Category: Donald Trump
Trump’s Tax Cuts, Budget, Deficits…Trump’s Recession 2019?
| February 16, 2018 | 9:20 am | Analysis, Donald Trump, Economy, Jack Rasmus | No comments

Trump’s Tax Cuts, Budget, Deficits…Trump’s Recession 2019?

Trump’s Tax Cuts, Budget, Deficits…Trump’s Recession 2019?

By
Jack Rasmus
Copyright 2018

“Lies and misrepresentation of facts have become the hallmark of American politics in recent years more than ever before. Not just lies of commission by Trump and his crew, but lies of omission by the mainstream media as well.

In Trump’s recent package of tax cuts for corporations, investors and millionaires, the lie is that the total cuts amount to $1.5 trillion—when the actual amount is more than $5 trillion and likely even higher. And in his most recent announcement of budget deficits the amounts admitted are barely half of the actual deficits—and consequent rise in US national debt—that will occur. Even his $1.5 trillion so-called infrastructure spending plan, that Trump promised during his 2016 election campaign, and then throughout 2017, amounts to only $200 billion. The lies and exaggerations are astounding.

The mainstream media, much of it aligned against Trump, has proven no accurate in revealing the Trump lies and misrepresentations: They echo Trumps $1.5 trillion total tax cut number and provide no real analysis of the true total of the cuts; they low-ball the true impact of Trump’s budget on US annual budget deficits and the national debt; and they fail to expose the actual corporate subsidy nature of Trump’s ‘smoke and mirrors’ infrastructure plan.

Trump’s multi-trillion dollar tax cuts for business, investors and the wealthiest 1%, plus his annual trillion dollar deficits as far as the eye can see, plus his phony real estate industry handouts that parade as infrastructure spending together will lead the US economy into recession, most likely in early 2019. Here’s the scenario:

The massive deficits will require the central bank, the Federal Reserve, to raise short term interest rates. What’s called the benchmark federal funds interest rate will rise above 2% (currently 1.5%). The longer term 10 year US Treasury bond rate will rise to 3.5% or more. Those rates have already been rising—and their rise already provoking stock and bond market corrections in recent weeks which should be viewed as ‘dress rehearsals’ of more serious financial asset market retreats and contractions yet to come.

As this writer has argued repeatedly in recent publications, both the US real economy and financial markets (stocks, junk bonds, derivatives, etc.) are ‘fragile’ and increasingly susceptible to a significant downturn. In 2007-08 central bank interest rates rose to 5% and that precipitated a crash in subprime mortgage bonds and derivatives that set off the contraction in the economy. With the US economy not fundamentally having recovered from 2008-09 still to this day, and with household and corporate debt well above levels of 2008, it will take less of a rise in interest rates to provoke another similar reaction.

The US real economy is already weak. GDP numbers don’t reflect this accurately. Important sectors like autos and housing are softening or even stalling already. Consumption will falter. Consumers have loaded up on household debt. At $13.8 trillion, levels are equal or greater than 2007. They have also been depleting their savings to finance consumption in 2017-18. And despite all the recent media hoopla, there’s been no real wage gains occurring for 80% of the workforce in the US. Moreover, renewed inflation now occurring will reduce households’ disposable income and buying power even more this year. Rising taxes for tens of millions of households in 2018-19 will also negatively impact consumption spending. Don’t expect consumption to rise in 2018 as interest rates, taxes, and prices do. Just the opposite. Consumption makes up 70% of the US economy and it is now nearly exhausted. It will stagnate at best, and even retreat steadily beginning in the second half 2018.

Like the real economy, the US financial markets are fragile as well. They are in bubble territory and investors are getting increasingly edgy and looking for excuses to sell—i.e. take their super capital gains of recent years and run to the sidelines. A rise in rates much above the 2% and 3.5% noted will provoke a significant credit contraction (or even freeze). Money capital (liquidity) will dry up for non-bank companies, investment and production will be scaled back, layoffs will rise rapidly, and consumption will collapse—together bringing the economy down. It’s a classic scenario the forces behind which have been steadily building. And it won’t take too much more to provoke the next recession—likely in early 2019. The Federal Reserve’s plans to hike rates four more times this year will almost certainly set the scenario in motion.

Trump’s $5 Trillion Business-Investor Tax Cuts

Trump & Congress—with the mainstream media in train—say the Tax Cut Act just passed amounts to $1.5 trillion. But that’s not the true total value of the business tax cuts. That’s what they claim is the deficit impact of the tax cuts. (But even that deficit impact is grossly underestimated, as will be shown shortly).

Here’s the true value of the business-investor tax cuts:

1. $1.5 trillion cut due solely to reducing the corporate nominal tax rate from 35% to 21%.

2. Another $.3 trillion for the new 20% tax deduction for non-corporate businesses (lowering their effective tax rate from 37% to 29.6%).

3. $.3 trillion more for ending the business mandate for the Affordable Care Act

4. Still another, at minimum, $.5 trillion for a combined accelerated business depreciation writeoffs (a form of tax cuts for writing off all equipment added by business in the year purchased instead of amortized over several years); plus repeal of the Alternative Minimum Tax for Corporations: and a roughly halving of the AMT for individuals. But that’s not all.

5. The wealthiest 1% households, virtually all investor class, get their nominal individual income tax rate reduced from 39.6% to 37%. Moreover, the 39.6% did not kick in until an income level of $426,000 was reached. Now the threshold for the even lower 37% does not start until $600,000 income is reached. All that amounts to at least another $.5 trillion in tax cuts.

That’s a total of $3 trillion so far in tax cuts in the Trump Plan. But the further, really big tax cuts come for US Multinational Corporations. Their ‘take’ will be another $2 trillion in tax reduction over the next decade.

The Multinationals have hoarded between $2-$2.7 trillion in cash offshore in order to avoid paying taxes on their earnings. But that $2 trillion is a gross underestimation. First of all, it’s a figure for only the 500 largest US multinationals. What about the hundreds of thousands of other US corporations that also have foreign subsidiaries in which they park their cash to avoid taxes? And what about the unreported cash and assets they’re hoarding in offshore tax havens in the Cayman Islands, Bermuda, Vanuatu and elsewhere? That too is not part of the $2.-$2.7 trillion. Another reason to doubt the $2 trillion is accurate is that they already had $2 trillion stuffed away offshore back in 2011-12. According to the business periodical, Financial Times, the largest US corporations by January 2012 “are collectively sitting on an estimated $2,000bn of cash”. Does anyone believe they stopped diverting profits and cash offshore after 2011-12 for the past five years?

If one conservatively estimates there’s $4 trillion in cash stuffed offshore to avoid taxes (accumulating since 1997 when Bill Clinton conveniently allowed them to begin doing so), the new Trump tax act allows them to pay a tax of only 10% on average if they ‘repatriate’ (bring back) that cash. If they paid the prior 35% tax rate, it would cost them $1.4 trillion in 2018-19, the first year of the Trump tax. But estimates of this provision in the Trump bill show they plan to pay only $339 billion. So they will be saving approximately $1.061 trillion in the first year alone. Thereafter for the next nine years they pay only 8% to 15.5%, instead of the 35%. That amounts to at minimum another $1 trillion in tax savings for multinational US corporations under the Trump tax.

6. In short, US multinational corporations will get a tax reduction of at least $2 trillion

The Trump tax cuts for businesses and investors thus total $5 trillion over the next decade!

So how do Trump, Congress, and the media get to only $1.5 trillion? Here’s how they do it:

They raise taxes on the middle class by $2 trillion in the Trump tax plan. That leaves the $5 trillion in business-investor cuts, minus the $2 trillion in middle class tax hikes, for a net $3 trillion in cuts. But they admit to only $1.5 trillion in net tax cuts. So where’s the difference of the other $1.5 trillion? That difference is assumed to be ‘made up’ (offset) by the US economy growing at a GDP rate of 3-3.5% (or more) for the next ten years—i.e. more than 3% for every year for ten more years without exception!

That 3-4% annual overestimated economic (GDP) growth for the US economy is based on ridiculous assumptions: that slowing long term trends in US productivity and labor force growth will someone immediately reverse and accelerate; that the US will now grow at double the annual rate it did the previous decade; and that there’ll be no recession for another decade when the historical record shows the typical growth period following recession is 7-9 years and the US economy is already in its 8th year since the last recession. (If there’s a recession, then the annual GDP growth for nine years will have to average close to 5% a year—a figure never before ever attained!).

It’s all Trump ‘smoke and mirrors’, lies and gross misrepresentations. But no matter, for its really all about accelerating the subsidization of corporations and capital incomes for the wealthiest 1% by means of fiscal policy now that the central bank’s 9 years of subsidization of capital incomes by monetary policy (i.e. near zero rates, QE, etc.) is coming to an end.

Trillion $Dollar US Deficits for Years to Come

The US budget deficit consequences of the Trump tax cuts are therefore massive. Instead of averaging $150 billion a year on average (the $1.5 trillion) the effect will be three to four times that, or around $300 to $400 billion a year!

On top of that there’s Trump’s latest US budget, which projects another $300 billion for the next two years alone. With the majority of that total $150 billion a year caused by escalation of the Defense-War budget as the US builds up its tactical nuclear, naval and air forces in anticipation of more aggressive US moves in Asia. Last year’s budget deficit was $660 billion. The Congressional Budget Office estimates deficits of $918 billion by 2019. Independent estimates by Chase bank put it at $1.2 trillion. And that’s just the early years and assuming there’s no recession, which will balloon deficits by hundreds of billions more in reduced tax revenues due to a contracting US economy.

Independent projections are for US deficits to add $7.1 trillion over the next decade. But that’s an underestimate that assumes not only no recession, but also that defense-war spending will not rise beyond current projection increases, and that government costs for covering price gouging by the healthcare and prescription drug industries (for Medicaid, Medicare, CHIP, government employees) will somehow not also continue to accelerate. The likely true hit to US deficits—and therefore the US national debt—will well exceed $12 trillion! The US could easily see consecutive annual budget deficits of $1.5 trillion. That will mean a US debt total rising from current $20 trillion to $32 trillion (or more) over the coming decade.

From Tax Cuts, Deficits & Debt to the Next Recession

How does this potentially translate into recession? Here’s a very likely scenario:

The US central bank, the Fed, has already begun raising interest rates. That has already begun slowing key industries like auto and housing. It will soon impact consumers in general, who are near-maxed out with credit card, auto, student loan, and mortgage debt, and facing further accelerating inflation in rents, healthcare costs, transport, state and local taxation, and prices for imported goods.

The massive deficits will require the central bank to raise interest rates perhaps even faster and higher than before. Slowing foreigners’ purchases of US government bonds to pay for the accelerating debt, may require the Fed to raise rates still further. It’s 2007-08 all over again!

Rising Fed interest rates and inflation will also continue to depress bond prices. That has already begun, and to spill over to stock prices as the major contraction in stock prices in February 2018 has revealed. Both bond and stock prices are headed for further decline.

Should stock market prices correct a second time this year, this time by 20% or more, the contagion effects across markets will result in a general credit crunch for non-financial corporations and businesses. US corporate debt has risen even more than US household or government debt since 2009. The corporate junk bond markets will experience a crisis, as US Zombie companies (i.e. those in deep debt, an estimated 12% to 37% of all US corporations, depending on the source) cannot get new financing and begin to go bankrupt.

These stock and bond market effects, and emerging Zombie company defaults, will result in a general investment pullback by non-financial corporations. That will mean production cuts that result in layoffs and further wage stagnation and slowing consumption spending. The next recession will have begun.

The Central Bank (FED) Will Precipitate the Next Recession—As It Did in 2007

This scenario is all the more likely if the general argument that the US economy is both financial and non-financially weak and fragile is accurate. The weakness in the real economy and fragility in the financial markets mean that Fed interest rate hikes cannot exceed 2.0%, and longer term rates (10 year Treasury bonds) cannot exceed 3.5%, before the system ‘cracks’ once again and descends into recession. With the Fed rates at 1.5% and approaching 2% and the Treasury at 3% and approaching 3.5%, the US economy today is well on its way to approaching its limits.

Just as it was interest rates peaking in 2007 that precipitated (not caused) the crash in (subprime) mortgage bonds, that then spilled over through financial derivatives to the rest of the credit system—today the bond markets may once again be signaling the ‘beginning of the end’ of the current cycle. The new contagious derivatives may not be mortgage based bonds and CDO and CDS financial derivatives, as in 2008; the new financial contagion will be driven by the new financial derivatives—i.e. Exchange Traded Funds(ETFs), and related ETNs and ETPs—with their effects amplified by Quant hedge funds’ automated algorithm-based trading.

In summary, Trump tax cuts and Trump’s budget will exacerbate US budget deficits and debt and cause the central bank to raise interest rates even faster and higher. Those rate hikes cannot be sustained. They will lead to another credit crisis—this time even sooner than they did in 2007 given the even weaker US economy and more fragile financial markets. The next recession may be sooner than many think.

Dr. Jack Rasmus

Dr. Rasmus is author of the recently published books, ‘Central Bankers at the End of Their Ropes: Monetary Policy and the Coming Depression’, Clarity Press, August 2017, and ‘Systemic Fragility in the Global Economy, Clarity, 2016. His forthcoming book later in 2018 is ‘Taxes, War & Austerity: Neoliberal Policy from Reagan to Trump’, Clarity Press. He blogs at jackrasmus.com and tweets at @drjackrasmus

“We’ll talk” to North Korea, says Mike Pence
| February 11, 2018 | 8:30 pm | Donald Trump, DPRK | No comments

“We’ll talk” to North Korea, says Mike Pence

https://www.nknews.org/2018/02/well-talk-to-north-korea-says-mike-pence/
In an apparent shift, Vice President says U.S. open to talks that don’t start about denuclearization

February 12th, 2018

The United States is prepared to talk to North Korea without preconditions, U.S. Vice President Mike Pence said in comments published on Sunday evening.

The statement appears to represent a significant shift in the U.S. position on North Korea – which has until now been that Pyongyang would have to agree to talking about complete, verifiable and irreversible denuclearization.

Describing the altered policy as “maximum pressure and engagement at the same time,” the Vice President stressed, however, that an ongoing campaign of sanctions would continue. The previous policy was simply called “maximum pressure and engagement”.

“The point is, no pressure comes off until they are actually doing something that the alliance believes represents a meaningful step toward denuclearization,” Pence told the Washington Post on Air Force Two.

“So the maximum pressure campaign is going to continue and intensify. But if you want to talk, we’ll talk.”

When asked what Pyongyang could do to relieve some of the sanctions, the Vice President said “I don’t know… That’s why you have to have talks.”

Relaying his conversations with South Korean President Moon Jae-in, the Vice President said he has been assured that North Korea would not receive any “economic or diplomatic benefits” in exchange for dialogue.

Any economic concessions to the North would be reliant on steps towards denuclearization – a pledge which, Pence said, meant the U.S. would be prepared to support DPRK-ROK engagement in the future.

One specialist said that while dialogue between Pyongyang and Washington was welcome, it was difficult to see North Korea making any concessions on its nuclear program in the near future.

“We will have to see what happens,” Daniel Pinkston, a North Korea watcher at Troy University, told NK News. “There are reasons and incentives for both sides to talk in order to avoid misperceptions and miscalculations that could trigger conflict that otherwise is avoidable.”

“The long-term objective must be denuclearization, as stated in the Rogin article. Whether that goal is achievable is partially dependent upon North Korea modifying or abandoning the KWP’s ideology and at least part of the DPRK state identity.”

This is not the first time U.S. officials have in recent months suggested that Washington would be open to talks with the North without preconditions, however.

Secretary of State Rex Tillerson in December said the U.S. was willing to talk to North Korea “without precondition,” while stipulating that any dialogue would need to take place following a “period of calm.”

“It’s not realistic to say we are only going to talk if you come to the table ready to give up your program,” Tillerson told the Atlantic Council-Korea Foundation Forum in Washington DC.

The White House later appeared to  distance itself from the Secretary of State’s comments, with a spokesperson insisting “the President’s views on North Korea have not changed.”

An op-ed in North Korea’s largest newspaper would days later, too, reject Tillerson’s comments.

But Pence’s comments come just a day after a North Korean delegation in the South delivered a message from DPRK leader Kim Jong Un to President Moon Jae-in inviting him to Pyongyang.

If the talks go ahead, they will be first between DPRK and ROK leaders in over a decade – but may exacerbate fears that North Korea is attempting to drive a wedge between South Korea and the United States.

The Blue House on Saturday said Moon wanted the two Koreas to “create the environment first for that (the visit) to be able to happen.”

Saturday saw Pence – who took great pains to avoid contact with the North Korean delegation while in the South – insist that there was “no daylight” between Seoul and Washington on DPRK policy.

Ahead of the Olympic Opening ceremony last week Pence also promised that the U.S. would soon unveil the “toughest and most aggressive round of economic sanctions on North Korea ever,” though did not offer further details.

Featured image: Vice President Mike Pence’s Facebook

Donald Trump in Twitter row with Corbyn & Hunt as he attacks Britain’s ‘broke’ NHS
| February 5, 2018 | 7:50 pm | Donald Trump, Health Care, Jeremy Corbyn | No comments

https://www.rt.com/uk/417903-nhs-trump-corbyn-hunt/

Donald Trump in Twitter row with Corbyn & Hunt as he attacks Britain’s ‘broke’ NHS

Donald Trump in Twitter row with Corbyn & Hunt as he attacks Britain’s ‘broke’ NHS
Labour leader Jeremy Corbyn has hit out at Donald Trump’s “wrong” criticism of Britain’s National Health Service (NHS) after the president claimed that thousands of people were protesting because “the system is going broke.”

Corbyn replied to Trump on Twitter, saying: “People were marching because we love our NHS and hate what the Tories are doing to it. Healthcare is a human right.”

Hunt – the Tory health secretary accused of ordering the cuts that have angered protesters – also took issue with Trump’s claim. He said on Twitter: “I may disagree with claims made on that march but not ONE of them wants to live in a system where 28m people have no cover.

“NHS may have challenges but I’m proud to be from the country that invented universal coverage – where all get care no matter the size of their bank balance.”

Trump tweeted on Monday: “The Democrats are pushing for Universal HealthCare while thousands of people are marching in the UK because their U system is going broke and not working. Dems want to greatly raise taxes for really bad and non-personal medical care. No thanks!”

Trump’s tweet refers to the mass ‘Save our NHS’ protest on Saturday, which saw tens of thousands of people walking to Downing Street in London to demand that PM Theresa May injects more funds into the crisis-stricken NHS.

His comments on the NHS are meant as an attack on the opposition Democrats, who want the government to play a bigger role in providing healthcare for Americans.

Currently only elderly and poor people can get free care in the US, with everyone else buying health insurance. Some Democrats – including potential challengers to Trump in the 2020 election – are calling for the US to move towards a system more similar to the NHS.

It is not clear on what information Trump was basing his assessment of the NHS. He thanked the hosts of Fox News’s morning ‘Fox and Friends’ show immediately after the first tweet.

The show had run a segment on the NHS that morning, featuring an interview with former UKIP leader Nigel Farage, who campaigned for Trump during the 2016 election campaign.

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Trade unionists slam Donald Trump for ‘actively hurting’ US workers after first State of the Union address
| February 1, 2018 | 8:24 pm | Analysis, Donald Trump, Labor | No comments

https://www.morningstaronline.co.uk/article/f-lead-trade-unionists-slam-donald-trump-actively-hurting-us-workers-after-first-state-union

US PRESIDENT Donald Trump was accused of siding with “corporations and their political allies to undermine the right of workers to bargain collectively” as he took to the podium for his first State of the Union address last night.

The president used his speech to brag about the “incredible progress and extraordinary success” of his first year in office, speaking at length about tax cuts, infrastructure investment, attacking environmental protections he derided as a “war on American energy” and reiterating promises to build a wall along the Mexican border and maintain the illegal concentration camp at Guantanamo Bay on Cuban soil.

But trade union federation AFL-CIO president Richard Trumka said that Mr Trump’s first year in office had “actively hurt working people” with its assault on collective bargaining.

“He has taken money out of our pockets and made our workplaces less safe. He has divided our country, abandoned our values and given cover to racism and other forms of bigotry,” the trade unionist said.

Mr Trump claimed to have defeated the “core” of Obamacare by eliminating an “especially cruel tax” — the individual mandate requiring citizens to purchase health insurance.

Journalist Dylan Scott noted that ditching the mandate would raise premiums and see some citizens lose healthcare coverage, with the Congressional Budget Office estimating 13 million people will lose access to healthcare as a result.

Analyst Josh Bivens cast doubt on the president’s claim to have invested in infrastructure, saying his proposals aren’t “just empty, but outright corrupt,” comprising loan guarantees that will reward financial speculators and tax credits for private developers.

“It’s an open invitation for crony capitalism, corruption and rampant inequality of public investments across communities,” he said.

Over 500 women held an alternative State of Our Union event, featuring Democratic congresswoman Pramila Jayapal, who boycotted the official event because of “all the racism and hatred coming out of this White House,” as well as Black Lives Matter co-founder Alizia Garcia and Ai-jen Poo of the National Domestic Workers Alliance. The meeting said “movement leaders” would discuss how to resist the Trump administration and responses to the “urgency of the current political and climate crises.”

Trump’s State of the Union Speech: Long on Theater, Short on Policy
| February 1, 2018 | 8:04 pm | Analysis, Donald Trump, Economy, Jack Rasmus | No comments

Trump’s State of the Union Speech: Long on Theater, Short on Policy

By
Jack Rasmus
copyright 2018

“Presidents’ State of the Union speeches used to report on accomplishments of the past year and proposals for new programs and policy changes for the next. Just as the country we once knew, those days are long gone.

In the 21st century the format is mostly theatrical: The president offers a short sentence about how wonderful America is, cuts his sentence short, and waits for applause. The Congress rises and claps longer than the spoken sentence that brought them to their feet. This goes on every 15 seconds. Sometimes less. Up and down, up and down. Turn off the volume, and it’s similar to canned laughter in a TV situation comedy—with the visual effect of bouncing butts replacing the canned laughter. Except it’s all more tragic than it is comedic.

A stranger viewing for the first time must conclude that something anatomically must be wrong with their backsides. Up-down, up-down. But when the incessant pattern of ‘short phrase, rise and clap too long, sit down’ threatens to become too repetitive, a new theatrical effect is introduced. Now it’s the president introducing staged character actors in the gallery above the floor, each introduction providing an appeal to the tv audience’s emotions. In the Trump speech tonight, there were no fewer than twelve such ‘gallery scenes’ to break up the mesmerizing stop-rise-clap-sit down nonsense.

First there was ‘Ashley the helicopter lady’, then ‘Dolberg the firefighter’, Congressman Scalise, whose only claim to fame was he got himself shot (definitely not on the level of the other ‘heroes’), followed. And how about the 12 year old ‘Preston the flag boy’, with whom Trump said he had a great conversation before the speech. (I’m sure it was of comparable intellect).
But clever by far was the next gallery event, the four parents whose kids were killed by MS13 gang members in Long Island, NY. All four were black, apparently to blunt the racist appeal by Trump injected into the scene, suggesting that all immigrants were gang members who came here as a result of ‘chained migration’ family policy. I guess MS13 gangsters never killed whites.
Not surprisingly, the next gallery scene was the ICE agent, a guy named Martinez who heroically smashed the MS13 gangsters. Of course, he too was Hispanic.

Both theatrical scenes dealing with ‘immigrant gangsters arriving by chained migration’ provided Trump a nice segway into describing his ‘4 pillars’ immigration bill, the only policy proposal he actually spelled out in his nearly hour and a half speech.

For a pathway to citizenship that would take 12 years for ‘Dreamer’ kids, Trump would have his $30 billion plus border wall, a new immigration policy based on ‘merit’ (welcome Norwegians), as well as an end to family ‘chained migration policy’ (which somehow would also protect the nuclear family, according to Trump). The message: white folks’ nuclear families good; immigrant folks’ (especially Latino) extended families bad, was the suggested logic. What it all added up to? If Democrats agreed to his pillars 2-4 right now, maybe there would be citizenship for Dreamers sometime by 2030! What a deal. But who knows, maybe the Democrats will take it, given that they retreated from their prior ‘line in the sand’ of pass DACA and dreamers or they’ll shut down the government.

The next theater event was no less interesting than the immigration scenes in the Trump play that was the presidential State of the Union address last night. In typical Trumpian worship of the police and military, Trump (the draft dodger) introduced an Albuquerque policeman in the gallery who had talked a pregnant woman on drugs from committing suicide. Seems the woman was desperate about bringing a kid into the world she’d be unable to afford to raise. The solution by the policeman was to offer to adopt her baby if she didn’t kill herself. It worked. The kid and mother were saved, and the policeman adopted the child. The policeman’s wife accompanied him in the gallery—with an infant in her arms of course. Not sure whose it was but no matter. Now that was double theater, a scene within a scene. Shakespeare would have been proud.

That impressive bit of theater, perhaps the high point of all the ‘gallery effects’ of the evening, was the intro to Trump’s solution to the Opioid crisis in America, where 60,000 a year now die from overdoses. In his speech, Trump’s solution to the opioid crisis was ‘let’s get tougher on drug dealers’. He failed to mention, of course, that the drug dealers in question most responsible for launching the opioid crisis were the prescription drug companies themselves who pushed their products like Fetanyl and Percoset on doctors a decade ago, telling them the drugs weren’t addictive.

As for the even larger prescription drug problem in American—i.e. the runaway cost of drugs that is killing unknown thousands of Americans who can’t afford them because of price gouging—Trump merely said “prices will come down substantially…just watch!” That solution echoed his press conference of several weeks ago when he publicly addressed the opioid crisis…but offered no solution specifics how. Watching Trump solve the opioid crisis will be slower than watching grass grow…in winter!

Trump’s speech was not all theater. Much of it was factual—except the facts were mostly misrepresentations and outright lies.

Like unemployment is at a record low. But not when part time, temp, contract and gig work is added to full time. More than 13 million are still officially jobless. The rate is still close to 10%. And that doesn’t count the 5-10 million workers who have dropped out of the labor force altogether since 2008, leading to record lows in labor force participate rates and employment to population ratios. That rate and ratio hasn’t changed under Trump.

Another lie was that wages are finally starting to rise. Whose wages? If you want to count average wages and salaries of the 30 million managers, supervisors, and self-employed, maybe so. But according to US Labor department data, real average hourly earnings for all non-farm workers in the US in 2017 rose by a whopping 4 cents!

Trump cited again his Treasury Secretary, Mnuchin’s, ridiculous figure that the average family income household would realize $4,000 a year in tax cuts. But no economist I know believes that absurd claim.

Perhaps the biggest facts manipulation occurred with Trump’s references to his recent tax cuts. He cited a list of so-called middle class tax cuts, leaving out wealthy individual tax cuts measures. Typical was his claim of doubling the standard deduction, worth $800 billion in tax cuts for the working poor below $24k a year in income. But he failed to mention the additional $2.1 trillion hikes on the middle class. (Or the $2 trillion in corresponding cuts for wealthiest households.) Independent studies show the middle class may get some tax cuts initially, but those end by the seventh year, and then rise rapidly thereafter by year ten. In contrast, the corporate, business, and wealthy household cuts keep going—beyond the tenth year.

What Trump conveniently left out in his speech regarding taxes also qualifies as lie by omission. He noted the corporate tax rate was reduced from 35% to 21% and the non-corporate business income deductions were increased by 20%. That was $1.5 trillion and $310 billion, respectively. Or that the Obamacare mandate repeal saved businesses another $300 billion. And multinational corporations would reap the lion’s share of $1 trillion in tax cuts, at minimum. And all that still doesn’t account for accelerated depreciation under the Act. Or abolition of the corporate Alternative Minimum Tax. Or continuation of the infamous corporate loopholes, like carried interest, corporate offshore ‘inversions’, or gimmicks that corporate tax lawyers joke about—like the ‘dutch sandwich’ and ‘double Irish’.

Then there were the Trump jokes. I don’t mean anything actually funny. Nonsense statements like “beautiful clean coal” (the oxymoron statement of the year). Or that US companies offshore are “roaring coming back to where the action is”. And car companies are bringing jobs back (while laying off in thousands). “Americans (white) are dreamers too”. Or the phony infrastructure program that’s coming, where companies will be subsidized by the federal government in ‘public-private partnership’ deals. And his unexplained reference to ‘prison reform’ (really?). Perfunctory references to trade, job training, another non-starter.

Hidden between the lines were other serious references, however. Like his ominous threat to “remove government employees” who ‘fail the American people’ or ‘undermine American trust’, which sounded like a warning from Trump to the bureaucracy not to cross him or else. Or his slap at National Football League players for not saluting the flag. Or plans to expand Guantanamo and the US nuclear arsenal. Or reaffirmation of the definition of ‘enemy combatants’ (which may include US citizens). Trump re-established the fact of his threat to civil liberties.
On the foreign policy front it was mostly threats as well, new and old: To withhold UN funding. Renewed support for new sanctions against Cuba and Venezuela. But North Korea was left for last. Here the return to theater was among the most dramatic. The last ‘gallery scene’ involved a legless defector from North Korea, Seong Ho, brought all the way from So. Korea just for the speech. This was theater with props; applause was sustained as Mr. Ho raised and shook his crutches above his head after Trump’s introduction.

Trump then rode the emotional wave to conclusion with his closing theme that the American people themselves are what’s great about America. Too bad he doesn’t mean all Americans.

So far as Trump speeches go, it was a ‘safe speech’, a teleprompter speech. But typically Trump. Lots of false facts. Emphasis on dividing the country. Long on Theater and emotional appeals to ‘enemies within and without’. And short on policy specifics. But after all, apart from tax cuts and deregulation for corporations and the rich, and a failed Obamacare repeal, not much was achieved in 2017 for him to talk about. And so far as new ideas for 2018 are concerned, there’s ‘no there there’ as well. ”

Jack Rasmus is author of the just published book, ‘Central Bankers at the End of Their Ropes: Monetary Policy and the Coming Depression’, Clarity Press, August 2017

Lies and deception reign in the White House
| January 30, 2018 | 7:23 pm | Analysis, Communist Party Britain, Donald Trump | No comments

Tuesday, January 30, 2018

ALBERT SCHARENBERG examines the Trump spectacle and the end of truth in the US

A US journalist recently commented in The New York Times that Donald Trump’s presidency marks the coming of age of The Society of the Spectacle — a society in which truth is essentially reduced to a mere hypothesis and consistently subordinated to orchestration.

Indeed, lies and deception reign in the White House. During his first year in office alone, The Washington Post counted more than 2,000 cases in which Trump lied or made misleading statements —equating to roughly five times per day.

The 45th US President, sworn into office just a year ago, may be a notorious denier of truth and understand next to nothing about politics but as a reality TV star and celebrity, however, he definitely commands the media.

Under his presidency, politics has been replaced by a frantic scramble for media coverage. This Twitter-President has made it his habit to hurl out daily insults against his domestic and foreign adversaries. Here, even scandals serve a purpose by drawing in the public as a consumer (ie audience), thus including them as part of the spectacle.

With scandals following the president’s every move, there is little time to analyse one incident before the next one makes the headlines.

The events occurring over the last couple of weeks impressively highlight this fact.

The US president decried African nations as “shitholes” and called for more Norwegian immigrants. His Republican henchmen immediately jumped to his aid, simply disavowing his remarks.

Then, as The Wall Street Journal reported, a Trump lawyer allegedly paid an adult-film star hush money shortly before the 2016 election to keep quiet about her sexual affair with Trump.

Notwithstanding the resistance of even Republican governors, Trump intends to open the nation’s coastlines to offshore drilling—with the exception of the Mar-a-Lago-state of Florida.

Steve Bannon, formerly one of Trump’s closest allies, has been driven from his position, and the noose around Trump’s neck in the Russia affair is getting tighter every day. To make things worse, Michael Wolff’s new book Fire and Fury reveals the grotesque and dilettantish nature of the new administration’s operations.

Few if any presidents have polarised the United States as much as Donald Trump has. The right-wing populist president’s ceaseless attacks on not only his political adversaries, but also the very democratic institutions of the nation — the rule of law, independent media, science — are shaking the country to its core.

While the liberal public does not tire of being incessantly appalled by the president’s erratic behavior, incompetence and permanent string of lies, this administration has pushed its agenda forward in certain policy areas.

Undoubtedly, numerous White House projects have fallen victim to the narcissistic president’s chaos and incompetence; the repeated attempts to reverse the Affordable Care Act (Obamacare) are the most infamous example.

Following a long warm-up phase, however, this right-wing government — stacked with representatives of big oil, Wall Street, and the military, and with its majorities in both houses of Congress — has nonetheless managed to implement cornerstones of its programme.

The administration’s greatest success came only a few weeks ago. In adopting the tax reform, the Trump administration has fulfilled the most important demand of Trump’s sponsors, namely to further cater to the rich and to corporations through massive tax reductions.

Interestingly, the Republicans—who had previously insisted on a balanced budget as the holy grail of budget policy under former president Barrack Obama — were not averse to financing the reform with debt, similar to their mode of operation regarding the wars in Afghanistan and Iraq.

Over the coming decade, this reform will lead to an increase of the public deficit of up to $1.5 trillion, unless further cuts are made in other areas. Republicans in Congress are therefore already discussing the alleged necessity of further cutbacks on (already meagre) social welfare payments.

But also below the legislative level, the Trump administration has used its executive powers to change the country’s course in important policy areas.

Headed by a Verizon lobbyist, the Federal Communications Commission (FCC) decided to repeal net neutrality regulations last December, a decision which is set to have far-reaching consequences. Moreover, by appointing the dyed-in-the-wool conservative Neil Gorsuch as Supreme Court Justice, Trump has consolidated the Court’s conservative right-wing majority.

Some changes have also taken place below the public radar. In August 2017, for instance, the Department of Labour eliminated all data on workplace fatalities and stipulated that companies with more than 10 employees no longer need to maintain records of occupational accidents and illnesses.

Regarding climate change, the course has changed as well. Against this backdrop, and by no means accidentally, Noam Chomsky dubbed the Republicans the “most dangerous organisation in human history.”

After announcing his withdrawal from the Paris Climate Agreement, Trump proceeded to channel his full support into the oil industry, the economic base of many of his most important supporters.

Scott Pruitt, the administrator of the Environmental Protection Agency (EPA), has largely replaced the scientists working for the Agency with energy sector lobbyists, lifted environmental regulations on water and air pollution, and removed all references to climate change from the government website.

Trump’s first year in office has conclusively disproved the notion that he is a non-ideological deal-maker and prime business partner. In reality, the exact opposite is the case. Thanks to Trump, the open racism that was quieted by the civil rights movement has found its way back into public discourse.

Indeed, Trump’s biography is pervaded by a continuity of racist thought and action. Incidents include his rallying against the (innocent) Central Park Five in the 1980s, his support of the racist Birther movement against Obama, his repeated slander of Mexicans and Muslims, the defamation of the protests by African-American athletes and, most recently, his description of African countries as “shitholes.”

For many observers, the moment of truth came with Trump’s remarks concerning the events in Charlottesville, Virginia, in August 2017.

Armed with torches, white supremacists and neonazis marched through the town chanting: “Jews will not replace us!” One marcher even raced his car into a group of counter-demonstrators, killing anti-fascist activist Heather Heyer.

Instead of decidedly denouncing the fascist mob, Trump stated that there were “some very fine people on both sides” — a statement that even made many Republicans feel uneasy. His media patron Rupert Murdoch, of all people, was publicly looking for the emergency brake.

According to his biographer David Cay Johnston, Trump would love to be a dictator. After all, as one is inclined to add, President Trump would like to govern the nation like his corporation — in absolutist style, without opposition. His domestic and foreign policy, however, bears both the proof and burden of this fact.

At the international level, Trump has publicly insulted and degraded Washington’s allies, among them Australia, France and Germany. At the same time, he openly embraces authoritarian leaders, from Riyadh to Moscow to Manila. He finds his friends and peers in the likes of European right-wing nationalists such as Nigel Farage, Marine Le Pen, or Jaroslaw Kaczynski.

Trump’s ignorance of the workings of international politics makes him a seemingly unwitting target for continuous hoodwinking by his “bromances”— and threatens to isolate the United States internationally.

Disparaging countries as “shitholes,” foolhardily siding with one party in highly complex conflicts (as with the Jerusalem issue), or insulting nuclear-armed dictators such as Kim Jong Un is not a way to make friends.

By now, foreign leaders have long understood that in order to get what they want, they only need to flatter Trump and receive him in pompous style. After all, Trump’s wishes can easily be gleaned from the president’s Tweets.

Trump’s total incapability is particularly highlighted by his foreign policy actions. After all, Trump’s political decisions are, besides his narcissism, motivated by only one major aim: pleasing his supporters back home.

This holds true for his withdrawal from the climate agreement, the decision concerning Jerusalem, as well as his political sabre-rattling toward Iran.

Ultimately, this also applies to his “shithole” comment and his instrumental criticism of German refugee policy. Neither does he understand the effects his words have in other countries, nor does it interest him in the slightest.

Trump has never attempted to be the president of all US citizens. He always was, and continues to be, exclusively the president of his Republican base. In this group, his popularity remains high; around 80 percent of Republicans agree with his administration. These four-fifths of Republicans, however, translate only into a 35 per cent approval rate in overall society — too little to consolidate Trump’s rule.

Resistance against Trump is therefore as old as his presidency. The Women’s March, held on the day after his inauguration, constituted the largest demonstration the country has ever seen.

At the ballot box, Republicans have recently suffered a series of painful defeats. Much will undoubtedly depend on the results of the mid-term congressional elections in November.

Unfortunately, it is becoming increasingly obvious that the real problem is not Trump but his supporters — the Republican constituency and their mind-set.

Even if Trump were to be removed from office or simply not re-elected, his followers — along with their deep-seated hatred of Latinos and Black people, of those who think differently, of science — will not simply vanish.

In fact, such a development would conceivably lead to an even more emphatic insistence on the fulfilment of the right-wing populist promises. This bodes a lot of trouble and adversity for the post-Trump era.

This article appeared first on peoplesworld.org.

Trump & the Fed: US Shadow Bankers About to Deepen Control of US Economy
| January 26, 2018 | 8:01 pm | Analysis, Donald Trump, Economy | No comments

Trump & the Fed: US Shadow Bankers About to Deepen Control of US Economy

Trump & the Fed: US Shadow Bankers About to Deepen Control of US Economy

What’s sometime referred to as ‘shadow bankers’ have been running the economy and drafting US domestic economic policy since Trump took office. ‘Shadow’ banks include such financial institutions as investment banks, private equity firms, hedge funds, insurance companies, finance companies, asset management companies, etc. They are outside the traditional commercial banking system (e.g. Chase, Bank of America, Wells, etc.) and virtually unregulated. Shadow banks globally now also control more investible liquid assets than do the world’s commercial banks.

It was the shadow banks–investment banks like Lehman, Bear Stearns, insurance giant AIG, GE and GMAC credit and others that precipitated the 2008 financial crisis that then froze up the entire credit system and led to the 2008-09 collapse of the real, non-financial economy. None of the CEOs of the shadow bank system went to jail for their roles in the collapse. And now they are back–not only reaping record profits and asserting even greater influence over the US and global economy; but have penetrated the political institutions of control in the US and other advanced economies even more than they did pre-2008.

Shadow Bankers On the Inside

In the US, shadow bankers from Goldman Sachs, the giant investment bank, took over the drafting of US economic policy when Trump took office. (Trump himself, a commercial property speculator, is part of this shadow banker segment of the US capitalist elite). Running the US Treasury is ex-Goldman Sacher, Steve Mnuchin. On the ‘inside’ of the Trump administration is Gary Cohn, chair of Trump’s key advisory, Economic Council. Together the two, Mnuchin-Cohn, were the original drafters (which was done in secret) of the recent Trump Tax cuts that will yield a $5 trillion windfall for US businesses and wealthy investors, especially multinationals. (More on this in my forthcoming article, to be posted here subsequently).

Mnuchin is also leading the charge for the Trump deregulation offensive, especially financial deregulation. Mnuchin recently took the offensive as well with public statements indicating it was US policy that US dollar should remain at record low levels. Why? To ensure US multinational corporations’ offshore profits are maximized when they convert their profits in local currencies back to the dollar, before they repatriate those profits back to the US at the new lower Trump tax rates (12% instead of 35% repatriation tax rate) and, even more lucratively, when they pay no taxes on offshore profits virtually at all starting 2019. The Mnuchin announcement caused quite a stir among European and other capitalist central bank and Treasury heads in Europe, who were angered because the statement reflected a rejection of prior ‘understandings’.

Goldman Sachs and the shadow banker crowd’s economic influence extends beyond the US Treasury and Economic Council. The New York Federal Reserve’s district president, Dudley, is also a former Goldman Sachs employee. He announced he’ll be resigning this year. The New York Fed is the key district of the Fed responsible for US Treasury securities buying and selling and other trading with global central banks outside the US. Watch for another Goldman Sachser to replace him, or some other former high level senior exec from private equity or hedge fund industry.(For my analysis of the rising global shadow banking sector and its destabilizing role, check out my 2016 book, ‘Systemic Fragility in the Global Economy‘, Clarity Press, and specifically chapter 12, ‘Structural Change in Global Financial Markets’).

Shadow Bankers Will Run the Fed

Trump and fellow shadow bankers are about to further solidify their control of US economic policy at the Fed as well. The Fed’s chair will soon be Jerome Powell, who comes from the private equity sector of the shadow banking industry.. But several additional Fed governor positions have been vacant for some time, as is the vice-chair of the Fed. Watch for appointees from the shadow banks here as well after Powell takes the helm.
Fed governors are officially supposed to serve 14 year terms. (They, along with Fed district presidents constitute the important FOMC, Federal Open Market Committee, that make day to day decisions at the Fed on matters of short term interest rate changes and such). But the Fed governors in recent decades never remain the 14 years. In fact, recently they remain around 3-4 years, if that. They leave early to take senior positions in the banking and shadow banking world. It’s a ‘revolving door’ problem.

Bankers get appointed to Fed governor and Fed district president positions, make decisions beneficial to their former banker buddies, and then leave early to return to their banker roots, with highly remunerative positions once again (often ‘do-nothing’ sinecures). As former governors they also go on the speech circuit, speaking at banker and business conferences, for which they’re paid handsomely, in the tens of thousands of dollars for a 20 minute speech. (Former Fed chairpersons, like Ben Bernanke and soon Janet Yellen get even more generous handouts, paid in the several hundreds of thousands of dollars a speech. They also get nice book contracts as they leave, with prepayments in the millions of dollars upfront, with guaranteed book purchases by corporations, and the best promotional efforts by publishers).

Trump’s appointment, and recent approval by the US House and Senate, of Jerome Powell to head the Fed is only the beginning. The vice-chair and several open Fed governor positions will enable Trump and Mnuchin to stack the deck at the Fed with their appointees. That will solidify Trump’s, and the shadow banker community’s, control of the Fed and ensure its policy direction will reflect Trump’s economic objectives of boosting business incomes, especially multinational corporations.

Central Bank Independence–But from Whom?

Mainstream economists write incessantly about the need to ensure ‘central bank independence’ (for the Fed) from elected government representatives. But they miss the more fundamental fact that it is the bankers themselves (especially now shadow bankers) that ultimately control the Fed. While mainstream economists talk about independence from government representatives, they ignore the deeper control (often through those representatives) of the Fed, and all central banks, by the bankers themselves.

Are Mnuchin, Cohn, Dudley and others really government ‘representatives’? Or are they shadow bankers first and foremos, who have managed to capture key positions in the government apparatus? Do the ‘revolving door’ former Fed governors act independently? Or do they decide with a keen eye on a lucrative offer from the private banks after a few years in office during which they ‘prove’ their value to the bankers? Do the Fed chairs and vice-chairs make decisions solely in the public interest at all times? Or are they perhaps too aware of the opportunity to become quick multimillionaires themselves once they leave office, recompensed nicely in various ways once they leave? And why is it that at the 12 Fed districts, the district president selection committee of 9 district board directors are almost always ‘stacked’ by 5-6 former regional bankers or banker business friendly former CEOs?

In my just published book, ‘Central Bankers at the End of Their Ropes’, Clarity Press, August 2017, I examine this ‘myth of central bank independence’ in detail, and show how central banks, including the Fed, from their very origins have always been dependent (not independent) on the private banks rather than from elected government representatives. Central banks emerged from the private banks and have always been an appendage of sorts of that private banking system. This fact is supported today more than ever by the fact that Fed and central banks’ policy since 2000, and especially since 2008, has been to ensure the subsidization of financial institutions’ profitability. It’s no longer just serving as ‘lender of last resort’ to bail out the private banks periodically when they get in trouble (which chronically occurs). Now it is permanent subsidization of the private banking system.

A Constitutional Amendment to Democratize the Fed

In the book I also propose in the addendum a constitutional amendment and enabling legislation that will sever the relationship of the central bank, the Fed, from the banking industry (and its government representatives) for good. (see the reviews and information re. the book,’Central Bankers at the End of Their Ropes‘ on my blog, jackrasmus.com, on my website, kyklosproductions.com, and at Amazon books. See the book’s addendum for the amendment and enabling legislation).

The trend in banker control of the Fed–and thus US economic policy–is about to deepen as Trump fills the open governor, chair, and vice-chair positions at the Fed in coming months. This will begin immediately after Jerome Powell assumes the chair position from Janet Yellen in early February 2018.

Economic Consequences of a Trump Fed

The shadow bankers, who gave us the last financial crash in 2007-09, will then be in total control–at the Treasury, in the White House, at the New York Fed, and in a majority of the Fed governorships. They will support Treasury Secretary Mnuchin’s policies–keep US rates at levels to ensure that the US dollar’s exchange rate is low versus other key world currencies. That will ensure that US multinational corporations’ profits offshore are not threatened, as they bring back those profits in 2018 at lower tax rates, and then can bring back profits thereafter paying little, if any, taxes on offshore profits at for the next nine years.

The next financial crisis and crash is coming. It is not more than two years away, and could come sooner. The Fed will be totally unprepared and unable to lower interest rates much in response. It will then re-introduce its massive free money injections into the banking system, as it did with ‘QE’ for seven years starting with 2009. The Fed and other central banks provided ‘free money’ in the amount of at least $25 trillion to bail out the private banks over the last 9 years. How much more will they give them next time? Will it be enough again to stabilize the US and world financial system? And will the Fed and US government then legitimize and legalize the private banks’ taking the savings of average depositors and converting those savings to worthless bank stocks? UK and US government preparations are already underway for that last draconian measure. For even today, when one deposits one’s money in a bank, that money legally becomes ‘owned’ by the bank.

Trump’s imminent appointments of Fed vice-chair and governors may prove historically to be the first step in the total capture of the US central bank by the shadow banker element in the US economy–by the Goldman Sachsers, the private equity firms, the hedge fund vulture capitalists, and the commercial real estate speculator that is Trump himself.

We now have government by the bankers unlike ever before in the US. And their policies will inevitably lead to another financial crisis. Only this next time, the rest of US will be even less prepared and able to endure–given the decade of stagnant wages, new record in household debt, collapsing savings rates, greater reliance on part time/temp/gig employment, decline of pensions, loss of social benefits and safety net, higher cost of healthcare, and all the rest of the economic decline that is afflicting more than 100 million households in the US today.

Meanwhile, Trump went to Davos, Switzerland, this week to party with the rest of the World Economic Forum’s multimillionaire-billionaire class. They will celebrate and pat themselves on the back about how well they’ve done for themselves in 2017: record profits, record stock markets’ price appreciation, record dividend payouts to wealthy shareholders, new tax laws that mean they can now keep even more of those profits and capital gains, continuing austerity for the rest of us, further destruction of unions (called ‘labor market reform’), decline and co-optation of remaining social democratic parties, etc. At Davos, Trump will bask his ego and give an ‘American First’ speech, largely for public consumption to his base in the US. But ‘America First’ means Trump, and his more aggressive wing of US capital, are signaling they plan to squeeze the rest of the world’s capitalists for a US larger share of the total pie (that is growing slower and slower). So they’ll have to take even more out of their workers with austerity, wage compression, social benefits reduction, and even more ‘labor market reform’, to keep up competitively with Trump’s USA.

The Davos crowd may think they are sitting on their mountain in Switzerland, but they are really sitting on a powder keg of accelerating inequality, growing economic populism and anti-globalism, and escalating global debt amidst slowing trade, investment, productivity and wages. The Trump answer is for the US elite to protect and expand its share of the global capitalist pie (which is growing more slowly) at the expense of its global capitalist competitors as well as its own middle class. Meanwhile, mainstream economists, asleep on the bridge of the Titanic, declare ‘steam on’, all is well and getting better.

Jack Rasmus
copyright 2018
Dr. Jack Rasmus is author of the recently published, ‘Central Bankers at the End of Their Ropes: Monetary Policy and the Coming Depression‘, August 2017, and ‘Systemic Fragility in the Global Economy‘, 2016, both by Clarity Press.