Dear President Trump:

It has been reported that you don’t want to see any additional federal aid directed to Puerto Rico.

The government debt crisis in Puerto Rico started in 1973 when the government began to operate on a deficit budget (i.e. spend more than what it collected). To cover the annual budget shortfall, the government issued bonds.

The impact of that decision had long range impacts, beginning with reduced capital spending resulting in deferred maintenance of public sector infrastructure (roads, bridges, public utilities, hospitals, electric power grid, ports, airports, etc.).

The practice of deficit spending in Puerto Rico continued for 4 decades!

In 2014 three major credit agencies downgraded several bonds issued by Puerto Rican government entities to “junk status” after the government was unable to demonstrate that it would be able to pay its debt from sustainable current cash flows. That action precluded Puerto Rico from access to the public debt markets, and forced them into the shadowy world of hedge funds and high-yield debt issuers.

I think you are punishing Gov. Ricardo Rosselló — and the people of Puerto Rico — for a situation which they inherited.

Meanwhile, there is a long-term lesson to be learned from the current Puerto Rico situation.

Fiscal responsibility requires discipline. In times of economic expansion, all eyes should be on reducing debt without creating abrupt changes in revenues or spending.
 
No responsible government should plan to operate on a deficit budget during times of economic expansion (prosperity).
 
The real job of our federal government is at a strategic level — looking into the future to create and support programs and policies which will help support a positive foundation for future Americans at the state and local base.
 
President Trump: I believe your fiscal priorities need to be revisited and carefully evaluated through an honest and open strategic filter.
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The Amazon Conundrum

March 5, 2019

While New Yorkers continue to debate the loss of Amazon from a site in Queens, the discussion seems to have lost sight of what Amazon contributes to the long-term well-being of our society.

Amazon is not a friend to America, has contributed very little if anything to our overall economy. The stock is currently grossly overvalued with a P/E ratio in excess of 80x.

Jeff Bezos, the founder of Amazon, has an estimated net worth of $165 Billion, primarily as a result of a business model which has dramatically changed the U.S. retail sector.

Most egregious? Amazon paper earnings for 2018 are $11.2 Billion, and early reports indicate that they will pay $0 in federal income taxes on these earnings.

(Amazon reported $5.6 Billion in U.S. profits in 2017 and paid $0 last year.)

Amazon creates jobs? True. Good jobs? False.

Economic scholars generally agree that a ‘living wage’ in the NY Metro area for an adult with one child is $31/hour, with 2 children $41/hour.

Amazon announced in early October 2018 that it would raise the minimum wage to $15 an hour for its U.S. employees.

Meanwhile, much like Walmart, Amazon has created a business model which effectively eliminates competition and destroys small business.

The hot topic today is the talk of ‘Democratic Socialism’ being portrayed by some pundits as a death threat to American democracy.

The real threat to American democracy is the proliferation and exponential growth of a few family-controlled and vertically-integrated oligarchies which are capable of re-creating the Feudal System which characterized medieval Europe during the Middle Ages.

“Those who fail to learn from the lessons of history are bound to repeat the outrage of history.”

Tax Returns & The Base

March 4, 2019

It truly is fascinating to watch the Hard Core Trump Base rise up on their haunches and respond to Trump tweets, pronouncements and positions.

I thought the Trump Base was loud but modest:  maybe 20% of American adults?  Wrong.

There seems to be a solid base of around 40% of American adults who idolize the words and actions of Donald Trump.  Though the number might occasionally rise or fall by a few points, Trump’s 40 percent approval rating seems to be mostly bulletproof.

Trump’s base is loud and determined.  One of his followers summed it up succinctly:  “People who voted for Trump will NEVER stop believing in his strength, intelligence and goodness. Trump 2020!”

Those of us who didn’t vote for Trump may never understand the deeply held values of the people who see America and the rest of the world so drastically different from us.

Do the hard-core Trump folks really believe that Trump is an economic and social policy expert who alone can make America great?

Or are they just lost souls clinging to the past in a desperate hope that the inevitability of change and uncertainty can be conquered through anger, bad manners and avoidance?

Trump defied an established custom developed over the last 40 years by refusing to release his tax returns during the 2016 presidential campaign, although he did say – on multiple occasions during the campaign – that his tax returns had been under a routine Internal Revenue Service audit since 2009 and that he could not release them until the audit was finished.  (N.B.  The IRS has repeatedly stated that there is no prohibition or restriction on releasing tax returns while they are under audit.)

After a while, Trump promised that he would release his tax returns once the audit was completed.

I’m no expert on IRS audits, having only been audited once myself.  My audit was completed within 90 days.

Generally, the statute of limitations for the IRS to close out tax audits on a taxpayer expires three (3) years from the due date of the return or the date on which it was filed, whichever is later.

Public evidence shows that in most cases, an IRS tax audit lasts less than one year.  In a few rare cases where substantial tax fraud or misreporting (generally, unreported income) is involved, the statute of limitations can be extended to six years.

That said – and assuming worst case situations —  the audit on Trump’s 2009 tax return would have been completed not later than October 15, 2016; 2010 by October 15, 2017; 2011 by October 15, 2018

Various public polls reflect the sentiment of a majority of Americans (70+ %) that Trump should release his tax returns.  Yes, even some of the Trump acolytes agree that releasing the tax returns is the right thing to do!

It’s the job of congressional committees to conduct oversight of the executive branch, and the Ways and Means committee is empowered to obtain anyone’s tax returns – even a sitting President – under a provision of the tax code which has existed since the 1920s.

Let’s get those Trump tax returns released ASAP, and eliminate at least one of the broken campaign promises.  As has been said, ‘sunlight is the best of disinfectants’.