TRUMPONOMICS – FAILURE IS PRE-PROGRAMMED
By Rudolf Hickel
[This article published in March 2017 is translated from the German on the Internet. Rudolf Hickel is a critical economist with the Bremen study group Alternative Economic Policy.]
Macro-economic and ecological connections are simply ignored with the concentration on short-term profit. The planned reduction of corporate taxes from the current 35% to 15 or 20% recalls the Laffer curve as the basis of Reagan's fiscal policy error. Between 2009 and 2015, the top US corporations stashed .6 trillion in tax havens. The social state and the energy turn are not funded but subverted. Oxfam explains how the Trump reform will worsen life.
Donald Trump’s election was based on the political instrumentalization of socioeconomic fears of those who fell from the middle class in the US through job losses and changing to precarious work. Paul Krugman speaks of the falling “white working class.” The desolation of once flourishing industrial districts (“Rust Belt”) symbolizes the regional economic collapse. Trump also found support in the rural population uncoupled from the modernization process. Trump manipulated these reality-based anxieties with the claim that local jobs were ousted by the export-surpluses of Germany and China and “stolen” by the shifting to foreign countries. With many untruths and distortions, Trump succeeded in being identified as the “rescuer” by vast numbers of economic losers. Hatred for the “Washington Establishment” who covered up the social truth with their often lying “political correctness” also helped him.
With his basic decisions and his proposed 2018 budget, the question is raised whether the new policy will benefit those in rural areas who voted for him expecting to be free from poverty work and social descent. The following double judgment seems likely if his policy initiated with drumbeats is not retracted:
Firstly, those who expected from him an improvement of their situation will not see anything positive in his policy. Yes, the Trumpian policy will worsen their job chances and social situation. They were merely instrumentalized as a herd of voters. The winners are the owners of assets and the super-rich.
Secondly, the trade policy, financial policy and regulatory policy under the strategic goal “America First” will end in a weakening of the US. In addition, a setback can be expected in the inadequate multilateral projects arduously built over decades (WTO, IMF, World Bank and the UN).
The instruments of the most important policy fields are erroneously set up and made confused, contradictory and opportunistic by economic lobbyists in the Trump cabinet:
• The screening by protectionism with tariffs and a border-equalizing tax up to 20% on imports in the US will weaken international competitiveness through meager innovative pressure.
• The planned deregulation of the financial sector disciplined with the Dodd-Frank Act as an answer to the mega-financial crisis of 2007 makes probably a new collapse of the financial system with effects all over the world. Abolition of stress tests, prohibition of speculative investment banking and resolution procedures for transgressing banks (“living wills”) are at the center.
• The planned reduction of corporate taxes by the central state from the current 35% to 15% or 20% recalls the Laffer-curve as the basis of Reagan’s fiscal policy error. Additional investments of businesses should not be expected. Pressure on the state budget will increase through tax shortfalls. The division between rich and poor will intensify.
• Trump’s proposal for his first budget provides an increase of military spending (from 1.9 to 4 billion, ten percent) and Homeland Security (seven percent). Veterans whose budget will rise six percent to .9 billion are among the winners.
• Financing the trillion public infrastructure spending for transportation, streets, bridges, schools and public buildings announced in the election campaign is unclear as in the past.
• Social policy only occurs in the form of planned cuts of measures gained through struggle. Housing with subsidized rents is cut twelve percent. Experts expect the loss of social housing and allowances for millions of citizens. Spending on health will be reduced 16% through the planned reduction of Obamacare. Altogether 52 million citizens will be uninsured with its complete abolition. Only 28 million were uninsured under Obamacare.
• On one side, ecologically-threatening oil production projects will be resumed according to the government motto “Climate catastrophe is impossible.” On the other side, federal environmental spending will be cut enormously. The US will withdraw completely and financially from the international climate change initiatives (also from the climate fund of the “Paris Agreement on Climate Protection”).
Apart from a terrible incompetence in the consultation environment of Donald Trump, these proposals are based on fallacies and a reality distorted counterfactually. Macro-economic and ecological connections are simply ignored with the concentration on short-term profit-seeking. The government ideology of the US follows the shady business model of the former real estate tycoon Trump. The daily stock prices of US corporations are the focus. The necessary social and ecological sustainability does not have a chance.
Trump already claims success for his policy. Fake News per Tweet also dominates here. The stock exchanges blind for future developments and the politically-cuddled big banks count for the short-term profiteers. The strengthened economic growth and declining unemployment are the fruits of the earlier Obama policy. The inflation that the Federal Reserve announced with the first interest rate increase under Trump is now critical. If the expected continuing upgrading of the dollar occurs, the protectionist trade policy will break down through the inexpensive imports in the US.
The economic-, financial- and social policy demonstrates unmistakably that those who voted for Trump hoping for better working- and living conditions belong to the losers unlike the big shots of the financial industry and the US multinationals. If this knowledge torments the instrumentalized, then Trumponomics could break down politically as well as economically.
`The Simpsons' on Trump's First 100 Days: Death and Prozac
by Yahoo TV
Thursday Apr 27th, 2017
`The Simpsons' on Trump's First 100 Days: Death and Prozac
Everyone else is weighing in on President Donald Trump’s first hundred days — why not The Simpsons? In a new clip, we see what’s going on in the White House, and the Simpsons‘ writers are pretty grim. Press secretary Sean Spicer has hung himself from a noose with a sign on his corpse saying, “I quit.” Jared Kushner and Steve Bannon are squeezing each other’s throats the way Homer usually throttles Bart. Ivanka Trump has replaced Ruth Bader Ginsberg on the Supreme Court.
Meanwhile, the President sits in bed, fingering his smart-phone, books scattered across his blanket. (Among them, Bill O’Reilly’s apparent latest: Killing a Good Thing.) An aide brings him a print copy of a thick new tax bill proposal and tells the President he needs to read it immediately. Trump whines, “Can’t Fox News read it, and I’ll watch what they say?” (Prediction: Look for this clip to turn up on Fox and Friends in the morning.)
WALL STREET CELEBRATES THE ROLLBACK
Once she was a financial analyst. After the financial crisis, Alexis Goldstein became a sharp bank critic. Now, she warns urgently of the withdrawal of bank regulations. “Nothing was learned from the mistakes.”
By Lukas Hermsmeier
[This article published on 8/30/2018 is translated from the German on the Internet, www.woz.ch.]
Every few months, Alexis Goldstein is invited on television. Her role is always the same. Goldstein is the spoil-sport. Trump’s tax reform? The rich profit above all, she explains on CNN. Deregulations for Wall Street? Deregulations could lead to the next crash, she warns. The longer Goldstein speaks, the faster she races from sentence to sentence with brutal precision… She shakes her head and rolls her eyes… “The financial system is neither just nor sustainable.”
Goldstein worked on Wall Street for seven years – for three different banks - first as a programmer and later as an analyst. “I made rich people even richer,” she looked back. At last, she quit. Shortly after that decision in the fall of 2011, a few hundred persons occupied Zuccotti Park in downtown Manhattan and proclaimed “Occupy Wall Street.” Suddenly, she found herself on the other side – as a protestor against Wall Street. Today, Goldstein works for a nonprofit organization that does its utmost to reform the banking sector. Goldstein, 37 years old, makes activism her vocation. Her insider knowledge is sought now.
Ten years ago, the financial crisis reached its peak. On September 15, 2008, Lehmann Brothers, one of the largest investment banks of the world, declared bankruptcy. A stock market crash followed the bankruptcy. Millions of people lost their jobs, their houses and their savings. Many Americans fear all this could soon be repeated.
The rollback rolls
The chances for a new financial crash increased since Donald Trump sits in the White House, Goldstein and many other experts warn. These chances for a repeat are because of the agenda of Trump’s administration, not his erratic figure. Step by step, many of the regulation- and control mechanisms installed after the great crash have been dismantled. The temporary apex of the rollback was reached at the end of May when Trump signed the so-called Crapo bill. The law introduced by Republican Mike Crapo meant great relaxations for medium-sized financial institutes. “These will hardly be examined in the future and will be obligated to less transparency,” Goldstein says. The risk of a new crash and a new state bailout action increases through the Crapo bill, the Congressional Budget Office, an independent agency of the US Congress, declared in the spring. The government promises a stimulation of the already booming economy with these measures. Smaller regional banks should be more flexible and consumers should obtain simpler credits, the supporters say.
The elections of a part of the Congress in November are awaited with hope and fear. The rules for banks could be strengthened again if the Democrats win back the majority in Congress. Candidates like the young bearer of hope Alexandria Ocasio-Cortez from New York urge a stricter bank monitoring. “A whole series of politicians are resisting the current system. That gives me hope,” Goldstein exclaims.
But more deregulations threaten if the Republicans keep the upper hand. Trump who raged against the “financial elite” in the election campaign and promised Wall Street “would not get away with murder” will be celebrated there.
The discrepancy between Trump’s election campaign rhetoric and his legislation is not unexpected. “To be surprised would be naïve,” says Goldstein. She has had experiences with collective naïveté.
A lobby against the lobby
Goldstein works today as a leading analyst with Americans for Financial Reform (AFR), an umbrella association of over 200 organizations that “seek to create the prerequisites for a strong, stable and ethical financial system.” As their website declares, “we want to give a voice to the rage of the people. Networking the different NGOs and groups scattered all over the country is one of their goals. The complex and often non-transparent financial policy should be illuminated with publications and events. AFR is a lobby against the lobby. “We are in constant contact with Congress,” Goldstein says. The organization was founded in 2009 when the wounds of the financial crisis were still fresh and Goldstein still worked on Wall Street.
Today, Alexis Goldstein speaks about the “massive injustices produced by the financial system.” Compensations are imperative. Because Goldstein piled up enormous debts like most students in the US, she agreed to a work contract with Morgan Stanley, one of the biggest banks of the US.
Lack of self-reflection
“I actually felt miserable most of the time,” Goldstein admits. She became cynical and embittered in those years. “The environment led me to see every person as a threat,” she wrote in the magazine “n + 1” in 2012. Lack of self-reflection, competing for overtime and the rat-race mentality prevailed. Doubtlessly, she could have given notice earlier. “But life was comfortable. I earned a large salary, received bonuses, traveled in business class and stayed in beautiful hotels.”
In October 2008, the US government announced a 0 billion bailout package. With tax funds, the banks were supported that were “too big to fail.” The arrogant, haughty reactions of her colleagues to this bailout showed Goldstein that the problems were profound. “In my office, people assumed the public would quickly forget everything,” she recalls.
Goldstein reacted and gave notice. Politics also reacted; President Barack Obama at that time signed a new law to stabilize the financial sector. The so-called Dodd-Frank Act would do more than protect Americans who will again bailout banks in the future. New control authorities were established and stricter regulations were introduced for transparency and risk management. “These regulations are now relaxed again,” Alexis Goldstein says.
For a long time, all banks with a balance of billion were regarded as systemically important financial institutions. Special rules and controls were in effect for these system-relevant global banks, They had to regularly submit to a stress test by the Federal Reserve central ban k. Through the Crapo bill, the threshold was set at 0 billion and fewer banks are regularly examined. Take Countrywide, a bank that had a balance under 0 billion at the moment of the financial meltdown and nevertheless inflicted tremendous damage. “Such banks are immediately treated as little regional banks.” Foreign financial institutions like Deutsche Bank and the big Swiss banks profit from the new law since the size of their US headquarters is below the threshold.
As another change, banks must provide the authorities with details about individual borrowers to prevent discriminations in awarding credits. “A Latino family should not receive a worse credit than a white family with the same credit-rating,” says Goldstein. This regulation was now loosened.
Deregulations of the financial system no go beyond the Crapo bill. A few weeks ago, the Federal Reserve proposed a reform of the so-called Volcker Rule. The rule named after the former Federal Reserve chairman Paul Volcker was one of the core points of the Dodd-Frank Act and prohibits small banks from speculative intrigues with customer deposits. These banks will have more freedom for risk if the Volcker Rule should be reformed or rescinded.
The establishment of a new authority to protect consumers was one of the achievements of the Dodd-Frank Act. The Consumer Financial Protection Bureau (CFPB) is now being gradually dismantled under the new US administration. One of the most important lower authorities of the CFPB, the Office for Young Consumers and Students, was massively scaled back by the new boss and Trump veteran Mike Mulvaney.
“Landmines in the law”
Senator Elizabeth Warren who is treated as the next presidential candidate of the Democrats, is one of the most prominent figures in the struggle against easements for Wall Street. Warren recently referred to the consequences of the Crapo bill: “Landmines for American families are hidden in the details of this law. Washington was completely uncoupled from the real problems of the people.” 16 of her party colleagues in the Senate voted for the Crapo bill alongside 51 republicans. Trump thanked the “tremendous Democrats” who supported him. “Many did not learn from the mistakes,” says Goldstein.
At a conference in July titled “Regulating Wall Street – 10 Years Later,” Senator Warren remembered the time before the 2008 crash: “It seemed as though the economy was great. The lobbyists were always high-spirited.”
What about today? The mood on Wall Street is unchanged, says Goldstein. When she speaks with ex-colleagues, she hardly hears concerns. “They are rather self-confident. But they were also self-confident before 2008.”