Depression Bread Line by George Segal, 1999, at the NJ Grounds for Sculpture – 2017 photo by Wrongo
There are two political imperatives facing America by the end of September: The House, Senate and the president must extend the Federal borrowing limit, and pass a budget. When Obama was president, extension of the borrowing limit was a dicey thing, as was passing a budget. From 2008-2016, we largely avoided government shutdowns, we passed spending bills, but not an entire budget.
And we never even considered tax reform, but it’s the third item on the GOP’s 2017 to-do list.
Republicans and Wall Street used to have concerns about the consequences for America if we didn’t get our finances under control. They said that the growing federal debt could eventually drag down the economy, burden future generations, and even threaten national security. CEOs of corporations and the biggest banks joined a campaign called Fix the Debt, arguing that the size of our debt was our most pressing issue.
But now these same people are all in on Trump’s plan to cut taxes for corporations and high earners, saying it is the way to fuel economic growth. That, despite estimates that Trump’s plan could reduce federal revenue by $3.9 trillion over 10 years, thereby increasing the debt that CEOs used to hate. From Bloomberg:
Goldman Sachs Group Inc. CEO Lloyd Blankfein, a Fix the Debt supporter…in 2012 told CNBC he’d be for higher taxes if they helped mend the fiscal gap. After the 2016 election, Blankfein told colleagues…that Trump’s proposals, including tax reform, ‘will be good for growth and, therefore, will be good for our clients and for our firm.’
Hmmm. Aren’t Treasury Secretary Steve Mnuchin and Trump’s Economic Adviser Gary Cohn both from Goldman?
They [CEOs] were yelling, Deficits, deficits, deficits… [and] as soon as George W. Bush gets in the White House? Oh, we’ll have a big tax cut.
The same thing is happening now. Bloomberg reports that according to Seth Waugh, chairman of wealth adviser Alex. Brown, many in finance have moved on from the debt: (brackets and emphasis by the Wrongologist)
It’s not a fun, sexy thing to talk about…Waugh, another Fix the Debt member, recalls playing golf with a private equity executive…Waugh told his friend it would be nice if Congress addressed deficits… [but]…The private equity executive said nobody was talking about that. It was a dead issue, and they should take the good news: Paying less in taxes, the friend reminded him, means getting richer.
It’s probably a distant dream. The GOPs plan for tax reform involves using the budget reconciliation process, which allows them to pass it with just 51 votes, that is, without Democrats. Otherwise, they face a filibuster. Reconciliation starts with passing a budget resolution for the coming fiscal year. In that budget resolution, they need to include special budget directives or instructions:
To start the reconciliation process, the House and Senate must agree on a budget resolution that includes “reconciliation directives” for specified committees. Under the Congressional Budget Act, the House and Senate are supposed to adopt a budget resolution each year to establish an overall budget plan and set guidelines for action on spending and revenue.
So they need to pass a budget, but before that, Republicans need to vote to raise the borrowing authority of the government. That may be impossible without support from Democrats.
We’ll know very soon if Dems are willing to get on board with Paul Ryan and Mitch McConnell on any of this.
It’s Saturday again, and despite the brief three-minute respite from politics brought by the solar eclipse, Trump had another successful week. (If success is his continued destruction of what remains of America’s psyche).
We are now in desperate need of something soothing to kick off next week’s war for truth. So grab a couple of Trader Joe’s Cold Brew Latte Dessert Bars (40 calories and 7 grams of sugar each), put on your best Bluetooth headphones, and listen to the late guitarist John Abercrombie, who died this week. Here is Abercrombie with Dave Holland on bass, and Jack DeJohnette on drums doing “Homecoming” live in 1995. Let’s hope it’s not the best few minutes of your week:
Pay attention to Abercrombie’s remarkable and airy technique.
Is it the best of times or the worst of times? This is no longer a partisan discussion. We have an economy in the midst of a long expansion, the third longest since 1850. The statistics say we are close to full employment. But, our mortality rate is moving in the wrong direction, and we have an opioid epidemic that is serious enough to cause jobs to go unfilled. The NYT reports that in Youngstown Ohio, middle class factory jobs go begging:
It’s not that local workers lack the skills for these positions, many of which do not even require a high school diploma but pay $15 to $25 an hour and offer full benefits. Rather, the problem is that too many applicants — nearly half, in some cases — fail a drug test.
The Fed’s regular Beige Book surveys of economic activity across the country in April, May and July all noted the inability of employers to find workers able to pass drug screenings.
So the best of times? Probably not. Bloomberg reports that the International Monetary Fund (IMF) looked at the US economy. This is what they see:
For some time now there has been a general sense that household incomes are stagnating for a large share of the population, job opportunities are deteriorating, prospects for upward mobility are waning, and economic gains are increasingly accruing to those that are already wealthy. This sense is generally borne out by economic data and when comparing the US with other advanced economies.
The IMF then goes on to compare the US with 23 other advanced economies in the Organization for Economic Cooperation and Development (OECD) in this chart:
The chart is a bit of an eye test unless it’s viewed on a big monitor, but its overall point is that the US has been losing ground relative to its past OECD reports by several measures of living standards. 35 countries make up the OECD. The members include all of Western Europe, Russia, Japan, Australia, and several developing nations like Korea and Panama.
And in the areas where the US hasn’t lost ground (poverty rates, high school graduation rates), it was at or near the bottom of the heap to begin with. The clear message is that the US — the richest nation on Earth, as is frequently proclaimed, although it’s actually not the richest per capita — is increasingly becoming the developed world’s poor relation as far as the actual living standards of most of its population go.
This analysis is contained in the staff report of the IMF’s annual “consultation” with the U.S., which was published last week. The IMF economists haven’t turned up anything shocking or new, it’s just that as outsiders, they have a different perspective than what we hear from our politicians and economists.
Income polarization is suppressing consumption…weighing on labor supply and reducing the ability of households to adapt to shocks. High levels of poverty are creating disparities in the education system, hampering human capital formation and eating into future productivity.
What is to be done? Well, the IMF report concludes:
Reforms should include building a more efficient tax system; establishing a more effective regulatory system; raising infrastructure spending; improving education and developing skills; strengthening healthcare coverage while containing costs; offering family-friendly benefits; maintaining a free, fair, and mutually beneficial trade and investment regime; and reforming the immigration and welfare systems.
In other words, they suggest substantial reform. It’s doubtful that America can take care of these things anytime soon.
The subtext to most of their suggestions is that other affluent countries have found ways to improve in these areas, while the US has not. We don’t have to look too far into the past to see when those countries were modeling their economies on ours. But today, on all sorts of issues, like taxation, labor markets, health care, and education, the opposite is now true.
Other wealthy countries have figured out how to raise revenue, provide quality education, help the the unemployed, reduce poverty, and keep their citizens healthier than America has.
We must catch up, or admit our time as the world’s indispensable economy is over.
Today’s music (dis)honors the turmoil in the White House. See ‘ya Mooch! Remember that in just six months, Trump has gone through two National Security Advisers, two Chiefs of Staff, two Communications Directors, two Press Secretaries, and two Directors of the FBI.
Here is “Disorder in the House” by the late Warren Zevon and Bruce Springsteen:
Those who read the Wrongologist in email can view the video here.
(The Wrongologist site was hit by a Denial of Service attack on Sunday, April 23. If you had difficulty accessing the site, Wrongo apologizes. We are working with the hosting company to sort it out, but the problem may continue until the end of day today.)
Congress returns today. They will try to pass an increase to the Debt Ceiling before the April 28th funding deadline. After that, at least a partial government shut-down looms.
The Republicans are not in agreement about their stance on the extension. The Orange Overlord complicated the negotiations by saying that he wouldn’t sign a Debt Ceiling increase unless it contained funding for the Wall that Mexico was supposed to pay for.
You are holding hostage health insurance for millions of lower-income Americans.
Actually, what I would say is they’re holding hostage national security…
Then he brought up obstructionism by Democrats:
The Democrats will oppose everything that this president wants to do, which is stunning to us, especially when we are offering them something they want in return.
You’re saying, ‘give us what we want. And if you don’t, we’re going to cut off funding that would provide health insurance for millions of lower income Americans’.
The laugher was that Mulvaney’s logic is that Trump is trying to build a border wall to protect millions of low income Americans who may lose their health care benefits in the trade-off.
So Mexico won’t pay for the wall, and Republicans don’t want to pay for the wall either. They would prefer that Democrats agree to pay for Trump’s wall to give the GOP cover for those Republicans who won’t fund Trump’s ghastly promise of a wall.
On the obstructionist claim, everyone knows that the Republicans made obstructionism an eight-year strategy when Obama was president. Now, Mulvaney’s pearl-clutching about obstructionism can’t possibly sound legitimate to anyone other than people who watch Fox News. We need to remember that it was the Republicans who picked the 100th day of the (now Trump) administration for last year’s Continuing Resolution that funded the government, to expire. The idea was to make Hillary Clinton look bad after she won, and then couldn’t get a Debt Ceiling increase passed without Republican help.
It never occurred to them that if the Republican nominee won, that he wouldn’t be able to get much done without support of Democrats.
So it’s time for Republicans to wake up, and pass a Debt Ceiling increase. After all, they control the House, Senate and White House. It is their job to avoid a government shutdown.
To help them wake up, here is the UK group Stone Foundation, a modern UK soul band with a tune from their new album, “Street Rituals”. The song is “Your Balloon is Rising”, featuring Paul Weller formerly of the punk rock group The Jam, and later, Style Council.
Here is “Your Balloon is Rising”, a blue-eyed soul tune that allows Weller to show all of us that he still has it:
Those who read the Wrongologist in email can view the video here.