Category: Economy
Bernie Sanders Drops A Bombshell Report That Exposes Trump’s Infrastructure Scam

Bernie Sanders Drops A Bombshell Report That Exposes Trump’s Infrastructure Scam

As the ranking member of the Senate Budget Committee, Sen. Bernie Sanders (I-VT) has released a report that exposes Trump’s infrastructure plan as a scam designed to benefit Wall Street.

Bernie Sanders Drops A Bombshell Report That Exposes Trump’s Infrastructure Scam

As the ranking member of the Senate Budget Committee, Sen. Bernie Sanders (I-VT) has released a report that exposes Trump’s infrastructure plan as a scam designed to benefit Wall Street.

The report exposes how Trump’s infrastructure plan actually cuts infrastructure funding:

Under Trump’s proposal, billionaires on Wall Street, wealthy campaign contributors and even foreign governments would receive hundreds of billions in tax breaks to purchase our highways, airports and water treatment plants. They would then be allowed to impose huge new tolls and fees on the backs of American commuters and homeowners.

The reality is that Trump’s plan to sell off our nation’s highways, bridges and other vital infrastructure to Wall Street, private investors, and foreign governments is an old idea that does not work. Trump’s plan to rebuild America relies heavily on the use of public-private partnerships to finance infrastructure projects with private equity capital. Such financing, whether through private equity or traditional tax-exempt municipal bonds, is repaid by ordinary citizens through a combination of taxes
and user fees.

Private equity financing is markedly more expensive than traditional government financing, however – by as much as three to six times. Considering the scale of infrastructure development under consideration, that difference could be enormous. For example: the charge for a $100 million-dollar investment using traditional government bond financing (at 3 percent, over 30 years) is about $90 million. For private equity capital, at a 15 percent return, the total skyrockets to $450 million.

Trump’s infrastructure plan is to cut real infrastructure spending while giving tax cuts to corporations and billionaires so that they can buy the nation’s infrastructure and profit off of it with tolls and fees. Once the infrastructure is privatized, the new owners will be motivated to keep expenses down and profit up. The easiest way to accomplish this goal would be to spend less on the maintenance of roads and bridges while charging user fees to all.

Sen. Sanders said, “Donald Trump wants to hand over critical public infrastructure to private investors who will squeeze profits from the American people by putting up new tolls and exorbitant user fees. That is unacceptable. We shouldn’t be selling off our infrastructure to billionaires to make huge profits on the backs of working people.”

Trump’s plan is a con. Sen. Sanders and his report make an important point. While the Russia scandal consumes the bulk of the national spotlight, Trump is continuing his efforts to use the presidency to make the wealthiest Americans ever richer.

Top 20 Percent Of Americans ‘Hoard The American Dream’

 

http://www.npr.org/2017/05/31/530843665/blame-the-top-20-percent-not-the-1-percent-author-argues?utm_campaign=storyshare&utm_source=facebook.com&utm_medium=social

Top 20 Percent Of Americans ‘Hoard The American Dream’

Richard Reeves, a senior fellow at the Brookings Institution, argues that the top 20 percent of Americans – those with six-figure incomes and above — dominate the best schools, live in the best-located homes and pass on the best futures to their kids.

Richard Reeves, a senior fellow at the Brookings Institution, argues that the top 20 percent of Americans – those with six-figure incomes and above — dominate the best schools, live in the best-located homes and pass on the best futures to their kids.

There’s a hidden force shaping our politics, says author Richard Reeves, a senior fellow at the Brookings Institution, and it’s hidden in plain sight.

In his forthcoming book, Dream Hoarders, Reeves argues that the top 20 percent of Americans — those with six-figure incomes and above — dominate the best schools, live in the best-located homes and pass on the best futures to their kids.

“They are members of the American upper-middle class, who, through various ways of rigging the market … are essentially hoarding the American dream,” he tells NPR’s Steve Inskeep.

Originally from England, Reeves has been “startled” to see what he calls “opportunity hoarding mechanisms” in America.

“[W]e protect our neighborhoods, we hoard housing wealth, we also monopolize selective higher education and then we hand out internships and work opportunities on the basis of the social network — people we know in the neighborhood or meet on the tennis courts. And so to that extent we are kind of hoarding those things that should be more widely available,” he says.


Interview Highlights

On the class differences in the U.S. and England

I never thought I’d say this but I sort of miss the class consciousness of my old country which I grew up hating. The reason I miss it is because at least we’re aware of it. It seems to me that in the U.S. you have a class system that operates every bit as ruthlessly as the British class system but under the veneer of classless meritocracy. There isn’t even a self awareness.

On how the tax system helps richer people buy houses near the best schools

The tax incentives that are available to buy houses in the U.S. are necessarily tilted. … Something like $70 billion go on mortgage interest deductions and the deductions for local property taxes. [I]t means that we’re not increasing housing ownership in terms of the breadth; we’re increasing it in terms of depth. We’re actually encouraging people who already have a lot of wealth to just double down on that by buying an even bigger house [and then selling it for even more money later] — and you’ll get an even bigger tax incentive for doing so. And so the entire cycle is almost designed to seal off the upper-middle class from everybody else.

On where this system came from

Many of the mechanisms actually have racist roots. So the zoning laws quite often … had racist origins. Legacy preferences are one way college admissions are rigged. Legacy preferences are genuinely extraordinary in the sense that no other country in the world does that.

They’re actually an attempt by elite colleges to keep Jewish students out, and so what you see is these sort of mechanisms that were evolved for different reasons. Now they interweave with each other to create a deeply unequal society.

On how these trends drive the history we’re living now

I’ve come to believe that the dangerous separation of the American upper-middle class from the rest of society is a huge problem for politics because there’s a sense of a bubble, there’s a sense of people who are kind of making out pretty well from current trends and who are increasingly separate – occupationally, residentially, educationally and economically — from the rest of society. They are also disproportionately powerful and the fact that they are not only separate but unaware of the degree to which the system works in their favor strikes me as one of the most dangerous political facts of our time.

NPR editor Steve Tripoli and digital producer Heidi Glenn contributed to this story.

A Masterpiece of Human Intelligence: Quotes from Karl Marx’s “Das Kapital” (1867)
| May 29, 2017 | 12:58 pm | Analysis, class struggle, Economy, Karl Marx, Labor | No comments

Sunday, May 28, 2017

A Masterpiece of Human Intelligence: Quotes from Karl Marx’s “Das Kapital” (1867)

https://communismgr.blogspot.com/2017/05/a-masterpiece-of-human-intelligence.html
On the occasion of the 150 years since the publication of “Das Kapital” (The Capital)- the most significant book for the world’s working class- we remember some basic thoughts written by Karl Marx. 
The commodity is first of all, an external object, a thing which through its qualities satisfies human needs of whatever kind. The nature of these needs, whether they arise, for example, from the stomach, or the imagination, makes no difference. Nor does it matter here how the thing satisfies man’s need, whether directly as a means of subsistence, i.e. an object of consumption, or indirectly as a means of production
  • Vol. I, Ch. 1, Section 1, pg. 41.
Every commodity is compelled to chose some other commodity for its equivalent.
  • Vol. I, Ch. 1, Section 3, pg. 65.
The whole mystery of commodities, all the magic and necromancy that surrounds the products of labor as long as they take the form of commodities, vanishes therefore, so soon as we come to other forms of production.
  • Vol. I, ch.1, section 4.
A commodity appears, at first sight, a very trivial thing, and easily understood.Its analysis shows that it is, in reality, a very queer thing, abounding in metaphysical subtleties and theological niceties.
  • Vol. I, Ch. 1, Section 4, pg. 81.
The religious world is but the reflex of the real world.
    • Vol. I, Ch. 1, Section 4, pg. 91.
Money is a crystal formed of necessity in the course of the exchanges, whereby different products of labour are practically equated to one another and thus by practice converted into commodities.
    • Vol. I, Ch. 2, pg. 99.
Capital is money, capital is commodities. … By virtue of it being value, it has acquired the occult ability to add value to itself. It brings forth living offspring, or, at the least, lays golden eggs.
  • Vol. I, Ch. 4, pp. 171–172.
As capitalist, he is only capital personified. His soul is the soul of capital. But capital has one single life impulse, the tendency to create value and surplus-value, to make its constant factor, the means of production, absorb the greatest possible amount of surplus-labour. Capital is dead labor,that vampire-like, only lives by sucking living labor, and lives the more, the more labor it sucks.

  • Vol. I, Ch. 10, Section 1, p. 257.
If this labourer were in possession of his own means of production, and was satisfied to live as a labourer, he need not work beyond beyond the time necessary for the reproduction of his means of subsistence, say 8 hours a day.
  • Vol. I, Ch. 11, pg. 336.
The directing motive, the end and aim of capitalist production, is to extract the greatest possible amount of surplus value, and consequently to exploit labor-power to the greatest possible extent.
  • Vol. I, Ch. 13, pg. 363.
Unlimited exploitation of cheap labour-power is the sole foundation of their power to compete.
  • Vol. I, Ch. 15, Section 8, pg. 520.
Capitalist production, therefore, develops technology, and the combining together of various processes into a social whole, only by sapping the original sources of all wealth — the soil and the labourer.
  • Vol. I, Ch. 15 (last sentence), pg. 556.
In capitalist society spare time is acquired for one class by converting the whole life-time of the masses into labour-time.
  • Vol. I, Ch. 17, Section IV, pg. 581.
One capitalist always kills many.
  • Vol. I, Ch. 32, p. 836.
The monopoly of capital becomes a fetter upon the mode of production, which has sprung up and flourished along with, and under it. Centralisation of the means of production and socialisation of labour at last reach a point where they become incompatible with their capitalist integument. This integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated.
  • Vol. I, Ch. 32, p. 837.
We have just seen that, apart from money-capital, circulating capital is only another name for commodity-capital. But to the extent that labour power circulates in the market,it is not capital, no form of commodity-capital. It is not capital at all; the labourer is not a capitalist, although he brings a commodity to market, namely his own skin.
  • Vol. II, Ch. X, p. 211.
But simultaneously with the development of capitalist production the credit system also develops. The money-capital which the capitalist cannot as yet employ in his own business is employed by others, who pay him interest for its use.
  • Vol. II, Ch. XVII, p. 325.
Since property here exists in the form of stock, its movement and transfer become purely a result of gambling on the stock exchange, where the little fish are swallowed by the sharks and the lambs by the stock exchange wolves.
  • Vol. III, Ch. XXVII, The Role of Credit, p. 440.
“Just as the savage must wrestle with Nature to satisfy his wants, to maintain and reproduce life, so must civilised man, and he must do so in all social formations and under all possible modes of production. With his development this realm of physical necessity expands as a result of his wants; but, at the same time, the forces of production which satisfy these wants also increase. Freedom in this field can only consist in socialised man, the associated producers, rationally regulating their interchange with Nature, bringing it under their common control, instead of being ruled by it as by the blind forces of Nature; and achieving this with the least expenditure of energy and under conditions most favourable to, and worthy of, their human nature. But it nonetheless still remains a realm of necessity. Beyond it begins that development of human energy which is an end in itself, the true realm of freedom, which, however, can blossom forth only with this realm of necessity as its basis. The shortening of the working-day is its basic prerequisite”.
– Vol. III.
Brazil: Canary in the Global Economy Coalmine?

Brazil: Canary in the Global Economy Coalmine?

Brazil is transitioning to a greater political crisis based on events of the past week, May 2017. The origins of the political crisis, however, are economic. Business and right wing forces precipitated the legal coup of 2016 to put their political representatives in direct control to enrich themselves again. The coup, however, was made possible only by the Brazilian economy’s deep recession of recent years, which was precipitated by its central bank raising interest rates to 14.25%, in order to prop up the value of its currency and prevent the collapse of assets of the wealthy.

How the Brazilian economy collapsed into recession was addressed in chapter 3, ‘Emerging Markets Perfect Storm’, in my 2016 book, “Systemic Fragility in the Global Economy”, Clarity press, 2016. (see the book icon on the front webpage of this website for reviews and more detail).

To read the chapter’s excerpt on Brazil’s economy, go to the following url to the ‘articles’ subpage on my website.

http://www.kyklosproductions.com/articles.html

Coltan: What You Should Know

http://www.congoweek.org/en/coltan-facts.html

What is Coltan?
Coltan is short for Columbite-tantalite – a black tar-like mineral found in major quantities in the Congo.. The Congo possesses 80 percent of the world’s coltan. When coltan is refined it becomes a heat resistant powder that can hold a high electric charge. The properties of refined coltan is a vital element in creating devices that store energy or capacitors, which are used in a vast array of small electronic devices, especially in mobile phones, laptop computers, pagers, and other electronic devices.

Who are the primary exploiters of Coltan in the Congo?
Rwanda, Uganda, Burundi and their proxy militias are the primary exploiters of coltan in the Congo. In an 18 month period Rwanda made $250 million as a result of exploitation of coltan in the Congo. Although Rwanda and Uganda possess little or no coltan, during the period of the war in the Congo, their exports escalated exponentially. For example, Rwanda’s coltan export went from less than 50 tons in 1995 to almost 250 tons in 1998. Zero cassiterite was transported from the Congo to Uganda in 1998, however by 2000 151 drums were transported.

The United Nations notes in its 2001 report on the Illegal Exploitation of Natural Resources in the congo that “The consequences of illegal exploitation has been twofold: (a)massive availability of financial resources for the Rwandan Patriotic Army, and the individual enrichment of top Ugandan military commanders and civilians; (b) the emergence of of illegal networks headed by either top military officers or businessmen.”

Foreign Corporate exploitation
Although the countries mentioned above directly exploit coltan, foreign multi-national corporations have been deeply involved in the exploitation of coltan in the Congo. The coltan mined by rebels and foreign forces is sold to foreign corporations. Although, the United Nations in its reports on the Congo do not directly blame the multi-national corporations for the conflict in the Congo, the United Nations does say that these companies serve as “the engine of the conflict in the DRC.

Major United States players include:
Cabot Corporation, Boston, MA
OM Group, Cleveland, Ohio
AVX, Myrtle Beach, SC
Eagle Wings Resources International, Ohio
Trinitech International, Ohio
Kemet Electronics Corporation, Greenville, SC
Vishay Sprague. Malvern, PA

Corporations from other countries have been a part of the coltan exploitation chain. These companies include but are not limited to Germany’s HC Starc and EPCOS, China’s Nigncxia, and Belgium’s George Forrest International.

Once the coltan is processed and converted to capacitors, it is then sold to companies such as Nokia, Motorola, Compaq, Alcatel, Dell, Hewlett-Packard , IBM, Lucent, Ericsson and Sony for use in a wide assortment of everyday products ranging from cell phones to computer chips and game consoles.

What are some of the uses of coltan in modern society?
• Laptop computers
• Cellular phones
• Jet engines
• Rockets
• Cutting tools
• Camera lenses
• X-ray film
• Ink jet printers
• Hearing aids
• Pacemakers
• Airbag protection systems
• Ignition and motor control modules, GPS, ABS systems in automobiles
• Game consoles such as playstation, xbox and nintendo
• Video cameras
• Digital still cameras
• Sputtering targets
• Chemical process equipment
• Cathodic protection systems for steel structures such as bridges, water tanks
• Prosthetic devices for humans – hips, plates in the skull, also mesh to repair bone removed after damage by cancer
• Suture clips
• Corrosion resistant fasteners, screws, nuts, bolts
• High temperature furnace parts.
• High temperature alloys for air and land based turbines

Links and Resources
Coltan Wiki Facts
Guns, Money and Cell Phones
United Nations Coltan Primer
Congo’s Coltan Rush!
POLE Institute Report “The Coltan Phenomenon!” (PDF)
Columbium and Tantulum: US Geological Survey (PDF)
“Stolen Goods: Coltan and Conflict …” by Dana Montague (PDF)

Is Trump Really President? by Jack Rasmus

Is Trump Really President? by Jack Rasmus

Is Trump Really President? by Jack Rasmus

These are strange times in American politics. And stranger still is the emerging character of the Trump presidency. Events are appearing with growing frequency, raising the question who is really running the White House and the US government? Is Trump really the President?

Trump sits there on the second floor, spending late evenings into early mornings tweeting to the world. In itself, that’s politically weird. But even more strange is what he’s tweeting and the next day fallout.

We hear about the aircraft carrier task force in Asia that was reportedly steaming at full speed to the North Korean coast a few weeks ago, only to learn soon after it was actually headed in the opposite direction to Australia. Did Donald imagine that? Was the US Navy informed or requested by its titular commander in chief to turn around and go north…and then didn’t? Was Trump’s command to go north perhaps countermanded by some head of Naval operations, or maybe someone else in the White House or government? Or did he just imagine it all and never even informed the Navy to head to Korea? All the possibilities are strange. Very strange.

And then there was the tweet by Trump that his big budget was going to be announced in a few days. It wasn’t even prepared. Government bureaucrats had to quickly slap something together in a couple of pages to provide to the press.

Trump did it again, tweeted announcing his big tax cuts. Again the bureaucrats were caught off guard and had to throw some general outline together and issue it to the press. All this happened after it was generally known that the tax cut proposals were not going to be developed until late summer, and that the Obamacare Repeal bill had to go forward first. The Obamacare repeal was a necessary prerequisite for the general tax cut. Its $592 billion in tax cuts for business and investors had to come first. Until it was resolved, it made no sense to publicize elements of the yet bigger tax cuts of trillions of dollars more scheduled to follow. But Trump tweeted it anyway, and the bureaucracy jumped, putting something down on paper. Who’s communicating what to whom? Is Donald just lobbing electronic policy missiles out of the second floor of the White House, hoping some bureaucrat will catch them before morning?

Or perhaps Trump is being allowed to sit up there on the second floor of the White House and do his tweet thing, while others actually run the government. By others, perhaps it is vice-president Pence in charge, working with some inside committee of key cabinet officers and the intelligence spooks in the NSA-CIA-FBI?

Is Trump being allowed to ‘play at President’ for public consumption, while the generals, spooks, and Goldman Sachs financial pirates run the show?

It’s hard to believe that the members of his administration and the government State bureaucracy knew in advance of Trump’s recent tweets welcoming Philippines President, Duterte, to the White House. Or that Trump would tweet recently that he’s willing to meet with North Korea’s president, for whom he, Trump, had great respect. You can imagine the political constipation that comment caused the spooks and the generals in charge of State, Defense, and National Security.

Last November 30, 2016 this writer wrote a piece predicting that Trump the right wing populist would be successfully ‘tamed’ by the political elites of this country that really run the show. I laid out some ideas how that would be accomplished. (see my blog, jackrasmus.com). But I didn’t think it would happen so fast and so easily.

The past month has witnessed Trump doing a total ‘about face’ on virtually all his right wing populist proposals during the election. He’s backtracking so fast it’s a wonder he hasn’t tripped over himself. (Check that, he has). What explains his 180 degree turnabout?

Was his talk of right wing populism during the campaign all political election hype? Tell the people whatever they want to hear to get elected, and then go do whatever the moneybags really running the show want from you—which is big tax cuts, massive across-the-board deregulation, end the taxation on Obamacare and we don’t care what happens to the rest of it, give us some infrastructure spending deals that resurrect wheeling-dealing commercial property investments with big tax loopholes, and just tweak and rearrange existing free trade treaties.

So what we actually got so far from Trump during his first 100 days is government by ‘executive orders’—i.e. repealing environmental protections, gutting immigrants’ rights, going after sanctuary cities, opening up national monuments and parks to mining and cattle exploitation, subsidizing killer coal companies, attacking consumer protection, smoke and mirror changes to H1-B skilled worker import quotas that haven’t changed, gutting K-12 education and shifting funds to private schools from public, opening up offshore drilling, and so on. But elsewhere it’s been a wholesale retreat from his election positions, proposals and promises. Here’s a short list:

Trump does a reversal on China, from declaring it a currency manipulator to offering it major concessions at the Mar-a-Lago meeting, in exchange for help with North Korea. One wonders if China’s offshore islands expansion is also part of the deal.

From NATO is a waste of money and unnecessary, Trump shifts to NATO is the great bulwark against Russia. From Putin the great leader to Putin is responsible for Syria using poison gas–of which still no proof thereof by the way. (Is it true, or is it all in that great American tradition of ‘yellow cake’ (2003), ‘babies thrown from incubators’ (1990), ‘tonkin gulf’(1965), ‘the war on drugs’ (Panama invasion), ‘Soviets are in Grenada’, and ‘remember the Maine’ (Spanish-American War) incidents that always precede and justify US going to war).

From Mexico is going to pay for the wall, to there’ll be no wall (latest per Homeland Security Secretary). From dumping NAFTA, to ‘I’m not going to terminate NAFTA’ (Trump quote).

And then there’s Trump’s staged press conferences with companies like Carrier Corp., indicating they’re not going to export some jobs to Mexico for now (as they continue to plan to export still others at the same time). And the list of companies announcing jobs they intend to hire in the US without saying when, or that they already had planned to hire them anyway prior to the press conference.

From cancelling the TTP free trade deal (already killed in Congress), to declaring a reopening of the TTIP free trade deal with Europe. And what about the silent deal Trump struck with Japan’s prime minister, Shinzo Abe, when he was here? It’s been leaked that Japan will pick up the lead on the TPP renegotiations and the US will join it later. Or Mexico’s recent offer to the US to just apply the TPP terms to a new ‘reform’ of NAFTA by Mexico and the US? Watch both these back door free trade resurrections, they’re coming too.

And what about Trump’s organizational about face, with right wing ideologue Steve Bannon banished from the National Security Council and pro-Russia general Flynn banished from the government?

What I also find interesting is the intense media attack on Trump— focusing on his Russia connection, his tax returns, nepotism in the White House, his companies’ benefiting (a violation of the emoluments clause of the US constitution) and calls for impeachment in Congress—all of sudden all the above have disappeared from view in the media front page. They’ve been put on the back burner in Congress and the press. And there’s no more damaging leaks coming weekly from the intelligence spooks either. Instead, what we hear is talk about ‘now he’s coming around’, beginning to appear presidential! Is all that just coincidental? Hmmm.

Is this a presidency where the Donald gets to sit on the second floor of the White House and do his late night tweets, and the bureaucrats scurry the next day to clean up? Where Donald is brought downstairs to the oval office for Executive Order signings or occasional reporter interviews and then trotted back upstairs? Is it a presidency where he makes his late night calls to his moneybag friends, like the billionaire Mercers and others, to find out ‘how am I doing guys’? While the rest of the representatives of the economic and political elite run the show?

Is this a Trump presidency, or a government by Generals-Goldman Sachs-Pence, with son in law Kushner functioning as intermediary between them and the Donald? A government of second floor tweets and first floor executive order signing events?

The quality of the American presidency has been in steady decline for decades. From the crook Nixon to the inept peanut farmer, Carter; from the movie-actor, camera friendly Reagan to the morally sleezy opportunist Bill Clinton; from know-nothing George Bush to the super-cautious false progressive Obama; and now to the fake right populist, blowhard, tweety-bird called Donald Trump.

We’re going to need a lot of luck to get through the next three and a half years folks!

A Painful Anniversary

A Painful Anniversary

– from Zoltan Zigedy is available at:
http://zzs-blg.blogspot.com/

Exactly ten years ago this past April 7, I posted an article on Marxism-Leninism Today entitled Tabloid Political Economy: The Coming Depression (for those who missed it, it is reproduced below). It was my first and only attempt at economic prognostication, always a challenging and risky venture. The “Tabloid” in the article’s title was a tongue-in-cheek reference to the headline in the April, 2007 issue of a now defunct supermarket tabloid, Weekly World News. Featured between Virgin Mary Slaps Boy and Jews Invented Pizzoh was the shrill admonition: Surviving the Next Great Depression! It’s Coming This Summer!

It didn’t come in the summer of 2007.
In fact, the Dow Jones Industrial Average continued to climb seemingly with no limit, reaching a new peak in the fall of 2007. The pundits continued to extol the virtues of unbridled capitalism.
While the folks at WWN built their case on scant evidence (“Skyrocketing gas prices, escalating war, crashing housing prices, calamitous weather and freefalling stock prices…”), there were many other good reasons to take their prediction seriously, reasons which I offered in my article. Unfortunately, the print edition did not survive to see the collapse that rocked the foundations of the global capitalist economy the following year. Nonetheless, the zany supermarket tabloid proved to be far more prescient than the Nobel laureates, academics, and popular pundits who postured as learned economists yet never saw the collapse coming.
Ten Years On

The global economy never fully recovered from the crash of 2008. Instead, it has stumbled along from one setback to another, with economic growth only marginally topping population growth. When both the enormous loss of wealth from the crash and the obscenely unequal distribution of the wealth recovered since the crash are configured, it is fair to say that the vast majority of the world’s population have seen little or no recovery. In fact, the casualties from the crash continue to pile up.

The US economy is neither healthy nor without serious symptoms. Despite the market euphoria that surprisingly accompanied the Trump election, the Atlanta Federal Reserve has lowered its growth expectations for the first quarter to .5% from an earlier forecast of 3%. Other projections have similarly dropped.
For three months in a row, since January, durable goods orders (excluding volatile transportation orders) have dropped. Industrial production fell .1% in January and was unchanged in February. Factory output dropped .4% in March from February and was only up .8% from a year earlier.
Bank loan growth has slowed.
Retail sales slowed by .3% in February and .2% in March. Inflation, as a measure of consumer demand, dropped .3% in March. Retail stores are closing in unprecedented numbers and retail employment growth has slowed.
Sales of new cars– the principal driver of consumption growth since the crash– has fallen for three straight months. Auto dealers are now offering buyer incentives that are greater than the labor costs of production (labor costs are less than $2500 per car, on average). Incentives account for 10.5% of average sticker price ($31, 435). Yet the average car sits for over 70 days on the lot.
Used car prices were down 8% in February, another sign of declining demand. And auto loan defaults are on the rise.
The US trade gap– the difference between imports and exports– reached a 5-year high in February.
In stark human terms, the US economy is failing working people. Between January 2016 and January 2017, average hourly earnings slipped .1% and the hours of the average workweek dropped .3%. This calculates to a .4% loss in real average earnings for those twelve months.
With reduced earnings, more and more workers are drawing on their retirement savings: 20% of 401(k)s have been reduced through self-loans.
Not surprisingly, household debt in 2016 grew the most in a decade. Unlike in the lead-up to the crash, mortgage debt is growing modestly, still below the explosive growth rate of that time. Instead, the growth in debt is in credit cards, auto loans, and student loans. Auto loan debt has reached $1.2 trillion, while student debt has risen to $1.3 trillion.
Student debt is particularly crippling. There are 42 million outstanding loans. The average student loan debt jumped from $26,300 in 2013 to $30,650 in 2016. Defaults went from 3.6 million in 2015 to 4.2 million in 2016.
And senior citizens are saddled with growing debt as well. In 1998, 30% of people 65 and older were in debt. In 2012, the percentage of seniors in debt reached 43.3. Growing debt comes in the wake of the collapse of net worth since 2005, when it topped $300,000 among those 55 to 64. By 2013, average net worth within that group dropped to $168,900 (even below the net worth of $175,300 reached in 1989).
Talking heads and media “experts” hail the job market. But they seldom delve deeply into its performance. Put simply, capitalists are hiring additional workers, rather than purchasing labor-saving equipment, because labor is cheap and flexible. The failure of organized labor to defend or advance labor’s relative position has served as a disincentive for capitalist investment in new technologies and equipment. They see no need to do so, when labor power can be used on demand, with no restrictions, and at low costs.
That trend is clearly reflected in the most recent period’s historically poor growth in productivity, among the lowest periods of productivity growth since the Second World War. Contrary to the widespread hawking of the idea that most workers are in danger of being replaced by robots, corporations are showing little interest in the introduction of new or old technologies. They are spending very little on equipment. While the technology may be there, capitalists have shown little need for it, given low labor costs.
As Shawn Sprague shows in a recent BLS paper, since 2009 the growth of aggregate hours-worked has grown more quickly than the growth of non-farm business output. This fact demonstrates that US capitalists feel little pressure to “save” labor while restoring profits during the so-called “recovery.” Rather than having existing workers work more hours, they are hiring more workers at low wages and contingently. Profits rebounded nicely because the working class had been slammed by the downturn, rendering the employment costs so low that there was no need to invest in labor-saving equipment.
This harsh truth has been ignored by economists and labor leaders alike because it shows the complete bankruptcy of class collaboration as an approach to social justice for workers.
US capitalists have enjoyed a decade of low labor costs, no pressure to invest retained earnings, and high profits (corporate after-tax profits dipped in 2015, but came back smartly in 2016). By securing labor power at low costs, they have foregone the purchase of labor-saving instruments and achieved modest growth by expanding employment. Today, capital is profoundly afraid that, with reduced unemployment, competition for labor power will drive up the costs of labor and erode profits. The Trump tax change package, favorable to corporations and the repatriation of profits, is one ruling class response to this anticipated problem.
Despite the return of an overheated housing market with escalating prices (lagging new construction is fueling demand), no systemic accumulation crisis comparable to that of 2007-2008 appears on the immediate horizon. Instead, the post-collapse era of stagnation and deteriorating living standards continues for the working class. As the shrinking income and mounting debt of working people erodes aggregate consumption, the possibility of a business cycle contraction grows more and more likely. The long, tepid expansion transferred nearly all its gains to the wealthy few, leaving little but debt or asset cannibalization for the majority. With declining retail sales, especially auto sales, and the growing weight of personal debt, the likelihood of further consumption growth is in doubt.
A business cycle contraction will only further weaken the position of working people, setting them up for a further dose of sacrifice and pain.
Isn’t it time to get off the capitalist roller coaster?
Zoltan Zigedy