Paul Ryan retired from Congress in January 2019 after 20 years of service culminating in his 3+ years of service as Speaker of the House.

Ryan was the chief cheerleader for the Tax Cuts and Jobs Act, and he left D.C. touting it as the greatest accomplishment of his political career.

Ryan repeatedly exclaimed how this new legislation (TCJA) would unleash unprecedented U.S. economic prosperity, by providing:

  1. Tax relief for middle-income families;
  2. Simplification of the tax code for individuals;
  3. Economic growth; and
  4. Repatriation of $3+ Trillion of profits U.S. companies have parked overseas would generate more investment and jobs in the U.S.

16 months after passage of the TCJA, it should be crystal clear that:

  1. Almost none of the tax cut benefits have reached the low- and middle income Americans who were promised tax relief;
  2. The TCJA legislation is some 1,097 pages itself, and it states very clearly that it is an Amendment to (the existing) Internal Revenue Code of 1986 (not a simplification);
  3. Economic Growth? The jury is still out on this one, but there seems to be no evidence of growth above or beyond the existing growth trend line which began in mid-2009;
  4. American companies have returned some (+/- $500 Billion) of their profits held overseas as a result of the tax holiday which was part of TCJA. Much of that money was used for stock buy-backs and debt reduction.

In fact, 16 months following the passage of the TCJA, U.S. companies are still waiting for final guidance from the Treasury Department on many of the final rules relative to repatriation.

And, despite continued U.S. economic growth and record corporate profits, a record 60 Fortune 500 companies avoided paying any federal income tax in 2018.

Federal tax revenues have declined during a period of economic expansion and our government spending has increased, thus the verifiable result from Paul Ryan’s signature accomplishment – the TCJA — is an increase in our federal deficit, an extra-special gift to our children and grandchildren.

The Treasury Department announced in March 2019 that the deficit for the first four months of the 2019 budget year (which began Oct. 1, 2018) totaled $310.3 Billion, up from a deficit of $175.7 Billion in the same period the year prior.

The Congressional Budget Office is projecting that the annual federal deficit between revenues and expenses will hit $897 Billion in fiscal year 2019, up 15.1 percent from the $779 Billion deficit recorded in FY 2018.

The end result: Our total federal debt will reach $22 Trillion this year – about 105% of GDP.

Why is that important? A comprehensive study by the World Bank examined economic data from 100 developing and developed economies spanning a time period from 1980 to 2008, concluding that a public debt/GDP above 77% begins to create a drag on economic growth.

The World Bank analysis concluded that for each additional percentage point of debt above the 77% threshold costs 0.017 percentage points of annual real growth.

If the World Bank study is correct, we are currently missing about 0.5% of our economic growth potential due to misguided public policy decisions, in addition to the future burden of repaying federal debt which was incurred unnecessarily.

Paul Ryan achieved his personal goal of shepherding record tax reform through Congress resulting in the passage of TCJA.

Although his personal goal was achieved at the expense of American society, Paul Ryan clearly is a winner.  So, please join me in sending a note of thanks and congratulations to Paul Ryan.  He left us a legacy.

Advertisements

Paul Ryan & Tax Cuts

April 16, 2019

Dear Paul Ryan,

In 1998 – at the age of 28 – you were first elected to the House of Representatives to represent the 1st District of Wisconsin.  You were re-elected a number of times, and you served for 20 years in Congress.

After John Boehner announced his intention to resign from the House and the Speakership in 2015, you were selected by your colleagues to become Speaker of the House.

You were involved in some very positive legislative accomplishments during your 20 year tenure as a Congressman representing the 1st District of Wisconsin, and during your tenure as Speaker of the House.

Unfortunately, your legacy will forever be connected to the Tax Cuts and Jobs Act (TCJA) which was passed into law at the end of 2017.

Although the TCJA provided the Trump Administration with an accomplishment relative to their campaign platform, it is a highly flawed piece of legislation which was created on a foundation of fictitious and inaccurate assumptions.

Just 16 months following the passage of TCJA, we can clearly see the adverse impacts.

Business and corporate tax cuts have resulted in: stock buy-backs; excessive executive compensation and bonuses; acquisitions and consolidations resulting in plant closings and layoffs.  All of these have been enabled by tax cuts which have resulted in 60 major corporations paying zero federal income taxes in 2018.

Whereas in times of economic expansion, the great majority of economists advise public sector entities to reduce deficits and aim for balanced budgets, the TCJA does just the opposite.

Some of the loss of tax revenue from business and corporate entities has been replaced by increased federal tax liability on individuals (like me), the majority of the lost tax revenue has been made up through deficit spending.

The annual federal budget deficit is expected to reach $900 Billion in fiscal 2019 and to equalize in the range of $1 Trillion annually for the next decade, up from $779 Billion in 2018.

Mr. Ryan:  over the course of your service in Congress, you achieved national recognition as a conservative policy wonk and as a relentless critical observer of our federal budget. You seemed to be a relentless critic of federal deficits, winning acclaim from centrists for your detailed charts showing the dangers that fiscal shortfalls posed to America’s future.

You slipped out of Washington in January 2018 knowing that you led the American people down a dangerous and dead-end road.

In your defense, we can acknowledge that you reluctantly took on the role of Speaker knowing that it was an impossible responsibility to fulfill.  Despite this, we must hold you fully accountable for failing to disclose to your constituents – and the entire U.S. population – that the TCJA was a sham – a complete flim-flam designed to create a false reality.

Paul Ryan:  Let us hope that your family, your wife, your children – and your neighbors – are willing and able to forgive you for selling out the interests of the people of Wisconsin — as well as the people of the United States – for whatever benefits you personally gained from your treachery toward the end of your tenure in Congress when you became the champion of the fictitious Tax Cuts and Jobs Act.

Mr. Ryan:  Good luck to you, and God bless.

National Emergency

February 13, 2019

Yes, we are facing a national emergency, and it’s not along our southern border.

Our real national emergency is our National Debt.

Let’s first agree that when the U.S. federal government runs a deficit, or spends more than it receives in tax revenue, the U.S. Treasury Department borrows money to make up the difference.

Next, let’s agree that our national debt is the amount of money the federal government has borrowed through various means, including: (1) by issuing bills, notes and bonds which are bought by investors (domestic and foreign), including the public, the Federal Reserve and foreign governments; (2) through intra-governmental debt, essentially money borrowed from trust funds used to pay for programs like Social Security and Medicare.

The great majority of economists and economic and fiscal analysts tend to agree that the significance of national debt is best measured by comparing the debt with the federal government’s ability to pay it off using the debt-to-GDP ratio, simply by dividing a nation’s debt by its gross domestic product.

Various sources have estimated that a healthy debt-to-GDP ratio is in the 40% to 60% range.  A longitudinal study conducted by World Bank economists published in 2010 estimated that in highly developed countries, 77% was a ‘tipping point’ where productivity and potential economic growth was constrained by adding additional debt without addition of incremental revenue.  (In emerging economies, they estimate that 64% is the tipping point.)  In either case, potential for default begins to increase once the tipping point has been breached, thus putting upward pressure on borrowing costs.

The first instance when U.S. debt-to-GDP ratio exceeded 77% was toward the end of World War II.  In the post-war years, our national debt shrank in comparison to the booming post-war economy, and the debt-to-GDP ratio fell as low as 24 percent in 1974.

Recession and rising interest rates during the Carter administration put upward pressure on the debt-to-GDP ratio, and once the tax cuts enacted during Reagan’s first term combined with increased spending on both defense and social programs, the debt-to-GDP ratio reached 50 % in July 1989.

Economic growth in the ‘90s, combined with tax increases under both Presidents George H.W. Bush and Bill Clinton helped keep the debt load in line, and by the end of December 2000, our national debt was about 55% of GDP.

Following the terrorist attacks on 9/11/2001, U.S. military spending spiked, yet tax cuts enacted in 2001 and 2003 during the George W. Bush administration combined with a mild recession in 2001 and the Great Recession beginning in 2007 caused significant decreases in tax revenues. By the time Barack Obama took office in January 2009, the debt-to- GDP-ratio reached 75%.

Deficit spending is one of the key tools available to stimulate economic recovery, and by the time of Obama’s 2nd inauguration in January 2013, the U.S. debt had grown to $16 Trillion – a debt-to-GDP ratio of 101%. By that time, it was clear that the economic stimulus of deficit spending had worked, evidenced by an expanding U.S. economy; signs of ending the wars in Afghanistan and Iraq; resurgence of the U.S. stock market; continued job growth; and other positive economic indicators.

All of these positive signs at the beginning of 2013 pointed to the need to rein in government spending and to strategically increase revenues (i.e. raise taxes).

Yet, the Congress has stubbornly refused to deal with the reality that our U.S. debt-to-GDP ratio has remained above 100 percent since 2013.

In early 2018, an analysis by the nonpartisan Committee for a Responsible Federal Budget concluded that the Tax Cuts and Jobs Act signed into law in late 2017 will push the U.S. national debt to $33 Trillion — 113 % of GDP — by 2028, a ratio not seen since immediately after World War II.

The Tax Cuts and Jobs Act is a sham (and a scam) which created a situation exactly opposite of what responsible elected officials should have supported.  The sooner it is  amended, repaired or repealed, the sooner the American people will be transitioned into a less dangerous and more stable and sustainable economic environment.

Economic and Fiscal Policy

February 12, 2019

Our current POTUS rarely stands still long enough for anyone to really examine how his positions and policies impact us in the present, or potentially in the future.

Here are a couple of observations which I managed to glean from rapidly moving targets:

Fiscal Policy:  Failure

By late 2017, the U.S. economy had enjoyed over 8 years of economic expansion (since June 2009), leading virtually all economists to conclude we were moving toward the end of an economic expansion cycle. Most experts agree that the government should constrain both borrowing and spending during an expansion phase, concurrently decreasing government debt.

When the expansion phase of a business cycle comes to an end, and the economy begins to sputter – and ultimately to contract – a government with reduced debt will have the capacity to spend more and tax less, helping to support the softening economy return to equilibrium faster and smoother.

The much-touted Tax Cuts and Jobs Act enacted at the end of 2017 introduced a $1.5 Trillion tax cut, sold as a source of economic stimulus when it was least needed.

In times of economic expansion, the government is on notice to reduce its deficit.

On February 12, 2019, the national debt passed a new milestone, topping $22 Trillion for the first time.  According to the U.S. Treasury Department, total outstanding public debt hit $22.01 Trillion, up from the $19.95 Trillion when President Donald Trump took office on Jan. 20, 2017.  This is mighty dangerous stuff, folks.

Trade Policy:  Failure

Tariffs are a tax on consumption, paid by end users.

Over several decades, the U.S. developed a dependence on manufactured goods from China.  In turn, U.S. exports to China – predominantly agricultural and unfinished goods – enjoyed strong growth over time.

President Trump abruptly started a trade war with China, imposing tariffs on goods imported into the U.S. beginning in July 2018.

China quickly retaliated, raising tariffs on American goods imported into China, resulting in significant shifts by China to alternative sources.

Winners?  Brazil; Russia; Germany; Japan.

Losers?  American agricultural producers in Iowa, Nebraska, Indiana, Missouri, Ohio, South Dakota, North Dakota, and Kansas; some American manufacturers; and American consumers overall.

It was once said, “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win.

The evidence seems to emphatically refute that position.

The Trump Trifecta

October 26, 2018

Since taking office in January 2017, Donald Trump has stood with House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell to proclaim various ‘victories’ for the American people.  Here are what seem to be the top three, A.K.A. “The Trifecta”:

  1. Complicit with Russia, Saudi Arabia and several other suspect regimes. Trump has continued to send public messages which downplay and/or absolve bad actors from behaviors which are contrary to existing international standards.

One clear reason:  Trump — and his close advisor Jared Kushner —  is involved in highly leveraged real estate development.  Neither Trump nor Kushner have the liquidity or availability of traditional financing sources to invest their own money.  Instead, they are forced to chase shady money from around the world, including huge sums of money sourced from Saudi Arabia, Russia, China, etc.

Essentially, Trump (along with the Kushner Companies) is beholden to Crown Prince Mohammed bin Salman; Vladimir Putin; various Chinese investors; along with ‘dark money’ sources in Cyprus, Panama and the Cayman Islands, among others.

2. The “Tax Cuts and Jobs Act” (TCJA) was passed in late 2017 incorporating some modest temporary individual and small business tax cuts while focusing in on very substantial big business and corporate tax cuts.

Traditional economic models, developed and refined over countless economic cycles, encourage tax cuts and deficit spending during economic downturns as a means to stimulate economic growth.  During times of economic expansion, increased government revenue from tax collections is then used to pay down public debt and help stabilize the economy.

N.B.  There was a strong case to be made for a modest corporate tax cut as the U.S. economy began to improve post 2012; there was zero legitimate case to be made for the magnitude of the corporate tax cut which was a cornerstone of the 2017 TCJA.

The foundation of the TCJA was a promise that slashing corporate taxes from a maximum 35% rate to a 21% cap would result in dramatic increases in capital investment, resulting in job creation and wage growth.  Americans for Tax Reform, a vocal advocate for the plan, generated promises of employee bonuses, increased wages, increased retirement contributions and/or expanded business operations as a result of the TCJA.

Actual outcomes of the Tax Cuts?  Record stock buybacks; extraordinary executive compensation; flat employee compensation; and continued failure of venerable American corporations.

Definitive proof of the foolishness of cutting taxes in a time of economic expansion?  A rapidly expanding federal budget deficit.  According to the final monthly Treasury Statement for Fiscal Year 2018 (the year that ended on 9/30/2018), the deficit was $779 Billion — a $113 Billion (17%) increase over the$666 Billion deficit recorded from FY 2017.

Perhaps most egregious to the American people?  Mitch McConnell is blaming self-funded safety net programs [Social Security, Medicare and Medicaid] as the root cause of our rising federal deficit.  Visualize McConnell as he does a little smile; looks straight into the camera; and then blatantly lies to the American people.  Was he also lying when he took the Oath of Office?

3.  Incendiary, Irrational and Emotionally-Inspired Immigration Policy:

Right or wrong, the U.S. economy depends on immigrant workers – documented or undocumented. Industry sectors which rely on immigrants for between 1/4 and 1/2 of their employment needs include: agriculture; hospitality; construction; textile, apparel and leather manufacturing; food manufacturing; and private households.

Through a series of small moves that add up to dramatic change, the Trump administration has bypassed Congress to create new process and procedures which could have lasting effects on how the US welcomes and evaluates immigrants.

In his election campaign in June 2015, Trump told us, “When Mexico sends its people, they’re not sending their best. They’re sending people that have lots of problems, and they’re bringing those problems with us. They’re bringing drugs. They’re bringing crime. They’re rapists…”

By painting virtually all immigrants with a broad brush as criminals; as a national security threat to the U.S.; as bad people; as people who steal jobs from Americans;  he has created a hostile environment on the world stage, offering fear and fallacies with no attempt to find viable and sustainable solutions.

In late October 2018, facing a ‘caravan of migrants’ moving north from Central America toward the U.S. Southern border, Trump has proclaimed that there are ‘criminals and people of Middle Eastern descent among the migrants within the caravan’ and has pointed to it as evidence that the U.S. has weak immigration laws. He has also threatened to cut off aid to Central American countries in response to the caravan.

An internal report from the Department of Homeland Security’s Inspector General found that the Trump administration’s “zero tolerance” crackdown at the border in early 2018 was troubled from the outset by planning shortfalls, widespread communication failures and administrative indifference to the separation of small children from their parents.

It has been said that the Trump Child Separation Policy is related to the worst abuses of humanity in history.  Child separation is connected by the same evil that separated families during slavery, and which dislocated tribes and broke up Native American families.

What’s the point?

The point is that differences of opinion are a cornerstone of society, and a critical ingredient of humanity.

The very essence of Debate relies on formal discussion on a particular topic.

In an honest debate, opposing arguments are put forward to argue for opposite  viewpoints. Genuine and honest debate can occur in public meetings, academic institutions, and in legislative assemblies.

A genuine debate requires some ground rules, particularly in the areas of logical consistency and factual accuracy, yet it also allows some degree of emotional appeal to the audience.

Sadly, today’s discussions on topics of importance to the American People seem to lack any rules about civility, logic or even factual accuracy.

Turn on the television and we find absolutism, tribalism and a “win at any cost” approach to delicate yet important societal issues. Dialogue has effectively been replaced by diatribe.

Worse, people can select news sources which support and reinforce their biases, finding comfort in “being right” by selective listening or watching. No time or need to consider other options when the platform has been fully developed to mirror your comfort zone.

Add to this dilemma the continuing disenfranchisement of American adults from the political process.

More adult males in America today are able to recite NFL statistics than are able explain issues facing American society, and women are not far behind.

Voter turnout in the United States fluctuates in national elections. In recent elections, about 60% of the voting eligible population votes during presidential election years, and about 40% votes during midterm elections. Turnout is lower for odd year, primary and local elections.

If we compare national voter participation in the 2016 presidential election to viewership of the 2016 Superbowl, we find a dead heat at around 112 Million.

Not necessarily the same people, but it does strike me that we have a real disconnect between the American public and our governance model, perhaps helping to explain why our system seems to be in need of some serious adjustments at this point in time.

The headline comes directly from Steven Mnuchin, our U.S. Treasury Secretary, who recently penned an op-ed piece which appeared in print in the Tampa Bay Times (July 3, 2018).  https://www.whitehouse.gov/articles/trump-tax-cuts-strengthened-u-s-economy/

Mnuchin’s opinion piece seems to consist primarily of fluffed-up puffery related to the Tax Cuts and Jobs Act (TCJA) of 2017.

Mr. Mnuchin omitted several critical issues which most economists agree must be included in any analysis of the U.S. economy.

First is the ‘business (economic) cycle’.  The National Bureau of Economic Research (NBER) has been tracking the U.S. economy for 160+ years.  NBER defines one business cycle as: A period of economic expansion; followed by a contraction (recession); ending at the next point of recovery.

NBER’s 160+ years of records reflect that (over that time) the U.S. economy experienced 66 business cycles. Since 1945, we have experienced 11 business cycles with an average length of expansions of 5 years, followed by an average length of recessions of 1 year.

We can’t forget that the U.S. economy almost collapsed in early 2008 following a period of ebullience and expansion apparently accompanied by loose regulatory oversight of the financial sector.

Quick intervention in 2008 by our federal government saved the U.S. economy from the deepest and longest downturn since the Great Depression.  NBER data reflects the point of recovery (beginning of expansion) of the U.S. economy occurred in June 2009, and has now entered its 10th year (109th month) of growth.

Our current economic expansion is now the second-longest expansion on record, exceeded only by the expansion from March 1991 to March 2001, which lasted a full 10 years.

History tells us we are very close to the point of contraction (recession) of the U.S. economy.

Second is the ‘Skills Gap’.  When Mr. Mnuchin tells us that “…there are enough job openings in America for every unemployed person in the country” he fails to explain that the majority of open jobs require skills which the majority of unemployed people lack. In other cases, the unfilled jobs are located hundreds – maybe thousands – of miles away from the location of potential job seekers.

One solution to filling the open jobs is to encourage migration – or immigration — of skilled workers.

Another solution is to recruit, educate and train currently underemployed or unemployed U.S. residents who live in near proximity to the open jobs.

Third involves a dangerous combination of tax cuts and deficit spending to finance those tax cuts.

Mr. Mnuchin touts benefits to U.S. workers as a result of repatriation of hundreds of billions of dollars from off-shore corporate subsidiaries to the U.S.  In fact, companies thus far have paid out dividends and other withdrawals of $305.6 billion from foreign receipts which far outstripped the amount of this cash which was reinvested domestically.  By some estimates, corporations have spent 72 times as much on share buybacks as they have spent on one-time worker bonuses and raises.

The U.S. ‘current account deficit’, which measures the flow of goods, services and investments into and out of the country, widened by $8.0 billion to $124.1 billion, or 2.5 percent of national economic output in the first 3 months of 2018, virtually all of which seems to be attributable to the repatriation tax holiday.

To make up for the loss of tax revenue, the Trump administration is relying on a combination of debt financing and mystical economic growth which they expect to occur at the end of an extended business cycle.

Mnuchin tells us that U.S. economic growth is on steroids.

Some observers have noted that the appearance of economic growth is highly influenced by the infusion of repatriated cash – somewhat similar to feeding 2nd graders sugar before sending them out onto the playground.

The energy is intense, but it won’t last very long, and it is just not sustainable.

A recent report (6/21/2108) from the U.S. Office of Government Accountability (GAO) warns that responsible action is needed on the nation’s growing federal deficit, which grew to $666 Billion in FY 2017 (10/01/16 to 9/30/17) and is projected to surpass $1 Trillion by 2020.

According to the GAO’s 2017 financial report, the federal deficit in FY 2017 increased by 13.5% from $587 Billion in FY 2016 and $439 Billion in FY 2015. Federal receipts in FY 2017 increased by $48 billion, but that was outweighed by a $127 billion increase in spending.  (Note that Deficit is an annual measure; National Debt is aggregate, an accumulation of annual shortfalls.)

The aggregate (gross) amount that the U.S. Treasury can borrow is limited by the U.S. debt ceiling. As of April 30, 2018, our National Debt was $21 Trillion, about 78% of GDP.

Since its passage in December 2017, the non-partisan Congressional Budget Office has warned that TCJA will add $1.84 Trillion to the federal deficit over the next 10 years, which they estimate will push the National Debt to an unprecedented 152 percent of GDP by 2028, significantly increasing the odds of a new financial crisis.

Interest rates are rising, and National Debt is increasing, thus interest on National Debt will consume an ever-increasing amount of future federal budgets.

And, of great concern is the flattening of the ‘yield curve’.  Traditionally, interest rates on short-term debt are lower than rates paid on long-term obligations.

The spread between the yields of the 2-year Treasury note (2.55 percent) and 10-year Treasury note (2.89 percent) was 34 basis points on June 23. That’s less than half of what it was in early February and the narrowest it’s been since August 2007.

An inversion of the yield curve — when long-term rates fall below short-term rates — traditionally predicts a looming recession.

—————————————————————————-

It’s not clear why Mr. Mnuchin – a seasoned financial services sector professional with a clear expertise in fixed income securities – would omit such important information in his assessment of the U.S. economy.

I am drawn to conclude Mr. Mnuchin is using his position as a high-ranking federal official to ‘butter his own toast’, likely through complex – and undisclosed — derivative positions.

We’ll have to see if the Walrus is correct…..

Another branch of our armed forces?

I just can’t imagine an Industrial Engineer who would look at the current structure of the Pentagon and the U.S. military and not conclude that we have an extraordinarily inefficient approach to defense.

Air, land and sea.  Sounds good, right?

Except that we have 5 branches which overlap, compete with each other directly and indirectly, and don’t always communicate well.

Now, the Master Obfuscator and Distracter-in-Chief wants to start a 6th branch!

I can only conclude that The Donald is running wild trying to divert attention away from some of his self-created demons: Immigration; His war on Canada; His new love affair with Kim Jong Un; A ‘tax reform’ plan which will leave America bankrupt; The deterioration and ultimate disintegration of the American health care system; The ‘Russia thing’; Cyber security intrusions and risks across the entire U.S. public and private sector; Rapidly deteriorating physical infrastructure across the U.S.; Escalating gun violence, the NRA and 21st century gun control; Mueller and his ‘Russian Witch Hunt Hoax’; Stormy Daniels; and Dozens of other critical issues which need to be addressed in an honest, responsible and strategic fashion.

Donald J. Trump has the attention span of a gnat, the moral turpitude of a ‘made man’ and the integrity of a Carnival Barker.  Despite that, he is our POTUS, and he continues to dash along his path toward fooling many of the people most of the time.

April, 11, 2018:  Paul Ryan announced his plan to retire from Congress in January 2019, at the end of his current term, and further stated that he will not run for re-election.

Ryan said that he is proud of the accomplishments which occurred during his 20 years of service in Congress, although he regrets that ‘they were unable to achieve Entitlement Reform’ during his tenure in office.  Despite his vocal regrets, he is planning to leave Washington in January 2019 with some of the most generous and egregious entitlements remaining in the U.S.

It has been said that Ryan’s remaining goal (‘Entitlement Reform’) is razor focused on cutting federal spending on Medicare, Medicaid and welfare programs as a way to temper extraordinary increases in the federal deficit.

These increases in the deficit were willfully enacted as a component of the 2017 Tax Cuts and Jobs Act as a result of rare, curious, wild and crazy tax cuts combined with wild and crazy spending increases, at a point in our economic cycle which begs for caution and restraint.

Paul Ryan said that he is extremely pleased to have played a significant role in the passage of the Tax Cuts and Jobs Act which he considers to be a highlight of his service in Washington.

Background on Jobs:

Since 2010, the U.S. economy has supported the creation of almost 17.5 Million jobs, leading to a November 2017 unemployment rate of 4.1%, a 17-year low. (Perspective: Unemployment reached 15% toward the end of 2009; many economists agree that “full-employment” occurs when the unemployment rate is at 5% or lower.)

Hundreds of U.S companies have been looking to hire workers for skilled positions to help them meet growing demand for their products and services. These jobs are often called “family wage jobs” because they provide compensation and benefits sufficient to support a family in the local economy.

The number of job openings in the U.S. (October 2017) remained at the 6 Million level, marginally lower than at the end of 2016. (Perspective: When the Great Recession was at its worst in 2009, job openings fell to 2.2 million, an all-time low.)

Average hourly earnings had risen just 2.5% over the 12 month period ending in October 2017, helping to support the theory that a significant skills gap continues to impede hiring for family wage jobs which typically require advanced reading, math and computer skills.

In addition to the dilemma of finding skilled workers in shrinking regional labor market pools (“skills gap”), hiring managers and economic development experts also report obstacles cited by job seekers such as: transportation (including long commutes); day care/child care; and noncompetitive wage rates.

Despite these documented facts, Paul Ryan, many members of Congress and President Trump actively and enthusiastically supported “The Tax Cuts and Jobs Act” of 2017, telling us – among other things, “Our legislation is focused entirely on growing our economy, bringing jobs back to our local communities, increasing paychecks for our workers…”

At a point in time when we had apparently reached full employment; when some 6 Million higher-skilled, family wage jobs were unfilled, at least 2 questions remained unanswered:

– Other than engaging in war, or the innovative programs launched in the 1930’s (CCC, WPA, etc.), has the federal government ever succeeded in an effort to create sustainable private sector employment?

– If new family wage jobs are created, who would be available to fill them?

Background on the tax side:

When George W. Bush (POTUS 43) took office in January 2001, he inherited a federal budget from his predecessor.

Fiscal Year Ending (FYE) 9/30/2001 resulted in revenues of $2.39 Trillion and expenditures of $2.23 Trillion, resulting in a budget surplus of $0.15 Trillion. FYE 2001 federal debt held by the public was $3.34 Trillion, representing 31.7% of GDP.

Fast forward to his final full year in office (FYE 9/30/08), Bush watched over a federal budget which included revenues of $2.52 Trillion and expenditures of $2.98 Trillion.

That left a FYE deficit of $458.6 Billion, which (combined with prior deficit spending) resulted in total federal debt of $9.99 Trillion at FYE (9/30/08), representing 67.7% of GDP.

The federal budget for FY 2009 was developed by then-president Bush, submitted to Congress, and inherited by Obama (POTUS 44). The actual federal revenues for FY 2009 were $2.10 Trillion; expenditures were $3.52 Trillion. That left a 2009 FYE deficit of $1.41 Trillion, which (combined with prior deficit spending) resulted in total federal debt of $11.88 Trillion at FYE (9/30/09), representing 82.4% of GDP.

Most reasonable people will agree that a newly elected President who inherits a spending plan from his predecessor should not be given credit for its success or failure.

POTUS 44 (Obama) presided over 7 years of steady economic growth in the U.S., and under his watch, the close of FY 2017 budget reflects an increase of total federal debt to $14.67 Trillion, which was a numerical increase, but which represented a relative decrease to 76.3% of GDP.

Not great, but a clear improvement over what Obama inherited from Bush.

Some economists have suggested a 60% ceiling for publicly held debt vs. GDP which seems to make sense.

Although policies enacted during the Obama administration did reduce the ratio for 82% to 76%, we have a long way to go.

The correct way to address this situation is through tax policy reform designed to create balanced federal budgets, focused on reducing federal deficits.

That is not what our Congress has approved, and what President Trump signed into law just prior to Christmas 2017.

Most recent analysis by the Congressional Budget Office (4/10/2018) estimates that the combined effect of the 2017 tax cuts and the March 2018 budget-busting spending bill is sending the annual federal deficit toward the $1 Trillion mark in 2019.

The CBO report says our nation’s current $21 Trillion debt would spike to more than $33 Trillion in 10 years, with debt held by investors spiking to levels that would come close to equaling the size of the economy, reaching levels that many economists fear could spark a debt crisis.

CBO says economic growth from the tax cuts will add 0.7 percent on average to the nation’s economic output over the coming decade. Those effects will only partially offset the deficit cost of the tax cuts.

The administration had promised the cuts would pay for themselves.

Best I can see, only Robert Reich has focused on the Real Facts, and who would listen to a guy like Reich, who has degrees from Yale, Oxford, Dartmouth — clearly a left-wing Liberal Snowflake….

As interim Pres. Trump tweeted today, “We are with you, Paul!”

Americans for Tax Reform

November 5, 2011

I am an American, and I am fully in favor of Tax Reform.

In my view, Tax Reform means removing all of the crazy loopholes that allow certain special interests to avoid paying taxes, or to shelter income under some special rule that allows their income to be taxed at some artificially low rate.

Tax Reform also means capturing federal and state income taxes from the “Shadow Economy.”

Of course, a portion of our shadow economy involves illegal activities such as burglary, robbery and drug dealing, but the lion’s share of our shadow economy is comprised of regular people who don’t seem to want to be obvious criminals.

As our official economy has continued to deteriorate and unemployment hovers in the 9% range, some creative people have found opportunities in the shadow economy.

It is no surprise that in hard economic times, creative people turn to resourceful solutions in order to get by, and Americans are noted for their ingenuity. With high unemployment, informal entrepreneurs — particularly those who don’t pay taxes – have come out of the woodwork.

Unshackled by excessive regulations, license fees, and (yes) various taxes, people work in the shadow, trying to keep their family from becoming a statistic.

Could be a day laborer waiting on a street corner for a construction gig; a single mother running a day care center out of her apartment; an unlicensed street food vendor; a plumber who offers a discount to clients who pay cash; or an auto repair shop that prefers cash over checks or credit cards, and offers an incentive to customers who are willing to pay cash.

Various sources have estimated that the shadow economy makes up a larger portion of the economies of countries like Greece (25 percent) or Mozambique (more than 40 percent) than it does in the U.S. where consensus pegs the shadow economy somewhere between 8 to 10 percent of total GDP — in 2010, an amount equal to around $1.4 trillion That translates to lost federal tax revenue of $280 Billion, assuming a 20% federal tax rate.

Added to this opportunity to increase tax revenues at the individual level, the awful state of our corporate income tax code further exacerbates the problem.

A recently released look at the inefficiency of our corporate tax policy and rules by the nonpartisan research group Citizens for Tax Justice gives us a picture of some simple changes that could be enacted to help create tax equity and to generate significant new revenue at the Federal level. The full report is available at

http://www.ctj.org/corporatetaxdodgers/CorporateTaxDodgersReport.pdf

Here is a brief excerpt:

“The corporate Alternative Minimum Tax (AMT) was established in 1986 to ensure that profitable corporations pay some substantial amount in income taxes no matter how many tax breaks they enjoy under the regular corporate tax. The corporate AMT (unlike the much-maligned personal AMT) was particularly designed to curb leasing tax shelters that had allowed corporations such as General Electric to avoid most or all of their regular tax liabilities.

But laws enacted in 1993 and 1997 at the behest of corporate lobbyists sharply weakened the corporate AMT, and now hardly any companies pay the tax. In fact, many are getting rebates for past AMT payments. In late 2001, U.S. House of Representatives leaders attempted to repeal the corporate AMT entirely and give companies instant refunds for any AMT they had paid since 1986. Public outcry stopped that outrageous plan, at least so far, but the AMT remains a shell of its former self that will require substantial reform if it is to once again achieve its goal of curbing corporate tax avoidance.”

So, while the organization known as “Citizens for Tax Reform” makes plenty of noise and strongly encourages candidates for public office to sign a Taxpayer Protection Pledge, the real deal here is that they are perpetuating the loopholes which corporations and wealthy individuals are able to use to avoid the tax bracket they ought to be in.

We don’t need to increase tax rates at all. What we need is real Tax Reform that will eliminate these tax avoidance scams once and forever.

Property Tax Caps?

June 27, 2011

Property tax caps! Starve the beast!

The current skirmish in New York is the latest round in the battle between revenue and expense.

Local governments – sometimes trying to hide behind the shield of “unfunded mandates” – raise local property taxes to balance the local budget.

Taxpayers – perhaps feeling victimized — become enraged, and start a local TEA Party chapter.

Things can quickly get mean, ugly and out of control…

Could there be a better way?

In Indiana, property tax caps imposed as an outcome from 2007 property tax spikes, ended up with layoffs of police officers and firefighters, and significant increases in business fees, all because the caps reduced local tax revenues.

Commercial taxpayers in Illinois were angry with the caps because legislators allowed property-tax rates for businesses to be three times the rate for homes.

Property tax caps tend to be very popular with voters who are homeowners.

If we could couple property tax caps with government spending reform, we might have a real solution!

In New York State, let’s start by consolidating our 700+ school districts into 70.

Let’s get rid of the practice of packing 200% overtime for police and firefighters into the final 2 years to generate six-figure pensions. Let’s eliminate defined benefit pension plans. Let’s eliminate free lifetime health benefits.

There are likely dozens of other ideas that could do more good than trying to cap property taxes at 2%, but they will all enrage union representatives.

That goes right back to the premise that progress is only possible if we work together in an honest and non-confrontational way.

We need to find people who can focus on the needs of their future grandchildren.

That really helps to separate the wheat from the chaff….