Who Can Trump Trump's Ambition?

Thomas Friedman seems to believe the Donald has almost sewed up a majority of the Republican Primary delegates and will be a formidable foe for Hillary, assuming she is the Democrat’s candidate.  But chances are his past will catch up with him as voters begin to think with their head rather than gut instinct that Friedman seems to believe motivates many voters.

“Donald Trump is a walking political science course,” said Friedman in a NYTimes Op-ed. “His meteoric rise is lesson No. 1 on leadership: Most voters do not listen through their ears. They listen through their stomachs. If a leader can connect with them on a gut level, their response is: “Don’t bother me with the details. I trust your instincts.” If a leader can’t connect on a gut level, he or she can’t show them enough particulars. They’ll just keep asking, “Can you show me the details one more time?”

That may be so for many Republican primary voters, but Trump’s suspect past hasn’t yet been investigated.  Thinking Repubs have given him a blank check to date, believing that he will flame out of his own accord.

Even Mitt Romney calling him a con artist last week didn’t seem to hurt Trump in Michigan, though Ohio Governor John Kasich was creeping closer in the final tally of delegate votes, in a defacto tie for second place with Texas Senator Ted Cruz.

Graph: Marketwatch

           

Trump’s sordid business dealings are known to very few.  One of his 4 Chapter 11 (business) bankruptcies was for Trump Casinos and Hotels. “For 10 years between 1995 and 2005, Donald Trump ran Trump Hotels & Casino Resorts — and he did it so badly and incompetently that it collapsed into Chapter 11 bankruptcy,” said Marketwatch’s Brett Arends, who has been tracking his business failures for years. “His stockholders were almost entirely wiped out, losing a staggering 89 percent of their money. The company actually lost money every single year. In total it racked up more than $600 million in net losses over that period,” something no other  major casino chain did over that term.

In total, Donald Trump pocketed $32 million in nine years of running Trump Casinos and Hotels, while his public stockholders lost more than $100 million.  But much more damaging are the various class action lawsuits filed again Trump and Trump University, which was a university in name only.

Instead of receiving a quality degree, “as good as any from a university”, said Trump, students received a printed certificate and no degree after spending as much as $36,000 on a weekend course that solicited more money, and were given commonly known real estate websites, such as Zillow, and several worthless property referrals.

These are the words of several plaintiffs suing Trump that a San Diego court has elevated to gangster status.  Trump is accused of not only fraud, but racketeering, as if he were running a criminal enterprise. 

One of the two San Diego cases has been allowed by the judge to be brought under the Racketeer Influenced and Corrupt Organizations Act, or RICO, said Time Magazine’s Steven Brill. “This means that, fairly or unfairly, opponents will be able to say that a large group of everyman voters, many of them elderly, have accused a leading contender for the Oval Office of being a racketeer.”

The records indicate, for example, that Trump University collected approximately $40 million from its students–who included veterans, retired police officers and teachers–and that Trump personally received approximately $5 million of it, despite his claim, repeated in our interview, that he started Trump University as a charitable venture.

Trump’s own followers may be able to disbelieve the evidence that is being unearthed of his many business failures in a hyper fervid primary season full of hyperbole.  But the facts are only now now coming to light. And the picture is revealing. 

The evidence is in plain sight.  The Donald always comes first, and very few others have profited thereby. 

Harlan Green © 2016

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

Two Percent Growth Isn’t ‘New’ Normal

Popular Economics Weekly

There are many ways to look at the “weak” 2 percent growth numbers for Q3, though just the ‘Advance Estimate’ and so subject to at least 2 more revisions. But such weak growth isn’t due to excessive government regulations (since deregulation has not created greater overall growth, only more recessions). The record low interest rates mean that banks and corporations have too much money to spend, but no place to invest it, since consumers aren’t spending as they used to.

Weak growth over the past decade in particular can mainly be traced to the fall in household incomes, and what consumers can really afford. If their incomes were growing as in 2000 before the Bush tax cuts and wars, for instance, then we would already be back to 1990s levels of economic growth—when 4 to 6 percent annual growth rates were more normal—before the last 2 recessions (gray bars) as the graph shows.

Graph: Calculated Risk

And where has the lost household income flowed, since corporations have the highest profits in history as a percentage of GDP? It has been paid to the investor class and corporate CEOs, in the form of increased dividends, capital gains and stock options, or is part of the $2 trillion cash hoard held by corporations.

Graph: CBPP

For it is the tremendous shift of wealth that has stunted growth since 2000 and caused the Great Recession. Incomes of the wealthiest have soared, mainly because of 2001 and 2003 tax cuts that lowered investment tax rates for the wealthiest and drastically cut tax revenues, while incomes of 99 percent barely grew. This diminished purchasing power of consumers has accounted for most of the $6 trillion in lost output that resulted from the 18-month Great Recession (12/2007 – 6/2009).

It is an example of the failure of small government policies that instead of creating more prosperity for all, diverted it to the wealthiest. And the resulting record income inequality has damaged economic growth say more and more studies, such as a recent IMF study by Andrew Berg and Jonathan D. Ostry that suggests income inequality might shorten our economic expansion by one-third in jobs lost and goods products.

“…a careful look at the varying levels of inequality in different countries demonstrates just how much societal divides in wealth really matter. Countries with high inequality are far more likely to fall into financial crisis and far less likely to sustain economic growth,” said the authors in a Foreign Affairs article.

The U.S. has fallen to the lowest ranking on income inequality. The CIA World Fact Book ranks the U.S. 94^th in income equality below all developed countries, Iran, and Russia. In fact, the U.S. is just above Jamaica and the poorest African countries. Wealth—both income and assets—has become concentrated among fewer and fewer Americans, in other words.

In spite of consumers’ massive loss of income, the University of Michigan reports confidence is being restored—though nothing like the 1990s readings of 100 plus. Hence the belief that consumers are becoming resigned to a ‘new’ lower growth normal. The 88.1 reading for current conditions is up a noticeable 2.4 points from September to hint at general growth for October's slate of economic data. The expectations index is up a sizable 5.5 points from September which hints at confidence in income prospects and is a positive for the holiday shopping outlook.

Graph: DShort

But this new normal for lower growth is nothing like the 1990s, as we’ve said, and as the graph makes clear. Contrary to Mitt Romney’s assertion that governments don’t create jobs, we can now see the effects of FEMA’s disaster relief efforts after Tropical Storm Sandy. Governments spend most revenues in the private sector—whether for defense, education, environmental protection, infrastructure or research.

So we do not have to accept slower growth, if we recognize and right the record inequality that has caused our market economy to repeatedly crash. As Nobel Economist Joseph Stiglitz was quoted in a recent review of his latest book, The Price of Inequality, “Inequality leads to lower growth and less efficiency. Lack of opportunity means that its most valuable asset — its people — is not being fully used. Many at the bottom, or even in the middle, are not living up to their potential, because the rich, needing few public services and worried that a strong government might redistribute income, use their political influence to cut taxes and curtail government spending. This leads to underinvestment in infrastructure, education and technology, impeding the engines of growth… “

Harlan Green © 2012

Romney’s 47 Percent Solution

Popular Economics Weekly

We know that Mitt Romney at a Florida fundraiser claimed that there are 47 percent of the people who will vote for President Obama no matter what, and "my job is not to worry about those people. I'll never convince them they should take personal responsibility and care for their lives," quoted Mother Jones Magazine in the news coup of the year.

But really, why isn't he worried about them? Because due to record income inequality, age, the recession, or disabilities, they have the least amount of wealth, and we know he is really about continuing to redistribute the wealth upward since the advent of government-is-the-problem, trickle-down economics of President Reagan.

As the Center for Budget Policy and Priorities has said: "Given all the talk about who does or doesn't pay federal income taxes and what this means for tax policy, here are a few basic facts.

• The vast majority (83 percent) of households who owe no federal income taxes are either working households that pay payroll taxes (61 percent) or elderly (22 percent).

• The remaining 17 percent of those who don't pay federal income taxes are mostly those who are not working due to illness or disability, or are in school.

His program, which I call the '47 percent solution,' will in fact further impoverish the 47 per cent who don't pay federal income taxes by continuing to cut back on the federal safety net of social security and Medicare. It does so by adhering to the Republican Party Platform, a combination of his 5-Point Plan and that of Veep candidate Paul Ryan, which is the only Republican budget plan with any detail that was passed by the House.

"House Budget Committee Chairman Paul Ryan's budget plan would get at least 62 percent of its $5.3 trillion in nondefense budget cuts over ten years (relative to a continuation of current policies) from programs that serve people of limited means said the CBPP. "This stands a core principle of President Obama's fiscal commission on its head and violates basic principles of fairness."

Whereas the core principal of Republican ideology is that the wealthiest create jobs and so most wealth should flow to them, hence the "trickle-down' name. But in fact too much debt, both private and public, caused our greatest recession. What built up so much debt? The so-called trickle-down economics of Presidents Reagan and Bush II that ran up the largest budget deficits since World War II with meager economic growth to show for it.

President Clinton even said it at the Democratic convention. Democrats who believe that government has to work for the people have 'outgrown' Republican administrations over the past 52 years. “We Democrats think the country works better with a strong middle class, real opportunities for poor people to work their way into it and a relentless focus on the future, with business and government working together to promote growth and broadly shared prosperity. We think 'we're all in this together' is a better philosophy than 'you're on your own.'

Who's right? Well since 1961, the Republicans have held the White House 28 years, the Democrats 24. In those 52 years, our economy produced 66 million private sector jobs. What's the jobs score? Republicans 24 million, Democrats 42 million!"

Neither trickle-down economics, nor the wealth redistribution upward that accompanies it have been good for the country, such as Romney's 47 percent solution.

Harlan Green © 2012

Why Do We Need QE3?

Financial FAQs

It’s not hard to see why we need “QE3”, the Fed’s bond buying program to keep long term interest rates low. It’s almost an act of desperation. The Fed is the only game in town to stimulate growth at the moment, when we are teetering on the edge of several ‘fiscal cliffs’.

That is, the private sector is not creating enough jobs on its own to pay down the budget deficit, or maintain a secure social safety net. In fact, the unemployment rate has to fall at least 2 points—close to 6 percent—to bring us near full employment and an economy that returns us to prosperity. The U.S. economy is also dealing with the prospect of another credit downgrade that could endanger our fiscal solvency.

“The stagnation of the labor market in particular is a grave concern not only because of the enormous suffering and waste of human talent it entails,” said Fed Chairman Ben Bernanke at the Fed’s annual Jackson Hole conference, “but also because persistently high levels of unemployment will wreak structural damage on our economy that could last for many years.”

Graph: Calculated Risk

There were just 96,000 payroll jobs added in August, with 103,000 private sector jobs added, and 7,000 government jobs lost. A meager total much below the first part of the year. The unemployment rate decreased to 8.1 percent (from the household survey), and the participation rate declined to 63.5 percent, mostly from the decline in manufacturing employment, which depends on exports which have flagged of late.

The reason for “persistently high levels of unemployment” is not a mystery. Incomes of the 80 percent of wage and salary earners whose spending powers most economic growth have fallen with no relief in sight when productivity gains are soaring. The problem is very little of those gains are flowing to the workers producing those goods and services.

From 1948 to 1973, the productivity of all nonfarm workers nearly doubled, as did average hourly compensation.  Although productivity increased by 80.1 percent from 1973 to 2011, average wages rose only 4.2 percent and hourly compensation (wages plus benefits) rose only 10 percent over that time, according to government data analyzed by the Economic Policy Institute.

That is a lesson that seems to have been lost at least since the 1970s. So until programs that stimulate actual job growth are enacted, there won’t be much more job growth, in spite of the Fed’s best efforts.

What programs are needed? This is also self-evident. Programs that decrease the record income inequality, the worst since the 1920s. And can be government-led, at the moment, without increasing the deficit. That is the misinformation being spread by those who do not understand growth. Romney, Ryan, et. al., don’t seem to realize that spending tax dollars on infrastructure, education, fire, police, healthcare, and the like, are actually dollars spent in the private sector that are deficit neutral. It’s called pay-as-you-go, the congressional rule that any spending increase had to be matched with a revenue increase. This rule that served President Clinton so well and enabled 4 consecutive budget surpluses, was only abandoned in 2000 when the Bush-Cheney administration cut taxes while increasing spending.

The huge inequality gap has reached historical levels not seen since 1928, which has depressed demand for the goods that drive growth. Economic historians such as Professor James Livingston, in particular, have known this. Private investment has been diminishing as a share of GDP since 1900. “So corporate profits do not drive economic growth — they’re just restless sums of surplus capital,” said Livingston, “ready to flood speculative markets at home and abroad. In the 1920s, they inflated the stock market bubble, and then caused the Great Crash. Since the Reagan revolution, these superfluous profits have fed corporate mergers and takeovers, driven the dot-com craze, financed the “shadow banking” system of hedge funds and securitized investment vehicles, fueled monetary meltdowns in every hemisphere and inflated the housing bubble.”

The policies that created such weak payroll numbers cannot be allowed to continue. Fed Chairman Bernanke and his Board of Governors are the only federal officials able to act at a time when our economic health hangs in the balance.

Harlan Green © 2012

Romney’s 5-Point Plan—Very Primitive Economics

Financial FAQs

Romney’s “Five Point Plan to Grow the Economy” that he touts on his website, is primitive economics almost beyond belief. It returns us to 19th century government of the few by the few with few regulations or insurance against the kinds of events that brought on the Great Depression and Great Recession, for starters.

Conservatives in general and Mitt Romney don’t seem to understand the most basic concept of modern economics--insuring against major disruptions—that is indispensable to run a modern economy. Insurance isn’t only about insuring the many to protect the most vulnerable—whether against physical disasters such as the Midwest drought, or financial disasters such as the Great Depression, or catastrophic illness. It is really about all of our citizens being for one, and one for all. It is why we tax ourselves to pay for a government, because government is really the protector of last resort against the most basic risks in a world grown increasingly complex and uncertain.

Modern economies can’t do without it, yet Romney says he opposes most modern forms of protection in his 5-point plan by continuing to reduce taxes that would starve government of revenues, as well as cap spending on regulation enforcement. He would also repeal the Affordable Care Act that insures 30 million more Americans. Instead he proposes more of GW Bush’s ‘Ownership Society’ which seeks to return us to the era of laissez faire, free, unregulated markets that existed 100 years ago. And we know the damage those institutions which evaded or ignored modern financial regulation did to financial markets.

Then was a much smaller, less complex world where most Americans were still living on farms. But the farming world collapsed in the 1920s when mechanization caused farming prices to plunge, ultimately bringing on the Great Depression. That is when the modern, industrial world came into being, requiring New Deal insurance; including social security, unemployment insurance, and even workman’s compensation to cushion the effects of modern business cycles on the urban unemployed who could no longer return to the farm during tough times. And unions came into being to organize workers so they could bargain for better than minimum wages and benefits.

The centerpiece of Romney’s plan is to continue to cut taxes for both individuals and corporations. This is when corporations have the highest profits as a percentage of GDP in history, while most individual tax cuts have benefited the wealthiest, thus creating the worst income inequality since the 1920s.

Graph: CBPP

And in starving the government of revenues he would  impose a regulatory budget cap, “reform” regulations so that coal-fired power plants would no longer have to control their pollution (thank you, Koch Brothers, for your $millions in contributions), open ANWAR, the Arctic National Wildlife Preserve to oil drilling, and in general continue to support our most polluting, non-renewable energy resources.

Returning the U.S. to an almost primitive society is already happening, of course, with continuing Republican attempts to block Dodd-Frank regulation, privatize Medicare and social security. The Great Recession was a product of Adam Smith’s primitive economic theory that said an ‘invisible hand’ controls markets for the benefit of all.

Really? That hasn’t been the case during the past two GW Bush recessions, including the Great Recession. $Trillions were lost during those recessions that were the result of inflated asset bubbles bursting, as regulations were ignored or evaded which controlled financial risk-taking. The Bush record is not pretty, and that is the most recent record to look at that is the result of primitive economic thinking.

Graph: Calculated Risk

The historical graph of economic growth shows most clearly which policies work to grow the economy—primitive economic policies, or using government as an active participant in growth? In fact, all recent recessions since 1980 have occurred during Republican administrations; from President Reagan’s in 1980, 1983, Bush I in 1991, and GW Bush in 2001 and 2007-09. Policies that starve government of what is needed to govern effectively starves all of U.S. Need we say more?

Harlan Green © 2012