Month: December 2017

However hard he may try to deny it, he’s still an Ayn Rand devotee, and therefore a CL.  Period.

At some point in time, probably not too far away, the Democrats will regain control of the federal government.  What will happen to the Trump tax bill at that point?

As with the Bush tax cuts, total repeal is not a realistic option.  Here is my prediction:

1.  The rate reductions for individuals will be made permanent, with the exception of the top bracket, which will return to about 40 percent;
2.  Corporate taxes will be increased to about 25 percent;
3.   The limitations on the SALT deduction will be removed;
4.   There will be serious discussion of a tax on fossil fuels, but it will fail as the result of opposition from red state Democrats;
5.   The increased standard deduction will remain in place;
6.   The pass-through provisions of the bill will be repealed; and
7.   The treatment of foreign income will be changed to create serious disincentives for corporations to move abroad.

If I were a corporate executive, I would be making my long-term plans based on these assumptions, not the current state of the law.

There was an article in Vox a few days ago which made a fairly persuasive case that the GOP’s efforts to completely repeal Obamacare should be over, at least for the next year or so.  This was partly due to the Jones victory, but it was also the result of the repeal of the individual mandate in the tax bill.   The thinking was that the mandate was the least popular feature of Obamacare, so with it gone, the GOP will find it much more difficult to rally support to get rid of the rest of the program.

The other side of the coin, which was not discussed in the article, is that the repeal of the mandate also complicates things for the Democrats.  It would be very difficult to sell the public on a bill that simply reimposes the mandate;  that would be vegetables without dessert.  There are two likely outcomes:  either the Democrats will simply accept the structure of the system as it is, and simply try to make it work better with an infusion of more public money; or they will push harder for single-payer.  I think you will hear both options discussed, but the latter will predominate.

The GOP has made it easier to imagine single-payer becoming law in spite of widespread opposition;  you simply keep the bill a secret until the last minute, jam it through the system as fast as possible, and make shady deals to keep everyone on board.  As ye sow, so shall ye reap.

In the end, the secret plan was . . . to do the same stuff that Obama was doing!  It worked, too.  Ross Douthat thinks Trump deserves credit for not screwing it up, but I find it hard to agree.

So what happens next?  Since Trump is giving unqualified support to the Saudi agenda and chose not to help the Kurds, the plan for Iraq is relatively clear:  use Saudi money, American weapons and influence, and Iraqi resentment of Iranian overreach to keep Iraq out of Iran’s orbit.  Whether or not that will be successful remains to be seen, but it at least represents a coherent strategy.  Syria is a different story.  The logical approach at this point would be to make a deal in which we trade territory and conditional support for Assad for the departure of the Iranians and Hezbollah.  Will that happen?  Probably not, as Putin and Assad have shown no inclination to run the Iranians out of town.

Plenty of left-leaning commentators are wondering why the GOP would be so determined to pass a tax bill that is both bad policy and self-defeating politics.  The answers are fairly simple:

1.  The PBP wing of the Republican Party is very transactional;  it demands tax cuts and deregulation for business in exchange for donations and votes.  The GOP has now delivered, and can expect the rewards.
2.  While the Reactionary wing is generally suspicious of wealthy businessmen, it has always been willing to swallow large regressive tax cuts which primarily benefit plutocrats, not them, on the basis that “it’s their money.”  They also see tax cuts as the necessary tradeoff for limits on immigration and support for the Reactionary social agenda and hope that, by “starving the beast,” they can force benefit cuts for the undeserving poor.
3.  Most GOP members of Congress think that, as long as they say the right things about God, guns, NASCAR, country music, and immigration, and they don’t pick up teenage girls at the mall, they can’t be beaten by a Democrat no matter what happens with the economy.  The sad thing is, they’re probably right.
4.  Peer pressure and cover from dishonest right-wing economists took care of the waverers.

And so, we will have a piece of atrocious legislation for our Christmas present. Enjoy!

Recent quotes from Orrin Hatch and Charles Grassley make it clear that the GOP’s disdain for impoverished slackers is definitely alive and well.  Some commentators assume this is purely for racist reasons (here’s looking at you, Mr. Coates), and there is undoubtedly substantial truth to that, but there is plenty of evidence that it applies to shiftless white people, too.  If you don’t believe me, just read “Hillbilly Elegy.”

I would find this line of argument more compelling if it also applied to wealthy slackers, but it doesn’t.  The GOP tax bill, for whatever reason, creates a clear preference for the ownership of capital over wages.  It would appear that unemployed wealthy coupon clippers are morally superior to their poor counterparts;  I just don’t see how.

 

Dick Cheney once told Paul O’Neill that Reagan proved deficits didn’t matter, and certainly Bush 43 governed in that spirit.  Once out of office, the GOP, for cynical reasons, pretended to find religion, and harassed Obama mercilessly over his deficits.  Back in power, they have predictably returned to type, and are on the verge of approving an enormous tax cut which has no chance of paying for itself.

Some commentators on the left have concluded that the GOP is right:  deficits don’t really matter.  Is that true?

Like most things, it depends on the circumstances.  In my view, deficits do matter under two conditions:

1.  As a result of a booming economy and tight monetary policy, public borrowing needs drive up interest rates and “crowd out” vital private sector investment.  No further explanation is necessary.

2.  Creditors lose faith in the ability of the government to repay its debts due to unusual external circumstances, hostile ideology, or simple incompetence.  The size of the debt matters here, but not as much as the quality of the government.  Greece would be an example of “unusual external circumstances,” which in that case meant the constraints created by the adoption of the euro, and “simple incompetence.”  Venezuela is an example of both “hostile ideology” and “simple incompetence.”

Neither of these conditions exists today in our country, and neither has existed for many years. That doesn’t mean they will never exist, particularly with Trump as president, the right’s support for tight money, and the likelihood of future debt ceiling crises.  Completely ignoring deficits is consequently a mistake.

 

Readers of this blog will remember that I predicted many months ago that the Trump Administration would lead us into one of three economic scenarios:  “Funhouse Reagan,” with a regressive tax cut, an exploding deficit, and higher interest rates resulting from an unnecessary stimulus; “Reverse Robin Hood,” with cuts to the safety net offsetting the tax cut; and “Trade Warrior,” which is one of the other two scenarios with a trade war added on top.

The predicted enormous regressive tax cut will be enacted this week, thereby setting the stage for the three scenarios.  Which will it be?  Paul Ryan and the CLs will be clamoring for cuts to “welfare” programs, but that will be a heavy lift for a GOP which could barely summon up enough votes to give away candy for Christmas.  “Trade warrior” hasn’t happened yet, but it’s on the horizon.  The administration will be doing its best to undermine the WTO and withdraw from NAFTA in the coming year.

My bet is still on “Funhouse Reagan,” but I could be wrong, and the alternatives are even worse.

Boris Johnson famously said that the UK could “have its cake and eat it, too” in the Brexit negotiations.  As it is turning out, the UK is actually giving the entire cake to the EU.  That was completely predictable, as the EU has far more bargaining leverage.

I can’t predict what kind of deal is ultimately going to be negotiated at this point, because the British government doesn’t really know what it wants.  What is fairly clear, however, is that the government is eventually going to be faced with a choice of either a deal that leaves the UK worse off than it is today, or no deal at all, and a default to WTO standards, which could lead to chaos, at least in the short run.

You would like to think that the government would give the public a third choice:  a referendum on maintaining the status quo.  Will that happen?  Probably not.

The text of the bill is available, and one of the winners is . . . me!  The increased standard deduction and the lower individual marginal rates will cut my taxes by thousands of dollars, and I may be able to take advantage of the pass-through deduction, although that is not completely clear right now.

Since the purpose of the tax cut is to promote investment, increased productivity, and  higher wages, it is fair to ask what I will do with the additional money. Here’s your answer:

1.  I won’t hire any employees (I don’t have any);
2.  I don’t intend to work any harder (if anything, I’ll work less);
3.  I obviously won’t increase wages; and
4.  I don’t intend to increase consumption at all.

The additional funds will be put away for retirement–in other words, they’ll be invested in the markets with the expectation that asset prices will increase.  That, in a nutshell, multiplied by millions, is what you can expect from the tax cut, which is not what the GOP has promised.

Is Doug Jones Scott Brown?  That’s the question lots of people have been asking since Tuesday night.

Yes and no, but mostly yes:

No, because Moore was a uniquely bad candidate;

No, because the economy is in relatively good shape;

Yes, because the market is due for a correction before the election;

Yes, because Trump and the GOP are extremely unpopular;

Yes, because Ryan’s proposed spending cuts will be even more unpopular.

The GOP has blown its chance to make a favorable first impression under promising circumstances. Things will get worse from here unless Trump initiates a war and wins it at little or no cost to the general public.

One party believes in low taxes, local control, and limited central government.  It strongly supports traditional values and is suspicious of foreigners and urban culture.  Abroad, it is isolationist.

The other party is urban, cosmopolitan, and dynamic.  It believes in using the power of the central government to grow the economy.  It is the party of the elites.

Is this the UK in 1715, the US in 1800, or the US today?  You decide.

As you can see, the Whig/Tory split is a fundamental one that runs through the history of our country and still resonates today.  However, today’s GOP diverges from the Tory model in two respects, both attributable to Ronald Reagan:

1.  Tories believe in small government and low taxes, but they aren’t tax cutting fundamentalists.  For today’s GOP, cutting taxes is an article of faith, to be followed even in the face of all of the evidence.
2.  The Trump Administration is torn between “America First” isolationists and supporters of a swaggering, robust foreign policy that embraces, rather than tolerates, strong men.  The former are the true heirs of the Tories; the latter are the heirs of Reagan.

Imagine that you are a businessman, and the Trump tax cut has just become law.  You’re overjoyed;  the tax cut was the whole point of his presidency, from your perspective.  You had every expectation that the proprietor of Trump University would be able to convince himself and his Reactionary supporters that a huge regressive tax cut would help the average American, and he delivered, with lots of help from your friends in Congress.  But now what?

Today, things are as good as they’re ever going to get.  From this day forward, you’re going to be playing defense to keep what you have.  And frankly, you’re worried about Trump.  His incompetence and corruption could provoke a Democratic backlash that would endanger your tax cut; the vote in Alabama could be evidence that the backlash has already started.  His ideas about trade are also a big threat to the markets and your investments.  He hasn’t done anything meaningful to damage the economy yet, but the protectionist rhetoric is still there, and you never know . . .

President Pence is starting to look pretty good to you.  And that, my friends, between now and the 2018 election, is the biggest threat to the Wizard of Id.

In the final analysis, the institutional problems experienced by the EU during the Great Recession had their roots in one fact:  citizens of the EU see themselves as Germans, or Greeks, or whatever, before they see themselves as Europeans.  As a result, the Germans didn’t (and don’t) want to spend their money bailing out the Greeks, or the Italians, or anyone else.

I don’t remember ever hearing stories about people from, say, Massachusetts denying any moral obligation to provide funds for hurricane relief to Florida or Texas.  While it appears that some of the worst features of the tax bill are being removed before final passage, however, you can still see evidence of efforts to weaponize the system against the residents of blue states.  That kind of activity invites retaliation, and could ultimately result in the US looking more like the EU at its worst.

Joe Manchin.  Claire McCaskill.  Joe Donnelly.  Heidi Heitkamp.  Jon Tester.  All of these people are Democratic senators from red states won by Trump, and all of them purportedly were willing to work with the GOP on the tax bill.  If the bill had been any good, they probably would have supported it.  The GOP would then have been able to claim that the bill was bipartisan, and it would have been a more difficult target in 2018 and 2020.

As it turned out, the bill had absolutely zero support from Democrats, even the most vulnerable, which tells you the following:

1.  There was no real outreach to the Democrats in the process;
2.  The bill is a terrible, extremely partisan piece of legislation;
3.  The bill is so unpopular, the Democrats in question do not fear the consequences of opposing it; and
4.  Trump lacks the clout to make them pay the price for opposition.