Tuesday, July 24, 2018

Gullibillies Take Another One Up the Butt from DJ Trump

It's difficult to guess how incredibly stupid Trump supporters, his base, must be but we're beginning to see some metrics.

Take the Republican tax cuts that DJT loves to brag about. Those cuts did a lot for a few just not for the many, including the Gullibillies.  Bloomberg reports that wages that were supposed to go up have instead gone down.  One chart demonstrates how Trump and his unitary Republican government have dismantled the progress implemented by the Obama administration.

It takes a while for companies to make investment decisions, more time for those decisions to be implemented and even more time for the resulting changes in labor demand to bid up workers’ wages. It therefore takes months or even years before the full impact of the tax bill will be known.

But it’s also important to evaluate policies like Trump’s tax reform as quickly as possible. Not only is this critical for deciding whether to change course, but as more time goes on, the effects of a policy can become harder to assess. Two years from now, plenty of other things will have had time to affect the economy, including Trump’s trade war and natural economic forces. And now that the tax cut has been in effect for a half-year, the results are starting to trickle in.

First, the tax reform hasn’t yet resulted in appreciably higher wages for American workers. Real average hourly compensation actually fell in the first quarter after the tax reform was passed.
But perhaps two quarters is too early to expect results in this area. A better gauge might be business investment — if the tax reform is spurring businesses to increase capital expenditure, as it was supposed to do, then wage increases will probably follow in due course. 
Some have expressed dismay that stock buybacks seem to have taken precedence over boosting capital investment. Since the tax cuts passed, companies have been using buybacks to return record amounts of cash to shareholders — more than $700 billion in the first two quarters. That naturally raises the possibility that companies don’t have good projects to invest in. If companies pass their tax windfall on to shareholders, those investors can choose to react by increasing consumption — meaning more of society’s resources go to the wealthy. They can also choose to invest the money in other companies with better growth prospects — but if those companies are also reacting by returning the money to their shareholders, rather than making capital expenditures, not much is getting accomplished. 
So is any of the tax-cut windfall being used to finance the capital expenditure that the economy needs? Private nonresidential fixed investment did increase as a share of the economy in the first two quarters since the reform was passed.
...Huge, immediate gains for wealthy shareholders combined with tepid increases in business investment and decreases in real wages don’t paint a flattering picture of the tax cut’s impact so far. There is, however, a possibility that the tax cut has acted as a Keynesian fiscal stimulus, helping to push down unemployment. 
But that’s not exactly the long-term structural improvement that the bill’s supporters advertised. And as a recent research note from the Federal Reserve Bank of San Francisco points out, fiscal stimulus in good economic times is less effective than in recessions. And growth hasn’t really sped up either — real per capita gross domestic product growth was only 1.34 percent in the first quarter, below 2017’s pace, and considerably less than in 2014 and 2015.
Has the mantra of "Everyday Low Taxes" had its day?
There’s still the possibility that Trump’s tax reform will bear fruit in the long term. But early results are pointing to another possibility — that tax cuts have run their course as an economic policy.

In the postwar period, with top marginal income tax rates at more than 90 percent, it made sense to cut taxes as a way of improving the economy’s long-term health. A series of big tax cuts, under presidents Lyndon Johnson and Ronald Reagan, might have boosted economic activity in their day. But the later tax cuts by George W. Bush were followed by years of underwhelming growth, implying that income taxes were no longer doing much damage to economic efficiency. 
Corporate taxes were really the last hope for the tax-cutting strategy. But if even that doesn’t provide more than a small momentary fiscal stimulus, then we’ve reached the end of that approach’s usefulness


Anonymous said...

Those corporate tax cuts weren't enough to keep Ivanka's business afloat. The First Shady announced she was shutting down her fashion grift immediately. I think that deserves a moment of silence for all the jobs lost in China.


The Mound of Sound said...

Yeah, Cap, but she says she's giving up the fashion trade to pursue a career in public policy. She really intends to be America's first woman president.

Trailblazer said...

That Ivanka Trump aspires to be a business woman or a future political leader just shows how dysfunctional the USA has become.

That she,Ivanka, has some chance of success shows that we are well and truly fucked.


Anonymous said...

A female (((globalist))) leading the party of Calhoun??? She wouldn't survive the first primary.


Karl Kolchak said...

Only someone who doesn't understand the American political system would call them "the gullibillies." Most have been beaten down for so long that they know Trump isn't going to "save" them. So they took the one option left--dragging the smug, condescending liberal professional class down with them.

Personally I'm of that class, but I don't blame them one bit.

Jay Farquharson said...

As the "Economic Anxiety" tours post election have shown,

74% are Upper middle class or entre rich, white, racist as fuck.


Anonymous said...

Nice theory Karl, but the professional class isn't hurting at all. In fact, life's just dandy with those tax cuts. And let's stop the nonsense about the "liberal professional class:"

Far from being purely a revolt by poorer whites left behind by globalisation, who did indeed turn out in greater numbers for the Republican candidate than in 2012, Trump’s victory also relied on the support of the middle-class, the better-educated and the well-off.

Of the one in three Americans who earn less than $50,000 a year, a majority voted for Clinton. A majority of those who earn more backed Trump.


Jay Farquharson said...

Karl's happy to embrace their non-existant "economic anxiety", if it let's him show his "economic anxiety" in public.

Anonymous said...

I suspect you're right. Economic anxiety comes from being asked to share white male privilege with others.


Jay Farquharson said...

Yup, yup, yup , yup

Anonymous said...

Agree with Cap and Jay here. Night Stalker, I have family in the USA and quite frankly, you're full of it. If the gullibillies aren't who you claim they are then they would have figured out by now that their decline started with Reagan and his "supply side economics" theory of giving the horse enough oats to eat and the sparrow will get his/her share at the other end. The rust belt started in the mid eighties under Reagan. Tax cuts to the very wealthy happen under the Republican presidents as well as recessions. So you believe they are right in blaming educated liberals for what the Republicans started and exacerbated while in charge of the presidency. Sounds like your more gulliblillyish than you'd like to admit. No, the American education system was never sufficient in my six decades on the planet and has been getting poorer as less money is invested per capita in the public school system. It shows in the average American's ability for critical thinking. Siding with the con man Trump (which I suspect you do) shows they really are the gullibillies. No misunderstanding here.

mr perfect

Anonymous said...

Correction - you're more gulllibillyish, not your more.

mr perfect

Anonymous said...

Anyone who knows anything about economics knows it takes YEARS for wages to recover – if and only if there is an economic recovery.

Something that didn't happen under Obama and wouldn't have happened under HRC. Economists at the time were saying economic growth was done forever. They "expected" it to keep falling down to somewhere around 1%. (The destruction of democracy and post-war prosperity complete.)

Wages have been falling since 1973. Bashed down by the US Fed every manufactured recession caused by jacking up interest rates.

This can be seen in this graph on prime-age male employment rates. (Their demographics don't change over time.)


Interest rates manufacturing recessions:


Now a quick look past Fake News "lies, damned lies and cooked statistics" from the Bureau of Labor Statistics. Full-time work and salaries bottomed out at $331/week in real dollars in early 2013 after the 2008 meltdown. From about $345/week.

They were $345/week when Trump came to power. Now $351/week. Expect them to go higher on the record-low unemployment numbers and Trump kicking free-trade-globalization ass!


Of course, Trump is now battling the Fed that wants to jack up interest rates to prevent wages from going higher.

Glad he's in the White House, not a neoliberal or neocon who wants them lower.

Trump cut the top income tax rate 2 percentage points: 39% to 37%. JFK slashed it 20 pps. Reagan 40 pps. Bush Jr. chopped it down to 15% via capital gains loophole.

America's official corporate tax rate (filled with loopholes) was 40% before Trump. Now 27%. Canada's rate? 26.5%.


Anonymous said...

Not sure what your point is, Anon 5:39. On what basis do you expect wages to rise? None of the tax cuts you point to resulted in wage increases for the average Joe and Jane, and there's no reason to expect the Trump cuts to be any different:

In the first six months after the Trump tax cuts were passed, corporate investment in equipment declined, America’s projected long-term deficit swelled by nearly $2 trillion, and wages for the vast majority of American workers fell on an inflation-adjusted basis.

... As the Washington Post’s Heather Long notes, Morgan Stanley reported last month that America’s businesses are planning less future capital spending now than they were a few months ago. And that finding is bolstered by a recent survey of 393 businesses from the U.S. Chamber of Commerce and the audit firm RSM, which found that only 38 percent of those firms plan to increase investment over the next three years.

Instead of channeling their profits into productive investment, S&P 500 companies are on pace to plow a record-setting $800 billion into buying back their own stocks. The point of such “stock buybacks” is to increase a firm’s share price (and thus, in many cases, the performance-based pay of its CEO) by reducing the supply of shares on the market.

So, exactly as economists predicted, the Trump tax cuts are fueling, not reducing, social inequality which is already at developing world levels. But then, you didn't actually expect the party of plutocrats to give a shit about anyone else, did you?


The Mound of Sound said...

My, my, my - I go out to do something about the damn weeds and look what you people get up to?

I would suggest that Anonymouse "Anyone who knows anything about economics" spend a bit of his day learning something about economics. A good starting point is Stiglitz' "The Price of Inequality." Stiglitz knows something about economics. He knows a lot about economics. He's got a Nobel prize to prove it and he's been focusing on inequality since he was a doctoral student. Or you can read Wilkinson and Pickett's "The Spirit Level" that's bound to leave you utterly dispirited when you realize how Red State America has totally screwed over its faithful Gullibillies.

And while Anonymouse thrills himself with Norse-grade sagas of tax rate cuts, here's something he needs to consider. Until the advent of Reagan and neoliberalism, every postwar president, Republican and Democrat, managed to lower the US federal debt as a percentage of GDP. Every one. Even during Vietnam.

Reagan transformed the US from the world's largest creditor nation when he assumed office into the world's largest debtor nation by the time he left. America's debt has done nothing but increase ever since with the exception of Clinton whose treasury was flooded by ersatz tax revenue from the Dot.Com bubble.

The Gullibillies, their bellies swollen and distended by the diet of steaming horseshit they've been fed by FOX News and their open-mouth radio gurus, believe Obama was a profligate wastrel. Never do they acknowledge the Great Recession shit show Obama inherited as Bush/Cheney left office. America's current "full employment" did not come from Trump. It came from policies implemented by the Obama administration despite resolute opposition by an insanely partisan Republican Congress. Anyone who knows anything about economics knows that.

And what has Trump done? Like his predecessors he's added a massive $1.5 trillion in debt while America is in a boom cycle. What kind of moron does that? You don't cut taxes in a boom economy. You collect taxes from that prosperity and pay down debt. Anyone who knows anything about economics realizes the lasting damage Trump's tax profligacy will inflict on working class Americans.

Sorry, Anon, but you're a total idiot.

Anonymous said...

I agree that tax cuts are mostly nonsense. (Can have an "animal spirits" effect to jump-start the economy.) But that's what Trump ran on and that's what Americans voted for.

Trump's tax cuts are largely sensible (corporate tax restructuring that needed to be done) and very moderate in comparison to previous presidents.

Democrats and Liberals like to bitch about tax cuts, but they never do anything about it. They certainly don't try to sell the people on returning to post-war levels of income taxation: 70%-90% top tax rate. That's because they are in the pockets of the rich.

Trump is stopping bad trade deals which have been a 40-year war on the economy. America's cumulative trade deficit since 1980 (trade debt if you will) is 92% of GDP. Their cumulative budget deficits (public debt) since this time: 95% GDP: $19-trillion.

This is predicted by the Twin Deficits hypothesis. (It's actually simple accounting. Ship factories out of the country that produce $1B in GDP. You lose $1B in GDP. It also drives down wages marking them to global markets.)

If the Democrats get some leadership, they could run on raising taxes on the rich in 2024. Build on what Trump is doing. Have a pendulum swing that represents the people in place of the neocon-neolib "far right" pundulum swing that is a wrecking ball on the economy producing rising inequality and falling wages.

Free-trade not only marks Western wages to global markets, it also marks Western social benefits and levels of taxation to global markets. It creates a giant global oligarchy that complete undermines democracy around the world.

This is the beast that Trump is determined to tame. This the beast the Fake Media, Fake Academia and Fake Politicians are trying to protect.

BTW, also too early to tell if all the tax cuts remain buy-back dead capital. Or if they are put in play. When the economy is perking up and consumer confidence is rising then businesses invest in real-world things for people to buy. When the jobs are brought back, they have more money to buy things. So corporations invest money in goods and services to sell them.

If all you got is a anemic-growth gouge-economy with upper-crust moochers hitting you at every turn, then you have exponentially-growing mountains of dead money demanding rent. Too early to tell yet, if this is the way it's playing out. But things will be much clearer by the 2020 election.

Anonymous said...

"And what has Trump done? Like his predecessors he's added a massive $1.5 trillion in debt while America is in a boom cycle. What kind of moron does that? You don't cut taxes in a boom economy."

A boom economy surpasses 4.5% GDP growth. The last time we had one was back in the 1990s. GDP has been in the crapper since 2000. A 20-year growth recession.

It still remains to be seen how much the tax cuts will cost in terms of deficit/debt. The $1.5-T number is all guess-work. The higher GDP rises, the less the tax cuts will add to the debt. A big enough economic boom and they will "pay for themselves." I.e., the budget will go into surplus.

The US economy needed stimulus badly. Tax cuts are the least effective way to accomplish stimulus – other than the central bank buying up $2T in toxic assets from bankers who just crashed the economy. (Does setting $2T on fire stimulate the economy? Now we know for sure.)

Those who think the economy is booming are doing well themselves. But they are in the minority. It's not enough for the people to vote for.

Jay Farquharson said...

Fun facts, when the Great Orange Shitgibbon announced his welfare plan for ConAgra and Archer Daniel Midlands,

- he used a Roosevelt era New Deal program, long mothballed, because there's no way he could get his "Golden Crutches for Ag Corps" through the House or Senate when it's his moronic tariffs that permenently cut the legs off US Farming.

- he blew 40% of the funding away in the first year, so he's going to have to go beg the House and Senate for more money in 2019,

- it only backfunds 20% of the projected losses for 2018, and Family Farms don't qualify for the welfare,

- he held up a green hat ( made in China) to announce the program, which in China, is the symbolism of a cuckholded husband.