Category: Jack Rasmus
The Real Causes of Deficits and the US Debt (Next Phases in Trump Fiscal Strategy)
| December 7, 2017 | 8:43 pm | Analysis, Donald Trump, Economy, Jack Rasmus | No comments

The Real Causes of Deficits and the US Debt (Next Phases in Trump Fiscal Strategy)

The Real Causes of Deficits and the US Debt (Next Phases in Trump Fiscal Strategy)

With the Senate and House all but assured to pass the US$4.5 trillion in tax cuts for businesses, investors, and the wealthiest 1 percent households by the end of this week, phases two and three of the Trump-Republican fiscal strategy have begun quickly to take shape.

Phase two is to maneuver the inept Democrats in Congress into passing a temporary budget deficit-debt extension in order to allow the tax cuts to be implemented quickly. That’s already a ‘done deal’.

Phase three is the drumbeat growing to attack social security, Medicare, food stamps, Medicaid, and other ‘safety net’ laws, in order to pay for the deficit created by cutting taxes on the rich. To justify the attack, a whole new set of lies are resurrected and being peddled by the media and pro-business pundits and politicians.

Deficits and Debt: Resurrecting Old Lies and Misrepresentations

Nonsense like social security and Medicare will be insolvent by 2030. When in fact social security retirement fund has created a multi-trillion dollar surplus since 1986, which the U.S. government has annually ‘borrowed’, exchanging the real money in the fund created by the payroll tax and its indexed threshold, for Treasury bonds deposited in the fund. The government then uses the social security surplus to pay for decades of tax cuts for the rich and corporations and to fund endless war in the middle east.

As for Medicare, the real culprit undermining the Medicare part A and B funds has been the decades-long escalating of prices charged by insurance companies, for-profit hospital chains (financed by Wall St.), medical devices companies, and doctor partnerships investing in real estate and other speculative markets and raising their prices to pay for it.

As for Part D, prescription drugs for Medicare, the big Pharma price gouging is even more rampant, driving up the cost of the Part D fund. By the way, the prescription drug provision, Part D, passed in 2005, was intentionally never funded by Congress and George Bush. It became law without any dedicated tax, payroll or other, to fund it. Its US$50 billion plus a year costs were thus designed from the outset to be paid by means of the deficit and not funded with any tax.

Social Security Disability, SSI, has risen in costs, as a million more have joined its numbers since the 2008 crisis. That rise coincides with Congress and Obama cutting unemployment insurance benefits. A million workers today, who would otherwise be unemployed (and raising the unemployment rate by a million) went on SSI instead of risking cuts in unemployment benefits. So Congress’s reducing the cost of unemployment benefits in effect raised the cost of SSI. And now conservatives like Congressman Paul Ryan, the would be social security ‘hatchet man’ for the rich, want to slash SSI as well as social security retirement, Medicare benefits for grandma and grandpa, Medicaid for single moms and the disabled (the largest group by far on Medicaid), as well as for food stamps.

Food stamp costs have also risen sharply since 2008. But that’s because real wages have stagnated or fallen for tens of millions of workers, making them eligible under Congress’s own rules for food stamp distribution. Now Ryan and his friends want to literally take food out of the mouths of the poorest by changing eligibility rules.

They want to cut and end benefits and take an already shredded social safety net completely apart–while giving US$4.5 trillion to their rich friends (who are their election campaign contributors). The rich and their businesses are getting $4.5 trillion in tax cuts in Trump’s tax proposal—not the $1.4 trillion referenced in the corporate press. The $1.4 trillion is after they raise $3 trillion in tax hikes on the middle class.

Whatever financing issues exist for Social Security retirement, Medicare, Medicaid, disability insurance, food stamps, etc., they can be simply and easily adjusted, and without cutting any benefits and making average households pay for the tax cuts for the rich in Trump’s tax cut bill.

Social security retirement, still in surplus, can be kept in surplus by simply one measure: raise the ‘cap’ on social security to cover all earned wage income. Today the ‘cap’, at roughly US$118,000 a year, exempts almost 20 percent of the highest paid wage earners. Once their annual salary exceeds that amount, they no longer pay any payroll tax. They get a nice tax cut of 6.2 percent for the rest of the year. (Businesses also get to keep 6.2% more). Furthermore, if capital income earners (interest, rent, dividends, etc.) were to pay the same 6.2% it would permit social security retirement benefits to be paid at two thirds one’s prior earned wages, and starting with age 62. The retirement age could thus be lowered by five years, instead of raised as Ryan and others propose.

As for Medicare Parts A and B, raising the ridiculously low 1.45 percent tax just another 0.25 percent would end all financial stress in the A & B Medicare funds for decades to come.

For SSI, if Congress would restore the real value of unemployment benefits back to what it was in the 1960s, maybe millions more would return to work. (It’s also one of the reasons why the labor force participation rate in the U.S. has collapsed the past decade). But then Congress would have to admit the real unemployment rate is not 4.2 percent but several percentages higher. (Actually, it’s still over 10 percent, once other forms of ‘hidden unemployment’ and underemployment are accurately accounted for).

As for food stamps’ rising costs, if there were a decent minimum wage (at least US$15 an hour), then millions would no longer be eligible for food stamps and those on it would significantly decline.

In other words, the U.S. Congress and Republican-Democrat administrations have caused the Medicare, Part D, SSI, and food stamp cost problems. They also permitted Wall St. to get its claws into the health insurance, prescription drugs, and hospital industries–financing mergers and acquisitions activity and demanding in exchange for lending to companies in those industries that the companies raise their prices to generate excess profits to repay Wall St. for the loans for the M&A activity.

The Real Causes of Deficits and the Debt

So if social security, Medicare-Medicaid, SSI, food stamps, and other social safety net programs are not the cause of the deficits, what then are the causes?

In the year 2000, the U.S. federal government debt was about US$4 trillion. By 2008 under George Bush it had risen to nearly US$9 trillion. The rise was due to the US$3.4 trillion in Bush tax cuts, 80 percent of which went to investors and businesses, plus another US$300 billion to U.S. multinational corporations due to Bush’s offshore repatriation tax cut. Multinationals were allowed to bring US$320 billion of their US$750 billion offshore cash hoard back to the U.S. and pay only a 5.25 percent tax rate instead of the normal 35 percent. (By the way, they accumulated the US$750 billion hoard was a result of Bill Clinton in 1997 allowing them to keep profits offshore untaxed if not brought back to the U.S. Thus the Democrats originally created the problem of refusing to pay taxes on offshore profits, and then George Bush, Obama, and now Trump simply used it as an excuse to propose lower tax rates for repatriated the offshore profits cash hoard of US multinational companies. From $750 billion in 2004, it’s now $2.8 trillion).

So the Bush tax cuts whacked the U.S. deficit and debt. The Bush wars in the middle east did as well. By 2008 an additional US$2 to US$3 trillion was spent on the wars. Then Bush policies of financial deregulation precipitated the 2007-09 crash and recession. That reduced federal tax revenue collection due to collapse economic growth further. Then there was Bush’s 2008 futile $180 billion tax cut to stem the crisis, which it didn’t. And let’s not forget Bush’s 2005 prescription drug plan–a boondoggle for big pharmaceutical companies–that added US$50 billion a year more. As did a new Homeland Security $50 billion a year and rising budget costs.

There’s your additional US$5 trillion added by Bush to the budget deficit and U.S. debt–from largely wars, defense spending, tax cuts, and windfalls for various sectors of the healthcare industry.

Obama would go beyond Bush. First, there was the US$300 billion tax cuts in his 2009 so-called ‘recovery act’, mostly again to businesses and investors. (The Democrat Congress in 2009 wanted an additional US$120 billion in consumer tax cuts but Obama, on advice of Larry Summers, rejected that). What followed 2009 was the weakest recovery from recession in the post-1945 period, as Obama policies failed to implement a serious fiscal stimulus. Slow recovery meant lower federal tax revenues for years thereafter.

Studies show that at least 60 percent of the deficit and debt since 2000 is attributable to insufficient taxation, due both to tax cutting and slow economic growth below historical rates.

Obama then extended the Bush-era tax cuts another US$803 billion at year-end 2010 and then agreed to extend them another decade in January 2013, at a cost of US$5 trillion. The middle east war spending continued as well to the tune of another $3 trillion at minimum. Continuing the prescription drug subsidy to big Pharma and Homeland Security costs added another $500 billion.

In short, Bush added US$5 trillion to the US debt and Obama another US$10 trillion. That’s how we get from US$4 trillion in 2000 to US$19 trillion at the end of 2016. (US$20 trillion today, about to rise another US$10 trillion by 2027 once again with the Trump tax cuts fast-tracking through Congress today).

To sum up, the problem with chronic U.S. federal deficits and escalating Debt is not social security, Medicare, or any of the other social programs. The causes of the deficits and debt are directly the consequence of financing wars in the middle east without raising taxes to pay for them (the first time in U.S. history of war financing), rising homeland security and other non-war defense costs, massive tax cuts for businesses and investors since 2001, economic growth at two thirds of normal the past decade (generating less tax revenues), government health program costs escalation due to healthcare sector price gouging, and no real wage growth for the 80 percent of the labor force resulting in rising costs for food stamps, SSI, and other benefits.

Notwithstanding all these facts, what we’ll hear increasingly from the Paul Ryans and other paid-for politicians of the rich is that the victims (retirees, single moms, disabled, underemployed, jobless, etc.) are the cause of the deficits and debt. Therefore they must pay for it.

But what they’re really paying for will be more tax cuts for the wealthy, more war spending (in various forms), and more subsidization of price-gouging big pharmaceuticals, health insurance companies, and for-profit hospitals which now front for, and are indirectly run by, Wall St.

Jack Rasmus is the author of the recently published book, “Central Bankers at the End of Their Ropes: Monetary Policy and the Coming Depression.” He blogs at jackrasmus.com and his twitter handle is @drjackrasmus.

Some Recent ‘Tweets’ Summarizing Senate-House Tax Cut Proposals
| December 7, 2017 | 8:38 pm | Analysis, Donald Trump, Jack Rasmus | No comments

Some Recent ‘Tweets’ Summarizing Senate-House Tax Cut Proposals

Some Recent ‘Tweets’ Summarizing Senate-House Tax Cut Proposals

by Dr. Jack Rasmus,

Republicans will now ‘sharpen their knives’ to go after grandma and grandpa, to cut social security and medicare–and medicaid for single moms and disabled, to pay for $2T deficit (not $1 or $1.5T) in Trump tax cuts

Senate bill means beginning of the end of ACA healthcare Act: Ending individual mandate will raise premiums for all by minimum 10% in 2018 and more thereafter. 4 million will immediately drop; 13m will drop by 2027, per independent estimates.

Senate tax bill means 3200 of the richest 0.1% households no longer will pay inheritance tax whatsoever; the remaining 1800 will have new threshold of $22 million before paying. Fewer than 0.1% households will now pay Inheritance tax.

Senate version off Trump Tax cuts reshuffles the House bill: Corps still get $1.5T; pass thru business $476B;Multinational corps $500B + bigger loopholes for real estate, autos, oil, depreciation=$3T business cuts paid by $3T tax hikes for middle class.

Trump’s latest ‘big lie’: the tax cuts “will cost me millions”. Trump’s 2005 tax returns show he paid only paid taxes due to AMT; doubling AMT exemption will halve his taxes. Trump’s 500 ‘business income pass through’ companies also gain from rate cut from 39.6% to 25% (or less 23% in Senate)

Multinational US corps past history with 2005 repatriation tax windfall tax cut (from 35% to 5.25%) showed 90% of windfall was used for stock buyback, dividends, and financing mergers and acquisitions.

Trump Tax cut based on faulty economic theory: give business more disposable income & they will invest it short run, leading to jobs, wages, GDP. US businesses now sit on $2 trillion cash in US +$2.8T offshore. If they aren’t investing with $4.8T, why would they with another $3t?

Senate tax bill deficit of $1 trillion based on absurd assumptions of economic growth. Past historical GDP trend for next decade will at least double the $1 to $2 trillion deficit or more. Decade from now, US debt will exceed $30 trillion

A Thanksgiving Letter to Our Wealthiest 1% Americans
| November 28, 2017 | 7:55 pm | Analysis, Jack Rasmus | No comments

A Thanksgiving Letter to Our Wealthiest 1% Americans

A Thanksgiving Letter to Our Wealthiest 1% Americans

By Jack Rasmus
Copyright 2017

As this Thanksgiving holiday comes to an end and the Xmas season approaches, let’s not forget to give thanks to our richest 1% fellow Americans and their corporations. Thanks to all 1.25 million of you from the 130 million of us 99 percenter households.

Your stewardship of the US economy has allowed us to keep 5% of all the national income created since the last recession in 2009; while you wealthiest 1% got to keep the other 95% (see UC Berkeley economist, Emmanuel Saez’s annual income inequality analyses).

But the more you get to keep, the more you can ‘trickle down’ to the rest of us, right? So say your politicians, talking media heads, economists, and other assorted hirelings. So thanks very much for at least sharing something with us.
If not sharing wages equally, we certainly got more jobs to be thankful for from you—who lose no opportunity to proclaim you are the source of all job creation.

Since 2009, you ‘gave’ us millions of part time, temp, contract, on call, and gig jobs. True, mostly low paid, without pensions or benefits jobs. Better than nothing jobs. And while it took you 8 years to re-create the level of jobs we had back in 2007, better late than never, right? Even if our pre-2008, higher paid jobs were replaced mostly by lower paid after 2008, it sure beats unemployment benefits. So thank all of you 1% self-proclaimed job creators for all the low paid, no benefit, service jobs you eventually did create for us.

As owners of the system you certainly had a difficult task managing your complex, mega-corporation called the USA economy, keeping all those foreign competitors and troublemakers in line with the US economic empire. You know, those ‘russkies’ that just won’t lay down and play dead anymore, those too clever Chinese, and all those assorted ‘rocket men’. But that’s what our 1000 offshore military bases are for, aren’t they? Our trillion dollar a year defense budget is well worth it.

And getting us out of the worst economic crisis since the great depression of the 1930s in 2008-09 was no easy task for you, we know. So all of you 1.25 million wealthiest 1% households deserve every dollar you’ve diverted to yourselves in the process of economic recovery these past 8 years, including:

• The $6 trillion in stock buybacks and dividend payouts paid out to you from your corporations since 2008 (see Yardeni Research, November 2017);
• The nearly 400% increase in the value of your stock holdings (see the DOW, S&P 500 and Nasdaq combined market gains since 2008);
• The additional $ trillions in capital gains income you earned on bond interest and capital gains since the last recession;
• Your share of half of the $1.9 trillions in ‘pass through’ non-corporate business income net gains since 2007 (see US national income accounts);
• The unknown $ trillions more you earned from investing in derivatives in offshore markets that you don’t report, which even the US government cannot discover;
• The still additional $ trillions more you stuffed in your offshore accounts to avoid paying US taxes (see recent revelations from the so-called ‘Paradise Papers’);
• The $2 trillion cash your bank and non-bank US corporations are still sitting on in the US, and another $2 trillion your multinational corporations are hoarding offshore—together earmarked at least in part for your personal future distribution (see Moody’s Analytics).

That’s easily more than $15 trillion in cash, near-cash, and easily convertible to cash sources of income accumulated over the past 8 years (and excludes the earnings from real estate and real property)—to be shared amongst the 1.25 million of you.

In total wealth and assets, not just income, American households held $58 trillion in net worth in 2009; that has since risen to $105 trillion, according to the US Federal Reserve bank’s latest 2017 report. Since median US Households’ net worth is still 30% below 2007 levels—and 90% of all US households are still below 2007 levels (per the New York Times, September 28, 2017)—the lion’s share of that $47 trillion total gain in net worth must therefore have gone to you one percenters. Congratulations. (Can’t wait to get my trickle down share. Please send by way of this blog address).

Let’s not forget to thank in particular the bankers among you. While it’s true they gave us the 2007-09 financial crash that led to 14 million home foreclosures and $4 trillion in our lost savings, your bankers did allow us to offset our stagnant wages these past 8 years with more loans and debt.

So thank you bankers, for the $1.4 trillion in student debt, the $1.2 trillion in credit card debt, and the more than $1 trillion in auto loan debt. That’s $3.6 trillion! Who needs wage increases when we can borrow our way to prosperity!
And while we’re talking about banks, let’s not forget to thank our central bankers, Ben Bernanke and Janet Yellen, for buying up all bad investments you one percenters made before the 2008 crash. I mean the subprime mortgage bonds and other securities you got stuck with and couldn’t sell, that Ben and Janet generously bought from you at above market prices. That was another $5 to $6 trillion cash subsidy to your professional investor class.

By the way, I hear Ben is now making the speech circuit rounds, speaking to your bankers and companies for a fee of $200k per pop, and is serving on your corporate boards? And Janet has just announced she’ll soon also be leaving the Fed and joining him. Reward them well, Mr. and Mrs. 1%. They’ve done yeoman work for your banks, providing loans at 0.15% for 7 years, while the US government charged students 6.8% student loan rates and grandma and grandpa retirees lost more than $1 trillion in fixed income savings as result of near zero interest rates.

And let’s not forget your great multinational corporations who’ve been offshoring our high paying jobs made possible by free trade treaties like NAFTA. You know, the tech companies, big pharmaceutical companies, auto parts and textiles, and all the rest. Now we can buy cheaper priced products at Walmart and Target from you that they make in Mexico, China, and Indonesia.

Like loading up on Loan debt, free trade is so much better than getting wage increases!

And this season let’s not forget to thank your politicians whose elections you finance. Thanks to George W. Bush for cutting taxes by $3.4 trillion. And Obama and the Democrats for cutting your taxes by another $1.1 trillion during the recession, and then extending the Bush tax cuts in 2013 for another decade by a further $5 trillion. Now their heir to the presidency, Uncle Donald, is proposing another $4.5 trillion tax cut for you one percenters, for yet another decade. I can’t wait for all the ‘trickle down’ that’s finally coming.

Your Republican party politicians (aka one wing of your Corporate Party of America) can’t take all the credit. Your Democrat wing deserves some.

So thanks to Nancy Pelosi and Chuck Shumer, for their current efforts to broker a deal with Uncle Donald to let the 800,000 ‘Dreamers’ kids stay in America—in exchange for agreeing to deport their parents and for funding the border Wall with Mexico.

I do hope that next year Nancy and Uncle Donald can revisit the repeal of the ACA-Obamacare Act. It will mean another $592 billion tax cut for you one percenters and your corporations, and maybe then even more trickle down to us 99%. All those single moms with kids, disabled persons, and mentally ill don’t really need the improvements in Medicaid they got from the ACA. They were doing just fine before. You one percenters need the tax cuts more.

In conclusion, I’d like to give special thanks to your most famous one percenter, Don Trumpeone, a member of the wealthiest .01% (or 12,600) super richest households within your ranks, whose income gains in 2016 averaged $65 million.

Thank you, Don Trumpeone, for keeping us 99% safe in 2017. We ‘kiss your hand’. This year not one American was killed by the North Koreans, or by the Russians in the Ukraine, or by those violent Yemenis and world domination seeking Iranians—even though 60,000 Americans have died from the Opioid epidemic (started by the big Pharma companies) this past year; another 38,000 of us died from guns made in the US (291,000 since 2007); and the USA has continued to fall below its 20th ranking in infant mortality among the advanced nations while our teen suicide rate has doubled since 2007.

We 99% have so much to be thankful for this holiday season. And you 1%–and your corporations, politicians, and media pundits—are largely responsible.

So God keep blessing America. Let’s all stand for the flag. And thank you, our wealthiest 1% fellow Americans, the richest and greatest generation the world has ever seen.

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. He blogs at jackrasmus.com, twitters @drjackrasmus, and his website is http://kyklosproductions.com

The Trump-Goldman Sachs Tax Cut for the Rich-print
| October 13, 2017 | 9:28 pm | Analysis, Donald Trump, Jack Rasmus | No comments

The Trump-Goldman Sachs Tax Cut for the Rich-print

The Trump-Goldman Sachs Tax Cut for the Rich-print

The following will shortly appear in various blogs and print publications. My detailed analysis of the Trump tax plan announced this past week.
Dr. Jack Rasmus
Copyright 2017

“This past week Trump introduced his long awaited Tax Cut, estimated between $2.0 to $2.4 trillion. Like so many other distortions of the truth, Trump claimed his plan would benefit the middle class, not the rich—the latest in a long litany of lies by this president.

Contradicting Trump, the independent Tax Policy Center has estimated in just the first year half of the $2 trillion plus Trump cuts will go to the wealthiest 1% households that annually earn more than $730,000. That’s an immediate income windfall to the wealthiest 1% households of 8.5%, according to the Tax Policy Center. But that’s only in the first of ten years the cuts will be in effect. It gets worse over time.

According to the Tax Policy Center, “Taxpayers in the top one percent (incomes above $730,000), would receive about 50 percent of the total tax benefit [in 2018]”. However, “By 2027, the top one percent would get 80 percent of the plan’s tax cuts while the share for middle-income households would drop to about five percent.” By the last year of the cuts, 2027, on average the wealthiest 1% household would realize $207,000, and the even wealthier 0.1% would realize an income gain of $1,022,000.

When confronted with these facts on national TV this past Sunday, Trump’s Treasury Secretary, Steve Mnuchin, quickly backtracked and admitted he could not guarantee every middle class family would see a tax cut. Right. That’s because 15-17 million (12%) of US taxpaying households in the US will face a tax hike in the first year of the cuts. In the tenth and last year, “one in four middle class families would end up with higher taxes”.

The US Economic ‘Troika’

The Trump Plan is actually the product of the former Goldman-Sachs investment bankers who have been in charge of Trump’s economic policy since he came into office. Steve Mnuchin, the Treasury Secretary, and Gary Cohn, director of Trump’s economic council, are the two authors of the Trump tax cuts. They put it together. They are also both former top executives of the global shadow bank called Goldman Sachs. Together with the other key office determining US economic policy, the US central bank, held by yet another ex-Goldman Sachs senior exec, Bill Dudley, president of the New York Federal Reserve bank, the Goldman-Sachs trio of Mnuchin-Cohn-Dudley constitute what might be called the ‘US Troika’ for domestic economic policy.
The Trump tax proposal is therefore really a big bankers tax plan—authored by bankers, in the interest of bankers and financial investors (like Trump himself), and overwhelmingly favoring the wealthiest 1%.

Given that economic policy under Trump is being driven by bankers, it’s not surprising that the CEO of the biggest US banks, Morgan Stanley, admitted just a few months ago that a reduction of the corporate nominal income tax rate from the current 35% nominal rate to a new nominal rate of 20% will provide the bank an immediate windfall gain of 15%-20% in earnings. And that’s just the nominal corporate rate cut proposed by Trump. With loopholes, it’s no doubt more.

The Trump-Troika’s Triple Tax-Cut Trifecta for the 1%

The Trump Troika has indicated it hopes to package up and deliver the trillions of $ to their 1% friends by Christmas 2017. Their gift will consist of three major tax cuts for the rich and their businesses. A Trump-Troika Tax Cut ‘Trifecta’ of $ trillions.

1.The Corporate Tax Cuts

The first of the three main elements is a big cut in the corporate income tax nominal rate, from current 35% to 20%. In addition, there’s the elimination of what is called the ‘territorial tax’ system, which is just a fancy phrase for ending the fiction of the foreign profits tax. Currently, US multinational corporations hoard a minimum of $2.6 trillion of profits offshore and refuse to pay US taxes on those profits. In other words, Congress and presidents for decades have refused to enforce the foreign profits tax. Now that fiction will be ended by officially eliminating taxes on their profits. They’ll only pay taxes on US profits, which will create an even greater incentive for them to shift operations and profits to their offshore subsidiaries. But there’s more for the big corporations.

The Trump plan also simultaneously proposes what it calls a ‘repatriation tax cut’. If the big tech, pharma, banks, and energy companies bring back some of their reported $2.6 trillion (an official number which is actually more than that), Congress will require they pay only a 10% tax rate—not the current 35% rate or even Trump’s proposed 20%–on that repatriated profits. No doubt the repatriation will be tied to some kind of agreement to invest the money in the US economy. That’s how they’ll sell it to the American public. But that shell game was played before, in 2004-05, under George W. Bush. The same ‘repatriation’ deal was then legislated, to return the $700 billion then stuffed away in corporate offshore subsidiaries. About half the $700 billion was brought back, but US corporations did not invest it in jobs in the US as they were supposed to. They used the repatriated profits to buy up their competitors (mergers and acquisitions), to pay out dividends to stockholders, and to buy back their stock to drive equity prices and the stock market to new heights in 2005-07. The current Trump ‘territorial tax repeal/repatriation’ boondoggle will turn out just the same as it did in 2005.

2. Non-Incorporate Business Tax Cuts

The second big business class tax windfall in the Trump-Goldman Sachs tax giveaway for the rich is the proposal to reduce the top nominal tax rate for non-corporate businesses, like proprietorships and partnerships, whose business income (aka profits) is treated like personal income. This is called the ‘pass through business income’ provision.
That’s a Trump tax cut for unincorporated businesses—like doctors, law firms, real estate investment partnerships, etc. 40% of non-corporate income is currently taxed at 39.6% (the top personal income tax rate). Trump proposes to reduce that nominal rate to 25%. So non-incorporate businesses too will get an immediately 14.6% cut, nearly matching the 15% rate cut for corporate businesses.

In the case of both corporate and non-corporate companies we’re talking about ‘nominal’ tax rate cuts of 14.6% and 15%. The ‘effective’ tax rate is what they actually pay in taxes—i.e. after loopholes, after their high paid tax lawyers take a whack at their tax bill, after they cleverly divert their income to their offshore subsidiaries and refuse to pay the foreign profits tax, and after they stuff away whatever they can in offshore tax havens in the Cayman Islands, Switzerland, and a dozen other island nations worldwide.

For example, Apple Corporation alone is hoarding $260 billion in cash at present—95% of which it keeps offshore to avoid paying Uncle Sam taxes. Big multinational companies like Apple, i.e. virtually all the big tech companies, big Pharma corporations, banks and oil companies, pay no more than 12-13% effective tax rates today—not the 35% nominal rate.

Tech, big Pharma, banks and oil companies are the big violators of offshore cash hoarding/tax avoidance schemes. Microsoft’s effective global tax rate last year was only 12%. IBM’s even less, at 10%. The giant drug company, Pfizer paid 18% and the oil company, Chevron 14%. One of the largest US companies in the world, General Electric, paid only 1%. When their nominal rate is reduced to 20% under the Trump plan, they’ll pay even less, likely in the single digits, if that.

Corporations and non-corporate businesses are the institutional conduit for passing income to their capitalist owners and managers. The Trump corporate and business taxes means companies immediately get to keep at least 15% more of their income for themselves—and more in ‘effective’ rate terms. That means they get to distribute to their executives and big stockholders and partners even more than they have in recent years. And in recent years that has been no small sum. For example, just corporate dividend payouts and stock buybacks have totaled more than $1 trillion on average for six years since 2010! A total of more than $6 trillion.

But all that’s only the business tax cut side of the Trump plan. There’s a third major tax cut component of the Trump plan—i.e. major cuts in the Personal Income Tax that accrue overwhelmingly to the richest 1% households.

3. Personal Income Tax Cuts for the 1%

There are multiple measures in the Trump-Troika proposal that benefits the 1% in the form of personal income tax reductions. Corporations and businesses get to keep more income from the business tax cuts, to pass on to their shareholders, investors, and senior managers. The latter then get to keep more of what’s passed through and distributed to them as a result of the personal income tax cuts.

The first personal tax cut boondoggle for the 1% wealthiest households is the Trump proposal to reduce the ‘tax income brackets’ from seven to three. The new brackets would be 35%, 25%, and 12%.

Whenever brackets are reduced, the wealthiest always benefit. The current top bracket, affecting households with a minimum of $418,000 annual income, would be reduced from the current 39.6% to 35%. In the next bracket, those with incomes of 191,000 to 418,000 would see their tax rate (nominal again) cut from 28% to 25%. However, the 25% third bracket would apply to annual incomes as low as $38,000. That’s the middle and working class. So households with $38,000 annual incomes would pay the same rate as those with more than $400,000. Tax cuts for the middle class, did Trump say? Only tax rate reductions beginning with those with $191,000 incomes and the real cuts for those over $418,000!

But the cuts in the nominal tax rate for the top 1% to 5% households are only part of the personal income tax windfall for the rich under the Trump plan. The really big tax cuts for the 1% come in the form of the repeal of the Inheritance Tax and the Alternative Minimum Tax, as well as Trump’s allowing the ‘carried interest’ tax loophole for financial speculators like hedge fund managers and private equity CEOs to continue.

The current Inheritance Tax applies only to those with estates of $11 million or more, about 0.2 of all the taxpaying households. So its repeal is clearly a windfall for the super rich. The Alternative Minimum Tax is designed to ensure the super rich pay something, after they manipulate the tax loopholes, shelter their income offshore in tax havens, or simply engage in tax fraud by various other means. Now that’s gone as well under the Trump plan. ‘Carried interest’, a loophole, allows big finance speculators, like hedge fund managers, to avoid paying the corporate tax rate altogether, and pay a maximum of 20% on their hundreds of millions and sometimes billions of dollars of income every year.

Who Pays?

As previously noted, folks with $91,000 a year annual income get no tax rate cuts. They still will pay the 25%. And since that is what’s called ‘earned’ (wage and salary) income, they don’t get the loopholes to manipulate, like those with ‘capital incomes’ (dividends, capital gains, rents, interest, etc.). What they get is called deductions. But under the Trump plan, the deductions for state and local taxes, for state sales taxes, and apparently for excess medical costs will all disappear. The cost of that to middle and working class households is estimated at $1 trillion over the decade.

Trump claims the standard deduction will be doubled, and that will benefit the middle class. But estimates reveal that a middle class family with two kids will see their standard deduction reduced from $28,900 to $24,000. But I guess that’s just ‘Trump math’.

The general US taxpayer will also pay for the trillions of dollars that will be redistributed to the 1% and their companies. It’s estimated the federal government deficit will increase by $2.4 trillion over the decade as a result of the Trump plan. Republicans in Congress have railed over the deficits and federal debt, now at $20 trillion, for years. But they are conspicuously quiet now about adding $2.4 trillion more—so long as it the result of tax giveaways to themselves, their 1% friends, and their rich corporate election campaign contributors.

And both wings of the Corporate Party of America—aka Republicans and Democrats—never mention the economic fact that since 2001, 60% of US federal government deficits, and therefore the US debt of $20 trillion, are attributable to tax cuts by George W. Bush and Barack Obama: more than $3.5 trillion under Bush and more than $7 trillion under Obama. (The remaining $10 trillion of the US debt due to war and defense spending, price gouging by the medical industry and big pharma driving up government costs for Medicare, Medicaid, and other government insurance, bailouts of the big banks in 2008-09, and interest payments on the debt).

The 35-Year Neoliberal Tax Offensive

Tax cutting for business classes and the 1% has always been a fundamental element of Neoliberal economic policy ever since the Reagan years (and actually late Jimmy Carter period). Major tax cut legislation occurred in 1981, 1986, and 1997-98 under Clinton. George W. Bush then cut taxes by $3.4 trillion in 2001-04, 80% of which went to the wealthiest households and businesses. He cut taxes another $180 billion in 2008. Obama cut another $300 billion in his 2009 so-called recovery program. When that faltered, it was another $800 billion at year end 2010. He then extended the Bush tax cuts that were scheduled to expire in 2011 two more years. That costs $450 billion each year. And in 2013, cutting a deal with Republicans called the ‘fiscal cliff’ settlement, he extended the Bush tax cuts of the prior decade for another ten years. That cost a further $5 trillion. Now Trump wants even more. He promised $5 trillion in tax cuts during his election campaign. So the current proposal is only half of what he has in mind perhaps.

Neoliberal tax cutting in the US has also been characterized by the ‘tax cut shell game’. The shell game is played several ways.

In the course of major tax cut legislation, the elites and their lobbyists alternate their focus on cutting rates and on correcting tax loopholes. They raise rates but expand loopholes. When the public becomes aware of the outrageous loopholes, they then eliminate some loopholes but simultaneously reduce the tax rates on the rich. When the public complains of too low tax rates for the rich, they raise the rates but quietly expand the loopholes. They play this shell game so the outcome is always a net gain for corporations and the rich.

Since Reagan and the advent of neoliberal tax policy, the corporate income tax share of total US government revenues has fallen from more than 20% to single digits well below 10%. Conversely, the payroll tax has doubled from 22% to more than 40%. A similar shift within the personal income tax, steadily around 40% of government revenues, has also occurred. The wealthy pay less a share of the total and the middle class pays more. Along the way, token concessions to the very low end of working poor are introduced, to give the appearance of fairness. But the middle class, the $38 to $91,000 nearly 100 million taxpaying households foot the bill for both the 1% and the bottom. This pattern was set in motion under Reagan. His proposed $752 billion in tax cuts in 1981-82 were adjusted in 1986, but the net outcome was more for the rich and their corporations. That pattern has continued under Clinton, Bush, Obama and now proposed under Trump.

To cover the shell game, an overlay of ideology covers up what’s going on. There’s the false argument that ‘tax cuts create jobs’, for which there’s no empirical evidence. There’s the claim US multinational corporations pay a double tax compared to their competitors, when in fact they effectively pay less. There’s the lie that if corporate taxes are cut they will automatically invest the savings, when in fact what they do is invest offshore, divert the savings to stock and bond and other financial markets, boost their dividend and stock buybacks, or stuff the savings in their offshore subsidiaries to avoid paying taxes.

All these neoliberal false claims, arguments, and outright lies continue today to justify the Trump-Goldman Sachs tax plan—which is just the latest iteration of neoliberal tax policy and tax offensive in the US. The consequences of the Trump plan, if it is passed, will be the same as the previous tax giveaways to the 1% and their companies: it will redistribute income massively from the middle and working classes to the rich. Income inequality will continue to worsen dramatically. US multinational corporations will begin again to divert profits, and investment, offshore; profits brought back untaxed will result in mergers and acquisitions, dividend payouts, and financial markets investment. No real jobs will be created in the US. The wealthy will continue to pump their savings into financial asset markets, causing further bubbles in stocks, exchange traded funds, bonds, derivatives and the like. The US economy will continue to slow and become more unstable financially. And there will be another financial crash and great recession—or worse. Only this time, the vast majority of US households—i.e. the middle and working classes—will be even worse off and more unable to weather the next economic storm.

Nothing will change so long as the Corporate Party of America is allowed to continue its neoliberal tax giveaways, its tax cutting ‘shell games’, and is allowed to continue to foment its ideological cover up.”

Dr. Jack Rasmus, October 2, 2017

Dr. 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, and the previously published ‘Looting Greece: A New Financial Imperialism Emerges’, October 2016, and ‘Systemic Fragility in the Global Economy’, January 2016, also by Clarity press. More information is available at Claritypress.com/RasmusIII. For more analyses on the Trump and neoliberal taxation, listen to Dr. Rasmus’s, September 29, 2017 radio show, Alternative Visions, on the Progressive Radio Network at http://alternativevisions.podbean.com. He blogs at jackrasmus.com and his website is http://kyklosproductions.com.

Update on Greek Debt Crises–Why Syriza Continues to Lose
| September 24, 2017 | 3:36 pm | Greece, Jack Rasmus, Syriza | No comments

Update on Greek Debt Crises–Why Syriza Continues to Lose

Update on Greek Debt Crises–Why Syriza Continues to Lose

This past August marked the second anniversary of the Greek debt crisis and the third major piling on of debt on Greece in August 2015 by the Eurozone ‘Troika’ of European Commission, European Central Bank, and the IMF. That 2015 third debt deal added $86 billion to the previous $230 billion imposed on Greece—all to be paid by various austerity measures squeezing Greek workers, taxpayers, retirees, and small businesses demanded by the Troika and their northern Euro bankers sitting behind it.

Studies by German academic institutions showed that more than 95% of the debt repayments by Greece to the Troika have ended up in Euro bankers’ hands.

But the third debt deal of August 2015, which extends another year to August 2018, was not the end. Every time a major multi-billion dollar interest payment from Greece was due to the Troika and their bankers, still more austerity was piled on the $83 billion August 2015 deal. The Troika forced Greece to introduce even more austerity in the summer of 2016, and again still more this past summer 2017, to pay for the deal.

Last month, August 2017, Syriza and its ‘rump’ leadership—-most of its militant elements were purged by Syriza’s leader, Alex Tsipras, following the August 2015 debt deal—-hailed as some kind of significant achievement that the private banks and markets were now willing to directly lend money to Greece once again. Instead of borrowing still more from the Troika—-i.e. the bankers representatives—-Greece now was able once again to borrow and owe still more to the private bankers instead. In other words, to pile on more private debt instead of Troika debt. To impose even more austerity in order to directly pay bankers, instead of indirectly pay their Troika friends. What an achievement!

Greece’s 2012 second debt deal borrowed $154 billion from the Troika, which Greece then had to pay, according to the debt terms, to the private bankers, hedge funds and speculators’ which had accumulated over preceding years and the first debt crisis of 2010. So the Troika simply fronted for the bankers and speculators in the 2nd and 3rd debt deals. Greece paid the Troika and it paid the bankers. But now, as of 2017, Syriza and Greece can indebt themselves once again directly to the bankers by borrowing from them in public markets. As the French say, everything changes but nothing changes!

What the Greek debt deals of 2010-2015, and the never-ending austerity, show is that supra-state institutions like the Troika function as debt collectors for the bankers and shadow bankers when the latter cannot successfully collect their debt payments on their own. This is the essence of the new, 21st century form of financial imperialism. New, emerging Supra-State institutions prefer weaker national governments to indebt themselves directly to the banks and squeeze their own populace with Austerity whenever they can to make the payments. The Supra-State may not be involved. But it will step in if necessary to play debt collector if and when popular governments get control of their governments and balk at onerous debt repayments. And in free trade currency zones and banking unions, like the Eurozone, that Supra-State role is becoming increasingly institutionalized and regularized. And as it does, forms of democracy in the associated weaker nation states become increasingly atrophied and eventually disappear.

Syriza came to power in January 2015 as one of those popularly elected governments intent on adjusting the terms of debt repayment. But after a tragic, comedy of errors negotiation effort, capitulated totally to the Troika’s negotiators after only seven months.

The capitulation by Syriza’s leader, Alex Tsipras, in July 2015 was doubly tragic in that he had just put to a vote to the Greek people a week beforehand whether to reject the Troika’s deal and its deeper austerity demands. And the Greek popular vote called for a rejection of the Troika’s terms and demands. But Tsipras and Syriza rejected their own supporters, not the Troika, and capitulated totally to the Troika’s terms.

The August 2015 3rd debt deal quickly thereafter signed by Syriza-Tsipras was so onerous—-and the Tsipras-Syriza treachery so odious—-that it left opposition and popular resistance temporarily immobilized. That of course was the Troika’s strategic objective. Together with Tsipras they then pushed through their $83 billion deal, while Tsipras simultaneously purged his own Syriza party to rid it of elements refusing to accept the deal. Polls showed at that time, in August-September 2015, that 70% of the Greek people opposed the deal and considered it even worse than the former two debt agreements of 2010 and 2012. Other polls showed 79% rejected Tsipras himself.

To remain in power, Tsipras immediately called new Parliamentary elections, blocking with the pro-Troika parties and against former Syriza dissidents, in order to push through the Troika’s $83 billion deal. This week, September 20, 2017 also marks the two year anniversary of that purge and election that solidified Troika and Euro banker control over the Syriza party—-a party that once dared to challenge it and the Eurozone’s neoliberal Supra-State regime.

The meteoric rise, capitulation, collapse, and aftermath ‘right-shift’ of Syriza raises fundamental questions and lessons still today. It raises questions about strategies of governments that make a social-democratic turn in response to popular uprisings, and then attempt to confront more powerful neoliberal capitalist regimes that retain control of their currencies, their banking systems, and their budgets–such as in the case of Greece. Even in the advanced capitalist economies, the message is smaller states beware of the integration within the larger capitalist states and economies–whether by free trade, central banking integration, budget consolidations, or common currencies. Democracy will soon become the victim in turn.

The following is an excerpt from the concluding chapter of this writer’s October 2016 book, ‘Looting Greece: A New Financial Imperialism Emerges’, Clarity Press, which questioned strategies that attempted to resurrect 20th century forms of social-democracy in the 21st century world of supra-State neoliberal regimes. It summarizes Syriza’s ‘fundamental error’—a naïve belief that elements of European social democracy would rally around it and together they—i.e. resurgent social democracy and Syriza Greece—would successfully outmaneuver the German-banker-Troika dominated Euro neoliberal regime that solidified its power with the 1999 Euro currency reforms.

Syriza and Tsipras continue to employ the same error, it appears, hoping to be rescued by other Euro regime leaders instead of relying on the Greek people. Tsipras-Syriza recently invited the new banker-president of France, Emmanuel Macron, who this past month visited Athens. Their meeting suggests Tsipras and the rump Syriza still don’t understand why they were so thoroughly defeated by the Troika in 2015, and have been consistently pushed even further into austerity and retreat over the past two years.

But perhaps it no longer matters. Polls show Tsipras and the rump Syriza trailing their political opponents by more than two to one in elections set to occur in 2018.

EXCERPT from ‘Looting Greece’, Chapter 10, ‘Why the Troika Prevailed’.

Syriza’s Fundamental Error

To have succeeded in negotiations with the Troika, Syriza would have had to achieve one or more of the following— expand the space for fiscal spending on its domestic economy, end the dominance and control of the ECB by the German coalition, restore Greece’s central bank independence from the ECB, or end the control of its own Greek private banking system from northern Europe core banks. None of these objectives could have been achieved by Syriza alone. Syriza’s grand error, however, was to think that it could rally the remnants of European social democracy to its side and support and together have achieved these goals—especially the expanding of space for domestic fiscal investment. It was Syriza’s fundamental strategic miscalculation to think it could rally this support and thereby create an effective counter to the German coalition’s dominant influence within the Troika.

Syriza went into the fight with the Troika with a Greek central bank that was the appendage, even agent, of the ECB in Greece, and with a private banking system in Greece that was primarily an extension of Euro banks outside Greece. Syriza struggled to create some space for fiscal stimulus within the Troika imposed debt deal, but it was thoroughly rebuffed by the Troika in that effort. It sought to launch a new policy throughout the Eurozone targeting fiscal investment, from which it might benefit as well. But just as the ECB was thwarted by German-core northern Euro alliance countries, the German coalition also successfully prevented efforts to promote fiscal stimulus by the EC as well. The Troika-German coalition had been, and continues to be, successful in preventing even much stronger members states in France and Italy from exceeding Eurozone fiscal stimulus rules. The dominant Troika German faction was not about to let Greece prevail and restore fiscal stimulus, therefore, when France and Italy were not. Greece was not only blocked from launching a Euro-wide fiscal investment spending policy; it was forced to introduce ‘reverse fiscal spending’ in the form of austerity.

Syriza’s insistence on remaining in the Euro system meant Grexit was never an option. That in turn meant Greece would not have an independent central bank providing liquidity when needed to its banking system. With ECB control over the currency and therefore liquidity, the ECB could reduce or turn on or off the money flow to Greece’s central bank and thus its entire private banking system at will—which it did repeatedly at key moments during the 2015 debt crisis to influence negotiations.

As one member of the Syriza party’s central committee reflected on the weeks leading up to the July 5 capitulation, “The European Central Bank had already begun to carry out its threats, closing down the country’s banking system”.

The ECB had actually begun turning the economic screws on Syriza well before the final weeks preceding the referendum: It refused to release interest on Greek bonds it owed under the old debt agreement to Greece from the outset of negotiations. It refused to accept Greek government bonds as collateral necessary for Greek central bank support of Greece’s private banks. It doled out Emergency Lending Assistance, ELA, funds in amounts just enough to keep Greek banks from imploding from March to June and constantly threatened to withhold those same ELA funds when Troika negotiators periodically demanded more austerity concessions from Greece. And it pressured Greece not to impose meaningful controls on bank withdrawals and capital flight during negotiations, even as those withdrawals and money flowing out of the country was creating a slow motion train wreck of the banking system itself. The ECB, in other words, was engineering a staged collapse of Greece’s banking system, and yet Syriza refused to implement any possible policy or strategy for preventing or impeding it.

For a more detailed analysis of the respective strategies and tactics of Syriza and the Troika in 2015 and after, and the role played by individual leaders and organizations, see the concluding chapter of Jack Rasmus, ‘Looting Greece: A New Financial Imperialism Emerges’, Clarity Press, October 2016, pp. 231-57. Dr. Rasmus is also author of the recently published, ‘Central Bankers at the End of Their Ropes?: Monetary Policy and the Coming Depression’, Clarity Press, August 2017.

Review of ‘Central Bankers at the End of Their Ropes: Monetary Policy and the Coming Depression’, Clarity Press, August 2017, by David Baker (forthcoming Z Magazine)
| September 10, 2017 | 8:39 pm | Jack Rasmus | No comments

 

Review of ‘Central Bankers at the End of Their Ropes: Monetary Policy and the Coming Depression’, Clarity Press, August 2017, by David Baker (forthcoming Z Magazine)

The following is a review of Dr. Jack Rasmus, ‘Central Bankers at the End of Their Ropes?: Monetary Policy and the Coming Depression’, Clarity Press, August 2017, by David Baker, which will appear in the October 1, issue of Z Magazine.

“Jack Rasmus has written a series of important books about the global economy; the critical question is, important or not, why would the general reader make the effort required to read any of them? The best answer comes from Noam Chomsky who tells us that we face two existential threats, nuclear holocaust and the environmental collapse called climate change. Those threats to tens of millions of people worldwide can only be mitigated by bringing back real democracy from the shadow of the empty political theater which we currently endure; but to bring back real democracy, we need to understand what destroyed it and what destroyed it is the collection of economic engines called neoliberalism. The most reliable guide to understanding neoliberalism is Jack Rasmus; his book, Central Bankers on the Ropes, examines the fundamental role of central banks in our new, savage global economy.

The word savage would puzzle Volker, Greenspan, Bernake, Yellen et al but it accurately describes neoliberalism’s impact on the world; the lower 90% are collateral damage in the service of the 1%. But the central banks have always served rulings elites; kings and princes historically have financed their endless wars with the help of the institutional ancestors of central banks; in more modern times, central banks provide trillions of dollars in cash, in various forms, to the financial industry which in turn have been used to prop up the stock and bond markets world wide; offshore jobs, gamble in financial instruments, and pour out dividends. The central banks are in effect a conduit straight to the one percent; as fast as legal tender is electronically printed, it ends up hoarded in their accounts, where it stays.

Jack Rasmus is excellent at peeling away the layers of economic deceit to demonstrate that the rivers of cash pouring out of the central banks does not bring prosperity to the lower 90%; the idea that prosperity is even trickling down is empty ideology. The way in which he peels away the layers of deceit is by examining each of the central banks, in turn, The Fed, The Bank of Japan, the EU Central Bank, and the Central Bank of China, and determines which if any is actually achieving their publicly announced goals. These goals include inflation at 2%; interest rate stabilization; money supply stabilization; bailing out major financial institutions during economic downturns, and increasing GDP.

With the exception of China, each central bank has failed in all of their stated goals. Since their publicly stated goals are not being achieved, we have to examine their actual outcomes to determine what their real goals are and ultimately after peeling away all the layers of deception, their real goal to help the one per cent, by propping up stocks and bonds, providing capital to offshore jobs as well as gamble in financial assets.

The case of China is of particular importance because prior to the 2008 collapse, China pulled out of economic downturns relatively quickly and easily and did achieve its announced goal of significant increases in GDP. What happened after 2008, is that China changed its mix of monetary and fiscal policy, conventional banking, and strict restrictions on capital flows. But because China wanted its currency used as a major trading currency, it was pushed by the rest of the world banking community to open up its economy to capital flows and allow non conventional banking, i.e. shadow banking to operate within in its borders. This was a huge mistake; once China made this shift in policy, it could no longer pull itself out of downturns easily and it is finding it harder and harder to maintain its GDP goals. It has fallen into the chronic subsidization trap of financial institutions.

It is this paradigm shift, the chronic subsidization of financial institutions by central banks world wide that is the key finding; it is why central bankers are “on the ropes.” Historically, one of the major roles of central banks has been to bail out large financial institutions when they fail. Which is exactly what the Fed and others did during the 2008-2009 collapse. But by 2010, the financial institutions were stabilized but the trillions of liquidity injections, quantitative easing and low or no interest loans, continued. Why? Because the banking industry and the one per cent were making so much money from what became chronic subsidization, a subsidization that continues to this day. And here is the problem. The central banks know that a serious downturn is coming; if they continue to generate trillions of dollars in world wide debt through the extension of credit then the inevitable collapse becomes greater; but if they stop, they also risk a huge collapse since the rise in financial assets worldwide has nothing to do with the real economy but is propped up by the central banks.

Rasmus also documents another element of the central banks dilemma; they can’t raise interest rates. The central banks want to raise interest rates, for many reasons but one important reason is because it allows them to lower rates when the inevitable financial bust comes. If they can’t raise rates now, they can’t lower them when the bust comes; likewise, if they can’t stop the cash distributions now, they have nothing left in their monetary weapons to use when the crash comes. Over and over again, throughout history, it was the raising of interest rates by central banks that plunged the world into either recession or depression. So we are truly looking at the abyss since the coming collapse will be more violent, due to the rising oceans of debt [over $20 trillion] and the central banks have no monetary weapons left, either cash or lowering interest rates.

Which brings me to the heart of the debate, what in the austere language of economics is called Fiscal Policy versus Monetary Policy. Progressive fiscal policy is what finally dragged the US out of the Great Depression; it is what Ronald Regan sneered at as “Tax and Spend”. For a progressive, you tax based upon ability and spend based upon need; and, during the 1950’s and 1960’s, the progressive tax and spend policies produced prosperity for all. If you think about it, taxes are the only way to generate capital without falling into the credit/debt trap. Not so with monetary policy.

Monetary policy is economic policy driven by the central banks who in turn serve the one percent. There are many tools that can be used in Monetary Policy, the most well known of which are electronically printing low or interest free loans as well as direct buys of stocks and bonds and raising and lowering interest rates. What Jack Rasmus provides is the insight that the one percent are not willing to wait for prosperity to “trickle up” from the lower 90%; they want instant cash now, as fast as the Fed can electronically print it. Even if it brings down the entire world economy. The lower 90% can wait, apparently forever.

Once again, China did provide an interesting contrast prior to 2008; it had a true fiscal policy, not the fiscal austerity that monetary policy demands. China made and continues to make enormous expenditures on infrastructure, on a scale close to the fiscal policies of the US during WWII. In sharp contrast, none of the other central banks or economies examined engage in this kind of fiscal policy; the case of the EU is quite extreme; they are prohibited by their enabling legislation from engaging in any fiscal policy other than fiscal austerity.

Extraordinary dangers require extraordinary measures. Jack Rasmus concludes with a proposed US constitutional amendment that would place The Fed under strict democratic controls such as nationalizing all banking, prohibiting shadow banking and casino capitalism, placing strict controls on capital flows, and making the explicit goal of The Fed the raising of household disposable incomes. There is a body of scholarly work that demonstrates that the US Constitution was designed to protect investor rights [see e.g. An Economic Interpretation of the US Constitution] so why not amend it and finally give the people control over their economy? One criticism of this proposal is that it really doesn’t go far enough; doesn’t global capitalism require global controls? Thomas Piketty in his groundbreaking work, Capital, proposes just that.

David Baker

The McLaughlin Campaign for Lt. Governor–The RPA (Richmond Progressive Alliance) Takes Progressive Politics to the State Level–audio
| September 10, 2017 | 8:36 pm | Jack Rasmus | No comments

The Gayle McLaughlin Campaign for Lt. Governor of California—Progressive Local Politics In Action – 09.08.17

To Listen to the podcast of the show go to:

http://prn.fm/alternative-visions-gayle-mclaughlin-campaign-lt-governor-california-progressive-local-politics-action-09-08-17/

Or go to: http://www.alternativevisions.podbean.com

SHOW ANNOUNCEMENT

Jack Rasmus interviews Gayle McLaughlin, founding organizer of the successful grass roots independent political action movement in Richmond, California, former mayor of Richmond and current city council member. McLaughlin explains how the Richmond Political Alliance, RPA, has been able to take over city government despite intense opposition from oil giant, Chevron Corp., that previously ran the city. How the RPA’s strategy and tactics enabled real political action, outside the two wings of the corporate party of America (aka Democrats and Republicans), to become successful. Gayle describes the progressive improvements the RPA has achieved, how it started, its organizational innovations and direct community ties and how electoral action and direct action tactics were melded successfully. McLaughlin and the RPA are now undertaking efforts to extend progressive politics to the state level with her candidacy for Lt. Governor of California. For more information about her Lt. Governor campaign, go to her website http://www.GayleforCalifornia.org . For how the RPA became a successful grass roots movement, its strategy, organization structure and tactics, see http://www.RichmondProgressiveAlliance.net. And for local San Francisco bay area residents, check out her campaign’s next meeting at 747 Lobos St., Richmond, Calif., this Sunday, September 10 at 2-5pm.

(For a full history of the RPA from origin to present, Dr. Rasmus also recommends reading RPA member, Steve Early’s book, Refinery Town: Big Oil, Big Money, and the Remaking of An American City, Beacon Press, 2017. )