Readers: this blog is set in the future (sometime after the year 2020). Each entry assumes there has been a 5th revolution in the US — the Revenge Revolution. More about the Revenge Revolution, a list of earlier revolutions and the author, Entry #1.
Periodically I write a “sense check” to assess whether in the next few years, a revolution in the US is still possible or whether the entire exercise is based on a statistical aberration — i.e., a roughly 50-year cycle between major upheavals in the US. Most recent sense check, Entry #332.
Begin Entry #340. Somewhat buried in this past week’s news was that Bud Abbott awarded Lou Costello the Presidential Medal of Freedom. Well, okay, it wasn’t really Abbott and Costello, but it might as well have been.
The actual players were Donald Trump and Arthur Laffer. If you don’t follow the players in the field of economics, you might not recognize the name Laffer. In the mid-1970s, Arthur Laffer, then working in the Nixon/Ford Administration, but previously a member of the faculty at University of Chicago, outlined for Messrs. Rumsfeld and Cheney (the same two as in the Bush 43 administration) a curve to illustrate the theory that government revenues could be maximized at certain marginal tax rates.
According to Laffer, too high a marginal income tax rate would be a disincentive for people to work and/or invest and tax revenues would fall. If the margin tax rate were too high, then lowering the tax rate would result in the economy expanding with overall tax revenues increasing despite the lower maximum rate.
The Laffer Theory, commonly referenced as the Laffer Curve, was cited as justification for large cuts in tax rates under Presidents Reagan, Bush 43, and Trump. In fairness to Laffer, his theory, which had been discussed earlier by other economists, could be true where a country had exceptionally high tax rates – although too high a tax rate has never been defined – and there was no compelling societal need justifying the higher rates.
Laffer’s Theory should also be considered the foundation for what is known as “trickle-down economics.” However logical Laffer’s theory and “trickle-down economics” might seem, to my knowledge there is no empirical evidence demonstrating the theory is correct.
In the 1950s, for example, maximum marginal income tax rates in the US were 70%. Yet during the 1950’s the labor-force participation rate was very high and the economy was strong. One might argue – and I think fairly – that the very high marginal tax rates were justified by a societal need. The US needed to pay down some of the enormous debt the US incurred during WWII.
More recent tests of Laffer’s theory include the Reagan, Bush 43 and Trump Administrations. What happened to government revenues when the Laffer Curve was used to justify lowering income tax rates in each of those administrations? The economy grew some but income taxes remitted to the Federal government never increased enough to offset the rate cuts. The result was a sharp increase in the Federal debt, both nominally and as a percent of GDP.
The Laffer Theory has been tried in other venues. In 2012 the Republican governor of the State of Kansas, to whom Laffer was an advisor, convinced the legislators to reduce maximum marginal tax rates. The project result, according to Governor Brownback, would be a rapidly growing economy and enough additional revenue to the state to offset the reduced tax rates.
What happened was just the opposite. Like the experience of the Federal government, tax revenues in Kansas plunged. The difference between the State of Kansas and the Federal government is a critical one. Unlike Washington, the State of Kansas is constitutionally required to balance its budget and does not have a Treasury Department that can print money. The only alternative for Kansas was to raise taxes and substantially cut expenditures in such critical areas as education and infrastructure.
Bush 41 called “trickle-down economics” that emanated from the Laffer Curve, “voodoo economics.” The voodoo economics label seems to be widely shared among most well-respected economists, with more than 95% of professional economists rejecting the Laffer Theory.
So why did Laffer receive the Presidential Medal of Freedom? The president has wide discretion in awarding the medal. A recent recipient, for example, was the golfer Tiger Woods.
What struck me as comical was the Administration’s justification for selecting Laffer. The White House press release indicated Arthur Laffer was “…one of the most influential economists in American history.” (Maybe true but “influential” does not equate necessarily to being correct.) Adding to the comedy of the press release were remarks by Trump, who claimed to have studied Arthur Laffer’s theory for many years.
Seriously? Studied for many years? Trump is anything but a student. He’s repeatedly demonstrated an appalling lack of understanding of basics taught in economics 101. While the examples are numerous, a couple of recent economic headscratchers include his claim that tariffs are paid by the country of origin – i.e., tariffs on goods shipped from China are paid by the Chinese. No, Donald, the tariffs are paid by the residents of the receiving country. The receiving country is called the United States and the tariffs are effectively a tax on consumers.
Another head-scratching idea is that world trade must be a zero-sum game; therefore, the US should work toward having a trade surplus with most all, if not all, countries. If that were true, then nearly every country worldwide would make and consume its own products. If I’m not mistaken, Trump’s theory went out millennia ago. Maybe Trump should study more about such people as say, Marco Polo. Somehow I think Marco Polo was in the international trading business.
What about Trump’s approach to increase US GDP over the long term? Roughly 2/3 of US GDP is driven by consumer consumption. If you don’t increase the number of consumers and/or increase consumption per capita, then GDP is not going to grow and it will gradually decline. As the population ages, consumption per capita decreases and the economy can stall or start to slide — just look at what happened to the Japanese economy beginning in the 1990’s. In the US, the declining birthrate among native-born citizens will result in lower potential GDP growth unless some fundamental changes are made.
One change to help ensure sustained economic growth could be to increase the pool of younger consumers. How does the US expand the pool? The government can’t force families to have more babies. So what about more Immigrants? Wouldn’t more immigrants help offset the declining birth rate?
According to the Trump Administration, the US should not allow more immigrants, especially those entering without visas. Moreover, according to Trump, even the number of legal immigrants should be reduced sharply.
Mmm, this economics game is not so simple. Maybe Trump should have attended economics class more often. Economics seems something like a teeter-totter. Somehow the two sides need to be balanced for the system to work.
What’s the takeaway from this blog entry? Most everyone, well most everyone except Trump’s hardcore supporters, acknowledges Trump is uneducated about many subjects and his decisions are often arbitrary and conflicting.
Maybe the purpose of this entry is allowing me – and I hope some of you – to vent frustration and anger at Trump with his gang of incompetents and enablers. For many years, I’ve studied economics and had jobs where applying economic theory was a key part of a critical decision. In many of those decisions, the financial well-being of numerous families was affected. In my view, and one seemingly shared by many others, Trump’s decisions about lowering income tax rates mostly for the wealthy, efforts to influence the Federal Reserve, restructuring immigration policy could harm significantly the potential for sustained economic growth in the US.
Now, I hope I’ve made the case for why I cringed when Trump awarded the Presidential Medal of Freedom to someone like Arthur Laffer. I cringed not because of Laffer. He had no hand in this decision. I cringed at the thought of what’s going to be the next incredibly stupid decision made by Trump that will have lasting negative consequences for US citizens.
We should all be concerned, regardless of political party. As for Abbott and Costello, my apologies to them for being drawn into the discussion. Unlike the Trump Administration, even Abbott and Costello figured out who was on first.
Post Entry Update: In the week following publishing Entry #340, Eli Broad (rhymes with road), a multi-billionaire, published an Op-Ed piece in the NYT outlining why taxes on the very wealthy should be raised. Unlike Trump, Broad views a higher-tax rate for the wealthy as necessary to help begin eliminating the growing economic inequities in the US. Link to comments, 19 06 26 NYT Eli Broad OpEd re Asking to Raise His Taxes.
Comments welcome, as always. Thanks for your time.
If you’re a parent, or have a brother or sister, wouldn’t you be proud to be able to make such a proclamation? Well, you can make such a proclamation if you support Donald Trump and his Republican enablers.
If you’re religious…if not pretend you are for a few minutes…then show me where in your religion is a list of basic tenets indicating acceptable behavior includes lying, cheating, stealing, discriminating. Even if your religion “forgives” such behavior, doesn’t the person being forgiven need to stop such behavior first?
Let’s put religion aside and talk instead about the oath of office taken by the president. The oath, which is part of the US Constitution, reads, “I do solemnly swear (or affirm) that I will faithfully execute the Office of President of the United States, and will to the best of my Ability, preserve, protect, and defend the Constitution of the United States.”
No, I won’t get over it…and neither should you. By latest count, Trump has been lying at least 30 times a day with the rate of lies increasing with each day closer to the mid-term elections. And those 30 lies per day are the ones known to the public. How many more lies does he tell inside the White House? Trump supporters – would you tolerate your child lying 30 times a day?
Making a choice about what type behavior you want from the president and other political leaders is not difficult. Do you want someone leading the country and/or representing you who lies, cheats, steals, and discriminates? If you would be proud of such behavior by your child or sibling, then Trump and his gang of enablers are for you.
As a result actions during the confirmation process, I increased the chances of a 5th US revolution to “highly likely.” However, my reasons for changing to “highly likely” may be different from what many others have stated or written about the Kavanaugh nomination/confirmation process.
Over the decades, what has allowed SCOTUS rulings to be recognized as law of the land by the populace? Obviously not everyone has supported every decision but why have even controversial decisions become the law of the land? Trust by the people in the objectivity of the justices. In parallel, the Court’s decisions likely have been moderated to a degree by public opinion. Justices have recognized the need to create trust and acknowledge public opinion so the vast majority of SCOTUS rulings have not been too far left or right.
Let’s take a closer look at McConnell’s greatest achievement. The initial phase of this latest “great achievement” was McConnell denying president Obama the right to have the Senate consider a nominee to fill an open seat on SCOTUS. According to McConnell the vacancy should be filled “after the people vote.” Forget the Constitution, forget precedent, McConnell alone should decide when a vacancy on SCOTUS should be filled.
To further build public trust…or maybe that’s distrust…in Kavanaugh, McConnell (this time thru Grassley and Trump), stonewalled efforts to dig deeper into Kavanaugh’s past. Charges ranged from sexual assault to excessive gambling. Rather than let the FBI explore a series of allegations fully, the Judiciary Committee allowed only one key witness to testify – yes, only one – Dr. Christine Blasey Ford. Kavanaugh followed Dr. Ford and managed to create even more concern about his truthfulness and demeanor as publicly insulted Senators seeking answers to some basic questions and even lied about what he should have dismissed as youthful indiscretions.
While those on the political right might view with great satisfaction McConnell’s tactics of attempting to hide the truth about Kavanaugh, thereby giving the finger to the left, how would the right react if a nominee from a Democratic president had the same questionable background and exhibited the same rude behavior as Kavanaugh? I can hear the cries now, “Lock him up! Lock him up!”
Senator Susan Collins is among the brainwashed or brain-dead. Collins gave a 45-minute talk justifying support of Kavanaugh. Her remarks included some truly nonsensical statements. For example, she claimed that as a sitting judge, Kavanaugh has consistently supported legal precedent…unless he considered the precedent wrong. Huh, Susan? In real speak that means precedent plays no part in Kavanaugh’s decisions. Why would anyone ever make such an inane claim? Collins was also interviewed on “60 Minutes” the day after the confirmation. Based on her comments during “60 Minutes,” no one would ever accuse her of being a deep thinker. Enough about Collins.
Then we have Senator Lindsey Graham. Graham’s behavior of late could be compared to that of Stormy Daniels in one of her movies – constantly taking on new positions and new partners, including cuddling up to president Trump. At least Stormy Daniels has been straightforward with the public about her beliefs. No so for Graham. Say Lindsey, do you not remember any lessons from John McCain?
Among people who have principles, there is an adage that most learned early in life. Mitch you must have missed the class…again and again and again. The adage is, “What goes around, comes around.” The follow-on part of that adage is when it comes back, the intensity is usually much greater. My suggestion Mitch? Be on the lookout because your life is about to begin heading down a very steep hill.
Is there any hope? Yes, there’s some. While we probably can’t avoid the Revenge Revolution, the intensity could be moderated by one person – Chief Justice John Roberts. Roberts is a smart guy. Roberts knows his legacy will be determined by how credible the public views decisions of SCOTUS. Roberts also knows he’s got two justices who are considered illegitimate by many people – Thomas and Kavanaugh.
Walt: “I’ll tell you another event that penetrated the brainwashing cap. In fact, I still shake my head when thinking about it.”
Walt: “That’s it. Todd looked more dumbfounded than a deer in headlights. Then he tried to let Giuliani correct his mistake. But Giuliani in true Trump fashion, refused to admit an error and proceeded to straight-jacket himself.”
Walt: “Hadn’t thought of it exactly like you phrased it but Giuliani’s comment was so stupid an alarm bell went off in my head.”
Walt: “Probably. But I’m still embarrassed to talk about my brainwashed state. I mean, when I was brainwashed, Kellyanne Conway’s claim about ‘alternative facts’ never caused me to pause.”
Walt: “Nothing. What still makes me smile was when the owner of the National Enquirer was granted immunity.”
Walt: “Once the brainwashing cap got penetrated, I started to look at the flood of Trump’s tweets a lot more critically. What I noticed was that virtually every tweet laid the blame for a problem on someone else or on some Federal agency. Trump seemed to forget he was in charge.”
Jordan: “OK, now we’re in a new era. Trump is gone and the country has gone through the Revenge Revolution. And you’re more open to crossing party lines. What about other former Trumpsters?”
Walt: “Great! Where’d you get it? Don’t tell me. It’s from that liberal bastion, Starbucks.”
Jordan: “C’mon. Stop me from banging my head against the wall. I admit I find your logic fascinating, even humorous at times…but your logic is also incredibly frustrating.”
Jordan: “If the FBI was trying to get Hillary elected, then why did Comey hold a press conference a few days before the election effectively reopening an investigation about Clinton that found no laws were broken?”
Walt: “Same thing with Obama. He knew the Russians had hacked the Democratic National Committee HQ and were releasing emails to the public. But he didn’t do anything about it. Why not?”
Jordan: “Just for fun, please tell me, in Trump world, does the sun come up in the east or west?”
Walt: “A thorough investigation. Why should the FBI allow a foreign country, especially a known enemy of the US, try to influence the outcome of a presidential election? If the FBI didn’t investigate, it would be dereliction of duty. All of them should be fired…and some tried for treason.”
Jordan: “Yet, when the FBI had very credible evidence that the Russians had infiltrated the Trump campaign and the campaign was likely conspiring with the Russians, you supported the Republicans in Congress who objected. Those same Republicans thought the investigation should be stopped. Why did you support them when you just said there should be an investigation?”
Walt: “Not likely fake, it was fake. At least now you’re starting to understand.”
Greenie: “OK, now that we’ve solved the mystery of the creation of the universe, I have another topic.”
JC: “You mean what event or action by Trump caused the FBI, or whatever group was responsible, to say, ‘enough, already. He needs to go.’”
Jordan: “Because by early 2018 it had become clear Trump was in the hands of the Russians…at least financially. They had him by the you know what.”
Greenie: “So why did Trump have Sessions fire McCabe? Firing McCabe accomplished nothing. Then Sessions got fired by Trump soon thereafter.”
Greenie: “Do you guys think Trump really understood who held all the cards? In the Washington poker game, Trump didn’t have a pair of deuces and Muller had a full house, yet Trump thought he could bluff Mueller.”
JC: “Pissing off mama bear is not smart. And doing so never has a good outcome.”
Greenie: “Most serious adults in the US…and worldwide…have great admiration for the FBI. I think it’s fairly well-known that when joining the agency you pledge to ‘support and defend the Constitution of the United States against all enemies, foreign and domestic.’ The people who I know connected with the Agency take the pledge very seriously.’ Trump’s behavior violated the pledge and effectively left them no choice.”
Jordan: “I’d like to ignore your last comment but you’re correct. Anyone with a modicum of gray matter could have seen what was going to happen when you mess with Mama-Bear FBI.”
Greenie: “Even after the transition from Trump, the country had the Revenge Revolution. Granted a few years later but probably a lot more peaceful that it might have been.”
Trump: “The list is tremendous…very long, very long. For one thing employment is higher than it’s ever been. Just look at all the new employees we’ve added this past year. Tremendous, right?”
Board Member: “So you want to compare the number of employees added this past year to employment say 20-30 years ago when the company was much smaller. Did I understand you correctly?”
Board Member: “Is it true you had an affair with an adult film star?”
Board Member: “Like I said, Mr. Trump, could you please explain your relationship with Deutsche Bank?”
Trump: “All those bankruptcies were not my fault. If the other partners had just…”
Trump: “A decent interest rate. You know what a tough negotiator I am. The other guy always loses.”
Board Member: “Well, when people came to the Don…not you, the head of the Corleone Family…they were in no position to negotiate terms. The Corleone’s always ended up with more than what you label a ‘decent return.’”
Trump: “’Laundering money’ was a slip of the tongue. I corrected myself.”
Mr. Trump, we know how you are obsessed with trying to appear wealthy. So part of our investigation included following the money trail. If you’d like we can take our findings to the FBI or IRS.”
Trump: “I don’t care what the Board thinks. You’re supposed to do what I say, not what you want to do. You’re supposed to be loyal to me. I’m the king…I mean president and CEO.”
Gelly: “Your predictions were pretty accurate.”
Jordan: “I know what you mean. My answer is the Revenge Revolution would have happened anyway.”
Trump: “You keep pointing the finger at me. I haven’t done anything.”
Board Member: “…Excuse me but I wasn’t finished speaking. Let’s see if you understand this. ‘Little Donnie, quit whining like a brat, and be quiet until the adults in the room tell you it’s ok to speak. Understand?’”
Trump: “You mean ‘The Buck Stops Here’ sign?”
Trump: “But I told you before about the plan to make the company great again. Step #1 is to change the compensation structure. The 1.0% management team needs more money. The peons who work for the company don’t really deserve any more money but we can throw them a few crumbs for a while…then gradually take it back. They’re too stupid to understand what’s really going on. Step #2 is…”
Board Member: “But what about their connections to shady Russian oligarchs, let alone Putin? Associating with the Russians will compromise the company.”
Board Member: “Mr. Trump, the trickle-down approach, which president George H.W. Bush called voodoo economics, has never worked. He was right. Trickle down has never worked in the US or anyplace in the world. The trickle-down approach slows economic growth, not accelerate it. You know that don’t you?”
Board Member: “You realize, of course, the workers contributed to their medical plan and their retirement plan. And they’ve done so for a long time. Your plan will basically screw them.”
company going forward.”
Gelly: “Jordan, I was cleaning out some files. Found an article you wrote at the end of Trump’s first year in office.”
one could have done it better. Now let’s adjourn and play some golf.”
Trump: “Why? I told you my performance was fantastic. Let’s go play golf.”
Board Member: “Just to be clear, the majority of the Board did not support you to be CEO. Only because we have an odd way of counting votes that were you elected.”
Trump: “There’s so many I don’t know where to begin. No other CEO has ever accomplished so much in such little time.”
: “The only thing I need to be more effective is total loyalty from everyone in the organization.”
Trump: “Experience running large companies doesn’t matter. I don’t need to know…in fact, I pride myself not knowing about lots of things you consider important. Remember, I’m a genius. Why waste my time learning anything new? I’d rather watch TV and play golf. What’s knowledge worth anyway? I go with my gut…and I’m always right.”
Trump: “In my way of thinking, all deals are zero-sum games. And I have to win. The other party in the deal needs to cave in to my demands.”
Matt: “Actually two things…and both are fundamental to building long-term relationships with friends, business colleagues, constituents…in fact, building a relationship with anyone.”
Matt: “Rhetorical question, I know, ‘How do you develop a relationship with someone who’s all over the map?’ One day left, one day right, one day up, one day down…I mean, how do you work with such a person?”
Jordan: “That’s funny, Trumpthong. I don’t even want to think about that. Anyway, the word is Trumpong, which is what I call Trump’s version of strategic ping-pong. The never-ending back-and-forth. Change your position day-to-day, sometimes even during the same day. Then bounce back to the original position. Back-and-forth just like ping-pong.”
Matt: “Mythomania? Is that yet another made-up word?”
Jordan: “Yep, an abnormal tendency to exaggerate or lie.”
Jordan: “Not all at once, of course. Over time more and more people felt like the model for one of Evard Munch’s paintings. They just couldn’t take it anymore and wanted to scream.”
Jordan: “True, but hard-core Trumpsters aren’t running the show any more. They got thrown out by the Revenge Revolution. I’m still convinced many of the hard-core Trumpsters were brainwashed. Their support of Trump’s policies was often contrary to their own best interests. The hard-core never seemed to understand the consequences of the proposed policies.”
Matt: “Each one of the sections could be a worth a couple of books…and 1-2 semester class or even a public lecture series.”
Jordan: “So, why don’t you two work together, already?”
usrevolution5 