Home » U.S. Economy

Category Archives: U.S. Economy

Can Trump Fix America’s Three Colossal Failures?

Some commentators say liberal ideas of “fairness and equality” in America aren’t accurate nor realistic — considering that a liberal’s idea of fairness means equal results for varying levels of input. For instance, workers and layabouts should receive equal pay.

At the same time, a conservative’s idea of “fairness” means a series of opportunities that are available to all Americans — therefore individuals have the opportunity to reach their dreams, but without the U.S. government guaranteeing the outcome. Conservatives say; ‘Hopefully, these will “equal out” in the long run’.

It should be noted at this point that people have been saying, “Hopefully, these will equal out in the long run” for decades, if not centuries.

But in every generation since Ancient Greece, we have seen that things never “equal out”.

There is simply no evidence, anywhere, that luck will make things… “equal out”.

My rebuttal to the conservative viewpoint is that there are three main points to consider regarding inequality in American society:

1) Over 94 percent of presently wealthy people, are children of wealthy parents. Which means that only 6% of people who become wealthy in America, rose from poverty, or middle-class status, to become wealthy. That’s a pretty telling statistic right there.

It means that our system is broken and that there is practically no chance of a person becoming wealthy — no matter how hard a person works.

Certainly, more than 6 percent of Americans have worked hard in their lives!

As I said, I don’t believe in luck causing things to “equal out”. Because it doesn’t work.

2) Right now in the United States, there are about 93 million unemployed people. It was many more people than that at the peak of the financial crisis.

In that group are short-term unemployed’s (people who are still eligible for unemployment insurance payments) and long-term unemployed’s (that no longer qualify for unemployment insurance payments) and people who couldn’t find a job and consequently (and only because they couldn’t find a job) returned to college or became a homemaker, or (with no other option left to them) and decided to retire early.

Also in that group are people subsisting on welfare schemes or are disabled but willing to work at a job that they are actually capable of doing.

The official U.S. unemployment rate for January 2017 was set at 4.8 percent — but that stat only relates to those people who are drawing unemployment insurance benefits and who are actively looking for work — not long-term unemployed’s who would work if there were jobs available.

(NOTE: An unemployment rate of 5 percent is considered ‘full employment’ by most economists. However since the year 2000, there are very large numbers of long-term unemployed’s who don’t show up on official statistics)

3) There are simply many more people looking for work than there are jobs available since 37 percent of all U.S. manufacturing jobs picked up and left for Asia since 1979.

Yes, more than 1/3rd of all U.S. manufacturing jobs left the country since 1979, and they won’t ever return due to the additional profits that U.S. corporations can make overseas.

A Must Read: Why doesn’t 4.9% unemployment feel great?

Some of the corporations that outsourced more than 1/3rd of American manufacturing jobs are the same corporations that received billions (sometimes, multi-billions!) in corporate welfare, which has totaled over $1 trillion since the Carter administration.

Yet, it’s often the unemployed workers who get the blame for being unemployed — by society, their family and friends, and by potential employers who ask them ‘Why?’

And they get the blame for the billions in corporate welfare paid by the government, and for the state of their former industry (Maybe if you had worked harder, all those millions of jobs wouldn’t have gone to Asia!’) and worse comments than that.

It’s the job of the government to stimulate the economy when appropriate (but not to add billions of dollars to profits to otherwise successful companies that can’t seem to keep their books straight) and to set the regulatory environment that is necessary for industry to thrive.

It’s the government’s fault that there are 23 million more people looking for work, than there are jobs available.

That is a permanent stat, it never goes away — although during the financial crisis of 2008-2012 it was higher.

However, when faulty or inept government regulations allow more than 1/3rd of all U.S. manufacturing to go overseas, it’s not the unemployed’s fault.

When $1 trillion is spent on corporate welfare instead of on the welfare of citizens, the government has the wrong priorities.

And when government stimulus goes directly into creating a whole new economic class of people on the planet (the 1 percent who own well over half of the wealth in America, and who do very little to increase aggregate demand) we know successive governments have dropped the ball on it’s citizens, the lowly taxpayers.

The creation of the 1 percent economic class that own well over 50 percent of America’s wealth (and rising exponentially) must rank as one of the colossal failures by any government in human history.

The loss of 37 percent of U.S. manufacturing must be ranked as another colossal failure by any government in human history.

And the loss (and it is a ‘loss’ for that money could’ve been much better spent) of $1 trillion in corporate welfare to U.S. corporations, must be ranked as yet another colossal failure by any government in human history.

And it is millions of workers and their families, millions of former workers who still want to work and their families, and the economy that is suffering because of it — all on account of the gross negligence shown by successive governments since 1979.

Not that any one person or political party is to blame, it’s just that nobody ran to catch the ball when it dropped — three times!

The question today is: Can President Donald Trump restore the economy which has foundered since the creation of the 1 percent, restore the loss of 37 percent of U.S. manufacturing jobs, and stop the corporate welfare schemes which have cost taxpayers $1 trillion since the Carter administration?

Let’s hope that President Donald Trump is the president with the right thinking, the fortitude to see it through, and the politician with enough political capital who can put an end to this sorry state of affairs and create a better future, that works not just for the 1 percent, but for all Americans!

Has Trump got the right economic plan?

by John Brian Shannon | December 5, 2016

Donald Trump won the 2016 election in an upset defeating the expected winner Hillary Clinton, because to voters, he represented change while Hillary represented the status quo.

His potential second term in office four years on, depends upon one thing; Will he have addressed the concerns of those who voted for him?

Disaffected and disillusioned voters put Mr. Trump into office. And just who are those people?

They’re the bottom-two economic quintiles, with some votes coming from the other quintiles, to be sure. But protest votes aren’t cast by those happy with their lot in life — which is to say; The Wealthy.

The protest voters are those among the 100 million that have given up looking for work — not the wholly unrealistic 4.9% official unemployment rate statistic, which shouldn’t ever be considered a metric on it’s own.  It’s a junk stat. Not true at all. Meaningless.

Any official unemployment stat should tell the whole truth — both regular unemployed’s, long term unemployed’s that have simply ‘given up’ looking for work, and it should include those on welfare willing to work (if they could find a job that would pay them enough to cover their basic needs) because most of those people were workers until their jobs were off-shored and their income tax contributions ended.

If Donald Trump solves inequality or even beats it back to a reasonable degree, he will likely win a second term in office; It will mean he listened to his constituents

Solving it via government handouts seems to be ‘out’ in a Trump administration but solving inequality via a $1 trillion infrastructure plan seems eminently reasonable, logical, and inspires hope for individuals and will work to add confidence to markets.

If 100 million people were to ‘suddenly’ get jobs (that’s the 100 million unemployed over and above the false official stat of 4.9%) in the United States over the next four years, watch the economy leap forward, the debt-to-GDP stat fall, total tax revenue will surge dramatically, and deficit spending could (and should) become a thing of the past.

Revenue-neutral? I’d like to hear more about that!

Privatizing America’s national parks? Confiscating the wealth of the 1 percent? Selling NASA to a group headed by Elon Musk? Selling the SouthWest to Mexico?

There are all kinds of ways to raise $1 trillion dollars to fund a national infrastructure program, but do we really want to do those things? Not really.

Well… selling NASA to Elon Musk (were he able to raise such a huge amount of capital) could inject some interesting entrepreneurial vigor into that legendary administration.

Incentivizing corporations via tax relief always results in more profits but rarely results in more infrastructure spending. Proved history on that

So where will that trillion come from?

IF ‘The Donald’ is thinking American citizens and U.S. corporations will invest in America’s infrastructure by buying ‘road building bonds’ and thereby lower their overall tax bill, it’s a brilliant plan

For individuals or corporations buying such bonds, whatever money they put toward it should be considered ‘taxation-free’ money by the IRS. (No tax payable on any money used to buy national road building bonds, and no tax payable on those bond dividends)

American citizens, U.S. corporations, and U.S. investor groups should get first dibs on it. From a psychological perspective, having American citizens and U.S. corporations ‘buying-in’ to such a goal is almost as good as getting the investment itself.

After two years it could be opened up to non-Americans and global institutional investors.

Also, the U.S. corporate tax rate should be harmonized to Canada’s lower corporate tax rate.

That should’ve been a part of the original NAFTA agreement, and it’s still not too late to add it in.

United States - Has President-elect Donald Trump got the right economic plan? Image courtesy of Statista.com

United States Economy: Has President-elect Donald Trump got the right economic plan? Image courtesy of Statista.com

It’s ridiculous that the NAFTA partners have three different corporate taxation levels

Remember when senior executives at Burger King wanted to move their corporate HQ to Canada to save billions in taxes?

I’m sure it’s not the only example that wreaked havoc in the political relations between NAFTA partners and caused some to wonder if America’s commitment to ‘Free Trade’ was serious, as the proposed Burger King move was overruled by the Obama administration.

You either believe in Free Trade or you don’t, you can’t have it both ways. Capitalism OR Statism — your choice.

With a corporate tax rate standardized to the lowest of the three NAFTA partner countries (Canada’s is the lowest) such moves and threats of moves, would become a thing of the past, while the lower tax rate would find some of those extra profits moving to U.S. infrastructure spending, “To Make America Great” again.

Finally, the UK should be invited to join NAFTA and match their corporate tax rate with Canada/U.S.A./Mexico

Such trade harmonization will lead to better political relations and less economic infighting between existing and potential NAFTA partners, concomitant with a trillion dollars earmarked for federal infrastructure spending courtesy of a tax-free road building bond scheme.

That’s the way to ‘Make America Great’

Related Article:

What would Ike Eisenhower say to President-elect Donald Trump?

by John Brian Shannon | November 18, 2016

United States 2016 election. Image of President-elect Donald Trump.

United States 2016 election results in a win for Donald Trump. Image courtesy of CBS affiliate local8now.com

First off, hearty congratulations on your historic come-from-behind victory in the 2016 U.S. election. You’ve won a hard-fought campaign by accurately capturing the mood of American voters.

It appears ‘The People’ are looking for change from the typical Beltway politics we’ve come to know. Significant numbers of Americans showed up at polling stations and waited in long lineups to invest in you!

It’s truly an honor for every U.S. president to represent America, and by extension to lead the free world.

Secondly, whom you choose for Cabinet posts says a lot to American citizens and to the wider world. Presidents win or lose the next election via their Cabinet appointments.

Personal loyalty to the President-elect has got to rank as Number One. Disloyal people are a dime a dozen and will ride your coattails for just as long as it takes for them to gain some notoriety — at which point they cut you down — while loyal acquaintances are often not the most experienced political actors, loyal people will always find a way to ‘get up to speed’ on their department and make a brilliant success of it.

My heartfelt advice, Mr. President-elect is to hire the most loyal people you know, then empower them to get up-to-date on their responsibilities, and let them do their jobs while offering any and all needed support.

Thirdly, don’t forget the big picture. Your election victory is a direct consequence of millions of Americans who decided they wanted a different America — one that represents their core interests (freedom, jobs, opportunity) and their values.

All elections are a protest vote of some sort, but you defeated Hillary Clinton the clear front-runner and you defeated her soundly. Which gives you a huge mandate to change the way politics are done in Washington.

Many ex-presidents would have given their right arm to gain such a strong mandate from voters!

While voters are patient in a president’s first year (although the press generally aren’t) that patience tends to decline over time. Therefore, you have the luxury of taking a few months to get things right so that the following three years will be productive enough to gain a second term in office.

Fourth, military power is a fine thing and America should always have the best-equipped and most combat-ready military in the world, not only to protect the American homeland but also to help maintain other democracies and support other trading partners throughout the world.

However, military power (as powerful as it is) represents only one-third of the total power of the United States. Economic power is far more valuable to an American president, and it is one form of power that costs the U.S. less to employ than for America’s economic competitors to defend against.

Yes, employing economic levers against other countries can be costly to the American economy, but the cost for America’s competitor nations are unimaginably more costly. America will win that fight every time.

Which brings me to the third part of American power, diplomacy.

Soft Power: Soft power can accomplish every one of America’s goals — given enough time. Yes, it’s true. There is nothing that can’t be accomplished using diplomacy, given the right policies and enough time.

For example: America didn’t beat the former Soviet Union via military means, America beat the Soviet Union with a one-two punch of soft power and economic power.

The U.S.A. embarked on a plan to change the world through the diplomatic efforts of the Eisenhower-era ‘Atoms for Peace’ program which resulted in the creation of the IAEA, and later, the nuclear Non-Proliferation Treaty (NPT), the Intermediate-Range Nuclear Forces Treaty, the Strategic Arms Reduction Treaty (SALT I), and the Comprehensive Test Ban Treaty. In addition to that list are a number of minor nuclear treaties that also worked to create a safer world.

Many other diplomatic efforts were undertaken including the world-changing ‘China Card’ played by former president Richard Nixon and his Secretary of State Henry Kissinger.

All of these diplomatic efforts worked to convince the Soviets that we were reliable partners and could be taken seriously. And by opening up hundreds of lines of individual communication between qualified diplomats and providing enough time to allow it to work, the largest and most powerful communist bloc the world had ever known came to it’s end. Peacefully.

We found out by talking with the Soviets that they didn’t want to die in a nuclear inferno, either. “Well, well. Now we have something to talk about,” said every U.S. and Soviet diplomat.

And the Pentagon teamed up with the Vatican to support Lech Walesa’s Solidarity Movement in Poland with millions of supporters demonstrating in wave after wave of unprecedented but peaceful protests throughout the Soviet bloc nations.

Economic Power: To put the final nail in the coffin of the Cold War, the U.S.A. relied on a massive buildup of it’s strategic oil reserve at the same time as it devoted huge efforts towards oil exploration and production within America’s borders — which caused a huge crash in the global oil price.

Oil revenues funded half of the Soviet Union’s total budget during the Cold War, and the oil price crash secured the end of the Soviet Union’s ability to win the Arms Race —  an Arms Race begun by former President Ronald Reagan with that exact endgame in mind from Day One of his presidency.

It was the right combination of Soft Power and Economic Power — not Military Power that allowed America and her allies to beat the once-mighty Soviet Union.

But Military Power kept us in the game for long enough to allow us to use these other important levers in the pursuit of our goals of a peaceful and American-led world order.

Fifth, respectfully, Mr. President-elect, when something isn’t broke, don’t fix it.

NATO is a functioning model. And sure, there are always things that can be improved, and yes, rattling the chains of NATO-member nations that aren’t paying the required 2% of GDP towards common defense is a useful thing to do.

At this point, only the U.S.A. and Britain are paying the full 2% of GDP towards NATO commitments while some others have been rightly termed ‘free riders’ on America’s tab, therefore some corrections are needed.

The only thing the Soviets ever feared was NATO, because the sum total of force projection was much greater compared to each NATO nation acting individually. In fact, the Number One goal for the former Soviet Union was to break-up NATO. That’s how much a threat NATO was perceived to be by the former Warsaw Pact nations.

NATO member nations should pay their fair share or be invited to leave the bloc, and all of that must be completed prior to the U.S. midterm elections — for obvious reasons. If some NATO member nations want to leave and are contributing little anyway, What’s the loss?

Sixth, America should rely on it’s traditional strengths: It’s superpowered economy, it’s strength in all forms of soft power, and it’s powerful and combat ready military.

A perfect example to showcase the synergy of American power would be to create a new and vibrant free-trade-zoned Atlantic Alliance that employs NAFTA as a unifier of trade policy within the Atlantic nations.

All Atlantic and Caribbean nations could be invited to such an Atlantic Alliance, and that enhanced trading area would bring a synergy of benefits for all members.

“A rising tide floats all boats.” — John F. Kennedy

Not only a free trade area, but also an area of unified naval command similar to the NORAD model where a U.S. General is always first-in-command, while a Canadian General is always the second-in-command.

In such an Atlantic Alliance, America’s oldest and traditional ally would be Britain — and fortuitously, both nations are historical naval powers.

I will have much more to say about this policy suggestion in later posts and I’ve written about it elsewhere, but it’s an idea that is absolutely crying out for doing and only needs someone capable to lead it — someone with experience at the senior NORAD level, or equivalent.

It must not ever become NATO nor part of NATO. The Atlantic Alliance would be a trade unifier with a robust at-sea antipiracy and anti-contraband component — as opposed to NATO which is a military-only organization originally set up to protect North Atlantic nations from Soviet nuclear attack.

Seventh, NAFTA needs a tuneup, it doesn’t need a new car.

The benefits of NAFTA are the billions of dollars of trade that happen between NAFTA nations and associate NAFTA nations (Costa Rica, Chile) that otherwise wouldn’t happen.

NAFTA created millions of new jobs but lost thousands of jobs in the U.S. and Canada — however, we must remember that the offshoring of millions of jobs from North America is an Asian phenomenon moreso than a NAFTA factor.

NAFTA also prevented a large influx of (probably) 20 million more economic migrants from Mexico which would have resulted in a huge drain on the economies of the western U.S. states.

There are benefits to immigration for the United States; Low-wage farm work and domestic helper work that most American citizens wouldn’t ever entertain is done by migrant workers. Also, a surprising proportion of combat-experienced U.S. Marines are Mexican citizens who volunteered to serve at least one combat tour in the Marines in exchange for the opportunity to be granted U.S. citizenship.

I figure that anyone willing to fight in combat for America, risking life and limb to do so are ‘good enough’ to offer U.S. citizenship! Some American citizens aren’t willing to fight in combat for America (just ask them) but if highly motivated and highly principled Latinos are, then good for them and the U.S.

NAFTA needs to update some of its terms, and once that’s done existing NAFTA members need to invite every Atlantic nation — and also Australia and New Zealand to become full members. Once these far-flung nations join, NAFTA will need a name change, but that’s a minor decision to be made later.

NAFTA created hundreds of billions of dollars in economic activity annually and helped to lower immigration from Mexico by 20 million since 1987. There can be no going-back. However, it’s true that some parts of the agreement need to be brought up to 21st century standards.

Eighth, must be the addition of a 5% import tax (a tariff) on every good that comes into the U.S.A. from every non-NAFTA member nation. And all of America’s trading partners should be invited to add a 5% tariff to any goods that arrive in their country. It’s best if everyone follows the same, standardized list of things to be tariffed.

This would provide mega-billions of revenue that the federal government can use to fund infrastructure projects in the United States, including a complete rebuild of America’s 3rd-world standards electricity grid and an Interstate highway system where 60% of the bridges are deemed “unsafe” by federal regulators!

Not only that, but America has a unique ability to create ten-times the present amount of clean hydroelectric power via so-called ‘run of river’ hydroelectric dams and small-scale hydroelectric dams. The potential here is mind-boggling! All that is lacking is the funding to do it.

And as investors are finding out, renewable energy in certain locations makes more sense than any other kind of energy, as no expensive fuels (and the transportation of those fuels to power plants) are needed to power electrical generators.

Solar power in the Southwest and wind turbines in Texas have more Republican investors than every other group put together. Former president George W. Bush is a famous wind turbine investor in Texas, for one example.

Also and not incidentally, adding a 5% tariff to goods coming into the U.S.A. makes those imported goods incrementally more expensive and in competitive segments of the retail market that price increase may tip the balance in favor of  American-made goods.

There is so much to be gained via a simple, standardized 5% tariff, that it should rank as the first legislation passed by the Trump Administration.

Ninth, is a complementary policy proposal that assists some of the other proposals listed above, to help them to become more efficient or more profitable.

Students should be encouraged to take a ‘Gap Year’ between their Senior High School graduation and the start of their college education. It’s commonly done in many countries although somewhat uncommon in the U.S.

Gap Year for many students, is a time to earn money to pay for college or university tuition and a time to enjoy their last blast at youth before getting serious about life.

The U.S. military should be encouraged to hire large numbers of Gap Year students, and cover their food, lodging, and medical care, wherever they are posted in America — but pay them no wage.

At the end of one year these students would receive a prepaid tuition at selected colleges across the country (including military colleges) equal to the tuition of one college degree — in exchange for their labor.

Gap Year kids shouldn’t face combat (unless they decide to stay in the military longer than one year, and thence receive combat-level training) but could be utilized by the U.S. Army Corps of Engineers as laborers and equipment operators, flag-persons, office staff, interns, etc. in any national infrastructure project that the Army Corps is tasked with.

Much of the original Interstate Highway system was built by the U.S. Army Corps of Engineers, as were many American hydroelectric dams and coal-fired power plants, levees, and so much more.

Many Gap Year students might choose to stay in the military, while some might return after their college education because of their familiarity with the Army Corps of Engineers courtesy of their Gap Year experience.

It may seem expensive to hire students for one year and then hand them a valuable college degree tuition at the end.

But if you think it sounds like an expensive program, add up the cost of Pell Grants (which would no longer be needed) then add the cost of the student loan program and defaulted student loans, the cost of youth unemployment, youth crime, and the very different lives that college educated kids live after age 25 vs. the lives that non-college educated kids live after age 25. (A big productivity difference!)

A Gap Year military-work-in-exchange-for-college-tuition program would be cheaper by half all costs considered.

Giving all students the option to receive a college degree can only assist them and American society.

It’s a good way for the military to screen for potential full time military members, for late-teens to gain new and valuable experiences, to lower youth unemployment and youth crime, and it’s a perfect way to lower student loan defaults.

To say nothing of a much better educated cohort and a national infrastructure program that has plenty of cheap, low-skilled labor.

Tenth, and probably the most important among a list of very important policy suggestions, must be to reverse the Reagan-era and George W. Bush-era tax cuts, which together are wholly responsible for the creation of the 1 percent class now wrecking havoc in the Western economies.

Not that those were bad policies at the time. Quite the opposite — those policies were the right policies for the times, but have now wrecked destruction in the West.

And the 1 percent aren’t ‘bad people’. On the contrary, they legally benefited by following the U.S. income tax laws as they were written. Nothing wrong with that.

However, the Reagan-era tax cuts created the 1 percent class and such wealth accumulation the world has never seen, while the G.W.B.-era tax cuts added gasoline to that fire.

At present, the 1 percent own more than 50% of the world’s total wealth. Leaving less than one-half of the world’s wealth for the remaining 7.3 billion people.

But by 2030, the 1 percent will own more than 75% of the world’s total wealth. Leaving only one-quarter of the world’s wealth for the (then) 8 billion people on the Earth.

And in 2040, the 1 percent will own more than 85% of the world’s total wealth. Leaving only one-sixth of the world’s wealth for the (then) 8.75 billion people to fight over.

World Wars have been waged over less!

United States and the 1 Percent

United States tax laws created the 1 Percent beginning with President Reagan-era income tax cuts. This image illustrates the share of the world’s total wealth between the Top 1 Percent vs. the Bottom 99 Percent. Image courtesy of OXFAM.

The political and military leaders that were in power during World War II made the hard decisions that needed to be made in their time, they did not shirk and they rarely flinched. Because they were up to the task, we do not live under tyranny, nor do we live under constant threat of military bombardment.

Likewise, our generation must be up to the challenges of our time, as previous generations were up to the challenges of their time.

Because fiscal budgets are already decided for 2016 and 2017, the time to begin addressing these imbalances is now, due to the considerable time lag of the budgetary process.

We simply can’t be responsible for the deaths of billions of people because the 1 percent want to live in unprecedented luxury.

Finally, Mr. President-elect, I congratulate you, your family, and your team on your brilliant election victory and wish you every success in your administration and in life! Well done.