Wednesday, January 31, 2018

The Coming Trump Recession

In those moments when I am not lamenting the bigotry that shapes so much of our political debate, especially over immigration, I lament the utterly unwarranted credit that Donald Trump takes for the current state of the American economy, which grew steadily under the stewardship of Barack Obama, and has continued to do so during Trump's first year in the White House.  The same economy that Trump despised as a candidate is now a source of pride to him, because he can now attempt to manipulate the public mood from the Oval Office instead of the campaign trail.  But the reality is simply that this has been Obama's economy, up until the so-called "tax-reform" bill that Republicans drafted and approved for Trump's signature last month.

And now?  Well, watch out.  Because the Obama recovery and expansion is about to be supplanted by the Trump Recession (or the Trump much-worse-than-that).

To begin with, the tax bill is paid for 100% with your grandchildren's money, in the form of T-bills.  This, combined with the ending of the Federal Reserve's quantitative easing policy of expanding the money supply, will ensure a spike in interest rates--a spike that, in fact, has already begun to show signs of starting.  The reason for this is very simple:  interest is the price tag for money when, in the form of borrowing, money is treated as a commodity.  Consequently, as the supply of money shrinks, borrowing becomes more and more expensive for individuals and businesses who want to borrow, which in America is just another way of saying everyone.

And it becomes even more expensive when people start to do one of two things--dipping into savings, or liquidating investments--that further reduces the available amount of money in the marketplace.  Surely, both of these things can't be happening at once.  Oh, wait.  For that matter, wait yet again.  Looks like people aren't waiting for their $30-dollars-a-week "tax bonanza" to "trickle down" to them.  Instead, they know a stock bubble when they see one, and they want their money now.

They also know that the tax bill, currently being marketed as middle-class tax relief, is anything but.  Not only because their share of it is so pathetically small, but because they see the money going from the employers to the shareholders, as well as CEOs.  It will then be offshored to overseas tax shelters, far, far away from the economy it was supposed to benefit.

What happens when, because of the cost of borrowing money, a business can not expand, or can only do so at great additional operating expense?  It may choose to slowly decline and go out of business, or it may simply try to pass along the additional cost to the consumer.  Either way, jobs will be lost, and purchasing power will shrink, which will increase the spiral of job losses.

And, before you know it, Donald Trump will have lived up to his resume.  He'll have done for America what he did for Atlantic City, going bankrupt four times in the process.  Remember that word:  bankrupt.  There's a decent chance that it will describe many of you, sooner than you think.

No one should misinterpret any of the foregoing as a defense of the tax code status quo.  There are many, many arguments for changing the tax code.  We need to bring home money that has been stashed away abroad, and encourage its investment in an economy that relies on renewable resources, trains Americans for 21st-century jobs, and ends the hardships of those who have been left behind in the globalization of the world's trade.  We need to discourage industries that contribute to extreme patterns of weather that use up productive resources faster than we can replace them.  We need to rebuild communities that have been devastated by the predatory business practices that began with Ronald Reagan's Presidency.  We need to find ways to rebuild the infrastructure that once made us the envy of the world, and that now looks pathetic and dangerous compared to much of what is now being accomplished in so-called "third world" countries.

All of this can and should be accomplished by sensible tax reform, one that focuses on advancing the public interest and stops pretending that there are no differences between public and private interests. That kind of tax reform can and should take place through a legislative process that involves representatives of the interests of all Americans, not one in which the investing class instructs the Representatives and Senators it has bought to conduct a midnight raid on the pantry of our public fisc. That kind of tax reform can and would take place if we had a President who believed in paying contractors whether they were in a position to blackmail him or not (I'm thinking about you right now, Stormy Daniels, with an acknowledgment to Stephen Colbert).

Instead, we have a tax bill that is guaranteed to take us into the coming Trump Recession--or worse.  There is only one sensible thing that you and I can do about it--vote Democratic, in 2018, 2020, and beyond.  Stop waiting for purity; the other side certainly isn't.  This isn't about purity any longer.  It's about preventing the economic suicide of the United States, and everyone in it.

I hope there are enough of you, starting this fall, to prevent it.  I'm counting on it.

No comments: