Posts Tagged Budget
Surely, most people realize that you cannot trust anything that Donald Trump and the GOP say. The Tax Plan, which they released this past Wednesday, was a charade–focusing on what the middle class might expect, while burying the real meat, which they don’t want us to see. This plan is intended to reinitiate the Bush Era tax cuts, skewed to the top one percent. Additionally, they are selling the repeal of the Estate Tax–from which only 6,000 of the very wealthiest families will benefit–which adds to the top one percent of taxpayers. Those cuts, early on in Bush 43’s first Administration contributed t The Great Recession (4Q07-1Q09).
There is no “reform” included in the proposal; but, rather, that is merely to enhance the appeal to the middle class. Trump and the Republicans have claimed ad nauseum that America has the highest personal and corporate tax rtes on earth. Au contraire, both of those rates fall in the dead center, after deductions and loopholes, according to the OECD organization of industrialized nations.
Oftentimes, Donald Trump meanders around in various directions, suggesting one thing and then another; but in the end, he often reverts back to something that he said on the campaign trail. Rather than get bogged down analyzing a his short outline, I am including a blog post that I published last January. As you can see, little has changed after his nine months in office.
When Bill Clinton passed the keys of the Oval Office to George W. Bush, on January 20, 2001, the American Economy was in great shape! Clinton had just balance the Federal Budget for the first time since 1964. The Unemployment Rate sat at 4.40%, somewhat lower than what the Federal Reserve deems “Full Employment,” at 5.00%. (The 5.00% is an assumption for those between jobs, changing jobs, recent lay-offs, etc.)
George Bush then took the Economy and devastated it, in order to accomplish ideological goals. He commenced to take the country into two never-ending wars, first, in Afghanistan, in 2001 and, then, Iraq in 2003. Both wars are still going on, which causes one to wonder what our Mission Statement was. Were they necessary? Will we ever leave?
Also early in his First Term, Bush decided to implement a series of Tax Cuts, which were primarily skewed toward the very wealthiest Americans. Why? Generally, a nation doesn’t lower taxes when it has one war to finance, let alone two! Also, tax cuts for the wealthy do not usually encourage consumer spending. On January 1, 2005, just after he had won his re-election, the Unemployment Rate was 5.30%, and the National Debt had increased from the tax cuts.
That rate began to edge up as the Economy began to stagnate. Banks, which were undercapitalized had been taking undue risks. Sub-prime mortgages were sold to homeowners who could least afford them. Even worse was the packaging of these questionable loans, which were sold to unknowing bond investors as AAA-rated mortgage-backed securities. And in the end, many of the banks, insurance companies, auto makers, etc., had to be bailed-out by the Taxpayers.
That Banking Crisis, which is commonly referred to as “The Great Recession” was first made public in October of 2007, when George Bush forced the very largest banks to take tens of billion of dollars, at virtually no interest. He described the scenario as such: “America is looking down into a Financial Abyss.” If you hadn’t been deeply concerned during the fourth quarter of 2007, when this all began, you certain became so after Bush’s announcement!
The Unemployment Rate of 5.00% at the beginning of 2008 quickly rose to 7.80% at the beginning of 2009. The Bush Tax cuts, coupled with financing two wars caused the Federal Budget to spike, and the interest on the, now higher, National Debt absorbed a larger slice of the budget, as well. Lay-offs reduced the tax polls, consumer spending declined considerably, and many small businesses closed their doors. And credit became virtually non-existent.
Just after Barack Obama took office, on January 20, 2009, the Dow Jones Industrial Average dropped to 6,500, from the prior high of 14,015 in October of 2007. Unemployment continued upward to 10.00% in early 2010.
The Obama Administration did the reverse of what George Bush did by allowing the Bush Tax Cuts to expire; but, he lowered rates for the middle class who, unlike the wealthy, spent their excess cash, thus giving new life to small businesses—the real job creators! Obama’s combination of Monetary and Fiscal Stimulus began the economic recovery, which continues to this day. The Unemployment Rate stood at 4.80%, when Obama left office last January.
Let’s consider how the two prior presidents—before Donald Trump—managed the American Economy. George W. Bush took over a nation, which had balanced its budget, and he ran it into the ground—turning the budget surplus to a deficit, lumping the expense of ineffective tax cuts and two unnecessary wars, doubling the Unemployment Rate and halving the stock market.
Barack Obama took a completely different stance. He almost balanced the budget, allowed the ineffective Bush Tax Cuts for wealthy to expire while lowering taxes for the middle class—the consumer class, put many small businesses back on their feet, tried to withdraw from the two Middle East wars in a gradual and rational manner, and he halved the Unemployment Rate while doubling the stock market.
Donald J. Trump seems dead set on following President Bush’s scenario. Are we ready for another Great Recession?
WHO OR WHAT ARE WE FIGHTING IN THE MIDDLE EAST? WHY? WHAT DO WE HOPE TO ACCOMPLISH? AND WILL WE EVER KNOW IF OR WHEN ITS OVER?
The First Rule of Warfare is to “Know Your Enemy!” But, after the terrorist attacks on 9/11, George W. Bush declared a Global War on Terror. So, what does that mean? Have we been fighting a tactic: Terrorism? Are we fighting for Good, versus Evil? What exactly is IT? Also, is the fight, against this uncertain opponent, limited to the Middle East, or might it be global in scope? Unfortunately, as the “Coalition” was gearing-up to invade, George Bush waved the red flag—citing the Crusades. How damn ignorant can one man have been?
Ever since those terrorist attacks, many in Washington have attempted to assign the role of our new invisible adversary to Islam. Why didn’t Bush confront the Saudis, since 15 of the 19 terrorists were Saudi nationals? By falsely accusing Global Islam to be our new Enemy, the Administration had enabled our real enemy to gain more strength, while America tilted at windmills!
Many of us in the more secular West have trouble understanding the role of Religion in other cultures. Until approximately 1500 AD, Western Europe was considered to be somewhat of a cultural backwater, as compared go the Great Empires of the world. The source of all power was universally thought to be the King, Caliph, Bishop, etc, who was believed to have received it from God.
Eventually, however, Europeans began to question the role of the Kings, as well as the Pope, as they also began to doubt that the Earth was the center of the universe. As people began to think for themselves, an Intelligentsia evolved, which explored science, philosophy, geography, economics, etc.
As that transition occurred, Western Europe jumped ahead of the rest of the world in knowledge, in adventure, and in understanding how things worked. So, while Europe had become more secular, the importance of Religion, however, had not changed among the other great civilizations of the world!
Muslims seem to have maintained a feeling of commonality with one another, around the world. For instance, many of those who fought in Bosnia, Chechnya, and Croatia, toward the end of the Twentieth Century, have answered the call to Jihad in the Middle East. Similarly, Muslims from Asia, Australia, Europe and North America, joined-in as well. Accordingly, how do we fight something that we cannot define, nor do we even understand?
We hoist our arrogance on our Military; but, two major powers have not faced-off in battle since the middle of the last century. Frankly, American GI’s are: too weighed-down by all of the high-tech firepower that they carry on their backs; the sometimes unreliable air cover; conflicting command structures; and the lack of loyalty, by local soldiers, for the general that we propped-up to head the country. Meanwhile, the enemy can travel light, knows he has little that can disappoint him, and he can blend in with the populace; BUT…he is also fighting for a cause!
Rather than funding a large invading army, with firepower out the gazoo, we should focus a sizable portion of the State Department budget on devising vital parts of the cultural infrastructure, which is so lacking. By helping build that missing support structure, out in the villages, America can eliminate the environment in which terrorist groups and religious extremists thrive.
For instance, three or four decades ago, much of South and Southeast Asia had been in a situation similar to that of the current Middle East. Poverty and illiteracy were rampant! Also, that part of Asia has considerably more Muslims than does the Middle East. Through the transformation, perhaps following Japan’s lead, the local infrastructures began to change. Education, industry, viable health care, a functioning economy, and the standard of living began to rise. A better lifestyle goes a long way in combatting terrorism and extremism. Also, preventing war is more cost-effective than waging it, and it saves lives!
NOTE: For a much more in-depth explanation of how western Europe transformed, here is the comment on my Books That I Recommend tab: A great historical and scientific explanation of Who we are, Where we came from, and How we got here. The obvious idea is to understand our past in order to contemplate our future. Namely, what We, as a Species, will become in the future?
REAL TAX REFORM IS MUCH OVERDUE! BUT, IT SHOULD BE LEFT TO A PROFESSIONAL BIPARTISAN COMMISSION, AND NOT TO POLITICIANS!
Donald Trump boasts that he will reform the Internal Revenue Code. Our tax code was first codified about 100 years ago, is now some 17,000 pages and still growing; but, not all of our tax statutes have been included yet! Previous changes and additions had political motivation, based on the ideology of whatever party was in power. And thus, Tax Reform has truly become a political football; but, without any coherent agenda!
Real reform must be placed in the hands of a totally bipartisan Commission, composed of tax and other financial professionals. The job at hand, however, could be compared to tearing down an old dilapidated building, and then starting from scratch. The existing tax code is much too vital to the on-going functioning of our federal government to go on without it! Therefore, the Tax-Reform Commission needs to be appointed for, let’s say, a ten-year term, and be subject to the oversight of a bipartisan Senate Tax-Reform Select Committee.
Such a Tax-Reform Commission, should be totally staffed and directed by professionals, who are knowledgeable in the functioning of the federal government. Similarities to the operation of the bipartisan Congressional Budget Office easily come to mind. The Leadership could be appointed by the (to be formed) Senate Select Committee, with the committee appointing replacement commission members, as needed.
The Commission should be expected to operate over, let’s say, a ten-year period, so as to: focus on the truly long-term nature of its mission, as well as to remove it from the regular political process. Furthermore, the establishing legislation should include a provision for a subsequent commission to be appointed every several decades.
DONALD TRUMP’S VINDICTIVENESS SEEMS TO BE BEHIND TWO SENSELESS IDEAS: ELIMINATING AFFORDABLE HEALTH CARE AND SLASHING THE STATE DEPARTMENT BUDGET BY 31%!
Donald Trump has said a lot of idiotic things, taken Tweetery to a new lunacy level, and he has accomplished absolutely nothing…in five months. Remember all of those asinine Legislative “Acts” that he was going to pass “…on Day One!” Did Mr. Know-it-all forget that Congress takes more time off than he does—including HIS Inauguration Day?
There are two major actions that Mr. Trump should have most definitely avoided: Repeal and Replace “Obamacare,” and to slash the State Department Budget by 31%.
Just like any comprehensive bill, such as the (real name) Affordable (Health) Care Act, modifications should be made from time to time, just like what was done after Medicare, was first rolled-out! Deep down inside, the real reason for eliminating ACA—and why Donald has disrupted it’s functioning—is to replace the huge tax cuts, assessed to the Top Two Percent of Taxpayers, which were lost when the Bush Tax Cuts expired.
And slashing the State Department Budget is reprehensible; because, those 170 State Department Embassies, Consulates and other installations, around-the-world, are the face of of the United States to many foreigners. Those offices are used for many other purposes, besides diplomacy: Trade and Agricultural Officers work out of them, foreigners apply for Visas there, and its where Americans go when they encounter problems in other countries. Besides, USAID and other social agencies provide excellent assistance, from those offices, directly to rural villages and groups that need it.
In the case of both eliminating ACA and slashing the State Budget, there is no responsible reason, whatsoever, for Donald Trump to do so. But, after analyzing these ideas, I definitely see a relationship. Let me highlight each:
1. Mr. Trump resents the fact that Affordable Health Care isn’t focused around him. Even though Republicans have called for some form of Health Care for All, going all the way back to Richard M. Nixon, and perhaps even earlier, the GOP just never seemed to have followed through in legislating it! Also, Trump is displaying his racism through his intention to eradicate the signature accomplishment of Barack Obama, our First Black President.
2. Additionally, Donald doesn’t seem capable of letting go of his hatred for former Secretary of State Hillary R. Clinton. When it came to “dirty tricks”, Trumpie was far and away, the all-time champion, and definitely not the victim, during the campaign! When Secretary of Defense James Mattis heard that State’s budget would be slashed, he said he was “…going to need more bullets!” Mattis realizes that every dollar spent by State—especially in its various social programs—results in less dollars needed for Defense!
So, when Trump & Friends misrepresent why they needs to Repeal “Obamacare,” and he proposes slashing the State Department budget, the reasons are: his narcissism; racism; sexism; providing huge tax breaks to Mega-Billionaires; and slashing State’s budget to will help pay for the idiotic Wall!
NOTE: Just a few days after Donald’s Inauguration, I described the basics of what might have been Trump’s expected Tax Plan in a blog post. Three months later, it’s still quite vague!
Although Trump prefers to label it as Tax Reform, yesterday’s big presentation was nothing but a vague suggestion of a Tax Give-Away, mostly to corporations and the top two percent of taxpayers. The stock market displayed its ecstasy by closing down a bit lower, and perhaps wondering if they had seen this movie before. Whatever might come of his Tax Plan, the corporate interests, who truly would benefit from a 57% tax-cut (from 35% to 15%) know that it still must get through Congress, and that is saying something!
Donald Trump will reach Day 100 on Saturday, after which pundits will begIn to slice-and-dice his accomplishments, most of which are quite minimal. That’s why he has been rushing to make big announcements, even if they are still in the early stages, and not thought-out. For instance: his visit to the Treasury Department, a couple of days ago, was nothing but a charade, signing an “Executive Order”, which directed Secretary Steve Mnuchin to do what he is already doing. And then today, Health Care is back in the news, as was an unnecessary briefing on North Korea, for the Senate, at the White House!
Over the past 22 months, Trump has vowed to reform the IRS Tax Code, and he complains that the Corporate Rate is too high. Donald, few companies actually pay the top rate of 35%. In fact, approximately ten percent pay no tax at all! For comparison, the Average “Effective Tax Rate” (after credits and deductions), that U. S. corporations pay is 27.7%, while the average for OECD (industrialized corporations) is 27.1%. So, the actual difference isn’t really much to complain about!
The really big question is how does the Trump Regime expects to pay for these give-aways—tax cuts to corporations; a one-time Tax Holiday for companies to repatriate earnings held overseas; tax cuts for the very wealthy taxpayers; and the elimination of the Estate Tax, which only about 6,000 families pay. And by the way, none of these tax cuts would boost the economy or have much of an effect on job creation!
There is one other give-away, which is not boasted about, perhaps because it tells of a personal special interest group; but, it would certainly appeal to Donald Trump’s billionaire buddies. Many very wealthy people file their taxes as Individuals, which would mean the 35% maximum personal rate. They are, for instance; doctors; lawyers; hedge funds; real estate developers; etc. Donald’s Plan proposes the establishment of some sort of tax vehicle, which would enable such taxpayers to file as corporations—at the 15%.rate!
Parsing the Plan, as presented, I can assume a best-efforts guesstimate, that this Trump Tax Reform Plan might reduce the Treasury Department’s Tax Revenue by, let’ say, $4 Trillion over the next decade, or $400 Billion annually. So, how does the Treasury recoup that huge loss? MAGIC!
Donald Trump and Secretary Mnuchin claim that, by lowering taxes on the wealthy, the economy would grow and that would, in turn, increase tax receipts. Since Ronald Reagan first proposed the “Trickle-Down” Theory, ing 1980, it has never been successfully demonstrated in the real world. The divergence, both in Income and Wealth, however, ,has increased substantially, in America ever since. Why would anyone expect the result be different this rime?
How many times are we going to hear Donald Trump boast about “Gonna-Do’s”, that aren’t on any sort of rational horizon: Health Care; Tax Reform; Infrastructure; Immigration Reform’ Trade Reform; The Wall, etc? At the same time, he acts like Congress and the American People are supposed to kiss his Royal Derriere. No, Donald, you’re no longer a Candidate, you must play by the Constitutional Rules, and we get to keep score!
NOTE #2: Nobel Laureate Paul Krugman described the Trump Tax Plan, in his NY Times column, with the following analogy to a “Twilight Zone” episode, about a six year-old child, with exceptional powers.
WHEN WILL WE GET AN UPDATE ON THAT INFRASTRUCTURE PLAN THAT DONALD KEEPS SAYING WILL BE THE MOST “HUGELY” GREATEST EVER?
Michael Bloomberg characterized Donald Trump quite accurately, when he referred to him as “A Con (Man)”, at the Democratic National Convention, last July. Trump’s initial Infrastructure Plan, which he revealed last October, was just another version of Corporate Welfare. It was a complete scam at the time and, although he keeps touting it in his current rambling monologues, he seems afraid to reveal what changes have been made, if any.
Prior to November’s Election, economist Peter Navarro, who is now a Special Advisor to the President, and Wilbur Ross, Trump’s Secretary of Commerce, had drafted a Plan, which, seeming to explain it, appeared to be intended more to obfuscate by using obtuse numbers and financial illusions. There seemed to be no attempt to explain it so the average American might understand it. Their final analysis, released on October 27, 2016, was titled: “The Trump Private Sector Financing Plan”.
The gist of Trump’s Infrastructure Plan, as far as I can see, can be explained from what is cited, in four paragraphs, on Page 4.
1. “For infrastructure construction to be financeable privately, it needs a revenue stream from which to pay operating costs, the interest and principal on the debt, and the dividends on the equity.” This quote seems to suggest that only projects, with revenue streams—toll roads, bridges, tunnels, etc.—would be included. Side road repair, clearing impassible waterways, environmental clean-up, obsolete levies, etc. wouldn’t.
2. “…we are assuming that, on average, prudent leverage will be about five times equity. Therefore, financing a trillion dollars of infrastructure would necessitate an equity investment of $167 billion, obviously a daunting sum.” That means the private companies, who would cumulatively be buying complete control of the projects, including the long-tam revenue streams, will provide only one-sixth of the equity in the total Capital Structure. But, it gets even more interesting in Numbers 3 and 4.
3. “…to reduce the cost of the financing, government would provide a tax credit equal to 82% of the equity amount. This would lower the cost of financing the project by 18% to 20% for two reasons.” The true numbers will be revealed in #4.
The Treasury will provide a “Tax-Credit” for the bulk of the corporations’ Equity Capital—their investment exposure. Keep in mind that, unlike a tax-deduction, which merely provides benefits at the tax-rate, a tax-credit is fully deductible—dollar-for-dollar—from the final taxes payable. Now, see #4.
4. Now, here’s where it can all come together. “First, the tax credit reduces the total amount of investor financing by 13.7%, that is, by 82% of [the]16.7%. The elegance of the tax credit is that the full amount of the equity investment remains as a cushion beneath the debt, but from the investor point of view, 82 percent of the commitment has been returned.” Plain as mud, huh? Let me put those numbers into a more-understandable format:
U. S. Treasury sells $1,000 Billion to finance entire Project.
in Project: $Taxpayers Debt Exposure833 Billion — 83.3%
Corporate Equity (financed by Treasury): $167 Billion — 16.7%
Treasury absorbs Corporate Tax-Credit: $137 Billion — 13.7%
U. S. Treasury Debt equals Taxpayer Debt: $970 Billion — 97%
Cumulative Corporate Debt to Treasury: $30 Billion –3%
In summary, America is literally giving away valuable revenue streams ON MONOPOLIES, perhaps in perpetuity, assumedly without any control about future prices, continued maintenance, and there is nothing mentioned which requires that American workers be used, with regard to re-construction, on-going maintenance, or the long-term operation. Now, perhaps Donald Trump and Speaker Paul Ryan are making this more digestible; but, I sure would like to see a summary of the particulars before I hear how “hugely” great it will be, or anymore.
And as Donald always says: “This will be Budget-Neutral. Just trust me!”