A Retrospective of the First 18 months of the Trump Administration

By Andy Winnick

A comprehensive review of what has happened to the U.S. (including developments elsewhere) so far under the Trump Administration.)  It includes an account of what the major threats are that are not being properly addressed by this Administration.  And it does not include any mention of the Mueller investigations.

  1. Impact of Tax Cut Law

            Major Features of the Law:

                        Cut in top Individual rate from 37.5% to 34%

                        Cut in Corporate rate from 35% to 21%

                        Cut in Pass-Through profits tax to business owners via a 20% of net income deduction

                        Change in rates re Foreign Earned Corporate Income –

                                    Can bring back retained earnings held abroad at a rate of only 5.5% for 2018 only

                                    First 10% of foreign earned profits are tax free, then only 10.5% (half rate on domestic profits)                                   

                        For Individuals/Families – modest cut in rates, plus

                                    Doubled Standard deduction from $6,000 to $12,000 per adult filer

                                    But elimination of Personal Exemptions of $4000/person (Combination          will hurt large families)

                                    Cap on deduction for State & Local taxes  - Mostly hurt those in Liberal/Blue states

           

Net Effect is that about 80-85% of $1.5 Trillion in tax cuts go to very rich and corporations, and that is before the impact of stock buy-backs and increased dividends. So the rich are getting much richer,

                        Small/medium business owners get big savings, while some         individuals/families get very modest tax savings, and some                                                                         families some will actually pay more in taxes

 What is NOT happening is any significant increase in Investment, Economic Growth or Job Creation despite promises to the contrary by Congressional Republicans and the Trump Administration.

So net result is a major increase in the Federal Budget Deficit. In fact, this was always the intended result so as to provide an excuse for major cuts in a broad range of social programs – But this effort has failed, so far. (See # 5)

  1. Immigration Policy

            Three attempts at Muslim Ban, last one OKed by Supreme Court after Venezuela and North Korea added

            Separation of families at Mexican border, hundreds of children not yet reunited with families

            Massive increase in indiscriminate deportations and in detention of refugees and immigrants in privately owned for-profit corporate prisons

            Narrowing of definition of basis for Asylum claims

            Severe limitation of total numbers of refugees to be accepted annually

            Proposed cut backs in legal immigration, including elimination of “family chain immigration”

            Ignoring demands of American firms, especially in Agriculture, for needed immigrant labor

            Ignoring ageing of US labor force and need for replacements

            Ignoring that net economic impact of immigration, legal or illegal, is increased job and small business creation, increased GDP, and even a net increase in taxes/revenue to gov’t

  1. Tariff and Trade policy

            Tariffs of up to 25% imposed on a broad range of good imported from China and on steel and aluminum products from Canada and elsewhere

            Equivalent tariffs imposed by China and other on exports from the U.S. to these nations

            Withdrew from TransPacific Partnership (TPP), renegotiating North American Free Trade Area (NAFTA)

            Ignores negative impact of import and export tariffs on U.S. prices, jobs and firms

            Looks only at balance of trade for Goods, ignores trade in Services which has large positive balance

            Ignores what happens with U.S. dollars paid for imports, including purchase of U.S. treasury bonds and other investments in U.S.

            New Bilateral agreements between EU and Canada and between EU and Japan, to detriment of U.S.

            Creation of China dominated Asian Infrastructure Bank, which Germany, France, Japan, So Korea, Canada and others joined, freezing out the U.S.

            Other eleven (11) nations have gone ahead with TPP, just without the U.S.

            Reduced foreign purchases of U.S. debt with likely increase in interest rates and downward economic pressure

            Net effect will likely be a reduction in the economic growth rate by 0.5 to 1% from current 2 to 4% rate and an increase in the rate of inflation by about same amount from current 2.1%

 

  1. Healthcare/Health Insurance/Affordable Care Act (ACT)/Obamacare

            Failed to rescind ACT/Obamacare, but have succeeded in weakening it

            Authorization of inadequate short-term insurance for up to 3 years instead of 3 months

            Authorization of corporate sponsored Association Plans with inadequate coverage

            Elimination of penalty for failure to buy/have health insurance

            Failure to uphold constitutional obligation to enforce laws re ACT

            Millions will lose health insurance or will suffer from having worse plans that do not cover pre-existing conditions, maternity and pre & post-natal care, medicines, addiction treatment, physical therapy, et al.

 

  1. National Fiscal Budget, National Deficit/Debt, Debt Ceiling – A Setback for the Trump Administration

            Two year budget approved for Fiscal Years through Sept 30, 2019

            Current fiscal year (which ends on Sept 30, 2018) $1.3 trillion spending authorization implemented with $80 billion increase for the military and $63 billion increase for other domestic expenditures, despite opposition by Trump Administration to most of the domestic increases. 

            Only $1.6 billion for Mexican border, not $25 billion requested by Trump.

            Increases in current spending levels will result in more than $140 billion increase in annual deficit and in total national debt, especially in combination with loss of about $1.5 trillion (over 10 years) in tax revenues. 

            Therefore this year is already seeing the largest federal borrowing effort in history.

            However, Congressional Republicans effectively removed the National Debt Ceiling    completely, in order to avoid causing federal government shut-downs every time their fiscal policies shattered the old ceilings.

            So after decades of claiming that the Congressional Democrats were being irresponsible for periodically increasing the debt ceiling, Republicans decided to simply remove it entirely.

            Spending Authorization for 2019 Fiscal Year (Oct 1, 2018 – Sept 30, 2019) is currently working its way through Congress, especially in the Senate, in hope of avoiding a shutdown on Sept. 30, 2018 – despite threats by Trump to not sign it if he does not get what he wants (e.g. $25 billion for his wall).

           

  1. Massive Changes (Cut-backs) in Federal Regulations

            Especially in regard to the environment, healthcare, occupation health and safety, federal land use policies, private for profit education, consumer safety, Consumer Financial Protection Bureau rules, rules regarding food and housing supports, LGBTQ rights – all in the direction of improving situation for businesses and worsening situation for individuals, families, and the environment

            Virtual shutdown of Civil Rights Division in Department of Justice, ending enforcement efforts of existing laws

            Appointment of almost one-third of Federal judges, plus one Supreme Court judge appointed and one pending

            Withdrawal from Paris Climate Accord

 

  1. Employment/Unemployment, Labor Force Participation, Wages and Median Household Income

            Official Unemployment rate overall, and White, Black, Hispanic rates, all at historic lows

            Discouraged and Involuntary Part-time worker unemployment still high, but lowest in 10 years

            But Labor Force Participation rate (% of persons age 25-54) still at historically very low rate; that is, millions fewer people in the Labor Force than would be expected given historic trend.

            Real Wages (i.e. Adjusted for inflation) near flat, and are below levels in early 1970s          - 45 years ago

            Recent Inflation at 2.1%, while Wage increase at 2.3% - So after inflation only 0.2% improvement.

            Note – Wages refer to the income received by all Non-agricultural and Non-supervisory workers in the U.S.  These constitute more than 80% of all employed workers in the U.S.

            Why have wage levels stagnated, whether measured hourly, weekly or monthly?

                        Very low recent increases in Productivity – well below 1% per year.  (Had been 2 to 4% per year.)

                        Unions very weak, and getting weaker (6.7% of private labor market), no more agency shops while corporations stronger – monopsony power – and supported by the Labor Department

                        Increase in Gig Economy – fewer long-term labor contracts & more non-    compete clauses

                        Loss of well-paid manufacturing jobs (due mostly to technology changes) and increase in poorly paid service sector jobs

                        Globalization - Greater competition internationally from low paid labor

                        Large scale retirement of Baby Boomers, many with high education and skill levels. They are being replaced with younger workers, many with less education and lower skill levels

                        Focus on increasing Shareholder wealth via more stock buybacks and dividends (esp. from tax cuts), rather that increasing wages of workers.

                        Note - Most of the income of the rich and very rich comes from wealth returns, not wages, and those folks are doing very well given increase in stock values of more than 320% since March 2009

                        Profits of “financial services” firms is highest proportion in history of all       corporate profits

            However, it must be noted that Median Real Household Income, that is, after being adjusted for Inflation, reached $59,039 in 2016, its highest level in history. This was the last year of the Obama Administration and was reported in September 2017.  The figure for 2017 will be reported in September 2018. Median income refers to the middle level of income for all households; that is, half received more, half less.  This reflects the fact that many households benefit from the income of two or more persons and of individuals holding two or even three jobs.   Despite the historically high level of Median Household Income, it must be placed in the context of being only a bit more than twice the poverty threshold of $24,300 for a family of four. Indeed, when adjusted for housing and food costs, etc., the poverty level in California is 19.4% or 7.4 million persons in 2016. This is the highest poverty level of any State, despite California having the largest economy in the U.S. and, in fact, being the 5th largest “nation” in the world.

            It might also be noted that the Median figure must be compared to the Per Capita Income figure, which is found by dividing the GDP by the population (every person regardless of age).  However, this is a very misleading measurement even though it is sometimes called the Average Income. In 2016, the Per Capita income amounted to $59,532, slightly more than the median received by each Household.  This implies that the U.S. produced a GDP sufficient to provide each Household of four (4) persons with 4 x $59,532 or $238,128 per Household.  In fact, the average household in the U.S. consists of just 2.6 people.  Even if each member of such a household received his/her per capita share, this would amount to $154,782, compared to the $59,039 Median Household income.  How does one account for the vast difference between the Median figure and the Per Capita figure? The answer is the astoundingly large amount of income that is received and controlled by the rich in our society. This leads us to point # 8.

  1. Changes in the Distributions of Income and of Wealth and Their Impact

            Gaps between the richest 0.1% and the rest, between the top 10% and the rest, and between the top 10% and the bottom 10% are all at historical high points, whether measured by income or by wealth

            As mentioned in #7, this is in part caused, by stagnation in wages versus major increase in stock values.

            Growing inequality trends in both income and wealth are being supported by changes in tax laws (See # 1)

            Reductions in social mobility resulting from barriers between the top 0.5%, the next 9.5% and the bottom 90% of households. Barriers include in housing, private/public education, healthcare, safety/justice system

            Increases in bankruptcies among the elderly

            Major shortage in affordable housing, leading to increase in homelessness and very long commutes to work.

            Massive increase in deaths due to drugs/medicines and reduced life expectancy esp. in white working class

 

  1. Trumpism as a Symptom, Not a Cause – The Weakening of Democratic Institutions Globally

            Weakening of democracy and increased presence of autocratic and illiberal populist leaders in power in U.S., Poland, Hungry, Turkey, Austria, Italy, Venezuela, Brazil and Israel

            Weakening of traditional centrist parties and strengthening of anti-immigrant, illiberal populist parties/factions as well in France, Belgium, Germany, Netherlands, United Kingdom, Denmark, Sweden and Australia

            Growing nationalism and weakening trust in multinational institutions (E.U., NATO, U.N., NAFTA, TPP)

            What are the common causes of the weakening of democratic Institutions globally? These are:

                        Stagnant living standards and growing economic inequality

                        Perceived lack of attention by economic/political elites for concerns of “common folk” re jobs, higher wages, affordable housing, healthcare, education or for the wellbeing of “the nation”

                        Increasing waves of immigration and resulting xenophobia due to

                                    Growing perceived economic inequality between nations (role of social media)

                                    Refugees from wars, ethnic conflicts and cleansing efforts

                                    Refugees due to climate change (droughts, floods, heat)

                        Autocratic leaders often tend to lead nations into economic crises due to perceived need to keep base happy via focused economic spending on infrastructure and military, typically using borrowed money, with increases in national debts and/or international borrowing, while resisting tax increases needed to fund the spending.

Eventually this results in inflation. But autocratic leaders resist efforts of bureaucracy and central banks to control inflation – leading to economic instability and crises

            How can nations overcome these tendencies and strengthen democratic institutions?

                        Limit ability of rich and corporations to dominate the political process and institutions

                        Redistribute money from where it is now held to where it is needed – that is:

                                    Increase taxes on wealthy and corporations, institute taxes/fees on stock transactions, institute/increase value added taxes with exemptions for some critical goods and services

                        Invest the funds in education, research, healthcare and housing,

                        Invest in upgraded infrastructure in sustainable energy and transportation systems

                        Incentivize increased productivity via increased investment in capital and software

                        Institute or increase legal minimum wages and guaranteed minimum family income

                        Encourage collective bargaining and worker membership on Boards of Directors

                        As technology reduces the need for labor, there is a need and opportunity to shorten the work    day and work week, institute/increase paid family leave and provide more vacation time

  1. China – The Elephant in the Room – How to peacefully ease its emergence as a dominate World Power

            China has a population five times that of the U.S. and three times that of the E.U.

            It has had an economic growth rate 3 to 5 times faster than the U.S. or the E.U.

            It has the second largest economy in the world, and will likely surpass the U.S. in the next 20 years.

            It has taken more than 500 million of its people out of poverty and into the middle class in the last 10 years

            It has built a network of major universities and research institutions and sent thousands of its people to study at the best universities around the world                                                            

            It has allowed/manipulated major firms from around the world to build high technology production facilities inside China on the condition that Chinese be trained in the use and development of those technologies   

            It has engaged in industrial/technological espionage

            It has developed a vast network of government and private banking institutions and an extensive stock market to support its economic development

            It is rapidly developing a technologically advanced military apparatus with global reach

            It has become the dominant economic influence throughout Asia, Africa and Latin America

            Far more cars are sold in China than in the U.S., and China will not allow the sale of gasoline or diesel cars after 2030 as part of a major effort to reduce air pollution, and it is moving to eliminate coal fired plants

            China has embarked on the Made in China 2025 program to insure its economic self-sufficiency, perhaps even global dominance in ten key industries, including artificial intelligence, high speed computing, genetic engineering, electric vehicles, renewable and nuclear energy, and space exploration/missile technology. (It is currently planning for the first landing ever on the dark side of the moon.)

            China has embarked on the Belt and Road initiative to link 71 nations throughout Asia, Europe, Africa and Oceania via a network of roads/high speed railways, pipelines and sea ports.  As part of this effort, it is building land routes from China to Pakistan, to Europe and to Turkey, and a network of sea ports that already includes Greece, Pakistan, Southern India/Sri Lanka and Eastern Africa. (China’s economic and military development of a chain of islands in the South China Sea is merely one link in this system.)

                        India, Pakistan, Russia, New Zealand, Turkey and Poland have formally joined the Belt and Road project and together constitute more than one-third of the world’s GDP. Others, including Greece and Sri Lanka, have already sold or agreed to develop port facilities. The first trans-Africa railroad from Dar es Salaam in East Africa to Lobito in West Africa will be a part of this system. Trains are already moving between China and Poland, connecting with existing routes throughout Europe. China had already spent more than $900 billion on these efforts, including contracts with several American corporations. 

Over the centuries, the world has seen a series of empires grow to dominate major portions of the planet, and then decline – from the Roman Empire to the Ottoman Empire to that of Spain to the British Empire (of which it was said “The sun never set on the Union Jack.”) to the dominant world position of the U.S. since World War II to include more than 700 military bases in more than 90 nations and the world’s largest economy and dominate military. However, in the last 40 years, the U.S. Empire has experienced military defeats in Vietnam, stalemates in Iraq and Afghanistan and growing irrelevance in Syria and Africa. The U.S. economy has gone from representing more than one-half of global GDP after World War II to only 13% in a steady shrinkage of its influence.

The U.S. has gone from having to coordinate with the G-7 in its efforts to influence the world’s economic policies to having to turn to the G-20 and to the TPP 12 (until, under Trump, the U.S. pulled out of the TPP, while the now 11 member organization has gone along its own path without the U.S.)  Moreover, the U.S. has found in the last twenty years that it can no longer dictate policy in any of these forums - a fact that President Trump confronted just recently at a meeting of the G-7.  Even earlier, both George W Bush and Barack Obama found they had to confront this same reality of lost influence.

            The two major issues that undoubtedly will dominate all public policy over the   remainder of the 21st Century, in the U.S. and around the world, are:

            (1) how to address the issue of climate change and

            (2) how to cope with the emergence of China as perhaps the dominant world power,                        maybe even encompassing the growth of a de facto Chinese empire.

            With regard to (2), the overarching concern will be how the U.S. copes with a rising         China while avoiding a military conflict.  Trump’s starting a “tariff or trade war” is             not an encouraging omen of things to come. Historically, sadly, we have seen that           the transition from one period of empire to another has involved major military conflict.  We can only hope, and work, to avoid that eventuality this time.

            One caveat needs to be mentioned with regard to China.  There is real potential for       an economic slowdown in China due primarily to overextended internal debts by firms and agencies leading to a possible debt crisis, problems arising from   corruption, and the possibility of rising public outrage and resistance if the economy should slow down significantly. That is, China’s future path may not be a smooth       one.  However, China’s ultimate ascent is unstoppable, despite efforts such as those now being made by the Trump Administration, which explicitly are aimed, in part, to slow down or block both the Made in China 2025 and Belt and Road initiatives.