Tag Archives: Republican

The Republican Tax Plan – Is it a Tax Cut Too Far?

I noted recently that economist cannot agree on the good, bad or ugliness of the medium to long term impact of near-zero interest rates or quantitive easing (QE). This suggests that economics is in a sad state of affairs. Even the Republican tax deal, winding its way through reconciliation this week, continues to create fervent grounds for disagreement. The most important sticking point concerns the rate of growth the tax changes might lead to. This is critical since it is the resulting change in GDP what will spin off excess profits and therefore taxes that will go to pay for the tax breaks. If GDP does not grow fast enough, insufficient funds will be created. If GDP excels, al will be well and the Democrats won’t be happy since they may lose the next general election.

In the Wall Street Journal on December 2-3 there was an interesting opinion piece by Phil Gramm and Michal Colon titled, Don’t Be Fooled by Secular Stagnation. Mr. Gramm is former chairman of the senate banking committee and now with the American Enterprise Institute. Mr Solon works for US Policy Metrics. The article compares America’s GDP averages over recent history and the assumptions that the Republicans are making with their forecasts. The two are not that far apart at all, yet other reports from different perspectives, using different assumptions, suggest growth will not reach its goals. The COB suggests growth might make 1.9% over 10 years; the Republican’s are looking for 2.6%. It turns out that since the end of WWII to 2008, America has averaged about 3.4% and this includes 10 recessions!

Then, when you get under the hood of the various models economist use you find the strangest of assumptions. The CBO’s model does not allow for any spin off of profits generated from growth to be plowed back into the economy to drive more growth. This the model is quite limited. Why don’t our economists or civil servants update their modes? Because it would be more political than economic. The CBO, as the article suggests, has been worn more times than it has been right with its GDP forecasts in the last 20 years. We might as well just ignore them and set up a new government department. At least that adds to employment which I am sure is irrefutable.

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At Issue with The Collapse of Conservatism

In the week’s Economist, the Lexington article (see A Republican senator revolts) praises senator Jeff Flake for a book, written in secret, that laments the decline and failing of conservatism. and the mistakes made by siding with, and electing, Donald Trump.  On first blush the well-written article leads me to conclude I want to read the book. But the author lets slip their own political views and so I’ll now give Mr. Flake’s book a pass.

What is conservatism?  It seems, if you read the article, that a ‘put your country second’ perspective is equitable to free trade. Why is a, ‘put America first’ not consistent with fair trade? Really, if you ever look at global trade and international supply chains, every organization, every country, looks out for their own benefit first.  They may not always say this – as it is all part of the negotiation.  But no one actually puts their own interests on hold for the other guy.  Only when satisfied or when satisfaction is in reach do sides negotiate closely and come to a ‘free trade’ agreement. And note, there is virtually never ‘free’ trade. There is almost always some cost, tax, cover charge, buy-back, duty etc.  

Mr Trump’s ‘put America first’ is not a call for nationalist policies; it is not a call for tariffs and duties.  It is a call to those that negotiate for their country that the US will now negotiate more fairly and not keep helping others out.  If you put a tariff on imports from the US, so the US will put tariffs on imports into the US.  That is fair trade – it is not protectionism.  When will the media, even the fair media, get this right?  Mr. Trump is making a political statement that says the obvious: this country needs to fair, as every other country is fair, in trade deals. Trump does not disbelieve the benefits global trade; all smart business leaders grasp the principles and see the benefits. Mr Trump believes in trade- period!

So we are left with asking why is his rhetoric picked on? We can only assume that such complaints and criticisms pander to a political sore that came about from losing the election; an institution and establishment that wanted to feed its own bloated cause: more government begets more government. Left and right have played this tune for years. Trump just happened to take the Republicans with him but in truth he needs his own part: New Deal Republicans.  

I get the feeling that Mr Trump is more conservative than many give him credit: freedom of the individual; responsibility of the individual over government; the expectation that the individual is not owed anything; that hard work and merit will be rewarded. And yes, that a safety net will be provided for those that need it.  However we live in s society today that assumes other owe them a living; that it is their right to sit on that backsides and be given everything the need and want.  We have become a A Nation of Takers.

Trump One Step Closer to Quitting

Reference:

I believe Donald Trump will quit the Presidency of the United States. I forecasted Trump would win (see April 2016: Trump Will Eat Clinton Alive), and in that article last Spring I suggested that he would quit. He will quit due to the inability for politicians in Washington to be rational and negotiate. He will quit with acrimony and bolshiness. About the only thing that will prevent this situation from taking place is tax reform.

Let me first state that I think that Obamacare was the wrong tool for the job. It was a rushed, Ill-focused, partisan and socialist effort to undermine the best parts of America. Its namesake and his supporters suggested that the Affordible Care Act (ACA) it helps those that need most help (the uninsured), and it does (in some way) but at a system-wide cost that is unacceptable and unaffordable.

The free market is anything but that; regulation is like a strangling vine; prices remain untouched and high; big pharmaceutical remains unfettered; patient outcomes remain anathema to healthcare. This country continues to spend ever more on healthcare, more than any other developed nation per capita, and yet our outcomes and their improvement reman poor and lacking, even on a good day. Obamacare was the wrong tool for the job.

The bad news is the Republican approach to Obamacare has split its own party. Worse, the repeal and replacement was in their reach. Yet last week the chance for correction was thrown out.  

There were even votes against the Republican policy from folks like Ron Paul who didn’t want the ‘Obamacare Lite’ but who wanted a full repeal. So he withheld his support. The Freedom Caucus, apparent fiscal hawks, had a chance to budget-fence Medicaid, yet they withdrew support in the mad hope of a perfect policy sometime in the future.  

This is madness. This is political suicide. The Democrats have been handed a free ticket and Trump must be mad. This is Washington at its worst. There will likely never be a perfect policy or time enough to develop it.

Now the movement shifts to tax reform. If an overhaul is not executed Trump will feel like quitting and he may yet do so. The Republicans need to realize that they have a rare opportunity but only if they unite. If they play party politics and splinter again, change will not be forthcoming. The Democrats, not in power of any sort, will be in power in all but name.

Obama won on the promise of change and socialists alike all rammed through their left-leaning, redistributive, anti-business and anti-free market policies. We are slowly bleeding to death now under the weight of ignorance and self feeling. Our polices cannot be paid for without printing money since we are all too happy to free-ride the masses and garrote the rest. The rest who are free and employed folks who work for a living, who want to improve their lot with their own blood, sweat and tears, not from hand-outs from Uncle Sam.

Trump also won on an argument for change. Alas the Republicans have forgotten how to govern.    

Why Trump Won

As the ashes gather on the General Election, and the tea leaves start to get surveyed, the realization of the significance of the result are just beginning to emerge. However, something is quite clear. Few of us really know what just took place.

The media on the left suggest that the Klan, and White extremists, racists, sexists and bigots just took over the White House. The media in the right suggest a struggle against politically correct progressiveness resisted, finally, in some titanic struggle. The reality, I am sorry to say, is more mundane than that.

A Trump win has little to do with any sexist or racist or any other extremist view. The facts don’t support the notion that  bigots, sexists, and racist groups banded together to beat out the other votes; and this does not fit well with the view of the Left that needs to rationalize its stunning defeat, lest it implode. According to the latest exit pole tea leaves, it turns out that Trump attracted more votes from women, blacks and Latinos than Mitt Romney did. How is that possible?  

Today I read an article that suggested the Democratic Party and promise was over; that a lifetime of hope was being sunk. That the right had prevailed and some kind of ‘normality’ had been restored. Again, the practical realities of this election are simpler than that.

In truth there is no need for the Democratic Party to panic. They didn’t lose for any complex reason. Both sides were throwing a decent amount of political rhetoric at each other during the election, let’s be honest. Anyone who still claims Hillary is a crook and Donald is a racist is first barmy, secondly ignorant.

Yes, both sides slandered the other. So what? There is nothing new in that; even if it was pretty keen and even edgy. And the press played its usual role in exalting the excessive claims, since it met with their intended goal (they thought) of securing higher numbers of eyeballs and ratings.

The fact is that this election was not about well defined voting blocks such as ‘Latino’, or ‘black’, or ‘women’ or even ‘disaffected white’ segments; the real driver was more of an economic call-to-arms for families of all colors and styles and sexes. The real winner here were those large numbers of the disaffected population that have seen their opportunities wither and who saw path forward to negate the left/right schism the US has experienced for 12 or more years.  

There is no right or left block any more in government. We, the people, have been left behind. The majority of politicians (not all, we hope) are corrupt. They beget regulation only to beget more.  

Some pundits have said that democratic progressivism is dead. I don’t accept that. I think it is alive and well and it will be back soon. It is only “down for the count” since family salaries, jobs and standard-of-living concerns took precedence this time around. Such concerns are not a block, or a group, but an economic condition. It so happened that such a forming was somewhat triggered by progressive policies long ago that came about due to a nation being so rich for a long time.

The fat and pork we must have farmed to afford ourselves the time, money and right, to consider the sex classification of national bathrooms for a size of the population impacted that might approach one small town, is telling and damning. We will return to this debate once we solve the real issue: how to regurgitate the American Dream.

Lastly I am being lampooned by friends and colleagues who claim that they cannot explain to their children what happened this week. Apparently some folks are claiming that their children are scared to go to school. Why? This country has not suddenly unleashed a batch of fanatics into the street. The only reason children are scared today is because irresponsility and ignorance is accommodated by a small minority of sore losers, seeking to undermine the rest.  Shame on them.  

I have faith in the American system. I have faith in a country born of conflict and forged in faith. I believe that a Trump presidency is a huge risk. But I feel that the risk is worth it. We are not afraid. No one should be. If we see racism and sexism and bigotry in our midsts we should all, every one, root it out and eliminate it. That is a given. But to confuse reality with political rhetoric is to suspend reality.

We have a new reality today. We have a chance. Let us unite together and rid the world of extremism and create a place where our children have more opportunity than we experienced. Hopefully that transcends sex, color, race and religion.

The Fact of the Matter with Trump

Let me say this first: I am not a fan of Donald Trump. The leader in last week’s The Economist sits well with my feelings: The Dividing of America: Donald Trump’s nomination in Cleveland will put a thriving country at risk of a great, self-inflicted wound. The article highlights how the facts are quite different from the rhetoric.  

As we know now, Trumps’ acceptance speech was very Nixon-like in that it portrayed a negative America that needs saving. I certainly believe that Trump’s business and some economic policies might favor high (GDP) growth, but even in this department, some of Trump’s polices are anti-global trade and so will reduce growth. Worse, his apparent temperament and terminology, let alone immigration and foreign policy, puts the backs up of many, left and right. In a nutshell, most of Trump’s policies are populist.   

And for total transparency, I actually dislike Clinton: she has demonstrated poor judgement, represents the establishment of big and bigger government, tax-based growth, large busines/lobbies and whatever her rhetoric, just look at her and Bill’s net worth. She is the epitome, the ultimate, political animal.

What I have to applaud is the US political system. After 8 years of gridlock, and since the early 70s, the US system has been leading up to this point. The Opinion piece in today’s Wall Street Journal, Why the Democrats Have Turned Left, by Ruy Teixeira of the Center of American Profress, captures the point with the idea of “equitable growth”. The idea is that capitalism as we know it creates more inequality. Growing inequality slows growth. Faster growth could alleviate these problems but that leads to increased inequality and so on. And apparently the Clinton elixir of taxing innovation and wealth creation (her band of capitalism) will save the day. Not one of her policies in the past has led to sustained economic growth.

It’s not capitalism that is at fault here, it’s the political system. The fact that every 4 or 8 years we flip-flop captains and direction, let alone direction changed mid-term, and in each case what passes as capitalism itself changes. We have seen more socialism, funded off the back of capitalism, than you can shake a stick at. Even the media are party to the game.  

The causes of the financial crisis are many but popularism suggest that poorly regulated selfish bankers were the true cause. They played a part, yes, but selfish poor homeowners who preferred to accept dodgy deals than work harder and wait their tern, were also at fault. But that is not politically correct, and as such, seems Trump-like. More at fault were republican and democratic presidents that signed off on socialist programs and policies to increase home ownership at the low end of the income and wealth scale, thus creating the original bubble. The financial industry simply exploited the creation. But this is not the story you read in the papers and nor do you hear left or right politician admit it. They are all in this thing together: for their own sake.

What I admire about the US system is that it has allowed itself to come to this near breaking-point. At one point we almost conceived of Trump v Saunders; two extremists. Now we end up with the establishment (Clinton) versus the wrecking-ball (Trump). And with the choice comes calamity in either case. But that calamity will be tempered by the changes in House and Senate control. What the system has nearly given us is a chance for extremism to be evaluated.  

If Trump wins, the US will certainly go through changes. If the House and Senate stay with the Republicans, the country will see radical changes that will likely create rapid growth (short term) but potentially global and even social damage (medium term). There is a slight chance that it all comes out well but it does not look promising.

In the other hand, if Clinton wins, and he House and Senate remain unchanged, we will have more gridlock and continued economic malaise. Inequality will continue to worsen, mainly due to a need to increase quantitative easing and helicopter money from the Fed and its banks. Innovation will further be eroded (the US has fewer start-up firms per year than at any time in its history) and wealth creating engines will be replaced with government led programs and the printing presses. All this works for a while; until China’s role in currency reserves changes. At that point Clinton’s clothes will vanish- and with it, the American economy and standard of living.

As such there is a chance that in either case, the damage will be significant enough that four years later, a real progressive conservative hybrid president and house and senate will get established. A new middle ground might appear, focused on smaller government but smarter government too. The problem is we have to wait 4 years for the current experiment to play out. And worse, the Supreme Court will be changed for a lifetime. In either case, it 2 or 3 new appointments will shift its markedly left or right for many years to come. Whoever wins, this next general election will have a lot to answer for in the future.

Why does the US government debt limit only ever go up?

Let me ask you this: Why does the US government debt limit only ever going up?

Every 6 to 9 months there seems to be another dance with the Devil whereby Democrate’s and Republican’s spa for some kind of agreement to increase the US debt limit. Yet again we have seen a spate of stories in the newspapers in the last couple of days. Today in the US print edition of the Wall Street Journal, there was an article titled, “Debt-limit Deadline Now Early November“. Yet again we are told that the left and the right will have to negotiate some deal lest the Federal Government will shut down and possibly avoid paying some bills.

I mean really! If I went to my bank every 6 to 9 months and only ever negotiated an upward change to my debt limit, I would soon be chastised and kicked-out of the branch for being so profligate and irresponsible. I have never once heard of a story whereby the US debt limit was reduced. It cannot be that we only ever borrow more money from tomorrow to pay bills of today. This is no way to run a bank account, let alone a country – the most important country in the global economy. 

In a “Nation of Takers“, Nicholas Eberstadt highlights how the US federal spending has been ballooning for years, and most of that increased spending is in support of burgeoning social, disabled, unemployment and other “welfare”. Even though over 50% of American’s receive at least one kind of benefit from Uncle Sam (it’s in the book, and many of those do receive benefots do not need them financially), my point is that spending only ever goes up and so the debt limit also keeps going up.  

Interestingly, there was a Commentary piece in yesterday’s US print edition of the Wall Stree Journal that implied that federal ‘outlays’ (whatever that means) as a percentage of GDP has been reduced in the last few years under the recent Repulican House and now Senate leadership.   Since GDP has grown, a falling percentage of spend does not necessarily mean that real government spending has fallen. But if the debt limit keeps going up, how can spend go down?

In some ways I really like Donald Trump’s rhetoric that he can shrink the government. This is a very “Reagenesc”and Thatcherite message. It once attracted a large popular vote since; and it used to be a clarion call from Republicans. It wasn’t always pretty and it didn’t work every time but it was a clear goal faught with tooth, nail and handbag.  The last Republican in the Whitehouse, however, did not reduce government spending – and to a great degree this explains the rise of the Tea Party movement. We need to get to grips with our spending, and this includes a smaller government, before the bank manager throws us out.