Tag Archives: economics

Voodoo You

“It just isn’t going to work, and it’s very interesting that the man who invented this type of what I call a voodoo economic policy is Art Laffer, a California economist.” – George H.W. Bush, Carnegie Mellon University, April 10, 1980

 

I’m frightened for the United States, and it’s not just because of my disdain for our faux president, Donald Trump.  I’m genuinely concerned about what could happen over the next few years.

In the above quote, George H.W. Bush was referring to the plans of fellow Republican and 1980 presidential candidate Ronald Reagan for revitalizing a stagnant U.S. economy.  Then, when Reagan won in most of the primaries, his camp offered Bush the vice-presidential position, and the former Texas congressman shut up about economics.  In 1980, the nation was in a bad financial situation.  The costs of the Vietnam War, coupled with oil embargoes from OPEC nations, had finally taken their toll.  Unemployment stood at nearly 10%; the prime interest rate was 21%; inflation was 14%; home mortgage rates were 17%; and the top marginal tax rate was 70%.  In the second quarter of 1980, the U.S. gross domestic product (GDP) declined by 8%.  By the end of the year, the overall GDP boasted about $3 trillion (in today’s dollars).

With the help of some Democrats in both houses of the U.S. Congress, Reagan was able to generate an agreement that slashed taxes down to 50% on wages, to 48% on corporate income, and to 20% on capital gains.  These measures initially jumpstarted the economy.  Average citizens had more expendable income, which they poured back into the economy by purchasing many so-called big ticket items, like vehicle and electronics.  By 1990, the size of the U.S. economy had grown from $3 trillion to $6 trillion, with roughly 4 million new businesses and 20 million new jobs created.  Although the national debt increased from $1 trillion to $4 trillion during the same period, overall revenues doubled.

Reagan’s economic policies were in line with conservative views on taxation: if we give the “investing class” (meaning, the most affluent) generous tax breaks, they will respond by expanding their businesses or starting new ones, which in turn, will create more products and / or services and more jobs.  Along with reduced business regulations (“job killers” in conservative lingo), average citizens will have more income, which of course, they will pour back into the economy.  Such growth then will expand the tax base; the additional revenue will replace any money lost to the initial tax cuts.

Ask any frustrated project manager and they will tell you that everything always looks great on paper.  While Reagan disciples keep championing his financial moves, the reality is that “Reaganomics” didn’t work out as planned.  One thing people forget is a little thing called the Garn-St. Germain Depository Institutions Act of 1982, which rolled back financial regulations that had been established by the administration of Franklin D. Roosevelt to prevent further damage caused by the 1929 stock market crash and the ensuing Great Depression.  It’s interesting that Bush’s voodoo comment was made at Carnegie Mellon University.  Founded by Andrew Carnegie in 1900 as Carnegie Technical School, it merged with the Mellon Institute of Industrial Research in 1967 to become Carnegie Mellon.  The Mellon Institute had been established in 1913 by brothers Andrew and Richard B. Mellon who, like Carnegie, were self-made businessmen and titans of early 20th century America.  Andrew Mellon served as Secretary of the Treasury from 1921 – 1932, one of the longest tenures for this position.  He created the “trickle-down” economic theory by declaring, “Give tax breaks to large corporations, so that money can trickle down to the general public, in the form of extra jobs.”

But Andrew Mellon is also known for a notoriously rotten hands-off policy with the Great Depression.  The banks that failed had put themselves in such a precarious financial position, he believed, and thus, they were responsible for extricating themselves from it.  It didn’t seem to matter that these bank failures took people’s money with them; therefore, amplifying the effects of the 1929 crash.

Still, President Reagan – like any good fiscal conservative – held onto these beliefs and eagerly signed the Garn-St. Germain bill.  That reduced the number of regulations on financial institutions and allowed them to expand and invest more of their customers’ deposits in various ventures, particularly home mortgages.  Again, that looks-great-on-paper ideology swung back around to bite everyone when the Savings & Loans Crisis erupted.  Between 1986 and 1995, 1,043 out of the 3,234 savings and loan institutions in the U.S. failed; costing $160 billion overall, with taxpayers footing $132 billion of it.  It was the worst series of bank collapses since the Great Depression.  That led to the 1990-91 Recession, the longest and most wide-spread economic downturn since the late 1940s.  I started working for a large bank in Dallas in April of 1990 and saw the S&L crisis unfold in real time.

Nonetheless, trickle-down economics saw a rebirth with George W. Bush, as his administration further deregulated the banking industry and also deregulated housing.  Combined with the costs of wars in Afghanistan and Iraq, the U.S. economy almost completely collapsed at the end of 2008.  The 2007-08 Recession was the worst economic downturn since the Great Depression.  Unemployment reached double digits for the first time since the start of the Reagan era, as millions of citizens lost their homes and their savings.  Had it not been for such programs as the Federal Deposit Insurance Corporation (the FDIC, established by Roosevelt), we surely would have plunged into another depression.

Now, with Donald Trump in office, I fear we’re headed for the same morass.  On December 22, 2017, Trump signed the Tax Cuts and Jobs Act; the largest overhaul of the U.S. tax code in 30 years.  Financial prognosticators have already forecast the act will raise the federal deficit by hundreds of billions of U.S. dollars over the next 10 years.  The law cuts individual taxes temporarily, but cuts corporate tax rates permanently.  As suspected, the most affluent citizens will benefit greatly, as they experience a significant reduction in their taxes.  The rest of us lowly peons may see a tax increase after those temporary provisions expire in 2025.

You know that classic definition of insanity?  Doing the same thing over and over, while expecting different results.  It’s more like, well, if you keep doing stupid shit, stupid shit will keep happening!

Ignore Russia-gate for a moment and the fact Melania’s side of the First Bed is colder than a Chicago winter.  This past week Trump visited the World Economic Forum (WEF) annual meeting in Davos, Switzerland.  This is where the most elite members of the business world meet (conspire) with leaders of developed nations to create economic policies and decide what’s best for us peons.  Kind of like evangelical Christians often meet to decide what people should see and read.  They’ve set themselves up as the righteous few; the ones who supposedly understand exactly what works and what doesn’t and are divinely compelled to bestow such knowledge upon the rest of us.

Trump ran his presidential campaign on the wave of anti-Washington sentiment; appealing to average citizens about reviving a once-lost “Great America” with a variety of clever ruses: ban Muslims, build a wall along the Mexican border, etc.  So many people, of course, bought into it.  Like Ronald Reagan, Trump was able to tap into that sensitive nerve of everyday angst; spitting out a slew of quaint buzz words to appeal to average folks.  He had said he would never take part in a WEF convention.  Yet, there he was; leading a parade of those self-righteous few into another kind of revitalization: the Gilded Age.

I doubt if most Trump voters even know what Davos means and how it could impact their lives.  Understand, though, that Switzerland is a place where Hollywood celebrities often went for a retreat or a little vacation – code words for cosmetic surgery; long before Phyllis Diller made it openly acceptable.  That’s essentially what Donald Trump did this past week.  He flew to Davos to tell the world, “America first is not America alone.”

I’m frightened for the United States.

 

Image: Golden Spike National Historic Site, Utah.

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Morass

yelling

As of 12:00 A.M. today, October 1, the United States government – for all intents and purposes – has stopped functioning.  I know it seems nothing has changed.  I mean, seriously – is there any difference?  But, the painful reality is that some 2 million government employees will not get paid and national parks have closed.  That’s the immediate effect.  It gets worse if the shutdown continues: military veterans won’t receive their benefits; the Centers for Disease Control and Prevention (CDCP) will have to halt its flu vaccination program – just as flu season approaches; some food safety operations will stop (and in a nation where behemoth butts have become the norm, that spells catastrophe); small business financing will stop; Head Start programs will start closing; disability benefits could be interrupted; funding for disease treatment through the National Institutes of Health could cease.

In the meantime, every member of both houses of Congress will receive their paychecks; their own health care won’t be adversely impacted.  Ironic, though, considering that the Affordable Care Act is the genesis of the squabble between the 2 principal political parties.  Most Republicans – especially the “Tea Party” clowns – despise the ACA, which they’ve derisively called “Obamacare.”  And, in an attempt to stop funding for the President’s signature law, the GOP is willing to risk what little integrity they have in their xenophobic bones and shut down the government.

Over the weekend, one particular “Tea Party” darling, Senator Ted Cruz, launched into a staunch tirade against the ACA.  Hoping to make a name for himself, the Canadian-born, Cuban-Italian Cruz has been campaigning for president since he took office back in January.  Representing my beloved home state of Texas, Cruz has done little else with his time and energy except commandeer the Republican Party’s vitriolic bandwagon and try to obstruct President Obama in any way possible.

Altogether congress has about a 10% approval rating.  I think ptomaine poisoning and getting stranded in the desert without water or cell phone service rank just above them.  Last year I wrote about the ongoing lack of progress from the Senate and the House of Representatives.  My wishful demand was for every elected official in Washington to get impeached, so we – the average, hard-working Americans – can elect more level-headed people to fill the apathetic void.  A million dollars in gold bullion has a greater chance of landing on my doorstep tomorrow morning.

I clearly remember the 1995 – 96 government shutdown in which a beleaguered President Bill Clinton ran head first into a recalcitrant Republican Party (led by the self-righteous Newt Gingrich) – and won.  It was a different time though.  The GOP held strong majorities in both houses of Congress; we weren’t at war; and the economy exploded into profitability for everyone shortly thereafter.  Clinton didn’t back down, thus forcing the GOP into embarrassingly humble defeat.

Today, the U.S. economy is still reeling from the worst downturn in 80 years; we have troops in Afghanistan and Iraq; and Republicans control only the House of Representatives.  Regardless, I’ve lost all respect for our elected officials.  Obama still hasn’t found any steel bars to inject into his spine, and the GOP has let itself be dominated by right-wing extremists.  I’m trying to imagine how things could get any worse.  If they do, colonizing Mars looks better all the time.

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Impeach Them All!

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Our elected officials have led the American people to the cliff’s edge – and have pushed.  We’re headed into the abyss of recession, and the pathetic bastards don’t care.  Their salaries and health care are assured.  The rest of us get reamed.  Now, don’t get me wrong!  I like being screwed like most anyone else – if I’m enjoying it.  But, I’m not enjoying this!  Neither is most every other American.

This has been going on since…oh, I’d say January 20, 2009, when President Obama took office.  The Republican Party made it a point from the moment that half-blooded Negro won the 2008 election that they’d do everything in their power to undermine his presidency.  Not help to hemorrhage the country’s increasing unemployment; not stop the wars in Iraq and Afghanistan; not start rebuilding the nation’s aging infrastructure; not find out who all was responsible for the banking and housing crises that led to the economic downturn in the first place.  No, their goal was simple: destroy Obama.  For their part, the Democrats replied in their usual conciliatory tone; bowing to the GOP over expiration of the Bush-era tax cuts.  They and Obama relented, lest unemployment insurance lapse in 2011.  Obama collectively – and rightfully – deemed the rest of us a “hostage.”  I dubbed him a wimp for caving to John Boehner and Mitch McConnell.

Now, angry that Obama won last month, the GOP is even more determined to destroy him – and take the rest of the country down, too.  If we look at this entire imbroglio in the same context as a business, Congress would be in bankruptcy.  Wherever I’ve worked anyone who didn’t cooperate with their constituents and strive to achieve the common goals set forth by management ended up contacting the unemployment office.  In other words, they got fired!  They were told to pack up and head out.  I’ve never known a place that allowed people to squabble and not accomplish anything.

Until now.

Congress is the exception.  They’ve always made themselves the exception.  Its members, of course, don’t have to worry about their respective financial futures.  They haven’t had to exhaust their 401K’s and empty their savings like I have in the two years since I got laid off from an engineering firm.  Their health care is secured.  They don’t have to worry about a proverbial “donut hole” like my parents and scrounge through their medications.  They have their own bank where they’re allowed to overdraw their checking accounts and not pay any fees.  Congress lives in its own glass bubble; separate from the rest of us – the people who elected them – and devoid of reality.

But, therein lies the key – we elected them.  We are their employers.  And, since they refuse to do as we instructed, I therefore propose we terminate them.  Every single one of them.  Just fire the whole lot of them and hire some new employees.  From President Obama whose backbone never seemed to have much lead all the way down to every “Tea Party” candidate who give trailer park residents a bad name.  Get rid of them!  They’re not doing the job we told them to do.  They have failed on every level.  I’ve voted Democrat most of my life – including twice for Obama – but, I’m not prejudiced.  Everyone there in Washington needs to go.  If Enron and Bear Stearns could lay off thousands of employees because the companies screwed up, we can certainly terminate every member of Congress for flat out refusing to do their jobs.  I mean, who the hell wants to keep employees like that anyway?  No business can succeed with that kind of staff!

So, as we fly off that “cliff” and head into the New Year, who’s with me on this mass impeachment?  We can work together on this!

Image courtesy I-Clipart.

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Fuzzy Math

Well, the U.S. has always wanted to be number 1 in something.

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Cliff Diving

“Obama’s proposals are not strong enough, per se, to undo the very large inequality increase the U.S. has experienced since the 1970s, particularly when it comes to the incomes at the very top.  To really make a dent, you would need to consider more radical policies.”

– Emmanuel Saez, University of California at Berkeley economist, in the Washington Post.

At the rate we’re going, with the partisan bitchery in Congress, it’ll take a few eons before economic conditions even out.  But hey – maybe the Mayan apocalypse will sort it all out for us before then!

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And, He Barely Got Out Alive!

“I hate to say this on FOX – and I hope I’ll be allowed to leave here alive – but I don’t think there is any way we can cut spending enough to make a meaningful difference.  We are going to have to raise taxes on very rich people; people with incomes of like say, 2, 3 million a year and up, and then slowly move down.”

– Conservative economist Ben Stein on FOX News.

This is Earth-shattering!  A well-known conservative saying taxes should be raised on the upper classes!  I know Stein must have been terrified; feeling like a Jew in a Catholic church during Easter mass.  But, the facts are what they are.  Mitt Romney’s economic scam – er – plan just doesn’t add up.  I can only hope at this point that the American people will see that I’m right, especially in the so-called swing states.

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Average Americans – Still Getting Screwed

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