Substacks
December 22, 2023 Heather Cox Richardson
Data from the Bureau of Economic Analysis released today showed inflation continuing to come down. In November the Personal Consumption Expenditures (PCE) price index was 2.6% over the previous November, down from 2.9% in October. The Federal Reserve aims for 2%. Falling gas prices meant that overall, prices actually dropped in November for the first time since April 2020.
In a statement, President Joe Biden reminded Americans that “[a] year ago, most forecasters predicted it would require a spike in joblessness and a slowdown to get inflation down. I never believed that. I never gave up on the hard work, grit, and resilience of millions of Americans.” In addition to the falling inflation rate, he noted that “the unemployment rate has stayed below 4 percent for 22 months in a row, and wages, wealth, and the share of working-age Americans with jobs are higher now than they were before the pandemic began.”
“But,” he said, “our work is far from finished.” To continue to lower prices for hardworking families, he said, he is focused “on lowering costs—from bringing down the price of insulin, prescription drugs, and energy, to addressing hidden junk fees companies use to rip you off, to calling on large corporations to pass savings on to consumers as their costs moderate.”
The administration is highlighting economic numbers not just because they are good—and they are: real gross domestic product (GDP) grew by an astonishing annual rate of 4.9% in the third quarter of 2023; under Trump it was 2.5% before the pandemic knocked the bottom out of everything—but also because they illustrate the administration’s return to an economic theory under which the U.S. government operated from 1933 to 1981.
In those years the federal government focused on supporting people on the “demand side” of the economy in the belief that what drives economic growth is demand for goods and services. This theory means that the government should work to make sure workers and those at the bottom of the economy have money to afford the goods and services they need. This theory suggests that education and good wages and a basic social safety net are good for the economy because they enable people to have enough disposable income that they can buy things.
After President Ronald Reagan took office in 1981, though, a different economic theory took hold. People in power believed that what drives growth is not the demand side, but rather the “supply side” of the economy: the people who create goods and services. This theory means that the government should work to make sure that producers can concentrate wealth and use it however they wish, because they will invest in the economy, producing more goods more cheaply and thus creating more jobs at better wages. This theory calls for little business regulation or taxation, both of which hurt the accumulation of wealth, and trusts market forces, rather than government policies, to keep the economy fair.
Neither of these theories is new in the United States, although in every incarnation they have had different elements and emphases. But today the struggle between those who believe in one side or the other is central to politics.
While Biden and the Democrats are working hard to support the demand side of the economy, Republicans are firmly in the camp of the supply side. On this date in 2017, then-president Trump signed into law the Tax Cuts and Jobs Act, sometimes referred to as the Trump tax cuts. Passed with Republican votes alone, the law cut tax rates for individuals until 2025 but made cuts in the corporate tax rate from 35% to 21% permanent.
Together with the tax cuts enacted in 2001 and 2003 under President George W. Bush and made permanent by lawmakers of both parties in 2013, the Trump tax cuts went primarily to households in the top 1% and to large corporations. In testimony in May 2023 before the Senate Committee on the Budget, tax analyst Samantha Jacoby of the Center on Budget and Policy Priorities noted that these tax cuts “ballooned deficits” while there is little evidence that they promoted growth.
Bobby Kogan from the Center for American Progress, who previously worked in the Biden-Harris White House, noted in March 2023 that Reagan’s tax cuts, which amounted to about $10 trillion, started a bipartisan effort to reduce spending and increase revenues. Those efforts meant that President Bill Clinton left office with budget surpluses. At the time, the nonpartisan Congressional Budget Office projected that even with an aging population and increasing healthcare costs, revenues would keep up with the costs of domestic programs.
But the massive Bush tax cuts threw that projection off. By the end of fiscal year 2023, those cuts will have cost more than $8 trillion, and most of the savings went to the wealthy. Trump’s tax cuts continued both of those patterns: they will cost about $1.7 trillion by the end of fiscal year 2023 and they, too, benefited primarily the wealthy and corporations. At a cost of almost $10 trillion, these combined tax cuts are central to the budget deficit and growing national debt.
For all the complaints about American tax rates, the U.S. ranks 32nd out of 38 nations in revenue as a percentage of GDP in the Organization for Economic Cooperation and Development (OECD), a group of market-based democracies devoted to “achiev[ing] the highest sustainable economic growth and employment and a rising standard of living.” The U.S. is so much below the average ratio that if its ratio were simply average, it would bring in $26 trillion more over 10 years.
Yet Republicans back making all the Trump tax cuts permanent; Trump and his advisors have called for still deeper tax cuts, possibly cutting the corporate tax rate to 15%; and House Republicans want to cut funding for the Internal Revenue Service that enables it to audit wealthy tax cheats.
Meanwhile, Republican representative David Schweikert (R-AZ), vice chair of the Joint Economic Committee of Congress, who is deeply concerned about the budget deficits, believes that what is driving those deficits is that Americans are aging. Like many of his colleagues, including Republican presidential candidate Nikki Haley, he believes the answer to fixing the budget is cutting Social Security, Medicare, and other services.
Tax policy and economic news sometimes come across as piecemeal and dull, but they are, at the end of the day, the story of how we think societies prosper and what role governments and markets should play to nurture that prosperity.
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Notes:
https://www.bea.gov/news/2023/personal-income-and-outlays-november-2023
https://www.forbes.com/advisor/investing/pce-inflation/
https://www.nytimes.com/2023/12/22/business/inflation-federal-reserve-economy.html
https://www.bea.gov/data/gdp/gross-domestic-product
https://www.oecd.org/about/document/oecd-convention.htm
https://www.washingtonpost.com/business/2023/09/11/trump-tax-cuts-2024/
Yesterday, U.S. officials arrested Ismael Zambada García, or “El Mayo,” cofounder of the violent and powerful drug trafficking organization the Sinaloa Cartel, and Joaquín Guzmán López, a son of its other cofounder. That other cofounder, Joaquín Guzmán Loera, or “El Chapo,” is already incarcerated in the U.S., as are another of El Chapo’s sons, alleged cartel leader Ovidio Guzmán López, and the cartel’s alleged lead hitman, Néstor Isidro Pérez Salas, or “El Nini.”
In a statement, Attorney General Merrick Garland said: “Fentanyl is the deadliest drug threat our country has ever faced, and the Justice Department will not rest until every single cartel leader, member, and associate responsible for poisoning our communities is held accountable.” El Mayo has been charged with drug trafficking and money laundering.
U.S. officials exploited rifts in the cartel to get Guzmán López to bring El Mayo in. The successful and peaceful capture of the two Sinaloa Cartel leaders contrasts with Trump’s insistence that the U.S. must bomb or invade Mexico to damage the cartels, a position echoed by Republican vice presidential candidate J.D. Vance and increasingly popular in the Republican Party. Mexico, which is America’s biggest trade partner, staunchly opposes such an intervention. Opponents note that such military action would do nothing to decrease demand for illegal drugs in the U.S. and would increase the numbers of asylum-seekers at the border as their land became a battleground.
Trump seems to think that governance is about dominance, but that approach often runs afoul of the law. Today the Justice Department reached a $2 million settlement with former FBI counterintelligence agent Peter Strzok and former FBI lawyer Lisa Page, who became the butt of Trump’s attacks after their work on the FBI investigation into the ties between the 2016 Trump campaign and Russian operatives. Trump’s Department of Justice released text messages between the two journalists. Today’s settlement appears to reflect that the release likely violated the Privacy Act, which bars the government from disclosing personal information.
Tonight, speaking to Christians at the Turning Point Action Believers’ Summit in West Palm Beach, Florida, Trump made his plans to become a strongman clear: “Get out and vote. Just this time. You won’t have to do it anymore. Four more years, you know what: it’ll be fixed, it’ll be fine. You won’t have to vote anymore, my beautiful Christians…. Get out, you’ve got to get out and vote. In four years, you don’t have to vote again, we’ll have it fixed so good you’re not going to have to vote.”
This chilling statement comes after Trump praised autocratic Hungarian prime minister Viktor Orbán in his speech at the Republican National Convention last week and then publicly praised China’s president Xi Jinping for being “brilliant” because he “controls 1.4 billion people with an iron fist.” It should also be read against the backdrop of the Supreme Court’s decision in Donald J. Trump v. United States that a president cannot be prosecuted for crimes committed as part of his “official duties.”
The Harris campaign reacted to Trump’s dark statements by ridiculing them, and him: “Tonight, Donald Trump couldn’t pronounce words [he mispronounced “landslide” as “land slade], insulted the faith of Jewish and Catholic Americans, lied about the election (again), lied about other stuff, bragged about repealing Roe, proposed cutting billions in education funding, announced he would appoint more extremist judges, revealed he planned to fill a second Trump term with more criminals like himself, attacked lawful voting, went on and on and on, and generally sounded like someone you wouldn’t want to sit near at a restaurant—let alone be President of the United States.
“America can do better than the bitter, bizarre, and backward looking delusions of criminal Donald Trump. Vice President Kamala Harris offers a vision for America’s future focused on freedom, opportunity, and security.”
Harris continually refers to Trump as a criminal in her speeches, but her campaign has taken the approach of referring to him and J.D. Vance as weirdos. On Tuesday, Minnesota governor Tim Walz said, “These guys are just weird.” Senators Chris Murphy of Connecticut and Brian Schatz of Hawaii recorded a video together about Vance’s “super weird,” “bananas,” and “offensive” idea that people with children should be assigned additional votes for each child, making their wishes count more than people without children.
As J.D. Vance continues to step on rakes, the “weird” label seems correctly to label the MAGAs as outside the mainstream of American thought. Today, Vance doubled down on his denigration of women who have not given birth as “childless cat ladies” but assured voters he has nothing against cats. In addition, a video surfaced of Vance calling for the federal government to stop women in Republican-dominated states from crossing state lines to obtain abortions.
Mychael Schnell of The Hill reported today that while MAGA Republican lawmakers like Vance, a number of House Republicans are bashing his selection as the vice presidential candidate. “He was the worst choice of all the options,” one said. “It was so bad I didn’t even think it was possible.”
“The prevailing sentiment is if Trump loses, [it’s] because of this pick,” another said, a sentiment that suggests Vance will be a scapegoat if Trump loses. Considering what happened to Trump’s last vice president after Trump blamed him for an election loss, Vance might have reason to be concerned.
Last night’s “Answer the Call” Zoom has now raised more than $8.5 million for Harris; the organizers thanked Win With Black Women “for showing us how it’s done.” Today the Future Forward PAC, which had threatened to hold back $90 million in spending if Biden stayed at the head of the ticket, began large advertising purchases in swing states for Harris.
Carl Quintanilla of CNBC reported that a week ago, those on a phone call of more than 400 people from Bank of America’s Federal Government Relations Team believed that a Trump victory was a “foregone conclusion.” Now that conviction is gone. “[T]here’s been a palpable sentiment reversal.”
The Harris campaign announced that it will launch 2,600 more volunteers into its ground game in Florida, a state where abortion rights will be on the ballot this fall, likely turning out voters for the Democratic ticket. The volunteers will write postcards, make phone calls, and knock on doors.
Today, Vice President Kamala Harris filled out the paperwork officially declaring her candidacy for president of the United States.
Notes:
https://www.cnn.com/2024/07/25/us/sinaloa-cartel-ismael-zambada-custody-report/index.html
https://www.texasstandard.org/stories/mexico-surpasses-china-us-biggest-trading-partner-exports/
https://www.politico.com/news/2023/04/10/gop-bomb-mexico-fentanyl-00091132
https://www.politico.com/news/2024/07/26/peter-strzok-lawsuit-settlement-00171498
https://www.vox.com/culture/363230/jd-vance-couch-sex-hillbilly-elegy-rumor-false
https://thehill.com/homenews/4793818-vance-vp-trump-house-republicans/
https://ballotpedia.org/Florida_Amendment_4,_Right_to_Abortion_Initiative_(2024)
X:
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Oh, no, it’s the sister again, for another slow news week. Let’s get to it.
→ Biden dropped out: Six years ago emotionally, but technically this past Sunday, Joe Biden dropped out of the presidential race. He did it via X and promptly threw his support (and cash) behind Vice President Kamala Harris. Then he got Covid and hunkered down in Delaware—or depending on what hooch you’ve been drinking, died and was reanimated so he could appear before the cameras on Wednesday to address the nation. Joe’s family, including Hunter, sat along the wall of the Oval Office as he spoke. The president talked about the cancer moonshot, ending the war in Gaza, putting the party over himself, and Kamala’s tenacity, as Kamala’s pistol dug ever-so-slightly harder into his back. Right after, Jill, the First Lady of passive aggression, who apparently wanted to outdo her heart emoji, tweeted a handwritten note “to those who never wavered, to those who refused to doubt, to those who always believed.” I respect a First Lady who stands by her man and her energetic stepson. A First Lady who sees the high road way up there and says to herself, “If they want us out of here so bad, they can clean out the fridge and strip the beds themselves!”
→ Kamala is brat, Biden is boots, please God send the asteroid today: I’ve learned the hard way—and by that I mean my parents once asked me what “WAP” meant—that certain things should never be explained with words. It’s not that it’s impossible, it’s just that it embarrasses everyone.
That’s how I feel about the whole Kamala-is-brat thing. Brat is a good album about partying and getting older and having anxiety that was released earlier this summer by Charli XCX. But it’s since been adopted by too-online and very young people as a personality, and by Kamala Harris’s campaign as a mode to relate to those very young people. Her campaign is leaning into the whole green look of the album to try and win over Gen Z, and generally recasting her many viral moments—“You think you just fell out of a coconut tree?” “I love Venn diagrams” “What can be, unburdened but what has been”—as calling cards. It’s like when Hillary went on Broad City, only this time more cringe.
And now we have Jake Tapper and Greg Gutfeld grappling with the “essence” and the “aesthetic” and overall vibe of brat girl summer. We used to be a serious country. We used to make things.
Here’s the thing about Kamla: she is hilarious and campy, but unintentionally so. Any goodwill that her goofy dances or weird turns of phrase garner should be considered bonus points, not game play. Was there ever any doubt that Fire Island would go blue? We’ve been debating whether Kamala’s meme campaign is a good move for her prospects in the Free Press Slack, and here I’ll borrow from my older and wiser colleague Peter Savodnik: “There is nothing more pathetic than an older person who cares what a younger person thinks is cool.”
→ Boomer behavior: While Kamala’s campaign is being run by a 24-year-old twink with an Adderall prescription, J.D. Vance’s speechwriter seems to be a drunk Boomer who just got kicked out of a 7-11. Vance, appearing this week at a rally in Middletown, Ohio, riffed, “Democrats say that it is racist to believe. . . well, they say it’s racist to do anything. I had a Diet Mountain Dew yesterday and one today, and I’m sure they’re going to call that racist too.” Crickets. Horror. Major “Thanks, Obama” energy. There was also a bit on fried bologna sandwiches and a lot of “lemme tell you another story.” The guy is 39 but sounds older than Biden.
Fresher, 35-to-60-year-old blood is exactly what we’ve been begging for. Let the Boomers boom, let the Zoomers zoom. Kamala and J.D.: act your age.
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