefited most from the Bush tax cuts during the "war" years:

"Those taxpayers are the same ones who benefited most from Bush-era tax breaks and who continue to pay low taxes. Even with recent increases, the new top rate of 39.6 percent is historically low; investment income is still taxed at special low rates; and the heirs of multimillion-dollar estates face lower taxes than at almost any time in modern memory."

Incredibly,  despite these facts, the Repukes are resisting any cuts to defense, this despite the fact that they haven't - up to now - paid for any of their earlier defense spending shenanigans. They let TWO "wars" go unfunded, during supposed "war time" - a big hoot if there ever was one- plus they've not paid for the two sets of Bush tax cuts that already produced $3.2 trillion in deficits even before Obama got into office.

The alert and aware citizen needs to grasp how tax phobia represents a toxic meme we cannot afford. Its entry into public consciousness has enabled our nation to reach an unsustainable, hyper-indebted condition that will gnaw our gains into chronic losses. Above all, on this tax day, we need to be wary of any presidential contender who expresses an anti-tax position, he or she does not have the nation's welfare at heart.

As Oliver Wendell Holmes once put it:

"Taxes are the price we pay for a civilized society"

Hence, any anti-tax politician by default must be for a state of chronic barbarism.

Can We Say Republicans Are Craven Budget Hypocrites? YES - We Can!

The Republicans are so full of it, one could almost roll on the floor laughing at their blatant budget hypocrisy. You know their song and dance! Always yapping about "deficits" and "debt" but when crunch time comes - or they win mid-term elections in both houses, or the Presidency - all of that goes by the backboards.

A case in point, revealed in a recent front page Financial Times article ('U.S. Congress Considers Host of Tax Breaks', Nov. 26) is congress' plans to "blow the budget open" with a whole swatch of tax breaks, some of which could be made permanent. Let us bear in mind these nitwits, mainly Repukes, are doing this in an environment which, as the FT notes- has seen a dramatic fall in in the federal deficit, from more than 10 percent of GDP 6 years ago to 2.8 percent of GDP now.

So why the hell go nuts and break the bank when things are just now turning rosy and the fiscal future appears much better? Well, because as is their usual shtick - the Reepos and their lackeys and useful idiots (like Peter G. Peterson and his Foundation, Fix the Debt etc.) want to generate enormous added debt via tax breaks and giveaways in order to justify cuts to social insurance programs like Social Security later. (Indeed, I just received an advanced alert yesterday from the National Committee to Preserve Social Security and Medicare that this is precisely what these callous assholes would do.)

One of the most egregious parts of the "mooted deal" - to use the FT's parlance - is the plan to expand and make permanent the R&D tax credit for corporations, which lets companies write off R&D expenses against their tax bills. While it sounds harmless enough, in the past grievous misuse has included writing off 2-3 time more R&D expenses than companies actually used. The FT estimates this could cost $160 billion over ten years, but I suspect that's a gross underestimate. Look instead for it to top $200 b, especially when Big PhRma starts exploiting it.


The FT notes this also "changes the starting point for future tax reform". Indeed! If R&D write-off is made permanent the business sector will have much less reason to back broader reform. Why should they when the pukes are handing them so much on a silver platter? The FT piece adds that it "also lowers the tax base for a revenue neutral package".

All of this is insane given that currently the nation's spending and remaining debt is some 15 times larger than its income via taxes. Our infrastructure alone is literally falling apart with each year it goes untended for maintenance or replacement. If any tax credit ought to be given, it is for company investment in repair of our crumbling infrastructure- water mains (some of which, like here in COS are over 100 years old), sewer lines, and bridges.

And don't for a minute believe the Dems are innocent little angels in all of this! No, they just aren't as bad as the repukes (that dysentery vs. Ebola comparison again). The FT notes, for example, it would include "mass transit and college tuition tax breaks" - likely made permanent - for Charles Schumer of NY.

But the worst omission? The presumptive deal would not make permanent the Earned Income Tax Credit so important to the working poor (i.e. those at Walmart where that store has requested more well off employees to help those in need, with food, care packages etc.)

The FT reports that the White House has "threatened a veto" and in my opinion, they ought to make good on that threat. Indeed, they need to veto this whole absurd  proposed tax package which would send us back to higher deficits we can't afford and allow the debt mongers to after the programs people need.

Leave it to the Reeps to f*ck the country up just when it's beginning to get on the right financial track including lower deficits. Another reminder that elections have consequences and Dem voters need to get their butts out and vote in mid-terms as much as they do in general elections!

Obama Has The Sense To Dump a Really DUMB Idea!

Above Obama discusses a possible "Grand Bargain" with John Boehner in 2011, which would have included the "chained CPI".

The Populist Left can now rejoice after the news has been released that  President Obama's forthcoming budget plan will not include a proposal to cut cost of living expenses from Social security, the dread "Chained CPI". Of course, this was always a dumb idea. Considering Social Security is a legacy of perhaps the most venerable Democrat, and serious cuts to it would harm seniors, the whole thing was a non-winner for Obama and the Dems and likely would have cost them both houses of congress in this year's mid-terms, as opposed to just the House.

Why would a Democratic President propose such nonsense at the outset anyway, when there was no need for it?  One plausible reason was because he wanted to act in "good faith" with a "Debt Commission" he'd appointed, headed by Alan B. Simpson and Ernest Bowles. By at least offering up cuts to Social Security he'd show he was acting in earnest with the Debt Commission, i.e. that he really wanted to do something about the deficits that the Reeps were endlessly squawking about.

In this manner, his aim was to strike a "Grand Bargain" with the Repukes which would have eliminated nearly $3.7 trillion in deficits over ten years. Never mind that a) the Reeps had generated more than 60 percent of the deficits from their unpaid for wars and tax cuts, and b) the same deficit savings could have been obtained relatively painlessly by simply not extending the Bush tax cuts for anyone, back in 2011. (A solution proposed by assorted writers, e.g. Clive Cook, Martin Wolf  in The Financial Times, and by many Left populists. But alas, the Bush tax cuts for the middle class proved too tempting an apple to exploit by the Dems, for the upcoming 2012 election.)

Since then, many Neoliberal mouthpieces (e.g. Robert Samuelson, Bob Woodward, Fareed Zakaria, Joe Klein etc.) believed the best option was to reach a big fiscal accord, built up from the baseline of higher taxes on rich people, from which Obama would agree to some entitlement cuts, Republicans would agree to close some tax loopholes, and the parties could put sequestration and budget brinkmanship behind them for years.  Obama seemed to agree with this, although again, no part of Social Security was responsible for the deficits, and higher taxes only on the rich would almost ensure having to try to gouge seniors with "entitlement cuts.'

Thus the penultimate stage led to the proposed 2014 budget, as dozens of liberal groups mounted a campaign to oppose any renewal of the Chained CPI. This included online petitions, as well as a full press mail campaign launched by the National Committee to Preserve Social Security and Medicare.  One of the White House’s most poorly kept secrets concerns Obama’s economic advisers - who have supported Chained CPI on the merits, or believed it to be the least-bad benefit cut Obama could offer Republicans.  But why support it at all, when the costs against Democrats in elections would be severe, and it was REEPs that ran up most of the deficits?  To many on the Populist Left this weasly sort of move imitated coughing up lunch money to the school bully before he even demanded it.

It showed political cowardice, and also contempt for the people that helped put Obama back in office in the 2012 election.   Hence, we who opposed it were pleased that Obama has decided to leave it out from his budget proposals to be announced in 2 weeks.  We were also quite aware there was little need to even keep it on the table given that deficits have plummeted from sequestration, and an additional $1 trillion in deficits can easily be avoided by the simple expedient of pulling out all U.S. troops from Afghanistan at the end of this year (and not leaving  7,000- 10,000 there until 2024, a foolish move if ever there was one, given nothing will stop Afghanistan from falling back into Taliban hands -- no matter how long we remain. And Karzai doesn't want us there anyway!)

The spin, of course, is that Obama pulled back from the brink because the Republicans offered nothing in return.  According to a New York Times report from yesterday:

"White House officials said on Thursday that since Republicans in Congress have shown no willingness to meet the president’s offer on social programs by closing loopholes for corporations and wealthy Americans, the proposed budget for the 2015 fiscal year will not assume a path to an agreement that no longer appears to exist."


  So be it. We can live with it.   The main thing is that Obama has avoided what would have been a whopper of a mistake, not only to Democrats up for election, but to his own legacy. Let us also hope the idea has finally been put to rest- like a vampire that's had a final stake driven through its heart.

See also:
http://www.smirkingchimp.com/thread/richard-eskow/54446/yes-the-left-killed-the-chained-cpi