January 26, 2018--Trump vs. Obama

Donald Trump launched his political career by savaging Barack Obama, beginning with the birther racism to accusing him of being a stealth Muslim to doing all he could first as a candidate and now as president to discredit and dismantle everything that was accomplished during the Obama eight years in the White House. 

It is as if Trump wants to nullify Obama's presidency (more racism) and delete his name from history. To make it as if Obama was not president. Forget that--to make it so that he never existed. 

For Trump's most ardent followers this is the definition of how to make America great again: Purge the country of people of color and anyone who is not Christian. Actually, not a Protestant. 

If one is looking for the Trump policy agenda all that is needed is to take out a list of Obama's achievements and invert them. Voilà, the Trump agenda is revealed. For example, most recently, most dramatically Obama-annihilating, Trump allowing all states bordered by our oceans to license oil companies the unfettered right to drill.

Try as Trump might to pull off this campaign to overturn Obama's record and place in history, the facts, assuming anyone is interested in them, present a very different picture.

Case in point, a recent Joe Scarborough op-ed column in the Washington Post, "The Damage Trump Has Done, Documented."

Drawing on data about the state of the economy from a January article in Forbes Magazine, not exactly a Bernie Sanders endorsed publication, "Trump's Economic Scorecard: One Year Since Inauguration," Scarborough compares how the economy fared during each presidency.

Most self-vaunted is the run up of the stock market. Trump claims there is no better evidence that his economic policies are working and that this is in contrast with the "failed" Obama record. During the first year of the Trump presidency the run-up in the Standard & Poor's average was a noteworthy 19.4%. But, though he never fails to reject the idea that he inherited a heating-up economy from Obama, the market did even better during Obama's first year--rising on the S&P an astonishing 23.5%.

In regard to jobs created Trump's numbers were lower in 2017 than in any of the first six years of Obama's presidency. And the unemployment rate declined faster under Obama than during Trump's first year in office.

The budget deficit last year was $666 billion, whereas it was a declining $585 a year earlier under Obama. And the national debt, a favorite target of conservatives, is now accruing at a more rapid rate than during the years of the Obama administration.

Then the trade deficit, an important indicator of economic health, was worse last year than in any of Obama's eight years.

There are things to criticize when it comes to the Obama record about the economy (for example the unrelenting growth in the gap between the wealthy and middle class), but things with Trump in regard to the economy, acknowledging its early achievements, are for the most part not as noteworthy as during the Obama years. 

One thing is certain, President Obama's record, which, in spite of Trump's obsessive assault on it, continues to endure while we may soon see the dismantling of the Trump presidency itself. And over time we will also see how history regards each of them. The outline of that, regardless of the Trump posturing, is already clear.

April 27, 2017--Laugher Curve

As I draft this, President Trump has not as yet revealed the details of his "massive" tax cuts.

In spite of this I can speculate what his multi-trillion dollar proposal will contain and how it will be paid for.

When the non-partisan Congressional Budget Office (CBO) finishes its scoring, they will find that most of the cuts go to corporations--where the effective rate will be cut from 35% to 15%.

Also, a large slice of the tax cuts will go to America's highest earners. There will, though, to put a fig leaf on the truth, be some tax savings for middle class people, mainly an increase in the deduction for dependent children. Then in regard to children, thanks to Ivanka Trump's influence, there will be tax credits to offset some of the costs of childcare.

Unless paid for, over the decade, these cuts will add multiple-trillions to the national debt. So there will be some attempt to show how the cuts will be paid for.

Nearly a trillion will be the result of repealing and replacing Obamacare. As noted here last week, the legislation inching its way through the House of Representatives is not a healthcare bill but a tax cut bill. This of course means it has no chance of passing in the Senate and probably not in the House. So chalk that trillion up to the debt.

The real savings to pay for the tax cuts will not be from savings at all but rather from extra tax income that will be the result of a dramatic rise in economic growth.

At the moment, the Gross Domestic Product (GDP) is going up by a tepid annual rate of less than two percent. The Trump proposal will show a growth rate of about twice that. They feel they can project that because tax cuts for wealthy people and corporations are stimulative to the economy. Growth will trickle down to average folks who will in turn use the extra income they derive from tax cuts and increased economic circumstances to buy cars and houses and stuff.

This assumption, this projection is based on bogus economic theory promulgated most prominently during the 70s. and 80s by Arthur Laffer. It is graphically most famously represented by the Laffer Curve which illustrates how tax cuts spur enough economic growth to generate new tax revenue which in turn cuts into the deficit.

Arthur Laffer in 1974

Here's the problem--

There is no historical or empirical evidence whatsoever that it works. When first taken up by Ronald Reagan during the 1980 Republican presidential primaries, George H.W. Bush, who was contesting for the nomination, memorably called it like it is--Voodoo Economics. Telling the truth helped cost him the nomination and the rest is history.

That history includes truly massive tax cuts under Reagan of just the sort of which Laffer would approve. And did approve. But it did not jolt the economy as promised and it was paid for, as Trump's will be, by adding trillions to the national debt. Over time, during the eight years of his presidency, Reagan nearly tripled it.

And if we need further evidence, when 20 years later, George (the son) Bush pushed another round of tax cuts through Congress, the economy collapsed and the debt doubled.

As the French would say, Viola.

On the other side of the ledger, there are other voila moments--the resulting state of the economy after Bill Clinton and Barack Obama raised taxes. Clinton raised them on the highest earners and the GDP increased annually, on average over his eight years, by 3.8%. Obama inherited a prostrate economy from George W. Bush and managed to more than halve the annual debt while the economy grew by about 2% a year.

One might, therefore, conclude that tax cuts of the Laffer kind do not follow the Laffer Curve but in spite of this here we are again with voodoo economics resurrected. Why anyone would believe Treasury Secretary Mnuchin that "The tax plan will pay for itself with economic growth" is beyond my comprehension.

He knows not all of us are economic illiterates and so he confesses that the preposterous 3-4% GDP growth rate is the result of "dynamic scoring." This is when growth rate projections are based not on observable reality but are derived from assumptions about where the economy will be as the result of various hypothetical actions. In other words, rather than projections based on a semblance of reality ("static scoring") economists such as Laffer and government officials such as Mnuchin just make things up. They pick a growth number out of the air that fits their theory and proclaim it to be the empirical truth.

These might be considered economic alternative facts. Let's see if the public and Congress will again take a sip of the Kool-Aid.

April 20, 2017--Tax Scam

I'm dense so it's taken me awhile to figure out why the Republicans so passionately want to
"repeal and replace" Obamacare. Actually, some of the most conservatives want only to do the repealing.

I got swept into believing some of the rhetoric. Obamacare is deeply flawed. True. It does not allow most people to keep their doctors, true; and it is not containing the rise in the cost of either medical care itself or healthcare insurance. Also true.

But, after a little time passed and the Republican talking points were countered, it became clear that the Paul Ryan American Health Care Act is not about healthcare but about taxes--a critical step toward his plan to cut and reform corporate and income taxes.

Here's the math--

In a March 22nd Forbes Magazine posting (not a socialist publication) it was reported that contained in the final version of the proposed bill, after all the deal making with the House of Representatives Freedom Caucus and White House, the nonpartisan Congressional Budget Office concluded that the plan would result in an $600 billion tax cut over the next decade, with at least $274 billion of the cuts going directly to the richest 2%.

Further, Medicaid would be cut, again over the decade, by $880 billion, making it more difficult for low-income taxpayers to secure insurance.

Though from a healthcare perspective it would be a crisis for low- and middle-income people--the CBO also estimated that these cuts would mean that 24 million would lose their current coverage--from a tax-cut perspective it would be a bounty. Again, with the top 5% benefiting the most from the GOP version of tax reform.

Obamacare does include two tax surcharges for high earners--

For couples filing jointly, if their adjusted gross income is $250,000 or higher there is a 0.9% Medicare surcharge and a 3.8% surcharge on net investment income, with the latter being income from certain types of dividends and capital gains.

The Ryan plan calls for the elimination of these two taxes for very high earners.

If this bill were to pass (and although it was set aside last month it is still a glimmer in Paul Ryan's eye and seems to have the support of the president, who feels the need to get at least something, anything done--even something this harsh and regressive) then Congress and the president could move on to what really interests them--massive tax cuts for the wealthy. Paid for largely, and here's the perversely brilliant part, by repealing the two Obamacare tax surcharges. Doing this would yield $1.48 trillion, which would "pay for" most of the additional tax cuts in a manner so as to make then seem "revenue neutral."

Again, this healthcare shell game is not about healthcare but tax cuts.

The claim, of course, is that cutting taxes for the wealthy is really about helping the middle class, because if you cut "job creators'" taxes they will invest in businesses that generate high-wage jobs.

The only problem with this claim is that it's untrue--the massive Reagan tax cuts and the even larger Bush tax cuts did not boost the economy or create jobs.  What was created were massive increases in the national debt--nearly tripling during Reagan's time and doubling under George W. Bush.

In contrast, the debt after Clinton's eight years increased by just 32% and during Obama's two terms, after inheriting a collapsed economy, it went up by 68%.

I am embarrassed to admit that it has taken me this long to finally figure out what is going on and what all the congressional healthcare machinations are about--tax cuts.