Mitch McConnell Likes Falling Bridges!

Throughout President Obama’s eight year tenure, one man stood out as the biggest hurdle to anything and everything Obama and his team proposed.  That man, of course, is the ignoble Mitch McConnell … the poster boy for why we need term limits.  McConnell’s power is far greater than it should be and when he pledges obstruction, you can count on him destroying everything in his path … even our lives.

Most recently, McConnell has pledged to do everything in his power to keep the infrastructure bill from seeing the light of day in the Senate.  Frank Bruni, writing for the New York Times, addresses the infrastructure bill and McConnell’s self-serving intended obstruction in his latest newsletter …


Mitch McConnell, Fickle Fiscal Prude

By Frank Bruni

Opinion Columnist

The numbers stagger me too.

President Biden is promoting more than $2 trillion for infrastructure (loosely defined). He signed legislation for $1.9 trillion for pandemic relief, economic stimulus and anti-poverty initiatives.

All of this comes after the Trump administration’s mammoth relief-and-stimulus spending in 2020, and all of this precedes what will almost certainly be yet more requests for additional trillions from the Biden administration.

We’re in uncharted waters. Experts offering assurances that all will be well — or even better than well — are giving us their best educated guesses. No one — not the cheerleaders, not the naysayers — truly knows how this will all turn out.

But here’s the thing: At some point you have to pick a path, choose a side, place your bet. In many instances the potential price of a flawed wager is almost certainly less steep than the cost of inaction. This instance, I think, is one of those. Maybe America will go too big in the end. But too small hasn’t worked for us.

Too small led to the economic dispossession and pessimism exploited by a junior-league demagogue and would-be despot who hurt this country gravely. Too small factored into our shameful and unsustainable degree of income inequality.

Too small was a culprit in America’s world-leading number of coronavirus infections and Covid-related deaths last year. By contrast, too big — or rather, big — was a partner in the speedy development and distribution of vaccines.

Mitch McConnell, the Republican minority leader in the Senate, has pledged to fight Biden’s infrastructure package “every step of the way,” as a sudden defender of fiscal discipline. I say “sudden” because his attachment to it over the past few years, before Biden took office, was as steady as a Slinky.

He was perfectly happy to run up the federal debt to stay in good with President Donald Trump, who wanted tax cuts and more gleaming military hardware. Now? We mustn’t leave crippling bills to our children and grandchildren! How horridly gluttonous! How downright immoral!

How utterly laughable. The truth about most politicians and spending is that they’re for it if the outlays bolster their electoral fortunes and against it if the other side may have more to gain. They’re not in thrall to some fixed economic ideology. They’re bound to partisan rivalries and enamored of ideological fashions of the moment.

Remember all of those fiscally principled Tea Party candidates who rocked the Republican Party and swarmed to Washington in 2010? That didn’t turn out to be any kind of revolution. Many of those candidates, along with most other Republicans, exiled their thriftiness when President Barack Obama exited the White House, then embraced Trump in all of his profligacy.

But back to infrastructure and Biden’s big-ticket legislation. Over recent decades of congressional sclerosis, America has fallen behind and imperiled its future prosperity. We’ve no choice but to catch up, and catching up, I believe, will cost more than McConnell is willing to agree to. It may cost even more than Biden is pitching.

Or not. Let’s just say, for the sake of argument, that the choice is between overdoing and underdoing. That it’s that clear, that stark. I’d vote for overdoing. We haven’t tried that in a while.

And my read of the American mood right now is that people are frustrated with the status quo and the timidity of politicians too focused on one another to focus on everyone else. There’s a hankering for movement of some kind — of any kind. There’s an appetite for boldness. Let’s feed it.

And The Winners Are …

I wrote a good bit about the republican’s tax cuts that would benefit mainly the wealthy back in 2017 when it was first passed into law.  Since then, I have only mentioned it in passing for the most part.  But today I would like to revisit the topic.  A lot of middle income wage earners are just now figuring out that it was not much more than a shell game whereby they saw a slight increase in their weekly pay, but at the end of the year, when it came time to file their taxes, they were left slack-jawed, wondering why, for the first time in decades, they owed money at year end.

If you have found yourself in that situation, take heart, for some people truly did receive a benefit from the 2017 tax cuts!  Companies like Amazon, Chevron, General Motors, Delta, Halliburton, and IBM paid NO income taxes for the year 2018!  Aren’t you happy?  Aren’t you dancing a jig?  According to the Institute for Taxation and Economic Policy (ITEP), some 60 Fortune 500 corporations were highly profitable, yet paid no income tax, and in some cases even received rebates!

Take Netflix, for example.  The company earned $845 million, its highest profit ever, and paid not a single dime in income taxes.  In fact, they recorded a $22 million federal tax rebate.  Then there was Amazon who nearly doubled their pre-tax income from $5.6 billion in 2017 to $11.2 billion in 2018, yet paid $0 … that’s right Zero, Nada, Zilch … in income taxes. trump-tax-memeThe tax cuts for the wealthy in 2017 lowered the maximum corporate tax rate from 35% to 21% and allowed companies to write off the total cost of capital equipment in the year of purchase, rather than via a depreciation schedule over the course of the life of the equipment.  Look at the results for the top earning Fortune 500 companies …

Company

U.S. Income (millions)

Federal Tax (millions)

Effective Tax Rate

Amazon.com $10,835 –129 –1%
Delta Air Lines $5,073 –187 –4%
Chevron $4,547 –181 –4%
General Motors $4,320 –104 –2%
EOG Resources $4,067 –304 –7%
Occidental Petroleum $3,379 –23 –1%
Honeywell International $2,830 –21 –1%
Deere $2,152 –268 –12%
American Electric Power $1,943 –32 –2%
Principal Financial $1,641 –49 –3%
FirstEnergy $1,495 –16 –1%
Prudential Financial $1,440 –346 –24%
Xcel Energy $1,434 –34 –2%
Devon Energy $1,297 –14 –1%
DTE Energy $1,215 –17 –1%
Halliburton $1,082 –19 –2%
Netflix $856 –22 –3%
Whirlpool $717 –70 –10%
Eli Lilly $598 –54 –9%
IBM $500 –342 –68%
Goodyear Tire & Rubber $440 –15 –3%
Penske Automotive Group $393 –16 –4%
Aramark $315 –48 –15%
AECOM Technology $238 –122 –51%
Tech Data $203 –10 –5%
Performance Food Group $192 –9 –4%
Arrow Electronics $167 –12 –7%

Source: Institute on Taxation and Economic Policy                                            

Still feeling really good about that extra $20 on your weekly paycheck? Let’s take a look at your tax rates.  If you were single and earned between $38,701 and $82,500, your effective tax rate was 22%, or between $8,514 and $18,150.  Sure, you probably paid less if you had any deductible expenses, but still … look again at the chart above.

ITEP’s Five Things To Know on the One-Year Anniversary of the Tax Cuts and Jobs Act:

  • The Tax Cuts and Jobs Act will substantially increase income, wealth, and racial inequality.
  • The Tax Cuts and Jobs Act will continue to substantially increase the deficit.
  • The Tax Cuts and Jobs Act is not significantly boosting growth or jobs.
  • The Tax Cuts and Jobs Act continues to be very unpopular.
  • Despite the Tax Cuts and Jobs Act’s lack of popularity and ill effects, many Republican lawmakers are calling for even more tax cuts for the wealthy and corporations.

Next time somebody tries to tell you that the 2017 tax cuts were to benefit the middle class, remember this post and tell them in your loudest voice:  HOGWASH!  And in case your blood pressure isn’t already through the roof, take a gander at this …Corporate tax cuts

I Have A Better Idea!

political toon.jpgIn December, Trump signed into law an ignominious tax bill that gave massive tax cuts to the wealthy, and the peanut shells that were left over were tossed downwind to the working class.  Those of us who have brains and use them to occasionally think, screamed “FOUL”, not because we are not gaining a benefit, but because these ‘donor tax cuts’, are absolutely certain to raise the federal debt as well as the deficit to unprecedented levels.  That, for those who wonder, is an extremely untenable situation.  We reminded Congress that, just like your household budget, the goal is to increase revenue, not decrease it!  We argued that this would give a huge boost to the already-wealthy, and would ultimately hurt the little guy – US!

Well, I don’t want to say, “I told you so!!!”, and so I won’t … but I just did.  The announcement came yesterday: Trump told Congress he was canceling government pay increases scheduled for next year.  Now mind you, this is not the high-paid, alread-in-the-top-1% gang whose pay is being frozen.  Oh no! No, the wealthy directors, secretaries and members of Congress are fine, as is Trump himself.  (And no, don’t fall for the “but, he donates his pay b.s.) This is your mail carrier, the person who scans your luggage at the airport, the nice lady who takes your Social Security application.  This is the nurse that is taking care of your dad in the V.A. hospital. This would affect some two million people!  These are the people who must sacrifice their paltry annual 2.1% increase (that amounts to an average of $850 per annum) so that Trump can give million dollar tax cuts to his wealthy cronies who have millions and even billions of dollars in their investment portfolios!

It becomes painfully obvious that Trump has no viable financial advisors, else he would have realized from the beginning that the budget was in trouble when he reduced revenue last December.  And now, he has no qualms making up that deficit from the people who are making a small percentage of what he makes?

“We must maintain efforts to put our Nation on a fiscally sustainable course, and Federal agency budgets cannot sustain such increases.”

trump-golfIn 2017, inflation was 2.1%, and in 2018 thus far, it is at 1.9% and likely to climb higher by the end of the year. Oh, but the budget can sustain all of Trump’s golf weekends and campaign rallies? Let’s look at some other ways the tax cuts might be offset instead of punishing the working class …

  • $26.98 million for flights to Mar-a-lago
  • $13 million for security at Mar-a-lago
  • $8.48 million for flights to Bedminster, New Jersey, for golf games
  • $103,000 for golf carts for the Secret Service (note that this cost goes to Trump’s company)
  • $3.4 million for Palm Beach law enforcement during Trump visits
  • $155,000 for police, fire & emergency services for each and every campaign rally
  • $147 million for personal travel

In addition to Trump’s, Melania’s and Barron’s protection by the U.S. Secret Service, Don, Jr. and Eric also receive protection at a cost of approximately $230,000 per month, or $2.8 million per year. And Trump was considering an ego trip military parade at a cost of $92 million, until his financial advisors told him “NO”!  And he wants to build a useless wall on the U.S.-Mexico border that would cost upward of $67 billion!  Yes, billion, as in more than everybody reading this post combined will ever see in a lifetime.  Billion as in … you and I cannot begin to imagine what it would even look like.  Billioin, as in numbers that Donnie Trump sneezes at … unless it is coming out of his own pocket.

My best guess is that Trump had this planned from the beginning of the year, ever since the tax bill passed and he was told the revenue reduction would need to be offset by reductions in spending.  He signed a 2.6% pay raise for troops into law as part of a larger military spending package earlier this year.  Oh yes, must keep the military strong, and to heck with everybody else.

The possible good news is that Congress has the final say and the authority to override Trump’s decision.  Unions representing government workers are begging them to do so, as should we be.  If you aren’t certain whether to contact your member of Congress over this, compare these two table settings:

And while we’re at it … let’s cut spending for those rich cabinet members!  They truly do not need to jet-set all about the world, but next time they feel the urge to, let them pay for their own travel expenses.  We, after all, have a budget to think of.

Congress needs to put a stop to this … pronto!  Will they?  Time will tell, but I’m not particularly trusting of them, for this wage freeze doesn’t affect them, and they could vote themselves a raise anytime, and no doubt Trump would sign it.  Plus, remember that this is the wealthiest Congress in the history of the nation."But we can't afford to increase the minimum wage if we're going to increase the maximum wage!"

Tick, tick, tick – young folks please raise some holy hell on this

Amidst all the hoopla and smoke & mirrors that defines Trump and his administration, there are some very serious long-term policy decisions being made that will affect the future of this nation. Friend Keith Wilson has brought one to the limelight, and we should all be taking this one seriously. Please take a moment to read Keith’s post about our national debt and where we are heading. Thank you, Keith, for the clarification.

musingsofanoldfart

Tick, tick tick…the US debt of $20.7 trillion is expected to increase by $10 trillion by 2027 even before the December Tax Bill and last night’s Budget Bill were passed.

Tick, tick, tick…per the nonpartisan Congressional Budget Office and Committee for a Responsible Federal Budget, the Tax Bill is projected to increase the US debt by $1.5 trillion or so by 2027.

Tick, tick, tick…last night’s Budget Bill which has now been signed into law is expected to increase the debt by $300 billion over the next two years.

Tick, tick, tick…unless something is done about it, the debt will be close to $33 trillion in 2027. The scarier thought is that might be low.

Tick, tick, tick…the added dilemma we are facing is the interest rates are increasing, since we may have overheated a good economy. That will add further to the annual interest cost on the debt.

If I were in…

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Why Stocks Are Falling

Curious as to why the stock market is plunging? I am not an economist, and while I have some understanding of the way the market works, I know just enough to be dangerous. So, I turn the explanations over to friend Erik Hare, who IS an economist and understands far better than I. Thank you, Erik, for well-written, understandable post!

Barataria - The work of Erik Hare

As the eight year old bull on Wall Street is slaughtered for its meat, several questions come to mind. Is the fall likely to continue? Where will it stop? And, for those on the sidelines looking to score political points, who is to blame?

The answers to these questions are easy and a little terrifying. Yes, this is going to go on for a while. It may not stop until a lot of money is lost. And while you can’t blame anyone for actions which are cyclical, you can blame those who make things worse. The US economy is a large engine, and any good mechanic knows that while you can do a few small, smart things to make it run better it is much easier to really screw it up.

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Tax Plan Belongs In The Trash Can

It would appear that Trump’s “top economic advisors” are not too smart.  Either that, or they think we are not too smart.  Either way, his “tax plan” is a piece of garbage that should not stand a chance of passing in Congress.

tax-3

When President Reagan did it in 1981, it was called “trickle-down” economics. It looked great on paper … only problem was, it did not, in fact, ‘trickle down’.  It did not work then, and it is just as unlikely to work now.  Economists outside the White House agree that this tax plan would almost certainly raise the federal deficit by as much as $7 trillion over the next ten years. Gary Cohn and Steve Mnuchin, two of Trump’s top financial advisors (both former Goldman Sachs bankers, as it were) claim that the deficit will be offset by economic growth, but that is a fantasy of their own imaginations. The entire plan is designed to benefit large corporations, such as the ones owned by Trump, himself, and the wealthy, such as Trump, himself, as well as Cohn and Mnuchin.

According to a New York Times article, here are the winners & losers under the plan:

Winners:

  • Businesses with high tax rates.
  • High-income earners.
  • People with creative accountants.
  • Multimillionaires who want to pass money to their heirs tax-free.
  • People who still fill out their tax returns by hand.
  • Retailers and other companies that feared a “border adjustment tax.”
  • Donald J. Trump.

Losers:

  • Upper-middle-income people in blue states.
  • Deficit hawks.
  • People who want Congress to pass something.

tax-2

One of the most ironic things to note is that under this plan, corporations would not have to pay taxes on their foreign profits, an unusual proposal for a president who has championed an “America first” approach and railed against companies that move jobs and resources overseas. But then, Trump himself has significant overseas interests, so I leave the rest to your imagination.

Nicholas Kristof’s column today said it best:

What do you do if you’re a historically unpopular new president, with a record low approval rating by 14 points, facing investigations into the way Russia helped you get elected, with the media judging your first 100 days in office as the weakest of any modern president?

Why, you announce a tax cut!

And in your self-absorbed way, you announce a tax cut that will hugely benefit yourself. Imagine those millions saved! You feel better already!

This isn’t about “jobs,” as the White House claims. If it were, it might cut employment taxes, which genuinely do discourage hiring. Rather, it’s about huge payouts to the wealthiest Americans — and deficits be damned! If Republicans embrace this “plan” after all their hand-wringing about deficits and debt, we should build a Grand Monument to Hypocrisy in their honor.

This isn’t tax policy; it’s a heist.”

Throughout his campaign, Trump swore to bring down the national debt, ranting that President Obama had ‘doubled the debt’, and that he, Trump, would reduce the deficit.  Trump’s tax plan comes with very few details, so it is difficult to assess, however a number of leading economists have reviewed the framework and here is what they have said:

“We’ve only done the rough numbers, but this looks like a tax cut of a magnitude of about $5 trillion. That is simply unimaginable given our fiscal situation and the size of the deficit, which is already the worst since World War II.Who doesn’t love a tax cut, especially if no one has to pay for it? This is a free-lunch mentality. ” – Maya MacGuineas, president of the Committee for a Responsible Federal Budget

“Paul Ryan and Kevin Brady must be beside themselves in private. They put in years of work on a tax reform plan that at least tried to be revenue-neutral, and wouldn’t explode the deficit.” – Leonard E. Burman, director of the Urban-Brookings Tax Policy Center

“Mr. Trump’s plan basically is tax cuts for everyone. Real reform, with revenue neutrality, is difficult. There are winners and losers, but Trump apparently just wants winners.” – Steven M. Rosenthal, a business tax expert and senior fellow at the Urban-Brookings Tax Policy Center

“I want a plan that’s focused on growth as much as anyone. But these tax cuts are not going to pay for themselves. If you believe that, you’re kidding yourself.” – Douglas Holtz-Eakin, an economist who served as director of the Congressional Budget Office and is now president of the American Action Forum

The bottom line is that the tax plan as it was presented to Congress, with unrealistic goals and almost no detail, is not going to be passed in either branch of Congress.  If Trump was hoping for another “achievement” to add to his “first 100 days list”, he is likely to be sorely disappointed.  Mick Mulvaney, Director of the Office of Management and Budget (OMB), Steven Mnuchin, Secretary of the Treasury, and Gary Cohn, Trump’s senior economic advisor, are going to have to do a much better job than this.

I suspect that this ‘plan’, if one can call it that, was a rush job, as Trump has actually spent his ‘first 100 days’ more concerned about getting his travel ban executed, deporting immigrants, destroying environmental protection controls, insulting our allies, threatening our enemies, and erasing all legislation passed under President Obama.  This tax plan has no earmarks of a thought process, but merely a fantasy devised in a very short period of time with no link to reality.  Back to the drawing board, Donnie … this one stinks!

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The Wizard of Trump … Smoke & Mirrors

Last week I wrote about Donald Trump’s newly-named team of economic advisors, 13 Rich White Men, and noted that each was in the stratosphere along with Trump himself, and far removed from the economic realities of the real world.  Therefore, I questioned whether their policy “advice” would be of benefit to the nation as a whole, or merely to the 1% in their own class.  This week, Trump gave his first (hopefully last) speech about his economic game plan, and proved that my concerns were justified.

While it is true that I am not an economist, I am a CPA and have a basic understanding of how budgets work, so let us take a look at just a few of Trump’s proposals and how they would affect the average citizen:

  • Cut the highest tax rate from 39.6% to 33%. This will be a great help to the 1% who may actually be in that top bracket, but neither I nor anybody reading this blog are likely in that bracket.
  • Cut corporate taxes from 35% to 15%. This might make the U.S. a more desirable location for multinational corporations, and might make the U.S. more competitive in world markets, likely adding some jobs.  However, with tax incentives and credits, the average corporation in the U.S. currently pays an effective rate of just over 18%.
  • Eliminate the ‘estate tax’. Guess what, folks!  The average citizen pays no ‘estate tax’!  Only the wealthiest individuals who inherit at least $5.45 million (or about $10 million for married couples) are subject to the 40% tax. His claim is that this would ‘help workers’.  Workers rarely inherit $5 million!
  • Repeal ACA (Obamacare). First, it is doubtful he could do this without some comparable alternative plan, as the republicans in Congress have tried over 50 times to repeal ACA and failed every time.  But even if he could, the result would be that some younger, healthier people might pay less for insurance, but older people would be left out in the cold, unable once again to afford insurance, and those with pre-existing conditions would likely be left without insurance.  Great idea, huh?
  • Eliminate environmental policies and place a moratorium on new policies. He would support increased use of fossil fuels such as coal, that have been proven to increase damage to the environment. He claims this would reduce the cost of electricity which, in fact has increased only a total of 2% over the past seven years and is expected to decrease in 2016.  The ultimate cost of such an action would far outweigh the benefits.

dollarIt is unlikely that any of these proposals would get through Congress, and certainly none are aimed at providing economic benefit to the average citizen.  More to the point, however, is what is missing from his plan.  If every one of his proposals were passed by Congress, it would leave a multi-trillion-dollar deficit for which he has made no proposal to compensate.

In May, Trump suggested that he might reduce the federal deficit by ‘persuading’ creditors to accept less than full payment.  At the same time, he said that the U.S. need never default on its debt because “you print the money”.  Both of these statements prove just how little Mr. Trump, a self-proclaimed “successful” businessman despite numerous bankruptcies and lawsuits, actually understands about how the economy works.  As I mentioned, I am not an economist, but even with my limited knowledge I am able to comprehend that you cannot simply create a $10 trillion deficit without first determining where the additional money to fund the government will come from.

Does he plan to cut spending on current programs by trillions of dollars?  If so, which programs?  Nobody seriously believes he will cut military spending, or any other programs that provide income for the wealthy, so that leaves healthcare, social welfare, and other programs that are designed to help the poor and middle-income people.  Or, does he have some magic plan to build federal casinos and hotels?  Or perhaps he will just “print more money”!!!  Nobody knows, and for that reason, if for no other, his entire “plan” is foolhardy, if not obscene.

swiss-cheese-2Trump’s plan is woefully short on detail and so full of holes that it would make a piece of Swiss cheese jealous. Those who blindly accept whatever Trump says will love his economic plan, because he has said it will put more money in their pockets.  He has said it will create “millions of jobs”, however who would fill those jobs?  If he wants to deport immigrants and ban immigration, there may not be enough workers to fill those millions of mostly low-wage jobs. The only beneficiaries of his plan are the very people who live in that stratosphere occupied by Trump and his 13 rich white advisors.  But try explaining that to the lemmings with dollar signs in their eyes. I am reminded of the ‘Great and Powerful Oz’ in The Wizard of Oz, who promised everything to everyone, yet had not the means to fulfill a single one of his promises.  Think about it.

 

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