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December 22, 2023 Heather Cox Richardson

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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.

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.whitehouse.gov/briefing-room/statements-releases/2023/12/22/statement-from-president-joe-biden-on-the-november-pce-report/

https://www.bea.gov/data/gdp/gross-domestic-product

https://www.wsj.com/articles/what-happened-to-the-economy-under-trump-before-covid-and-after-11602713077

https://www.cbpp.org/research/federal-tax/after-decades-of-costly-regressive-and-ineffective-tax-cuts-a-new-course-is

https://www.americanprogress.org/article/tax-cuts-are-primarily-responsible-for-the-increasing-debt-ratio/

https://www.cnbc.com/video/2023/09/26/rep-david-schweikert-the-number-one-driver-of-the-deficit-is-demographics.html

https://www.jec.senate.gov/public/index.cfm/hearings-calendar?id=B06EA009-ECD1-4504-81A2-D69F43F97479

https://www.oecd.org/about/document/oecd-convention.htm

https://www.washingtonpost.com/business/2023/09/11/trump-tax-cuts-2024/

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WATCH: ‘This Is My First Rodeo’ | Ben Meets America Ben Kawaller

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In the latest stop on his cross-country quest to understand America, Ben Kawaller watches men hurl cows to the ground.

Last month I attended The American Rodeo in Arlington, Texas, a city of around 400,000 souls situated between Dallas and Fort Worth. This was my first rodeo, and it did not take me long after entering its host venue, the gargantuan Globe Life Field, to realize that I did not know what a rodeo was. If you’d asked me six weeks ago to define the term, I would have said something like, “It’s when you watch someone career around an enclosed pen on an animal.” 

Which is actually not too far off. But what I hadn’t realized is that a rodeo is actually a sporting event. 

You see, some people are especially good at bending these animals to their will, and if you are one of those people, you can win competitions for things like making the animals run very fast, or tying the animals up very quickly, or not dying while trying to sit on one of the animals.

Of course, I wasn’t really there for the games; I was there to talk to the crowd about what makes our society so divided. If you’re tuning in for the first time to my new series—“Ben Meets America”—I was born and raised in progressive Brooklyn, I now live in West Hollywood, and I will admit to being soft in some fundamental way. Suffice it to say I get a more transcendent high from watching a torch song than I do from watching a man hurl a small cow to the ground.

But, in fact, theater and rodeo have their similarities. If you’ve been to a play in recent years, you will have suffered the degradation of a “land acknowledgement.” This is when the audience is told before the show—either in an announcement or in the program notes—that they’ve gathered on land stolen from whatever Native American tribe existed there years ago. My sense is that some of this is rooted in the idea that America itself is fundamentally illegitimate. Whatever’s behind it, the inclusion of a land acknowledgement has become de rigueur.

I did not think conservatives did land acknowledgements, so I was surprised when the Native American actor Mo Brings Plenty appeared before the start of one of the competitions and performed a minute or two of indigenous wailing. I believe the intent of this was to, well, acknowledge the fact that Native American bloodshed was central to the expansion of the American West. What I did not expect was the incongruence of what came after. Watch the video and you’ll see what I mean. I’m still puzzling over its significance.

In the end, however, I decided I prefer the conservative version of a land acknowledgement. Unlike the inane liberal sacrament, it appears to be capable of expressing two truths at once: that oceans of indigenous blood were spilled in the creation of this country, and that we live in one of the greatest nations on earth.

Even if one of our favorite spectator sports is man versus cow.

Only paid subscribers can see Ben’s video on The American Rodeo. Become one today and scroll down to watch.

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April 14, 2024 Garamond

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Senate spotlight: A Trump Republican’s China problem Judd Legum

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November’s election will not only determine which party controls the White House but also the United States Senate. Currently, the Democratic caucus holds a narrow 51-49 advantage. Control of the chamber will come down to a handful of competitive races. This is the first installment in a series that takes a deep dive into the issues shaping these campaigns. 

In Ohio, businessman Bernie Moreno (R) is attempting to unseat Senator Sherrod Brown (D). Ohio, once a swing state, has been trending Republican. Moreno’s campaign strategy is to attach himself at the hip to Donald Trump. He refers to himself as the “Trump endorsed Republican nominee for US Senate from Ohio.” This helped him easily win the Republican primary against a field of more politically experienced opponents.  

In a potential second term, Trump is vowing to declare economic war on China, promising to “tax China to build America up.” Trump’s plan is to revoke China’s most favored nation trading status and impose a tariff on Chinese goods of up to 60%. (The policy would cost the typical American household thousands of dollars annually and increase inflation.) Imports of “essential goods” from China, including electronics, steel, and pharmaceuticals, would be completely banned

Moreno has taken a similar approach, saying he is running for Senate to “Beat Communist China.” To bolster his anti-China credentials, Moreno claims to have a history of combating Chinese power. These stories, however, don’t stand up to scrutiny.

Moreno made his fortune through buying and selling car dealerships. As his wealth increased, so did his interest in Republican politics. In 2011, former Ohio Governor John Kasich (R) appointed him to the board of trustees at Cleveland State, one of Ohio’s public universities. Moreno served as chairman of the Cleveland State board from 2016 to 2018.

Confucius Institutes, which offer “Chinese language and culture programs,” were established at numerous U.S. universities beginning in 2005. They were partially funded by the Chinese government. Over time, there were bipartisan concerns that Confucius Institutes were being used to promote Chinese government propaganda or even to facilitate espionage. On the campaign trail, Moreno has repeatedly claimed that, in his role as chair of Cleveland State’s Board of Trustees, he eliminated the university’s Confucius Institute.

Here is how Moreno described his role in a March 2023 campaign event:

I chaired the board of trustees at Cleveland State University, and I’m very proud of the fact that when I was there, we got rid of our Confucius Institute. We made certain that we focused everybody on student achievement, and we respected free speech on campus.

He made a nearly identical claim in October 2023. But it is a lie.

Moreno’s service on the board ended in May 2018. Cleveland State did not shut down its Confucius Institute until 2021. The truth is, while Moreno was on the board, he repeatedly approved funding for Cleveland State’s Confucius Institute. In 2016, when Moreno was still vice chairman, he voted to approve $38,000 in funding for the school’s Confucius Institute. The following year, as chairman, Moreno voted to re-up the funding. Minutes from these meetings show that Moreno did not express any concerns about the Confucius Institute

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Moreno told the Columbus Dispatch that he deserves credit for the elimination of the Confucius Institute at Cleveland State because of “his role in the hiring of Harlan Sands, who was Cleveland State’s president when the institute closed.” There are a couple of issues with this response. First, this is not what Moreno said previously. He clearly said that the board “got rid” of the Confucius Institute while he was chair. Second, Cleveland State did not eliminate the Confucius Institute because of the initiative of President Sands. Cleveland State, along with nearly all other universities, closed its Confucius Institute after Congress passed legislation in 2018 and 2020 limiting federal funding for universities that maintained the Confucius Institutes. From 2019 to 2023, the number of Confucius Institutes operating in the United States went from about 100 to fewer than 5.

The truth about Moreno and Chinese-made SUVs

“When I was a General Motors dealer, I sold Buicks. The Buick Envision was made in China. I told General Motors I wouldn’t sell one of them, don’t even ship it to me,” Moreno said during a February 10, 2024 radio interview. “They threatened me and sent me all kinds of nasty notes… we have to actually take this stand…”

That story, which Moreno also told during his brief run for Senate in 2021, is a lie. 

In reality, Moreno sold the Buick Envision at his dealership for at least five years — from 2014 to 2019 — and promoted the vehicle repeatedly on its social media channels, an investigation by NY1 revealed

A December 13, 2016 video published on the “Bernie Moreno Companies” YouTube page begins with this testimonial: “My name is Kayla McCullough. I purchased a 2017 Buick Envision from Buick GMC of Beachwood… I highly recommend you visit the team at Buick GMC of Beachwood, a Bernie Moreno company.”

Moreno’s campaign “acknowledged to Spectrum News that his dealership did sell the Chinese-made SUVs.” It claimed that “in response to the closure of the Lordstown Plant here in Ohio [in March 2019],  Bernie made a decision to stop any new inventory of Envision’s from being sold at his dealership. After he sold off the inventory he already had on the lot, he refused to take orders for more Envisions.” This explanation, however, makes little sense as the Envision was also produced in China and never at Ohio’s Lordstown Plant. Moreno’s dealerships also continued to advertise for the Envision months after the closure of the plant. 

 

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