While higher interest rates allowed banks to earn more from lending in the first quarter, the main boost to bank came from the billions of dollars they saved in taxes under the tax law Trump signed in December. Combined, the six banks saved at least $3.59 billion last quarter.
Before the tax law change, the maximum US corporate income tax rate was 35%. Banks historically paid among the highest tax rates, because of their US-centric business strategies. Before the Trump tax cuts, these banks paid 28% to 31% of their yearly income in corporate taxes.
Last week’s results showed how sharply those rates have dropped. JPMorgan Chase had a first-quarter tax rate of 18.3%, Goldman Sachs paid 17.2%, and the highest-taxed bank of the six majors, Citigroup, had a tax rate of 23.7%. Bank executives at the big six firms have estimated that their full-year tax rates will be about 20%-22%. If you annualize the quarterly savings, $3.6 billion is about $14 billion a year for the six largest banks in America.
Does anybody think that the savings will go to customers in the form of reduced service fees? Or employee raises? Nope, Bank of America announced in December that they will be spending $5 billion to buy back their shares.
This is a permanent annual loss of revenues for America. If the GOP stays in power, you know exactly what they plan to cut to make up these billions. On to cartoons.
Trump’s week looked like this:
(But you can’t fix FOX.)
The two guys who were arrested had a bad day. Maybe Starbucks shouldn’t say “shot”:
Rumors that you will be fired will cause anxiety:
(Maybe John Boehner can hook him up.)
What Syrians might say about Trump’s cruise missile attack:
Frozen branch in Lake Erie, Cleveland OH – 2018 photo by Igorius
The Democrats’ demand of passage of DACA legislation, or they would block a Continuing Resolution (CR) to keep the government open, lasted 72 hours. No DACA legislation was passed, but Dems are touting a Republican promise of debate about DACA over the next three weeks.
That promise comes from Mitch McConnell, the guy who stole Merrick Garland’s Supreme Court seat, and got away with it.
Wrongo believed that dying on DACA hill was a bad political choice for Democrats. After all, there are 700,000 Dreamers, but 320 million Americans would be affected by a government shutdown. Their negotiating position shows how weak the Dems are today.
Those Dems who say that capitulation on the CR was worth it to secure the Children’s Health Insurance Program (CHIP) funding for six years, should remember that the CR runs out in three weeks. Then it will be up for discussion again.
So from the Dems viewpoint, if by February 8th, the Republicans have not dealt with DACA, the Dems can shut the government down again, this time using the narrative that Mitch McConnell is a liar, and that they gave Republicans a chance to fix the problem. Unfortunately, McConnell has been called a liar before.
But if February 8 comes, and Democratic Senators back off on another confrontation to protect the Dreamers, that will not only be terrible for Dreamers, it’s terrible for Democrats. They have a few weeks to pressure Republicans to get this done.
Once Senate Dems say “no” to that, McConnell can say “Well, we put a DACA bill on the table, and the Dems rejected it. I lived up to my promise.” There will be some tinkering by middle-of-the-road Dems around the edges of the SAF bill. Then it will be attached to the CR. How long do you think it will be before 10+ Dems cave, and pass it?
Fault lines exist. A dozen Senate Democrats broke with party leaders to vote against the bill, including a number of potential presidential candidates, a sign they knew exactly where their base is, even if the leadership doesn’t.
Democrats need to use their time in the minority to remake the Party. They should pursue and deliver programs that offer real benefits for middle and working class voters. They need a plan to deal with income inequality. Fundamental questions about what being a Democrat means in the 21st Century must be addressed.
FDR provides a great example for today’s Democrats. In the 1930s, FDR responded to a financial crisis with bold, creative policies that delivered massive, tangible benefits to working people. Because of what FDR did, the Republicans were forced to go in his direction to stay politically competitive. Republicans began to promise that they could improve the programs they once opposed.
Let me warn you, and let me warn the nation, against the smooth evasion that says ‘Of course we believe these things. We believe in social security. We believe in work for the unemployed. We believe in saving homes. Cross our hearts and hope to die. ‘We believe in all these things. But we do not like the way that the present administration is doing them. Just turn them over to us. We will do all of them, we will do more of them, we will do them better and, most important of all, the doing of them will not cost anybody anything’
In the post-war period, the Republican Party looked more like Dwight Eisenhower than like Ronald Reagan.
And today, Democrats must emulate FDR: Move Republicans to the left, not move the Dems further to the right. This isn’t about finding someone to create an Obama third term. Democrats shouldn’t prioritize getting rid of a bad president, they need to build a serious alternative to Republican ideology.
The Democratic Party has failed many times to produce a political strategy which would force the Republican Party to change direction. And they look like they may fail once again. The Democratic leadership believes that the party needs to unify at all costs to present the strongest possible electoral challenge to Trump in 2020.
It’s counter-intuitive, but to secure a future Democratic majority, Dems must first decide to be a party with a plan that addresses income inequality.
They can knock out Trump without moving to the right.
Big Ben being cleaned. In order to clean the four clock faces, every 5-7 years, skilled climbers hang down from the belfry on ropes, and they clean the front of each clock face. There is one removable panel of glass on each face, which is removed during the cleaning so that the clock maintenance staff can talk to the cleaners while they’re working. (“you missed a spot?”) Hat tip to Wrongo’s friends at the Goodspeed Opera House!
Yesterday we pointed out that there is a very large program that the country needs to fund if we are to maintain our position in the global superpower competition. The issue at hand is the stunning thought that we might lose up to 75 million jobs to automation in the next 13 years, and that we need to train the out-of-work unfortunates for new jobs in a different economy.
It’s highly unlikely that we would need to train that many, but it could be 25 million Americans. And we have no idea where the money would come from to accomplish that. After all, the Republicans now plan to reduce tax receipts bigly, thus adding to the deficit and thereby, to the total debt of the country.
We know that as soon as the new tax cuts begin accruing to their patrons, the GOP will start talking about reducing the budget deficit by cutting non-military expenses. Ron Brownstein conceives the Republican tax plan correctly:
Gaius Publius observes: (brackets and editing by the Wrongologist)
As they did in the 1980s, Republicans are laying a “deficit trap” for Democrats. As they did before, they’re blowing up the budget, then using deficit [fear] to force Democrats to “be responsible” about cutting social programs — “because deficits matter.”
In the 1980s Republicans ran up the deficit, then insisted that Democrats work with them to raise taxes on the middle class to over-fund the Social Security (SS) Trust Fund. This converted SS from a pay-as-you-go system that increased revenues as needed via adjustments to the salary cap, to a pay-in-advance system. That allowed any excess SS money to be loaned back to the government, partially concealing the large deficits that Reagan was running up.
Today, Republicans are expanding the deficit again, and are already starting to talk about deficits to argue for cuts in what they call “entitlements” — Medicare, Medicaid, and eventually Social Security, even though Social Security can be self-funding.
Fear of deficits is the go-to Republican ploy to try to maim or kill the FDR and LBJ-created social safety net. To the extent that Democrats are willing to accept the GOP’s argument that both parties need to be responsible to decrease the deficits, they will support cuts in social services. Even Obama was willing to consider doing just that in the name of “bipartisanship”. More from Gaius:
The reality — Deficits aren’t dangerous at all until there’s a big spike in inflation, which is nowhere near happening and won’t be near happening for a generation…
Do we want the US government to shrink the money supply year after year after year, by running budget surpluses, or do we want to grow the amount of money in the private sector, making more available for use by the middle class? The trillions spent on the current GOP giveaway to the already-rich could have been given to college students in debt, or people still underwater in their mortgages since the Wall Street-created crash of 2008. It could have been used to build better roads, airports, seaports or a national high speed internet backbone.
What would be the effect of that re-allocation of money?
Back to Gaius Publius for the final words. Which of these three options would you rather the government choose:
Spend money on the already-rich?
Spend money on you and the country’s needs, ignoring the pleas of the already-rich?
Hoard as much money as possible in a vault and spend the least possible?
The first is the GOP’s current tax plan. The second is a plan for the many, an FDR-style economic policy. The third is the GOP’s wet dream, one that they will ask Democrats to help them accomplish once the already-rich have banked their share of our tax money.
Wrongo’s fear is that at some point down the road, a compromise will be offered up: Cuts to social programs in exchange for a repeal of some of the more onerous tax cuts. The only issue will be the extent of the cuts to social programs.
It will be celebrated as bipartisan sanity returning to Washington.
Two short thoughts for your Saturday. First, hidden in the language of the GOP’s Tax Bill is a something that would change the Johnson Amendment, a provision in the tax code that prohibits churches, faith communities, and other non-profits from outright endorsing political candidates:
…The provision is not a complete repeal of the Johnson Amendment. As written, it would only free up religious communities—not all non-profits—to endorse candidates and appears to prohibit churches from going out of their way to campaign for a candidate outside of their normal religious activities.
The GOP wants to erode the separation of church and state. Let’s see who, if anyone, in Congress is willing to fight for the Constitution.
Second, the Democrats had a grenade go off inside the DNC when an excerpt from Donna Brazile’s new book was published by Politico. She claims that the Clinton administration assumed control over the Democratic National Committee (DNC) in exchange for keeping it solvent, then funneled most of the funds raised into her campaign, leaving the states with very little to support down-ballot races.
The states kept less than half of 1 percent of the $82 million they had garnered from the Hillary fund-raisers the campaign was holding to support state-level candidates. That’s about $4.1 million.
When Howard Dean was chair of the DNC he instituted a 50-state policy, saying the DNC would maintain full time workers in each state, to contest seats up and down the ballot from the county, to state legislature to house and senate races.
When Obama won, Dean was out, and the 50-state policy was dismantled. After that, the DNC was reorganized to serve only national level elections. And Obama For America took its place as the funds-raising vehicle for the presidential re-election. And Hillary did much the same with the Hillary Victory Fund, but she went further, as Brazile reveals: The DNC would covertly back Hillary in the primaries.
And now, through these efforts, the Democrats have lost the White House, the Senate and the House, in addition to most state governments.
It’s hard to decide what’s worse, that the party is run by incompetents, or that it is just hopelessly corrupt.
Time for a hostile takeover of the Democratic Party.
On to the weekend. You obviously need to go to a happy place that doesn’t include continual assaults by our national media. So brew up a cup of London-based Union Hand-Roasted Coffee’s El Topacio Microlot, El Salvador, available online for £8/200g.
Now kick back someplace you can see the natural world outside, and listen to Peter Mulvey playing his instrumental, “Black Rabbit”. Mulvey is known for his guitar chops and songwriting. He got started by playing in the Boston metro. This short acoustic gem is executed with ease, and pure musicality:
Those who read the Wrongologist in email can view the video here.
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.
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