Welcome To Trump's Third World America

This morning Carolyn Maloney,vice chair of the Joint Economic Committee released a report, Retirement Insecurity, meant to coincide with the 84th anniversary of the signing of the Social Security Act. The report shows that, while Social Security has been successful in preventing millions of Americans from falling into poverty, the two other pillars of America's retirement system are in crisis: personal savings and pensions. "Half of American households," it reads, "are at risk of being unable to maintain their standard of living in retirement. Even those who take extraordinary steps-- like working until 65 (five years past the current average retirement age), annuitizing all financial assets or reverse-mortgaging their homes-- may not be able to maintain their living standards. Worse, forty percent of workers ages 50-60 who are not currently poor would be poor if were they retire at age 62. Women, Blacks and Hispanics are at substantially greater risk of being poor in retirement."

Earlier in the week, Scott Paul, president of the Alliance for American Manufacturing, wrote that "Senate and House negotiators will soon meet to decide whether to advance legislation to ban Chinese-owned or controlled companies from using taxpayer money to build U.S. rail cars and buses. The Senate already passed language to ban both, but the version passed by the House applies only to rail. And if folks like GOP Leader Kevin McCarthy get their way, nothing will happen. There’s widespread bipartisan concern-- and growing-- about the litany of security risks posed by allowing companies backed by the Chinese government to make America’s rail cars and buses."

And in rural America, Trump's policies have already brought on a bad recession, dairy farms being hit hardest. According to the American Farm Bureau farm loan delinquencies and bankruptcies are rising. And among the hardest hit states are red counties in Wisconsin, Minnesota, Kansas, Georgia, California, Minnesota, Nebraska, Texas and New York. Trump areas of Iowa, Pennsylvania and North Carolina are also hurting badly.

Following several years of low farm income and rising debt levels, a review of Federal Deposit Insurance Corporation quarterly call report data reveals that the delinquency rates for commercial agricultural loans in both the real estate and non-real estate lending sectors are at a six-year high.

For the first quarter of 2019, 2.5% of commercial real estate loans in agriculture were more than 30 days past due, up from 2.1% in the prior quarter and above the long-run average of 2.1%. Similarly, 2.2% of non-real estate loans in agriculture held by commercial lenders were more than 30 days past due, up from 1.5% in the prior quarter and above the long-run average of 1.6%. The first quarter of 2013 was the last time delinquency rates were this high for commercial lenders. Figure 1 highlights the delinquency rate for both real estate and non-real estate loans held by commercial lenders.

While the delinquency rates are well below the levels experienced following the recession, they are above the historical average and trending in the wrong direction due to several years of poor farm income exasperated by extreme weather events and ongoing trade disruptions.

...In the year ending June 2019, Chapter 12 farm bankruptcies increased in every region in the United States, except for the Southeast. However, there were still a significant number of bankruptcies filed in that region. The Midwest and Southeast had the highest number of filings, 240 and 100 bankruptcies in the past year, respectively. The Midwest is up from 215 filings from the previous year to 240 filings, an increase of 12%. The biggest increase in bankruptcies, 50%, occurred in the Northwest, which includes Washington, Oregon, Idaho, Montana and Wyoming.

Across the U.S., farm loan delinquencies and Chapter 12 bankruptcies are rising. The deteriorating financial conditions for farmers and ranchers are a direct result of several years of low farm income, a low return on farm assets, mounting debt, more natural disasters and the second year of retaliatory tariffs on many U.S. agricultural products.

Meanwhile the federal deficit is at $3.7 trillion, Trump being the worst fiscal steward in living memory. According to Newsweek, the ridicule of Trump and his incompetent economic team is bipartisan. So far this year Trump has added $867 billion to the deficit.

The massive 27 percent deficit increase from last year is only expected to worsen as Trump's $1.5 trillion tax plan from a year-and-a-half ago fails to "pay for itself" as the White House previously claimed. Congress also passed another over-budget spending bill earlier this month. The Treasury Department report predicted on Monday a $1 trillion deficit in two months at the end of the fiscal year and analysts noted it's the most money the federal government has spent in the first 10 months of a fiscal year since 2009 efforts to pull out of the Great Recession.

"In case there were any remaining doubts about whether Trump's tax cut would pay for itself, it hasn't," Chris Lu, a previous White House cabinet secretary and deputy secretary of Labor under former President Barack Obama, said on Tuesday.

Fiscal critics blasted the Tax Cuts and Jobs Act of 2017 which was passed by a Republican majority in both chambers of Congress before being signed into law by Trump that December. This week, both Democrats and Republicans criticized the budget passed August 1 which suspended the debt ceiling until the end of July 2021 and put spending levels about $320 billion above limits set by a 2011 law. Trump championed the budget deal as a "great victory" for the U.S. military and veterans as the Defense Department was allotted record amounts of taxpayer money.

Kentucky GOP Senator Rand Paul said earlier this month the budget deal marked the "death of the Tea Party movement" among fiscal conservatives. Twenty-three Republicans joined five Democrats to oppose the budget deal.

"Great work by Mitch McConnell in deepening our budget deficit. I guess it was worth it to give his rich friends and donors a tax break," said Amy McGrath, the Kentucky Democratic challenger to the current Republican Senate Majority Leader.

"Revenue up 3 percent, spending up 8 percent equals [a] deficit of $897 billion in 10 months. DC doesn't care," remarked former GOP Florida Governor Jeb Bush Tuesday. He also commended Arizona Republican Governor Doug Ducey for balancing the state's budget, "Great work Governor Ducey. Is Washington watching?

..."The part of DC with all the power at the time wanted its taxes cut and insisted this wouldn't happen," CNBC economy analyst John Harwood replied to Bush via Twitter Tuesday.

Harwood went on to label Bush's "DC doesn't care" comment inaccurate and an "evasion of accountability" given the numerous debates and deals cut between congressional Republicans, Democrats and Trump Treasury Secretary Steve Mnuchin.

"Maybe electing the guy with all the bankruptcies and debt was a bad idea?" quipped writer Molly Jong-Fast.

"It seems after Obama, the elected conservatives have conveniently dropped 'fiscal' from their descriptions. I can ignore the false talking points but I think neither side brings this up because the spending means votes until the dollar becomes worthless," replied a pro-Trump Twitter critic.

Many top Republicans and fiscal hawks remained silent or offered deflections after the Monday Treasury report was released, prompting mockery from several conservative-leaning social media users. "Let's go to Capitol Hill to get a response from budget hawk Republicans," replied one critic, displaying a picture of crickets.

Trump has been a very weak, even disastrous, steward of the American economy and, despite his endless boasting and contemptible gaslighting, the stock market has performed very poorly since he and his entirely incompetent team of imbeciles occupied the White House. And the Great Trump Recession hasn't even started yet-- except in farm country. In terms of the stock market, the only recent president that has done worse than Trump is George W. Bush. This list represents how stocks performed under all recent presidents since Ronald Reagan, from best to worst:

• Bill Clinton +210%
• Barack Obama +182%
• Ronald Reagan +118%
• George HW Bush +51%
• Señor Trumpanzee +25%
• George W. Bush -40%

Getting Around The Massive Deficits Trump And The GOP Are Leaving The Country... And The Next President

Obama left Trump a powerful, healthy and expanding economy. In 2021 Trump— even without a recession— will be leaving Bernie or whoever wins the presidency, something very different. As it does every year, the CBO just released a report presenting its budget projections for the next 30 years reflecting current law. The top line looks pretty dire: “Large budget deficits over the next 30 years are projected to drive federal debt held by the public to unprecedented levels— from 78 percent of gross domestic product (GDP) in 2019 to 144 percent by 2049. That projection incorporates CBO’s central estimates of various factors, such as productivity growth and interest rates on federal debt. CBO’s analysis indicates that even if values for those factors differed from the agency’s projections, debt several decades from now would probably be much higher than it is today.”

I’m not afraid of debt— so long as it’s used productively. Example: building a better educational system and empowering millions of young people with it is a valuable investment and exactly what the government should be doing. Ditto for a modern healthcare system, a robust approach to infrastructure, etc. The opposite is wasting money on tax cuts for the wealthy and on corruption, which is how Trump has run up the deficit not just quantitatively but also negatively qualitatively. His deficits are toxic for the country and may make it more difficult for a president with a bold vision for transforming society to get his or her plans funded by a small-minded, austerity-oriented Congress (Republicans, Blue Dogs and New Dems that have enabled Trump and played patsy with him in creating the impending fiscal disaster).

The CBO offers a caveat: “Other Possible Outcomes. The agency’s projections of debt are highly sensitive to changes in the factors underlying them. For example, if the growth of total factor productivity in the nonfarm business sector was one-half of one percentage point lower each year than CBO projects, all else being equal, debt in 2049 would be 185 percent of GDP; if such growth was one-half of one percentage point higher, debt that year would be 106 percent of GDP. If interest rates were one percentage point higher each year than CBO projects, debt in 2049 would be 199 percent of GDP; if they were one percentage point lower, debt that year would be 107 percent of GDP.”

Bernie is calling for a political revolution that foresees the engagement of the general public in his vision of societal and political change. That’s going to be very difficult to achieve, although I’m bolstered by seeing how widely this vision in being embraced by people under 30. It’s sad that so many people over 60 don’t see it at all and just want to be left alone to live out their remaining years with as little fundamental change as possible— which explains why voters closest to death are also most enthusiastic about Status Quo Joe’s ill-fated candidacy.

"In terms of economic management," Alan Grayson told me this morning, "to have a trillion-dollar deficit when unemployment is at 4 percent is criminal. Trump has led six companies into bankruptcy, and now he’s trying to do it to the whole country."

Arizona progressive Democrat Eva Putzova, running for a congressional seat occupied by "ex"-Republican Blue Dog Tom O'Halleran, has a very practical way of looking at the problem: "If we invest in healthcare, education, and green infrastructure, the returns from greater productivity in our economy will mitigate any increased deficits. I support those investments which, when paired with increased taxes on the wealthy and reductions in military spending, will ensure a healthy economy and society."

Getting Bernie elected and giving him the bully pulpit to use for political revolution persuasion is the most important thing we can do now. Second, is helping replace members of Congress who are part of the problem— basically all Republicans plus the Republican wing of the Democratic Party— the Blue Dogs, New Dems and their fellow travelers. We need to start with the primaries to excise garbage Democrats like Dan Lipinski (IL), Steny Hoyer (MD), David Scott (GA), Henry Cuellar (TX), Tom O’Halleran (AZ), Jim Costa (CA), etc. After that, there are at least 50 solid Republican targets for 2020, from 10 in Texas alone (McCaul, Hurd, Marchant, Carter, Crenshaw, Roy, Taylor, Williams, Olson and Wright) to 4 each in California (LaMalfa, McClintock, Nunes and Hunter) and New York (Zeldin, King, Katko and Collins).

Kara Eastman is a progressive Democrat running a spectacular grassroots campaign for the Omaha congressional seat occupied by Trump enabler Don Bacon. This morning, Kara told me that “The Republicans can no longer claim to be the fiscally responsible party when they continue to increase our debt, threaten to cut earned benefits like Social Security, and give blatant hand outs to the very wealthy and large corporations. My grandfather, a Republican who earned a Purple Heart in WWII, would not recognize his party today. Especially when as a veteran today, he would not be able to afford a decent home and would have to work more than one job to support his family of 7. He believed that in America, if you worked hard you could get ahead. He believed that there was dignity in working long hours to support your family. He would be disgraced by his party’s loyalty to the wealthy over the rest of us.”

Voters Don't Know It Yet, But The Worst Chink In Trump's Armor Will Be His Disastrous Handling Of The Economy

The day after April Fool's Day, 2016, Trump was still playing us for fools. He was bellowing about how he and only he could get rid of the national debt. Instead his deficits have ballooned into the stratosphere, primarily because of tax cuts for corporations and for the super-wealthy and because of an attitude-- which he even expressed aloud-- akin to Louis XIV's Après moi, le déluge. In private he says all the deficits he's running up will be his successors' problems and that he won't be around to see any of it anyway. Even publicly his attitude can best be described as cavalier-- claiming we can just keep borrowing and that the country could get out of it the same way he always did in private life" or... just print money. "I’ve borrowed knowing that you can pay back with discounts,” he explained. "I would borrow knowing that if the economy crashed, you could make a deal."

Paul Brandus reminded MarketWatch Friday that Trump "took office vowing to eliminate the entire national debt in eight years, but it has only gotten worse, thanks to the skyrocketing budget deficit. In turn-- and this is the unanticipated or unintended effect on something else-- it has made the trade deficit worse as well. The Census Bureau said Wednesday that the trade deficit for goods soared to an all-time high in 2018: a whopping $891 billion."

When Trump took office, the national debt was $20.24 trillion. By the end of Trump’s first full fiscal year-- Sept. 30, 2018-- it had jumped more than 5% to $21.51 trillion... and that has been accelerating: "In the first five months of the current fiscal year (through Feb. 28), it has jumped nearly 2.8% more, to $22.11 trillion... By fiscal year 2028, which begins Oct. 1, 2027, the debt is projected to be-- hold on-- $33 trillion... [F]ailure to grasp even basic Econ 101 hasn’t stopped Trump from telling his base-- or them believing him-- that everything’s going great. He keeps talking about the how the economy is growing like gangbusters. Here, his grasp of reality falls short again: GDP did grow at an impressive 4.2% pace in the second quarter of 2018, but that was then. It slowed to a 2.6% pace by the end of last year, and a recent survey of economists by the Wall Street Journal forecasts a growth rate of 2.0% for the first quarter of this year. We are shifting into a lower gear whether Trump-- or his base-- believes it or not."

Yesterday, the Associated Press ran a piece that the budget deficit is ballooning and that almost no one in DC cares. The writer, Andrew Taylor, is confused-- very confused. "[E]ven if they did [care]," he wrote, "the political dynamics that enabled bipartisan deficit-cutting deals decades ago has disappeared, replaced by bitter partisanship and chronic dysfunction." That way of thinking is what has gotten us, as a society, into trouble. It isn't bipartisan deficit-cutting deals" that we need right now-- quite the contrary. Taylor, an antiquated budget hawk kind of guy, moans that "Trump has given no indication he’s much interested in the deficit and he’s rejected any idea of curbing Medicare or Social Security, the massive federal retirement programs whose imbalances are the chief deficit drivers." Stupidest, stultified thinking imaginable. I mean-- worse than even Trump!

The old way of doing things would be for Republicans to break the bank with military spending, special interest coddling and big tax breaks for the rich-- with a "deficits don't matter" attitudes. That would be followed by recession or worse and then Democrats coming into power with a tepid attitude of paying off the Republicans' debts while doing nothing for their base-- while Republicans screamed about deficits-- and then another cycle of Republican control.

Deficits really don't matter... IF the deficits are caused by borrowing and that money is deployed to empower society: infrastructure, human capital... a Green New Deal, free state universities, more equality... That's what makes a society strong and healthy, vibrant and productive. The Republicans never understood that and the Democrats lost that understanding when Bill Clinton led them, as a party, into selling their souls.

Today, Trump's new budget is DOA-- lot of spending cuts to popular domestic programs to pay for another $8.6 billion for more of his vanity wall and increases in the military budget. What Taylor is right about is that "Trump’s 2017 tax cut bears much of the blame... Promises that the tax cut would stir so much economic growth that it would mostly pay for itself have been proved woefully wrong. Trump’s upcoming budget, however, won’t address any of the main factors behind the growing, intractable deficits that have driven the U.S. debt above $22 trillion. Its most striking proposed cuts-- to domestic agency operations-- were rejected when tea party Republicans controlled the House, and they face equally grim prospects now that Democrats are in the majority."

Taylor then digs up a brainless Democrat just like him who would LOVE to cut Medicare and Social Security, just like he does-- Tennessee Blue Dog Jim Cooper, a political anachronism. "Concern about the deficit is so woefully out of fashion that it’s hard to even imagine it coming back into fashion. This is as out of fashion as bell bottoms." Cooper is an arch conservative across the board, representing a very progressive district. They should have dumped his ass years before Ocasio wiped out Joe Crowley. The PVI in his Nashville-based district is D+7. Obama beat McCain 57.5% to 41.3%, then beat Romney 55.9% to 42.5%. Even Hillary prevailed there, beating Trump 56.5% to a pitiful 38.2%. This is not a district that needs a backward-looking Blue Dog pining for bell bottoms like Cooper.

I wouldn't be surprised if he agrees-- quietly-- with Taylor's sick and sickening dream: "While in charge of the House, Republicans used to generate nonbinding budget blueprints that promised to balance the federal ledger by relying on a controversial plan to eventually transform Medicare into a voucher-like program. But they never pursued follow-up legislation that would actually do it... Leading Democratic presidential contenders talk of 'Medicare for All' and increasing Social Security benefits instead of curbing them."

Taylor brings some of the old doggies from a prehistoric world into the conversation:

“You have to get pretty damn serious about revenue as well as defense spending, and those are two things the Republicans don’t want to bring into the conversation,” said Sen. Dick Durbin (D-IL) “My Democratic friends who talk about expansion of benefits. I’ve told them to ‘get real.’”

Trump has never gone to the mat for his plan to slash domestic spending such as renewable energy programs.

“If Trump can be criticized I think the perception has been that he has not fought for the spending cuts that he’s proposed,” said former Sen. Jim DeMint (R-SC). “There’s no upside to trying to cut anything. There’s no political reward. But if you cut something there’s a lot of political downside.”

Neither is there any reservoir of the political will and bipartisan trust required to take the political heat for the tough steps it would take to rein in deficits. And it’s not like voters are clamoring for action.

Looks like voters are a lot smarter than Taylor and his political chorus. Politico yesterday afternoon: Trump's budget will "stoke fresh fears of another government shutdown" as presents "an audacious plan for sucking 5 percent from the budgets of non-military arms of the federal government, while using an accounting trick to bust beyond set spending limits for defense programs. The 5 percent would be below the fiscal 2019 budget limits for domestic agencies. Trump in his budget proposal is expected to rekindle partisan feuds with an $8.6 billion request for the border wall. The administration also will project robust economic growth above 3 percent, propose taking longer to balance the books than Republicans have advocated in the past and seek funding for a new Space Force within the Air Force."

Trump Crashes The Stock Market-- Next Comes The Economy

Have you known many people like Trump? Hustlers and grifters like him are a dime a dozen in New York. I once worked for one who was a firm believer that if you went around hissing your poison in enough peoples' ears, you would create a new reality of your own. Trump tried it Tuesday with his China trade-war bullshit (above)-- but all he created was the 4th biggest stock market collapse in U.S. history, down 799 points. The fucking orange orangoutang's tweets caused the Nasdaq composite to drop 3%, the S&P 500 and the Dow to each lose 2.5%. Small caps took the hardest hit as the Russell 2000 slumped 3.3%. The four biggest point drops in U.S. history have all occurred under Señor Trumpanzee. Whether you think of him as Pig Man or Tariff Man, "Global markets," as the Washington Post noted Tuesday, "demand consistency and reliability; Trump delivers neither. Instead, he makes knee-jerk announcements that surprise investors, lawmakers and even some of his own aides and advisers, who sometimes find themselves reversing course," depending on the asshole’s whims.

The next day, The Post reported that "three days after Trump emerged from his dinner with Xi touting an 'incredible' deal, U.S. and Chinese officials were offering different accounts of whether there was a 90-day deadline for progress in new trade talks, the schedule for China to increase its purchases of American farm and industrial products, and Beijing’s plans to reduce or eliminate specific tariffs." China's leaders are too wily and well-informed to buy into Trump's simplistic gaslighting.

The golden pig was back on the royal twitter machine early Wednesday morning, apparently hoping against hope for a better outcome:

Chuck Todd and Co. wondered if Trump can get out from under the trade crisis he created, reminding readers that "it’s a crisis that he ultimately might not be able to solve, because he doesn’t understand that tariffs mean higher prices for American business and consumers." There's a lot the failed businessman in the Oval Office doesn't understand-- like why the federal deficit is out of control, not despite his economic policies, but because of them. Scott Horsley, for NPR, two months ago:

The federal deficit ballooned to $779 billion in the just-ended fiscal year-- a remarkable tide of red ink for a country not mired in recession or war.

The government is expected to borrow more than a trillion dollars in the coming year, in part to make up for tax receipts that have been slashed by GOP tax cuts.

Corporate tax collections fell by 31 percent in the fiscal year ending Sept. 30, despite robust corporate profits. That's hardly surprising after lawmakers cut the corporate tax rate from 35 percent to 21.

Income taxes withheld from individuals grew by 1 percent. Overall tax receipts were flat. As a share of the economy, tax receipts shrank to 16.5 percent of GDP, from 17.2 percent the previous year.

Trump hasn't a clue what's going on, blames his own Fed chairman for increasing interest rates and is depending on the old right-wing trope-- that "accelerating economic growth will eventually help fill the deficit hole"-- though that never does work and today shows no evidence on any kind of exception. One of Trump's moron economic advisors, Mike Mulvaney, insists "This fiscal picture is a blunt warning to Congress of the dire consequences of irresponsible and unnecessary spending," while McConnell, lying his ass off, Trump style, blamed the deficits on Social Security, Medicare and Medicaid. Horsley reported that "McConnell's comments drew a swift rebuke from the top Democrat in the Senate, Chuck Schumer (D-NY), who blamed the rising deficit on Republicans' "tax cut for the rich. To now suggest cutting earned middle-class programs like Medicare, Social Security, and Medicaid as the only fiscally responsible solution to solve the debt problem is nothing short of gaslighting."

The fiscal year-end report from the Treasury Department was broadly in line with White House and Congressional projections. Although White House economic adviser Larry Kudlow falsely claimed in June that the deficit was coming down, the trend toward rising red ink was widely anticipated.

"As expected, recent tax cuts and spending increases-- all put on the national credit card-- are making a bad problem even worse," said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.

Growing deficits, coupled with rising interest rates, will increasingly put pressure on other government spending priorities. MacGuineas notes that interest payments jumped 24 percent in the last 12 months, to $325 billion.

"Those elected to Congress this year will face stark and difficult choices to put the debt on a downward path and protect our nation's social programs from insolvency," MacGuineas said. "It's no longer a problem for the future."

Two more perspectives on this-- one from the Daily Beast and one from Joe Kennedy III. Asawin Suebsaeng and Lachlan Markay wrote that Trump's advisors have been whining to him about the national debt since the campaign but that souces close to the treacherous imbecile "say he has repeatedly shrugged it off, asserting-- the classic sociopath that he is-- that he doesn’t have to worry about the money owed to America’s creditors "because he won’t be around to shoulder the blame when it becomes even more untenable."

Kennedy, currently toying with a presidential run (yawn)-- I doubt he'll do it-- is urging fellow Dems in Congress to adopt some bullshit he's calling "moral capitalism," a pointed slam against both Trump and-- more to the point-- Bernie as a way of putting himself in the comfy political center even if his feel-good approach solves nothing at all.

Kennedy said the push is a rebuke to what he describes as the “trickle-down, feed-the-top, if-you’re-struggling-try-harder narrative” of conservatives.

It’s a narrative he says President Donald Trump has sharpened to divide Americans, many of whom share similar economic worries despite holding different political views.

“His is a country of bitter rivalry between fellow citizens, forced to endlessly spar over the scraps of our system,” Kennedy said Monday before a regional business association in Boston. “My wages can’t grow unless your food stamps go. Your medical bills can’t fall unless my insurance gets taken way. So Americans spend their days fighting each other over economic crumbs - while our system quietly hand delivers the entire pie to those at the top.”

Kennedy, without naming names, also chided the extremes on the liberal end of the political spectrum, which he said have failed to effectively counter Trump’s zero-sum game world view.

“For years, the left has failed to offer a competing-- compelling-- economic vision,” Kennedy said. “We’ll have to do more than tax the rich to meet our needs in infrastructure, childcare, health care, college and climate change.”

Stephanie Kelton, the most important economist in America, took a look at Kennedy's proposal and saw right through it. "He twice indicts the system, which is of course capitalism," she told me. "But it’s a certain kind of capitalism. It reminds me a little bit of Hyman Minsky, one of the most important economists of the 20th century. Minsky famously argued that there are as many varieties of capitalism as Heinz has pickles-- at least 57."

"Capitalism performed best, Minsky taught us, when we were growing the welfare state-- i.e. after WWII through the 1960s. We had the longest peacetime recovery in U.S. history, median incomes rose, the distribution of income was better skewed in favor of the bottom 90%, the banking system was robust, and we avoided any serious financial crisis. But then we transitioned away from 'welfare capitalism' to 'money-manager capitalism.' Reagan gave us trickle-down economics, we saw the decline of unions, deregulation became the order of the day, the welfare state was under attack, the working class lost ground, the top began to runaway with a larger share of the income and wealth, and we had the Savings & Loan crisis. Today, we've got 'finance capitalism.’ An extension of the Reagan dynamics with a massive explosion of the FIRE sector (Finance, Insurance and Real Estate). Recessions are longer and more protracted, and the policy response tends to focus on recovering conditions on Wall St. without much attention or help for Main St. So, yes, the system is not serving the majority of working people very well. Is a kinder, gentler capitalism the answer? And what, exactly, would that look like? The Congressman doesn’t tell us.

"Kennedy is right to point out that we are trapped in a policy framework that treats the federal budget as a zero-sum game. It’s the old guns vs. butter dilemma, where the only way to put more resources into education or infrastructure, e.g., is to pull some resources from defense. So what is his solution? He mentions taxes, but we don’t know what he’s thinking. He implies that we can’t get build a moral capitalism simply by taxing the rich. I agree! He says we need a new economic vision, but he doesn’t do much more than call for a rejection of trickle-down economics. What we need is to reject the fiscal straightjacket that leads to a too-timid use of the federal budget so that we can fund the programs we value. A moral capitalism will require the deployment of federal funds-- public money-- to meet the needs he describes: infrastructure, childcare, health care, college, and climate change.

"Until we do that, all we have is a feel-good exercise in our moral superiority over the Republicans."

Are Pelosi And Hoyer Just Too Damn Old To Understand Modern Monetary Theory? Is That Why They're Still Whining About PAY-GO?

A Washington Post headline-- The Deficit Hawks Are Dead-- And Few In Washington Muster Any Outrage-- points a finger at Washington's most dedicated Ayn Rand disciple, Speaker Ryan and his GOP zombies "who had, wrote Paul Kane, railed against deficits in the first years of the Obama administration pushed through a massive tax cut despite CBO projections of a surge in federal borrowing." But what the Post isn't counting on is the presumptive next Speaker and her chief Deputy-dog Steny. Their first priority seems to be PAY-GO, the crowning jewel of Deficit Hawkism, the trap the Democrats always fall into when the GOP loses Congress, trap that guarantees the Democrats will never be able to diver on anything the voters went to the polls and supported them-- setting up another GOP take-over. This is in Pelosi's and Hoyer's DNA because of their age. This was ingrained in them from a time when the Republicans really did care about deficits and balanced budgets. But the GOP was smart enough to pay attention to MMT even if Pelosi and Hoyer never even tried.

Given possible high ground on the issue, Democrats have largely fielded a crop of candidates across the nation who have ignored, downplayed or outright rejected the significance of the still-growing deficits.

The Democrats have, across all factions of their party, lambasted the Republican tax-cut legislation of December and the $1.5 trillion shortfall it is estimated to leave in the budget over the next decade. But they have not attacked that as money that should go to the U.S. treasury to pay down the overall $21 trillion debt. Rather, they have almost universally pledged that the money be used for other federal spending, such as infrastructure or an expansion of the Affordable Care Act.

That’s a far cry from 2006, when House Democrats marched toward a decisive midterm victory that thrust them into the majority. Then, their numbers were populated by fiscal conservatives in Southern and rural districts who pledged to cut the deficit, as well as antiwar liberals who wanted to bring troops home from Iraq at a time when the war was costing more than $100 billion a year.

Some Democrats from that era acknowledge that the issue simply does not have as much resonance now, in large part because of the economic collapse that occurred 10 years ago this week and stagnating wages that followed years thereafter.

“When they write the history of this time, the financial collapse and the Great Recession is going to be the defining moment that changed the politics around a lot of these issues, around things like deficits,” said Rep. Joe Courtney, D-CT) a member of the 2006 Democratic class.

Rather than worry about surging deficits, Democrats are pushing for ways to boost everyday life for working Americans, Courtney said. “That economic fragility that people felt in the wake of the Great Recession has kind of overtaken the fiscal-hawk sort of priorities,” he said.

With Democrats not focusing on the issue, Republicans have been given a free ride with voters. A June survey by the Pew Research Center found a remarkable data point: Voters trust Republicans over Democrats, 41 percent to 35 percent, to do a better job with deficits.

In April, just 14 percent of Americans cited the deficit as the most important issue, according to the Kaiser Health Tracking Poll. Deficits trailed the economy (25 percent), health care (24 percent), gun issues (23 percent) and immigration (17 percent).

Ryan, a onetime preacher about the evil of debt, now brushes aside any questions about how annual deficits rocketed under his watch-- from about $430 billion in 2015, when he took the gavel, to almost $1 trillion as he heads for the exits three years later.

“Revenues are up. The problem is a predictable one-- it is spending,” Ryan said in a farewell event with Wisconsin media Wednesday at the Capitol. He pinned the blame on Medicare and Social Security costs.

“It is baby boomers retiring, a country not prepared for it,” Ryan said. “It’s health inflation, and it’s the entitlement programs.

This outrages the deficit hawks, most of whom have long since retired.

“History will show you there’s no country in history that’s been strong and free and bankrupt,” John Tanner (D-TN), a co-founder of the Blue Dog Coalition who retired in 2010, told the Washington Post’s Erica Werner.

If Democrats take back the House in November’s midterms, it will be the first time in more than 70 years the majority has flipped without deficits or government overreach playing some key role in creating the backlash to the party in power.

In 1994, when Republicans won the House majority for the first time in 40 years, Newt Gingrich’s troops campaigned against the emerging Clinton administration health-care plan, panned as “Hillarycare” for first lady Hillary Clinton, even though it never even got a vote in Congress. Once in power, Gingrich (R-GA) led a fiscal standoff over a bid to save $270 billion from Medicare, ending in a government shutdown around the 1995 holidays.

The 2006 switch came as a reaction to the war. Dozens of Blue Dog Democrats, as the fiscal conservatives were known, went on to impose a new House rule known as “PAYGO,” a briefly held statute requiring offsetting cuts to any new spending.

And in 2010, as John Boehner’s House GOP roared back to the majority, Republicans campaigned against the ACA as a pricey government takeover of the health-care system at a time of ballooning deficits. Most of the Democratic losers came from the Blue Dog caucus, drastically shrinking its influence.

Throughout 2011 and 2012, Speaker Boehner (R-OH) staged several fiscal showdowns with President Barack Obama that led to some modest deficit reduction, through spending caps on annual federal agency budgets and higher taxes on families with more than $400,000 in income.

Those deals were essentially scuttled by the December passage of the tax cuts and a subsequent budget blueprint that was a bipartisan binge for the House and Senate appropriations committees, which set defense and domestic agency spending.

If you want to rein in the debt, do not bother the appropriators. “If you want to deal with deficits, you’re going to have to deal with entitlements. That’s where the spending is,” said Rep. Tom Cole (R-OK), a senior member of the House Appropriations Committee.

Some lawmakers predict that, eventually, the financial markets will force Congress into action.

“It’s not really just candidates who get to decide whether deficits matter or not,” Courtney said. “I think external forces are going to show up and change that.”

"Deal with entitlements. That’s where the spending is." That's the way Republicans-- and the Democrats from the Republican wing of the Democratic Party (the New Dems and Blue Dogs)-- talk about weakening and eventually eliminating Social Security, Medicare, Medicaid and other social safety net programs. Imagine all the tax cuts for the wealthy that would produce! So why Nancy Pelosi would identify PAY-GO as one of her top 3 priorities if she wins the speaker's chair again is too frightening to contemplate. I've been defending her as the best of all possible horrible options. But I'm rethinking that now. She's got to stop with the PAYGO bullshit or she's going to lose her whole left flank.

Turning The Deficits Hysteria Table On The GOP

I was speaking to a congressional campaign manager yesterday who had just finished a poll of which issues were resonating in his rural district. Some of the issues were what you'd expect: Medicare expansion and Social Security being the top two. But two I didn't see coming-- at least so high up on the list: the trade deficit and the budget deficit. Both have been growing exponentially under Trump's steerage of the ship of state. These are traditionally Republican concerns that have neem weaponized against Democrats in elections. It looks like the GOP is about to get a taste of its own medicine.

On Friday Jeffry Bartask reported for MarketWatch that in June the trade deficit rose 7%-- from $46.3 billion from $43.2 billion. That's a lot and it keeps the U.S. "on track to post the largest annual gap in a decade even as the Trump White House escalates tariffs in an effort to bring it down." Imagine if Trump has actually gone to Wharton and studied economics instead of a "special" real estate program his father paid for. So why? What happened?

U.S. exports fell 0.6% to $213.8 billion just a month after hitting a record high. The biggest drop was in new cars and trucks. Exports of drugs, jewelry and passenger planes also declined.

Soybean exports surged again following a similar spike in May as buyers sought to stock up before retaliatory tariffs took effect.

Soybean shipments were nearly 50% higher in the first six months of this year as compared with the comparable period in 2017: $15.2 billion vs. $10.9 billion. Exports could soon taper off sharply, though, as the tariffs kick in.

Imports rose 0.6% to $260.2 billion. The U.S. imported more oil and pharmaceutical drugs. Oil imports were the highest in 3½ years.

Drug imports were significantly higher compared with a year earlier, in perhaps another case of pre-tariff buying.

Tariffs imposed by President Trump on foreign steel and aluminum appeared to have an effect. Imports of both metals sank in June.

Although Trump claimed last week that his administration had cut the trade deficit, it’s actually still going up.

Part of the reason is that the U.S. economy is doing well compared to other countries. Americans can afford to buy more imports. The rising value of the dollar has also made American exports more expensive for foreign customers to buy.

The U.S. has run trade deficits for years, and it’s unlikely that any president could quickly reduce them. The U.S. doesn’t even produce many of the goods, such as cellphones, that it imports from China in mass quantities.

An intensifying trade war with Chinese is a wild card, but most economists predict the trade gap will increase a bit faster in the second half of the year. If does, the annual deficit could surpass last year’s total of $552 billion and hit the highest level since 2008.

The Swamp by Nancy Ohanian

Writing for USA Today Friday, Mindy Finn asserted that Trump has built a pyramid scheme of public fraud-- a taxpayer-backed cash grab. Short version: "It's an orchestrated, unprecedented scheme to enrich a president, his family and his friends."

Even after warnings that tariffs would wreak havoc on the economy, Donald Trump has staked his presidency on a series of trade wars that are now coming home to roost. With economic ruin looming over American farmers-- a key constituency-- he refuses to change course. Instead, he’s mulling a policy of clientelism, a $12 billion cash handout to the victims of his own bad ideas.

It’s a surprising development for many, especially the conservatives who have long lamented bailouts and subsidies, but it’s hardly out of character. On the contrary, it’s a natural fit for a White House that encourages corruption, exploitation and fraud in exchange for loyalty. As with his cabinet officials, he expects that the allure of taxpayer-funded kickbacks will be enough to keep farmers from holding him accountable for his own corruption and failures. It’s not an accident, it’s a strategy: grease the wheels of government so heavily that they spin in place.

Far from draining the swamp, Trump and his coterie of grifters, fraudsters and co-conspirators have filled it in entirely, dividing the land into personal fiefdoms to exploit.

Team Trump has been playing dirty

The result has been an open season for public funds, private payoffs, and abuses of office. It’s almost quaint to remember that Health and Human Services Secretary Tom Price was fired for using private jets for official travel. The now-resigned Environmental Protection Agency Director Scott Pruitt exclusively travels in first class, while Interior Secretary Ryan Zinke is fond of chartered flights. To say nothing of Treasury Secretary Mnuchin’s use of military planes to see a solar eclipse with his wife.

It isn’t just about luxury. Zinke’s involved in a land deal with Halliburton which is likely to benefit him directly. Pruitt reveled in petty grift, taking discounted rent from lobbyists and using his government security and employees as personal servants. Pruitt even used his position to try to find his wife a job.

Following the president’s lead, Commerce Secretary Wilbur Ross has been less than honest about divesting his assets. The man helming Trump’s global trade war is profiting from it, even short-selling his stocks in a Kremlin-backed shipping company when he learned reporters were writing a story about it.

The taxpayer-backed cash grab radiates even outside government officials. Former campaign manager Corey Lewandowski opened a business selling his access to the president, even potentially to foreign governments. Trump lawyer Michael Cohen did similarly, trading a direct connection to Trump for six-figure checks.

All of this is not only permissible to the president, it’s encouraged. That’s what makes our current situation unprecedented. This is an orchestrated effort to enrich the president, his family, and his friends. That’s why the Trump hotel in Washington is now a favorite location for foreign emissaries, reaping tens of millions of dollars from those seeking audience with the president. Membership at Mar-a-Lago doubled in price, because lobbyists and influence peddlers will pay anything to catch the president’s ear. And Trump condos are flying off the market as foreign governments pay exorbitant prices to gain the president’s favor. Even his own party pays the piper. The GOP and affiliated political groups have spent over $3 million at Trump properties since he took office.

In short, Trump has built a clearly organized machine for largesse and corruption. It’s a pyramid scheme of public fraud, and the president gleefully sits at its top, reaping the rewards and doling out the shares.

A new level of corruption in Washington

Still, the president and his defenders deny anything is wrong. Many throw up their hands and say “Washington has always been this way.” That’s certainly what Trump would have us believe. In truth, this level of corruption is rampant in dictatorships across the globe, but unprecedented here.

It’s disturbing to see the president ripping this page from the authoritarian textbook, though entirely in character. All around him he’s traded his blessing of corrupt dealings for a weakening of the agencies which might hold some check on him. Now, as key voters threaten to rebel over his policies, it’s only natural that he’d seek the same bargain with them.

But the American people aren’t so easily bought. We’ve already waged and won numerous battles against the president’s corruption, but our fight is far from over. We must reinvigorate the institutions of transparency and accountability in our government. We must hold our leaders to an even higher ethical standard. And, especially when it starts to feel fruitless, we must do so with Donald Trump.

Robert Mueller: Into the Swamp by Nancy Ohanian

The Smartest Economist In America Explains What Deficits Really Mean

In early October one of the brightest economists in the country, Stephanie Kelton-- who had served as the Democrats’ chief economist on the Senate Budget Committee and as Bernie’s chief economics adviser during his presidential campaign-- penned an especially instructive OpEd for the NY Times, How We Think About the Deficit Is Mostly Wrong. At the time, it helped open the eyes of dozens of members of Congress and congressional staffers. It needs to be more widely distributed since American have been schooled their whole lives to not understand public deficits. We are constantly told to think of deficits the same way we think of personal debt. There’s a big difference.

Kelton’s OpEd was written about 3 months before the Trump-Ryan Tax Scam passed. She pointed out that the preliminary 9-page framework “achieved a rare feat of bipartisan agreement in Washington-- worry from the left and the right about the plan’s potential to increase the deficit. Chuck Schumer warned that the plan would deepen the deficit by $5 trillion to $7 trillion. Bob Corker said, “If I think it adds one penny to the deficit, I’m not going to vote for it.” Schumer was wrong and Corker was easily bought off. Kelton is no fan of this monstrosity, but not for Schumer’s hypocritical reasoning.

Are the proposed tax cuts a huge giveaway to the rich? Most definitely. Will they, as advertised, create a booming economy with benefits that trickle down to everyone else? I don’t think so. Mr. Trump’s plan will widen the country’s already dangerous wealth and income gaps, and because the gains go mostly to those at the very top, the tax cuts won’t do much to promote broad-based consumer spending or overall job growth.

That’s enough to reject the plan. But it would be unwise to oppose tax cuts, or any other federal legislation, simply because they add to the deficit.

Why? Because bigger deficits wouldn’t wreck the nation’s finances. Unfortunately, budgetary effects are the sun around which everything revolves in Washington. Should we invest a trillion dollars in our crumbling infrastructure, offer Medicare for All or pass the biggest tax cut in the country’s history?

Propose any of these, and the first question on everyone’s lips will be, “How are you going to pay for it?” The reason is simple: Lawmakers are obsessed with avoiding an increase in the deficit.

The impulse is so strong that it’s almost Pavlovian. It’s also holding us back. Politicians of both parties should stop using the deficit as a guide to public policy. Instead, they should be advancing legislation aimed at raising living standards and delivering the public investments in education, technology and infrastructure that are critical for long-term prosperity.

Right now, anything ambitious requires a score from the Congressional Budget Office. A “bad” score-- one that adds to projected budget deficits-- can easily doom good legislation because lawmakers are told that their math doesn’t add up. And that’s a problem.

Because, actually, the math always adds up. To see why, we have to look beyond the government’s balance sheet. Think of it this way. Government spending adds new money to the economy, and taxes take some of that money out again. It’s a constant churning of pluses and minuses, and their minuses become our pluses.

When the government spends more than it gets in taxes, a “deficit” is recorded on the government’s books. But that’s only half the story. A little double-entry bookkeeping paints the rest of the picture. Suppose the government spends $100 into the economy but collects just $90 in taxes, leaving behind an extra $10 for someone to hold. That extra $10 gets recorded as a surplus on someone else’s books. That means that the government’s -$10 is always matched by +$10 in some other part of the economy. There is no mismatch and no problem with things adding up. Balance sheets must balance, after all. The government’s deficit is always mirrored by an equivalent surplus in another part of the economy.

The problem is that policy makers are looking at this picture with one eye shut. They see the budget deficit, but they’re missing the matching surplus on the other side. And since many Americans are missing it, too, they end up applauding efforts to balance the budget, even though it would mean erasing the surplus in the private sector.

And because there is so much misunderstanding, Americans are vulnerable to nationalist scare tactics that warn of the perils of relying on foreigners to pay our bills. The truth is, there’s no reason to worry about China (or any other entity) refusing to finance our deficits. In fact, we should think of the government’s spending as self-financing since it pays its bills by sending new money into the economy.

When there’s a deficit, some of that new money can be traded in for a government bond. What’s often missed in the public debate is the fact that the money to buy the bond comes from the deficit spending itself.

What isn’t missed is the fact that the government pays interest on those bonds. Lawmakers are obsessed with this line item in the budget, as if it’s akin to a cable bill that keeps taking a bigger and bigger bite out of your household budget. It isn’t. Unlike a household, the government doesn’t have to trim other parts of its budget to make ends meet. Congress can always create more room in the budget by adding rows or widening the columns to put more resources into education, infrastructure, defense and so on. It is purely a political decision.

Of course, there are real limits to what can be done. No country can commit to large-scale infrastructure investment unless it has the available labor, machinery, concrete and steel. Trying to spend too much will cause an inflation problem. The trick is to adjust the budget to make efficient use of the people, factories and raw materials we have.

But all of this goes unrecognized on Capitol Hill, where the very words “debt” and “deficit” have been weaponized for political ends. They serve as body armor to politicians who would deny resources to struggling communities or demand cuts to popular programs.

Perhaps no one is more skilled in the dark art of deficit deception than Representative Paul Ryan, the House speaker. He has described the budget outlook as a “fiscal train wreck,” and he has demanded cuts to programs like Social Security and Medicare in the name of protecting future generations from a “crushing burden of debt.” His language is poll-tested and inflammatory by design. It’s intended to create a sense of urgency to move the budget into balance, where, we are told, the math of federal spending will finally “add up.”

In a more rational world, lawmakers would abandon the crude C.B.O. scoring model and recognize that the risk of overspending is inflation, not bankruptcy. They would avoid fruitless battles over the debt ceiling, and they would acknowledge that the deficit itself could be deployed as a potent weapon in the fights against inequality, poverty and economic stagnation.

Another $40 Billion Left the Country in July

From the U.S. Commerce Department's September 2015 Report of the U.S. Monthly Trade Deficit (source)

by Gaius Publius

We Americans usually focus on the government's deficit with, mainly, its citizens, often called the "national deficit." This is an almost completely artificial number, since the government isn't a household, but the manufacturer of something most of us very much want — money. (Think of it this way; every dollar the government doesn't spend, every dollar it keeps in its back pocket, is a dollar that will never get into your back pocket, ever. Every dime the government doesn't spend is a dime you'll never see. Please think about the implications of that.)

But the trade deficit, the "balance of payments" deficit — the difference between the amount of money we actually give to foreigners, and the money we take from them — is real. If you were the United States, in July you handed a net $40 billion to foreign individuals and corporations. And you've been doing the same each month for the past year. Multiply that by 12 months and you're looking at roughly $500 billion (half a trillion) going out the door in a year.

Here's what that looks like over a longer period of time:

U.S. Balance of Payments, year after year, since 1950 (source)

That $40 billion that went out the door in July is actual money, it's actually gone, and it will only come back to the U.S. when the foreign entities who own it offer to buy your assets with it — your house, say, or all of the stock in Burger King — and you're so broke you're eager to sell it to them.

Dave Johnson, our go-to writer on trade, with the news:

The U.S. Census Bureau reported Thursday that the July goods and services trade deficit was an enormous, humongous $41.9 billion. This is down from a revised $45.2 billion in June.

This is an increase from May’s enormous, humongous $40.9 billion trade deficit.

We had the highest ever level of imports in autos and auto parts, at $30 billion.

The trade deficit with China was $31.57 billion. This is the highest monthly trade deficit of this year, and it was 75 percent of our July trade deficit.

The U.S. goods deficit with Japan was $5.7 billion, up from $5.2 billion in June.

The U.S. goods deficit with South Korea was $2.6 billion, up from $2.3 billion in June.

Note that these numbers do not reflect China’s big currency devaluation, which happened in August. Even without that, this trade deficit measures a terrible situation for American manufacturers and workers.

We're giving away the store, month after month, year after year. Eagerly, in the case of the wealthy, since a lot of that wealth comes back to them in the form of higher profit and CEO compensation. Or blindly, in the case of our middle class, since Tom Brady's problems are of greater interest, it seems, than their own. (I blame the men and women who own our media, but you may have other thoughts on that.)

How to Think About the Trade Deficit

The simplest way to think of the trade deficit, and why it's happening, is this. Imagine a man (usually it's a male we're talking about, though Carly Fiorina qualifies) whose company makes $100 million in revenue in a given year, who pays $30 million of that in non-CEO wages, and whose company, when it's all done, sees $20 million in profit.

From that $20 million, he takes a CEO salary of, say, $3 million in cash and other benefits, including stock options. His company's stock is a solid $10 per share, and has been for a while.

Then he figures it out. He closes all his U.S. factories, fires those workers, and outsources all of his manufacturing to "contractors" in Asia. Now, instead of paying $30 million in wages, he pays just $5 million in U.S. wages and $10 million to his manufacturing contractors, saving $15 million on what used to cost him $30 million. Nothing else has changed in this example, neither his sales nor his prices.

Since he doesn't drop his retail price, his profit swells from $20 million to $35 million on the same sales volume. With the extra money, he bumps his own pay from $3 million to $6 million. In the process the stock price jumps to $15 per share (because of the jump in profit), which further sweetens his own take, since his pile of company stock, part of his "executive compensation package," is now worth 50% more.

Next year he'll use company money to buy back a big pile of stock and take it off the market, making his personal stock pile (sorry) even more valuable. And he'll look for an even cheaper foreign "contractor" to manufacture his goods.

What Just Happened? Making CEOs Rich at Your Expense

Simply by changing his manufacturing base, the following occurred:

• All of his U.S. manufacturing workers lost their jobs. 
• $10 million that would have stayed in the U.S. (as U.S. wages) went to a foreign "contractor," thus adding to the trade deficit. 
• The company pocketed $15 million in increased profit, which boosted its stock price.
• Of that $15 million, the CEO pocketed an extra $3 million. 
• The stock market is buoyed by stock buybacks and the need by CEOs to keep prices high.

Bottom line, the CEO sent $10 million overseas so he could skim $3 million from the savings. In essence this is a kickback scheme. Multiply that across the entire U.S. manufacturing (and part of the service) economy, and you'll see (a) why CEOs everywhere are handing U.S. money as fast as they can to foreign entities so they can pocket the skim, and (b) why this will never stop until someone makes it stop.

Want to watch it in real time? Watch the monthly trade deficit report. 

The Crumbling American Middle Class

In the meantime, all of those fired workers buy fewer and fewer goods even as foreign-produced goods become cheaper and cheaper. Or, to quote the decidedly right-leaning International Living, a magazine for libertarian expat-wannabes, the consumer action is rapidly moving abroad (Sept 2015, print only):

Want to Profit? Look Abroad

"The U.S. is no longer the consumer market it once was," writes Jeff D. Opdyke of TheSovereignInvestor.com. "And that is all you need to know to find your future investment opportunities.

"McDonalds, for instance, has set its sights on high-growth markets outside the U.S. Across Asia/Pacific, the Middle East, and Africa MCD is planning to open 550 new restaurants, with 200 additional eateries slated for China alone.

"Though I am not a proponent of investing in multinationals, as an investor, you can see where you should look for opportunities by watching where companies like McDonald's are shifting their focus. Go there, and large profits await for you."

As analysts like Thom Hartmann have written (for example, in his excellent book The Crash of 2016), the American middle class is crumbling as we watch. If you want the reason, look no further than the trade deficit, the "balance of payments." Again, that money is gone, and will only come back when its new owners want to buy our assets, because frankly, that's mainly all we have left to sell them.

GP