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The Wrongologist

Geopolitics, Power and Political Economy

Category Archives: Economic Policy

Saturday Soother – May 13, 2017

The Daily Escape:

Bluebells, Brussels Belgium April 2017 photo by Francois Lenoir

In many ways, it is too easy to criticize Donald Trump. While we can have differing opinions on matters of policy, they only account for a few of the issues Wrongo has with Trump. Most are his unfathomable attempts to avoid telling the truth. Consider his interview with The Economist which posted the entire transcript on Thursday. Let’s focus on this excerpt:

The Economist: Another part of your overall plan, the tax reform plan. Is it OK if that tax plan increases the deficit? Ronald Reagan’s tax reform didn’t.
Trump: Well, it actually did. But, but it’s called priming the pump. You know, if you don’t do that, you’re never going to bring your taxes down.

[Snip]

Economist: But beyond that it’s OK if the tax plan increases the deficit?
Trump: It is OK, because it won’t increase it for long. You may have two years where you’ll…you understand the expression “prime the pump”?

Yes.
We have to prime the pump.

It’s very Keynesian.
We’re the highest-taxed nation in the world. Have you heard that expression before, for this particular type of an event?

Priming the pump?
Yeah, have you heard it?

Yes.
Have you heard that expression used before? Because I haven’t heard it. I mean, I just…I came up with it a couple of days ago and I thought it was good. It’s what you have to do.

Ok, so how did the guy from the Economist keep a straight face? The reporter is thinking John Maynard Keynes, the great British Economist, who came up with the idea of “priming the pump” in the 1930’s. By the way, Keynesian pump-priming is temporary government spending to boost temporarily weak demand. It is designed to boost growth, (and jobs) during a downturn, but we can’t assume that it will boost the economy’s growth rate.

Trump’s idea for pump-priming is more tax cuts. He’s following classic trickle-down economics, and claims that his tax cuts will boost investment, productivity growth, and labor supply, and thus raise the long-term growth rate of the economy. In this regard, Trump conflates Keynes, who’s been proven right, with Arthur Laffer, who wasn’t.

But, didn’t Trump graduate from Wharton with a business degree? Nobody gets out of Wharton without knowing that Keynes was the “pump primer”. And his saying that he coined the phrase ‘prime the pump’ a few days ago? Unfortunately, there are only two explanations: first, Trump is 70 years old and his cognitive skills are starting to desert him. Or second, he is a pathological liar.

Wrongo wants to go with #2.

He just wants to sell America something with his name stamped on it. But since America isn’t buying a hotel, he’s trying to sell Trumponomics, Trumpcare, etc. He does not really care about the details, he just wants to pass it, and to claim it is a success. That’s America’s tragedy.

So with Comeygate, Trumpcare and pump-priming, we all need to unplug and try, just try to relax on Saturday. We had a full moon and clear skies over the fields of Wrong on Thursday, so today we listen to “Claire du Lune” by Claude Debussy. It is the third movement of “Suite bergamasque”. Its name comes from Verlaine’s poem Clair de Lune, “moonlight” in French. Here it is played by Dame Moura Lympany, British pianist, who died in 2005:

Those who read the Wrongologist in email can view the video here.

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Sunday Cartoon Blogging – April 30, 2017

It only took 100 days for Donald Trump to reduce the office of the presidency to the point of near-zero credibility. Unfortunately, it appears as though his base and Republicans in Congress remain very accepting of him as president. In Twitter speak, #So Sad.

Back to the administration’s one page tax plan: The plan works if we assume 6% annual GDP growth for the full 8 years of a Trump presidency. Since the end of the Great Recession, annual GDP growth has been about 2%. More to the point, we now have a 3.5% (of GDP) budget deficit, and we are at the top of the current business cycle, with a 75% debt-to-GDP ratio.

Republicans used to refer to that as being broke.

Mostly, what has been accomplished in the last 100 days are a blizzard of executive orders and proclamations. We all remember when executive orders like Trump’s were considered tyranny by Fox News. On to cartoons. The GOP walks out on its long-term companion, the deficit hawks:

Trump’s first 100 days did NOT include tons of winning:

The clown show about trickle-down economics continues:

Trump explains his new tax brackets:

Arkansas needs help after botching another execution:

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Thoughts on Tax Day

The Daily Escape:

Tu Lien Bridge (design, to be built) – Hanoi, Vietnam

Today is officially the day our federal income tax returns are due. That’s because April 15 was a Saturday, while Monday is a holiday in Massachusetts. And as the Bay State goes, so goes America when it comes to filing taxes. Wrongo appreciated the extra time.

Americans shouldn’t mind paying their taxes. We live in a great country, and if you want to fly first class, you gotta pay the fare (unless, of course, you’re flying Air Force One).

The process of filing taxes could (and should) be simplified, but reducing taxes would be a mistake. America has deferred spending for social needs and for infrastructure, and not just on the federal level. Wrongo sits on his town’s Roads Committee. If we were to continue to fix our local roads at the same rate going forward as we have for the past few years, it will take us 40 years to fix just the roads that are rated “poor” quality or worse. Still, many in town think we should spend less, so they could be taxed less. As Justice Oliver Wendell Holmes noted in a dissenting opinion in a 1927 Supreme Court case:

Taxes are the price we pay for a civilized society.

Some of us are still learning that.

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Democrats Have Failed

The Daily Escape:

Lavender in Provence – 2017 Photo by Fabio Antenore

This week, Wrongo wrote that 50% of US births are paid for by Medicaid, and how worry about hunger and homelessness has never been higher among Americans. Both of these issues are symptoms of how our economy fails low-income and lower middle class Americans, and neither political party is truly interested in addressing the problems.

Trump won because he led people who used to vote for Democrats to believe that they had nothing to lose if they voted for him. Below-median income voters had long ago lost faith that Democrats, and Hillary in particular, would ever do anything to change their plight.

Trump said he would look out for them. Whether he does or not, remains an open question, but even before Trump, Democrats had already lost a big swath of America. From the American Prospect:

In the race for the White House, the Democratic presidential candidate has won…fewer US counties with average incomes under the national median and with populations that are more than 85% white in every general election since 1996. Concentrated in the Midwest, Appalachia, and the upper Rocky Mountains, there are 660 such counties today. Hillary Clinton won two of them.

Think about that: The Democratic Party’s influence in mostly white, lower-income America has eroded to nearly nothing since Bill Clinton was president. This chart documenting their fall is stunning:

 

 

 

 

 

 

 

 

 

 

 

 

The Parties basically split below-median income counties that were 85% white in 1996. Over a 20-year period, the erosion of the Democrats’ control was steady, and complete. This isn’t just the result of a poor 2016 presidential candidate, it is an indictment of the Democratic Party, its leadership, and its strategy.

The American Prospect article is about Montana’s Democratic Governor, Steve Bullock, who won his state by 4 points while Trump was beating Clinton by 20. Bullock is a rural populist in a party of technocrats. Obama lost Montana by 2 points in 2008. Bill Clinton won Montana in 1992.

But, the electoral failure of Democrats is worse than its showing in these below-median income white counties. The following graphically illustrates the abject failure of Democrats to be competitive in political contests at all levels:

Nothing that Barack Obama did by holding on to the White House for that entire period compensates for these terrible losses.

Democrats remain divided about their Party strategy, many clinging to the thought that if Hillary could have turned about 80k voters in Michigan, Pennsylvania, and Wisconsin, where white working-class people are abundant, she would be president.

But she would not control either legislative branch, and she would have had to propose Supreme Court Justices similar to Neil Gorsuch to get one confirmed by the Senate.

The question is where will the DNC be taking the Party in 2018? In a 2018 mid-term election where the president has a historically poor approval rating with independents and Democrats, like Trump has now, victory is possible.

If Democrats want to win back Congress, and the White House in 2020, they need to field candidates who believe in jobs and economic growth first. The candidates need to be authentic people, who listen more than they talk. And when they do speak, they should use PIE as a metaphor for America’s economy, as in: (H/T Seth Godin)

  • How big is the pie?
  • Is the pie growing?
  • What will my share of the pie be tomorrow?
  • Who allocates the slices of pie? Can they be trusted?

When voters think the economy isn’t growing, things begin to feel zero-sum. People begin to think that they may permanently lose their place in our society.

If the Democrats want to win back Congress, they need to describe concretely what they plan to do when they say they support their working-class constituents, regardless of color.

They need to get to be better than Trump on jobs, economic growth and finding a peace dividend.

All of that, and Medicare for all. In Wrongo’s Thursday column, Gallup found that health care concerns ranked highest across all income cohorts.

Shouldn’t these principles be credible with working-class people—including whites?

A song about pie: Here is D’Angelo with “Devil’s Pie” from 1998. It’s a dystopian vision of capitalism, where everybody’s fighting for more of the tasty, materialistic dish. All is fair in pursuit of a bigger paycheck:

Those who read the Wrongologist in email can view the video here.

Takeaway Lyric:

Fuck the slice we want the pie
Why ask why till we fry
Watch us all stand in line
For a slice of the devil’s pie

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Worry About Hunger and Homelessness Higher Than Ever

The Daily Escape:

White-Faced (Capuchin) Monkey, Costa Rica, 2015 – photo by Wrongo

The American economy has never been very kind to people at the lower income levels. In most ways, since 2008’s Great Recession, the economy has become riskier, and more tension-filled for lower income Americans, those making $30,000 or less per year. Nothing makes this clearer than this Gallup poll conducted March 1-5, 2017. Gallup surveyed 1,018 adults in all 50 US states. From Gallup:

Over the past two years, an average of 67% of lower-income US adults, up from 51% from 2010-2011, have worried “a great deal” about the problem of hunger and homelessness in the country.

More from Gallup:

Concern about hunger and homelessness now ranks as high as, or higher than, concern about most other issues tested in Gallup’s annual Environment survey. The only issue with a significantly higher “worried a great deal” percentage in this year’s poll is the availability and affordability of healthcare, at 57%.

People’s perspectives are based on their experience, so it shouldn’t be surprising that Gallup found that people making more than $75k/year had other concerns, and ranked hunger and homelessness much lower, at 37%. Still, even that number is up substantially from 23% in 2001.

The survey asks participants to rank their concern about 13 elements, and the differences between the concerns of the $30k or less cohort and the $75k or more cohort are stark.

  1. Americans making $30k and less rank their top seven worries in this order:
  • Hunger/homelessness
  • Crime/violence
  • Healthcare
  • Drug use
  • Terrorism
  • Social Security
  • Economy
  1. Americans making $75k or more ranked their top seven in this order:
  • Healthcare
  • Budget deficit
  • Economy
  • Social Security
  • Environment
  • Race relations
  • Hunger/homelessness

One reality is that the lower income Americans list “terrorism” in their top five, while it does not appear at all as a top worry of higher income Americans. Lower-income Americans worry more in general than those with higher incomes; everything is riskier and tougher for them. But nothing compares to the worries about hunger and homelessness. Gallup:

On average, across the 13 issues, the percentage of lower-income adults who worry a great deal is seven percentage points higher than among middle-income Americans, and 17 points higher than among upper-income Americans.

Here is Gallup’s chart showing the relative degree of “worry” by economic group:

No surprise that more money brings one fewer big worries. No individual worry of the $75k+ cohort was felt by as many people as the seventh-ranking worry by the $30k or less cohort.

In fact, the greater than $75k cohort sees the “budget deficit” as its second-most worried about item. Of course, this dooms any chance for the people making less than $30k to have greater security in life. Congratulations to Pete Peterson and the GOP deficit hawks on a job well done! Their decades of propaganda have made austerity a political obsession for the well-off, because government must tighten its belt, and cut its way to greatness.

Paging Dr. Maslow! Your theory of the hierarchy of needs is again demonstrated in the real world by Gallup. Here it is 2017, near the twilight of the empire. Physiological and safety needs are in the top five of the major worries of a population that is hanging on to our society by their fingernails.

Tighten your belts. Lower your dreams. Ignore the fact WE live in 10,000 sq. ft. mansions. We deserve it, and you don’t.

The American dream is a fallacy. Free markets are a fallacy. They are propaganda used to fool those poor Americans who live every day in all-too visible peonage.

Here is a 2005 tune by Coldplay, “Fix You” from their album “X&Y”. It gives a few words of empathy:

Those who read the Wrongologist in email can view the video here.

Takeaway Lyric:

When you try your best, but you don’t succeed
When you get what you want, but not what you need
When you feel so tired, but you can’t sleep
Stuck in reverse
And the tears come streaming down your face
When you lose something you can’t replace
When you love someone, but it goes to waste
Could it be worse?

 

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Monday Wake Up Call – March 27, 2017

The Daily Escape:

(Many Glacier, Glacier National Park, August 2016 – photo by Wrongo)

What’s next for the White House? Many are saying that the collapse of the Republicans’ failed effort to pass Trumpcare demonstrated that the ideological cleavage within the House and Senate Republicans will not be easy to overcome. This could make it more difficult for Trump to get much of his agenda passed in the immediate future.

Trump wants to move on many things, including tax reform and passing a budget, but the biggest challenge facing Republicans is the Debt Ceiling. The clock started ticking on the need to raise the debt limit, because it already expired on March 15th. That was a “soft” deadline, since the Treasury department can fire up a well-used arsenal of “extraordinary” measures to delay a reckoning, meaning that Congress can take until the early fall to enact a debt ceiling increase.

More time may not mean that a solution will be forthcoming, since the main adversaries to increasing the debt ceiling are the same people who helped derail Trumpcare. The House Freedom Caucus and their allies in the Senate have in the past, expressed a willingness to let the country default, rather than increase the level of the Treasury’s debt.

Since they were able to face down Trump on health care, they may well be emboldened to stand up to the president and Congressional leadership again on an issue that is so close to their hard hearts.

If America were to default on its debts, Trump would be presiding over the Bananaization of our Republic, and our ability to lead in the world would be eclipsed. Wrongo plans to write more about this in the future, but it will take real management by Trump to head this off, at a time that his management skills have been called into question.

So far, he has shown himself to be little more than a salesman for his ideas.

The famed management guru Peter Drucker, who wrote about management for corporations, non-profits and governments, at one point wrote management rules for presidents, in a 1993 article for the WSJ:

It’s hard to imagine a more diverse group than Bill Clinton’s predecessors in the American presidency — in abilities, personalities, values, styles and achievements. But even the weakest of them had considerable effectiveness as long as they observed six management rules. And even the most powerful lost effectiveness as soon as they violated these rules.

Wrongo has condensed Drucker’s management rules for presidents for your convenience:

  • What Needs to be Done? Is the first thing the President must ask. He must not stubbornly do what he wants to do, even if it was the focus of his campaign
  • Concentrate, Don’t Splinter Yourself. There usually are half a dozen right answers to “What needs to be done?” Yet unless a president makes the risky and controversial choice of only one, he will achieve nothing.
  • Don’t Bet on a Sure Thing…Roosevelt had every reason to believe that his plan to “pack” the Supreme Court…would be a sure thing. It immediately blew up in is face – so much so that he never regained control of Congress
  • An Effective President Does Not Micromanage…the tasks that a President must do himself are already well beyond what any but the best organized and most energetic person can possibly accomplish
  • A President Has No Friends in the Administration…they are always tempted to abuse their position as a friend and the power that comes with it
  • Sixth rule? Harry Truman advised JFK: “Once you’re elected, stop campaigning”

(h/t Barry Ritholtz)

Just how many of these rules does Trump follow, and how many does he violate? Discuss.

Perhaps if he followed all of them, the country would avoid Trumageddon, be less divided, and get a middle of the road agenda enacted.

So here’s a wake-up call for Donald Trump and his advisors: FOCUS!! To help them wake up and get focused, here is the Canadian group Bachman Turner Overdrive with their big hit (#12 in the US) from 1973, “Takin’ Care of Business”:

Wrongo used to take the 8:15 in to the city. Working from home is a major improvement.

Those who read the Wrongologist in email can view the video here.

Sample Lyrics:

And I’ll be taking care of business (every day)
Taking care of business (every way)
I’ve been taking care of business (it’s all mine)
Taking care of business and working overtime, work out

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Why Trump Doesn’t Talk About Jobs Anymore

The Daily Escape:

(Bamboo after snowfall in January, near Kyoto. Photo by Hiroki Kondo)

During the 2016 presidential race, Trump campaigned on populist themes. Now that he is in office, it is clear that his policies will be neither populist nor popular, but strictly pro-business. The first clue was his choice of Cabinet members. Despite promising to “drain the swamp”, nobody realized that he could do that by making lobbyists pointless, as their clients are in charge of the government: The CEO of Exxon is head of foreign policy, a former Goldman Sachs partner heads Treasury, the daughter of a ship owner heads Transportation, a corporate raider is at Commerce, and so it goes.

Two months into his presidency, it is clear that the Trump economic policy is pro-business, not pro-jobs, or pro-little guy. If you still have doubt, the Republicans just rolled back a series of Obama-era worker safety regulations. The Senate voted 49-48 to kill a rule that required federal contractors to disclose and correct serious safety violations.

It’s clear that industry CEOs can’t believe their good luck, despite having opposed Trump at every step before the election. He’s only asking them for some vague promises to add new American jobs in return. Acting normal when they are interviewed after leaving a Trump meeting must be the hardest part of their day.

Trump hardly mentions jobs anymore, because he knows there aren’t many. His bogey man of weak domestic manufacturing needs to be addressed: China’s total exports in 2015 were $2.3 Trillion. The US total exports in 2015 were $1.5 Trillion, second in the world.

And the total value of US manufacturing in 2015 was $6.2 Trillion and we are doing it with fewer people than ever before. Today, US factories produce twice as much stuff as they did in 1984, but with one-third fewer workers.

Trump’s carrot and stick approach with US companies is theater. He is now industry’s number one value creator: When he commended Ford for deciding not to build a new plant in Mexico, the price of its shares rose 4.5%.

Softbank shares went up 6.2% after being praised by Trump for investing $50 billion in the US. Softbank’s motive was simple: Softbank owns Sprint, who would like to merge with T-Mobile. The authority to permit this merger lies with the new head of the FTC, yet to be named by Trump. Trump’s positive tweets feed Softbank’s hopes that the merger will be approved.

The Trump presidency has begun in the worst possible way for all who believed he would be an activist in new jobs creation for the lightly skilled, the people who overwhelmingly helped to elect him.

If the opposition wants to take Trump down, they should stop talking about Russia, and focus on Trump’s record with jobs creation. He made big promises – a job for everyone. It will be a long time (if ever) before a significant number of new manufacturing jobs materialize. This is true because Trump’s plan is to cut the fat out of government, cutting so many jobs that he might never add enough to make up for those he eliminates.

His plan is to use the freed-up funds to do something splashy with infrastructure. This would allow him to boast significant job creation, while downplaying the lost jobs in government. If Trump can figure out how to take unemployed, 50+ year old white males living in small town West Virginia, and make them productive, employed workers, then he’s a genius.

Capitalism hasn’t changed. A subset of oligarchs led by Trump have seized control of the US government. They are “nationalists”. Another subset, the “globalists” lost control of the state.

OTOH, the American people would have lost regardless of who won.

This is being repeated around the industrialized world, from Brexit, to Marine Le Pen’s right-wing challenge in France, to far right challenges to Angela Merkel in Germany.

The chaos described in Naomi Klein’s Shock Doctrine: The Rise of Disaster Capitalism is engulfing the world.

In honor of those who still believe that Trumpy will solve the jobs equation, here is Alan Jackson with “Hard Hat and a Hammer”:

Those who read the Wrongologist in email can view the video here.

Sample Lyrics:

Lace-up boots and faded jeans
A homemade sandwich, and a half a jug of tea
Average Joe, average pay
Same ol’ end, same ol’ day

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February 23, 2018

The Daily Escape:

(Yukon Bear before hibernation)

From the WSJ:

The Trump administration has drafted preliminary economic growth forecasts for its federal budget planning that rely on assumptions that are far rosier than projections made by independent agencies and most private forecasters, according to several people familiar with the discussions.

Imagine. The Trump Team ordered government economists to cook up rosy economic forecasts upon which to base the latest Republican fantasy sales pitch about trickledown economics.

Trump’s “the economy will be great” promises made during the election are now turning into policy and legislation. The problem is that the future they are cooking up for us is most likely unobtainable. Consider that recent GDP growth has been around 2%, while Trump is telling us to expect growth of between 3.0% and 3.5% for the next 10 years. But the Trumpets have a plan:

Trump officials believe a regulatory rollback and a tax-code revamp will unleash growth that drives a recovery in productivity, sends business investment higher and draws idled workers back to the labor force. They also assume interest rates would remain low because the US would become a more attractive place to park money.

Most economists believe sustained growth at more than 3% will be difficult to achieve unless there is a sharp rebound in productivity growth, while the US labor force also grows. Few are projecting that both of those will happen. Worker productivity growth has slowed to 0.7% a year since 2010, a sharp slowdown from rates exceeding 3% in the late 1990s and early 2000s.

So the simultaneous equations to achieve growth include increased spending on military and infrastructure, tax reform, cuts in regulations, and not touching granny-starver Paul Ryan’s favorite target of cuts to Social Security and Medicare.

The WSJ says that the Trump team gave the Council of Economic Advisers (CEA) staff the growth targets that their budget should produce, and asked them to backfill other estimates to justify those numbers.

Business school logic says that could work if the baseline target is realistic. Matt Yglesias at Vox points out that under Trump’s budget, the deficit would be larger; but the economy would be 17% larger and therefore, the deficit as a percentage of GDP would be smaller (perhaps small enough for the GOP to again say “deficits don’t matter?”).

So, Trump has an overly optimistic budget based upon phenomenal growth which no one else believes will happen, and he will hand off this budget grenade to Congress. If Congress balks, or does not find a way to make Trump’s budget happen, accusations will be tweeted from The White House regarding how Congress can’t get anything done.

It will be everybody’s fault except the Donald’s.

This reminds Wrongo of his days in the Fortune 500. Corporate HQ orders an extremely aggressive budget number. The number is missed, and people are terminated. Things continue to slide, and a new CEO is hired, who gets another “stretch” budget that is again missed.

How many times do we need to watch this movie? Trump has declared bankruptcy six times.

Will this make seven?

Here is Alex Dezen with “A Little Less Like Hell”:

Lyric:

Tell me who I gotta talk to
Tell me who I gotta kill
Just to make this place
Feel a less like hell

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Are Donald Trump and Andrew Jackson Soul Mates?

President Trump has hung a portrait of Andrew Jackson in the oval office. Several of Trump’s spokespeople have heaped praise on Jackson, so Trump has picked Old Hickory as his populist role model.

Really? Did anyone on Trump’s staff even read the Cliffs Notes about Andrew Jackson? Here is the surface view:

A presidential candidate who strikes a wide range of observers, including leaders of his own party, as dangerously abrasive, arrogant, and racist. Partly because of those qualities, the candidate appeals stylistically to common-man voters who feel threatened by change, despite his being one of the super-rich himself. While this is Donald Trump in 2016, it also describes Andrew Jackson in the 1820s.

According to Benjamin Studebaker, when Jackson was elected, the accepted view was America needed strong economic growth to compete with Europe. Most thought the country needed to be industrialized quickly to turn us into an independent power. Tariffs should protect infant American industries from their established British competitors. Infrastructure investments should be directed towards transportation.

Jackson was uninterested in industrialization. He won the election because of slaveholding, agricultural states. The southern states had not industrialized, and they hated tariffs. Tariffs made British manufactured goods expensive, and made the price of Southern cotton uncompetitive. South Carolina attempted to nullify the tariffs, which led to tough talk and threats by Jackson to invade. But, ultimately, he signed legislation to reduce the South’s tariffs.

At the time, Jackson was praised for averting a violent confrontation, but his compromise left the issue of nullification unresolved. This eventually led to our Civil War.

The Second Bank of the United States (created by John Q. Adams, Jackson’s predecessor), was designed to stabilize prices and facilitate commerce. Jackson refused to renew the charter of the Second Bank of the US. Public monies were then directed to state banks, called “pet banks” since they were located in states that were Jackson’s core base of support. This deprived the industrial northeast of the investment funds it needed to grow.

The favored state banks began lending the new money feverishly, inflating land prices, and exposing the banks to undue risk.

Jackson blamed the resulting inflation on paper money, so he issued the “Specie Circular”, an executive order requiring all land purchases from the federal government to be made in gold and silver. This destroyed the value of the country’s paper currency, causing land prices to crash.

Executive orders can come back to bite you, Donald.

There is supreme irony that Jackson waged war on the Second Bank of United States, but he is on our $20 bill. Jackson found support for his economy policies among white men who felt threatened by changing from an agrarian to an industrial economy. But his war on the Bank, and the Democrats’ commitment to limited federal government helped propel the country into a four-year depression after the Panic of 1837.

Jackson created the spoils system. Thereafter, newly elected presidents would purge the civil service and hand out government jobs to friends, supporters, and even relatives. Jackson fired 10% of the federal workforce, replacing experienced hands with his buddies and lackeys. This practice continued for decades, ensuring that the federal government was consistently full of incompetents.

Jackson drained the swamp, and then recharged it with camp followers. Just like Trump!

Many on the right revere Jackson for the same reason they admire Donald Trump – he acts like a badass. Jackson killed people in duels. He spoke his mind. He may have rolled over on tariffs, but he used the word “treason” to describe South Carolina before he compromised. That made him seem tough.

The Right lets Jackson’s tough manner obscure the reality, that often he had little notion of the consequences of his actions. He sank the country’s economy for a decade, and handed its civil service over to generations of mismanagement.

A reappraisal of Jackson’s presidency forces us to look at the now-infamous policy of Indian Removal, whereby Jackson approved the confiscation of Native lands and then forcibly evicted them to the far West. He ignored John Marshall’s Supreme Court ruling that his Removal policy was unconstitutional.

He thought those in the abolitionist movement were traitors. His Postmaster General suppressed their mailings, and his party passed the Gag Rule in 1836 suppressing all antislavery petitions and discussion in Congress.

Trump’s new Gag Rule on Abortion limits the funding of global family planning providers if in any aspect of their work, they recommend, discuss, or even mention abortions to clients.

In most ways, it’s a fool’s errand to compare Trump to Andrew Jackson. Although there are gross similarities, Trump isn’t Jackson. Jackson was a military hero, but a failure at national policy. Trump has no heroic resume, and the jury is out on the success of his national policy.

For one thing, Trump confuses military school with military service.

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All Aboard The Bailout Train

In February 2014, Wrongo alerted that hedge funds and other Wall Street firms had been buying up single family homes, many of which had been foreclosed on during the housing crisis between 2007 and 2010:

Most rental houses in the US are owned by individuals…but a new breed has emerged: Wall Street-backed investment companies with billions of dollars at their disposal. In just the last two years, large investors have bought as many as 200,000 single-family houses and are now renting them out.

Tim G, a Wrongologist reader who is an expert in mortgage finance, commented at the time that he hoped that:

Fitch/Moody’s and any other rating agencies learned their lesson from 2007, and won’t (as you suggested) just slap AAA ratings on these. By definition these rental properties carry much more risk, since if they are vacant for any period, the incentive to keep paying drops quickly.

Well, slap they did. You know the drill from 2008; the new game was just like the old game: The new bundled securities were AAA rated by the same rating agencies. The bonds were sold to those seeking high yield without commensurately high risk.

Now we have a new wrinkle. Wolf Richter is reporting that Invitation Homes (owned by private equity giant, Blackstone) today owns 48,431 single-family homes. This makes Invitation Homes the largest landlord of single-family homes in the US. They just obtained government guarantees for $1 billion in rental-home mortgage backed securities. From Richter:

The disclosure came in an amended S-11 filing with the SEC on Monday in preparation for Invitation Homes’ IPO. Invitation Homes bought these properties out of foreclosure and turned them into rental properties, concentrated in 12 urban areas. The IPO filing lists $9.7 billion in single-family properties and $7.7 billion in debt.

The plan is to have a successful IPO, and then refinance some of the debt with the sale of $1 billion of government-guaranteed rental-home mortgage-backed securities.

Fannie Mae, a government-sponsored entity (GSE) that was bailed out, and then taken over by the US government during the 2008 financial crisis, is providing the guarantee of bond principal and interest, and the offering documents call them “Guaranteed Certificates”. More from Wolf: (emphasis by the Wrongologist)

This is the first time ever that a government-sponsored enterprise has guaranteed single-family rental-home mortgage-backed securities, issued by a huge corporate landlord. It’s an essential step forward in financializing rents: taxpayer backing for funding the biggest landlords.

These government guarantees allow Invitation Homes to pay lower interest rates. The bottom line is that Invitation will have cheap financing for future home purchases, and thus lower costs and greater profits.

It’s a sweet deal: low-cost funding made possible by government guarantees, is a special gift that was agreed to by the Obama administration. Other corporate landlords will want to follow in Blackstone’s footsteps, and it is difficult to see how Fannie Mae will choose not to guarantee the other firms.

Bloomberg reported on a Dodd-Frank mandated stress test conducted by the Federal Housing Finance Agency. It showed that during the next severe economic downturn, Fannie Mae and its sister Freddie Mac would need between $49 billion and $126 billion in taxpayer bailout money.

Socialize the losses, Part Infinity.

The Blackstone deal looks like new policy: The government subsidizes the largest landlords, helping increase their profits from renting out the same single-family homes that individual homeowners lost to the same financial thugs during the housing foreclosure crisis. The mission of Fannie Mae is to promote home ownership, not to give real estate entrepreneurs a way to limit their losses.

This guarantee was worked out under Obama’s watch, but Blackstone did not make it public until it updated its filing with the SEC this week. The timing is curious. The public disclosure comes after the Trump team is in charge, meaning Obama wouldn’t face criticism, and the Trump Administration will certainly let the deal stand.

This is worse than the government’s gift of TARP to Wall Street. That at least had optics that said it protected Main Street. But, this securitized mortgage market doesn’t involve Main Street, and the market isn’t even in big trouble.

This isn’t a bailout. It’s a grift. The Kleptocracy is now more entrenched than in 2008.

How ironic. Big business gets a sweetheart government deal, while the GOP moves to cut social programs.

Will this add new jobs to the Trump economy?

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