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News & Supplemental  

Krugmenistan vs Trumplandia: Backflipping into a Depression

In this return to Krugmenistan we’re going to return at a topic everyone loves: Federal Reserve interest rate policies. Yay! If that sounds boring, note that we’re specifically going to examine Donald Trump’s plans for the Federal Reserve so it’s guaranteed to be crazy. And ominous. Does that sound boring? How about plans to intentionally collapse the economy. Does that sound boring? No, this is Donald Trump’s policies we’re talking about. It’s anything but boring. Or sane.

***************************************

Now that we’re in the “final stretch” part of the 2016 election season, and since it’s still unclear if Donald Trump is even capable of not acting like a crypto-Nazi on a near daily basis, it’s worth reflecting back on the campaign just about five months ago. Why then? Because it was just about five months ago, April 21st to be precise, when we got the reports that Trump’s new campaign manager, Paul Manafort pledging to GOP mega-donors that Trump was really just “projecting an image” for the primary season and not going to continue “being Trump” after he secures the nomination and goes into the general election season. Yes, it was just five months ago when, if you really, truly wanted to believe that Donald Trump wasn’t going to continue behaving like a crypto-Nazi on a near daily basis forever, you could still sort of believe that. It was still a foolish belief at the time, but at least it wasn’t as yet proven wrong. Instead, we’ve seen Trump dropped the mask even more if that’s possible, replace Paul Manafort with the Alt-Right’s media champion Steve Bannon as his campaign manager, and make it clear that he can’t go more than a week without a melt-down of one form or another. His general election strategy is to go Full Trump with an Alt-Right flair.

What a difference five months makes. An age of innocence. *poof* Gone. April was the good ol’ days:

The Associated Press

Trump team tells GOP he has been ‘projecting an image’

Originally published April 21, 2016 at 12:42 am Updated April 21, 2016 at 5:15 pm

Ted Cruz conceded publicly for the first time that he doesn’t have enough support to claim the nomination before the GOP’s national convention, but he also vowed to block Trump from collecting the necessary delegates as well. Many party loyalists fear an all-out Republican civil war.

By STEVE PEOPLES
and THOMAS BEAUMONT

HOLLYWOOD, Fla. (AP) — Donald Trump’s chief lieutenants .told skeptical Republican leaders Thursday that the GOP front-runner has been “projecting an image” so far in the 2016 primary season and “the part that he’s been playing is now evolving” in a way that will improve his standing among general election voters.

The message, delivered behind closed doors in a private briefing, is part of the campaign’s intensifying effort to convince party leaders Trump will moderate his tone in the coming months to help deliver big electoral gains this fall, despite his contentious ways.

Trump’s newly hired senior aide, Paul Manafort, made the case to Republican National Committee members that Trump has two personalities: one in private and one onstage.

“When he’s out on the stage, when he’s talking about the kinds of things he’s talking about on the stump, he’s projecting an image that’s for that purpose,” Manafort said in a private briefing.

“You’ll start to see more depth of the person, the real person. You’ll see a real different guy,” he said.

The Associated Press obtained a recording of the closed-door exchange.

“He gets it,” Manafort said of Trump’s need to moderate his personality. “The part that he’s been playing is evolving into the part that now you’ve been expecting, but he wasn’t ready for, because he had first to complete the first phase. The negatives will come down. The image is going to change.”

The message was welcomed by some party officials but criticized by others who suggested it raised doubts about his authenticity.

“He’s trying to moderate. He’s getting better,” said Ben Carson, a Trump ally who was part of the GOP’s front-runner’s RNC outreach team.

While Trump’s top advisers were promising Republican leaders that the GOP front-runner would moderate his message, the candidate was telling voters he wasn’t ready to act presidential.

“I just don’t know if I want to do it yet,” Trump said during a raucous rally in Harrisburg, Pennsylvania, Thursday that was frequently interrupted by protesters.

“At some point, I’m going to be so presidential that you people will be so bored,” he said, predicting that the size of his crowds would dwindle if he dialed back his rhetoric.

Trump also said the plan to swap Jackson for Tubman on the $20 bill is an act of “pure political correctness.

““He’s trying to moderate. He’s getting better,” said Ben Carson, a Trump ally who was part of the GOP’s front-runner’s RNC outreach team.”

Ahhh, the good ol’ days. It was a simpler time back then. A time when anything was possible:

Trump’s newly hired senior aide, Paul Manafort, made the case to Republican National Committee members that Trump has two personalities: one in private and one onstage.

“When he’s out on the stage, when he’s talking about the kinds of things he’s talking about on the stump, he’s projecting an image that’s for that purpose,” Manafort said in a private briefing.

“You’ll start to see more depth of the person, the real person. You’ll see a real different guy,” he said.

Just wait and see! Like a butterfly emerging from its cocoon, the real Donald Trump was going to emerge. That was Paul Manfort’s message. Then Trump dumped him and hired the Alt-Right’s media champion to replace him. Say hello to the real Trump. You’ve previously met.

That other Trump article from April 21st
But it’s also worth noting that on the very same day that the above AP article about Paul Manafort’s behind-the-scenes pledge that the “real person” was going to emerge from the Trumpian hate cocoon, Fortune Magazine came out with a long interview of Trump. It’s an absolutely priceless interview of Trump that’s the gift that keeps on giving. It also had a very “real Trump” feel in the sense that it was Trump being Trump. The Trump we now know is never going away. Including the part when Trump pledges he’s never going to rebrand. He’s going Full Trump forever:

Fortune

Donald Trump In His Own Words: Atlantic City to the White House

by Stephen Gandel

April 21, 2016, 10:30 AM EDT

Fortune interviews the GOP frontrunner.

The following is a transcript of an interview Fortune conducted with Republican presidential candidate and businessman Donald Trump on Tuesday, April 19, the night of the New York primary, in his office at Trump Tower on 5th Ave. in Manhattan. Fortune reached out to Trump’s campaign three weeks before our publication date, seeking an interview about his business career. After originally agreeing to meet, Trump’s team canceled the interview and said the GOP frontrunner would not participate in Fortune’s article, which can be found here: Business the Trump Way.

But just four days before the deadline for our May issue, Trump agreed to sit for the following discussion:

Donald Trump: I looked at the numbers that you are giving Hope [Hicks, director of communications for Trump’s campaign] and they are totally wrong. I mean they are so far off.

Fortune: I didn’t give the numbers to Hope. Right now the plan is there are two articles. There’s one . . .

This is Alan Weisselberg, chief financial officer.

Hello.

Weisselberg: Hello. How are you?

There’s the article that some other Fortune writers have been working on for a while and there’s this Q&A, which is your say on who you are as a businessman and a politician.

But how could they be working on an article about me and my private company—and you can put this in my Q&A or before my Q&A—which has hundreds of deals under negotiation all over the world and taking in tremendous amounts of money that they have no idea about because these are private deals.

I don’t want to spend too much time on this. But—

Well it’s an important point. I looked at your numbers and your numbers are ridiculous.

So another person at Fortune reached out as part of that article.

I never heard about.

OK. Well I don’t know. So I reached out to you because again we had the relationship when I covered New York real estate for Crain’s New York [Business] and thought you might be willing to talk to me.

Your article is going to be fine because it’s question and answer and that’s fair. But I don’t know how another group could be doing an article about a private real estate company that has hundreds of deals under negotiation and in many cases licensing deals. There’s no investment [coming from The Trump Organization]. The name [Trump] is the hottest it’s ever been right now. Fortune is a magazine I respect by the way. In fact, your sister magazine [TIME] I have been on the cover of quite a few times in the last few months.

Do you respect them [TIME] this week?

I respect them this week, and I hope I will respect them even more next week, because I think maybe they are doing another one. Let’s see what happens. They [Fortune reporters] don’t know anything about my company. We have an unbelievable company. We have very little debt. We have some of the most iconic assets in the world. We have a tremendous cashflow. We have the kind of assets that sell like a great painting would sell.

I think they have done the best job they can based on the fact that you weren’t cooperating. But let’s move on..=

Let’s go.

What makes a businessman great?

Proper instinct—so important. Knowing the limits that they can go. Imagination, so important.

Do the things that make a businessman great make a president great?

They help—but it’s another step. You have to have a lot of different skills in addition to those of a businessman. You need great communication skills, which a businessman does not need. I have friends of mine who are tremendously successful but they don’t communicate well. But they have other assets. You do need a lot of heart; businessmen don’t necessarily need heart.

You’ve said you plan to pay off the country’s debt in 10 years. How’s that possible?

No, I didn’t say 10 years. first of all, with low interest rates, you can think in terms of refinancings, and get it down. i believe you can do certain things to pay off the debt more quickly. The most important thing is to make sure the economy stays strong. You can do it in smaller chunks. You can do it in larger chunks. And you can do it in refinancings.

How much of the debt could you pay off in 10 years?

You could pay off a percentage of it.

What percentage?

It depends on how aggressive you want to be. I’d rather not be so aggressive. Don’t forget: We have to rebuild the infrastructure of our country. We have to rebuild our military, which is being decimated by bad decisions. We have to do a lot of things. We have to reduce our debt, and the best thing we have going now is that interest rates are so low that lots of good things can be done that aren’t being done, amazingly.

So you like the fact that interest rates are low? Some of the candidates have said that’s wrong. Do you think interest rates should be as low as they are?

I always like low interest rates, certainly as a developer. The problem with low interest rates is it’s unfair that people who’ve led the American way of life—the true American way of life—that have saved every penny, that have paid off their mortgages, that have done everything they were supposed to do, and they were going to retire with their beautiful nest egg, and they were going to get interest on their money, and now they’re getting one-eighth of 1%. I think that’s unfair to those people, who have led their lives in the way they were supposed to.

Should the Fed be raising interest rates? Has the Fed and Janet Yellen done a good job?

People think the Fed should be raising rates. What’s a scary prospect is if you start raising rates and you have to borrow money as a country, and if the rates, instead of where they are now, the rates are substantially higher, where the rates are 3% and 4%, or whatever it may end up being. That is a very scary prospect for this country. When you start adding that kind of number to an already reasonably crippled economy, certainly in terms of what we produce, that number is a very scary number for a lot of people to be looking at. And if you notice they don’t look at it. Because they want to keep interest rates down. A frightening scenario is that interest rates go up and we have to refinance the debt at higher rates, as apposed to paying very little like we are now.

Do you think Janet Yellen is doing a good job?

I think she’s doing a serviceable job. But you never know if they’re doing a good job until about five years after they leave office.

Would you reappoint her?

I don’t want to comment on reappointments. I would be more inclined to put other people in.

Are you for the audit the Fed movement, that the Congress would be able to audit the Fed’s decisions?

Yes. Totally.

First, note how much Trump generally supports the current Federal Reserve interest rate regime. While he laments the impact it has on savers (a lament that ignores the generally far bigger risk to savers that comes from the Fed killing the recovery by prematurely raising rates), he’s still generally approving of the Fed’s ultra-low rate policies and Janet Yellen’s performance. Keep that in mind for the articles below.

Continuing…

A lot of business people do believe having debt is a good thing. Higher leverage leads to higher returnns. And you have talked about wiping out the debt. Why is it bad for the U.S. to have debt?

Oh, I would rather not have debt. But we are stuck with it. If I had a choice of taking over debt free or having $19 trillion dollars—which, by the way, is going up to $21 trillion soon, because of the omnibus budget, which is a disaster—I’ll take no debt every time. I can look at myself. I have lived a life where I have a lot of debt and like now I have very, very little debt and I’ll tell you it’s more pleasant with very little debt.

But you may take over this country where some people think we have a lot of debt.

No, where everybody thinks—every sane person thinks we have a lot of debt.

Some people have called you a bully. Are you?

I don’t think so at all, no.

But you’ve also talked about your tough negotiating skills?

I don’t talk about them. Other people talk about them. I don’t say that I am tough. I say that I know how to negotiate. I’m a smart person. I look at the deals our country has made. This Iran deal is one of the worst negotiations I’ve ever seen of any kind. Our trade deals are horrendous. Carl Icahn endorsed me. Many other people endorsed me. Great business people endorsed me. I would use our great businesspeople to negotiate those deals. Right now we have political hacks doing it. And they are negotiating the biggest deals in the world. Deals with China and Japan. And deals with Mexico. We have people who don’t have any ability, who don’t have business instinct negotiating these deals. I would use the best business minds, and we have the best in the world. I would use our best people to negotiate those deals, many of which have endorsed me.

Note that it’s unclear if the businessmen Trump wants to use to negotiate all sorts of sensitive deal (trade deals, nuclear disarmament deals, etc) would become government employees or if we’re going to just start letting active CEO start negotiating our deals. Hopefully someone follows up with Trump on that.

Continuing…


The hard business tactics, the tough negotiations, the brinksmanship in hostile M&A deals for instance, that happen in business, would that work in politics. As an example, you have said that you would impose 45% tariffs on China. Is that what you really want or is that an negotiating tactic?

First of all I never said that. I made a statement to the New York Times to the editorial board. And that was not said. Something different was said. I would talk to China and probably be able to get them to do what to do what they should be doing. China has zero respect for our country. They have zero respect for our president and our leadership. I would tell China that the devaluation [of the Chinese yuan] is destroying our businesses. We are losing tremendous amounts of business. Not only China. You look at what Japan is doing with the yen. You look at what others countries are doing with the devaluation and manipulation of their currencies. Something of which our leaders have no idea what’s happening. And they are systematically. I just left upstate New York, You look at Pennsylvania and Indiana where carrier just left for Mexico. I would tell China that either you start playing by the rules, or we will be imposing tariffs on your products coming in. That doesn’t mean I am doing it, because in my opinion if they believe it they are going to play by the rules. But they have to believe it.

But does tough negotiations like that, where you are risking a trade war with China, does that work?

What’s a trade war? How are we losing? We already have hundreds of billions of dollars of trade deficit. So we have massive trade deficit with China.

Similar, saying we will pull out of NATO, is that a negotiating tactic. And if so, does that work?

I never said we were going to pull out of NATO. You have 28 countries in NATO, it’s 68 yrs old. It’s obsolete. Right now we have to be focusing on terror. It was set up for the Soviet Union. Russia’s still a problem, but Russia is not the Soviet Union. NATO is obsolete and the problem is we’re carrying NATO. You have many countries, known fact, that can afford to but they have decided not to pay their way. We’re protecting countries within NATO and they’re not paying their way. And I’ve said, they have to pay their way. If they don’t pay way their way, we’re not going to be protecting them. They wil pay their way if said to them in the right manner.

That’s not said in a touch manner or a soft manner. It’s just said. They owe us a great deal of money from delinquencies and past payments that haven’t been made. In many cases, the only reason they haven’t made ‘em in many cases is they have no respect for our country. They have no respect for our leadership.

But many of the NATO countries are not carrying their weight. This is a known fact. When I said NATO is obsolete and when I said the second part about not carrying their weight financially, at first there was an uproar and then if you notice a lot of people are saying, ‘You know, Trump is right,’ and I’ve gotten a lot of credit for saying it.

Just take a moment and soak in that gem of a NATO rant: in response a question about whether or not prior Trump’s comments on pulling out of NATO were part of a negotiating tactic, Trump argues that NATO is indeed obsolete now that there’s no more Soviet Union but also that there’s a problem with NATO members paying their dues and that he’s not going to actually respect the NATO treaty if they don’t pay up. And then he justified his first argument – that NATO is obsolete – with his his second argument – that members are behind on payments – which he in turn justified by observing that many people said “you know, Trump is right” about his second argument.

Skipping down…

So as a business man you have made the deals that were the best ones for you. As president of the United States how do you transition to putting the people of the country first and not Mr. Trump. How should people know you’ll do that?

The country will always be first. I built a great company. You don’t know anything about my company. I built a company that is worth a tremendous amount of money, has a tremendous amount of cashflow—its a never ending cashflow. But it is a business that is very unimportant to me if I won the presidency. My executives and my children will run the co and they’ll run it well. It’s not a hard company to run. We are dealing now with over 121 deals world wide for licensing. Tell him about the hotels, Eric.

In light of the recent questions over how exactly Donald Trump plans are transferring his business empire into a blind trust run by his kids, note the claims Trump just made about his business: It makes tremendous amounts of money, a never ending cash flow, and his kids will run it. But it’s not a hard company to run. And it’s current in over 121 deals world wide “for licensing”.

Also note what he said earlier in the interview: “Your article is going to be fine because it’s question and answer and that’s fair. But I don’t know how another group could be doing an article about a private real estate company that has hundreds of deals under negotiation and in many cases licensing deals. There’s no investment [coming from The Trump Organization]. The name [Trump] is the hottest it’s ever been right now. Fortune is a magazine I respect by the way. In fact, your sister magazine [TIME] I have been on the cover of quite a few times in the last few months.”

So Trump himself acknowledged in this interview that the bulk of Trump’s never ending cash flow comes from licensing the “Trump” name but his kids will run the business for him. This is Trump’s idea of a blind trust. Yep.

Continuing…

Eric Trump: We are opening up four this year. The remainder of the year we are opening up Old Post Office on Pennsylvania Ave. [in Washington, D.C.]. We are opening up the tallest building in Vancouver, which is 100% sold out, and the highest price ever seen in Vancouver. We are opening up at Turnberry in Scotland, and we are opening up in Rio right before the Olympics. We are also working on two deals that are in the hotel pipeline in Bally and Jakarta. And we’ve got a million others.

You’re so good at being a real estate developer, and running hotels, and buying properties. Why haven’t you stuck to that over your career? Why get into the airplane business, or do the steaks, or all the others stuff?

You are right. But I make a lot of money. Like the water company, I make a lot of money with the water company. But more importantly I supply water to all my facilities. Steaks and all of this. It’s just auxiliary. It’s simple, but it works well with my company.

But is it right to say that you haven’t been as good at those other things as you have been at being a real estate developer.

I do them largely for my own company, so it all fits together. Like water, it’s not a big deal for me, one way or another, but we sell it to the company. Steaks, which we do branded steaks, but it’s not a big deal.

Eric Trump: How about the wine. We are now the largest winery on the East Coast of the United States. We sell 45,000 cases of wine a year. We just won double gold in San Francisco, so we beat every other Californian winery there. So there is lots we do ancillary to company and our main core which is build buildings like this that are enormously successful. [Fortune note: It has been widely reported that Donald Trump no longer owns Trump Winery. It is now owned by Eric Trump.] Look at the Apprentice. We ran one of the most longest running reality TV show in history. That’s the ancillary business.

Donald Trump: Still running. They wanted me to do two more seasons but I said, “I can’t do it,” because I am running for president.

Do you know what you don’t do as well as other things? Do you know where you are not as strong as in other areas?

No. I think I’m good in areas where I want to focus. In my life, where I want to do something I’ve done it well. I started this company with one million loan, and the company is worth much more than $10 billion right now.

Yes, when asked what his weaknesses are, Trump responded that he doesn’t have any. He can do anything. Isn’t this interview awesome? You can see why the press seems to want Trump to be president so badly. It would be one endless telegenic trainwreck. Endless cash flow!

Continuing…


As president, do you think you will know what you don’t do as well to other things, and will get advisors, and lean on them?

Totally. I believe in getting great people and getting people who are the absolute best. As an examples for negotiating trade deals, some of the people who you interview are the right people to get. But unfortunately, we don’t use in many cases those people. We use people with absolutely no ability. When China comes at us, they come with groups of 20 and everyone one of those people is trained to take every penny out of the United States that you can take.

What’s dirtier: Business or politics?

Politics.

If you get the nomination, would you self fund in the general election?

I haven’t made a determination of that yet. Haven’t really looked at it yet. I am totally self funding my primary campaign. I have not made that determination.

You have a high unfavorable rating for a front runner. Do you have a plan to re-brand the Mr. Trump brand in the minds of voters.

I’m not going to rebrand.

Can you make yourself likable?

In poll after poll when you look at the numbers it will show, and starting to already that I will beat Hillary. Or as I call her, ‘Crooked Hillary. I will do very well. I’ve had 55,000 negative ads against me. Other people like Kasich and Cruz have had virtually no negative ads, and despite that they can’t beat me and despite that I will beat Hillary. And I will beat her very easily.

Ok. But that’s enough questions.

A version of this article appears in the May 1, 2016 issue of Fortune with the headline “Q&A: the Donald Speaks.”

“I’m not going to rebrand.”

That was Trump’s message near the end. No rebranding. And, of course, that massive mess of an interview came out the same day we got reports about Paul Manafort promising that the “real person” is going emerge and make his moderate popular appeal. Trump would become a non-scary clown. He’ll rebrand. Just you wait.

Credit Where Credit’s Due. Trump Supported Cheap Credit For a Sluggish Economy as He Should. At least Back in April
It’s a pretty hilarious juxtaposition of Trump campaign articles to come out on exactly the same day. Or would be hilarious if he wasn’t this close to actually winning and trashing the future. But note that one of the areas where he was actually surprisingly sober in that interview was actually a pretty important one. It was a notable ray of sanity and if one was inclined to hold out hope that Trump’s primary-season antics were all just a ruse for the rubes, it would have been something to hold onto: Trump basically supports (or supported back in our April of Innocence) Federal Reserve Chair Janet Yellen and the current ultra-low rate regime that the right-wing normally rails against:

The Week

Donald Trump is shockingly sane on the Federal Reserve

Jeff Spross

April 26, 2016

It’s almost decision day at the Federal Reserve. On Wednesday, the Fed officials who vote on monetary policy will conclude one of their semi-regular meetings, and announce where they want to set interest rates for the next month and a half.

When it comes to what the Fed should do, we’re hearing something like sense from the most unlikely of sources: Donald Trump.

What’s important here is that Trump is running for the Republican nomination for the presidency. To say the GOP has lost its mind when it comes to the Federal Reserve would be putting things rather mildly. House Speaker Paul Ryan has made a side career out of hapless predictions that low interest rates and quantitative easing would deliver hyperinflation. Ted Cruz has called for a return to the gold standard. John Kasich claimed in January that low interest rates are one of the reasons wages are stagnating.

In short, the field is just saturated with nonsense.

If you read the interview Trump gave to Fortune last week, you can tell he feels the weight of this ideological junk. He suggested he’d replace Fed Chair Janet Yellen, while admitting she’s doing a “serviceable job.” And he brought up the usual Republican talking points about how low interest rates hurt savers and the need to audit the Fed.

But you get the sense Trump’s heart isn’t really in it. For one thing, he has experience as an actual businessman, which means he knows one of those basic economic realities that politics tends to obscure: Namely, that low interest rates make economic activity easier. They mean higher rates of job growth and higher rates of wage growth. “I always like low interest rates, certainly as a developer,” Trump said.

This is one of those things you can’t repeat enough. The express purpose of hiking interest rates is to slow down rates of job creation and wage growth — to keep inflation from rising and “overheating” the economy. But here’s how inflation has behaved since 1960 — as measured by the common-used CPI (in red), which tends to be erratic, and the Fed’s preferred measure of core PCE (in blue) which tends to be smoother.
[see plot of inflation]
By either measure, does it look to you like we have an inflation problem to fight? Yeah, me neither.

In fact, financial markets expect the inflation rate to be around 1.6 percent in five years. And that’s high compared to the five-year rate they’ve expected over the last 10 months.

In the Fortune interview, Trump goes through the motions of pointing out that low interest rates make life more difficult for people who have saved and now rely on their investment portfolios for income. Of course, such people tend to be older, so it’s worth noting the considerable age gap between the parties: The GOP’s obsession with keeping interest rates high speaks to a voter base that benefits from high interest rates. You can almost see Trump wiggling uncomfortably under the unspoken logic that we should wreck the livelihoods of workers in order improve the livelihoods of the retired.

Finally, as a businessman, Trump probably also can’t help but acknowledge that low interest rates are a market signal: They mean borrowing is cheap, so now is the time to borrow and invest. That’s as true for the country as it is for individual companies. “The best thing we have going now is that interest rates are so low that lots of good things can be done that aren’t being done, amazingly,” Trump said.

Again, being a Republican, Trump emphasized spending more to build up the military. That’s ridiculous: American military spending is already larger than the next 10 biggest countries combined. But Trump also mentioned infrastructure, and that’s where he has a good point. The United States’ infrastructure may not be terrible, but it needs some serious improvements. And with an unemployment rate still hovering around 5 percent, and historically depressed labor force participation, there are plenty of Americans who could be put to work.

Meanwhile Ted Cruz irresponsibly suggests the Fed is “hiding” the “true” cost of the nation’s debt. And when Kasich says low interest rates are contributing to low wages, he’s literally describing the opposite of how it works.

Shockingly enough, when it comes to the Federal Reserve, Donald J. Trump is the only one of the bunch who even sounds halfway sane.

“Shockingly enough, when it comes to the Federal Reserve, Donald J. Trump is the only one of the bunch who even sounds halfway sane.”

Yes, shockingly, Donald Trump wasn’t a complete nut job like the rest of his GOP peers when it came to the Federal Reserve in that he gave a rather mealy-mouthed endorsement of Yellen. But hey, by today’s standards that’s significant:


If you read the interview Trump gave to Fortune last week, you can tell he feels the weight of this ideological junk. He suggested he’d replace Fed Chair Janet Yellen, while admitting she’s doing a “serviceable job.” And he brought up the usual Republican talking points about how low interest rates hurt savers and the need to audit the Fed.

But you get the sense Trump’s heart isn’t really in it. For one thing, he has experience as an actual businessman, which means he knows one of those basic economic realities that politics tends to obscure: Namely, that low interest rates make economic activity easier. They mean higher rates of job growth and higher rates of wage growth. “I always like low interest rates, certainly as a developer,” Trump said.

It looks the construction side of Trump’s business would have at least one positive side-effect during a Trump presidency: it’s not really in his personal business interests to succumb to the contemporary GOP’s macroeconomic dementia and endless calls to jack up interest rates and force a period of mass liquidation in order to cure the economy through a mass purging. At least back in April it looked like that might be the case. And then it changed. Again. So, yes, if it seems like Trump’s relatively tame stance on the Federal Reserve’s ultra-low rate regime was actually a flip-flop on an attack Trump made on Yellen back in October that’s because it was a flip-flop.

The Great Fed Flip-Flop-Flip to Make America Great Again. Via a Planned Economic Crisis, aka the Bellyflop Backflip of Doom
And a few days ago he flipped again:

The New Yorker

Trump and the Truth: The Interest-Rate Flip-Flop

By Adam Davidson , September 15, 2016

This essay is part of a series The New Yorker will be running through the election titled “Trump and the Truth.”

Over the past year, Donald Trump, who famously never backs down, has attacked, backed down, and then again attacked Janet Yellen, the chair of the Federal Reserve. He has done it in his way, never acknowledging when he says precisely the opposite of what he has previously said. (Yellen, for her part, has ignored the whole thing.)

Trump’s Yellen cycle began in October, when, in an interview with The Hill, he accused Yellen of keeping down the Fed’s key interest rate, known as the Fed funds rate, because President Obama “doesn’t want to have a recession-slash-depression during his administration.” (This raised the question, of course, Who expects a President to want a recession-slash-depression?) By the spring of this year, Trump had revised his thinking about Yellen. “I have nothing against Janet Yellen whatsoever,” he told CNBC, on May 5th. “She’s a very capable person. People that I know have a very high regard for her.” Trump explained his newly rosy view by endorsing the very policy he had mocked a few months earlier. “She’s a low-interest-rate person; she’s always been a low-interest-rate person. And I must be honest, I’m a low-interest-rate person.” A couple of weeks later, Trump reiterated his happy view of the Fed chair. In an interview with Reuters, he said, “I’m not a person that thinks Janet Yellen is doing a bad job.”

This week, Trump was back on the attack. On Monday, he told CNBC that Yellen should be “ashamed” of the low-interest-rate policy that Trump himself endorsed so fully in May. “She is obviously political, and she’s doing what Obama wants her to do,” he said. Once again, Trump made the claim that there was a secret Obama-Yellen pact to keep rates low, rooted in their nefarious desire to prevent an economic crisis. They both knew, he said, that “as soon as [rates] go up, the stock market is going to go way down.” On Thursday, after giving a speech at the Economic Club of New York, Trump again took aim at the Fed. “The Fed has become very political,” he said. “Beyond anything I would have ever thought possible.”

It’s impossible to reconcile Trump’s conflicting statements on Yellen and the Fed’s interest-rate level. Low interest rates can’t be both smart policy and evidence of corruption, just like Yellen can’t be both “very capable” and a shameful Obama stooge. But beyond the contradictions, Trump has betrayed a basic misunderstanding of how central banks work. Take his statement that he and Yellen are both “low-interest-rate” people. Yellen, he said, has “always been a low-interest-rate person.” Central bankers like to say that the entire point of the Federal Reserve is to “lean against the wind,” meaning that, when the economy is growing so fast that it risks inflation, the Fed raises its interest rate, and, when economic growth is sluggish, the Fed lowers it. In the context of central banking, Yellen is often identified as a “dove,” which means that she is generally a bit more concerned about lowering unemployment than about the risks of inflation. But calling Yellen a “low-interest-rate person” is like calling a doctor concerned about a patient’s high fever a “low-temperature person.” Yellen, like all central bankers, is not a low-interest or high-interest person. She’s a person for whatever interest rate is appropriate, given economic conditions. In her two decades of votes as a senior Fed official, she has voted for higher rates plenty of times.

Where Trump is most clearly and dangerously wrong is in his accusation of political interference by the White House. Yellen doesn’t make decisions about the interest rate on her own. As chair, she has one vote on the Federal Reserve’s twelve-member Open Market Committee, which is currently made up of five members appointed by President Obama and seven members who come from regional Federal Reserve banks and who are chosen by their own boards, made up of bankers, businesspeople, and, in some cases, community representatives. It’s a diverse lot—several members of the committee have shown no particular loyalty to the President. What’s more, the board’s decision-making process about the interest rate is public. We know how each of the twelve members vote at each meeting of the committee. The Fed even releases a “dot plot,” which shows how the different members expect to vote over the coming years.

This publicness has been designed for good reason. The Fed funds rate is the interest rate at which banks lend money to one another for overnight loans. In practice, this rate sets the tempo of the entire global economy, and changes to it ripple through every aspect of our economic lives. Sudden and unexplained moves would create panic. That the Fed hasn’t raised its rate since December cannot be explained as some nefarious plot jointly concocted by Obama and Yellen. It is fully explained by a board of technocrats studying the data and coming to pretty much the same conclusion that nearly everybody else who looks at the data reaches: our economy is still in a period of sluggish growth and, despite Tuesday’s cheery economic news, a Fed-induced tightening could send millions of Americans back into unemployment and generally wreak havoc on the economy—a point Trump himself endorsed in his brief pro-Yellen phase a few months back.

The Fed is far from perfect and has earned its share of fair criticism. But what makes Trump’s views on central-bank policy particularly troubling is that it is impossible to know where they are coming from. The next President will be able to select a Fed chair and several Federal Reserve governors. By this point in a Presidential election, the major-party candidates’ economic preferences are typically well established, and usually embodied by their economic advisers. Whether you embraced them or despised them as candidates, since the nineteen-seventies, the major-party candidates have made it relatively easy to know how they would approach the Fed if elected. Notably, candidates in recent decades have all shown enormous deference to the Fed as an independent, nonpartisan institution. Reagan, Clinton, George W. Bush, and Obama all reappointed the Fed chair of their cross-party predecessor. Trump has said he will not reappoint Yellen to a second term. So how would he pick her successor? What framework would he use?

Trump’s economic advisers can for the most part be placed in one of three groups. In the first are Larry Kudlow and Judy Shelton, the intellectuals of the bunch, and both advocates of a return to the gold standard. While it has become popular among some Republicans in the past few years, returning to the gold standard is dismissed as a discredited, fringe idea by nearly all economists and market participants. And, for their part, gold-standard supporters typically reject the very idea of a Federal Reserve, so if Trump were to appoint Kudlow, Shelton, or another gold-standard supporter to the Fed, it would be the most radical and potentially damaging economic move since the dawn of our modern economic system, after the Great Depression. (Just how awful an idea returning to the gold standard would be is difficult to convey in a short space, but it’s worth pointing out that, under the gold standard, recessions and deep depressions were frequent, and the central bank and government officials had no ability to respond.)

The second group of Trump advisers is, famously, made up of businesspeople: all those Steves—Feinberg, Mnuchin, Roth, Calk, and the others who come from real estate and finance. As a group, they, like Trump, have not expressed great knowledge of or interest in monetary policy.

Finally, there’s the group represented by Stephen Bannon, the former Goldman Sachs banker and Breitbart News chief now heading Trump’s campaign. Bannon has not talked much publicly about his views of the Fed. But his deep association with the alt-right is worth examining: some on the alt-right have expressed contempt for the very idea of a healthy economy. A guide to the alt-right, published by Breitbart in March, identified a subset of the movement, known as “natural conservatives.” For these people, the authors explained, a strong economy isn’t necessarily something to wish for. “Culture, not economic efficiency, is the paramount value,” the guide states. “More specifically, [natural conservatives] value the greatest cultural expressions of their tribe. Their perfect society does not necessarily produce a soaring GDP, but it does produce symphonies, basilicas and Old Masters.” This outlook was contrasted with the views of “an establishment Republican,” who has an “overriding belief in the glory of the free market, [who] might be moved to tear down a cathedral and replace it with a strip mall if it made economic sense.”

Reading these passages helped me understand something that I had found confusing. In reading stories on Breitbart and other sites connected to the awful alt-right movement that Trump has embraced, I found it impossible to identify any overarching view of how the economy should work. There were sloppy and occasional potshots at Obama or Yellen, and a general contempt for the many institutions of modern liberal society. But there were no coherent economics. Which brings us back to Trump’s own views. He has no coherent plan, no view that can be mapped onto the common range of established discussion, whether left, right, or center.. On Thursday, Trump’s campaign released his “economic policy.” Amid the assertions that a dramatic cut in taxes and regulation will lead to more economic growth and higher employment, there is no mention of the Federal Reserve. Instead, Trump has offered the public a general, instinctive contempt for the Fed and its policies.

On Thursday, at the Economic Club of New York, Trump was asked specifically how he would advise the Fed, and his answer was filled with as much narcissism and nonsense as any he had given before. “Well, as a real-estate person, I always like low interest rates, of course,” he said. “Obama wants to go, he wants to play golf, and he wants to leave. He doesn’t want to have any stock-market disruptions. . . . I think the Fed is totally being controlled politically.” He concluded, “I really believe if it was a political decision or the right decision, they’re going to go with the political decision every time.”

“This week, Trump was back on the attack. On Monday, he told CNBC that Yellen should be “ashamed” of the low-interest-rate policy that Trump himself endorsed so fully in May. “She is obviously political, and she’s doing what Obama wants her to do,” he said. Once again, Trump made the claim that there was a secret Obama-Yellen pact to keep rates low, rooted in their nefarious desire to prevent an economic crisis. They both knew, he said, that “as soon as [rates] go up, the stock market is going to go way down.” On Thursday, after giving a speech at the Economic Club of New York, Trump again took aim at the Fed. “The Fed has become very political,” he said. “Beyond anything I would have ever thought possible.””

Donald Trump’s Great Fed flip-flop-flip is a conspiracy theory that Janet Yellen and Obama are conspiring not to tank the stock market and economy. That’s where we are. And we can’t confidently identify which adivsor might be pushing this split because he’s surrounded himself with such a variety of economic charlatans. Was it the gold bugs advising him to take this stance or Steve Bannon and the Alt-Right? Both? The answer isn’t obvious. But a re-rebranding clearly just took place that signals Trump is planning on replacing Janet Yellen with a Federal Reserve chair who is willing to tank the economy and stock market via a series of incoherently justified rate hikes.

So, all in all, it sounds like we can possibly trust that he really won’t allow his personal business interests to dictate a Trump administration’s policies, blind trusts are not. After all, he’s willing to tank the global economy for basically no reason at all. At least no reasons he can explain. And he’s willing to do it soon.

What a great businessman. What a great leader.

Discussion

25 comments for “Krugmenistan vs Trumplandia: Backflipping into a Depression”

  1. Now that the Federal Reserve decided to keep interest rates steady in September and Federal Reserve chairman Janet Yellen was forced to rebuke Donald Trump over his charges that the the Fed’s decision making was all “obviously political” and designed to mask a weak economy that should actually be doing much worse than it current is (yes, Trump thinks the Fed should be intentionally taking the economy because that’s where the economy “should” be), one of the questions going forward is how Trump is going to respond. Is he just going to take that from Janet Yellen? That would be a very non-Trumpian response.

    So, assuming Trump decides to add Janet Yellen to his personal enemies list and continues asserting that the Fed needs to be jacking up rates now in order to reveal to the world how bad the Obama economy really is (that’s basically his argument…he doesn’t even make the standard “there’s going to hyperinflation” argument you normally hear from rate hawks), we can probably add “harmfully politicizing Federal Reserve decision-making” to the list of Trump’s accomplishments. But wait, wasn’t Trump’s argument that the Fed is already acting politically to protect Obama? Yes, and by making such a argument in a presidential race and basically calling for the Fed to intentionally trash the economy in order to ‘unmask the real Obama economy’, Donald Trump just massively politicized the Fed’s rate policies. And at a critical time given the delicate nature of the Fed’s rate “lift off”.

    So, given all that, get ready for a lot more GOP politicization of the Federal Reserve:

    Bloomberg Markets

    Yellen Must Brace for More Political Attacks If Hike Is Delayed

    Jeanna Smialek
    September 19, 2016 — 11:01 PM CDT

    * Most economists see a rate increase following the election
    * Trump says the Fed ‘is being totally controlled politically’

    Janet Yellen will frame a decision this week to forgo an interest-rate increase as necessary to achieve the Federal Reserve’s economic goals. Donald Trump and his supporters are likely to frame it as political.

    That’s because the central bank on Wednesday will also release fresh “dot plot” projections which will probably show policy makers see one quarter-point rate hike by the end of the year. Such a forecast would be widely interpreted as a sign that a hike is coming at the Fed’s December meeting, instead of at the November gathering, which comes a week before the U.S. presidential election and isn’t accompanied by one of the chair’s quarterly press conferences.

    Problem is, having the dot plot signal a December move comes with political baggage. Trump, the Republican presidential nominee, argues that the Fed has created a “false economy” by keeping borrowing costs low in order to help President Barack Obama. Although economists generally have said recent cooler economic data will encourage the Fed to leave rates near rock-bottom, some people may see electoral politics staying Yellen’s hand.

    Recapture the Narrative

    “If you’re a dyed-in-the-wool Trump supporter, and Trump loses in November and the Fed increases interest rates, logical fallacies aside, you will simply say — correlation, therefore causation,” said Peter Conti-Brown, a Fed historian and assistant professor at the Wharton School of the University of Pennsylvania. “What Donald Trump is trying to do is recapture the economic narrative.”

    Yellen was appointed by Obama and served as President Bill Clinton’s top economic adviser in the 1990s.

    The Fed is expected to leave rates unchanged this week. At her post-meeting press conference, Yellen may try to stress that the next Fed gathering in November is a “live meeting” where the central bank could raise rates. The Federal Open Market Committee could even potentially go so far as to explicitly signal in its statement that an increase is likely at the Nov. 1-2 gathering.

    Decision Politics

    Fed officials regularly say politics are not a consideration as they make monetary policy decisions, and people who have been in the room at FOMC meetings say that elections are just not a topic during the policy debate.

    “It’s amazing how little anyone talks about these things in these meetings — it may have been on their minds, but I never heard anyone talk about it,” said Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics in Washington and a former senior economist at the Fed.

    Even so, perceptions that the Fed plays politics exist, as Trump’s comments suggest.

    “The Fed is being totally controlled politically, they’re not raising rates, and they’re being controlled politically — I think they’re going to be low, I don’t even know if they’re going to have a raise, but I think they’re going to be low until the end of the year,” Trump told an audience of finance leaders in New York last week.

    It may not matter very much, practically speaking, if some Americans believe Trump’s assertion that the Fed is political. The central bank isn’t a popularly elected body, which shields it from near-term disapproval from the U.S. electorate.

    Still, it is accountable to Congress, so if a large chunk of U.S. public opinion comes to view it as a politicized institution, there could be longer-term implications.

    A Trump triumph on Nov. 8 could breathe life into legislative reform of the Fed, especially if Republicans maintain control of Congress.

    Emergency Measures

    Sapping public support for the central bank may also make it hesitant to use unconventional policies during the next recession. The Fed’s emergency measures during the 2008-2009 financial crisis later drew heat from Congress — spurring legislative proposals to make it follow a policy rule — and that memory could affect FOMC thinking next time around.

    “If the Fed is under constant political assault, it will be more hesitant to use those tools,” Conti-Brown said. “If we’ve got a central bank that’s experimenting, then it risks prompting that exact existential debate that it wants to avoid.”

    Democratic presidential nominee Hillary Clinton, whose lead in national opinion polls has narrowed, has said the Fed needs to work on its diversity, but has also blasted Trump for accusing the central bank of being political. “You should not be commenting on Fed actions when you are either running for president or you are president,” she said Sept. 6.

    Recent economic data have been less supportive of a rate change. Disappointing readings from the Institute for Supply Management’s services and manufacturing indexes, a steeper-than-expected decline in August industrial production, and slower retail sales have all called a September hike into question.

    “You have elections, the Fed is certainly aware of that, but I think it’s easy to say that the data that we have now do not justify a rate increase,” said Gus Faucher, vice president at PNC Financial Services Group Inc. in Pittsburgh. “I do think that the data between now and December will be supportive of a rate hike.”

    “Sapping public support for the central bank may also make it hesitant to use unconventional policies during the next recession. The Fed’s emergency measures during the 2008-2009 financial crisis later drew heat from Congress — spurring legislative proposals to make it follow a policy rule — and that memory could affect FOMC thinking next time around.

    That’s something critical to keep in mind: the more Trump and the GOP bash the Fed now for it’s ultra-low rate policy response to the 2008 financial crisis that threatened the global economy, the less likely the Fed is to use similar tools in the future.

    But also note that Donald Trump wasn’t simply calling for a rate hike when he charged the Fed with being “totally controlled politically” earlier this month. He appeared to be call for an end to low rates entirely. Soon:


    “The Fed is being totally controlled politically, they’re not raising rates, and they’re being controlled politically — I think they’re going to be low, I don’t even know if they’re going to have a raise, but I think they’re going to be low until the end of the year,” Trump told an audience of finance leaders in New York last week.

    That sure implies Trump was like to see a rather rapid hike it rates next year, although keep in mind that Yellen’s term doesn’t end until 2018, which raises the question of whether or a President Trump would somehow be pressuring the Fed to carry out that rapid rate hike. What sort of totally non-political method does he have in mind? Maybe someone should ask him about that.

    Another major question raised by Trump’s desire to see the Fed intentionally depress the economy in order to ‘expose the Obama economy’ is whether or not Trump has joined the ever-growing contingent of GOPers who want to get rid of the Fed’s dual mandate – the twin goals of holding inflation in check while simultaneously promoting employment – and just go with the single mandate of solely trying to control inflation. You know, like the European Central Bank is tasked to exclusively try to control, to the immense detriment of Europe.

    It’s a particularly important question in light of earlier reports that Trump was willing to hand over “foreign and domestic policy” to his vice president and Trump’s selection of Mike Pence to essentially be Trump’s Dick Cheney because, surprise surprise, back in November 2010 – just after the GOP’s big “Tea Party” med-terms sweep and a time when the economy was much weaker and low rates were even more critical for avoiding a major recession – Mike Pence led the GOP charge to end the dual mandate and end the Fed’s focus on employment:

    The Wall Street Journal

    GOP’s Pence Calls for Fed to Drop Focus on Employment

    By Sudeep Reddy
    Nov 15, 2010 6:31 pm ET

    Rep. Mike Pence of Indiana, a top House Republican, said he plans to introduce legislation Tuesday to end the Federal Reserve‘s dual mandate, which requires the central bank to balance both employment and inflation concerns in its monetary policy.

    Pence, a potential 2012 presidential candidate, is one of several GOP politicians in recent weeks to attack the Fed over its recent decision to buy government bonds to boost the economy, warning that the move — often called Quantitative Easing 2 — could spur significant inflation. On Monday, he called for striking the dual mandate to force the Fed to focus only on price stability. The Fed today, under a 1977 law, also must pursue maximum sustainable employment — generally view as an unemployment rate of 5% to 6%.

    “The Fed’s dual mandate policy has failed,” Pence said in a statement. “For a record 18th straight month the nation’s unemployment rate is at or above 9.4 percent. It’s time for the Fed to be solely focused on price stability and not the recently announced QE2 which will monetize our debt and trigger inflation.

    The legislation is unlikely to become law, either this year or in the next Congress. Democrats strongly support the Fed’s focus on employment, and few Republicans have voiced the inflation worries that are gaining traction among the GOP’s tea party contingent. But Pence’s move is likely to further boost attention on the Fed and could draw other potential 2012 candidates into the inflation debate.

    To support the economy after the financial crisis, the Fed has kept its target for overnight interest rates near zero since December 2008. It also bought $1.7 trillion in U.S. Treasury debt and mortgage securities to drive down long-term interest rates and spur more borrowing and spending. But it’s falling short on both sides of its mandate. Unemployment remains too high, at 9.6%, and inflation is running below the Fed’s target of 1.7% to 2%. As a result, the central bank’s policy committee on Nov. 3 voted 10-1 to resume the bond-buying and purchase $600 billion in Treasurys over the next eight months.

    Meanwhile, Republican-leaning economists and strategists, coordinating with GOP politicians, launched a campaign this week to boost pressure on the Fed and push the issue into the 2012 presidential campaign.

    “The Fed’s dual mandate policy has failed…For a record 18th straight month the nation’s unemployment rate is at or above 9.4 percent. It’s time for the Fed to be solely focused on price stability and not the recently announced QE2 which will monetize our debt and trigger inflation.

    That was Mike Pence in 2010 when the unemployment rate was twice the current rate. Because the Fed’s low rates hadn’t magically cured the economy two years after the largest financial crisis since the Great Depression, Mike Pence wanted the Fed to just stop caring about unemployment at all. And now he’s poised to become the most powerful vice president in history.

    So…shouldn’t someone be asking Donald Trump about his views of the dual mandate? Or, perhaps more appropriately, shouldn’t someone be asking Mike Pence whether or not he still backs that position? It seems like a pretty obvious question. Along with some question of whether or not sharply higher interest rates will be an issue during a Trump presidency given the Trumpian explosion of debt resulting from tax cuts for the ultra-rich that appears to be a central element of Trump’s economic plan.

    The Huffington Post

    Donald Trump’s Tax Cuts Would Cause Deficit To Explode, Report Says

    Seriously, this guy’s budget is a joke.

    Jonathan Cohn Senior National Correspondent, The Huffington Post

    09/22/2016 12:10 am ET | Updated

    Donald Trump’s policies would make the federal deficit much bigger. Hillary Clinton’s wouldn’t.

    That’s the most important takeaway of a new report, one that maybe should get a little attention this campaign season.

    The report comes from Committee for a Responsible Federal Budget, a nonpartisan think tank that, as the name suggests, focuses heavily on whether the government has enough resources to meet its financial obligations.

    Earlier this year, the committee published a thorough review of the Clinton and Trump agendas – with a particular focus on how each would affect the deficit (the difference between what the government spends and takes in) and the debt (the total amount of money that the government owes).

    On Thursday, the committee published a new version, taking into account proposals that Clinton and Trump had introduced since the last analysis. The verdict was pretty similar to the last one.

    Once again, the committee found, Trump’s proposed tax cut would pour red ink all over the federal ledger, while Clinton painstakingly identified enough new taxes to offset nearly the entire cost of the programs she would launch.

    To be clear, government borrowing isn’t always a bad thing. Economists argue among themselves over how much debt the federal government can carry, and for what purposes it might be worthwhile.

    Today might actually be an ideal time for government to incur higher deficits, at least for the short term, because low interest rates make borrowing unusually cheap – and a burst of spending for infrastructure could pay off in the long run.

    But, for the most part, that’s not the kind of borrowing Trump has in mind.

    The big item on the Republican nominee’s agenda is that tax cut. It’s gone through no less than three incarnations now, and the latest version is actually smaller than the previous one. But the basic shape is the same, with corporations and the wealthy benefitting disproportionately.

    And according to the committee’s projection, it would permanently change the budgetary baseline, substantially increasing the shortfall between what the government takes in and what it sends out – to the tune of $4.5 trillion over the next 10 years.

    Throw in the rest of Trump’s agenda, including a boost in defense spending and an even bigger cut to Medicaid, and ? according to the report ? you get a total impact of $5.3 trillion in new debt over the next 10 years.

    The story with Clinton’s agenda is quite different. In fact, it may surprise cynics who assume all politicians are equally unserious when they say they would pay for new initiatives.

    The Democratic presidential nominee has called for an array of new spending programs, some of them quite expensive. These include efforts to help people pay out-of-pocket medical bills and generous new aid for families paying college tuition.

    But Clinton has also said she will offset the cost of those programs with new taxes on corporations and the wealthiest Americans – a promise, the committee found, she has largely kept with her proposals. All told, the committee found, Clinton’s policies would add $200 billion to the federal debt over 10 years. In the context of campaign promises, which are never that precise, that’s a pittance ?-and maybe even a rounding error.

    The estimate may be slightly generous to Clinton, as it assumes her promise of capping child care costs at 10 percent of family income would cost just $150 billion over 10 years. Projections for similar proposals from independent think tanks suggest such a program, fully implemented, would cost much more.

    But even allowing for that, the impact of Clinton’s agenda on the deficit would be far less than Trump’s ? and would ultimately depend on whether Clinton could identify other sources of revenue to pay for it.

    For a better sense of how the Trump and Clinton agendas compare, you can think about debt in the way most economists do – by looking at it as a percentage of gross domestic product, or GDP. If Clinton’s policies became law, the committee found, federal debt after 10 years would be 86 percent of GDP – pretty much what the experts project as of now. If Trump’s policies became law, by contrast, federal debt after 10 years would land at around 105 percent.

    A very real danger of pushing debt levels higher indefinitely is that it could slow the economy – or, at the very least, create a financial shortfall that would eventually force deep cuts to Medicare and Social Security, programs Trump has insisted he would defend.

    “Once again, the committee found, Trump’s proposed tax cut would pour red ink all over the federal ledger, while Clinton painstakingly identified enough new taxes to offset nearly the entire cost of the programs she would launch.”

    That’s right, the Trump campaign’s recently revised budget proposals – which were intended in part to address previous criticisms of his earlier proposal that would have exploded the deficit to pay for tax cuts for the rich – continue to explode the deficit to pay for tax cuts for the rich. Hillary’s plan largely pays for itself. Should this be more of a campaign issue? Sure, voters generally don’t really care about the debt or deficit when that debt is being used to pay for things that help average people. But this is basically a a massive explosion of the debt to pay for tax cuts for Donald Trump and his billionaire buddies. That seems like potentially big issue in this campaign, especially now that Donald Trump has made it clear he wants interest rates – and therefore the interest paid on government debt – to rise sharply. Shouldn’t he be forced to answer questions about his desire to have the Fed jack up rates and then have the public pay higher interest on the debt he plans to create to pay for those tax cuts for billionaires (and probably try to get rid of the Fed’s dual mandate so employment is no longer a consideration) at least once during this election? Sure, his answer will undoubtedly be nonsense, but since he’s about to become president it’s pretty important nonsense.

    It’s all a reminder that when Trump says his plan for the economy is “jobs, jobs, jobs”, he’s mostly talking about jobs for bankers, bond traders, and bankruptcy lawyers. The job growth is going to be YUUUUGE!

    Posted by Pterrafractyl | September 24, 2016, 6:12 pm
  2. With the first big Clinton/Trump debate Monday night with a focus on national security, it’s worth noting the Trump campaign has a new argument it can make for how much Trump loves the military: Now that the Trump has finally decided to partially pay for his trillions in proposed tax cuts for the rich by implementing a “penny plan” of reducing a discretionary federal spending by one percent a year, the military is one of the only parts of the government his budget plan wouldn’t eviscerate to pay for those tax cuts. That’s how much he loves the military. It’s probably not an argument the Trump campaign wants to actually make in public since it’s been trying to pretend like Trump’s not a typical slash and burn supply-side Republican, but the Trump campaign could indeed make that argument:

    Associated Press

    AP FACT CHECK: How Trump’s ‘Penny Plan’ adds up to big cuts

    By CHRISTOPHER S. RUGABER and CALVIN WOODWARD
    Sep. 16, 2016 2:48 PM EDT

    WASHINGTON (AP) — Donald Trump’s “Penny Plan” sounds like a painless pinprick in the federal budget — a 1 percent annual cut in a chunk of government spending, adding up to huge savings. “One penny,” he says. “We can all do that.”

    But it’s really an axe that would hollow out much of what it touches.

    In his economic speech Wednesday in New York, Trump said the plan would save $1 trillion over a decade. Military spending, Social Security, Medicare, Medicaid and veterans programs would be left untouched.

    How can a mere penny on the dollar do that, especially when the biggest budget items are exempted?

    A look at some of Trump’s economic claims and how they compare with the facts:

    TRUMP: “If we just save one penny of each federal dollar spent on nondefense and non-entitlement programs, we can save almost $1 trillion over the next decade. One penny, we can all do that.”

    THE FACTS: It’s far from that simple. Trump only has about a third of the budget to work with, because he’s vowing to protect the vast areas of spending in the other two-thirds. The cuts he’s actually talking about would add up to about 25 percent over the 10 years, compared with what would happen with future spending under current law, calculates the nonpartisan Committee for a Responsible Federal Budget.

    Those cuts are “potentially drastic,” the committee says in its analysis of the Penny Plan, and Trump did not spell out what they would be.

    The chunk of spending he would target — known as non-military discretionary spending — covers health programs, education, the environment, public works, energy and almost everything else the government does, apart from the huge entitlement programs and Pentagon spending. And the cuts would come as the country grapples with rising health costs and an aging population.

    If the country bites the bullet and accepts severe cuts, would that really save $1 trillion in a decade? Not quite, but in the ballpark.

    The group’s analysis estimates savings of $700 to $800 billion. “Still,” it says, “implementing the proposal would be quite difficult without eliminating or dramatically scaling back several government functions, and we would encourage the Trump campaign to identify where at least some of these cuts would come from.”

    ___

    TRUMP, on 14 million people leaving the workforce during Obama’s presidency: “My economic plan rejects the cynicism that says our labor force will keep declining.”

    THE FACTS: It’s not cynicism that’s the problem, it’s mostly aging.

    Roughly 10,000 baby boomers turn 65 every day, and many of them retire. That reduces the number of Americans working or looking for work and limits how fast the economy can grow. Fewer people working translates into slower growth. The nonpartisan Congressional Budget Office estimates that the labor force participation rate will be 60.2 percent in 2026, down from 62.8 percent today, based partly on population trends.

    To be sure, aging isn’t the only factor. The proportion of Americans in their prime working years — from age 25 through 54 — who have jobs or are looking for work is still about 1.5 percentage points below pre-recession levels. Some have given up looking, while others have joined the disability rolls.

    It’s also true that the number of Americans outside the workforce has increased to 94 million from about 80 million when Obama was inaugurated. That also reflects increasing retirements, and the rising likelihood that those aged 16 through 24 will stay in school rather than seek work.

    ___

    TRUMP: “Over the next 10 years, our economic team estimates that under our plan, the economy will average 3.5 percent growth and create a total of 25 million new jobs.”

    THE FACTS: That sounds like a lot, but it’s the current pace of job growth, which is a little slower than in 2014 and 2015.

    In the past 12 months ending in August, the U.S. economy has added nearly 2.5 million jobs — the same annual pace Trump is promising. In 2015, the economy added 2.7 million, and the year before that, 3 million. Those were the two best years of hiring since 1998-99.

    Trump’s goal, then, could be quite realistic, but it might be hard to square with his declaration that his plan is “the most pro-growth, pro-jobs, pro-family plan put forth perhaps in the history of our country.”

    ___

    “The chunk of spending he would target — known as non-military discretionary spending — covers health programs, education, the environment, public works, energy and almost everything else the government does, apart from the huge entitlement programs and Pentagon spending. And the cuts would come as the country grapples with rising health costs and an aging population.”

    Also recall the reports that Trump told Paul Ryan that cutting entitlements is the ‘morally right’ thing to do but that he can’t get elected running on that so, in all likelihood, the only part of the federal government that isn’t going to get slashed and burned under a Trump presidency is the military. He really loves the military. To the near exclusion of everything else apparently. He’s probably not going to bring that up in the national security debate, but he could.

    Posted by Pterrafractyl | September 25, 2016, 10:27 pm
  3. So Donald Trump decided to attack not just the Federal Reserve and Janet Yellen during last nights debate but also the overall US economy. “We are in a big, fat, ugly bubble. And we better be awfully careful.” That was Donald Trump’s message to America. And when you consider that consumer confidence is actually on the upswing and maintaining that confidence is one of the trends we need in order to safely lift off from the current ultra-low rate environment, it’s probably safe to say that what Trump told the US public about the state of the US economy wasn’t actually very careful. Perhaps even awfully careless:

    US News & World Report

    Consumers Feeling Good Despite Trump’s ‘Bubble’ Belief

    Consumer confidence and investor sentiment is high. But is Trump right about a dangerous bubble forming?

    By Andrew Soergel | Economy Reporter Sept. 27, 2016, at 5:06 p.m.

    American consumers haven’t felt as comfortable as they do now since before the Great Recession. That in some ways doesn’t bode well for GOP nominee Donald Trump’s doom-and-gloom assessment of the economy, but it also could support his claims that the country is perched in a precarious bubble.

    The Conference Board’s latest Consumer Confidence Index climbed in September to its highest level since 2007, as components tracking both present conditions and future expectations improved over the month.

    “Consumers’ assessment of present-day conditions improved, primarily the result of a more positive view of the labor market. Looking ahead, consumers are more upbeat about the short-term employment outlook,” Lynn Franco, the board’s director of economic indicators, said in a statement accompanying the report.

    It’s no surprise Americans are feeling comfortable with their employment prospects. The domestic labor market has now generated more than 14 million new positions over 71 consecutive months of expansion. The government’s most recent layoff tally dropped to a three-year low in July, and the unemployment rate has hovered at 4.9 percent for three straight months.

    By nearly all indications, employment in the U.S. is on solid footing.

    “If you showed up on the planet today and knew very little about today’s environment and hadn’t been living through it, you’d look at the U.S. and see 3 percent unemployment rates in some cities,” says Andrew Chamberlain, chief economist at employment hub Glassdoor. “You’d see record numbers of job openings. And you’d see a labor market that is working remarkably well, especially in light of how bad the last recession was.”

    And yet a major presidential candidate has made unemployment and job loss a staple of his campaign. During his Monday night debate with Democratic nominee Hillary Clinton at Hofstra University, Trump hammered home the idea that America’s labor market is hurting because China and Mexico have eaten up manufacturing jobs – jobs that are widely believed to be gone for good.

    “Our country is suffering because people like Secretary Clinton have made such bad decisions in terms of our jobs and in terms of what’s going on,” Trump said. “Look, we have the worst revival of an economy since the Great Depression.”

    To be sure, America’s recovery from the Great Recession – which was itself the country’s single worst economic downturn since the Great Depression – hasn’t exactly been stellar. Yet while Trump is right that economic growth has been sluggish of late, his diagnoses of what’s wrong with the labor market have been hit as off base.

    He has repeatedly suggested African-American youth unemployment, for example, sits north of 50 percent, when actual government statistics suggest the rate is roughly half that. And he continues to suggest he can bring back millions of jobs, some of which have been rendered obsolete by technological innovation.

    So despite recent labor market successes, widespread wage gains, a continued housing recovery, low layoff totals and pre-recessionary levels of consumer confidence, Trump regularly doubles down on doom-and-gloom.

    In that vein, he made an interesting point Monday night that’s sure to send economic doomsayers into a tizzy. Maybe certain aspects of the economy and the market appear too strong right now, he implied. We’re in a bubble, he alleged, and policymaking allies of President Barack Obama – Clinton included – have put us at risk of a burst.

    “Believe me, we’re in a bubble right now. And the only thing that looks good is the stock market, but if you raise interest rates even a little bit, that’s going to come crashing down,” Trump said Monday. “We are in a big, fat, ugly bubble. And we better be awfully careful.”

    Although it’s not exactly correct to say that the “only thing that looks good is the stock market,” Trump’s right that the market has looked good lately: The Dow Jones industrial average closed Tuesday up more than 130 points. That’s more than 2,220 points – 13.9 percent – higher than where it sat a year ago. Stocks have climbed considerably over the last few years, and the market’s strength is undoubtedly one of the reasons consumer sentiment is so high.

    The problem with bubbles, though, is that they’re hard to identify before they burst. But analysts generally don’t believe the country is on the verge of a meltdown.

    Nouriel Roubini, an economist and professor at New York University’s Stern School of Business – and a man who predicted the housing bubble of the mid-2000s and subsequent financial crisis – told CNBC last week that he doesn’t think “we are in a bubble right now,” but that “the price of many assets … look kind of expensive.”

    “Across the board, I don’t see a bubble,” he said. “But I see certainly some frothiness.”

    Trump blames what he sees as a “bubble” on political games being played by the U.S. Federal Reserve. He’s made this claim several times before but dug in further Monday night, saying that stocks will “come crashing down” when the Fed raises interest rates even slightly.

    “Crashing down” might be extreme, but there are actual market movements to back up Trump’s claims. Stocks have tended to waver of late when Fed officials deliver statements suggesting they’d support a near-term interest rate hike, and markets have climbed after central bankers passed on raising their benchmark interest rate at their periodic meetings in Washington.

    Low interest rates are designed to help stimulate economic growth, and investors aren’t looking forward to seeing the training wheels come off completely. But what Trump is alleging is that Fed Chair Janet Yellen and her colleagues are keeping rates low to secure Obama’s economic legacy. The GOP nominee believes stocks will plummet when the next president moves into the White House.

    Yellen and a handful of her colleagues, for their part, have repeatedly indicated their economic deliberations are conducted independently of political pressures. It’s also worth noting that Trump has seemed to contradict his own argument by saying the Fed should have raised rates already. If the economy is as bad as Trump says it is, rates theoretically should be as low as possible to boost growth. Trump thinks rates should be higher, as do many other analysts, but that desire typically is based on the assumption that the economy is strong enough to handle higher rates.

    Still, if the Fed raises interest rates in December as expected and Trump emerges victorious on Election Day, the stock market could come crashing down – though not for the reasons Trump believes.

    “Should Trump win, there is likely to be an immediate negative shock in the financial markets due to increased levels of uncertainty and a shaking up of the status quo,” Nigel Green, founder and CEO of financial consultancy the deVere Group, wrote in a research note Tuesday. “Should Clinton win, the financial markets are likely to immediately bounce as they breathe a collective sigh of relief – they highly value the continuity she represents.”

    So even though consumers feel pretty good about current conditions, the labor market is in good shape and stocks continue to exhibit strength, analysts will be keeping a keen eye on any bubble-like developments.

    And should Trump win in November, his Wall Street doomsday prophecies could become self-fulfilling.

    “Low interest rates are designed to help stimulate economic growth, and investors aren’t looking forward to seeing the training wheels come off completely. But what Trump is alleging is that Fed Chair Janet Yellen and her colleagues are keeping rates low to secure Obama’s economic legacy. The GOP nominee believes stocks will plummet when the next president moves into the White House.

    That’s right, Trump’s message to the American public isn’t simply that Janet Yellen and the Fed board of governors are in a conspiracy to uphold the stock market to secure President Obama’s legacy. He’s extending that assertion to include the prediction that the stock market is poised to crash with just the slightest hike in rates and that this is going to happen soon, regardless of who wins the election:


    Believe me, we’re in a bubble right now. And the only thing that looks good is the stock market, but if you raise interest rates even a little bit, that’s going to come crashing down,” Trump said Monday. “We are in a big, fat, ugly bubble. And we better be awfully careful.”

    Now, it is true that stock markets do tend to got down with central bank rate hikes, which is why you generally don’t want to hike rates before the economy is improving. But it appears that Trump is telling the American public that we are just months away from a major, unavoidable stock market crash. And there’s nothing we can do. If pundits and other commentators want to publicly predict that outcome there’s nothing wrong with that. But here we have the GOP nominee who has made the prediction of an inevitable major stock market collapse, soon, one of his major campaign themes. That’s probably not going to do great things for consumer confidence.

    As we can see, while the US economy is indeed continuing to face challenges, including the major challenges associated with carefully extricating ourselves out a ultra-low-interest environment without making things worse, the biggest bubble threatening the US economy today isn’t exactly financial in nature.

    Posted by Pterrafractyl | September 27, 2016, 6:53 pm
  4. Now that Donald Trump has declared war on the Federal Reserve and Janet Yellen in particular (although he was actually declaring war on the entire Fed but doesn’t seem to realize that), one of the unpleasant questions we have to ask is whether or not Trump actually trying to create an economic crisis by freaking out the markets in advance of the election. After all, given that Trump is basically pledging to somehow force the Fed to raise interest rates and tank the stock markets, the closer he gets tying or leading in the polls the likelier it is that we’re going to see a Trump presidency and some sort of major economic crisis. We’ve long known that he was planning on causing a fiscal crisis given his budget and tax schemes. But now that he’s declared war on the Fed and low interest rates and is assuring the public that the markets are going to crash the moment Obama leaves office, it’s also very clear to markets that a Trump presidency is going to create a monetary crisis too.

    Markets notice things like that. And Trump sure knows markets know that. So is Trump trying to make sure the markets are going to get increasingly freaked out in the hope of triggering a big sell off that he can use to sour the electorate’s mood on the economy? Or maybe he’s just being chaotically reckless and there’s no real method to the madness? Who knows. But as this Baron’s interview makes clear, when Trump trash talks the Fed and economy simultaneously and assures voters that a big crash is just around the corner (but his magical supply-side unicorn economy plan will fix it all so don’t worry) the financial sector is listening too:

    Baron’s

    What A Trump Presidency Could Mean for Janet Yellen

    By Amey Stone
    September 28, 2016, 9:35 A.M. ET

    Post debate analysis among bond strategists is centering on the question of what Fed Chair Janet Yellen will do if Donald Trump is elected president. Trump trashed Fed policy in Monday night’s spectacle (you can see a video of his comments here).

    For the bond market, political meddling in monetary policy is troubling, to put it mildly.

    RBS strategists have been fielding questions from clients about what a Trump presidency could mean for the Fed. There are two main questions strategist Blake Gwinn answers Wednesday:

    Question No. 1: Would Trump try to push out Yellen?

    Answer: Certainly seems likely.

    Gwinn adds:

    However, Yellen’s term as Chair doesn’t end until February of 2018, while her Board term doesn’t expire until January 2024, although it would be highly unusual for her to keep serving on the Board after her Chair term ends.

    Question No. 2: If Trump starts actively pushing her out, would she go?

    Answer: Maybe, but she would probably stay until the end of her term.

    Gwinn explains:

    This question is much more difficult. On the one hand, Yellen might want to avoid dragging the Fed into the crosshairs of the new administration or at least feel that the Fed/economy would be better served by allowing the new President to speed up the time frame for choosing her replacement. On the other, Yellen may see staying until the end of her term as a statement about Fed independence. She might see not stepping down as sending a clear message that the Fed is not another branch of the administration. There is also an argument to be made for maintaining some continuity in Fed leadership during a period of transition for both monetary policy, as the Fed (theoretically) continues on the path to normalizing rates, and government, as a Trump win would likely bring about some significant changes at Treasury, as well as some likely changes in fiscal policy.

    I would expect her to take the second option, and stay until the end of her term. Never forget, Yellen is old-school Brooklyn. I think she may stay around for no other reason than to send a clear message that the Fed won’t be pushed around by the political process.

    Gwinn makes one additional point on Trump and the additional Fed board seats that would open up:

    It’s worth remembering that there are still 2 open seats on the Fed Board that Trump could potentially fill if he is elected. So even if Yellen didn’t resign, he could theoretically start stacking the deck with FOMC members more in-line with his point of view from day 1. Who those nominees would be, for either those FOMC seats or Yellen’s replacement, are anyone’s guess but I would assume that he would lean more towards the business/MBA side than the academic/PhD side and probably lean more hawkish than dovish. Overall, I could see this adding a hawkish element to any Trump on/off trade as we continue to ride the poller-coaster into November.

    “I would expect her to take the second option, and stay until the end of her term. Never forget, Yellen is old-school Brooklyn. I think she may stay around for no other reason than to send a clear message that the Fed won’t be pushed around by the political process.

    It sure sounds like the fight Trump picked with the Fed is a fight he might actually get if he wins. A fight that could reverberate across the global economy, potentially for years. Attacking Yellen as being part of some sort of Obama cabal that’s going to let the economy tank as soon as Obama leaves office (apparently even if Hillary wins they’ll let it tank) isn’t exactly the kind of campaign theme that’s going to reassure markets but that’s we he said. That’s literally what he explicitly said during the debate.

    So if Trump wins, the global markets are poised to get a very sudden and weirdly unpleasant shock: Trump either bullies the Fed into doing his bidding and interest rates get hiked or he spends his first year in office in open opposition to the Fed waiting for Yellen’s term to end while he complains about the Fed not jacking up interest rates when inflation is still near zero. That’s new.

    Adding to the certain uncertainty that a Trump presidency brings, we still don’t really know who he would appoint to the Fed Board.

    It’s worth remembering that there are still 2 open seats on the Fed Board that Trump could potentially fill if he is elected. So even if Yellen didn’t resign, he could theoretically start stacking the deck with FOMC members more in-line with his point of view from day 1. Who those nominees would be, for either those FOMC seats or Yellen’s replacement, are anyone’s guess but I would assume that he would lean more towards the business/MBA side than the academic/PhD side and probably lean more hawkish than dovish. Overall, I could see this adding a hawkish element to any Trump on/off trade as we continue to ride the poller-coaster into November.

    Considering there are two Board seats open, and considering he’s made his Yellen/Obama/the-economy-is-about-to-crash Fed conspiracy a major campaign theme, shouldn’t we be asking him about who he’s planning on filling those two seats? We know they’ll be hawks. But what kind? The more traditional right-wing hawk crank or a full-blown Alt-Right end-the-Fed gold-bug? It’s an especially important question to be asking at this point after one of Trump’s economic advisors, Judy Shelton, just wrote a piece for the Financial Times that predicts bringing back the gold standard will be on the Trumpian agenda (and that central banks shouldn’t be manipulating interest rates at all because that’s a form of currency manipulation):

    Financial Times

    Trump is right to take aim at the ‘political’ Fed

    He actually understands how interest rates affect investment calls, writes Judy Shelton

    by: Judy Shelton

    September 28, 2016

    Donald Trump has broken a cardinal rule in US presidential campaigning by openly questioning the effectiveness of the Federal Reserve. He believes that the low interest rate regime engineered by America’s central bank has not stimulated real growth but has rather created a “false economy” that could lead to the next global financial meltdown. Moreover, he questions the motives of Fed officials. “The Fed is being more political than Secretary Clinton,” he said in Monday night’s presidential debate.

    To suggest that the implementation of monetary policy could be influenced by political considerations is to pull back the curtain on an institution with vast discretionary powers. “We do not discuss politics at our meetings,” Fed chair Janet Yellen stated after its latest opt-out on raising rates.

    Not explicitly, perhaps. But the central bank can hardly be exempted from the ramifications of its powerful role in distributing economic rewards. The Fed has adopted monetary policy decisions that channel low-cost funding to wealthy investors and corporate borrowers at the expense of people with ordinary bank savings accounts and retirees on fixed-income pensions. That is not only inherently political — it is antithetical to the American principle of treating all citizens equally.

    American economic revival is the crux of the Trump pro-growth agenda. And while his economic plan encompasses tax reform and a rollback of excessive regulations, Mr Trump also recognises the importance of a dependable, stable monetary foundation to foster economic growth for the whole of society, rather than merely lining the pockets of financial market speculators.

    This position is in keeping with his long-expressed disapproval of countries that manipulate their currencies to gain a trade advantage. He sees it as a violation of free-trade principles, a distortion that rewards one set of individuals at the expense of others. How can genuine free-market competition flourish when foreign governments can tilt the playing field in favour of their own industries? It is time to acknowledge, too, that central banks are the biggest culprits when it comes to moving exchange rates.

    What can we expect in the event of a Trump victory in November? Anyone who thinks that the candidate’s criticisms of the Fed are meant to spur a rise in interest rates is missing the point: we have arrived at a point where conjecture over when the central bank will increase its key interest rate by a mere one-quarter of 1 per cent carries the threat of igniting the world’s next financial crisis.

    Clearly, this is no way for the US to run monetary policy. The minutiae of monetary policy have seemingly become more important than the fullness of fiscal policy in forging the path to salvation for our low-growth, low-productivity economy — crowding out the pillars of substantive reform and undercutting the potential for fundamental renewal aimed at making America great again. Mr Trump’s bold plan for increasing jobs, wages, incomes and opportunities depends on fixing what is broken. He believes people flourish under a minimum government burden and warns that the Fed’s economic meddling is doing more harm than good.

    Something has clearly gone wrong with the Fed’s model; even when its own metrics have been attained, we are left to guess what happens next. No wonder its motives have likewise been called into question. By focusing on the Fed, Mr Trump raises the importance of restoring monetary integrity. The dollar should be the world’s most trustworthy currency.

    Can the pursuit of sound money at home be reconciled with the notion of American economic leadership on the world stage? Mike Pence, Mr Trump’s running mate, has called for a rethinking of the international currency system — even proposing that perhaps the time has come to have a debate over gold and the proper role it should play in monetary affairs.

    Mr Trump has not publicly embraced any such idea, although he has mused: “Bringing back the gold standard would be very hard to do, but boy, would it be wonderful.” No one anticipates that a Bretton Woods-style conference will soon take place at Mar-a-Lago, the exclusive Trump resort in Florida. Still, as Mr Trump often urges: it is time to start thinking big once again.

    The writer is a member of the Trump economic advisory council

    “This position is in keeping with his long-expressed disapproval of countries that manipulate their currencies to gain a trade advantage. He sees it as a violation of free-trade principles, a distortion that rewards one set of individuals at the expense of others. How can genuine free-market competition flourish when foreign governments can tilt the playing field in favour of their own industries? It is time to acknowledge, too, that central banks are the biggest culprits when it comes to moving exchange rates.

    That’s right, Trump’s economic advisor, Judy Shelton, just told us that central banks are the biggest culprits of currency manipulation. So it would appear that in Trump’s view central banks shouldn’t actually ever change interest rates because that would be a form of currency manipulation. Could that really be what Shelton is implying? Well, that would indeed appear to be what she’s implying. Especially considering that she ended the piece with talking about how Trump and Mike Pence are both fans of the gold standard and really wouldn’t mind a discussion about returning to that:

    Can the pursuit of sound money at home be reconciled with the notion of American economic leadership on the world stage? Mike Pence, Mr Trump’s running mate, has called for a rethinking of the international currency system — even proposing that perhaps the time has come to have a debate over gold and the proper role it should play in monetary affairs.

    Mr Trump has not publicly embraced any such idea, although he has mused: “Bringing back the gold standard would be very hard to do, but boy, would it be wonderful.” No one anticipates that a Bretton Woods-style conference will soon take place at Mar-a-Lago, the exclusive Trump resort in Florida. Still, as Mr Trump often urges: it is time to start thinking big once again.

    Yes, it is time to start thinking big once again. Like how bithe financial crisis will be under a Trump presidency once he starts talking about “rethinking of the international currency system” and trots out Mike Pence and folks like Judy Shelton to fill in the details. And with Trump in striking distance of taking the White House, the time to think big (big crisis) isn’t after the election. The time is now. Especially for the markets. The markets that will get increasingly jittery at the prospect of a Trump presidency and therefore increasingly pro-Trump since jittery markets are bound to help Trump at the polls. Is that intentional or just Trump being Trump? Or rather, Trump being Pence?

    It’s also worth keeping in mind that since Trump appears simultaneously question the Fed’s independence and attempting to bully it into hiking rates, as appealing as ending Fed independence might sound a lot of people, it’s not as if there isn’t a branch of government that has potentially far more power than the Federal Reserve to manipulate the economy and is, at least in theory, directly accountable to the public: Congress. Congress controls spending. And Congress can, and should, spend a lot in an low-interest environment following the kind of financial crisis that happened in 2008. Instead the GOP forced the spending sequester as the compromise to much larger cuts they were demanding. And Trump is promising to cut spending even more to close the giant budget gap his tax cuts for the rich will create. So the fiscal policy and overall public investments that Congress should have been legislating in the wake of the 2008 financial crisis, the largest financial crisis since the Great Depression, have had no prospect of happening and will continue to have no prospect of happening as long as the GOP is in control of the executive or legislative branches of government. But that doesn’t mean Congress couldn’t be stimulating the economy like it should. It just chooses not to. Maybe the voters could utilize their collective voter independence to do something about that. Maybe.

    Posted by Pterrafractyl | October 1, 2016, 7:33 pm
  5. Now that the 2005 ‘hot mic’ footage of Donald Trump bragging about how he can use his fame to sexually assault women has apparently finally created the kind of controversy that will lead his fellow GOPers to call for him to drop of the race, it’s probably worth reminding ourselves that Trump’s running mate, Mike Pence, is a misogynist’s dream politician based on how his policies callously harm women. So while Trump’s policy proposals can be seen as a metaphorical assault on the almost everyone who isn’t wealthy, it’s pretty clear that women in general will be one of the groups threatened and disrespected by a Trump presidency, especially when it comes to reproductive health policies.

    So with that in mind, and with the fact that about 25 percent of US households are headed by single-mothers (and 6 percent by single-fathers) in mind, check out which group of Americans is probably going to see their taxes rise under Donald Trump’s budget-busting tax cut plans:

    Medium
    CAP Action

    Trump’s Tax Plan Raises Taxes on Single Parents. His Campaign’s Examples Prove It.

    By: Harry Stein
    Sep 26, 2016

    Donald Trump seems to have a grudge against single parents. His maternity leave proposal might exclude some single mothers. And a new study by New York University Law Professor Lily Batchelder found that Trump would raise taxes on at least 7.8 million families, including the majority of single parents.

    Perhaps this is why Trump uses examples with married couples when discussing his tax plan. Even Trump’s example families would pay higher taxes under Trump’s plan, if those families were headed by a single parent instead of a married couple. These tax increases are larger than the tax cuts received by the married couples in Trump’s examples.

    Comparing Trump’s tax plan to the current tax system, Trump raises taxes on single parents in three ways: eliminating the head of household filing status, eliminating personal exemptions, and raising the tax rate in the lowest tax bracket from 10 percent to 12 percent.

    To illustrate how his tax plan would work, Trump uses two example families, both of which are headed by married couples with two children. One of these families makes $50,000 per year and has $8,000 in child care expenses. The other family makes $75,000 per year and has $10,000 in child care expenses. The family making $50,000 would get a tax cut of $93, and the family making $75,000 would get a tax cut of $1,083.

    If Trump gets his way, the wealthiest Americans would see much larger tax cuts, according to an analysis by the conservative Tax Foundation. At the same time, Trump’s tax plan would make huge spending cuts to affordable housing, education, and even health care for veterans.

    Yet even with such a large overall tax cut that would undermine health care, retirement security, and other middle-class programs, Trump would still raise taxes on most single parents. A single parent with a $50,000 income, two children, and $8,000 in child care expenses?—?the same as Trump’s example but with a single parent?—?would get a $340 tax increase. If their income was $75,000 and their child care expenses were $10,000, Trump would raise their taxes by $1,140.

    The Trump campaign claims that Batchelder’s study is “invalid,” because it does not include the possibility that families will receive a $500 matching contribution from the federal government for using Trump’s proposed Dependent Care Savings Accounts. However, Trump’s own numbers using the sample families examined here also did not include any government match from these accounts.

    The Tax Foundation also did not include Dependent Care Savings Accounts in its analysis of Trump’s tax plan, but instead of calling this analysis invalid, the Trump campaign touted the Tax Foundation’s findings?—?even after criticizing the Batchelder study. If the Tax Foundation had included this provision in its analysis, it would have further increased the already massive cost of Trump’s tax plan. The Trump campaign says that the government matching contribution is for “low-income families,” but has not made clear whether a family income of $50,000 or $75,000 qualifies as low-income. Even if the single parent with a $75,000 income received a $500 match for both children, Trump’s plan would still raise their taxes by $140.

    The Trump campaign now says that Trump would tell Congress not to raise taxes on any low- and middle-income Americans – even though his own tax plan says otherwise. In other words, Trump is saying “believe me” to some of the same working families that have already been victimized by Trump’s scams and broken promises.

    “Yet even with such a large overall tax cut that would undermine health care, retirement security, and other middle-class programs, Trump would still raise taxes on most single parents. A single parent with a $50,000 income, two children, and $8,000 in child care expenses?—?the same as Trump’s example but with a single parent?—?would get a $340 tax increase. If their income was $75,000 and their child care expenses were $10,000, Trump would raise their taxes by $1,140.

    That’s right, despite the trillions of dollars Trump’s tax cut would add to the debt, somehow a majority of single parents, a demographic that is overwhelmingly single mothers, would get a tax hike. Funny how that works.

    Also note that when Trump responds to these criticism by saying that he’ll tell Congress not to raise taxes on any low- and middle-income Americans, the President doesn’t actually get to tell Congress what to do. And the GOP-controlled Congress might have its own tax and spending plans:

    Politico

    Ryan on Trump’s tax plans: ‘Congress writes these laws’

    By Kyle Cheney

    09/25/16 11:16 AM EDT

    Presented with a series of Donald Trump’s policies that conflict with his own policy vision, House Speaker Paul Ryan had a message: “Congress writes these laws.”

    “Congress is the one that writes these laws and puts them on the president’s desk,” the Wisconsin Republican said Sunday on CBS’ “Face the Nation.”

    Pressed by host John Dickerson about Trump’s plans for a maternity leave entitlement and insistence on protecting entitlements from cuts, Ryan said, “We have someone that is going to work with us at putting these reforms in place.”

    “They should pay attention to both of us … we are offering a unified front of solutions,” Ryan said.

    ““They should pay attention to both of us … we are offering a unified front of solutions,” Ryan said.”

    Yes, when House Speaker Paul Ryan is asked about Donald Trump’s plans that don’t fall under traditional GOP ‘starve the needy’ orthodoxy like Trump’s proposed maternity leave plan or his pledge to not cut entitles like social security, Ryan’s response is ‘hey, I’ve got plans too! Talk to both of us!’. Ryan probably isn’t actually concerned about Trump refusing to cut entitlements since Trump reportedly told Ryan he agrees they need to be cut but can’t get elected if he admits it, but his fake protestations are still a sign of what’s to come if Trump or a any other GOPer that steps in to replace Trump actually wins. And since Paul Ryan’s plans basically never change, even after the Romney/Ryan ticket lost in 2012, all signs point towards the Ryan Budget plan. A budget plan seemingly designed to harm women:

    The Nation

    What Paul Ryan’s Budget Means for Women
    Short version: a huge reduction in many of the programs they rely on.

    By Bryce Covert
    March 12, 2013

    The latest iteration of Paul Ryan’s budget is out today, and while you might expect it to look very different than the one proposed before he was part of a losing presidential ticket, he seems to have dug in his heels on some of his most extreme proposals, like block granting vital programs, voucherizing Medicare and drastically slashing spending. As with the first rounds of Ryan budgeting, this one would be bad for nearly everyone (except perhaps the wealthy), but it would especially take an enormous toll on the country’s women.

    Medicaid

    Women depend heavily on Medicaid. They make up 70 percent of its beneficiaries, which means 19 million low-income women have access to health care.

    Last time around, Paul Ryan wanted to block grant Medicaid. This time is no different. In its current form, Medicaid is a program in which states and the federal government jointly finance health care for low-income people. Because the federal government shares the cost with states, it also requires them to adhere to some guidelines on benefits and eligibility. In a block grant system, however, the federal government sends a lump of cash off to the states with no strings attached. Even if actual spending on the program isn’t reduced (which, given the huge cuts to government spending included in this program, those who are wonkier than I may find it will be), simply changing the structure of the program this way is a very bad plan.

    We’ve tried this experiment before: we block granted welfare, now called TANF, and it’s done a terrible job of helping low-income Americans, particularly as demand skyrocketed during the recession. In 2010, only twenty-seven of every hundred families living in poverty received TANF benefits. Some states could decide to increase benefits and eligibility, but given the tight budget constraints they face it’s much more likely that people will be dropped. In fact, somewhere between 14 million and 27 million could lose Medicaid coverage by 2021 under a block grant system. That will have a huge impact on the women who rely on it.

    But the picture gets even worse when you consider what else he wants to do.

    Obamacare

    Ryan also promises to repeal the Affordable Care Act. While he doesn’t want to repeal cuts to Medicare spending included in the act, he does promise to repeal the benefits, perhaps the biggest of which is the Medicaid expansion. Women would reap huge benefits from the expansion of Medicaid, given that 13.5 million were expected to get health coverage that way by 2016.

    Other provisions that women have been benefitting from in the ACA: the end to gender rating, which was costing women an extra $1 billion a year; access to preventive care without a co-pay, netting a woman around $11,000 now that she doesn’t have to pay a co-pay for contraception, among other things; getting rid of “pre-existing conditions” like pregnancy and domestic violence; and many other great benefits. All out the window if Ryan gets his way.

    Medicare

    As with Medicaid, the majority of Medicare beneficiaries are women. Women live longer than men, but they also are far more likely to live in poverty in their old age, with twice as many women over age 65 in poverty compared to men.

    Ryan still wants to voucherize Medicare, even though the electoral trouncing he and Romney took last year seemed at least in part a rejection of messing with this program. Currently, taxpayers are on the hook for any increase in healthcare costs or premiums that are higher than expected. But with the voucher program, seniors get a coupon of sorts to buy insurance coverage—in its current form, Ryan’s budget allows for them to buy private insurance or Medicare insurance—and will have to make up the difference if the coupon doesn’t go far enough. Meanwhile, Medicare currently guarantees what services will be covered, but in Ryan’s program seniors will be responsible for determining what services they need depending on which insurers they pick. That’s a pretty difficult job in such an opaque market.

    On top of this, last time around the coupons increased so slowly that spending on the average 67-year-old would have dropped by 35 to 42 percent by 2050. Elderly women would see less and less support for buying the insurance they need.

    Food stamps

    Women rely on food stamps to feed themselves and their families. They are more than 60 percent of adult SNAP (the food stamp program) recipients and over 65 percent of elderly recipients. More than half of the households that rely on SNAP benefits are headed by a single adult, nearly all women.

    Ryan’s plan would block grant SNAP the same as Medicaid. Currently, eligibility for the program has few restrictions, allowing it to serve a wide swath of needy people—47 million participants. On top of this, it’s extremely flexible, allowing it to be one of the most effective cushions for the rising misery during the recession. That would all change under a block grant. Eligibility would vary by state. Meanwhile, while SNAP reaches 75 percent of those who are eligible, we can look at the low rates of TANF participation to see what would happen if it were block granted.

    Discretionary spending

    Ryan’s tax reforms would lead to the federal government losing out on $7 trillion in revenue, mostly with tax breaks aimed at the rich and corporations. But at the same time, he promises to balance the budget in ten years. To get there, he’ll cut spending by $5.7 trillion compared to the current baseline (which, lets remember, is already so low that it’s cutting into vital programs). These cuts won’t fall evenly on defense and non-defense spending—he actually increases defense spending compared to current law by $500 billion over the same time period.

    There are likely lots of other ways this budget will harm women—we’ll find out as budget wonks continue to analyze it. But it’s clear either way that Paul Ryan took his defeat and decided to double down on the policies he set forth. Women voters roundly rejected him and his running mate in 2012. This budget does nothing to address their needs and works against the most vulnerable among them.

    “There are likely lots of other ways this budget will harm women—we’ll find out as budget wonks continue to analyze it. But it’s clear either way that Paul Ryan took his defeat and decided to double down on the policies he set forth. Women voters roundly rejected him and his running mate in 2012. This budget does nothing to address their needs and works against the most vulnerable among them.”

    That was the Ryan Budget in 2013, back before he was Speaker of the House and merely the GOPer on the House Budget Committee who got to take the lead in designing the GOP’s doomsday budget. it was also right after the Romney/Ryan ticket went down in flames in part due to a public rejection of things like the Ryan Budget. So how have things changed in 2016? Well, Ryan is Speaker now. That’s about it. The doomsday budget is still the plan, and Paul Ryan has a plan to make it reality:

    Think Progess

    Paul Ryan plans to use a Trump presidency to ram through his extreme agenda
    He’s already talking about how he’ll pull it off.

    Bryce Covert
    10/6/2016

    Election Day is still a month away, but House Speaker Paul Ryan (R-WI) has already tipped his hand about how he plans to enact his agenda without interference from Democrats if Donald Trump wins.

    At a recent news conference, as reported by Politico, Ryan said that he planned to use the process known as budget reconciliation to implement his policy agenda, which he has dubbed “A Better Way.” That would mean Republicans could pass their priorities without Democratic members of Congress being able to block them.

    “This is our plan for 2017,” he said, showing off a copy of the agenda. “Much of this you can do through budget reconciliation… This is our game plan for 2017.

    Ryan and other Republican lawmakers could use this process to push through their desired changes to the tax code. The tax plan Ryan put forward in June would lower the corporate tax rate, lower rates for the wealthy, and repeal the estate tax. An analysis of the plan found that 99.6 percent of its benefits would go to the richest 1 percent of Americans, leaving just 0.4 percent for everyone else. It would also cost the government $3.1 trillion over a decade.

    They could also pass their proposals for Medicare and Medicaid, food stamps, and rental assistance. Ryan recently proposed instituting strict work requirements for food stamps and housing assistance that could mean throwing people off the rolls if they can’t fulfill the new conditions. His recent agenda includes block-granting Medicaid, which would cut the program by billions and leave tens of millions of people uninsured, and replacing the current guarantee of health care coverage under Medicare with a voucher to purchase private health insurance.

    Meanwhile, Republicans are likely to gut key parts of the Affordable Care Act this way, as they have already tried to do only to be thwarted by a veto from President Obama.

    It seems likely that a President Trump would then sign the measures. One of Trump’s economic advisers, Larry Kudlow, told Politico that passing a tax package through reconciliation would be “not good, fabulous” and “the fastest way in our judgement to get necessary pro-growth tax reform.” He’s been encouraging Trump to use the procedure and he said Trump’s team is considering it.

    Reconciliation has been deployed 20 times by both parties, including Republicans pushing through President George W. Bush’s tax cuts in 2001 and 2003 and Democrats pushing through the final version of the Affordable Care Act in 2010. But Republicans expressed widespread outrage about its usage in the latter instance: Ryan himself called it “an extraordinary and unprecedented abuse” and a “convoluted legislative charade” and said, “Never before has the House committee process been so grossly exploited.”

    “It seems likely that a President Trump would then sign the measures. One of Trump’s economic advisers, Larry Kudlow, told Politico that passing a tax package through reconciliation would be “not good, fabulous” and “the fastest way in our judgement to get necessary pro-growth tax reform.” He’s been encouraging Trump to use the procedure and he said Trump’s team is considering it.”

    Behold, the Ryan Doomsday Budget Plan! Coming to a Congress near you. Complements of President Donald Trump or any GOP replacement. Sure, it’s the kind of plan that will hurt almost everyone who isn’t wealthy. Men and women. Young and old. But as we saw, it’s going to be women and their dependents who are probably going to get hit the hardest. Because of course. It’s a Republican plan.

    Posted by Pterrafractyl | October 8, 2016, 8:12 pm
  6. Some reports comparing the tax plans of Hillary Clinton and Donald Trump came out over the last week in response to the big changes Trump made to his plan last month following criticism that it would explode the debt to pay for tax cuts for the rich. And, of course, the new Trump plan explodes the still debt to still pay for tax cuts for the rich (and Hillary’s does the opposite):

    The New York Times

    Donald Trump Tax Plan Would Add to Debt and Hillary Clinton’s Wouldn’t, Study Finds

    By JACKIE CALMES
    OCT. 11, 2016

    WASHINGTON — The stark choice that Hillary Clinton and Donald J. Trump pose for voters goes as well for their revised tax plans: Mr. Trump would simplify the tax code but cut taxes mainly for the rich and add trillions of dollars to the federal debt, while Mrs. Clinton would do the opposite, an independent analysis released Tuesday.

    The review by the Tax Policy Center, a joint research arm of the Brookings Institution and the Urban Institute, is the first to examine the plans since Mr. Trump significantly rewrote his proposal after criticisms of its costs and inequities and Mrs. Clinton on Monday proposed to double the existing tax break for parents with young children.

    “They really couldn’t be more different,” Len Burman, director of the center and a professor at Syracuse University, said in a conference call with reporters.

    It is unclear that either plan would pass in Congress. If Republicans keep control of the House, even if they lose the Senate, they would probably block Mrs. Clinton’s proposed tax increases. And while Mr. Trump’s plan is similar to one that House Republicans have outlined, many Republicans would probably object to its cost given the size and projected growth of the federal debt as an aging population drives spending higher.

    Mr. Trump’s tax cuts would be the deepest ever, reducing revenue $6.2 trillion in the first decade and mostly benefiting corporations and the highest-income Americans, the center said. Some middle-income families, however, would receive a tax increase.

    With interest, the cost would be $7.2 trillion over 10 years, nearly doubling the growth in the federal debt that is otherwise projected. The cost would build in subsequent decades, though Mr. Trump denounces the size of the debt at nearly every campaign appearance.

    His campaign disputed the cost estimates, saying that the Tax Policy Center did not account for the economic benefits of his tax cuts and other policies on trade, energy and federal regulations. The center’s economists said they would have another analysis of both candidates’ plans within days that accounts for economic changes, but said it was unlikely to alter their conclusions much.

    Mrs. Clinton would substantially raise taxes on high-income taxpayers, mostly on the top 1 percent; slightly reduce taxes on average for middle- and low-income households; and overhaul corporate taxes. Her plan would increase federal revenue $1.4 trillion over the first decade. Rather than lower the federal debt, however, Mrs. Clinton would use the money to pay for education and other initiatives.

    While Mr. Trump, in keeping with his populist message, frequently points to his proposal to end the so-called carried interest tax break for hedge fund operators and other investment managers, the center’s analysis reaffirmed that his tax plan actually gave them “a much better deal” than the existing tax break, Mr. Burman said.

    Under current law, much of their income is taxed as capital gains, at a preferential rate of 23.8 percent instead of higher income-tax rates. Though Mr. Trump would repeal that break, his plan would allow money managers to pay a new 15 percent business rate and “retain a substantial tax advantage on their income compared with wage earners,” according to the center.

    The Trump plan would give the richest 0.1 percent of taxpayers — those with incomes of more than $3.7 million this year — an average tax cut of $1.1 million, for a 14 percent increase on average in their after-tax income. The middle one-fifth of Americans by income would receive a tax cut increasing after-tax income less than 2 percent, on average, while the poorest fifth would get a break of less than 1 percent.

    But many large families and single parents — a separate study put the number at about eight million families — would face tax increases under Mr. Trump’s proposals. That reflects his proposals to repeal personal exemptions and the head-of-household filing status.

    Mr. Trump would reduce the top marginal tax rate for individuals, now 39.6 percent, to 33 percent, and the corporate rate to 15 percent from 35 percent.

    The Trump campaign has sent contradictory signals about the candidate’s plan for owners of so-called pass-through businesses — sole proprietorships, partnerships and S corporations. Campaign officials have told the National Federation of Independent Business that such businesses could pay a flat 15 percent business rate instead of the generally much higher individual rates they currently pay but told accountants calculating the cost of the plan that they would get no such choice.

    Absent clarification from the campaign, the center assumed that choice would be available and concluded the change could lead to significant tax avoidance — of income taxes and payroll taxes that finance Social Security and Medicare — as high-wage employees reclassify themselves as pass-through businesses for tax advantage.

    Unlike Mrs. Clinton, Mr. Trump would also repeal taxes on the wealthy that help finance the Affordable Care Act, and eliminate estate and gift taxes. He would tax some capital gains at death and cap some itemized deductions, to hold down his plan’s costs.

    Mr. Trump, in his plan, does not address the tax breaks so beneficial to real estate developers that may have allowed him to avoid federal income taxes for as much as 18 years. Roberton C. Williams, an economist at the tax center, said about one-tenth of 1 percent of high-income taxpayers avoided any federal income taxes.

    But the number may be larger: Mr. Burman noted that Mr. Trump would not have qualified as rich in the years in question because of the big real estate losses he was claiming.

    Mr. Trump, in his plan, does not address the tax breaks so beneficial to real estate developers that may have allowed him to avoid federal income taxes for as much as 18 years. Roberton C. Williams, an economist at the tax center, said about one-tenth of 1 percent of high-income taxpayers avoided any federal income taxes.”

    Yep, Trump’s revised budget-busting tax plan, which was released before everyone discovered that he may have avoided almost two decades of income tax due to a real estate tax deduction loophole, still contains that loophole. Imagine that. Perhaps a third revision is in order. Perhaps a revision that doesn’t erode the economy’s growth potential and eventually lead to the loss of millions of jobs:

    Fortune

    Donald Trump’s Tax Plan Could Cost the U.S. 11 Million Jobs

    by Lucinda Shen

    October 17, 2016, 7:12 PM EDT

    According to the Penn Wharton Budget Model.

    Donald Trump’s presidency may boost the economy—but only in the short run.

    The Republican presidential nominee’s plan to lower the corporate tax rate and individual taxes would increase federal debt, according to a study the the Penn Wharton Budget Model released in tandem with the Tax Policy Center Monday.

    Trump’s tax plan would initially boost gross domestic production by 1.12% and jobs by 1.7 million more than what both would have been in 2018 without his plan. But by 2027, the results of those tax cuts would push GDP 0.43% lower, and cut some 692,000 jobs.

    If the government continued spending as much as Trump proposed, the U.S. could lose 11 million jobs by 2040, said Kent Smetters, professor of economics and public policy at Wharton who led the development of the model, in a Monday interview at the university.

    “Almost all the bang comes early on” in Trump’s tax plan, Smetters said in the interview. “However, over time, because his plan is unbalanced fiscally, it’s going to produce fairly large deficits.”

    Those budget deficits would theoretically crowd out private investments in the long term, leading to an economic slow down.

    Democratic presidential nominee Hillary Clinton’s tax plans, however, would be “fairly neutral on the economy in the short run.”

    Clinton’s tax plan would shrink GDP by 0.19% and add just 282,012 positions by 2018. But by 2027, Clinton’s policies would lead the GDP up by 0.4%, and add 645,161 jobs. By 2040, the U.S. would have added some two million jobs in comparison to what that figure would have been without her.

    ““Almost all the bang comes early on” in Trump’s tax plan, Smetters said in the interview. “However, over time, because his plan is unbalanced fiscally, it’s going to produce fairly large deficits.””

    Yeah, that sounds like a Republican tax plan: tax cuts for the top trickle down to give the economy a cheap short-term buzz. And then it’s hangover/crash time because it was a stupid plan. Except this time it’s going to be an extra-YUUUUGE hangover/crash that permanently lowers the economic growth rate. Yay.

    Still, in mild defense of Trump’s plan, it’s worth noting that when the above analysis makes the argument that the budget deficits caused by Trump’s plan would reduce future economic growth by “crowding out” private sector spending by flooding the debt markets with public debt, keep in mind that this is a favorite right-wing argument for opposing just about any government spending. Especially stimulus spending.

    Now, the “crowding out” argument is actually going to be valid under some circumstances, like under a Trump plan where government debt spikes due to tax cuts for the super-rich but without a proportional boost to the economy (because the super-rich just throw it all in their offshore tax shelters). So it’s not like arguments against the “crowding out” argument actually doubles as a defense of Trump’s incredibly reckless tax plan. Still, if the Trump campaign would like to come out against that classic “crowding out” right-wing argument against government deficits, it’s sort of an option but they would have to sort of agree with Paul Krugman:

    The New York Times
    The Conscience of a Liberal

    The Doctrine of Immaculate Crowding Out

    Paul Krugman
    May 11, 2011 4:42 pm

    I’ve written before about the doctrine of immaculate transfer in international macroeconomics, which is a common fallacy but not, I’ve suggested, one that rises to zombie status.

    There is, however, a somewhat related doctrine — call it the doctrine of immaculate crowding out — which has now, I’d argued, achieved true zombiehood. That is, it keeps coming back no matter how many times you kill it.

    The most recent example came from John Boehner’s Wall Street talk, where, as Bloomberg puts it,

    Boehner’s statement in his Wall Street speech that government spending “is crowding out private investment and threatening the availability of capital” runs counter to the behavior of credit markets.

    “Look at interest rates. Look at capital spending,” said Nariman Behravesh, chief economist of IHS Inc., a research firm based in Englewood, Colorado. “It’s very hard to come to a conclusion that there’s any kind of crowding out.”

    Well, yes. If you believe that government spending has to crowd out private spending by actually changing incentives, namely by raising interest rates, you have to confront the fact that rates are historically very low, even for business borrowers:

    But it’s now an article of faith on the right that government spending must crowd out private spending, no evidence is necessary. And one must say, alas, that this view has been promulgated by supposedly serious economists.

    And the thing is, at this point no amount of facts and logic will dislodge that article of faith. It’s pretty hard to kill a zombie.

    “Well, yes. If you believe that government spending has to crowd out private spending by actually changing incentives, namely by raising interest rates, you have to confront the fact that rates are historically very low, even for business borrowers”

    As Paul Krugman pointed out back in 2011, the GOP’s arguments against government stimulus spending were basically the classic “crowding out” argument…despite the fact that interest rates were near historic lows at the time which is not a sign of “crowding out” in the debt markets. Quite the opposite. And here we are, five years later with trillions more in debt – largely thanks to the 2008 financial crisis and the GOP’s unwillingness to do the responsible thing and raise taxes on the rich – and those interest rates are still near-historic lows. No signs of “crowding out” so far.

    So, given all that, it’s not unimaginable that the Trump campaign could try to make the case that the “crowding out” argument being used against his tax plan isn’t entirely fair. Sure, it would basically be a disingenuous argument if Trump busted out Paul Krugman’s case against the “crowding out” crowd for a variety of reasons (like how it would ignore the different impacts of government debt used for useful stimulus spending vs government debt as a result of tax cuts for the rich and the fact that Trump wants to dramatically cut taxes but also dramatically indiscriminately cuts useful government jobs and services). But still, Trump could make anti-“crowding out” arguments in favor of his drunken-sailor tax-cut plan. But he won’t because he would also have to basically abandon his war on the Federal Reserve and stop arguing that there needs to be hike interest rates. And acknowledge that his plan is going to explode the debt and deficit and that’s definitely not going to happen. It’s one of those situation where the preexisting insanity and vanity of Trump and the rest of the GOP preclude him/them from using relatively sane views in a deceptive manner to justify his/their insane/vain policies. While that’s not a great situation, it could be worse. Yay.

    Posted by Pterrafractyl | October 18, 2016, 8:32 pm
  7. Here’s some news out of the Fed that should at least sort of please the Trump campaign given Donald Trump’s desire to see interest rates rise: While the Fed is keeping rates steady in November, it sounds like it’s also committed to not only to raising rates relatively soon (likely in December), but is also committed to keeping inflation under 2 percent indefinitely. It all that suggests that the Fed is prepping for an extended series of rate hikes. That should be music to Trump’s ears.

    But an even more pleasing tune for Trump is the reason the hawkish Fed board is giving for why it feels to need to raise rates soon, especially given Trump’s prior statements about how wages in America are too high: The Fed’s hawks are concerned that if unemployment falls too low, wages will rise and that will cause the inflation they dread so much and that’s why they need to raise rates soon:

    The Wall Street Journal

    Fed Doesn’t Aim to Push Inflation Beyond 2%
    Janet Yellen’s sympathy for low interest, jobless rates doesn’t alter Federal Reserve’s policy target

    By Kate Davidson
    Updated Nov. 2, 2016 4:27 a.m. ET

    Fed Chairwoman Janet Yellen set markets abuzz last month when she said running a “high-pressure economy” might help undo some of the economic damage wrought by the Great Recession.

    Some investors wondered whether she meant the Fed was now seeking to push inflation above its 2% target. Her remarks came the same day Bank of England Gov. Mark Carney said the central bank was willing to let inflation temporarily overshoot its 2% goal to prevent the jobless rate from rising sharply, and three weeks after the Bank of Japan said it would aim to exceed its 2% inflation target.

    But Ms. Yellen wasn’t suggesting the Fed follow suit, nor do the central bank’s projections imply a similar strategy.

    She effectively expressed sympathy for the idea of letting short-term interest rates and the jobless rate stay low for a while to explore the costs and benefits to the economy. That would cause inflation to accelerate, but not rise above 2%, according to the Fed’s forecast. Inflation has run below that level for more than four years.

    Her remarks reflect the debate Fed officials are having at their two-day meeting, which concludes Wednesday. They are likely to leave their benchmark federal-funds rate unchanged in a range between 0.25% and 0.5% and signal they could raise it next month.

    Some officials argue for keeping rates low and letting the jobless rate, which was 5% in September, fall further in hopes of generating more jobs and economic gains for people who are only just starting to benefit from the expansion, including African-Americans and Hispanics.

    Others say the Fed should have raised rates already, warning that letting unemployment fall too low could lead to a surge in prices that forces the Fed to raise rates quickly, in turn causing a recession. These officials say this could hurt the very people their colleagues aim to help.

    Fed officials’ projections show they are running a mild version of a high-pressure economy. They expect the unemployment rate to drop over the next few years below 4.8%, which many of them believe is the level—called full employment—below which inflation picks up. They see it falling as low as 4.5% by the end of 2018. In theory, that could draw more workers back into the labor force and boost business investment.

    The jobless rate has held steady around 5% for much of this year despite strong job growth, while the share of Americans who have a job or are seeking one has edged up in recent months. And the unemployment rate for African-Americans has fallen to 8.3% in September from 9.2% a year earlier.

    Meantime, Fed projections show officials expect inflation to rise to 2% by 2018 and stay there through 2019 and in the long run.

    Fed officials don’t know exactly how low the jobless rate can go before inflation picks up too much. If they allow unemployment to fall to 4.5% and inflation doesn’t start to pick up, they will have learned that they might be able to let it decline further without spurring inflation.

    San Francisco Fed President John Williams said last week he has no problem running the economy “somewhat hot,” and said it wouldn’t be unexpected or problematic for inflation to slightly exceed the 2% target. However, aside from Chicago Fed President Charles Evans, who has said inflation should be above 2% half the time and below it half the time, no Fed officials are calling for an inflation overshoot.

    “This idea that we’re going to purposefully overshoot and maybe try to make up for lost ground for the fact that we were missing [the target] for a number of years, that’s a different strategy,” Mr. Williams said.

    That strategy could have advantages, he said, but it isn’t the one Fed officials are pursuing.

    “Fed officials’ projections show they are running a mild version of a high-pressure economy. They expect the unemployment rate to drop over the next few years below 4.8%, which many of them believe is the level—called full employment—below which inflation picks up. They see it falling as low as 4.5% by the end of 2018. In theory, that could draw more workers back into the labor force and boost business investment

    Yes, the unemployment rate is so low that economists are worried that it could drop the so called “full employment” unemployment rate of 4.8 percent and maybe even drop a little below that and start drawing people back into the labor force. And apparently this is concerning to the Hawks:


    Some officials argue for keeping rates low and letting the jobless rate, which was 5% in September, fall further in hopes of generating more jobs and economic gains for people who are only just starting to benefit from the expansion, including African-Americans and Hispanics.

    Others say the Fed should have raised rates already, warning that letting unemployment fall too low could lead to a surge in prices that forces the Fed to raise rates quickly, in turn causing a recession. These officials say this could hurt the very people their colleagues aim to help.

    If we don’t prevent unemployment from falling so low that people start getting raises, there’s going to be hyperinflation!!!! That’s the argument from the Fed hawks. And that’s the argument that appears to be winning on the Fed Board.

    So, given that Donald Trump attacked the Fed for not raising rates, and given that Trump actually doubled-down on his “US wages are too high (especially the lowest wages” comment when questionable about it, it seems like Trump should at least be asked as to whether or not he approves of the Fed’s current plan to raise rates in order to ward off a period of low unemployment and higher wages. It seems like he should be thrilled. His supporters maybe shouldn’t be so thrilled, but Trump sure should be.

    Posted by Pterrafractyl | November 3, 2016, 9:28 pm
  8. While correlation is not causation, it’s worth noting that the rise of Donald Trump’s odds of winning over the last week or so just happens to coincide with the longest consecutive drop in US stocks since 1988:

    CBS MoneyWatch

    As Trump keeps rising in polls, stocks keep falling

    By Anthony Mirhaydari
    November 4, 2016, 5:40 PM

    U.S. equities fell for the ninth consecutive session on Fridaythe longest losing streak since 1980 — as investors grew increasingly nervous about the rising odds of GOP presidential hopeful Donald Trump prevailing over Democratic rival Hillary Clinton. Fresh polls show him taking thelead in New Hampshire, which could be enough to push him to victory, given polling in other battleground states (assuming he gets Nevada, Florida, and Maine’s Second Congressional District).

    A Trump win next Tuesday could upend the three-year calm in the stock market: Citigroup analysts believe the result could be a 5 percent sell-off for stocks.

    “Our September client survey showed that the Street convincingly believes that Hillary Clinton will be the next American president,” wrote Citi’s Tobias Levkovich. “However, if Donald Trump were to win, that outcome would have been unexpected and thereby may cause a jump in the equity risk premium.”

    In other words, stocks would suddenly look riskier and thus, less valuable.

    ““Our September client survey showed that the Street convincingly believes that Hillary Clinton will be the next American president,” wrote Citi’s Tobias Levkovich. “However, if Donald Trump were to win, that outcome would have been unexpected and thereby may cause a jump in the equity risk premium.””

    Oh look at that, the business community is scared shitless of Donald Trump, which is rather amazing when you look at his plans to gut tax rates for both corporations and wealthy individuals and deregulated almost everythingincluding food safety. Normally stock markets love that kind of poison. So what’s going on?

    Well, it’s possible that even investors recognize that authoritarian fascists pledging to burn the system down as part of an appeal to the grievance politics zeitgeist of the times are bad for business in long-run because it destroys societies. Maybe that’s part of what’s prompting this historic market drop as Trump’s prospects rise.

    But let’s not forget one very obvious reason that the markets might have to getting massively spooked by the prospects of a Trump presidency: He pledged to tank them:

    The New Yorker

    Trump and the Truth: The Interest-Rate Flip-Flop

    By Adam Davidson
    September 15, 2016

    Over the past year, Donald Trump, who famously never backs down, has attacked, backed down, and then again attacked Janet Yellen, the chair of the Federal Reserve. He has done it in his way, never acknowledging when he says precisely the opposite of what he has previously said. (Yellen, for her part, has ignored the whole thing.)

    Trump’s Yellen cycle began in October, when, in an interview with The Hill, he accused Yellen of keeping down the Fed’s key interest rate, known as the Fed funds rate, because President Obama “doesn’t want to have a recession-slash-depression during his administration.” (This raised the question, of course, Who expects a President to want a recession-slash-depression?) By the spring of this year, Trump had revised his thinking about Yellen. “I have nothing against Janet Yellen whatsoever,” he told CNBC, on May 5th. “She’s a very capable person. People that I know have a very high regard for her.” Trump explained his newly rosy view by endorsing the very policy he had mocked a few months earlier. “She’s a low-interest-rate person; she’s always been a low-interest-rate person. And I must be honest, I’m a low-interest-rate person.” A couple of weeks later, Trump reiterated his happy view of the Fed chair. In an interview with Reuters, he said, “I’m not a person that thinks Janet Yellen is doing a bad job.”

    This week, Trump was back on the attack. On Monday, he told CNBC that Yellen should be “ashamed” of the low-interest-rate policy that Trump himself endorsed so fully in May. “She is obviously political, and she’s doing what Obama wants her to do,” he said. Once again, Trump made the claim that there was a secret Obama-Yellen pact to keep rates low, rooted in their nefarious desire to prevent an economic crisis. They both knew, he said, that “as soon as [rates] go up, the stock market is going to go way down.” On Thursday, after giving a speech at the Economic Club of New York, Trump again took aim at the Fed. “The Fed has become very political,” he said. “Beyond anything I would have ever thought possible.”

    “This week, Trump was back on the attack. On Monday, he told CNBC that Yellen should be “ashamed” of the low-interest-rate policy that Trump himself endorsed so fully in May. “She is obviously political, and she’s doing what Obama wants her to do,” he said. Once again, Trump made the claim that there was a secret Obama-Yellen pact to keep rates low, rooted in their nefarious desire to prevent an economic crisis. They both knew, he said, that “as soon as [rates] go up, the stock market is going to go way down.” On Thursday, after giving a speech at the Economic Club of New York, Trump again took aim at the Fed. “The Fed has become very political,” he said. “Beyond anything I would have ever thought possible.”

    Gee…might the markets be spooked a bit by Trump’s claims that the Fed is rigging markets with low rates as part of a political conspiracy coupled with his prediction that the markets will be “going way down” once rates rise? That sure would strongly imply that he’s planning on a big hike with the full expectation that it will tank the markets. Especially since his economic advisors are encouraging him to do exactly that…and maybe consider the gold standard.

    Might that be spooking that markets? Maybe. Although the fact that he’s an overtly unhinged lunatic probably has something to do with it.

    Posted by Pterrafractyl | November 4, 2016, 6:54 pm
  9. Oh look, Janet Yellen is being used in a Trump ad. It’s one of the closing ads of the campaign that attempt to sort of summarize his overall pitch to voters. And, of course – since this is the Trump campaign we’re talking about – it’s an ad that aggresively flirts with “global Jewish banker cabal” imagery:

    Talking Points Memo Editor’s Blog

    Trump Rolls Out Anti-Semitic Closing Ad

    By Josh Marshall
    Published November 5, 2016, 8:22 PM EDT

    Take a moment to look at this closing ad from Donald Trump.

    From a technical and thematic perspective it’s a well made ad. It’s also packed with anti-Semitic dog whistles, anti-Semitic tropes and anti-Semitic vocabulary. I’m not even sure whether it makes sense to call them dog whistles. The four readily identifiable American bad guys in the ad are Hillary Clinton, George Soros (Jewish financier), Janet Yellen (Jewish Fed Chair) and Lloyd Blankfein (Jewish Goldman Sachs CEO).

    The Trump narration immediately preceding Soros and Yellin proceeds as follows: “The establishment has trillions of dollars at stake in this election. For those who control the levers of power in Washington [start Soros] and for the global [start Yellen] special interests [stop Yellen]. They partner with these people [start Clinton] who don’t have your good in mind.”

    For Blankfein: “It’s a global power structure that is responsible for the economic decisions that have robbed our working class, stripped our country of its wealth and put that money into the [start Blankein] pockets of a handful of large corporations [stop Blankfein] and political entities.”

    These are standard anti-Semitic themes and storylines, using established anti-Semitic vocabulary lined up with high profile Jews as the only Americans other than Clinton who are apparently relevant to the story. As you can see by my transcription, the Jews come up to punctuate specific key phrases. Soros: “those who control the levers of power in Washington”; Yellen “global special interests”; Blankfein “put money into the pockets of handful of large corporations.”

    This is an anti-Semitic ad every bit as much as the infamous Jesse Helms ‘white hands’ ad or the Willie Horton ad were anti-African-American racist ads. Which is to say, really anti-Semitic. You could even argue that it’s more so, given certain linguistic similarities with anti-Semitic propaganda from the 1930s. But it’s not a contest. This is an ad intended to appeal to anti-Semites and spread anti-Semitic ideas. That’s the only standard that really matters.

    This is intentional and by design. It is no accident.

    Trump has electrified anti-Semites and racist groups across the country. His own campaign has repeatedly found itself speaking to anti-Semites, tweeting their anti-Semitic memes, retweeting anti-Semites. His campaign manager, Steven Bannon, is an anti-Semite. The Breitbart News site he ran and will continue running after the campaign has become increasingly open in the last year with anti-Semitic attacks and politics.

    Beyond that, this shouldn’t surprise us for a broader reason. Authoritarian, xenophobic political movements, which the Trump campaign unquestionably is, are driven by tribalism and ‘us vs them’ exclusion of outsiders. This may begin with other groups – Mexican immigrants, African-Americans, Muslims. It almost always comes around to Jews.

    “From a technical and thematic perspective it’s a well made ad. It’s also packed with anti-Semitic dog whistles, anti-Semitic tropes and anti-Semitic vocabulary. I’m not even sure whether it makes sense to call them dog whistles. The four readily identifiable American bad guys in the ad are Hillary Clinton, George Soros (Jewish financier), Janet Yellen (Jewish Fed Chair) and Lloyd Blankfein (Jewish Goldman Sachs CEO).

    No doubt this was all an innocent mistake. Much like all the other innocent neo-Nazi-ish mistakes of this nature that the Trump campaign somehow can’t stop making. So that gives us a bit of preview of how a Trump administration would go about shoring up public opinion if Trump tries to force Yellen out or pushes for a return to the gold standard: first, frame the Fed as part of a globalist Jewish banker cabal out to rob the United States.

    In ironically tangentially related news, the Trump campaign recently, and quietly, issued its big plans for rebuilding America’s roads, bridges and other public infrastructure: privatize them:

    Slate

    While You Weren’t Looking, Donald Trump Released a Plan to Privatize America’s Roads and Bridges

    By Jordan Weissmann
    Nov. 4 2016 6:56 PM

    So this is kind of cute. While most of us were tearing our hair out over the FBI and Hillary Clinton’s emails last weekend, Donald Trump’s campaign quietly released a plan to privatize new infrastructure development in the United States. I know, that’s not very sexy on the surface. But given that the man might be president come Tuesday, it seems worth remarking upon. Because it could mean we’ll all be paying to drive on more roads built for profit.

    Trump, as you might have noticed during this long, emotionally torturous campaign, likes to wax poetic about America’s collapsing bridges and “third-world” airports, and he has vowed to fix up the country by doubling Hillary Clinton’s proposed spending on infrastructure. At the same time, he’s also promised to pass gargantuan tax cuts while limiting the budget deficit.

    This has all raised an obvious question: How, exactly, does America’s angriest clementine plan to pay for all of this building? I mean, Mexico isn’t going to cover the wall and repairs to I-95, is it?

    Thankfully, we now have an answer from two of Trump’s chief economic advisers. In a report from Oct. 27, University of California–Irvine professor Peter Navarro and private equity honcho Wilbur Ross outlined how the candidate would transform about $167 billion of federal tax credits into $1 trillion of infrastructure spending. Factor in the effects of economic growth, they argued, and the cost to taxpayers would amount to zero, zilch, nada. Or, as they put it, the whole thing would be “budget neutral.”

    Of course, it‘s not really free. Americans would just end up paying for the construction a bit later on.

    Under Trump’s plan—at least as it’s written (more on that in a minute)—the federal government would offer tax credits to private investors interested in funding large infrastructure projects, who would put down some of their own money up front, then borrow the rest on the private bond markets. They would eventually earn their profits on the back end from usage fees, such as highway and bridge tolls (if they built a highway or bridge) or higher water rates (if they fixed up some water mains). So instead of paying for their new roads at tax time, Americans would pay for them during their daily commute. And of course, all these private developers would earn a nice return at the end of the day.

    The federal government already offers credit programs designed to help states and cities team up with private-sector investors to finance new infrastructure. Trump’s plan is unusual because, as written, it seems to be targeted at fully private projects, which are less common. That may or may not be what the campaign entirely intended; in an email exchange, Ross and Navarro suggested to me that the tax credits could also be used for public-private partnerships, but they were a bit vague and muddled on the details. In any event, one obvious disadvantage of relying so heavily on private developers, as the Washington Post notes, is that it would mostly encourage new building in wealthy areas that can afford to pay high user fees. Private companies go where there are private profits to be earned, after all. Poorer areas—areas where infrastructure may be more likely to be crumbling!—could end up being neglected.

    Despite the Trump campaign’s sales pitch, it may also be a pretty expensive plan for building new roads. Governments can borrow for much, much less than your typical private company. That gives them a big, built-in cost advantage when it comes to infrastructure. If a corporation wants to compete, it has to be hyper-efficient about construction. And some might be! But between the higher interest rates they pay on their debt and the need to turn a profit, chances are a lot of private developers would end up just charging a boatload in tolls and fees—more, over time, than the government would have to levy in taxes. The federal tax credits Trump would offer are designed so companies would be able to charge less in fees, of course. But that’s still money coming out of the public coffers.

    “The federal government already offers credit programs designed to help states and cities team up with private-sector investors to finance new infrastructure. Trump’s plan is unusual because, as written, it seems to be targeted at fully private projects, which are less common. That may or may not be what the campaign entirely intended; in an email exchange, Ross and Navarro suggested to me that the tax credits could also be used for public-private partnerships, but they were a bit vague and muddled on the details. In any event, one obvious disadvantage of relying so heavily on private developers, as the Washington Post notes, is that it would mostly encourage new building in wealthy areas that can afford to pay high user fees. Private companies go where there are private profits to be earned, after all. Poorer areas—areas where infrastructure may be more likely to be crumbling!—could end up being neglected.

    Yes, under Trump’s plan to rebuild America’s crumbling infrastructure, the lucky wealthy neighborhoods would get privatized roads and bridges, bristling with tolls (because profits take a priority in Trump’s America). And the less lucky poorer neighborhoods most likely get nothing. Or maybe they’ll get tolls too, in which case the poor won’t even be able to afford to use their local roads. If you’re planning on driving through the wealthier areas of the United States be sure to bring lots of cash. And if you want to drive in the poorer parts of town, well, hopefully some private investors deemed that area a worthwhile investment. Otherwise, good luck!

    Also keep in mind that foreign investors have been some of the biggest buyers of privatized US infrastructure, so it would be interesting to learn if Trump’s infrastructure privatization plan will include investors from around the globe or just US investors. Of course, with the election tomorrow hopefully Trump will loses and it will end up being a moot question. But if Trump ends up winning, it’s going to be quite interesting to see if the campaign that’s blowing ‘global Jewish banker’ in its closing argument is also planning on a massive global fire sale of US infrastructure. Either way, as we can see, the Trump campaign’s YUUUUGE new $1 trillion plan for rebuilding America’s infrastructure is basically $167 billion tax credit to private investors. And lots and lots of tolls. That will surely teach those Jewish bankers a lesson.

    Posted by Pterrafractyl | November 7, 2016, 3:47 pm
  10. It looks like Wall Street is starting to get used to idea of living under Donald Trump’s jackboot. Or rather, the idea of putting on Donald Trump’s jackboots and dancing like it’s 2006:

    CNBC.com

    This sector is ‘partying like it’s 2006’

    Rebecca Ungarino
    Friday, 11 Nov 2016 | 7:00 AM ET

    The Financial Select Sector SPDR ETF (XLF) rose on Thursday to its highest level since before the financial crisis in early 2008, rallying nearly 8 percent following Trump’s victory.

    But some experts warn that there’s not much room left for the banks to run.

    Banks have rallied to a combination of the massive rally in U.S. bond yields since Trump’s victory — the 10-year Treasury yield has surged 23 percent since Wednesday — and the belief that the Donald Trump administration will bring less regulation in the banking industry.

    In a note published Thursday, Michael Block, chief strategist at Rhino Trading Partners, wrote that the banks are “trading like Dodd-Frank and the Volcker rule have already been wiped out of existence and that we are partying like it’s 2006.”

    JPMorgan, one of the largest components in the XLF, touched an all-time high in Thursday trading. Goldman Sachs and Bank of America both rose 4 percent.

    Trump’s presidential transition team said in a Wednesday statement that it would “dismantle” the Dodd-Frank Act, the legislation passed in 2010 that brought significant regulation upon the banking industry following the financial crisis.

    In another potentially bullish sign, sources told CNBC’s Kate Kelly that JPMorgan CEO Jamie Dimon has been considered for the role of treasury secretary.

    “In a note published Thursday, Michael Block, chief strategist at Rhino Trading Partners, wrote that the banks are “trading like Dodd-Frank and the Volcker rule have already been wiped out of existence and that we are partying like it’s 2006.””

    Yes, not only is Wall Street set to be deregulated so we can have another 2006-2008 boom/bust bonanza, but Jamie Dimon is getting courted to head up with Treasury too. Ooo…those bankers Trump was warning everyone about in his anti-Semitic final ad must be super sad a populist like Donald Trump won.

    Still, don’t assume Dimon will take the job. As the article below notes, now that Trump has won and sort of broken the US political mold by demonstrating that a billionaire with no political experience can because president, Jamie Dimon is thinking about a a political role much bigger than Treasure Secretary:

    Reuters

    Here’s Why Trump Outreach to Jamie Dimon for Treasury Post May Fall Flat

    by Reuters

    November 11, 2016, 4:15 AM EST

    Dimon has said the only job in government he would want is the one Donald Trump is about to get.

    JPMorgan Chase Chief Executive Officer Jamie Dimon did not support Republican Donald Trump’s presidential campaign, yet some Trump advisers want America’s most famous banker to become Treasury Secretary to calm nerves on Wall Street.

    A member of Trump’s transition team contacted Dimon recently to see if he would be interested in the role, two people familiar with the matter told Reuters on Thursday.

    It was not clear whether Dimon had responded, though he has said emphatically multiple times that he was not interested in the role. JPMorgan spokesman Andrew Gray declined to comment, and Dimon, who is traveling outside the United States, could not be reached.

    Trump’s close circle of advisers includes several with Wall Street ties. His campaign finance manager, Steven Mnuchin, is a former Goldman Sachs Group banker. Fundraiser Anthony Scaramucci is a hedge fund executive.

    A person familiar with Trump’s personnel efforts said the transition team’s list included Dimon, Mnuchin and Rep. Jeb Hensarling. The person said that Mnuchin was a more likely choice given his proximity to Trump.

    Trump’s controversial rhetoric and behavior during the campaign concerning immigrants, women, minorities, the disabled, Muslims and China, among other things, were offensive to many senior Wall Street executives who have tried to embrace inclusion, diversity and globalization.

    Trump also criticized Wall Street on the trail, saying the industry “got away with murder” and would not be let off the hook.

    Since being elected on Tuesday, Trump has softened his tone and tried to bridge gaps by meeting with President Obama and taking calls from foreign officials. Bringing Dimon on board could help him mend fences with the financial industry, which appears to be coming around to the idea of Trump in the White House.

    At an event on Thursday, Goldman Sachs Group CEO Lloyd Blankfein said Trump could be good for the economy and Dimon would be an excellent choice for Treasury Secretary, while hedge fund manager Bill Ackman said Trump’s advisers would get “the best and brightest” to run the economy.

    Hensarling’s office indicated in a statement that he did not want the job.

    “Serving in his Cabinet is not something I’ve indicated an interest in and it’s not something I am pursuing,” the statement said. He said he looked forward to working in Congress to repeal the Dodd-Frank Act which tightened regulations on Wall Street in the wake of the financial crisis.

    Dimon, a lifelong Democrat, has been floated as a possible candidate for roles like Treasury Secretary in the past. However, resentment toward bankers following the 2007-2009 financial crisis made his candidacy much less likely, as did JPMorgan-specific scandals related to a costly derivatives trade and bad mortgages.

    A $13 billion mortgage settlement JPMorgan reached with the federal government in 2013 prompted Trump then to call Dimon “the worst banker in the United States.”

    However, Dimon has managed to retain a reputation within the banking industry as a distinguished leader, in part by the way he handled those scandals and the way he talks about JPMorgan’s role in society as the largest U.S. bank.

    However, Dimon has said as recently as September that he would not want a role as Treasury Secretary. If he holds to that, it could put him and JPMorgan in an awkward position.

    Saying “no” to a presidential request to join the cabinet is unusual, and the bank would then be overseen by appointees from an administration Dimon rejected.

    Even so, his associates do not expect Dimon to say “yes.”

    Dimon has said his determination to act would make it hard to make political compromises. Talking before an audience in September, he said the only job in government he would want is the one Trump is about to get.

    “I would love to be president of the United States of America,” Dimon told the Economic Club of Washington. “Until Donald Trump got to where he was, they said you’ll never see a rich businessman who’s never been in politics be president. I clearly was wrong about that.”

    “I would love to be president of the United States of America,…Until Donald Trump got to where he was, they said you’ll never see a rich businessman who’s never been in politics be president. I clearly was wrong about that.”

    And now we know anyone can become president. Donald Trump is surely an inspiration for billionaires everywhere. But in this case it looks like that inspirational might backfire because now Jamie Dimon might get presidential hopes of his own. As we can see, the US’s business elites are clearly shaken by Donald Trump’s populist revolt of 2016. Power to the people! The really, really rich people. But since it doesn’t look like Dimon is going to take the job, it looks like populists will have to settle for ex-Goldman Sachs banker/Hollywood producer Steven Mnuchin.

    2016 was quite the year for populism.

    Posted by Pterrafractyl | November 14, 2016, 12:01 am
  11. Kansas Governor Sam Brownback, whose name is on the Trump administration’s short-list for Agriculture secretary and whose hyper-supply-side economic policies destroyed Kansas’s finances in a shockingly short amount of time, reportedly heard Vice President-elect Mike Pence talking with other governors at the Republican Governors Association conference about the Trump administration’s plans. Brownback called the agenda “an exciting one.” So that’s pretty ominous. But Brownback also has some ominous words of advice for the incoming Trump administration: beware of high public expectations (which presumably includes expectations that the nation’s finances aren’t about to be destroyed):

    McClatchy

    Kansas’ Brownback: Excited about GOP agenda, but public could be impatient

    By David Lightman

    ORLANDO, Fla.

    Gov. Sam Brownback is excited about the prospect of Republicans taking control of both Congress and the White House – but also has a word of caution.

    In Florida this week for the Republican Governors Association conference, the Kansas governor heard Vice President-elect Mike Pence tell the governors in a private meeting how the White House wants to proceed. Brownback called the agenda “an exciting one.”

    “There are really some things you can do near term,” Brownback told McClatchy in an interview. Executive orders and actions can be undone. The corporate income tax could come down. Pieces of Obamacare can be repealed and replaced.

    But, Brownback, who also served as a congressman and U.S. senator, warned, “There’s high expectations now,” and the public doesn’t have endless patience.

    “Our team’s been pretty insistent for a long period of time and you’ve got to get things out there and you’re going to have to move it fast,” he said.

    One mistake Republicans must avoid, Brownback said, is taking action that doesn’t get the economy moving. “I thought that’s where (President Barack) Obama made a mistake. He went with Obamacare,” Brownback said.

    Obama did push a massive economic stimulus plan quickly that helped revive the ailing economy. Later in his first year, he championed the overhaul of the healthcare system that continues to sharply divide Democrats and Republicans.

    “But, Brownback, who also served as a congressman and U.S. senator, warned, “There’s high expectations now,” and the public doesn’t have endless patience.”

    Yes, when you sell the public on magical supply-side cures for what ails the economy and convince average voters that massive tax cuts for the wealthiest is going to improve everyone’s lives, the public might actually develop high expectations. It’s a lesson Sam Brownback knows well, perhaps better than any other governor in the nation:

    The Kansas City Star

    Gov. Sam Brownback retains his title as ‘America’s most unpopular governor’

    * New poll has same result as one last year: Kansas’ governor is really not popular in his home state

    * Unfortunately, it’s a well-deserved honor given the woes he has created for the Sunflower State budget

    Yael T. Abouhalkah
    May 12, 2016 11:08 AM

    The new survey is out today: Kansas Gov. Sam Brownback has narrowly kept his title as the “most unpopular governor in America.”

    As many Kansans realize, it’s a well-deserved “honor” for a governor whose policies have pretty much destroyed the state budget.

    Brownback had to beat out some tough competitors for the title.

    The survey from Morning Consult made a special point of noting that Brownback is even more unpopular in his home state than Michigan Gov. Rick Snyder is in his even given the Flint water crisis.

    “Despite national outrage being directed to Snyder and his administration, he does not have the worst approval rating” in the country, the authors wrote.

    The survey culled information from more than 66,000 voters in all 50 states from January until May.

    The result for Brownback is that only 26 percent of Kansas voters approve of the job he’s doing — and a whopping 65 percent disapprove.

    Those are the same numbers he had in November, the last time this kind of survey came out.

    “The survey from Morning Consult made a special point of noting that Brownback is even more unpopular in his home state than Michigan Gov. Rick Snyder is in his even given the Flint water crisis.”

    Sam Brownback’s decision to turn Kansas into a giant experiment in hyper-supply-side economics made him less popular than a governor whose supply-side policies lead-poisoned an entire city. Apparently Kansas’s voters grew impatient watching their state go bankrupt. Imagine that.

    and Kansas doesn’t just have the privilege of having the most unpopular governor in the nation thanks to his far-right economic scheme ending disastrously. As the article below notes, the Federal Reserve Bank of Philadelphia recently ranked Kansas 50th in the nation for employment growth, manufacturing hours worked, unemployment rate and wage growth. And as the article also notes, the Brownback plan that destroyed Kansas is the Trump plan for America:

    The Wichita Eagle

    Does Trump’s tax plan sound familiar, Kansas? It should.

    By Kelsey Ryan
    November 15, 2016 7:00 AM

    Slow growth. Tax cuts. Sound familiar?

    President-elect Donald Trump’s proposed tax plan for the nation is similar to Gov. Sam Brownback’s self-proclaimed “real-live experiment” tax plan enacted in 2012.

    Both plans include a rate cut for individual income tax and cuts for business income, analysts say.

    Kansas faces a nearly $350 million budget gap for the current fiscal year, which runs through June. The budget gap has forced the state to make cuts to most state agencies, the state pension system, highway projects and universities.

    In September, the Federal Reserve Bank of Philadelphia ranked Kansas 50th in the nation for employment growth, manufacturing hours worked, unemployment rate and wage growth. An economist with the Washington-based, low-tax advocate Tax Foundation told Mississippi lawmakers evaluating planned tax cuts that Kansas is “an example of what not to do in tax reform.”

    Meanwhile, some legislators say they will push for the state to roll back the tax cuts next year, and the state budget director said last week that raising taxes is not out of the question.

    Brownback has stood by his tax plan and said he is happy Trump plans to implement a similar strategy at the national level.

    “I am pleased the President-elect understands the importance of revitalizing the American economy by creating an environment that keeps jobs in America and encourages the growth of both large and small businesses,” Brownback said in a statement to The Eagle.

    “Just as we did in Kansas, the President-elect intends to lower taxes on both individual Americans who are working hard to build a future for themselves and their families, and create a favorable environment for the small businesses that drive growth and create jobs. The national economy has been lethargic for a long time and it is good the President-elect wants to take decisive actions to move our nation forward.”

    Will the rest of the nation live the Kansas experiment firsthand?

    ‘Trickle down’

    Both Kansas tax policy and the Trump proposals are predicated on the idea that such tax cuts will spur economic activity – trickle-down economics, sometimes called Reaganomics.

    Under President Ronald Reagan, taxes were cut and the economy expanded, but the national debt also increased.

    Both Brownback and Trump were advised on their tax plans by economist Art Laffer, who was on Reagan’s economic policy advisory board.

    In Kansas, the theory was that the cuts would spur economic growth.

    “You can look at Kansas and see what happened here. The economic growth did not happen here,” said Duane Goossen, former state budget director in both Republican and Democratic administrations and a senior fellow at Kansas Center for Economic Growth, which has been consistently critical of Brownback’s policies.

    “In Kansas, the state budget is broken,” Goossen said.

    The benefits of the tax cuts went primarily to the wealthiest Kansans.

    Kansas’ poorest residents, those who make $25,000 a year or less, saw a slight increase in their taxes after the 2012 law went into effect, according to an Eagle analysis of data from the Kansas Department of Revenue.

    The average state income tax liability for Kansans in that bracket rose nearly $50 from 2012 – the last year under the old rates – to 2013. The average tax liability went down in 2014, but it was still a net increase of about $40 since the rate cuts.

    Last year, the Legislature eliminated income taxes for 380,000 low-income Kansans. But it also increased the state sales tax, a change that some analysts say wipes out the savings from the income tax exemption.

    Brownback’s office says dropping agriculture and oil prices have contributed to the state’s budget gap.

    When the Kansas Legislature passed the tax cuts in 2012, it didn’t couple it with adequate spending cuts, said Kyle Pomerleau, director of federal projects at the conservative Washington-based Tax Foundation.

    Kansas has to have a balanced budget, unlike the federal government.

    “It’s either reduce spending or allow borrowing to go up,” Pomerleau said.

    There are similarities between the Brownback plan and the Trump campaign’s tax plan.

    “Of course, it’s a much different scale,” Pomerleau said.

    Brownback’s tax cut was about an $800 million annual tax cut starting in 2014 – about 10 percent of revenue.

    “Trump’s tax plan is similar in nature. … It’s about a $6 trillion tax cut over 10 years, and that’s a little more than 10 percent of federal revenues over the next decade,” Pomerleau said.

    To avoid increasing the national debt, the government would need to find ways to cut at least 10 percent of federal spending to offset the tax cuts if growth does not occur as a result of the cuts.

    “What we should pay attention to as time goes on is how Trump’s plan may change as it goes through the legislative process,” Pomerleau said.

    The House GOP has a tax reform proposal that is different than Trump’s plan and is much smaller – $2.4 trillion versus the $6 trillion in cuts over a decade.

    “Trump will have to decide: ‘Is this the size of the tax cut that I want, which requires a lot of spending cuts?’ Or does he rethink some of these proposals, maybe adopt the distance between the House GOP plan and the Trump plan,” Pomerleau said.

    Just as we did in Kansas, the President-elect intends to lower taxes on both individual Americans who are working hard to build a future for themselves and their families, and create a favorable environment for the small businesses that drive growth and create jobs. The national economy has been lethargic for a long time and it is good the President-elect wants to take decisive actions to move our nation forward.”

    As we can see, Governor Brownback remains proud of his economic accomplishments and excited to see the Trump administration is following in his footsteps. And why shouldn’t he be pleased? The odds of Kansas moving up from its worst-in-the-nation economic status are going to be a lot better after Trump does to the rest of the US what Brownback already did to Kansas. Yes, things are looking up for Sam Brownback’s legacy…specifically because that very same legacy is about to be applied nationally and now things are looking down for everyone else. He must be so proud.

    Posted by Pterrafractyl | November 16, 2016, 3:54 pm
  12. One of the interesting things about the Trump transition period is how nearly every day we seem to be learning lesson about what a Trump president will be like. Lessons that we should have already known through simple observation. And while Trump’s Sunday tweet tirade alleging that “millions” of people voted illegally for Hillary Clinton – cheating him of a popular vote victory he asserts he truly won – is just the latest reminder that he’ll be an incredulous president leading an incredulous administration, it’s important to keep in mind that the lessons about Trump’s incredulousness aren’t just a lesson about his deceptive nature. It’s also a lesson about how his administration is going to be operating from a worldview that is divorced from reality. Yes, Trump has been divorced not twice but thrice: Ivana, Marla, and Reality.

    So with that unfortunate pair of lessons in mind, it’s also probably worth noting that just because a Trump presidency is going to be basing its policies on a bed of lies and fantasy, that doesn’t mean it’s going to be original lies and fantasy. There are are plenty of long-standing right-wing policy rooted in lies and fantasy already packaged and ready Trump to peddle. And plenty of other peddlers of those lies and fantasies that are more than happy to help. For instance, since it’s looking like Trump’s economic policy is going to be a national version of the supply-side nightmare Art Laffer helped unleash in Kansas, we should probably expect to hear a lot from Art Laffer over the next four to eight years. And that means, much like how we need to intellectually steel ourselves from a flood of lies like “millions of people voted illegally” from the President, we’re also going to have to get ready for an abundance of bad advice and profoundly poor lessons about economics from Art Laffer for foreseeable future:

    The New York Times
    The Conscience of a Liberal

    The Laffer Swerve

    Apr 10, 2015 Apr 10, 2015
    Paul Krugman

    Jim Tankersley has a good article on Arthur Laffer’s never-stronger influence on the Republican party, with just one seriously misleading statement:

    Laffer’s ideas have also grown out of fashion with much of the mainstream economic community. There is an entire branch of economic literature that uses detailed equations to show cutting top tax rates does not spark additional growth.

    No, Laffer hasn’t “grown out of fashion” with mainstream economics — he was never in fashion. There was never any evidence to support strong supply-side claims about the marvels of tax cuts and the horrors of tax increases; even freshwater macroeconomists, despite their willingness to believe foolish things, never went down that road.

    And nothing in the experience of the past 35 years has made Lafferism any more credible. Since the 1970s there have been four big changes in the effective tax rate on the top 1 percent: the Reagan cut, the Clinton hike, the Bush cut, and the Obama hike. Republicans are fixated on the boom that followed the 1981 tax cut (which had much more to do with monetary policy, but never mind). But they predicted dire effects from the Clinton hike; instead we had a boom that eclipsed Reagan’s. They predicted wonderful things from the Bush tax cuts; instead we got an unimpressive expansion followed by a devastating crash. And they predicted terrible things from the tax rise after Obama’s reelection; instead we got the best job growth since 1999.

    And when I say “they predicted”, I especially mean Laffer himself, who has a truly extraordinary record of being wrong at crucial turning points. As Bruce Bartlett pointed out a few years ago, Laffer was even wrong during the Reagan years: he predicted that the Reagan tax hikes of 1982, which partially reversed earlier cuts, would cripple the economy; “morning in America” promptly followed. Oh, and let’s not forget his 2009 warnings about soaring interest rates and inflation.

    The question you should ask, then, is why this always-wrong economic doctrine now has a stronger grip on the GOP than ever before.

    It wasn’t always thus. George W. Bush’s inner circle clearly had little use for the likes of Laffer; they engaged in a lot of deceptive advertising about the economy (and a few other things), but they never made extravagant supply-side claims — and remember that Greg “charlatans and cranks” Mankiw served as chairman of the Council of Economic Advisers. But since 2009 the GOP has swerved hard right into fantasy land — and it has done so despite a remarkable string of dead-wrong predictions by the people peddling that fantasy.

    Tankersley quotes me as saying that it’s about wanting economists who tell them what they want to hear, which is self-evidently true. But that kind of wishful thinking is always around. What seems to have happened to American conservatives is that they have lost all the checks and balances that used to limit that kind of solipsism. And of course it’s not just economic policy.

    What do we do in the face of a major party gone mad?

    “It wasn’t always thus. George W. Bush’s inner circle clearly had little use for the likes of Laffer; they engaged in a lot of deceptive advertising about the economy (and a few other things), but they never made extravagant supply-side claims — and remember that Greg “charlatans and cranks” Mankiw served as chairman of the Council of Economic Advisers. But since 2009 the GOP has swerved hard right into fantasy land — and it has done so despite a remarkable string of dead-wrong predictions by the people peddling that fantasy.”

    Worse than W. That’s what we’re in for. Unless you subscribe to Art Laffer’s fantasy version of economics, in which case we’re in for 25 years of prosperity just like the 25 years of prosperity Reagan created which was the greatest prosperity ever:

    The Wall Street Journal

    A New Justice

    A transcript of the weekend’s program on FOX News Channel.

    Nov. 27, 2016 6:33 p.m. ET

    David Asman: Welcome to “The Journal Editorial Report.” I’m David Asman, in for Paul Gigot.

    And this week, we’re looking ahead to the first days of the Trump presidency, the challenges facing his administration at home and abroad, and the policies that are likely to top his agenda.

    Asman: It’s been called a golden opportunity. House Republican leaders, looking ahead to a Trump presidency, have already have begun to map out a very ambitious agenda, kind of a blueprint for early next year. At the top of their to-do list is a complete overhaul of the U.S. tax system, all 75,000 pages. This is something the GOP has been advocating and planning for decades.

    Art Laffer has been doing that. He is a former Reagan economic adviser and Trump supporter.

    You know, Art, for the first time in decades, really, the stars are in alignment for real meaningful change. I’d just like to know, is there anything that can stop it now? We have the Republicans controlling the House, the Senate, of course the White House. They’ve said this will be tops in their agenda. Is there anything Democrats can do to stop it?

    Laffer: I don’t think so—the governorships, the state legislatures, shortly the Supreme Court and shortly the Fed. You know, this is the grand conjunction, this is the moment in time and space when we can really do something. and the House has already, with Brady and Ryan, has already gone huge distances in preparing the groundwork and working out the details. You got Ted Cruz in the Senate who has worked out a lot as well. This is our moment, and I think we will really shine.

    Asman: I mentioned the 75,000 pages. We could show the piles of page after page. Most Americans, of course, don’t have to deal with that much. But they do have to deal with more than they think is necessary. Are average Americans going to see a simplification out of this process? Are they going to finally be able to get rid of their accountants and do taxes themselves?

    Laffer: Yeah. I think they have to be patient. First, it takes time for tax bills to get through all the committees, get through all the stuff and then be signed. Then they implement it over time. So, it takes time in the first bill. But the real killer comes, the real bit—in ’86 we did the final bill, which is the great one. We reduced the number of brackets from 14 to two—28% and 15%—with the two tax rates. We got rid of the deductions, exemptions, exclusions, loopholes. It led to the greatest prosperity ever. That’s the one. It’s a long process. It’s a marathon. Please don’t make it a sprint. It’s not a sprint. But the House has done a great job in preparing the groundwork for all of this.

    Asman: It sounds like a lot of people want to make it a sprint, Art, including Paul Ryan and Donald Trump. This is one thing those guys agree on. Is it conceivable that by the time most Americans do their taxes in April 2017, they will have a much simpler, much lower tax rate to deal with?

    Laffer: I think it will be very difficult to do that for the year 2016.

    Asman: Twenty seventeen.

    Laffer: Yeah, but that’s when they file your returns—tax year 2016.

    Asman: Twenty sixteen, gotcha.

    Laffer: We have all of our tax laws already in place. It’s almost the end of the year. I don’t know how they can do it retroactively. We did a little bit retroactive with Reagan. We had a 1.25% cut retroactively in 1981. That’s very tough. It’ll be even tough to do much in 2017 because this stuff takes time. Slow and steady wins the race. I’d much rather have it done carefully, deliberatively and purposefully, and have it work a thousand years than put it in, in a rush, and have it fall apart in two years.

    Asman: You know the process. That’s one reason you are a great asset in this.

    The supply side effect of this—that’s what the Laffer Curve is about.

    Laffer: Yes.

    Asman: The economists, most of the mainstream economists have looked at this tax plan and say it will cost a lot of money because we’re going to get—the government is going much fewer revenues; therefore, the deficit and debt will go up, as they cared about that over the past 10 years.

    Laffer: They never have.

    Asman: But what happened in the 1980s, with Ronald Reagan, tax rates, as you mentioned, came down tremendously. Didn’t revenues actually double? They got so much more revenue because there was so much more growth, right?

    Laffer: Yes, they did. And especially in the highest income brackets where we had the biggest tax cuts, those groups way increased their payments. I mean, if I remember correctly, the amount paid as a share of GDP in 1980 was about 1.5% of GDP by the top 1%. By 2006, it was 3.2% of GDP. And GDP had gone through the ceiling. So, it was really working on the highest-income earners, which is—what you call mainstream, I call them kooks. But where they say it doesn’t work, of course, it works there, and it works there the most.

    But don’t forget, when you take over a company that’s been run into the ground, David, it’s lost its productive capacity, it’s lost its good employees, it’s lost its market share, you’ve got to cut prices, which means tax rates, you’ve got to do infrastructure rates, and then you’ve got to get it going. So, it will take some deficit, some investment in the period, but don’t believe for a moment this won’t lead to 25 years of huge prosperity, just like Reagan’s did.

    Asman: A final question.

    Laffer: Yes, sir.

    Laffer: Thank you, sir.

    Asman: Art Laffer—

    Laffer: You’re wonderful.

    Asman: —you are one optimistic man in the universe, I think, it’s fair to say.

    Good to see you, my friend.

    till ahead—

    Laffer: Thank you very much, David. Talk to you later.

    “Laffer: Yeah. I think they have to be patient. First, it takes time for tax bills to get through all the committees, get through all the stuff and then be signed. Then they implement it over time. So, it takes time in the first bill. But the real killer comes, the real bit—in ’86 we did the final bill, which is the great one. We reduced the number of brackets from 14 to two—28% and 15%—with the two tax rates. We got rid of the deductions, exemptions, exclusions, loopholes. It led to the greatest prosperity ever. That’s the one. It’s a long process. It’s a marathon. Please don’t make it a sprint. It’s not a sprint. But the House has done a great job in preparing the groundwork for all of this.”

    The 1986 tax cut led to the greatest prosperity ever! Now you know. Or maybe Art Laffer is just a serial deceiver. We’ll find out since we’re about to repeat history. But it’s worth noting that when you hear the assertion that Reagan’s tax cuts doubled tax revenues, increased the percentage of taxes paid by the top 1 percent, and led to a generation of prosperity…


    Asman: But what happened in the 1980s, with Ronald Reagan, tax rates, as you mentioned, came down tremendously. Didn’t revenues actually double? They got so much more revenue because there was so much more growth, right?

    Laffer: Yes, they did. And especially in the highest income brackets where we had the biggest tax cuts, those groups way increased their payments. I mean, if I remember correctly, the amount paid as a share of GDP in 1980 was about 1.5% of GDP by the top 1%. By 2006, it was 3.2% of GDP. And GDP had gone through the ceiling. So, it was really working on the highest-income earners, which is—what you call mainstream, I call them kooks. But where they say it doesn’t work, of course, it works there, and it works there the most.

    But don’t forget, when you take over a company that’s been run into the ground, David, it’s lost its productive capacity, it’s lost its good employees, it’s lost its market share, you’ve got to cut prices, which means tax rates, you’ve got to do infrastructure rates, and then you’ve got to get it going. So, it will take some deficit, some investment in the period, but don’t believe for a moment this won’t lead to 25 years of huge prosperity, just like Reagan’s did.

    …keep in mind that the top 1 percents share of the total national wealth has exploded since 1980 as a percentage of GDP as a consequence of these supply-side policies and it’s the top 0.01 percent where we’ve seen the biggest income growth for the past twenty years, with a doubling of the 0.01 percent’s national share of wealth since 1995 and a quadrupling over the last half century. Also keep in mind that tax revenue growth under Reagan’s tax cuts didn’t actually double and was historically rather lackluster and Democrats repeatedly hiked rates on the riches which is what has actually been a source of significantly increasing revenues and decreasing deficits and debt:

    The New York Times
    The Conscience of a Liberal

    Reagan and revenue

    Paul Krugman
    January 17, 2008 7:03 pm

    Ah – commenter Tom says, in response to my post on taxes and revenues:

    Taxes were cut at the beginning of the Reagan administration.

    Federal tax receipts increased by 50% by the end of the Reagan Administration.

    Although correlation does not prove causation the tax cut must have accounted for some portion of this increase in federal tax receipts.

    I couldn’t have asked for a better example of why it’s important to correct for inflation and population growth, both of which tend to make revenues grow regardless of tax policy.

    Actually, federal revenues rose 80 percent in dollar terms from 1980 to 1988. And numbers like that (sometimes they play with the dates) are thrown around by Reagan hagiographers all the time.

    But real revenues per capita grew only 19 percent over the same period — better than the likely Bush performance, but still nothing exciting. In fact, it’s less than revenue growth in the period 1972-1980 (24 percent) and much less than the amazing 41 percent gain from 1992 to 2000.

    Is it really possible that all the triumphant declarations that the Reagan tax cuts led to a revenue boom — declarations that you see in highly respectable places — are based on nothing but a failure to make the most elementary corrections for inflation and population growth? Yes, it is. I know we’re supposed to pretend that we’re having a serious discussion in this country; but the truth is that we aren’t.

    Update: For the econowonks out there: business cycles are an issue here — revenue growth from trough to peak will look better than the reverse. Unfortunately, business cycles don’t correspond to administrations. But looking at revenue changes peak to peak is still revealing. So here’s the annual rate of growth of real revenue per capita over some cycles:
    1973-1979: 2.7%
    1979-1990: 1.8%
    1990-2000: 3.2%
    2000-2007 (probable peak): approximately zero
    Do you see the revenue booms from the Reagan and Bush tax cuts? Me neither.

    “Is it really possible that all the triumphant declarations that the Reagan tax cuts led to a revenue boom — declarations that you see in highly respectable places — are based on nothing but a failure to make the most elementary corrections for inflation and population growth? Yes, it is. I know we’re supposed to pretend that we’re having a serious discussion in this country; but the truth is that we aren’t.”

    Yes, just as we were supposed to pretend that we were having a serious discussion of economic policy back in 2008, we’re still supposed to pretend that today. Even more so. And as Laffer kept warning, it’s going to be a marathon, not a spring. A marathon of bad ideas and half-truths that will inevitably end in a disaster that Democrats will one day be forced to clean up while the oligarchy waits for right-wing amnesia to once again set in. Assuming we actually can clean up the coming mess. Don’t forget, compared to what we’re in store for, W. was the good ‘ol days. *gulp*

    Posted by Pterrafractyl | November 28, 2016, 12:31 am
  13. Well that’s, ummm, interesting: the next Treasury Secretary is going to be a former Goldman Sachs executive and Hollywood producer who played a role in the housing crisis and worked for George Soros:

    The Washington Post

    Trump expected to name financier Steve Mnuchin to Treasury

    By Ylan Q. Mui and Philip Rucker
    November 29, 2016

    President-elect Donald Trump is planning to name investor and former Goldman Sachs executive Steven Mnuchin as treasury secretary, opting for an industry insider with no government experience to helm the agency in charge of the nation’s finances, according to people familiar with the matter.

    Mnuchin (pronounced mah-NEW-chin) joined Trump’s whirlwind campaign in May as finance chairman, despite the fact that he had never worked in politics and that he had donated to Democrats in the past. He quickly earned Trump’s trust as he worked closely with the Republican National Committee to raise substantial amounts of money in a short period. On policy issues, he was instrumental in crafting the details of Trump’s proposal to overhaul the tax code.

    “He’s an expert on finance issues,” said Stephen Moore, who worked with Mnuchin as an adviser to the president-elect on the campaign trail. “He clearly, like Donald Trump, understands that the number one goal for this administration is going to be to grow the economy and get jobs.”

    The president-elect scored an early victory Tuesday night when air-conditioning manufacturer Carrier announced that it would reverse plans to move one of its factories from Indiana to Mexico. The company, which is owned by United Technologies, said about 1,000 U.S. jobs would be preserved.

    Trump’s tough talk on trade during his campaign helped cement his populist appeal. But Trump — a real estate developer famous for his flashy style — appears to be staffing his Cabinet with advisers who also have amassed extraordinary wealth. Trump is expected to nominate industrialist billionaire Wilbur Ross to lead the Commerce Department, and Michigan billionaire Betsy DeVos was named as Trump’s pick for education secretary last week.

    Mnuchin made his fortune on Wall Street, first at the storied New York investment bank Goldman Sachs and then as the head of his own private-equity fund. His close ties to an industry he would be in charge of regulating have the potential to complicate his confirmation and could undermine Trump’s populist message.

    While on the stump, the ­president-elect frequently lambasted big banks — Goldman Sachs in particular — and advocated the reinstatement of the Glass-Steagall legislation that once separated retail and investment banks. In addition, Mnuchin was deeply involved in running a bank that had been at the heart of the subprime housing bust, eventually selling it for billions of dollars in profit.

    “So much for draining the swamp,” said Adam Hodge, communications director for the Democratic National Committee. “Trump is already heading into office as the most corrupt, conflicted and unpopular president-elect in history, and now he’s breaking his signature promise to the voters who elected him.”

    As treasury secretary, one of Mnuchin’s top priorities probably would be shepherding Trump’s tax plan through Congress. Trump has advocated cutting the corporate tax rate to 15 percent and streamlining individual tax rates into three brackets. Although Republican lawmakers have expressed enthusiasm for reform, there remains substantial debate over how to tackle corporate profits overseas, among other issues. In addition, key GOP senators are advocating for a more bipartisan approach that probably would require complex negotiations with Democrats.

    In news interviews, Mnuchin has said he was not previously close to Trump, but the two move in the same circles of big-money financiers, willing to take big risks in the face of improbable odds. Trump’s campaign was just the latest big bet in Mnuchin’s varied career in the upper echelons of finance, which has stretched from New York to Hollywood.

    Working at Goldman Sachs was a family affair for Mnuchin. Before he worked at the Wall Street giant, his father, Robert Mnuchin, spent more than 33 years at the bank. His brother, Alan, was a Goldman Sachs vice president.

    Mnuchin spent 17 years at the bank, rising from its savings-and-loan business to mortgage-backed bond trading before becoming the bank’s chief information officer in 1999. Mnuchin is a “very smart guy,” Lloyd Blankfein, chief executive of Goldman Sachs, said this month.

    “He was a very senior guy at a very young age at Goldman Sachs,” he said.

    After leaving the bank, Mnuchin worked for famed billionaire investor George Soros — a well-known Democratic donor. He then founded his own private-equity fund, Dune Capital Management. Among its most notable investments was the purchase of IndyMac from the Federal Deposit Insurance Corporation during the depths of the financial crisis in 2009.

    Dune led the consortium of investors who bought the failed subprime lender for about $1.6 billion, and Mnuchin oversaw the rebuilding of its business as chairman of the renamed OneWest. (A member of Trump’s economic advisory team, John Paulson, was also part of the investor group.)

    Under Mnuchin, the bank more than doubled its branches and increased its assets. But it also faced criticism from advocacy groups who complained about aggressive foreclosure tactics. At one point, activists marched to Mnuchin’s home in the Bel Air area of Los Angeles to protest its treatment of customers.

    As treasury secretary, Mnuchin would be responsible for the Trump administration’s response to the aftermath of the housing bust. A crisis-era program that helps homeowners refinance their mortgages, for example, is not scheduled to end until next year. He also would head the Financial Stability Oversight Council, which oversees some of the country’s largest financial institutions.

    “Putting a Wall Street CEO in charge of his administration’s oversight of Wall Street is dangerous and even more proof that Donald Trump is only interested in protecting corporations at the expense of working families,” said Jessica Mackler, head of American Bridge 21st Century, a Democratic political action committee.

    In 2014, OneWest was sold to financial services firm CIT Group for $3.4 billion. Mnuchin is on CIT’s board of directors but is not involved in day-to-day operations. He owns about $100 million in company stock, according to compensation research firm Equilar.

    After moving to California with the purchase of IndyMac, Mnuchin also became involved in financing Hollywood films. Dune Capital invested in several blockbusters, including “American Sniper,” “Gravity,” “Avatar” and “Life of Pi.”

    “While on the stump, the ­president-elect frequently lambasted big banks — Goldman Sachs in particular — and advocated the reinstatement of the Glass-Steagall legislation that once separated retail and investment banks. In addition, Mnuchin was deeply involved in running a bank that had been at the heart of the subprime housing bust, eventually selling it for billions of dollars in profit.”

    Ok, so Donald Trumnp just chose the living embodiment of the bankster archetype he allegedly opposed throughout his campaign to be the next Treasury Secretary. It kind of raises the question of why, of all the possible right-wing people in finance he could have chosen, he went with Mnuchin. Is it just because Mnuchin was Trump’s money man during the campaign and therefore passes Trump’s loyalty fetish? Perhaps in part. But let’s not discount the role a Treasury secretary will play in cheerleading and justifying any upcoming Trump tax cuts, and the incredible value in having who will say anything to make those tax cuts a reality. Anything:

    The Washington Post

    Trump’s new Treasury, Commerce nominees say no ‘absolute’ tax cut for the wealthy, predict faster economic growth

    By Ylan Q. Mui and Jim Tankersley
    November 30, 2016

    President-elect Donald Trump’s nominee to lead the Treasury Department on Wednesday called reforming the nation’s tax code his top priority, promising significant tax breaks for the middle class but no overall tax cut for high-income households.

    Steven Mnuchin, a former Goldman Sachs banker and Hollywood financier, confirmed in an interview Wednesday on CNBC’s Squawk Box that Trump had asked him to serve in the administration. Billionaire industrialist Wilbur Ross also confirmed that he is the nominee for Commerce Secretary. In the joint interview, they professed confidence in the new administration’s ability to boost economic growth as high as 4 percent a year.

    Crucial to that projection would be passage of Trump’s proposed overhaul of the tax code, including streamlining individual tax rates into three brackets and reducing the corporate tax rate to 15 percent. Independent research groups have estimated the plan could cost as much as $6 trillion over the next decade. However, that analysis does not include the potential economic benefits the tax cuts could generate.

    Mnuchin said Wednesday that he believed the tax cuts would generate more jobs, helping to offset the cost. Some of Trump’s economic advisers said during the campaign that his plan would not add to the federal deficit. However, the Tax Foundation estimated that even with so-called “dynamic scoring,” Trump’s tax package could cost about $3 trillion over a decade.

    In addition, Mnuchin emphasized that a reduced tax rate for the highest earners would be offset by the elimination or curtailing of many deductions that favor the wealthy. He suggested that the cap on the popular deduction for mortgage interest could be lowered but did not provide details. The current cap is $1 million on first and second mortgages.

    Mnuchin also pushed back against analysis by the nonpartisan Tax Policy Center that found the bulk of the benefits under Trump’s plan would go to wealthy households, while some single-parent households would end up paying higher taxes. He highlighted plans for a child-care tax credit and rebates for lower-income families.

    “There will be no absolute tax cut for the upper class,” he said. “There will be a big tax cut for the middle class.”

    The comments highlight two potential sources of tension for the Trump administration as it pushes its tax plan – one with congressional Republicans, the other with the federal budget deficit. They also fly in the face of every independent analysis of the Trump plan, including one Trump has frequently cited favorably.

    Mnuchin reiterated Trump’s commitment to cutting taxes for the middle class, a key difference between the president-elect’s campaign plan and the tax blueprint put forth by GOP leaders on Capitol Hill. The congressional plan, like Trump’s, would cut taxes for the wealthy and for corporations, but it would not do nearly as much as Trump would to cut taxes for lower- and middle-income Americans. Reconciling the two will be a major sticking point in any tax-reform negotiations next year.

    Mnuchin also said two things about Trump’s tax plan that independent analyses do not support. One is the idea that the wealthy will receive no net tax benefits from the plan. The other is that the plan will not add to the deficit, because of increased economic growth.

    Even the friendliest analysis toward Trump, work by the independent Tax Foundation that the Trump campaign frequently cited to bolster his proposals, finds Trump’s plan would add at least $2.6 trillion to the federal debt over a decade, and as much as $3.9 trillion, after accounting for increased economic growth.

    The Tax Foundation also finds Trump’s plan would boost incomes for the top 1 percent of U.S. earners by between 10 and 16 percent, an amount that dwarfs the benefits lower- and middle-income earners would see from the plan. That’s true even though the group factored in Trump’s promise to limit deductions for high earners, which Mnuchin reiterated on Wednesday.

    Mnuchin and Ross also appeared to step back from some of Trump’s most confrontational rhetoric on the campaign trail. Trump has repeatedly threatened to levy double-digit tariffs on goods coming from China and Mexico and pull out of existing free-trade deals. But Ross said Wednesday those measures may only be a last resort.

    “Everybody talks about tariffs as the first things. Tariffs are the last thing. Tariffs are a part of the negotiation,” he said. “The real trick is going to be increase American exports.”

    “Mnuchin also said two things about Trump’s tax plan that independent analyses do not support. One is the idea that the wealthy will receive no net tax benefits from the plan. The other is that the plan will not add to the deficit, because of increased economic growth.”

    Yep, George W. Bush’s ‘Fuzzy’ math is back! With a vengeance. Oh goodie.

    And that means the rich are about to get a lot fuzzier richer. A lot richer:

    CNBC

    Trump Treasury secretary pick Mnuchin’s tax claims about the wealthy defy math

    Robert Frank
    Wednesday, 30 Nov 2016 | 10:47 AM ET

    Newly designated for Treasury secretary, Steve Mnuchin told CNBC on Wednesday that Donald Trump’s tax plan would contain “no reduction” in taxes for the rich. Yet an independent analysis of the president-elect’s plan suggests that most of the benefits would, in fact, go to the top earners.

    “There will be no absolute tax cut for the upper class,” Mnuchin said. “Any tax cuts we have for the upper class will be offset by less deductions that pay for it. ”

    But the nonpartisan Tax Policy Center said Mnuchin’s comments don’t square with Trump’s plan. In an analysis that included the deduction caps, which include benefits from charitable giving and mortgages, the center found that those changes aren’t large enough to offset lower income tax and capital gains rates for the top earners.

    Specifically, Trump’s plan calls for capping deductions for single filers at $100,000, and at $200,000 for joint filers. It would also cut the top tax rate from 39.6 percent to 33 percent; trim the capital gains tax to 20 percent from 23.8 percent; lower the corporate tax and rate for pass-through incomes (partnerships and LLCs used by the weathy); and eliminate the estate tax.

    “The limitation on tax preferences available to the rich are not significant enough to offset tax cuts elsewhere in the plan,” said Roberton Williams, a fellow at the center. “The cuts on the other side are so large you’ve got to come up with something really big to offset them. And deductions aren’t even close.”

    According to the center’s analysis, middle-class and lower earners would get a tax cut of less than 2 percent. The top 1 percent of earners would get a cut of 14 percent. And the top 0.1 percent would receive a break of more than 14 percent — totaling more than $1 million a year per filer.

    The Tax Foundation also found that the Trump plan gives the largest cuts to those at the top — including the cap on deductions. “Even with the cap on deductions, you still end up with a net tax cut for those at the top, and they are the ones benefiting the most from the plan,” said the foundation’s Kyle Pomerleau.

    That’s not to say that Trump’s plan won’t stimulate the economy or investment. And there is no doubt that Trump’s plan lowers taxes for almost every type of taxpayer in America.

    But Mnuchin may have overstepped the law of numbers when he said the wealthy will get no tax break.

    “According to the center’s analysis, middle-class and lower earners would get a tax cut of less than 2 percent. The top 1 percent of earners would get a cut of 14 percent. And the top 0.1 percent would receive a break of more than 14 percent — totaling more than $1 million a year per filer.

    Oh may, So Trump’s nominee for Treasury secretary is making startlingly absurd statements about Trump’s proposed tax cut. Imagine that!

    But also keep in mind that while it’s true that the lower and middle-classes will at least see a tiny tax cut (single parent households being a notable exception) in addition to the rich’s major cut and the super-rich’s mega-cut, this is also all going to come at the cost of a far more useless and, eventually, bankrupt government that will be incapable of providing useful public services. It’s a reminder that, as the GOP continues to signal that it’s going to gut Medicare over concerns that ‘we can’t afford it’ in the long-run, the GOP’s embrace of ‘fuzzy math’ is part of a broader embrace of a ‘fuzzy lives’ philosophy.

    Posted by Pterrafractyl | December 3, 2016, 8:28 pm
  14. Remember how Donald Trump would rail against the Federal Reserve and it’s ulta-low rates, and even included Janet Yellen in his creepy anti-semitic final campaign commercial? And remember how he thought rates were too low and needed to be raised, and then changed his mind, and then changed his mind back? Well, now that the Federal Reserve made its second fateful rate hike as it eases off of historic lows, it’s worth keep in mind that the economy is already running close to full employment but Trump’s stimulus plans are a supply-side mess that’s unlikely to stimulate effectively so it’s unclear if we should expect even short-term economic strengthening. But if that does happen, Donald Trump is probably going to get those rate hikes he was asking for

    The New York Times

    A Trump Economic Boom? The Fed May Stand in the Way

    By BINYAMIN APPELBAUM
    DEC. 13, 2016

    WASHINGTON — Investors in financial markets, and those predicting faster economic growth in 2017, would do well to remember the famous words that William McChesney Martin Jr., the former Federal Reserve chairman, uttered way back in 1955: The Fed’s job is to remove the punch bowl just as the party gets going.

    President-elect Donald J. Trump’s promises to cut taxes and regulation and to increase spending on infrastructure and defense have convinced many that a sugar high in the near term will goose the economy. But Fed officials say the economy is already expanding at something close to its maximum sustainable pace, meaning faster growth would drive inflation toward unwelcome levels.

    To avoid overheating, the Fed could respond by raising interest rates more quickly. The more Mr. Trump stimulates growth, the faster the Fed is likely to increase rates.

    “I guess I would argue that I think people have gotten a bit ahead of themselves about what a Trump presidency would mean,” said Lewis Alexander, chief United States economist at Nomura. “If we have a big stimulus, the logical thing for the Fed to do is to raise rates faster. There isn’t a whole heck of a lot of scope to just let the economy run under those circumstances. There’s a big question about whether fiscal stimulus under Trump just leads to higher interest rates.”

    Underscoring that question, the Fed is expected to raise its benchmark rate on Wednesday for the first time since last December in light of new economic data. The rate sits in a range of 0.25 percent to 0.5 percent, a low level intended to stimulate economic growth by encouraging borrowing and risk-taking. Analysts predict the Fed will shift the range upward by a quarter of a percentage point, modestly reducing those incentives.

    The rate increase is widely regarded as a foregone conclusion. The odds, derived from asset prices, topped 95 percent Monday, according to the CME Group. The looming question is how quickly the Fed will continue to raise rates in 2017.

    Economic forecasts always require large assumptions, but that is particularly true in the present case because Mr. Trump has provided relatively few details about his plans. Perhaps the most accurate thing that can be said about Mr. Trump’s victory is that it has increased the uncertainty of the economic outlook.

    “At this juncture, it is premature to reach firm conclusions about what will likely occur,” William C. Dudley, president of the New York Fed, said in a recent speech.

    During his campaign, Mr. Trump predicted 4 percent annual growth, and his actions since Election Day point to a single-minded goal of short-term job creation.

    “Our No. 1 priority is going to be the economy, get back to 3 to 4 percent growth,” Steven Mnuchin, Mr. Trump’s pick to serve as Treasury secretary, said last month.

    Many economists regard such growth predictions as fanciful; the economy has been mired in an extended period of slow growth and the reasons, including an aging population and a dearth of innovation, are unlikely to change quickly. Some think Mr. Trump is more likely to push the economy into recession than to catalyze a new boom.

    Even if Mr. Trump is right, however, the Fed does not want 4 percent growth.

    The central bank’s outlook has become increasingly gloomy. Officials estimated in September that annual growth of 1.8 percent was the maximum sustainable pace, and they predicted growth would not exceed 2 percent in the next three years. They will update those forecasts Wednesday, but large shifts are unlikely.

    Fed officials also are increasingly convinced that steady job growth has substantially eliminated the post-recession backlog of people seeking work. The unemployment rate fell to 4.6 percent in November, a level the Fed regards as healthy.

    For years, Fed officials urged Congress to increase fiscal spending. Now, Mr. Trump is promising to do just that — and the Fed has concluded that it is too late.

    Stanley Fischer, the Fed’s vice chairman, said last month the Fed might still benefit from fiscal stimulus because it could raise rates more quickly. That would increase the Fed’s ability to respond to future downturns by reducing interest rates.

    But such gains would come at real cost: A fiscal stimulus would increase the federal government’s debt burden, which already is at a high level by historical standards, reducing the room for a fiscal response to a future downturn. Janet L. Yellen, the Fed’s chairwoman, urged Congress last month to be mindful that the government is already on the hook for more spending as baby boomers age into retirement.

    “With the debt-to-G.D.P. ratio at around 77 percent, there’s not a lot of fiscal space, should a shock to the economy occur, an adverse shock, that did require fiscal stimulus,” she said.

    The tension between fiscal and monetary policy is likely to unfold in slow motion.

    Mr. Trump has promised to press for rapid changes in government policy, but Congress is not built for speed. A similar effort to cut taxes at the beginning of the George W. Bush administration, for example, was signed into law on June 7, 2001. The impact of new cuts, and any increase in infrastructure spending that Mr. Trump can persuade dubious Republicans to embrace, would be felt mostly in future years.

    Mark M. Zandi, chief economist at Moody’s Analytics, predicted that tax cuts, regulatory rollbacks and deficit-financed spending would fuel faster growth in the first half of Mr. Trump’s four-year term. But he said that the Fed’s rate increases, and restrictions on trade and immigration, would gradually begin to take a larger toll. By the end, Mr. Zandi predicted, the American economy would be “unnervingly close” to recession.

    “The Fed and markets in general will ultimately wash out any benefit,” Mr. Zandi said Monday. “The economy under President Trump ultimately will be diminished.”

    ““Our No. 1 priority is going to be the economy, get back to 3 to 4 percent growth,” Steven Mnuchin, Mr. Trump’s pick to serve as Treasury secretary, said last month.”

    Yep, the Trump administration’s top goal is explicitly to create the kinds of economic conditions that are guaranteed to prompt a strong rate hiking environment. So how Trump responds to the fact that the Fed is systematically poised to respond to his economic plans with contractionary monetary policies is one of the big Trumpian unknowns going forward. With rates being still near 0 and the economy in the midst of a slow but steady expansion since the crisis nearly broke the global economy, it’s hard to see the Fed passing up this opportunity to raise rates. Especially given the overall disdain for low rates and central bank intervention in general with rightwing economic orthodoxy.

    So while the reality of any sort of Trump stimulus plan remains to be seen – tax cuts for the rich and an infrastructure stimulus plan that’s really just a privatization plan probably won’t be very stimulating – it’s not impossible that there’s going to be some sort of economic sugar high in the short run and if that happens a significant series of rate hikes could be what follows it along with all the fun effects that could have across the globe as the dollar rises. And if that sugar high happens, it’s not impossible the Fed will respond in a way that earns Trump’s ire. Turbo-charged economic growth is part of Trump’s planned “brand”. So the fact that this puts him on a path towards conflict with the Fed can’t be taken casually. Don’t forget that Trump’s economic advisor, Judy Shelton, would like to see the Fed destroyed and a return to the gold standard. Don’t discount the damage a Trump war with the Fed could do.

    Of course, it’s also possible there won’t be any conflict with the Federal Reserve at all due to there being no pressure to raise rates at all given all the damage Trump and the GOP will do to the economy from the savage cuts to entitlements and the safety net that are central to the Paul Ryan agenda that Trump appears to fully back. Which would, in this context, at least have the benefit of keep inflation down:

    The New York Times
    The Conscience of a Liberal

    Will Fiscal Policy Really Be Expansionary?

    Paul Krugman
    Dec 18, 2016 1:49 pm

    It’s now generally accepted that Trumpism will finally involve the kind of fiscal stimulus progressive economists have been pleading for ever since the financial crisis. After all, Republicans are deeply worried about budget deficits when a Democrat is in the White House, but suddenly become fiscal doves when in control. And there really is no question that the deficit will go up.

    But will this actually amount to fiscal stimulus? Right now it looks as if Republicans are going to ram through their whole agenda, including an end to Obamacare, privatizing Medicare and block-granting Medicaid, sharp cuts to food stamps, and so on. These are spending cuts, which will reduce the disposable income of lower- and middle-class Americans even as tax cuts raise the income of the wealthy. Given the sharp distributional changes, looking just at the budget deficit may be a poor guide to the macroeconomic impact.

    Given the extent to which things are in flux, I can’t put numbers on what’s likely to happen. But I was able to find matching analyses by the good folks at CBPP of tax and spending cuts in Paul Ryan’s 2014 budget, which may be a useful model of things to come.

    If you leave out the magic asterisks — closing of unspecified tax loopholes — that budget was a deficit-hiker: $5.7 trillion in tax cuts over 10 years, versus $5 trillion in spending cuts. The spending cuts involved cuts in discretionary spending plus huge cuts in programs that serve the poor and middle class; the tax cuts were, of course, very targeted on high incomes.

    The pluses and minuses here would have quite different effects on demand. Cutting taxes on high incomes probably has a low multiplier: the wealthy are unlikely to be cash-constrained, and will save a large part of their windfall. Cutting discretionary spending has a large multiplier, because it directly cuts government purchases of goods and services; cutting programs for the poor probably has a pretty high multiplier too, because it reduces the income of many people who are living more or less hand to mouth.

    Taking all this into account, that old Ryan plan would almost surely have been contractionary, not expansionary.

    Will Trumponomics be any different? It would matter if there really were a large infrastructure push, but that’s becoming ever less plausible. There will be big tax cuts at the top, but as I said, the push to dismantle the safety net definitely seems to be on. Put it all together, and it’s extremely doubtful whether we’re talking about net fiscal stimulus.

    “But will this actually amount to fiscal stimulus? Right now it looks as if Republicans are going to ram through their whole agenda, including an end to Obamacare, privatizing Medicare and block-granting Medicaid, sharp cuts to food stamps, and so on. These are spending cuts, which will reduce the disposable income of lower- and middle-class Americans even as tax cuts raise the income of the wealthy. Given the sharp distributional changes, looking just at the budget deficit may be a poor guide to the macroeconomic impact.”

    It turns out gutting the the services that actually help people hurts the economy too. Now we know. Still. And just to make it clear how severe those cuts are going to be, note the size of those cuts that Paul Ryan’s budget would have made reality in 2014:


    If you leave out the magic asterisks — closing of unspecified tax loopholes — that budget was a deficit-hiker: $5.7 trillion in tax cuts over 10 years, versus $5 trillion in spending cuts. The spending cuts involved cuts in discretionary spending plus huge cuts in programs that serve the poor and middle class; the tax cuts were, of course, very targeted on high incomes.

    That’s $5 trillion in cuts to entitlements and spending for the poor heading out way in order to pay for more tax cuts for the rich so they can better afford to buy up our public infrastructure in a privatization bonanza. In other words, Trump’s giant tax cut for the rich is getting paired with the trashing of programs for the middle-class and poor.

    So while the Federal Reserve may be poised to raise rates for potentially years to come, putting it in potential opposition with the Trump administration that’s made rapid economy growth one of its primary promises, let’s not forget that this is an unusually far-right GOP administration with an unusually far-right GOP congress, which means the stars have aligned for the kind of brutal austerity you only see once every few generations. And when you pair your national stimulus with a national lobotomy of privatization and savage austerity, inflationary pressures may not be as one might otherwise expect. Although not non-existent.

    Posted by Pterrafractyl | December 19, 2016, 1:18 am
  15. With the Trump administration set to slash taxes for the rich and explode the deficit it’s worth noting that Fitch just threatened to downgrade the US’s top credit rating specifically because of Trump’s tax cuts:

    Reuters

    Trump’s tax cuts may pressure U.S.’s top credit rating: Fitch

    By John Geddie | LONDON
    Thu Jan 12, 2017 | 6:20am EST

    U.S. President-elect Donald Trump’s plans to slash taxes could threaten the country’s triple-A credit rating over the medium term, the head of EMEA sovereign ratings at the Fitch agency said on Thursday.

    “We do see increasing medium-term pressures (on the U.S. rating),” Ed Parker said at the agency’s annual credit outlook conference in London.

    “Even before elections the U.S had the highest level of government debt of any triple-A country. If we add on top of that Trump’s plans to cut taxes by $6.2 trillion over the next 10 years that could add around 33 percent to U.S. government debt,” he added.

    Trump will take office on Jan. 20 but some of his promised policy changes have already sparked market and economic concern, including tax cuts, a repeal of the healthcare reform enacted under President Barack Obama and a threat to slap tariffs on companies moving jobs overseas.

    Parker said that in the short-term Trump did not pose a risk to the U.S. credit rating because the country continues to benefit from strengths such as the role of the dollar as the world’s predominant reserve currency

    Fitch has a stable outlook on its AAA rating on the United States. Of the other two main agencies, Moody’s also has the top rating for the No. 1 world economy but Standard and Poor’s has it one notch lower at AA+.

    “Even before elections the U.S had the highest level of government debt of any triple-A country. If we add on top of that Trump’s plans to cut taxes by $6.2 trillion over the next 10 years that could add around 33 percent to U.S. government debt,” he added.”

    Huh. It appears Fitch isn’t very optimistic that Trump’s budget busting tax cuts will magically pay for itself. Imagine that.

    And if you’re tempted to blame the current US debt that Trump’s tax cuts will be on some sort of spendthrift Obama administration, it’s probably worth recalling that the budget deficit has fallen almost every year under the Obama administration. Although, as we can see, that didn’t prevent S&P from downgrading the US’s credit rating back in 2011 from AAA to AA+.

    And if you’re tempted to blame that credit rating downgrade on the Obama administration and spendthrift Democrats, it’s probably worth recalling that the S&P’s 2011 downgrade was specifically because of the Bush tax cuts. Or rather, specifically because S&P was pretty confident that the Bush tax cuts were going to become permanent in 2012 due to the GOP’s willingness to engage in legislative hostage-taking and threaten to shut down the government if it didn’t get its way:

    The Nation

    GOP Causes S&P Downgrade, but Republican Candidates Blame Obama

    S&P downgraded the US credit rating because the GOP won’t raise taxes and played brinksmanship with the debt ceiling. But Romney, Bachmann et al. say it’s Obama’s fault.

    By Ben Adler
    August 8, 2011

    It is clear from Standard & Poor’s statement downgrading the federal government’s credit rating that it places the blame squarely on Republican actions and policies. Two of S&P’s biggest concerns about whether the United States will pay off its debt are whether Republicans will be so insane as to refuse to lift the debt ceiling, a possibility Republicans intentionally stoked fears of, and whether the United States will raise much-needed tax revenue. Specifically, S&P changed its baseline assumption that the Bush tax cuts would expire on schedule in 2012 because Republicans are so insistent that they must be renewed. “We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues,” wrote S&P. That adds $4 trillion over ten years to the projected deficits.

    So, how are Republican presidential candidates responding? By blaming President Obama, instead of their co-partisans in Congress who are actually responsible. “America’s creditworthiness just became the latest casualty in President Obama’s failed record of leadership on the economy,” said front-runner Mitt Romney in a statement. “His failed policies have led to high unemployment, skyrocketing deficits, and now, the unprecedented loss of our nation’s prized AAA credit rating.” Apparently, Romney knows better than S&P itself why it downgraded our credit rating, and it has nothing to do with lost revenue due to Republican tax cuts, or Republican threats not to pay our debts (a fairly straightforward threat to our creditworthiness if ever there was one.) No, it’s just because of our economic performance, which Romney seems to think is determined entirely by the actions of the president and is in no way beyond his control.

    If you want to take a longer view of how the US debt reached this height, Steve Benen of The Washington Monthly made a timeline illustrating how it is almost entirely the Republicans’ fault. But the long view is not of any interest to the modern Republican Party.

    “It is clear from Standard & Poor’s statement downgrading the federal government’s credit rating that it places the blame squarely on Republican actions and policies. Two of S&P’s biggest concerns about whether the United States will pay off its debt are whether Republicans will be so insane as to refuse to lift the debt ceiling, a possibility Republicans intentionally stoked fears of, and whether the United States will raise much-needed tax revenue. Specifically, S&P changed its baseline assumption that the Bush tax cuts would expire on schedule in 2012 because Republicans are so insistent that they must be renewed. “We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues,” wrote S&P. That adds $4 trillion over ten years to the projected deficits.”

    And, sure enough, at the end of 2012 there was indeed a debt ceiling showdown, with the GOP even offering to end the showdown if the entire Bush tax cuts, including for the top 2 percent, were extended permanently. And, sure enough, the US went off the “fiscal cliff” on New Years Eve 2012 as part of that budget showdown. It was resolved the next day and at the end of it all the Bush tax cuts for all but the wealthiest where made permanent. Flash forward four years, and we have an even bigger round of tax cuts that are even more oriented for the rich.

    Given all that, while the question of whether or not Fitch will actually downgrade the US is a pretty big and looming question, it’s probably not as big as the question of when Moody’s joins S&P and Fitch and the “big three” make the tax-cut fueled downgrading of the US official.

    Posted by Pterrafractyl | January 12, 2017, 10:52 pm
  16. Elaine Chao, George W. Bush’s Labor Secretary and Donald Trump’s choice for Transportation Secretary and the wife of Senate Majority Leader Mitch McConnell, just had her Senate confirmation hearing. It was, by all accounts, a pretty breezy affair with few substantive questions and fewer substantive answers. Although quite a few dodges. So it’s basically more of the same from the Trump Team on its big infrastructure plans. Which is a problem since there have been few answers from the Trump Team so far and and the few answers we’ve gotten so far are so alarming. Although we did learn something from Chao’s testimony. It sounds like she’s up for privatizing the FAA and turning it into a non-profit. Presumably as a foot in the door for a profit-driven model (otherwise how is the magic of the market supposed to work). Oh goodie.

    And when it comes to Trump’s big $1 trillion infrastructure mystery package, the mystery remains intact. Chao confirmed little other than that there would be some public spending (big surprise) and otherwise they would focus on being “creative” in financing the $1 trillion plan. And, of course, “creative” = privatize creatively:

    Politico

    Chao skates through hearing despite little info on infrastructure

    By Kathryn A. Wolfe

    01/11/17 10:22 AM EST
    Updated 01/11/17 03:57 PM EST

    Transporation Secretary-designee Elaine Chao emerged from the Senate Commerce Committee’s hearing today largely unscathed despite offering few concrete details about how she or Donald Trump planned to roll out a massive infrastructure investment program that the president-elect has promised.

    Chao, a familiar face to many on the committee because of her work in the two Bush administrations and her marriage to Senate Majority Leader Mitch McConnell, promised to look at creative ways to attract funding for the $1 trillion infrastructure investment that Trump campaigned on — though she was careful to avoid mentioning any specific financial figures.

    Under questioning from Sen. Cory Booker (D-N.J.), Chao said she thinks Trump’s infrastructure package would include at least some federal spending.

    Booker commented that most of the money Trump has pledged for his infrastructure plan seems to be derived from tax breaks and private investment, but he also noted adviser Steve Bannon’s prior support for direct investments. “Do you and President-elect Trump support an infrastructure package that will include direct federal spending?” he asked.

    “I believe the answer is yes,” Chao said.

    That’s the closest the Washington veteran came to stating that federal money would be use to help repairs the nation’s highways, bridges, railways and airports after stating in her prepared remarks that the incoming administration would look at “all the options … both public and private, that provide the greatest cost-benefit.”

    Chao did acknowledge that a fix was needed for the nation’s main transportation infrastructure program, the Highway Trust Fund, saying it was “among the top priorities” for Trump. But gave no hints just how the incoming president planned to alter its revenue source.

    “The Highway Trust Fund is in bad shape,” Chao said, in part because more fuel efficient vehicles mean less gasoline tax dollars going into the fund.

    “The pay-fors for an infrastructure proposal are challenging,” Chao said. “They all have their particular champions and also detractors.”

    Chao demurs on FAA spinoff

    Under questioning from Sen. Bill Nelson (D-Fla.) about her position on spinning air traffic control away from the FAA and into a nonprofit body, as proposed by the House last year, Chao demurred. She replied “I’d like to get confirmed first,” to laughter throughout the hearing room.

    Gathering herself, Chao followed up: “Obviously this is an issue of great importance, it’s a huge issue that needs to have a national consensus,” she said. “For that national consensus to occur there needs to be a dialogue. The administration has not made a decision on this point.” Chao said she is “open to all ideas,” understands the sides, and pledged to work with Congress on the matter.

    McConnell praises Chao’s “good judgment”

    McConnell opened his statement with a raft of praise for Chao, including a dryly referenced compliment about her “good judgment … on a whole variety of things.”

    “Let me just say this — Elaine is going to do a fantastic job as secretary of Transportation. She’s going to do good things for her country, she’s going to make the Commonwealth of Kentucky proud. She’ll be only the second Cabinet secretary we’ve had from my state since World War II,” McConnell said. “Who is the other? Secretary of Labor Elaine Chao.”

    McConnell, Chao’s husband, plans to testify on her behalf this morning, lending extra welcoming firepower to what should already be a relatively easy day for Chao. Sen. John Thune (R-S.D.) will speak first at the hearing, and with Sen. Rand Paul (R-Ky.), Chao’s other home-state senator, will also testify.

    “Chao, a familiar face to many on the committee because of her work in the two Bush administrations and her marriage to Senate Majority Leader Mitch McConnell, promised to look at creative ways to attract funding for the $1 trillion infrastructure investment that Trump campaigned on — though she was careful to avoid mentioning any specific financial figures.

    Yeah, that sure sounds like crypto-fascist way of saying “we’re gonna privatize everything. In a hurry. At some yet to be determined point in time. When no one is paying attention.” It’s ominous code-speak.

    And note the level of commitment we’ve gotten to non-profit public investment: It will be included in the $1 trillion envision package. That’s the level of commitment. But at least now it’s sort of been confirmed for the first time ever:

    Booker commented that most of the money Trump has pledged for his infrastructure plan seems to be derived from tax breaks and private investment, but he also noted adviser Steve Bannon’s prior support for direct investments. “Do you and President-elect Trump support an infrastructure package that will include direct federal spending?” he asked.

    “I believe the answer is yes,” Chao said.

    That’s the closest the Washington veteran came to stating that federal money would be use to help repairs the nation’s highways, bridges, railways and airports after stating in her prepared remarks that the incoming administration would look at “all the options … both public and private, that provide the greatest cost-benefit.”

    “That’s the closest the Washington veteran came to stating that federal money would be use to help repairs the nation’s highways, bridges, railways and airports after stating in her prepared remarks that the incoming administration would look at “all the options … both public and private, that provide the greatest cost-benefit.””

    Gee, will privatizing everything with publicly guaranteed profits for by the greatest cost-benefit model? Hmmm…

    So, private utilities are probably pretty happy with the next Treasury Secretary’s testimony. Or lack thereof.

    Interestingly, as the article below notes, the Fed isn’t sharing that optimism based on the minutes from the recent meeting. And the reason has to do with a concern that Trump’s big $1 trillion infrastructure plan is going to raise in inflation fast enough to force the Fed to jack up interest rates so fast that the markets get roiled. It also notes that the other part of the plan is a tax holiday of 0% for repatriated overseas corporate profits if that money is invested in the infrastructure. So who knows if we could see some inflationary pressure emerge from the plan.

    But as the article also notes, the schemes proposed so far are something that should be worrying the Fed. Why? Well, for starters the Trump transition website already updated the scope of the plan. It’s now less than $600 million in spending, with plenty more room to shrink once Congress gets a hold of it.

    And given the likelihood it’ll mostly be privatization schemes it’s probably going to be a lot smaller than $600 million anyway because there aren’t enough public infrastructure plans that can feasibly be set up in a way that can realistically guarantee a steady revenue stream. And that’s a requirement in a privatization scheme. There are only so many toll roads you can have unless the GOP is willing to take the political hit of becoming the toll road party.

    So if the article below is correct and there really is a dearth of existing or new privatization possibilities that can really work with the model Trump is probably going to use (where infrastructure really is run for profit wherever possible) and there really won’t be a big inflationary push so the Fed shouldn’t worry about being forced into a destabilizing rate spike because the plan is all a Trump hype illusion that will fail and be forgotten:

    Yahoo Finance

    Everybody’s getting Trump’s infrastructure plan wrong

    Rick Newman
    Columnist
    January 5, 2017

    The Federal Reserve is worried.

    At its December meeting, members of the Fed’s interest-rate-setting committee debated the likelihood of “more expansionary fiscal policy” during the next 12 months. That’s Fedspeak for increased infrastructure spending under incoming president Donald Trump. The concern is that more government spending could push inflation higher than normal, which would force the Fed to raise rates faster than it would otherwise—which would most likely be an unpleasant surprise for stock and bond markets.

    Trump began last fall by proposing $1 trillion in new spending on roads, bridges and other projects, which would indeed be a historically large sum. But that was the campaign pitch; the goal now is $550 billion in spending, according to the Trump transition website. So the opening bid has already dropped by 45%.

    Even more important is the way Trump wants to raise that money. The transition site doesn’t spell it out, but the plan Trump put out last fall relied largely on private investors to fund new infrastructure projects. The government’s role would be to offer an 82% tax credit on a portion of the private investment, as an incentive to draw private money, which might otherwise flow to investments deemed safer or more lucrative. The tax credits, representing the ultimate cost to taxpayers, would represent a small portion of the $1 trillion, and an even smaller amount if the real target is $550 billion.

    The problem with getting private investors

    The Trump plan—drafted by Wilbur Ross, Trump’s nominee for Commerce Secretary, and economist Peter Navarro, who will be a presidential advisor—went one step further. Trump also wants to offer US companies a repatriation holiday, by cutting the tax rate on overseas profits booked in the United States from the current rate of 35% to 10%. A company repatriating profits could cut its effective tax rate on that money to zero if it invested the right amount in infrastructure projects and took advantage of the 82% tax credit for that. On paper, the net cost to taxpayers would be nothing.

    There’s one huge catch, though. Private investors only typically put money into infrastructure projects when there’s a guaranteed revenue stream backed by tolls or other types of user fees that can’t be revoked. Some private infrastructure investing already exists, but it hasn’t really caught on in the United States. The Trump model relies on private debt for a considerable part of the financing, and without tolls or user fees, there’s no cash flowing back to investors to make debt payments and compensate investors. Without that, the model simply doesn’t work.

    So Trump, in essence, has proposed an infrastructure program that would require little or no taxpayer money, but would only work on projects where user fees provide a cash flow back to investors. There are a few projects that fit the profile, such as airport renovations that can be funded in whole or part by airport fees tacked on to ticket prices. There are a couple of privately owned and operated toll roads in the United States, such as the Chicago Skyway and the Indiana East-West toll road. But the prospect of imposing tolls on roads or other facilities that are currently free is a nonstarter in Congress and just about every state capital, except for unusual cases where a municipality is desperately strapped for money or private funding for a new project may be the only way it gets built.

    It’s possible Congress could come up with a different plan to boost infrastructure spending the old-fashioned way, through taxes. But there seems to be little appetite for that. Democrats might go along, but they’re the minority in both chambers. House Speaker Paul Ryan is a budget hawk who says he doesn’t support a big boost in taxpayer funding for roads and bridges, and enough Republicans probably agree with him to squelch any big new programs—especially with all the other priorities Republicans are pursuing.

    So Trump has proposed a novel infrastructure program that’s only applicable to a handful of projects, while Republicans in Congress are looking the other way and Democrats have no truck on the matter. The big question on infrastructure spending is always, where will the money come from? For the next few years, the answer is probably nowhere.

    So Trump, in essence, has proposed an infrastructure program that would require little or no taxpayer money, but would only work on projects where user fees provide a cash flow back to investors. There are a few projects that fit the profile, such as airport renovations that can be funded in whole or part by airport fees tacked on to ticket prices. There are a couple of privately owned and operated toll roads in the United States, such as the Chicago Skyway and the Indiana East-West toll road. But the prospect of imposing tolls on roads or other facilities that are currently free is a nonstarter in Congress and just about every state capital, except for unusual cases where a municipality is desperately strapped for money or private funding for a new project may be the only way it gets built.

    So as the article puts it, the private model is such a bad fit for public utilities and infrastructure that there’s not much available that private investors are even going to be interested in other than toll rates. And there’s probably not going to be a lot of public demand for things like toll roads (and, in turn, Congressional demand if it’s super unpopular). Unless, of course, Congress passes an infrastructure plan that forces almost all the funding be private funding and just hopes the public doesn’t care because it’s so distracted with all the other Trump scandals or not paying attention at all. And the other scenario is if municipalities become totally cash-strapped and can’t raise public funds due to insane tax cuts or a trashed economy and the municipalities are going to go with things like toll roads out of desperation.

    Unfortunately, neither of those scenarios seem that outlandish. We’re in the Trump Era. Unfortunate scenarios abound. Although even if they happen it might not be on a very large scale. Just widespread privatization of the remaining low-hanging fruit. And in both of those scenarios they’ll either be the cause of or consequence of disasters which will probably dampen inflation. So, all in all, while the Fed might be fearing that an big infrastructure and tax-cut fueled spending spree forces its interest rate ‘liftoff’ to become a little too Huuuuge to handle, that might not be the case if it’s a Huuuge scam. Yay.

    Posted by Pterrafractyl | January 13, 2017, 11:33 pm
  17. Oh look at that: It appears Trump is planning isn’t simply planning on slowing the growth of federal spending. No, he’s planning on cutting the federal budget. Specifically, cutting it by $10.5 trillion over 10 years. So about a $1 trillion a year. And do to that he’s planning on implementing the Heritage Foundation’s “Penny Plan”. That’s the plan where the budget of every federal agency is cut by 1 percent. Every year. But that “Penny Plan” still won’t come close to saving a $1 trillion annually since discretionary spending is already only ~$1 trillion annually and he has also pledged to significantly increase military spending and not cut entitlements at all. So unless he’s planning on reversing his pledge to increase military spending and/or not touch entitlements, that just leaves discretionary spending to cut. And, again, since discretionary spending is only about $1 trillion a year that means he’s basically planning on implementing a scheme that would eliminate all federal discretionary spending over the next decade:

    Salon

    Donald Trump will adopt Heritage Foundation’s “skinny budget”: Arts, violence against women funding to be cut

    Trump’s transition team has reportedly met with career White House staff to plan massive cuts to major agencies

    Sophia Tesfaye
    Thursday, Jan 19, 2017 12:32 PM CST

    Donald Trump is relying on a blueprint budget from the conservative Heritage Foundation and the guidance of a former Rand Paul staffer to deliver the most extremely right-wing restructuring of the federal government in decades.

    The Trump transition team has been at work for months with career staffers at the White House and throughout the federal bureaucracy to draft a plan to cut $10.5 trillion out of the federal government over 10 years, according to multiple reports.

    The president-elect vowed to slash government spending on the campaign trail, promising to add those savings to the massive budget of the Department of Defense. New reporting now outlines just which parts of the federal government will be eliminated by the incoming Trump administration.

    So-called “landing teams” have been assigned by the Trump transition team to federal agencies in order to develop a plan to cut some department budgets by as much as 10 percent while slashing 20 percent from the federal workforce. According to the Hill, this effort is being headed by two longtime conservative spending hawks — Russ Vought, who has a reputation for pressuring moderate Republicans while at the right-wing Heritage Foundation, and John Gray, a former staffer for libertarian-leaning Republican Sen. Rand Paul — both also staffers for Vice President-elect Mike Pence.

    Although the Heritage Foundation initially branded Trump as a big-government liberal in conservative’s clothing, his pick of Mike Pence as his running mate pleased the anti-tax and anti-spending group that has since emerged as one of the most influential forces shaping the president-elect’s transition team. Trump’s pick of a budget hawk, South Carolina Rep. Mick Mulvaney, to head the Office of Management and Budget, provided a clearer sign that the long sought massive cuts in the bureaucracy will be a top priority in the new administration.

    Most past presidents have measured success in “cutting” the budget by how much they reduce the growth of spending from year to year. For instance, if federal spending typically grows by 2 percent or more year over year, freezing spending at the current rate could be considered a reduction in future spending. Trump’s plan looks to go even further with actual cuts just as a new U.S. Government Accountability Office report released on Tuesday found that “the structural gap between revenues and spending puts the federal government on an unsustainable long-term fiscal path.”

    But Trump’s cuts would target only discretionary spending, not mandated programs such as Medicare or Social Security, the Washington Examiner reported Wednesday.

    Part of Trump’s plan to reduce spending involves the penny plan, which would cut back certain agencies’ budgets by one cent for every dollar spent over several years. In total, the administration aims to cut spending by $10.5 trillion over the next decade. All federal discretionary spending amounts to roughly $1.1 trillion a year, so cutting $1.05 trillion a year under Trump’s 10-year plan means cutting nearly all of the government’s discretionary spending. All federal budget expenditures in 2016 totaled an estimated $3.9 trillion.

    At the Departmet of Justice, Trump’s plan would eliminate programs that aim to prevent violence against women, encourage community-oriented policing, and provide legal aid to the indigent. The Heritage Foundation has called those programs a “misuse of federal resources and a distraction from concerns that are truly the province of the federal government.”

    Trump’s transition team reportedly also wants to eliminate all funding for the Minority Business Development Agency, the National Endowment for the Arts, and the National Endowment for the Humanities, which offers grants to museums, educational institutes, researchers, and authors. The Corporation for Public Broadcasting, which distributes funding to nearly 1,500 locally owned public radio and TV stations would be privatized, according to the Hill. Three years ago, the NEH and NEA were pushed out of the Old Post Office in Washington, D.C. to make way for Trump’s newest hotel.

    At the Energy Department, Trump’s plan would eliminate the Office of Energy Efficiency and Renewable Energy and Office of Fossil Energy, which develops technologies to reduce carbon emissions. The so-called skinny budget would also drastically reduce funding for the DOJ’s Civil Rights and Environment and Natural Resources divisions.

    But as the Washington Post’s Phillip Bump pointed out, eliminating some of these public arts programs only amounts to a quarter of 1 percent of the entire budget. The majority of federal government spending is allocated to non-discretionary programs like Social Security and Medicare that cannot be easily slashed or eliminated.

    Trump has repeatedly pledged not to cut spending on these so-called entitlement programs.

    The incoming Trump administration has also trumpeted plans to increase infrastructure and military spending, all while passing big tax cuts for corporations and individuals. Without cutting defense or entitlement spending, it will be nearly impossible—short of completely eliminating every other part of the federal government—to get to the reported $1 trillion in cuts Trump is seeking every year. Perhaps that is why even the original Heritage “skinny budget” also cut out-of-control military spending.

    Trump’s budget proposal should be released within 45 days of Trump taking office, according to the Hill, and the full budget would have to be approved by Congress. Trump’s cuts are similar to those in the budget adopted by the conservative Republican Study Committee, representing a majority of House Republicans. But when that similarly draconian budget came up for a vote in the GOP-controlled House in 2015, it was rejected by a vote of 132 to 294.

    “Part of Trump’s plan to reduce spending involves the penny plan, which would cut back certain agencies’ budgets by one cent for every dollar spent over several years. In total, the administration aims to cut spending by $10.5 trillion over the next decade. All federal discretionary spending amounts to roughly $1.1 trillion a year, so cutting $1.05 trillion a year under Trump’s 10-year plan means cutting nearly all of the government’s discretionary spending. All federal budget expenditures in 2016 totaled an estimated $3.9 trillion.

    So what’s it going to be?
    a. Eliminating basically all federal discretionary programs.
    b. Cutting entitlements too.
    c. How about military cuts?

    Well, don’t forget about the $7 trillion that Trump’s proposed tax cuts for the rich are expected to add to the debt over the next decade too. So the answer is probably:

    d. All of the above.

    Posted by Pterrafractyl | January 19, 2017, 11:23 pm
  18. Wilbur Ross, Trump’s new billionaire Secretary of Commerce who co-authored the previous $1 trillion infrastructure plan with Peter Navarro that was almost entirely based on private investment, offered more details on the administration’s thinking on how it’s going to structure the $1 trillion infrastructure stimulus plan:
    surprise, surprise, it’ll be $137 billion in tax credits for private investors and the rest is supposed to come from the private investors:

    The Washington Post

    Economists pan infrastructure plan championed by Trump nominees

    By Steven Mufson
    January 17, 2017

    Billionaire businessman Wilbur Ross, whose nomination as commerce secretary comes before Congress this week, has mapped out details to one major policy proposal to boost infrastructure spending — and leading economists say it doesn’t hold water.

    The proposal is this: To stimulate $1 trillion in expenditures over 10 years, the Trump administration should hand out $137 billion worth of tax credits to private businesses. That federal tax credit would leverage a flood of private money, covering 82 percent of the equity needed for new projects, argues Ross, who co-authored the plan with Peter Navarro, a University of California at Irvine business professor whom President-elect Donald Trump has tapped as his trade adviser

    “Today, much of America’s infrastructure is crumbling. Much more needs to be built anew,” Ross and Navarro wrote, adding that under President Obama, “urgently needed projects have been routinely delayed for years due to endless studies, red-tape, and obstructionist lawsuits.”

    Moreover, Ross and Navarro say the tax credits would cost the government nothing because of increased tax revenue from new private spending, economic activity and employment.

    Hogwash, say economists from across the political spectrum. “It is totally ill conceived,” Lawrence H. Summers, Harvard University economist and former treasury secretary, said in an email.

    The clash over the plan goes to the heart of one of Trump’s main campaign pledges — to boost infrastructure spending. Trump never laid out whether he would do that through federal spending or through public-private partnerships. And he has not defined what would qualify as infrastructure, potentially triggering a feeding frenzy in Congress as public officials and corporations seek support for their pet projects.

    As a result, the Ross-Navarro proposal, unveiled in late October, is the closest thing to an official one. But economists say its flaws are numerous.

    First, “it will function largely as a giveaway to contractors on projects that would have happened anyway,” Summers said.

    Take the Keystone XL pipeline, for example. TransCanada decided years ago that the project made economic sense on its own merits. Now, if Trump follows his pledge to approve the project’s path from the Canadian border through Nebraska, then the Calgary-based company might make even more money thanks to the new tax credit.

    The tax-credit plan would also exclude a wide variety of worthy projects that are unlikely to appeal to private investors, because they don’t generate an identifiable stream of revenue.

    “This proposal would work only if you have projects that generate cash flows such as tolls, congestion charges or user fees that can be used to generate the return on equity,” said Douglas Holtz-Eakin, president of the American Action Forum, which describes itself as a center-right policy institute.

    One area that doesn’t usually generate cash, policy experts say, is maintenance. And U.S. infrastructure is aging fast. Repairing existing infrastructure, such as bridges, can often be the most effective way to bolster communities and spur other investment — even if new tolls or fees can’t be imposed.

    Moreover, other analysts note, user fees and tolls are regressive, like gasoline taxes, placing a bigger burden on the lower and middle class because they eat up a larger portion of their income. Federal grants for infrastructure, however, would draw on tax revenue raised through the progressive income tax.

    In addition, most of the biggest private investors in infrastructure don’t need tax credits, Summers added. That’s because they are tax-exempt entities such as pension funds. Instead, the high tax credit would be more likely to attract those seeking tax shelters, not those seeking the most urgent public needs or efficient investments.

    Holtz-Eakin, a former director of the nonpartisan Congressional Budget Office, takes issue with the assumption the tax credits would pay for themselves. “It’s imagining that somehow there will be an immediate macro-feedback,” he said. “It’s not going to be that big.”

    He noted that the new capital devoted to infrastructure would “shift from one place to another. For the nation as a whole, a big chunk of that’s a wash.” The increase in wages Ross and Navarro promise, “that’s coming at the expense of something else,” Holtz-Eakin said.

    Holtz-Eakin also said that a plan to boost infrastructure must include state and local governments and must also define what infrastructure is. People have called for spending on everything from bike paths and affordable housing to schools and roads.

    Summers also fired salvos at another paper by Ross and Navarro containing estimates of the impact of trade tariffs. Ross and Navarro said they would boost U.S. gross domestic product. Summers called their calculations the “economic equivalent of denying climate change or being for creationism.”

    Ross and Navarro did not return calls or emails asking for comment. Their October paper defends the tax credit for private investors, saying construction costs “tend to be higher” when projects are built by the government rather than private sector. They said that by covering 82 percent of equity needed, the tax credits would ease concerns about forecasts of revenue streams.

    Yet Americans apparently don’t want to pay bridge and transportation tolls for private infrastructure investors via tax breaks as Ross and Navarro suggest, according to a Washington Post-ABC News poll conducted Jan. 12 to 15. The survey showed that 66 percent opposed such a plan and only 29 percent supported it.

    While Republicans were more favorable, at least half of each group, Republicans, Democrats and independents, opposed the idea. The poll was a random national sample of 1,005 adults. The question didn’t mention Trump, Ross or Navarro.

    Even economists who favor privatization of infrastructure oppose tax credits as the way to go about that. Steve H. Hanke, a professor of applied economics at Johns Hopkins University, served on President Ronald Reagan’s Council of Economic Advisers, where he was in charge of the infrastructure portfolio.

    Hanke believes that infrastructure should be built and operated by private companies, arguing that public infrastructure projects are plagued by “massive waste, fraud and abuse.”

    Yet Hanke, too, says that tax credits won’t do the trick. He says that tax credits for financing infrastructure are “an opaque way to finance infrastructure” that would “complicate an already monstrously complex U.S. tax code.”

    Moreover, he said, “tax credits are resold from cash-flow-poor developers to a small number of cash-flow-rich banks, institutional investors and corporations who have profits and desire tax credits to offset their income tax obligations.” He said that “these are not boilerplate-type transactions but only for the sharpest of the Wall Street sharpies.”

    “My point is that tax credits are fraught with many problems,” Hanke said. “This is not the slam dunk that has been advertised. A very complicated set of issues would have to be addressed before I would consider a thumbs up for tax-credit financing for infrastructure.”

    “The proposal is this: To stimulate $1 trillion in expenditures over 10 years, the Trump administration should hand out $137 billion worth of tax credits to private businesses. That federal tax credit would leverage a flood of private money, covering 82 percent of the equity needed for new projects, argues Ross, who co-authored the plan with Peter Navarro, a University of California at Irvine business professor whom President-elect Donald Trump has tapped as his trade adviser”

    Get ready for toll-roads, toll-bridges, and toll-whatever-else-can-be-tolled. Although don’t get ready for infrastructure maintenance:

    The tax-credit plan would also exclude a wide variety of worthy projects that are unlikely to appeal to private investors, because they don’t generate an identifiable stream of revenue.

    “This proposal would work only if you have projects that generate cash flows such as tolls, congestion charges or user fees that can be used to generate the return on equity,” said Douglas Holtz-Eakin, president of the American Action Forum, which describes itself as a center-right policy institute.

    One area that doesn’t usually generate cash, policy experts say, is maintenance. And U.S. infrastructure is aging fast. Repairing existing infrastructure, such as bridges, can often be the most effective way to bolster communities and spur other investment — even if new tolls or fees can’t be imposed.

    With all these great features, is it any surprise that a whole one third of people support this kind of public(a little)-private(almost entirely) partnership model? Yes, it’s a little surprising in that the support is that high. Still, politically speaking, it doesn’t sounds like there’s going to be much political support for Trump’s big infrastructure scheme:

    Yet Americans apparently don’t want to pay bridge and transportation tolls for private infrastructure investors via tax breaks as Ross and Navarro suggest, according to a Washington Post-ABC News poll conducted Jan. 12 to 15. The survey showed that 66 percent opposed such a plan and only 29 percent supported it.

    While Republicans were more favorable, at least half of each group, Republicans, Democrats and independents, opposed the idea. The poll was a random national sample of 1,005 adults. The question didn’t mention Trump, Ross or Navarro.

    It doesn’t sounds like people like tolls everywhere and a for-profit-for-everything model of society. Imagine that.

    So we’ll see what happens politically, but note that Trump’s infrastructure scheme does have have significant support in one major demographic: the Speaker of the House demographic:

    The Hill

    Ryan offers picture of public-private spending in Trump’s infrastructure plan

    By Melanie Zanona – 01/19/17 02:06 PM EST

    President-elect Donald Trump’s massive infrastructure package should have $40 of private-sector spending for every $1 of public spending, according to House Speaker Paul Ryan (R-Wis.)

    “A great agency … has public-private partnerships. For every one dollar of federal dollars, there’s $40 of private sector spending,” Ryan said on the Charlie Rose Show. “We want to leverage as much private-sector dollars as possible to maximize the fixing of our infrastructure.”

    It’s perhaps the clearest picture to date of whether — and how much — direct federal funding for transportation upgrades may be included in Trump’s promised $1 trillion infrastructure bill.

    There has been mounting concern, particularly among Democrats and rural Republicans, that relying on private financing would only attract projects that can recoup investment costs through tolls or user fees.

    However, based on Ryan’s preferred ratio, private-sector dollars are still likely to make up a majority of the package, with public dollars only accounting for 2.5 percent.

    Trump floated a blueprint on the campaign trail that would offer $137 billion in federal tax credits to private investors that back transportation projects, which he says would unlock $1 trillion worth of infrastructure investment over 10 years.

    Ryan emphasized that although the price tag of Trump’s proposal is “eye popping,” that figure is only the overall investment level, not the cost of the legislation.

    “That’s not a trillion dollars coming from federal taxpayers into the transportation system,” Ryan said. “That is the total amount we’re shooting for.”

    But tax credits would still need to be fully paid for, Ryan said. Trump claims his plan would be revenue neutral thanks to taxes from new jobs and contractor profits, but economists have cast doubt on those assertions.

    And any direct spending in the plan, which would be around $3.5 billion under Ryan’s vision, would definitely need an offset to pass the Republican-led Congress.

    “Now we have to go about figuring out how to, in a fiscally responsible way, get that going,” Ryan said. “We have to cut spending elsewhere to pay for infrastructure.”

    Trump has not yet defined which infrastructure needs he intends to upgrade, which could include everything from roads and bridges to power grids and broadband.

    He has put together a team, lead by real estate developers Richard LeFrak and Steven Roth, to start identifying which projects should be targeted under any infrastructure proposal.

    Ryan indicated on Wednesday that the plan would run the gamut.

    “That’s airports, that’s pipelines, that’s roads, that’s bridges, that’s harbors, that’s canals,” he said. “All of them is essential.”

    ““A great agency … has public-private partnerships. For every one dollar of federal dollars, there’s $40 of private sector spending,” Ryan said on the Charlie Rose Show. “We want to leverage as much private-sector dollars as possible to maximize the fixing of our infrastructure.””

    So there we have it: Between Wilbur Ross’s comments and Paul Ryan’s statement, it’s pretty clear by now that Trump’s big $1 trillion infrastructure plan is almost certainly going to be almost entirely private investment. Which might mean it’s not actually that big given the limited number of possible investments that could be run for-profit unless it becomes a generic tax credit slush fund for the energy sector or something. It’s not the most inspiring stimulus plackage. Especially since it’s apparently going to require spending cuts elsewhere to finance it:

    But tax credits would still need to be fully paid for, Ryan said. Trump claims his plan would be revenue neutral thanks to taxes from new jobs and contractor profits, but economists have cast doubt on those assertions.

    And any direct spending in the plan, which would be around $3.5 billion under Ryan’s vision, would definitely need an offset to pass the Republican-led Congress.

    “Now we have to go about figuring out how to, in a fiscally responsible way, get that going,” Ryan said. “We have to cut spending elsewhere to pay for infrastructure.”

    “Now we have to go about figuring out how to, in a fiscally responsible way, get that going,” Ryan said. “We have to cut spending elsewhere to pay for infrastructure.”

    That’s right, all those tax-credits to fuel the privatization of the public’s infrastructure is going to have to be paid for with cuts elsewhere in the federal budget…presumably cuts for programs that help single moms or something because this is going to be GOP-determined cuts.

    Tolls everywhere, minimal maintenance, and cuts elsewhere to pay for the tax-subsidized tolls. It should be a super popular program.

    Posted by Pterrafractyl | January 23, 2017, 12:49 am
  19. It looks like currency traders have found a new muse to keep them burning the midnight oil: Trump-induced anxiety. Specifically, Trump-induced anxiety caused by the confusion created by the Trump team’s dollar policy. More specifically, Trump-induced anxiety caused by the confusion created by the Trump team’s own very apparent confusion over its dollar policy:

    Bloomberg Markets

    Dollar Policy Confusion Keeping Currency Traders Up at Night

    by Liz McCormick
    February 8, 2017, 1:50 PM CST

    * Trump Adminstration sends mixed signals on greenback strength
    * Bechtel of Jefferies says pronouncements lead to paralysis

    Currency traders appear to be just as perplexed as the Trump Administration when it comes to the dollar.

    With the greenback’s fortunes ebbing and flowing as the White House sends mixed signals on its preferences for the currency’s strength, sleep has been hard to come by. Even the administration’s policy prescriptions have kept traders guessing. More infrastructure spending, revitalized manufacturing and lower taxes should spell faster growth and inflation — and a stronger dollar. But the focus lately has been on restrictive trade and immigration measures, dimming growth prospects — and sending the greenback into a tailspin.

    After Steven Mnuchin, Trump’s pick for Treasury secretary, seemed in early December to fall in line with long-held policy of the government supporting a stronger dollar, things have become much less clear. The president has since said China and Japan had unfairly devalued their currencies, while his trade adviser Peter Navarro said the euro was “grossly undervalued.” And Mnuchin himself has since seemed to adjust, saying in January that an “excessively strong dollar” could have a negative short-term effect on the economy.

    “The thinking among market participants is that the U.S. strong-dollar policy has ended,” said Neil Jones, head of hedge-fund sales at Mizuho Bank Ltd. “But the strong dollar has not necessarily ended. That’s why there is some dilemma in the market.”

    That’s because traders are still hopeful that over the long-term, Trump will bolster growth by lifting infrastructure spending, cutting taxes and reducing regulation.

    The Bloomberg Dollar Spot Index fell 0.1 percent Wednesday to 1,236.22, extending a loss in 2017 to 2.5 percent. The index gained 7.2 percent in the fourth quarter.

    Adding to the cloudy outlook for the buck is that not everyone is convinced that Trump will in the end push through pro-growth agenda changes.

    BlackRock Inc.’s Chief Executive Officer Laurence D. Fink said Wednesday businesses are in a “slow down” because of the uncertainty about whether Congress and the new administration will enact policies that energized markets after the election.

    The Federal Reserve for its part added support to the dollar in December by ratcheting up by a quarter a percentage point its policy rate band. That has lost steam, with traders now not seeing more than a fifty-percent probability for another hike until June, after wage growth stalled in January.

    “The market is in this state of confusion in terms of how to price the timing of this stuff,” said Brad Bechtel, a currency strategist at Jefferies Group LLC in New York. And government officials recently “have had nothing but negative dollar comments. There is a lot of ebbing and tiding in terms of the news flow and it is really putting traders frozen in their tracks.”

    “With the greenback’s fortunes ebbing and flowing as the White House sends mixed signals on its preferences for the currency’s strength, sleep has been hard to come by. Even the administration’s policy prescriptions have kept traders guessing. More infrastructure spending, revitalized manufacturing and lower taxes should spell faster growth and inflation — and a stronger dollar. But the focus lately has been on restrictive trade and immigration measures, dimming growth prospects — and sending the greenback into a tailspin.”

    Well, it’s not hard to see why traders would be kept up at night trying to figure out what the hell the Trump administration is thinking. Or not thinking. So it’s probably not going to help these traders’ sleep deficit once they learn that the same questions keeping them up at night are keeping Trump up at night too, and he’s calling Lt. Gen. Michael Flynn, who is not an economist, to get answers:

    The Huffington Post

    Leaks Suggest Trump’s Own Team Is Alarmed By His Conduct
    White House leaks are common, but leakers suggesting the president might be unfit for office are not.

    S.V. Date Senior White House Correspondent, The Huffington Post
    Christina Wilkie White House reporter, The Huffington Post
    02/07/2017 09:30 pm ET | Updated 11 hours ago

    WASHINGTON – President Donald Trump was confused about the dollar: Was it a strong one that’s good for the economy? Or a weak one?

    So he made a call – except not to any of the business leaders Trump brought into his administration or even to an old friend from his days in real estate. Instead, he called his national security adviser, retired Lt. Gen. Mike Flynn, according to two sources familiar with Flynn’s accounts of the incident.

    Flynn has a long record in counterintelligence but not in macroeconomics. And he told Trump he didn’t know, that it wasn’t his area of expertise, that, perhaps, Trump should ask an economist instead.

    Trump was not thrilled with that response – but that may have been a function of the time of day. Trump had placed the call at 3 a.m., according to one of Flynn’s retellings – although neither the White House nor Flynn’s office responded to requests for confirmation about that detail.

    For Americans who based their impression of Trump on the competent and decisive tycoon he portrayed on his “Apprentice” TV reality shows, the portrait from these and many other tidbits emerging from his administration may seem a shock: an impulsive, sometimes petty chief executive more concerned with the adulation of the nation than the details of his own policies – and quick to assign blame when things do not go his way.

    “Flynn has a long record in counterintelligence but not in macroeconomics. And he told Trump he didn’t know, that it wasn’t his area of expertise, that, perhaps, Trump should ask an economist instead.”

    That’s our ‘businessman’ president! Surprised? Well, you shouldn’t be surprised given all the backflipping he was doing on Federal Reserve policy and interest rate policies during the course of the campaign. Although it is pretty surprising Michael Flynn was the guy he decided to call. At 3 AM.

    So, since Trump doesn’t seem to be interested in talking to the actual economists on his team, perhaps someone should give him Paul Krugman’s phone number. At least he’ll get answers, although he might not like the answers he gets:

    The New York Times
    The Conscience of a Liberal

    Reagan, Trump, and Manufacturing

    Paul Krugman
    Jan 25, 2017 3:46 pm

    It’s hard to focus on ordinary economic analysis amidst this political apocalypse. But getting and spending will still consume most of peoples’ energy and time; furthermore, like it or not the progress of CASE NIGHTMARE ORANGE may depend on how the economy does. So, what is actually likely to happen to trade and manufacturing over the next few years?

    As it happens, we have what looks like an unusually good model in the Reagan years — minus the severe recession and conveniently timed recovery, which somewhat overshadowed the trade story. Leave aside the Volcker recession and recovery, and what you had was a large move toward budget deficits via tax cuts and military buildup, coupled with quite a lot of protectionism — it’s not part of the Reagan legend, but the import quota on Japanese automobiles was one of the biggest protectionist moves of the postwar era.

    I’m a bit uncertain about the actual fiscal stance of Trumponomics: deficits will surely blow up, but I won’t believe in the infrastructure push until I see it, and given savage cuts in aid to the poor it’s not entirely clear that there will be net stimulus. But suppose there is. Then what?

    Well, what happened in the Reagan years was “twin deficits”: the budget deficit pushed up interest rates, which caused a strong dollar, which caused a bigger trade deficit, mainly in manufactured goods (which are still most of what’s tradable.) This led to an accelerated decline in the industrial orientation of the U.S. economy:
    [see chart showing show sharp drop in percentage of US labor in manufacturing]

    Again, this happened despite substantial protectionism.

    So Trumpism will probably follow a similar course; it will actually shrink manufacturing despite the big noise made about saving a few hundred jobs here and there.

    On the other hand, by then the BLS may be thoroughly politicized, commanded to report good news whatever happens.

    “As it happens, we have what looks like an unusually good model in the Reagan years — minus the severe recession and conveniently timed recovery, which somewhat overshadowed the trade story. Leave aside the Volcker recession and recovery, and what you had was a large move toward budget deficits via tax cuts and military buildup, coupled with quite a lot of protectionism — it’s not part of the Reagan legend, but the import quota on Japanese automobiles was one of the biggest protectionist moves of the postwar era.

    And what happened when Reagan slashed taxes while going on a military spending spree and some trade protection (Trump’s current game plan)?

    Well, what happened in the Reagan years was “twin deficits”: the budget deficit pushed up interest rates, which caused a strong dollar, which caused a bigger trade deficit, mainly in manufactured goods (which are still most of what’s tradable.) This led to an accelerated decline in the industrial orientation of the U.S. economy

    So that gives us one answer to Trump’s “should the US pursue a strong or weak dollar?” question: he shouldn’t really be trying to push up the dollar if reviving US manufacturing is one of his top priorities, but since slashing taxes (and exploding the deficit) is also one of his top priorities, a strong dollar is probably inevitable. So it’s less a question of whether or not Team Trump should be trying for stronger or weaker dollar. It’s a question of what’s his top priority: tax cuts for the rich or reviving US manufacturing.

    Also keep in mind that Krugman’s analysis isn’t an indication that budget deficits are always going to lead to a strong dollar or that protectionist policies are always going to be futile. Like everything in economics, context matters. If, for example, you’re economy is in the middle of a massive tail-spin and interest rates are already near zero, significant deficit spending can be exactly what your economy needs in part because it’s not going to put the same kind of upward pressure on interest rates (and the value of the currency) than would happen if those same deficits occurred in the middle of a relatively strong economy. But we shouldn’t expect the same kind of dynamic if deficits explode when the economy is as strong as it is today.

    It’s sort of like how it’s not absurd that a president, especially a new president, would ask his advisors the question of whether or not a stronger or weaker dollar is desirable. The meta-answer is “it depends” and it’s a question that should be asked routinely when crafting policy. But calling your loopy national security advisor in the middle of the night to ask him about macroeconomics is indeed pretty absurd. Context matters.

    Posted by Pterrafractyl | February 8, 2017, 8:53 pm
  20. The Financial Times had a recent report on the “dimming” US corporate profit estimates and early indications that the Trump-infused spirits that infected investors at the very beginning of the Trump presidency aren’t quite as high as they were in January. It’s not bad news in terms of investor sentiment. Just not as good as it was initially. The bad news happens when Trump can’t actually follow through on all the promises that led to such positive investor sentiment.

    And while Trump can likely follow through on those expectations when it comes to slashing corporate taxes, the larger Trump pledge of leading an economic renaissance (which is basically what Trump was pledging, especially to rural America) is much harder to do. Especially when Trump’s trillion dollar infrastructure stimulus is really less than $200 billion in tax credits for private investors who provide the rest of the trillion dollar “stimulus”. And also since Trump’s budget assumes that the economy grows between 3-3.5 percent for the next decade which is far higher than should realistically assumed, especially since Trump inheriting a decent economy. So irrational Trumpian expectations is a real thing that is already having real impacts on the market and could have a bigger impact if those expectations aren’t met. But for now, those expectations are still going strong. Just not quite a strong as two months ago:

    Financial Times

    Outlook for US corporate profits dims
    Analysts pare down forecasts for 2017 at a time when S&P 500 is at near record highs

    Adam Samson and Nicole Bullock in New York
    March 19, 2017

    The US corporate profit outlook has dimmed in recent weeks, with analysts paring back their forecasts, in a fresh sign of the risks facing the Wall Street rally that has powered equities to record peaks.

    Earnings for companies listed on the S&P 500 index, the main US stock barometer, are predicted to rise 9 per cent in the first quarter, FactSet data show. While the rate marks a significant uptick from the 4.9 per cent notched in the final three months of 2016, it represents a reduction from the 12.3 per cent expected at the start of this year.

    The weaker estimates come at a time when stocks are trading near record highs. The S&P 500 has rallied by 6.2 per cent year-to-date as of Friday’s close — and the benchmark sits less than 1 per cent from the all-time peak it hit on March 1.

    Equities look more expensive as a result. A closely watched valuation measure developed by Yale economist Robert Shiller, the cyclically adjusted price-to-earnings ratio, struck its highest point in 15 years this month.

    Nicholas Colas, chief market strategist at Convergex, noted that it was a “normal pattern” for analysts to “start high with [earnings] estimates and move lower”, but he said this time should have been different given President Donald Trump’s slate of business-friendly initiatives.

    “You wouldn’t know that there was an agenda in place to lower corporate taxes and raise infrastructure spending. That is invisible in the numbers,” he said.

    Investors may have become too optimistic about the positive impact of Mr Trump’s fiscal policies, said Russ Koesterich, a portfolio manager at BlackRock.

    In particular, he said that it is possible that the heated debate on Capitol Hill over healthcare reform will delay other measures, such as tweaks to the corporate tax code, that are expected to be a boon to companies’ bottom lines.

    Beyond earnings, another cause for caution is that while data on the US economy have been “solid” overall, there are indications that growth may not “accelerate as quickly as people thought at the beginning of the year,” according to Mr Koesterich.

    A running projection for first-quarter economic growth from the Atlanta Federal Reserve offers a prime example. It pegged the annualised rate of expansion at 3.4 per cent at the start of February on the back of strong data on manufacturing.

    But the figure has consistently fallen, hitting 0.9 per cent after the jobs report on March 10 — a prediction that has held steady since then as further private and government economic reports have been released.

    “We’re certainly in a better place than a year ago, but it’s not entirely obvious” that the pick-up will be as strong as investors had anticipated, Mr Koesterich said.

    “Earnings for companies listed on the S&P 500 index, the main US stock barometer, are predicted to rise 9 per cent in the first quarter, FactSet data show. While the rate marks a significant uptick from the 4.9 per cent notched in the final three months of 2016, it represents a reduction from the 12.3 per cent expected at the start of this year.”

    Corporate earnings expectations aren’t quite what they were in January: 9 percent projected growth vs 12 percent. It’s not the kind of dimming sentiment that’s probably going to worry the Trump administration very much. At least not yet. But, again, the Trump budget is based on the assumption of unusually high growth rates over the next decade and you have to wonder how much of the investor sentiment today is predicated on an assumption that US economic growth and corporate profits really are entering into a new Trumpian era where historically high growth rates are the norm. If so, it could be quite a wake up call for markets if that sentiment changes. For instance, Bank of America just put out a survey of fund managers that found more fund managers saying stocks are overvalued now than at any point over the last 20 years. And while, on the one hand, that’s a positive sign in the sense that it indicates “the markets” aren’t quite as irrational as they could be but it’s also a reflection of how markets really have shot up pretty substantially since Trump’s win and there’s now a significant Trump bull run baked into current valuations. So despite the fact that an economic pull back is to be entirely expected at some point during Trump’s term, it’s not clear just how much investors are expecting that, at least based on current market valuations.

    That’s all part of what’s going to make the performance of the economy under Trump so fascinating: It’s got to be consistently good to meet current expectations and it’s not really clear how expectations will shift if things don’t go well. Like, what will Trump himself do if the economy cools off – or actually experiences a full blown crisis? Will he just start brooding and blaming phantoms (probably Obama) for the economy’s woes on Twitter? Declare war? Deregulate Wall Street even more? What’s he going to do? It’s a very open question, like a choose-your-own-adventure with no good endings.

    But the role that elevated market expectations could play into the Trump economy is also pretty fascinating in part due to the fact that the Federal Reserve is basically mandated to try and ensure that the economy does well, but not too. And by “too well”, we of course mean not too much inflation. More specifically, not too much wage inflation. If the economy heats up hot enough long enough and wages start rising more than 2 percent a year or so, the Fed feels it has a mandate to step in and cool off the economy. That’s just how the Fed works these days.

    So assuming the Trump team does manage an extended string of plus 3 percent annual growth rates and wages start rising at the kind of clip that normally freaks out conservative central bankers, what on earth is the Trump team going to do if the Fed steps in to ‘take away the punch bowl’ and cool things off? Will the Trump team view that as the excuse they were looking for to weasel their way out of the irrational expectations the Trump team set up for itself? Or will Trump get all pissy? It’s a question without clear answers at this point, but as the article below points out, the Fed board of governors is leaning strongly towards a rapid rate rise this year alone in order to ward off plus-2 percent inflation and that’s not going to stop if the economic expansion Trump inherited continues, so the answer to that question could get a lot clearer in the next year or two:

    Bloomberg Markets

    Kashkari Emerges as Opposing Voice as Fed Shows Optimism

    by Jeanna Smialek, Matthew Boesler, and Christopher Condon
    March 20, 2017, 10:29 AM CDT March 20, 2017, 11:08 AM CDT

    * Presidents Harker, Evans both see more rate increases coming
    * Minneapolis Fed chief doesn’t see 2% core inflation in 2017

    The U.S. Federal Reserve could raise interest rates two, three or four times this year, said Chicago Fed President Charles Evans, though his Minneapolis colleague Neel Kashkari argued that there was no need to rush.

    “We do not have a high-inflation threat right around the corner,” Kashkari said during an interview on Bloomberg Television Monday, adding that the lack of price pressure affords the Fed patience in raising rates. “I’d be very surprised if core inflation reaches 2 percent this year.”

    The Minneapolis Fed chief cast the sole dissent when the Federal Open Market Committee voted on March 15 to raise rates. Kashkari’s stance establishes him as a voice of resistance as the Fed gets moving: as of last week’s meeting, officials forecast two more rate increases this year, assuming their economic projections for low unemployment and near-2 percent inflation are met.

    “The data are basically moving sideways, so I’m asking, what’s the rush to raise rates,” Kashkari said. “When the data really call for it, then we should remove accommodation.”

    ‘Entirely Reasonable’

    Kashkari is a first-time voter in 2017 and his comments were in contrast to those of Chicago’s Evans, who also votes on policy this year.

    “If the growth outlook solidifies and I have more confidence that inflation is going up, three for the entire year is entirely reasonable,” Evans, who has long been an advocate of a patient approach to raising rates, said earlier on Fox Business. “It could be three, it could be two, it could be four if things really pick up.”

    U.S. unemployment has dipped to 4.7 percent, which is near the level most Fed officials see as consistent with maximum employment. The Fed’s preferred gauge of price pressures, excluding food and energy, rose 1.7 percent in the 12 months through January, still a bit shy of its 2 percent goal. Policy makers also view international risks as less threatening than last year, and solid progress at home without major headwinds from abroad have improved their confidence in the outlook.

    Philadelphia Fed President Patrick Harker, who also votes on monetary policy this year, separately said that he can’t rule out more than three rate increases this year, and that there probably will be some overshoot on the Fed’s 2 percent inflation goal.

    Dot Plot

    The Fed’s so-called dot plot — the anonymous chart that displays policy makers’ estimates for rate increases over the next three years — was updated at the March FOMC meeting. All 17 FOMC participants submitted forecasts. Two favored just one hike in 2017; one official penciled in two; nine saw three being warranted; and five policy makers viewed four or more increases as needed.

    St. Louis Fed President James Bullard has previously said he only forecasts one increase this year. Kashkari declined to say how many he had estimated, though some Fed watchers say he probably has just one increase written down, while Evans probably has two hikes.

    That implies all seven members of the Board of Governors in Washington, including Chair Janet Yellen, Vice Chair Stanley Fischer and New York Fed chief William Dudley, have also probably forecast three increases in 2017.

    U.S. unemployment has dipped to 4.7 percent, which is near the level most Fed officials see as consistent with maximum employment. The Fed’s preferred gauge of price pressures, excluding food and energy, rose 1.7 percent in the 12 months through January, still a bit shy of its 2 percent goal. Policy makers also view international risks as less threatening than last year, and solid progress at home without major headwinds from abroad have improved their confidence in the outlook.”

    That’s right: Donald Trump inherited an economy near maximum employment, at least according to the US unemployment rate. And while Trump has repeatedly claimed this the unemployment rate is much closer to 42 percent, the Fed doesn’t base its decisions based on Trump’s hallucinations.

    Also note that the lone dissenter on the Fed’s board for the latest rate hike, Niel Kashkari, is a Republican who was generally hawkish and critical of the Fed’s low rates before he was appointed as Fed governor in 2015. So the biggest Dove was recently Hawk and is still potentially very hawkish. Just not yet.

    So we could be looking at Fed rate hikes imposing real economic headwinds for Trump’s economy fairly soon. Sure, Fed rates are still historically low and there’s plenty of room for them to rise before they even approach historically “normal” ranges. But those rises still have an impact, especially on sectors of the economy that are often seen as a proxy/barometer like housing and stock markets. Will Trump simply tout how great it is that middle-class savers can earn higher interest on their bank CDs are could we be looking at a real fight between Trump and the Fed. Trump promised a wild party and the Fed is already planning on pulling away the punch bowl, it’s a pretty big question. Especially since Turmp’s prior comments on the Fed are pretty schizo and he has immense power to reshape the Fed in coming years (and has surrounded himself with people who want to bring back the gold standard and are quite hawkish in general):

    Politico
    The Agenda

    What Trump could do to the Federal Reserve

    His inner circle contains some radical monetary thinkers—and Wall Street bankers. Who will prevail?

    By Danny Vinik
    03/15/17 05:26 AM EDT

    What happens when President Donald Trump gets his hands on the Fed?

    It’s the question gripping the economic world these days. Though not as big a headline as immigration policy or his cabinet picks, Trump has a chance to appoint a new person to nearly every top Fed job over the next two years—a power not afforded most presidents, and with very high stakes. The Fed’s decisions can ripple through the economy, making mortgages more expensive, causing mining companies to reduce investment in new machinery and preventing retail stores from hiring new workers.

    Given the president’s tendency to take advice from a very close circle, experts have started casting a wary eye on just who’s in Trump’s immediate orbit—and what they think about the Federal Reserve. What they’re seeing suggests that Trump has the potential to bring more dramatic changes to the Fed than any president since at least Ronald Reagan.

    While recent presidents have drawn from bankers and economists with a narrow set of views, Trump has surrounded himself with a number of advisors who hold extreme, even fringe ideas about monetary policy—including at least six who have spoken favorably about the gold standard. Not all are gold standard supporters, but many are far more hawkish in their approach to money than typical Fed officials over the past few decades.

    The support for the gold standard around the president “seems like nothing that’s happened since the Great Depression,” said Joseph Gagnon, a senior fellow at the Peterson Institute for International Economics who has worked at the Fed off-and-on for the past 30 years. “You have to go back to Herbert Hoover.”

    The first big signal of Trump’s direction will come with his choices for three open Fed board spots. Two spots have been empty for nearly three years, while another will open up in April when Fed Governor Daniel Tarullo steps down. Wall Street is especially awaiting Tarullo’s replacement because he has overseen the implementation of the Fed’s regulatory responsibilities under Dodd-Frank.

    That’s just the beginning, though. Before even half his term is complete, Trump will be able to choose an entire new leadership of the central bank: the terms of the chair and vice chair of the Board, Janet Yellen and Stanley Fischer, are both up in the first half of 2018. He will also influence the replacement for the president of the New York Fed, William Dudley, who is supposed to retire in January, 2019. Yellen, Fischer and Dudley currently hold the three most important positions at the Fed—known together as the Troika.

    So, what will Fed policy look like under the Trump administration? As on so many other issues, Trump’s own views are nearly impossible to determine. At one point during the presidential campaign, Trump called himself a “low-rate person”; at another, he attacked the Fed’s low-rate policy for creating a “false economy.” But based on the figures around him, it’s possible to game out a few ideas for what monetary policy could look like in the years ahead. To do so, POLITICO spoke with former Fed staffers, economists and Trump advisors to understand what Trump might look for in nominees for top Fed positions and how those nominees, in turn, could alter the most important economic institution in the world. Here are four possibilities:

    1. The gold standard returns.

    The gold standard is nearly synonymous with “fringe idea” in modern monetary policy—not since 1933 has the United States literally pledged that it would back every dollar with a dollar’s worth of stored gold. But right now it’s high times for gold standard advocates, starting at the top of the executive branch: “Bringing back the gold standard would be very hard to do, but, boy, would it be wonderful. We’d have a standard on which to base our money,” Trump said in November, 2015.

    Given Trump’s other comments on monetary policy, it’s impossible to say whether he actually supports the gold standard. But if he does, he would become the first president to favor it since Hoover, according to Louis Johnston, an economist at the College of Saint Benedict—a fact that’s not lost on its other fans in American politics. “We’re in a better position than we’ve ever been in my lifetime as far as talking about serious changes to the monetary system and talking about gold,” said former Rep. Ron Paul, a long-time supporter of the gold standard.

    It’s not just Trump. Not since Reagan­—perhaps earlier—have so many gold bugs had such high levels of influence in the White House. Beyond the president, the gold standard has support from Judy Shelton, the director of the Sound Money Project at the Atlas Network, who was on Trump’s transition team; Rebekah and Robert Mercer, top Trump donors who have funded past efforts in support of the gold standard; Ben Carson, the neurosurgeon turned presidential candidate who is now Trump’s Secretary of Housing and Urban Development; David Malpass, a former member of Trump’s transition team and potential selection for a top spot at Treasury; and John Allison, the former CEO of BB&T Corp. who Trump interviewed for treasury secretary in November.

    Gold appeals to people who are skeptical of banks and global institutions and fear society’s collapse; it’s a durable commodity with tangible value that can be held in the hand. Like most “hard money” fans, gold standard supporters fear that the government’s looseness with issuing money will cause skyrocketing inflation and reduce the value of the dollar—unless they can put on the brakes by strictly tying dollars to a valuable, limited commodity.

    Starting in 1879, the U.S. tied the dollar to gold until it effectively abandoned the policy in 1933 after policymakers blamed it, in part, for the government’s weak response to the Great Depression. (Richard Nixon completely ended the dollar’s ties to gold in 1971, and today, no industrialized economy links its currency to gold.) Mainstream economists from both sides of the aisle oppose the gold standard for limiting the Fed’s ability to respond to recessions. In a 2012 survey of 32 economists by the University of Chicago, not a single one supported it.

    Could Trump bring it back? Not likely. Even supporters of the gold standard admit that there are practical limitations to returning to such a standard today, including determining the price of gold given the government’s limited supply. But a Fed filled with gold standard supporters might weigh gold much more heavily in their monetary policy decisions—an indirect way, at least, for a gold-driven philosophy to influence the economy.

    That would represent a dramatic break from the monetary policy debates in recent decades. Reviving the argument over gold would undoubtedly roil the economics profession, with unknowable effects on the broader economy. To most presidents, that may be a reason to avoid such a move. To Trump, it may be his exact reason for doing it. “He may not even support [the gold standard] but it’s a way of sticking the middle finger to the establishment,” said David Beckworth, a monetary economist at the Mercatus Center. “I could see a certain part of him being like ‘So gold standard is what irritates them, great, let’s run with it.’”

    2. Ending the Fed’s dual mandate

    Since 1978, the Fed has officially had two main directives: maximum employment and stable inflation. This is called the “dual mandate,” and sometimes the goals can be in conflict, as when unemployment falls so low that inflation rises. The art of running the Fed often consists in balancing the two successfully.

    But Mick Mulvaney, president Trump’s new budget director, actually sponsored legislation to end the dual mandate when he was in Congress. Instead, Mulvaney, a fiscal hawk, wants to see the Fed focus solely on keeping inflation low. (Mulvaney has also flirted with fringe monetary thinking. In 2013, he appeared to publicly support a theory, popular on the libertarian right, that U.S. inflation statistics are rigged, and the government is underestimating the true level of inflation.)

    Mulvaney has a powerful ally in Vice President Mike Pence, who during his time in Congress also sponsored legislation to end the dual mandate. But since the dual mandate is a statutory responsibility, Trump can’t end it through nominations alone. That could only happen through an act of Congress and it’s unlikely Senate Democrats, and many Senate Republicans, would agree to such a radical change. But even if the dual mandate is unlikely to be formally repealed, Mulvaney and Pence’s roles in the White House ensure that Fed hawks will receive a full hearing in the Trump administration and potentially gain important positions at the Fed. That could portend a more inflation-phobic Fed in the years ahead, even with the dual mandate still firmly in place.

    3. A rules-based approach to monetary policy.

    The most likely reform for the central bank goes by the technical term “rules-based.” This means that instead of the Fed setting its benchmark interest rate on the judgment of its policy-making committee, it would do so according to a specific rule. The most famous proposed rule comes from Stanford economist John Taylor­—it’s known as the Taylor Rule—and incorporates changes to inflation, growth and other economic indicators. If applied now, the Taylor Rule would call for the Fed to set its benchmark interest rate at around 2.5 percent—far above its current level of 0.5 percent. This would instantly raise interest rates on everything from mortgages to credit cards to corporate loans, and likely roil financial markets.

    Republicans for years have been yearning for a rules-based Fed, arguing that during the Obama administration, the Fed’s policy of keeping its benchmark interest rate near zero and buying trillions of dollars in assets to further lower long-term rates hurt seniors, whose savings benefit from higher interest rates, devalued the dollar and set the stage for higher inflation. House Republicans passed legislation requiring the Fed to adopt a rule of some kind, although it didn’t specify the Taylor Rule. The Fed would have been allowed to deviate from the rule, but would have to explain to Congress why it did so.

    Unlike the gold standard, a rules-based approach to monetary policy enjoys support from many mainstream economists, including those who have largely supported Obama-era monetary policy. It also has support in Trump’s inner circles, including many of those who support a gold standard. Often, a rules-based approach to monetary policy is seen as a less-extreme version of the “hard money” philosophy, one that would still likely lead to tighter monetary policy. Fans in the Trump orbit include Peter Navarro, the U.C.-Irvine economist Trump chose to head the newly-created National Trade Council; Tom Price, the head the Department of Health and Human Services; and Larry Kudlow, the famed supply-sider and informal Trump advisor.

    4. Business as usual.

    One other possibility: Trump doesn’t remake the central bank after all.

    Traditionally, the president’s selections for top Fed posts are guided by a few key policymakers—the heads of the Office of Management and Budget, National Economic Council and Council of Economic Advisors, and the treasury secretary, along with senior staff at the White House. Besides Mulvaney, at OMB, feelings in that group on the Fed are more traditional. Treasury Secretary Steven Mnuchin and NEC Director Gary Cohn have both spoken positively of recent Fed policy, as has Wilbur Ross, Trump’s choice as commerce secretary, and are likely to support more traditional GOP nominees. Kevin Hassett, Trump’s pick to head the CEA who was a researcher at the Fed earlier in his career, has expressed skepticism about some of the Fed’s decisions after the financial crisis but is considered an establishment figure.

    What could that look like? Former Fed officials and mainstream economists hope that Trump will choose to replace Yellen with a traditional Republican economist like Kevin Warsh, a former Fed governor, or Glenn Hubbard, the former top economist to George W. Bush. John Taylor is also frequently rumored as a top candidate for the job.

    Maybe he even keeps Janet Yellen.

    “That would represent a dramatic break from the monetary policy debates in recent decades. Reviving the argument over gold would undoubtedly roil the economics profession, with unknowable effects on the broader economy. To most presidents, that may be a reason to avoid such a move. To Trump, it may be his exact reason for doing it. “He may not even support [the gold standard] but it’s a way of sticking the middle finger to the establishment,” said David Beckworth, a monetary economist at the Mercatus Center. “I could see a certain part of him being like ‘So gold standard is what irritates them, great, let’s run with it.’”

    Might Trump decide to flirt with the gold standard just to f#ck with everyone? It would certainly be a great distraction. But as the article as pointed out, the more Trump indulges in gold-standard-ish economic theories, the harder it’s going to be for him to avoid an extremely hawkish Fed. Because if today’s Fed looks hawkish just look at the gold bugs. THAT’s hawkish. And yet Trump has surrounded himself with gold bugs and is going to have the opportunity during his term to dramatically reshape the Fed, both in terms of personnel and potentially the rules that the Fed operates under. Very basic rules like whether or not the Fed even factors in the unemployment rate at all in its decisions (the dual mandate) or whether the Fed even gets to factor anything at all into its decisions and instead just follows a sets of rules (the “rules-based” approach”). Even if Trump doesn’t push the gold-standard, he can still impose gold-standard-lite:


    2. Ending the Fed’s dual mandate

    Since 1978, the Fed has officially had two main directives: maximum employment and stable inflation. This is called the “dual mandate,” and sometimes the goals can be in conflict, as when unemployment falls so low that inflation rises. The art of running the Fed often consists in balancing the two successfully.

    But Mick Mulvaney, president Trump’s new budget director, actually sponsored legislation to end the dual mandate when he was in Congress. Instead, Mulvaney, a fiscal hawk, wants to see the Fed focus solely on keeping inflation low. (Mulvaney has also flirted with fringe monetary thinking. In 2013, he appeared to publicly support a theory, popular on the libertarian right, that U.S. inflation statistics are rigged, and the government is underestimating the true level of inflation.)

    Mulvaney has a powerful ally in Vice President Mike Pence, who during his time in Congress also sponsored legislation to end the dual mandate. But since the dual mandate is a statutory responsibility, Trump can’t end it through nominations alone. That could only happen through an act of Congress and it’s unlikely Senate Democrats, and many Senate Republicans, would agree to such a radical change. But even if the dual mandate is unlikely to be formally repealed, Mulvaney and Pence’s roles in the White House ensure that Fed hawks will receive a full hearing in the Trump administration and potentially gain important positions at the Fed. That could portend a more inflation-phobic Fed in the years ahead, even with the dual mandate still firmly in place.

    3. A rules-based approach to monetary policy.

    The most likely reform for the central bank goes by the technical term “rules-based.” This means that instead of the Fed setting its benchmark interest rate on the judgment of its policy-making committee, it would do so according to a specific rule. The most famous proposed rule comes from Stanford economist John Taylor­—it’s known as the Taylor Rule—and incorporates changes to inflation, growth and other economic indicators. If applied now, the Taylor Rule would call for the Fed to set its benchmark interest rate at around 2.5 percent—far above its current level of 0.5 percent. This would instantly raise interest rates on everything from mortgages to credit cards to corporate loans, and likely roil financial markets.

    So is Trump at all tempted at this point to ditch the dual mandate, move over to a “rules-based” monetary policy and formally switch over to a gold-standard-lite model? Well, at this point probably not since that would destroy the economy and the current Trumpian enthusiasm. But what if we’re talking, say, a few years from new and the economy is already kind of destroyed or at least very troubled and Trump has nothing to lose? What then?

    That’s one of the very fascinating questions raised by the juxtaposition of Trump’s promises of historic economic growth coupled with his palling around with gold bugs and uber-hawks. While the gold bugs and uber-hawks like to tell you that awesome economic growth is synonymous with gold buggery and uber-hawkishness, there’s a reason modern economies don’t the gold standard. It’s like turning the central bank on auto-pilot. A central bank auto-pilot predisposed to high-than-warranted policies favoring banks and those with lots of bonds and savings when times are worst. That’s not a useful auto-pilot, especially for an economic super-power that wants to retain that status and yet Trump has an awful lot of people that either want the gold standard or some sort of gold-standard-lite scheme like ditching the dual mandate (how the ECB is structure…which a rather big warning flag right there) or switching over a brain dead “rules-based” system. And all of these gold bug-ish people Trump surrounded himself with either advocate ending the Fed outright or at least hiking rates a lot. And that means keeping a lid on the Trump economy that Trump’s teams has predicted is going to be running hot for the next decade and is already running hot right out of the gates because, again, Trump inherited an unemployment rate that’s so low the Fed considers it near “full unemployment” (despite what you may have heard).

    And that’s all part of why how Trump’s relationship with the Fed is going to be so fascinating: the politics and economics do not mix. At all. Unless things get really, really bad economically. So while the stock market is near all time highs and the gold markets have seen better days, the gold bug market is looking pretty bullish, especially if things get extremely bearish in general. And you thought the last bubble was scary.

    Posted by Pterrafractyl | March 21, 2017, 10:19 pm
  21. Here’s an interesting student loan-related fun fact about Donald Trump’s for-profit governing philosophy: When Trump was campaigning back in 2015 he remarked about how the one area of the federal government that shouldn’t make money off is on student loans, saying at the time “That’s probably one of the only things the government shouldn’t make money off — I think it’s terrible that one of the only profit centers we have is student loans.” And while Trump hasn’t really had much to say about US student loan crisis at all since getting elected that doesn’t mean Trump and the GOP aren’t poised to make some pretty big changes to student lean regulations. Specifically, once the GOP gets finished gutting the Consumer Financial Protections Burueau, those students loans are going to be a lot more profitable. profitable for the government and the student loan servicers who will be allowed to legally steer struggling borrowers towards profit-maximizing repayment strategies and do this all under the guise of providing sound financial advice and without any Consumer Financial Protection Bureau to try and stop them:

    Bloomberg

    Student Debt Giant Navient to Borrowers: You’re on Your Own
    The servicer says publicly it wants to help you pay debt. In a government lawsuit, it has a different message.

    by Shahien Nasiripour
    April 3, 2017, 3:00 AM CDT

    Over the past several years, Jack Remondi, chief executive of student loan giant Navient Corp., has gone out of his way to tout the company’s devotion to helping Americans cope with student debt.

    He’s mentioned it in meetings with investors, on calls with Wall Street analysts, in testimony before Congress, and even on his Medium blog. “At Navient, our priority is to help each of our 12 million customers successfully manage their loans in a way that works for their individual circumstances,” he said March 20.

    But faced with a potential multi-billion dollar lawsuit by the federal government for not living up to that mantra, Remondi’s company, formerly an arm of student lender Sallie Mae, sang a different tune in court filings.

    Borrowers can’t reasonably rely on America’s largest student loan servicer to counsel them about their many options, Navient said on March 24 in a motion to dismiss the case, because its primary role is, after all, to collect their payments.

    “There is no expectation that the servicer will act in the interest of the consumer,” Navient said in response to the litigation filed Jan. 18 by the U.S. Consumer Financial Protection Bureau.

    With about one in four of the nation’s roughly 44 million student debtors either in default or struggling to stay current, there’s broad agreement that loan servicers such as Navient are key to ending the crisis. Remondi, 54, has said as much on several occasions. One of his four ideas to slash defaults is for policymakers to encourage borrowers to call their loan servicer. “For some borrowers, student loan debt can be especially daunting. The good news is that borrowers can turn to their student loan servicers for help to navigate the complex repayment options,” Remondi said in February.

    But in court, Navient made clear that the company’s main job isn’t helping debtors; it’s getting them to cough up cash for creditors like its biggest client, the U.S. Department of Education. The department, Navient explained, didn’t agree to pay for the level of customer service the CFPB wants Navient to give.

    “This ranks among the most appalling statements I have heard in my career,” said David Bergeron, who after more than 30 years of working at the Education Department recently retired as the head of postsecondary education. “If that’s all they are doing,” Bergeron said of Navient’s claim that its only responsibility is to collect, “the Treasury Department and the Internal Revenue Service would do it better.”

    “What this means for the Education Department is that it needs to fire Navient,” Bergeron said. “Damn the costs.”

    Patricia Christel, a Navient spokeswoman, declined to make Remondi available for an interview. The company helps borrowers “navigate loan repayment through proven solutions,” she said in a prepared statement. In court, Navient has also sought to undercut the lawsuit by arguing that the CFPB—under siege by a Republican-controlled Congress and White House—is itself unconstitutional.

    In January, the CFPB sued Navient in a Pennsylvania federal court, alleging the company “systematically” cheated student debtors by taking shortcuts to minimize its own costs. Navient illegally steered struggling borrowers facing long-term hardship into payment plans that temporarily postponed bills, the government alleged, rather than helping them enroll in plans that cap payments relative to their earnings.

    The latter option promises debtors the possibility of debt forgiveness after years of steady payment. The former raises the possibility of a financial time-bomb.

    Navient chose the former, the CFPB said, because it took less time for its employees to set up. Borrowers can typically enroll in so-called forbearance plans over the phone, while income-based repayment plans require paperwork and lots of explanation.

    In July 2013, when Navient was the servicing arm of Sallie Mae, Remondi said in an earnings call that “it’s very expensive work, for example, to enroll a borrower into something like an income-based repayment program … which we are doing. But we don’t actually get paid for outperformance in that side of the equation.”

    By pushing distressed debtors into forbearance agreements, the CFPB said, Navient’s conduct violated a federal law (PDF) banning “abusive” practices.

    The Education Department and Navient repeatedly encouraged borrowers to contact the company if they had trouble meeting their obligations, the CFPB said in its complaint. Through statements on the websites of both the company and the government, debtors were prodded to reach out. But when they did, Navient employees allegedly sought to exploit their lack of knowledge and steer them into payment plans more beneficial to Navient, the CFPB said.

    The consumer protection bureau estimates that as much as $4 billion in additional interest charges were added to principal balances of loans repeatedly placed in forbearance. The CFPB seeks an injunction barring such conduct, modification of existing payment agreements, and restitution to affected students.

    “The Education Department ultimately is asking loan servicers to act on its behalf to fulfill its fiduciary responsibility to borrowers,” Bergeron said, and the government “expects its servicers to make sure that borrowers gain access to income-based repayment plans.” The CFPB argued in its complaint that this was decidedly not the case with Navient.

    Navient has repeatedly denied the government’s allegations, pointing to how more than 40 percent of loan balances it services for the Education Department are enrolled in income-based repayment plans. Borrowers with Navient-serviced federal loans are less likely to default within the first three years of payments than the national average, company spokeswoman Christel argued, citing the company’s internal data.

    However, an analysis of the most recent federal figures shows that 30 percent of Navient-serviced borrowers are behind on their payments—the worst rate among the Education Department’s loan contractors. CFPB data also show (PDF) that Navient ranks seventh on a list of the nation’s most recently complained-about financial companies.

    In its motion to dismiss the consumer bureau’s complaint (PDF), Navient argued that borrowers couldn’t “reasonably rely” on the company to counsel them about their options, because federal law doesn’t require it. Furthermore, Navient said, its public statements encouraging borrowers to contact the company didn’t mean Navient would act in borrowers’ best interests. Its only legal duty is to lenders, it argued.

    “It’s rare for a company to be this bold,” said Jenny Lee, a former CFPB attorney now with the law firm Dorsey & Whitney LLP in Washington. “It’s a sound legal argument, but it may not be the best public relations argument.”

    Suzanne Martindale, a San Francisco-based attorney for Consumers Union, the advocacy arm of Consumer Reports, said Navient’s claim raises questions as to whether borrowers are afforded their right to apply for income-based repayment plans. Bergeron, the former Education Department official, and Rohit Chopra, formerly a student loan regulator with the CFPB, added that they couldn’t recall ever hearing—in public or private—a loan servicer arguing that it wasn’t required to counsel borrowers about their options.

    “When consumers call their servicers, they’re not expecting them to withhold information,” Chopra said.

    If anything, a close review of Navient’s utterances outside of court revealed a consistent message of commitment to helping borrowers manage their student loans.

    Last May, for example, Remondi wrote on his blog that “at Navient, we make it a priority to educate our federal borrowers about income-driven options,” because, he explained, the government’s various income-based repayment plans “are our primary tool in helping borrowers avoid default.”

    Almost two years earlier, in September 2014, Remondi told investors at a Wall Street conference that the typical borrower doesn’t know the difference between the government’s various income-based repayment plans. “Our job as a servicer,” Remondi explained, “is to really work with those customers and make sure that they understand the differences and which program best fits their needs.”

    During the Obama administration, the CFPB urged financial companies to reorient their culture toward a more consumer-focused approach, said Lee, the former CFPB lawyer. “But then there’s a perverse incentive,” she said. “If a company does too good of a job advertising how consumer-friendly it is, the CFPB could use it as evidence against the company—in that it created this reasonable expectation that consumers can rely on the company.”

    “It’s a really serious dilemma,” she said.

    “In its motion to dismiss the consumer bureau’s complaint (PDF), Navient argued that borrowers couldn’t “reasonably rely” on the company to counsel them about their options, because federal law doesn’t require it. Furthermore, Navient said, its public statements encouraging borrowers to contact the company didn’t mean Navient would act in borrowers’ best interests. Its only legal duty is to lenders, it argued.”

    Student loan giant Navient, which advertises itself as providing sound financial advice to student borrowers, argued in court after the CFPD sued them that borrowers couldn’t “reasonably rely” on the company to actually given them good advice because their only legal duty is to the lenders. And according to a former CFPB attorney that’s a sound, albeit unseemly, legal argument:


    “It’s rare for a company to be this bold,” said Jenny Lee, a former CFPB attorney now with the law firm Dorsey & Whitney LLP in Washington. “It’s a sound legal argument, but it may not be the best public relations argument.”

    So that gives us a sense of the legal landscape in the finance industry: companies that base their business model on convincing people that the company exists to provide clients was sound personal financial advice can actually legally steer those people towards personally financial time-bombs:


    In January, the CFPB sued Navient in a Pennsylvania federal court, alleging the company “systematically” cheated student debtors by taking shortcuts to minimize its own costs. Navient illegally steered struggling borrowers facing long-term hardship into payment plans that temporarily postponed bills, the government alleged, rather than helping them enroll in plans that cap payments relative to their earnings.

    The latter option promises debtors the possibility of debt forgiveness after years of steady payment. The former raises the possibility of a financial time-bomb.

    Navient chose the former, the CFPB said, because it took less time for its employees to set up. Borrowers can typically enroll in so-called forbearance plans over the phone, while income-based repayment plans require paperwork and lots of explanation.

    And it’s just a matter of time before the GOP does away with the CFPB, the government agency designed to bring at least a minimum level of consumer interest to the finance industry or at least inform consumers about possible scams.

    It’s another reminder that watching out for scams is going to be a key survival skill for the Trump era. And not just financial scams.

    Posted by Pterrafractyl | April 3, 2017, 3:23 pm
  22. With Donald Trump having already embarked on his much anticipated first foreign trip as president, it’s worth noting one of the pretty significant domestic implications of his first stop in Saudi Arabia: Remember how Trump’s big $1 trillion infrastructure investment plan turned out to be a mass public infrastructure privatization plan where the vast majority of the $1 trillion is supposed to come from the private sector who will buy up and manage US infrastructure? Well, it’s looking like one of those big private sector entities is going to be government of Saudi Arabia and Trump is set to ink the deal:

    Bloomberg Politics

    Saudis to Boost U.S. Ties With $40 Billion Investment

    by Dinesh Nair, Keith Campbell, and Matthew Martin

    May 11, 2017, 1:39 PM CDT May 12, 2017, 5:01 AM CDT

    * Kingdom’s wealth fund plans to invest in infrastructure deals
    * Plan may be unveiled next week when Trump visits kingdom

    Saudi Arabia is preparing to cement ties with President Donald Trump by committing to unprecedented investments in the U.S.

    The kingdom’s sovereign wealth fund is set to announce plans to deploy as much as $40 billion into U.S. infrastructure, according to people familiar with the matter. The investment may be unveiled as early as next week to coincide with Trump’s visit to the kingdom, said the people, asking not to be identified as the information is private. No final decisions have been made and the announcement may still be delayed, they said.

    A White House official, speaking on condition of anonymity, confirmed that the plans were in the works and that Trump’s son-in-law and senior adviser, Jared Kushner, had played a critical role in the discussions. A representative for Saudi Arabia’s Public Investment Fund declined to comment. The Ministry of Finance didn’t immediately respond to requests for comment.

    Trump in March offered his support for developing a new U.S.-Saudi program in energy, industry, infrastructure and technology that could be valued at more than $200 billion in direct and indirect investments within the next four years, according to the White House. The president has said he intends to push for$1 trillion in U.S. infrastructure investments over the next decade, with $200 billion coming from taxpayers and the rest from the private sector.

    Making a Megafund

    Saudi Arabia is planning to expand its sovereign wealth fund into the world’s largest as part of its attempts to diversify away from oil after prices slumped. The kingdom will transfer ownership of Saudi Arabian Oil Co. to the PIF, as well as the proceeds from the oil company’s initial public offering. The fund could eventually control more than $2 trillion, Bin Salman has said.

    Since last year, the PIF has funneled about $50 billion of the kingdom’s reserves into investments abroad, almost all of it into technology. It has said it will commit as much as $45 billion to partner with SoftBank Group Corp. to set up a new $100 billion vehicle to invest in global technology. The fund also invested $3.5 billion in Uber Technologies Inc. last June.

    Still, the Saudi government’s economic reforms have caused push back at home as residents complained about slashed government spending and the suspension of some allowances for state employees. Bin Salman said this month that 50 percent to 70 percent of income from its initial public offering of Saudi Aramco, what may be the largest-ever listing, will be used on domestic investments.

    ———-
    “Saudis to Boost U.S. Ties With $40 Billion Investment” by Dinesh Nair, Keith Campbell, and Matthew Martin; Bloomberg Politics; 05/12/2017

    The kingdom’s sovereign wealth fund is set to announce plans to deploy as much as $40 billion into U.S. infrastructure, according to people familiar with the matter. The investment may be unveiled as early as next week to coincide with Trump’s visit to the kingdom, said the people, asking not to be identified as the information is private. No final decisions have been made and the announcement may still be delayed, they said.”

    Do you enjoy the idea of the Saudi government getting rich off selling you oil? If so, you’re going to love the idea of paying the Saudi government for all sorts of other privatized services. What’s it going to be? Toll roads? Utilities? With $40 billion in planned investments it will probably be a bit of everything, but keep in mind that this is just the planned US infrastructure investments from just one government. Sure, it’s a government with a massive sovereign wealth fund looking for things to invest in but it’s not like there aren’t plenty of other governments or international investors that are potential US infrastructure investors. But only as long as the expected returns on their investments make it worth it (i.e. those tolls probably aren’t going to be cheap).

    So that’s one of the big domestic angles to Trump’s first big foreign trip…he’s rounding up foreign investors for his big domestic privatization plan. Starting with the Saudis. Unless you’re an international investor.

    It’s also not the only domestic economic stimulus that’s sort of on Trump’s agenda during this trip. Because let’s not forget that Trump is going to trying to finalize a massive arms sale to the Saudis too. So, you know, the economic stimulus that comes from selling the Saudis up to $300 billion in arms over the next decade is also sort of a domestic economic stimulus plan. A plan to arm the heartland of far-right reactionary Islamist extremism. With lots and lots of high-tech weaponry. It’s not the most inspiring economic stimulus program. But it’s on the agenda:

    Reuters

    U.S. nears $100 billion arms deal for Saudi Arabia: White House official

    By Steve Holland | WASHINGTON
    Fri May 12, 2017 | 9:20pm EDT

    The United States is close to completing a series of arms deals for Saudi Arabia totaling more than $100 billion, a senior White House official said on Friday, a week ahead of President Donald Trump’s planned visit to Riyadh.

    The official, who spoke to Reuters on condition of anonymity, said the arms package could end up surpassing more than $300 billion over a decade to help Saudi Arabia boost its defensive capabilities while still maintaining U.S. ally Israel’s qualitative military edge over its neighbors.

    “We are in the final stages of a series of deals,” the official said. The package is being developed to coincide with Trump’s visit to Saudi Arabia. Trump leaves for the kingdom on May 19, the first stop on his maiden international trip.

    Reuters reported last week that Washington was pushing through contracts for tens of billions of dollars in arms sales to Saudi Arabia, some new, others already in the pipeline, ahead of Trump’s visit.

    The United States has been the main supplier for most Saudi military needs, from F-15 fighter jets to command and control systems worth tens of billions of dollars in recent years. Trump has vowed to stimulate the U.S. economy by boosting manufacturing jobs.

    The package includes American arms and maintenance, ships, air missile defense and maritime security, the official said. “We’ll see a very substantial commitment … In many ways it is intended to build capabilities for the threats they face.”

    The official added: “It’s good for the American economy but it will also be good in terms of building a capability that is appropriate for the challenges of the region. Israel would still maintain an edge.”

    A major part of the agenda with Gulf leaders will be the Syrian civil war amid calls for “de-escalation zones” in Syria to provide a safe haven for Syrian refugees.

    Besides Saudi Arabia, Trump’s first foreign trip will also include visits to Israel, the Vatican, Brussels for a NATO summit and Sicily for a Group of Seven summit.

    ———-
    “U.S. nears $100 billion arms deal for Saudi Arabia: White House official” by Steve Holland; Reuters; 05/12/2017:

    “The official, who spoke to Reuters on condition of anonymity, said the arms package could end up surpassing more than $300 billion over a decade to help Saudi Arabia boost its defensive capabilities while still maintaining U.S. ally Israel’s qualitative military edge over its neighbors.”

    $300 billion in weapons over a decade. That’s a lot of weapons. But, hey, that’s more money for the defense contractor industry so, you know, there’s probably going to be some additional jobs. Jobs for making weapons to sell to the heartland of far-right reactionary Islamist extremism. Woohoo! And that’s on top of whatever jobs will be created from privatizing the US’s infrastructure for the benefit of foreign investors. Like the Saudis. Double woohoo!

    And the stimulus fun doesn’t stop there. Because it sounds like these twin ‘economic stimulus’ programs could be part of a package deal, and the deal might include a lot more than just $40 billion in investments in privatized US infrastructure projects. Perhaps up to $200 billion, with a focus on the ‘rust-belt’ states like Ohio, Michigan, and Wisconsin that Trump barely won in the 2016 election. Yep, those states that put so much hope in Trump reinvigorating their economies might get some big infrastructure investments. Privatized infrastructure investments from the Saudis. That’s apparently the deal the Saudis are offering…as long as Trump inks the arms deal which will include weapons the Obama administration refused to sell:

    AlterNet
    Grayzone Project

    In the Saudis’ Den of Extremism, Trump Trades Advanced Weapons for a $200 Billion Investment in Rust Belt Swing States
    Trump’s public relations bonanza will feature a speech on Islam composed by his most Islamophobic aide.

    By Max Blumenthal
    May 18, 2017

    President Donald Trump’s nine-day-long “tolerance tour” will continue this Friday with a visit to Saudi Arabia. The junket offers Trump a brief respite from the suffocating atmosphere in Washington, where he faces a mounting campaign fueled by anonymous leaks from intelligence officials that is aimed at nothing less than his impeachment and replacement by a more supplicant Republican.

    Trump’s ties to Saudi Arabia run deep. During the campaign, even as Trump blamed the Saudi royal family for the 9/11 attacks, he registered eight companies connected to hotel interests in the kingdom. Once Trump was inaugurated, the Saudis returned the favor, paying for rooms at his Washington, D.C., hotel through Qorvis MSLGroup, a Beltway lobbying firm. The rooms were reserved for a group of veterans flown into town by Qorvis to lobby against the Justice Against Sponsors of Terrorism Act (JASTA) congressional legislation that would allow the bereaved family members of 9/11 victims to sue the Saudi government for its alleged role in the attacks.

    Many of the veterans had no idea they were acting on behalf of Saudi Arabia, and some, like Tim Cord, staged an open revolt when they realized they had been deceived. “We’re sitting in a room full of retired generals, colonels, men who gave 25 years of their life to this country and they’re being lied to by a bunch of young punks who are using the vet angle to make themselves sympathetic. Why do you think a 60-year-old general would want anything to do with the Kingdom of Saudi Arabia?” Cord, a veteran of the Iraq war, complained to the website 28pages.com. “I mean, that’s a pretty heavy thing to assume we’re all going to be cool with.”

    Throughout his chaotic tenure, Saudi Arabia has proven to be Trump’s most durable foreign ally, even providing him with political cover after the fallout from his Muslim travel ban. Following a White House meeting this March with Trump and his national security team, Saudi Crown Prince Mohammed Bin Salman hailed the president as “a true friend of Muslims who will serve the Muslim World in an unimaginable manner, opposite to the negative portrait of his Excellency that some have tried to promote.”

    Ahead of the White House meeting, the Saudis hired a D.C.-based consulting group, Booz Allen Hamilton, to compose a special presentation for the president. Prince Salman walked Trump through the Powerpoint slideshow the firm prepared, outlining a plan to invest at least $200 billion in American infrastructure and open up new business opportunities for U.S. companies inside the kingdom. In exchange, Trump was asked to ink the largest weapons deal in history, forking over the advanced missile defense systems and heavy weapons the Obama had administration had refused to sell. The weapons would then be used to pulverize Yemen.

    Trump reportedly accepted Salman’s pitch, but only on the condition that Saudis plow their infrastructure investments into the Rust Belt swing states—Ohio, Michigan, and Wisconsin—that held the key to his 2020 presidential victory. So far, Trump’s foes in the Democratic Party and the organized liberal “resistance” have shrugged at the reports of his collusion with a foreign theocracy to secure re-election, obsessing instead over nebulous claims of his illicit ties to Russia.

    When Trump arrives in Riyadh this week, he plans to deliver a speech that will “demonstrate America’s commitment to our Muslim partners,” according to his National Security Council Director, Gen. H.R. McMaster. The address will likely have less to do with tolerance than with interests that converge around hostility to Iran, the drive to destroy a government in Yemen that is seen as its proxy, and selling the tens of billions in weapons the meat grinder operation requires. The spectacle will nevertheless give the president the chance to bask in the admiring glow of a Muslim ally, countering his image back home as a glowering bigot.

    ———-
    “In the Saudis’ Den of Extremism, Trump Trades Advanced Weapons for a $200 Billion Investment in Rust Belt Swing States” by Max Blumenthal; AlterNet; 05/18/2017

    “Ahead of the White House meeting, the Saudis hired a D.C.-based consulting group, Booz Allen Hamilton, to compose a special presentation for the president. Prince Salman walked Trump through the Powerpoint slideshow the firm prepared, outlining a plan to invest at least $200 billion in American infrastructure and open up new business opportunities for U.S. companies inside the kingdom. In exchange, Trump was asked to ink the largest weapons deal in history, forking over the advanced missile defense systems and heavy weapons the Obama had administration had refused to sell. The weapons would then be used to pulverize Yemen.”

    It’s a fire sale! The kind of fire sale centered on the production and sale of a lot of things that create fire by blowing other things up. Probably things in Yemen. That’s what the Saudis would like to finalize during this trip. But Trump has catch:


    Trump reportedly accepted Salman’s pitch, but only on the condition that Saudis plow their infrastructure investments into the Rust Belt swing states—Ohio, Michigan, and Wisconsin—that held the key to his 2020 presidential victory. So far, Trump’s foes in the Democratic Party and the organized liberal “resistance” have shrugged at the reports of his collusion with a foreign theocracy to secure re-election, obsessing instead over nebulous claims of his illicit ties to Russia.

    Yep, if this deal is worked out, Ohio, Michigan, and Wisconsin will be the lucky states to get focused Saudi investments in a massive $200 billion plan. A plan to privatize public infrastructure.

    So let’s hope Trump’s arms-for-privatization scheme (which is really an arms-and-privatization-for-really-rich-guys scheme) generates lots of new domestic jobs. Americans are going to need the extra cash. That privatized infrastructure isn’t going to be free.

    Posted by Pterrafractyl | May 19, 2017, 3:46 pm
  23. Remember how you could sort of dismiss the notion that Trump’s big infrastructure plan would actually come to fruition because it was just a mass privatization plan that lacked enough potential public assets and new projects available for privatization on that scale…unless you decide to sell off highways and bridges en mass into an national network of for-profit private toll roads…and there’s no way even the GOP would be crazy enough to do something as politically suicidal as that. Well…:

    The Washington Post

    Trump advisers call for privatizing some public assets to build new infrastructure

    By Michael Laris
    May 23, 2017

    The Trump administration, determined to overhaul and modernize the nation’s infrastructure, is drafting plans to privatize some public assets such as airports, bridges, highway rest stops and other facilities, according to top officials and advisers.

    In his proposed budget released Tuesday, President Trump called for spending $200 billion over 10 years to “incentivize” private, state and local spending on infrastructure.

    Trump advisers said that to entice state and local governments to sell some of their assets, the administration is considering paying them a bonus. The proceeds of the sales would then go to other infrastructure projects. Australia has pursued a similar policy, which it calls “asset recycling,” prompting the 99-year lease of a state-owned electrical grid to pay for improvements to the Sydney Metro, among other projects.

    In the United States, Chicago Mayor Rahm Emanuel (D) explored privatizing Midway International Airport several years ago but dropped the idea in 2013, after a key bidder backed away. Transportation Secretary Elaine Chao says such projects should be encouraged.

    “You take the proceeds from the airport, from the sale of a government asset, and put it into financing infrastructure,” Chao said. St. Louis is working with federal officials to try to privatize Lambert International Airport, she said.

    Officials are crafting Trump’s initiative, and he has yet to decide which ideas will make the final cut. But two driving themes are clear: Government practices are stalling the nation’s progress; and private companies should fund, build and run more of the basic infrastructure of American life.

    A far-reaching proposal from the Trump administration earlier this year to take the nation’s air-traffic control system out of government hands was fueled, in part, by frustration at sluggish efforts to modernize technology.

    To speed up infrastructure projects, officials are preparing to overhaul the federal environmental review and permitting system, which they blame for costly delays. Trump asked advisers whether they could collapse that process, which he said takes at least 10 years, down to four months. “But we’ll be satisfied with a year,” Trump said. “It won’t be more than a year.”

    In a bid for broader support, Trump and some of his advisers have also signaled an openness to raising the gas tax to pay for needed projects. The 18.4-cent-per-gallon levy is the federal government’s main source of highway funds and was last raised in 1993.

    The infrastructure initiative is being shaped by White House officials and a task force representing 16 federal departments and agencies. In addition, there is a committee of outside advisers co-chaired by billionaire developer Richard LeFrak, a Trump friend.

    LeFrak said the administration’s effort, which is being led by Gary Cohn, director of the National Economic Council, Chao and others, is a sweeping attempt to rethink how infrastructure gets built. LeFrak said the issues are intensely personal for Trump, who spent his career in real estate and sees this as an area where he can make a lasting impact.

    “He does think he’s the president to rebuild America. He’s a builder. It’s just logical,” LeFrak said. “He’s highly enthusiastic about this idea and getting it done.”

    Critics said Trump and his advisers are putting ideology ahead of the national interest and oversimplifying how the process works.

    Public stewards should not be “trying to figure out how to extract maximum value” by selling off government assets or “making huge, multibillion-dollar wagers” that span decades, said Kevin DeGood, director of infrastructure policy at the Center for American Progress, a liberal advocacy group. “Building infrastructure faster and without adequate study or time for community input may be good for developers, but it’s lousy for everyone else.”

    Still, there are bipartisan concerns that important projects have been stymied by politics and bureaucracy, and that Washington has been unwilling to allocate the money for needed improvements. A civil-engineering group in March tallied a “$2 trillion, 10-year investment gap” in the nation’s roads, transit systems, bridges, water systems, power grids, parks, ports and schools.

    In February, Trump told Congress that he would seek legislation “that produces a $1 trillion investment” in infrastructure and creates “millions of new jobs.” Officials have since said that the plan will probably include $200 billion in direct federal funds, which would be used to “leverage” the larger figure over a decade.. LeFrak sees the chance for a deal, noting that Senate Minority Leader Charles E. Schumer (D-N.Y.) also “wants a trillion-dollar program.”

    “So you’ve already got two important people — one very, very important person and one very important person — both from different sides of the aisle, who come in favor of this,” LeFrak said.

    But on Tuesday, when Trump’s budget proposal was released, Schumer condemned the president’s “180-degree turn away from his repeated promise of a trillion-dollar infrastructure plan,” saying the budget contains deep cuts in spending on roads, transit projects, public housing and more.

    “The fuzzy math and sleight of hand can’t hide the fact that the President’s $200 billion plan is more than wiped out by other cuts to key infrastructure programs,” Schumer said in a statement.

    Trump administration officials disputed Schumer’s calculations, saying they included budget items that should not be considered cuts. They cited a projected “drop-off” in federal highway funds that could be eliminated as part of the broader infrastructure agreement.

    The budget places a heavy emphasis on market solutions, such as making it easier for states to toll interstates, saying that the federal government has become “a complicated, costly middleman.” The budget also talks about leasing vacant space in Veterans Affairs facilities and selling off major power facilities as ways of “disposing underused capital assets.”

    Faster is always better

    At a recent White House event, Trump stood alongside one of his top infrastructure aides, DJ Gribbin, who held up a seven-foot-long flow chart illustrating the highway permitting process. The colorful boxes and baffling array of crisscrossing lines were meant to drive home a point about regulatory overreach.

    The chart also could have been a graphic representation of the difficulty of crafting a $1 trillion package capable of making it through Congress at a time beset with political division.

    Democrats, including Schumer, and some Republicans favor a heavy reliance on federal spending, while others in the GOP want to cut that spending and push more responsibility onto states. Agreeing on ways to better manage arcane state and federal regulations would be tough in even the most forgiving of climates.

    Add in the priorities of numerous government agencies, and the puzzle becomes even more complex.

    “This is a democracy,” Chao said. “They’re not easy questions.”

    So Chao and others crafting the president’s plan have cut the problem into smaller, more digestible pieces: regulation and permitting; government procurement, which Trump officials say is too clunky and doesn’t make enough use of private options; government revenue and private capital; and lessons from abroad.

    They also are trying to account for dizzying technological advances. How do you plan for a 10-year broadband expansion, for example, when the technology could easily shift in five years? Chao asked.

    LeFrak, who co-chairs the advisory committee with another Trump friend, Vornado Realty Trust Chairman Steven Roth, said they have also been wrestling with another challenge,the controversy over high-speed rail, “which is one of the things people dream about.”

    But he has seen studies showing a much lower per-mile cost for using driverless cars instead. So should the government invest in rail, which takes passengers station to station, or in “some kind of road network which is going to allow these cars to travel at relatively high speeds” and take a passenger door to door? he asked.

    The administration’s focus on shortening the environmental-review process has concerned environmental groups that point to Trump’s moves to reverse efforts to fight climate change.

    Trump’s advisers say it’s possible to speed up projects that have clear support and a good business case — while also doing more to protect the environment. But Trump’s push for strict new deadlines would require major changes to environmental laws, which would face fierce opposition.

    “There’s no reason why the U.S. cannot function as efficiently as other Western-style democracies in getting worthy projects through the system and permitted,” LeFrak said. “The math speaks for itself. What we’re doing in six years, seven years, eight years, 10 years, these other countries get done in a year or two.”

    DeGood said Trump’s team is relying on exaggerated figures and playing down recent reforms to speed approvals. Administration officials cited a report saying it took the Federal Highway Administration more than six years to approve major environmental reviews for projects that need them. While that was true in 2011, DeGood said, that figure has since dropped to 3.6 years.

    Chao said that things still move too slowly and that many permitting processes can be done simultaneously rather than sequentially. Officials will cut “duplicative or wasteful steps,” she said.

    “If we can make these construction projects come online faster without compromising the environmental concerns, it’s good for the quality of life of a community. … It helps people. It creates more jobs. It creates less congestion,” Chao said. And faster approvals create less-risky, more-attractive opportunities to invest in America. “What I heard from the private sector is there’s lots of money available, but there are not enough projects.”

    Partnership pros and cons

    The administration plans to push states to use public-private partnerships — P3s in industry jargon.

    In such arrangements, a private firm might bring together investors and low-cost federal loans to expand a highway, for example, then collect tolls from motorists to recoup costs and earn a profit. Companies can more nimbly tap technology and other innovations in building and maintaining such projects, advocates say. Critics say relying on tolls will not work in rural or distressed communities.

    Some of those partnerships have worked as intended, such as the Washington region’s Interstate 495 Express Lanes — 14 miles of toll and carpool lanes that opened in 2012. Although the tolls are unpopular, the partnership gave drivers more options for faster travel. Maryland’s proposed Purple Line light-rail system also would be built with a public-private partnership.

    Other such arrangements have failed, with ill-prepared governments saddling themselves with bad deals. Chicago’s inspector general cited the 75-year lease of city parking meters to a private firm for $1.16 billion in 2008. Under the same terms, the city would have earned at least $974 million more by keeping the meters, the IG said.

    Big-ticket possibilities

    That still leaves the question: How do you get to $1 trillion?

    “Everything’s on the table,” Chao said.

    Administration officials are putting together a menu of options to hit that total, including big-ticket possibilities such as “repatriating” funds parked overseas by U.S. firms, and smaller ideas such as privatizing highway service plazas, Chao said.

    Chao said congressional leaders — she is married to Senate Majority Leader Mitch McConnell (R-Ky.) — have made clear “the administration has to have a bill with pay-fors before they will accept it. So we understand that.”

    LeFrak says that there is money lying around in government assets that can be privatized, and that people can get “socialized” to paying tolls.He said uncollected Internet sales taxes could go to states to help pay the infrastructure bill. He also thinks Washington should borrow large sums at today’s low interest rates.

    He also noted that the federal gas tax hasn’t been raised in nearly a quarter-century, and that more than 20 states have raised or indexed their gas taxes since 2013. For federal officials, that presents “a test in political courage,” LeFrak said.

    ———-

    “Trump advisers call for privatizing some public assets to build new infrastructure” by Michael Laris; The Washington Post; 05/23/2017

    “The budget places a heavy emphasis on market solutions, such as making it easier for states to toll interstates, saying that the federal government has become “a complicated, costly middleman.” The budget also talks about leasing vacant space in Veterans Affairs facilities and selling off major power facilities as ways of “disposing underused capital assets.””

    We need to make it easier to set of highway tolls. That’s going to get heavily emphasized in Trump’s big infrastructure package. Is he even planning on running for re-election? Was the last election the last election? Or are Trump and the GOP seriously planning on proudly championing toll roads everywhere on the campaign trail? We have to ask because it looks like Trump is going to be heavily advocating selling off highways and setting up toll roads everywhere. Many of which will be owned by countries like Saudi Arabia. And tax payers are going to subsidize the toll-road-ization of their highways with federally subsidized low-interest loans. That should be super popular. Especially when it happens all over the place in just a few years because the approval process is suddenly collapsed to a year and the scale of privatization to reach $1 trillion would be vast enough to be seen in most peoples day to day lives. And this will all happen instead of raising taxes on the rich to pay for things and avoiding the whole ‘tolls everywhere’ thing. Are they trying?

    To speed up infrastructure projects, officials are preparing to overhaul the federal environmental review and permitting system, which they blame for costly delays. Trump asked advisers whether they could collapse that process, which he said takes at least 10 years, down to four months. “But we’ll be satisfied with a year,” Trump said. “It won’t be more than a year.”

    In a bid for broader support, Trump and some of his advisers have also signaled an openness to raising the gas tax to pay for needed projects. The 18.4-cent-per-gallon levy is the federal government’s main source of highway funds and was last raised in 1993.

    Partnership pros and cons

    The administration plans to push states to use public-private partnerships — P3s in industry jargon.

    In such arrangements, a private firm might bring together investors and low-cost federal loans to expand a highway, for example, then collect tolls from motorists to recoup costs and earn a profit. Companies can more nimbly tap technology and other innovations in building and maintaining such projects, advocates say. Critics say relying on tolls will not work in rural or distressed communities.

    Some of those partnerships have worked as intended, such as the Washington region’s Interstate 495 Express Lanes — 14 miles of toll and carpool lanes that opened in 2012. Although the tolls are unpopular, the partnership gave drivers more options for faster travel. Maryland’s proposed Purple Line light-rail system also would be built with a public-private partnership.

    Other such arrangements have failed, with ill-prepared governments saddling themselves with bad deals. Chicago’s inspector general cited the 75-year lease of city parking meters to a private firm for $1.16 billion in 2008. Under the same terms, the city would have earned at least $974 million more by keeping the meters, the IG said.

    Big-ticket possibilities

    That still leaves the question: How do you get to $1 trillion?

    “Everything’s on the table,” Chao said.

    Administration officials are putting together a menu of options to hit that total, including big-ticket possibilities such as “repatriating” funds parked overseas by U.S. firms, and smaller ideas such as privatizing highway service plazas, Chao said.

    According to the Transportation Secretary, “everything’s on the table.” Including a lot of roads and bridges. And power facilities. And tolls. All over. Fast-tracked. And subsidized by tax payers. That’s reportedly what the Trump team has in mind. Especially the part about tolls everywhere. Yowza.

    Posted by Pterrafractyl | May 28, 2017, 7:35 pm
  24. In what is undoubtedly an attempt to change the focus away from things like the big Jim Comey testimony this coming week, the Trump administration is planning on declaring next week “Infrastructure Week”. A week for Donald Trump to go on a road trip and tout his big new infrastructure plan. And in terms of creating a distraction from his administration’s many woes, “Infrastructure Week” doesn’t sound like a bad idea…in the sense that this infrastructure plan could actually be an effective distraction due to how bad an idea it is. And it could be an especially good distraction for Trump’s voting base in rural America because, wow, is Trump’s infrastructure plan (and larger budget proposal) a horrible idea for rural America. So it’s going to be extra interesting to see how Trump’s road trip goes in rural America:

    The Washington Post

    Heavy cuts to rural development and infrastructure in latest Trump budget

    By Jose A. DelReal
    May 23, 2017

    Rural Americans stand to lose billions of dollars in federal assistance to support infrastructure and economic development in their communities, according to an analysis of the Trump administration’s 2018 federal budget. Many of the programs for elimination provide direct services to rural areas where Trump is most popular.

    The White House would slash rural housing subsidies, mortgage loan guarantees, programs that maintain clean water and other utilities and independent agencies that support job training programs. In many cases, states would be expected to offset spending cuts to critical infrastructure, like sewer repairs; but in other cases, including development grants that revitalize neighborhoods or seed new local businesses, communities would likely have to turn to private organizations for funding or assistance.

    The Rural Utilities Service would lose billions of dollars under the proposed budget for the U.S. Department of Agriculture, including more than $2 billion used to keep power lines, phones and Internet connectivity working in rural areas. Funding for rural business owners also would be slashed, from nearly $130 million in 2017 to $31 million.

    “The 2018 budget eliminates this program because it has not been able to show evidence of improved outcomes; such as economic growth and decreasing out-migration,” the proposal says.

    USDA’s Rural Housing Service would also see billions in cuts that virtually eliminate direct loans and mortgage guarantees for rural households, potentially making homeownership and revitalization more difficult. Under the administration’s proposals, there is no funding for new housing grants for rural families or farm laborers in the budget, nor for direct loan subsidies.

    The Rural Housing Insurance Fund — which provides mortgages to rural home buyers and insures home loans — would cut the budget for its direct-loan program to $250 million in 2018, from nearly $3.7 billion in 2016. The budget does not detail the White House’s reasoning for ending the program, but the conservative Heritage Foundation — which has provided much of the groundwork for the administration’s budget priorities — has railed against the program in the past, saying that government subsidies deter private lenders from entering the market.

    The budget would also end housing repair grants for very low-income people in non-metro areas, saving $30 million from 2016 levels, and would end a program that provides loans for rural housing revitalization, saving another $20 million. The budget also shaves $30 million by ending a program that provides guidance for people seeking to build their own homes in partnerships with other families.

    The administration is also seeking to cut nearly $50 million in subsidies to renters in rural areas, reducing funding for that program to $1.3 billion. The budget continues to provide about $1.3 billion in funding for such people.

    Funding for research meant to benefit rural and agricultural areas would also be greatly diminished by the new budget. The Agricultural Research Service — which funds scientific research specifically focused on issues related to farming, livestock, nutrition and food safety — would see its discretionary budget cut by $165 million.

    The budget also calls for the termination of several independent agencies that invest heavily in rural America, including the Appalachian Regional Commission and the Delta Regional Commission. The ARC is particularly popular among politicians and community leaders in Appalachia. Because many infrastructure projects, such as sewer system overhauls and highway repairs, are not high-profile, many Americans who benefit from such federal funding are unaware. In Kentucky, one program funded by the ARC is helping retrain workers who have lost their jobs in computer training, including coal miners; other funding has gone toward creating seniors centers, community kitchens, drug rehabilitation spaces and educational programs.

    ———-

    “Heavy cuts to rural development and infrastructure in latest Trump budget” by Jose A. DelReal; The Washington Post; 05/23/2017

    The budget also calls for the termination of several independent agencies that invest heavily in rural America, including the Appalachian Regional Commission and the Delta Regional Commission. The ARC is particularly popular among politicians and community leaders in Appalachia. Because many infrastructure projects, such as sewer system overhauls and highway repairs, are not high-profile, many Americans who benefit from such federal funding are unaware. In Kentucky, one program funded by the ARC is helping retrain workers who have lost their jobs in computer training, including coal miners; other funding has gone toward creating seniors centers, community kitchens, drug rehabilitation spaces and educational programs.”

    Massive cuts to an array of federal infrastructure programs for rural America. #MAGA?

    And note how ‘privatization/tolls everywhere’ isn’t the only theme Trump’s privatization plan. Like his Medicaid ‘reform’ planz, the infrastructure privatization is paired with shifting costs from the federal government to states:


    The White House would slash rural housing subsidies, mortgage loan guarantees, programs that maintain clean water and other utilities and independent agencies that support job training programs. In many cases, states would be expected to offset spending cuts to critical infrastructure, like sewer repairs; but in other cases, including development grants that revitalize neighborhoods or seed new local businesses, communities would likely have to turn to private organizations for funding or assistance.

    Shifting costs to states. And as the following article notes, the plan isn’t just to shift the costs onto states. Cities too. So get ready for a choice between tolls or higher local taxes for almost all infrastructure going forward. All so federal infrastructure spending (which tends to be much more progressively finances than state and local spending) can be cut. Just how many local roads will get tolls? We’ll find out, but the poorer the community the more privatized toll/fee-based infrastructure you’re going to see. That should do wonders for low-tax Republican-run states. Especially the rural ones. Tolls everywhere or much higher taxes. It’ll be toll-rific!

    The New York Times

    Trump Plans to Shift Infrastructure Funding to Cities, States and Business

    By JULIE HIRSCHFELD DAVIS and KATE KELLY
    JUNE 3, 2017

    WASHINGTON — President Trump will lay out a vision this coming week for sharply curtailing the federal government’s funding of the nation’s infrastructure and calling upon states, cities and corporations to shoulder most of the cost of rebuilding roads, bridges, railways and waterways.

    He will also endorse a plan to privatize and modernize the nation’s air-traffic control system. That plan, which is to be introduced on Monday at the White House and the subject of a major speech in the Midwest two days later, will be Mr. Trump’s first concrete explanation of how he intends to fulfill a campaign promise to lead $1 trillion in United States infrastructure projects. The goal is to create millions of jobs while doing much-needed reconstruction and updating. But the actual details of the initiative are unsettled, and a more intricate blueprint is still weeks or even months from completion.

    What the president will offer instead over the coming days, his advisers said, are the contours of a plan. The federal government would make only a fractional down payment on rebuilding the nation’s aging infrastructure. Mr. Trump would rely on a combination of private industry, state and city tax money, and borrowed cash to finance the rest. It would be a stark departure from ambitious infrastructure programs of the past, in which the government played a major role and devoted substantial resources to paying the cost of large-scale projects.

    “We like the template of not using taxpayer dollars to give taxpayers wins,” said Gary Cohn, director of the National Economic Council and an architect of the infrastructure plan, in an interview Friday in his West Wing office.

    His language evoked the corridors of Wall Street, where he previously worked. “We want to be in the partnership business,” Mr. Cohn said. “We want to be in the facilitation business, and we’re willing to provide capital wherever necessary to help certain infrastructure along.”

    On Wednesday, Mr. Cohn said, the president will travel to the banks of the Ohio River to deliver a speech about overhauling the nation’s infrastructure, including the inland waterways that are in dire need of attention.

    The philosophy undergirding the speech, administration officials said, is that melding public and private forces to rebuild the nation’s physical backbone will vastly expand the resources available to pay for doing it. The concept — a discussion of which helped cement Mr. Cohn’s hiring by Mr. Trump late last year — has driven infrastructure policy in the United States for many years. But Mr. Trump is proposing a far smaller federal investment than many Republicans and Democrats have long thought is necessary.

    Mr. Trump is “trying to figure out, How do I get the most infrastructure improvements for the American citizens in the quickest fashion I can with the best return on investment for the U.S. taxpayers,” said Mr. Cohn, a former Goldman Sachs executive. “It’s sort of a businessman’s model.”

    On Thursday, Mr. Trump will hold listening sessions at the White House with a group of mayors and governors. On Friday, he plans to cap off what members of the administration are calling “infrastructure week” with a visit to the Transportation Department, where he will discuss drastically reducing the time it takes to obtain federal permits for projects.

    The Trump administration clearly hopes the infrastructure rollout will provide a sorely needed policy victory. Its first attempt to overhaul the Affordable Care Act was so unpopular, even among Republicans, that House Speaker Paul Ryan called off a planned vote and began a rewrite. Senate Majority Leader Mitch McConnell recently said he was uncertain whether he could find a majority to move a health care bill through his chamber.

    The president’s principles for a “massive” tax cut, encapsulated in what appeared to be a hastily written one-page document issued in April, were widely ridiculed for a lack of specifics and their underlying economic-growth assumptions, which many economists and policy experts considered overly rosy. And Mr. Trump has been roundly chastised for his recent decision to withdraw from the Paris climate agreement, a multinational plan to limit global warming through curbs on emissions that Mr. Cohn and many prominent corporate executives supported.

    Despite the public push to promote the infrastructure package, Mr. Cohn acknowledged that the White House did not have a detailed proposal ready to release. He said, for example, that no decision had been made on whether the infrastructure plan would ultimately be married to a tax measure. Republicans and Democrats tried such a step during the Obama administration, in a plan that would have used revenue from repatriating corporate profits parked overseas to finance projects to improve roads, bridges, waterways, broadband and other areas.

    “It’s undetermined yet,” Mr. Cohn said. “It may come before. It may come during. It may come after.”

    Mr. Trump said in an interview with CBS News in April that his infrastructure bill was “largely completed, and we’ll be filing over the next two or three weeks, maybe sooner.”

    Mr. Cohn blamed the delay on lawmakers, saying the White House was reluctant to send its proposal to Congress until progress had been made on the health care bill, a budget bill, legislation to raise the debt ceiling and the as-yet-unformed tax bill.

    “If we thought it was the time to release an infrastructure bill, we would release an infrastructure bill,” Mr. Cohn said. “We just can’t keep throwing stuff on Congress. We actually need them to get legislation done. And as they start getting legislation done, we’ll come back with infrastructure.”

    When that happens, the package is likely to meet with substantial criticism from Democrats, who were heartened to hear Mr. Trump focus on infrastructure spending during his presidential campaign but crestfallen to see the budget he unveiled last month. The proposed spending plan devoted only one-fifth of the money that he had spoken of for building and improving infrastructure.

    “When Trump talked during the campaign about $1 trillion for infrastructure, people were taking him at his word that it would be $1 trillion,” said Sarah Feinberg, a former senior official at the Transportation Department in the Obama administration. Mr. Trump’s budget proposal to spend $200 billion in the next 10 years falls far short of what is needed, she said.

    “The idea that this really minimal amount of federal investment will spur that level of private investment is hopeful but not realistic,” Ms. Feinberg said. “The reality is, the state of infrastructure has become an existential threat to huge portions of the economy.”

    ———-

    “Trump Plans to Shift Infrastructure Funding to Cities, States and Business” by JULIE HIRSCHFELD DAVIS and KATE KELLY; The New York Times; 06/03/2017

    “What the president will offer instead over the coming days, his advisers said, are the contours of a plan. The federal government would make only a fractional down payment on rebuilding the nation’s aging infrastructure. Mr. Trump would rely on a combination of private industry, state and city tax money, and borrowed cash to finance the rest. It would be a stark departure from ambitious infrastructure programs of the past, in which the government played a major role and devoted substantial resources to paying the cost of large-scale projects.”

    So long federal infrastructure. That’s seriously Trump’s big $1 Trillion infrastructure plan. $200 billion in federal spending over 10 years (not nearly what’s required) and a massive reconfiguration of how infrastructure is done in the US going forward. A choice between state/local taxes or privatized toll/fee-based infrastructure.

    And how are they going to sell it to the public? As something for nothing:


    “We like the template of not using taxpayer dollars to give taxpayers wins,” said Gary Cohn, director of the National Economic Council and an architect of the infrastructure plan, in an interview Friday in his West Wing office.

    “We like the template of not using taxpayer dollars to give taxpayers wins”

    By defederalizing infrastructure in America, US taxpayers win. Something for nothing, yay (Plus tolls but let’s not mention that)! But it is a big win for federal tax payers. And since federal taxes are financed by billionaires much more than state and local taxes, it’s a big win for billionaires. Who will presumably have flying cars soon to avoid the tolls. Or just live in neighborhoods wealthy enough to not have to privatize everything as costs are shifted to the local level. But for everyone else, especially rural America and Red States that are net beneficiaries of federal spending, infrastructure is about to get a lot more expensive with a lot more tolls.

    While details are still relatively sparse on Trump’s overall infrastructure plan, the more we learn the better it sounds…as a Trumpian-league distraction from the rest of Trump’s Trumpian-league disasters. And if this ever becomes law there’s going to be a lot more distract from the fact that there’s suddenly tolls and local tax hikes everywhere. And all the other problems he’s going to create, like the problems he’s trying to distract us from now with “Infrastructure Week”. Creating problems as a distraction from problems generally isn’t a sustainable solution.

    But in the short run, creating new problems turns out to be a real solution for taking attention away from Trump’s existing problems. And he can do this at will. Trump has like a Midas touch, where everything turns into problems for others while he makes money on the side. It’s kind of like a Monkey’s Paw touch but Trump’s not impacted by the Monkey’s Paw badness. Just everyone else. Creating problems is a tried and tested solution for Trump. His whole life. He’s good at it.

    So we’ll see to what extent Trump can keep his present problems away by creating new ones to overwhelm us and undermine the US’s psychosocioeconomic foundations. So far he’s off to an impressive start.

    Behold! “Infrastructure Week”!

    *shudder*

    What was I paying attention to before?

    *golf clap*

    Posted by Pterrafractyl | June 3, 2017, 9:44 pm
  25. Now that “Infrastructure Week” – a week for Donald Trump to travel around the country touting his infrastructure mass privatization plan – is coming to a close, it’s probably worth noting that even if Trump manages to not get himself removed from office and his plan to generate $1 trillion dollars in infrastructure spending over the next decade actually comes to fruition, that’s still less half the $2.5 trillion in spending over the next decade that amount the American Society of Civil Engineers says the US needs. And it’s that urgent national need for more infrastructure spending that’s the biggest selling point for Trump’s plan. The selling point isn’t the plan. The plan is awful. The selling point is the infrastructure need that the awful plan is supposed to address.

    But since at least a few Democrats in the Senate are going to be required for any infrastructure plan to actually become law and the plan is politically toxic since it basically pays privately developers massive amounts of money so they can build infrastructure that the public gets charged to use, the odds of Trump’s plan happening at all are looking bleak (sorry “Infrastructure Week”). And that means the $2.5 trillion in national infrastructure needs is probably going to be much, much higher once the Trump nightmare ends.

    It’s a reminder that the next President (or post-apocalyptic warlord) is going to have a very compelling case to pass their infrastructure plan (especially the post-apocalyptic warlord), decent or indecent (don’t forget Trump’s plan is basically a standard GOP privatization plan), assuming Trump’s indecent infrastructure scheme fails like it reasonably should (don’t forget reason is apparently outdated):

    The Washington Post

    Trump will never get help from Democrats in passing his infrastructure plan. Here’s why.

    By Paul Waldman
    June 5, 2017

    The Trump administration is hoping to use this week to roll out its infrastructure plan, which at the moment is a “plan” in the same sense that the White House has a health-care plan and a tax plan. That is to say, officials have produced a vague outline that won’t take up more than a few pages of bullet points.

    But what’s there is more than disturbing enough.

    When President Trump was running for the White House last year, his advocacy of a large investment in infrastructure was often cited as evidence that he wasn’t a traditional Republican. After all, would some doctrinaire conservative propose spending a trillion dollars of taxpayer money on government projects to shore up our roads, bridges and water systems?

    But there was a bait-and-switch going on, one that becomes more evident as we get closer to seeing the details.

    Trump has said many times that he should be able to get Democrats to join with him to pass infrastructure spending, because it’s something they support. And the problem is enormous and getting worse: The American Society of Civil Engineers estimates that we need to invest an additional $2 trillion over the next 10 years in order to get our infrastructure to a reasonable level. Leaving these needs unmet imposes a constant stream of costs on businesses, governments and individuals. When roads are in disrepair, cars and trucks wear out more quickly and require more repairs, deliveries are slower, more gas is used, and goods and services cost consumers more. The ASCE says that failing to make the required investments would mean $3.9 trillion in lowered GDP over that decade and 2.5 million fewer jobs. The longer we wait, the worse the problems get and the more it costs to fix them.

    The problem with what the Trump administration proposes is that while the number $1 trillion gets mentioned a lot, that’s not actually what it wants to spend. The budget proposal the White House released called for $200 billion in new infrastructure spending, but Democrats noticed that it simultaneously made over $200 billion in cuts to existing spending. For the most part, the administration wants to pass costs on to state and local governments and hope that private investors come up with the rest of the money. As the Associated Press describes it, “According to Trump’s budget proposal, the funding would come from $200 billion in tax breaks over nine years that would then — in theory — leverage $1 trillion worth of construction.”

    That’s the biggest problem of all. Not long ago the Center on Budget and Policy Priorities succinctly described the approach Trump wants to take:

    Rather than public investment — with the government allocating the money and directing it to where it’s most needed — the Trump plan relies entirely on private projects through which investors (e.g., private contractors) would own the projects, get huge federal tax credits equal to a stunning 82 percent of their equity investment, and make profits from the tolls or fees they would charge to consumers.

    That might save some money in the very short run, but it means that consumers keep paying, basically forever. In the traditional approach, government spends the money to build, say, a bridge, and then it’s built and it belongs to the taxpayers. There are maintenance costs, but that’s it. In the Trump approach, the government gives almost as much money in tax breaks as it would have spent building the bridge, but it belongs to the developer, who charges tolls that everyone who uses the bridge has to keep paying.

    The other big problem with this method is that which projects get built is determined by where private developers think they can continue to make profits, not where the need is greatest. But there are lots of necessary infrastructure projects that might not be profit centers. (If you want to see how liberal Democrats would handle the infrastructure challenge, the Progressive Caucus has a plan to devote $2 trillion in public spending to it.)

    But the broader infrastructure plan faces the same basic problem in passing Congress that the administration faces when it comes to taxes and health care. There are some Republicans who are uneasy about some parts of it, but anything the administration does to satisfy them makes the prospect of getting any Democratic votes highly unlikely. And if no Democrats join in the effort, it can’t overcome a filibuster in the Senate, even if Republicans can hold all their members and pass it through the House.

    Democrats don’t like the idea of trying to fund infrastructure only through tax breaks, but that’s not their only objection. Will there be “prevailing wage” guarantees that ensure that the people working on these projects are paid adequately? What about environmental protections? Is an infrastructure plan going to be a Trojan horse to attack those protections? It would be more appealing to many Republicans if it were, but it would harden Democrats’ resolve against it.

    But the biggest hurdle is the basic structure of the plan: having taxpayers give a huge amount of money to private developers, so that those developers can then turn around and charge people even more to use the systems that get built. If Trump thinks Democrats are going to go for that, he’s fooling himself.

    ———-

    “Trump will never get help from Democrats in passing his infrastructure plan. Here’s why.” by Paul Waldman; The Washington Post; 06/05/2017

    “But the biggest hurdle is the basic structure of the plan: having taxpayers give a huge amount of money to private developers, so that those developers can then turn around and charge people even more to use the systems that get built. If Trump thinks Democrats are going to go for that, he’s fooling himself.”

    The infrastructure bait-and-switch is so bad it’s the kind of scheme only a GOP elected official could support. With likely far less support from GOP voters. And everyone else. Including Democratic elected officials. Which means the plan is filibuster-guaranteed:


    But the broader infrastructure plan faces the same basic problem in passing Congress that the administration faces when it comes to taxes and health care. There are some Republicans who are uneasy about some parts of it, but anything the administration does to satisfy them makes the prospect of getting any Democratic votes highly unlikely. And if no Democrats join in the effort, it can’t overcome a filibuster in the Senate, even if Republicans can hold all their members and pass it through the House.

    And if the plan is filibuster-guaranteed, the US just keeps digging that $2.5 trillion hole of need:


    When President Trump was running for the White House last year, his advocacy of a large investment in infrastructure was often cited as evidence that he wasn’t a traditional Republican. After all, would some doctrinaire conservative propose spending a trillion dollars of taxpayer money on government projects to shore up our roads, bridges and water systems?

    But there was a bait-and-switch going on, one that becomes more evident as we get closer to seeing the details.

    Trump has said many times that he should be able to get Democrats to join with him to pass infrastructure spending, because it’s something they support. And the problem is enormous and getting worse: The American Society of Civil Engineers estimates that we need to invest an additional $2 trillion over the next 10 years in order to get our infrastructure to a reasonable level. Leaving these needs unmet imposes a constant stream of costs on businesses, governments and individuals. When roads are in disrepair, cars and trucks wear out more quickly and require more repairs, deliveries are slower, more gas is used, and goods and services cost consumers more. The ASCE says that failing to make the required investments would mean $3.9 trillion in lowered GDP over that decade and 2.5 million fewer jobs. The longer we wait, the worse the problems get and the more it costs to fix them.

    So don’t forget, when newly installed President Mike Pence unveils his shiny new infrastructure plan that’s basically the same, it’s going to be about as bad as Trump’s plan but with a much stronger sales pitch due to all the additional need. A much stronger sale pitch:

    The Washington Post

    Multiple transit projects across U.S. at risk as White House infrastructure plan falters

    By Damian Paletta and Mike DeBonis
    June 9, 2017 at 6:24 PM

    Dozens of public transit projects around the country are in danger of stalling as the White House’s plan to boost U.S. infrastructure fails to gain momentum — with thousands of jobs at risk.

    The uncertainty over these projects has worsened in recent days as President Trump — who had vowed to make the week’s focus infrastructure — faced a series of distractions, including a congressional hearing featuring former FBI director James B. Comey.

    The president, who had called for $1 trillion in new infrastructure programs to create millions of jobs, now faces an increasing probability that not only will his proposal fail in Congress, but also that existing infrastructure efforts will stumble.

    The situation has emerged because the Trump administration has signaled it wants to take an approach to infrastructure spending that is different from the previous administration’s. Instead of funding many of the existing projects that depend on federal money — a practice that officials say they worry is wasteful — the administration says it wants to move toward a version of financing projects that is based far more on private funding.

    The sudden uncertainty has left local officials who had long anticipated federal support for their projects worrying whether they will get it.

    In previously unreported letters, officials at the Department of Transportation last week told project managers for a bus corridor in Pittsburgh and rail projects in Phoenix and New York that the administration’s budget plan for next year “proposes no funding for new projects” under an existing federal program known as the Capital Investment Grant.

    Robert Rubinstein, who received the letter as executive director of the Urban Redevelopment Authority of Pittsburgh, said the proposed cancellation of funding would effectively kill the project, which has been in the works for 10 years. It would have created an electric-bus corridor between Pittsburgh and nearby Oakland, Pa.

    “We don’t have enough resources locally to undertake the larger project,” Rubinstein said. He said officials had sought roughly $80 million in federal money to go toward the $224 million project. He said the several million dollars already spent on studies and engineering reviews could be lost.

    CIG funding allocates $2.3 billion each year to various projects and was recently authorized by lawmakers from both parties. Its projects include public transportation projects such as rail, streetcars, and rapid bus systems. The White House’s most recent budget has proposed phasing out CIG funding, and the White House can block any new CIG projects even if there is congressional support.

    Andrew Brady, senior director of government affairs at the American Public Transportation Association, said that more than 50 public transit projects are at risk of being denied federal funding because of Trump’s planned cuts to infrastructure spending.

    “He’s saying a lot of good things on infrastructure, but what he’s done is implement very real cuts to infrastructure programs,” Brady said.

    Capitol Hill aides closely tracking infrastructure funding say that uncertainty over the administration’s infrastructure plans is particularly threatening to programs that are far along and are dependent on federal funding for completion.

    The projects that are most at risk, they said, include some that have moved through the funding pipeline for years but are just short of final approval. Many are in states that Trump won last year, and they include a light-rail platform-lengthening project in Texas, a streetcar line in Arizona, and a bus rapid-transit line in Indiana.

    Bryan Luellen, a spokesman for IndyGo, said the agency is concerned about long-term funding stability as it embarks on a major expansion of its system. The agency is expecting the CIG program to cover $75 million of the $96 million project, and it plans to seek federal funding for two other rapid transit projects in the coming years.

    “Obviously, the less federal support we have, the less we can do overall,” he said.

    Besides the transit program, Trump’s budget proposes ending the Transportation Department’s TIGER grant program, which was created under the Obama administration in the 2009 stimulus bill and has since funded $5 billion worth of road, rail, port and bicycle projects.

    Trump’s budget request said the program funds “projects with localized benefits” that often “do not rise to the level of national or regional significance.”

    Those projects, it said, would be better funded through another DOT grant program, Nationally Significant Freight and Highway Projects, that is focused on roads and freight rail.

    Speaking at the Department of Transportation on Friday, Trump focused on his efforts to dismantle regulations that he says stand in the way of new building.

    “The excruciating wait time for permitting has inflicted enormous financial pain to cities and states all throughout our nation and has blocked many important projects from ever getting off the ground,” Trump said. “Many, many projects are long gone because they couldn’t get permits and there was no reason for it.”

    White House officials have said they are undertaking an expansive review of infrastructure spending but argue that, in the meantime, any promise of federal spending could delay projects as local officials await word. The White House has proposed spending just $5 billion toward its $1 trillion infrastructure project next year.

    In a statement, White House assistant press secretary Natalie Strom said of the CIG program in particular that “there’s always been a great deal of uncertainty around the funding of that program and as a matter of fact uncertainty is one of the most significant impediments to infrastructure, whether it’s funded by the public or private sector.”

    “That’s why the President is committed to simplifying and streamlining the process so that there is less uncertainty all around,” she said.

    So far, Trump’s advisers have publicly identified projects to cut at a faster pace than they’ve identified projects to fund, leading to widespread confusion about the administration’s intent.

    Dan Slane, an Ohio developer who worked on the infrastructure plan during Trump’s transition, said he is still receiving calls from state and local governments, frustrated with the slow pace of planning and asking him for details.

    “They don’t want to pay for anything,” Slane said of the administration. “They want all infrastructure to be privately financed or privately owned.”

    ———-

    “Multiple transit projects across U.S. at risk as White House infrastructure plan falters” by Damian Paletta and Mike DeBonis; The Washington Post; 06/09/2017

    “So far, Trump’s advisers have publicly identified projects to cut at a faster pace than they’ve identified projects to fund, leading to widespread confusion about the administration’s intent.”

    Yep, so far Trump’s infrastructure plan has more declared cuts than new projects. But it’s not just cuts to existing infrastructure spending. Thanks to all the confusion over whether or not the federal government is even going to have a meaningful roll in financing infrastructure going forward (since that’s how extreme Trump’s plan is in terms of shifting funding away from the federal government), a whole bunch of new federal projects that have been in the approval pipeline for years and are about to get federal funding aren’t getting that funding:


    Andrew Brady, senior director of government affairs at the American Public Transportation Association, said that more than 50 public transit projects are at risk of being denied federal funding because of Trump’s planned cuts to infrastructure spending.

    “He’s saying a lot of good things on infrastructure, but what he’s done is implement very real cuts to infrastructure programs,” Brady said.

    Capitol Hill aides closely tracking infrastructure funding say that uncertainty over the administration’s infrastructure plans is particularly threatening to programs that are far along and are dependent on federal funding for completion.

    So Trump’s infrastructure plan is such a horrible idea that it’s actually halting new infrastructure spending.

    Of course, the fact that the radical nature of Trump’s plan – a plan that brings the role of the federal government in infrastructure spending into question – has led to a complete freeze of the projects that were nearly about to get started will just add to the urgency of the situation and probably be used by Trump as the GOP as a reason to make it law. And while there’s a good chance that won’t work and Trump doesn’t see his infrastructure bill happen, he’s still making President Paul Ryan very similar infrastructure bill a lot more likely to pass simply by adding to the urgency of the nation’s infrastructure needs.

    Because failing upwards isn’t just a tactic, it’s a lifestyle.

    Posted by Pterrafractyl | June 9, 2017, 9:13 pm

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