If you LOVED Joe Biden's inflation, wait til you enjoy his tax increase!

 

In January 2021 just 47.4% of the civilian population had full-time jobs, compared with 2020's average of 47.3%

Biden reportedly said in response to the employment situation summary today:

"At that rate it's going to take ten years to get back to full employment. That's not hyperbole that's a fact."

The fact is employment has never recovered to pre-Great Recession levels, and Biden is as little likely to fix that as were Obama and Trump.

The Reagan era tax reforms hollowed out the labor economy. 

Before Reagan, high marginal tax rates on ordinary income steered that income into capital investment, gains from which received preferential tax treatment if held long enough. The investment grew the economy, providing good jobs for Americans and tax revenues for government at all levels. The arrangement distrusted rich people to do the right thing with their money, but rewarded them if they did.

Reagan libertarianism changed all that.

We were sold the idea that lower taxes on high ordinary incomes would still result in capital investment because we could trust people to do the right thing with their own money.

Guess what? Libertarian trust of human nature turned out to be as false as liberal trust of human nature. 

Under the influence of libertarian free trade dogma and growing globalization, that investment went abroad where there was far cheaper labor, lower taxes and less regulation. Profits soared for the few, bringing the number of billionaires from less than fifty in the 1980s to nearly 800 today. Meanwhile the good jobs gradually disappeared and income inequality soared.

Ordinary people today cannot afford cars, educations, health care, and houses as a result.

Add in cheap labor competition from immigration at a clip of 1 million a year and you can understand how Trump was so popular, however incompetent and narcissistic he was.

Trump may be gone, but the people remain screwed by these problems and by the time serving politicians and 2.8 million federal bureaucrats working for pensions who stand in the way.

Returning to the status quo ante might fix it, but it would take a generation to start feeling it. And who among us has the vision and the cojones to pull it off?

Certainly not the women and snowflakes who cry crocodile tears of fear on the House floor. Certainly not the sailors on board the Chafee who are in a panic because the cooks are infected with COVID.

The country is rotting from the inside out. All it will take to bring it down is . . . a series of unfortunate events.

Berman and Milanovic show increased "intersection between the top decile of capital-income recipients and labor-income earners" since Reagan 1986 tax reform has led to higher income inequality

Regrettably the study does not mention another factor, how free-trade, particularly with China and East Asia generally, helped drive wages in the US at the bottom ever lower. The Reagan era produced a perfect storm of screwed for the bottom half in America.

Here:

Where does homoploutia come from? The data do not allow us to determine that with certainty, but they allow to investigate what is consistent with individual hypotheses. There is strong evidence that increased wage-stretching that began around 1980 is associated with the rising homoploutia (the other alternatives that do not perform as well are rising inequality of capital incomes and rising capital share).

The link between higher inequality of labor incomes and homoploutia might have occurred in two ways. The first is that many high-earning individuals saved a large share of their wages, invested it, and after some years began receiving large capital incomes. The second is that many capital-rich people decided, perhaps because of changed social norms, or because top jobs became more lucrative as marginal tax rates were reduced, not to treat university education as “luxury consumption” but rather to use it to secure good jobs. It could be, of course, that both mechanisms were at work. 

Biden in the cat bird seat: Just as Bernie tanked after promising criminals will get to vote, Warren has tanked after hedging on Medicare for all

Ezra Klein, here:

One lesson of the past few weeks is that the Medicare-for-all debate has become a minefield for Democrats — and it’s not clear that any candidate has a safe path through it.

Sen. Elizabeth Warren has dropped 14 points since October 8, when she briefly led the Democratic field in the RealClearPolitics polling average. Most attribute her decline to her handling of Medicare-for-all — the financing plan she released made her the target of attacks from the moderates, and then the transition plan she released, which envisions a robust public option in the first year of her presidency and only moving to Medicare-for-all in year three, left single-payer advocates unnerved about her commitment to the cause.

The Democrat left has been its own worst enemy.

In addition to alienating working people by going soft on crime, the people who bear the brunt of it,  Bernie has notably lost ground with the working class by flipping on immigration restriction. Every new immigrant drives down their wages when immigrants are not taking their jobs outright.

For her part, on top of hedging on Medicare for all, Warren has rolled out a veritable cornucopia of crazy in this campaign, including a ban on all fracking in the US and ending the Electoral College. Combined with the recent lying about the little details of her life, voters justifiably doubt her sincerity on these larger issues and suspect that she cares about little except getting the power into her hands.

Hence the default candidate still on top, Joe Biden.

America's political institutions are still so structured that even when radicals like Obama do win, those institutions frustrate their aims. The upside of this is that harmful radicalism is usually stopped in its tracks. The downside is that mediocrities and grotesques are produced.

Just as Obama was content to let his Clinton retreads handle the Great Financial Crisis resulting in the still poor full time employment, moribund GDP, unaffordable housing and low interest rates catastrophic to income portfolios of the present time, Obama provided zero leadership on healthcare reform. This resulted in the competing Democrat House and Senate versions which consumed his first year in office, and eventually produced the Affordable Care Act camel, a horse designed by a committee. He sure did enjoy watching basketball in the private residence, though, and went on to make the Bush tax cuts permanent after winning re-election in 2012. Some radical, huh?

The same thing has happened with Trump. Although promising us the moon about immigration, healthcare reform and foreign wars, he instead delivered tax reform mostly for the corporations and huge spending increases for the military industrial complex, which is the basic consensus of the Republican caucus in Congress, foolishly hoping that they would give him a little somethin' somethin' in return.

Nothing doing. Even trade realignment will disappear when Trump does.

Trump's problem is that he never had a political faction holding any seats in Congress to drive his agenda. He just assumed the existing members would adopt his positions, which is pretty damn naive considering how he attacked and alienated them all throughout 2015-2016. Instead, Trump has steadily moved away from his own positions and adopted theirs, for his own political survival.

Trump's porous bollard fencing instead of the real wall he promised is simply the most public symbol of this, going back as it does to the George W. Bush administration.

The only radical realignment we have seen is the realignment of the radicals with their respective parties, and Election 2020 will be the same old, same old fight between them.

Those who won't realign get discarded.

This is the tyranny of the legislative. And the only way to remedy this is to repeal the 22nd Amendment to the Constitution, the great mistake of 1951. Only the threat of a Trump or an Obama perpetually in the White House will restore the balance of power between the three branches of government and advance the interests of the people who vote for the president.

As things stand, the best we can hope for is a president desperately stacking the courts to increase his power in a tyranny of the judiciary, which is hardly the remedy intended by the founders and is unacceptable to Americans loyal to the constitution and the nation as founded. The three stooges of the law schools on display at the impeachment hearing yesterday are proof enough of that. 

Trade wars started in 2018 instead of 2017 by default, the same reason immigration wars started after he lost the House

Trump never had a strategy for getting what he ran on, but the GOP had a strategy for getting what it wanted.

Trump should have leveraged this situation to his advantage. You give me my immigration checklist, my trade checklist, I'll give you corporate tax reform and defense spending. Instead, the phony Art of the Deal author caved and gave them everything without getting anything.

Trump wasted the first entire year on repealing and replacing Obamacare, the latter being the fool's errand Trump in his hubris added after securing the nomination. Did he not pay attention to the clash between Democrats in 2009 over the House healthcare plan vs. the Senate plan? It took a Herculean effort to get a compromise, all without Republican input. Like he could get Republicans united for something similar, after ripping them all to shreds in 2016.

Total doofus, surrounded by doofi.

The only thing he's getting right is that he doesn't need anybody to conduct the trade war. Doesn't really matter when he conducts it, but Republicans would have been begging him to end it much earlier if he had started it much earlier. And that is the definition of the art of the deal.

Too bad he didn't think of it.

y/y change US imports of goods from China: Sum Ting Wong long before this

Notice how five of the seven 30-year bond yield dives are a feature of the recent period since the 2000 bubble

And notice how all the episodes of great stress are post-1986 tax reform.

The chickens . . . are coming home . . . to roost!

Tax cuts were real despite average refund in 2019 coming in $56 lower than last year, $50K earners saved $48 a week with lower withholding under tax reform

The IRS stats are in: Here’s how tax refunds look compared to last year

Your Paycheck Could Increase Very Soon -- Here’s How Much You Can Expect

 

Much smaller than first thought to be, the gig economy lies prostrate before the great wall of state capitalism

"The Gig Economy Increasingly Defines Late-Stage Capitalism

Annie Lowrey, Atlantic" is how Real Clear Markets links to:

The Truth About the Gig Economy

Uber and similar companies aren’t driving huge changes in the way that Americans make a living.

Real Clear Markets' libertarian headline writer completely missed the point of the article, which is that the gig economy is as much as 80% smaller than we first thought. A capitalism disintegrating into a chaos of millions of small holders in risky circumstances, careening into the ditch, is a complete myth. The leftists who still long for this resemble no one so much as the Christian millenarians.

Clearly Marxism-light thoroughly infects economic thinking at the popular level in more places than just The Atlantic, blinding us to where we really are, which is in the golden age of fascism. Here tax reform for the individual is an afterthought, a necessary piece of propaganda in the big scheme of things having to do with state capitalism and its myriad forms of corporate welfare. What really matters is the relationship between government and business, protecting their mutual interests.

The West's version is little different from China's. China exercises top down control through the corrupt Communist Party, but we increasingly have the same thing from the bottom up through the unjust hand of Political Correctness, populated through the right schools and the revolving door of Washington where the regulators become the richly rewarded regulated.

The extension and consolidation of control by this globalist fascist system since the Reagan Revolution is responsible for all the failure lately attributed to capitalism by the coddled generations of children of the post-war Baby Boom. It couldn't be otherwise in a world where everything has been organized to feed the corporation through the glorification of the job. You must go to school, you must get good grades, you must get a college degree in order to get hired, you'll need loans to make this happen, and for the car to get to work, and good credit, and . . .. And then they've got you. It's called preying on human nature.

The declarations of independence of our former youth often used to take the form of getting out of Dodge as soon as they turned eighteen. Now those declarations are a mere shadow of their former selves, taking the form of tattoos on that creature that still lives in your basement in his twenties . . . or thirties.

The risk-taking of capitalism has been expunged, and the consequences of rebelling against the new rigidity have been amplified. Stenosis has set in, and if the barbarians finally do overtake us they will find that the bones break easily.     

My latest utility bill: "We are pleased to pass along the savings from federal tax reform"

$4.99-

What oh what will I do with this unexpected windfall?

Noah Smith embraces the Trump narrative: "There’s no doubt that the U.S. economy is in a boom"

Here for Bloomberg.

After examining several indicators, which, however, are not unequivocal for their interpretation despite saying "no doubt", Noah Smith comes down on the side of improved sentiment as the cause of the current "boom".

On that we agree. There's a boom in sentiment.

The problem is, too many people are importing that improved sentiment into their reading of the data, and into their choice of the data.

For example, Smith focuses on job openings to unemployed, which is a tiny measure (6.66 million in June) of what's really going on in the labor market. But the broadest measures of unemployment still show 15.9 million unemployed, underemployed, and no longer counted in the labor force. There is still huge slack in the labor market, which is one reason why wages for the vast majority of workers are not rising like they would in a real economic boom (2.7% y/y in July vs. in the 4s in 2006/7).

Similarly Smith discusses the percent of population employed aged 25-54, but clearly misses that it's most definitely not "back to 2006 levels" as he claims (H1 2018 is at 79.2%, still below the 2006 average of 79.8% and also below the average of either half of 2006). The broadest measure of the percent employed, on the other hand, still shows a huge gap between now and the pre-Great Recession average when over 6 million more were employed than are at present (60.5% now vs. 62.9% then, on average).

The case is similar with domestic investment.

Smith chooses to highlight "Shares of gross domestic product: Gross private domestic investment: Fixed investment: Nonresidential (A008RE1Q156NBEA)" to show that "investment as a percentage of the economy is at about the level of the mid-2000s boom". But the current level in H1 2018 at 13.7% is also identical to H2 2014. Was that indicative of a boom? Did we blink and miss it? How about in H1 2008 when it was again at 13.7%? Was that indicative of a boom? If so, why did the economy then promptly crash in H2 2008?

A broader measure of domestic investment, however, "Shares of gross domestic product: Gross private domestic investment (A006RE1Q156NBEA)", shows us well off the 2006 peak and even the more recent 2015 level. Whatever we call what we have right now, the current 17.7% is still far below the 19.8% level of H1 2006, which itself failed to equal the boom level of the year 2000 (19.9%).

With all that cash unleashed by the tax reforms and sloshing around in the economy, one would think things would look a lot better than this, which simply shows that most of that money indeed went elsewhere.

GDP has been temporarily goosed by the tax reforms in concert with a fresh gusher of federal deficit spending. But those are one-offs. They will not, and cannot, be repeated over and over again in short succession.

We know what comes next.

Frank Rich slams Gary Cohn in NY Mag, Cohn fires back in Bloomberg

Frank Rich on the 5th, here:

The Wall Street bandits escaped punishment, as did most of the banking houses where they thrived. Everyone else was stuck with the bill. ... But it’s a measure of how much the country is broken that we just shrug with resignation when the wealthy Democratic Goldman Sachs alum Gary Cohn joins this administration to secure an obscene tax cut, then exits without apology to enjoy his further enrichment at the expense of the safety net for the country’s most vulnerable citizens.

Gary Cohn here on the 6th:

In ’08 Facebook was one of those companies that was a big platform to criticize banks, they were very out front of criticizing banks for not being responsible citizens. I think banks were more responsible citizens in ’08 than some of the social media companies are today. And it affects everyone in the world. The banks have never had that much pull. ... In Washington nothing’s perfect, so I’m not thinking it’s perfect, it’s never going to be perfect. But the fact that we got something really important done, which is corporate tax reform, which made us competitive with the rest of the world, is good.

Republican corporate tax cuts = record stock buybacks in May 2018 = corporate insiders selling to profit BIGLY

From the story, "Corporate executives are using stock buybacks to pad their own compensation, according to the SEC", here:

Indeed, buybacks totaled $178 billion during the first quarter, hit a record $171.3 billion in May alone and have seen $51.1 billion announced so far in June, according to market data firm TrimTabs. At the same time, insider selling has totaled $23.6 billion.

Meanwhile Challenger, Gray & Christmas reports total hirings in the first five months of 2018 are down 48% from the first five months of 2017.

The Republican tax cuts are working out as predicted: Failing to provide jobs while enriching elites.

Slate takes The Atlantic to task for not taking the 1% seriously enough

Here in "Actually, the 1 Percent Are Still The Problem".

Actually, the Reagan 1986 tax reform was the problem, but Jordan Weissmann never mentions it.

This despite his wonderful graph of the top 10% over time showing the 1% take-off after the reform. When it becomes easier for the already rich to take high incomes the ordinary way, like everyone else, because of low top marginal rates, less money ends up getting plowed back into productive purposes like it used to before 1986.

We keep believing the myth that "the rich are different than you and me", but they're not. They're as indolent, undisciplined and blinkered as any middle class family leveraged to the hilt which believes it deserves a house a little larger than it can afford, two car payments, the weekly fine dinner out and the expensive annual winter vacation.

The 1% aren't the problem. You will have them always with you, by definition. The problem is human nature, and government's failure to correct for it.

Say what you will about "Christian" belief, previously it at least curbed the 1%'s enthusiasm, with the stick of high marginal income tax rates and the carrot of low long term capital gains taxes.

Ironman estimates stock repurchases by corporate America of $628 billion in 2018 due to tax cuts

Here:

What we find is that 2018's projected total of $628 billion in buybacks will break the previous record of roughly $589 billion worth of stock repurchases that was set by U.S. corporations in 2007, which would work out to be about a 7% increase over that previous record.

Time will tell if share repurchases were the right thing for the companies that are choosing this action to have done with the benefits they received from U.S. corporate income tax reform.

Republican tax reform in 1986 resulted in a FLOOD of investment out of the country, so how will this time be different?

Little Marco admits Republican tax bill went too far helping corporations

Story here.

Great. But he still voted for it. 

No Profile in Courage Award for you, mister.

Tax Policy Center expects charitable giving to drop by $13 to $20 billion annually because of Republican tax reform

Way to go, Brownie!

Discussed here.

Once again in the dead of night Senate Republicans pass tax reform for multinational corporations

The New York Times, here:

The Senate approved the bill early Wednesday morning.

The Senate voted 51 to 48, with no Republican defections and no Democratic support.

Under the final tax bill, the corporate tax rate would fall to 21 percent, from the current 35 percent, a move that Republicans are betting will increase economic growth, create jobs and raise wages. Individuals would also see tax cuts, including a top rate of 37 percent, down from 39.6 percent. The size of inheritances shielded from estate taxation would double, to $22 million for married couples, and owners of pass-through businesses, whose profits are taxed through the individual code, would be able to deduct 20 percent of their business income.

But the individual tax cuts would expire after 2025, a step that Republicans took to comply with budget rules, which do not allow the package to add to the deficit after a decade.

Republican tax reform for multinational corporations passes US House 227-203-2

The New York Times has the roll call, here.

Just 12 Republicans voted "No", most from states hurt by the $10,000 cap for deductibility of state, local and property taxes:

CA-48

Dana Rohrabacher

N

CA-49

Darrell Issa

N

NC-3

Walter B. Jones

N

NJ-2

Frank A. LoBiondo

N

NJ-4

Christopher H. Smith

N

NJ-7

Leonard Lance

N

NJ-11

Rodney Frelinghuysen

N

NY-1

Lee Zeldin

N

NY-2

Peter T. King

N

NY-11

Dan Donovan

N

NY-19

John J. Faso

N

NY-21

Elise Stefanik

N

Taxes are about precise numbers, which means Rush Limbaugh will make you cringe

He just said Ronald Reagan lowered the top marginal rate from 90% in the 1981 tax reform.

He didn't. John F. Kennedy lowered the top rate from 90% to 70%.

Reagan lowered the top rate from 70% to 50%.

Just about everything Rush says about taxes is imprecise, and wrong, including about what he has no excuse for not knowing, namely taxes under his hero Reagan.

But hey, he can't even get the old chestnut "whose ox is gored" correct. Today it's the goose getting gored, or something.

Take another pill, Rush. Just one more hour to go before you're off for two weeks.

Update: My bad. Rush will be back tomorrow, to celebrate the tax bill passing.