Monday, August 08, 2016

Detroit Crock City

Let's all get ready for the Big Drumpf Pivot, in which this fucking clown, after more than a year of acting like a fucking clown, is suddenly going to show us how presidential he thinks he is. Billed as an economic policy speech, this was really just a teleprompter-driven, toned-down version of his usual stump speech, with a few economy-based generalities thrown in.

Let's look at the high points, such as they are:
  • Simplifying the tax system to just three brackets;
  • Capping the business tax rate at 15%;
  • Reduce "job-killing" regulations (and presumably the jobs of the people who enforce them);
  • Pull out of the TPP and renegotiate NAFTA;
  • Slap tariffs on countries who won't negotiate "fairly";
  • Commit to spending on infrastructure;
  • Bring back coal industry jobs;
  • Repeal the estate tax.
Obviously, most of this is the usual supply-side bafflegab we've been enduring off and on since the Reagan (PBUH) years. There's nothing new here. Working on the free-trade agreements is actually not a bad idea -- and even HFC has stated a willingness (for what that's worth) to look at both TPP and NAFTA -- but there are domestic conditions that must be addressed before that can happen, or it will absolutely cause trade wars which would definitely cost jobs and probably a recession as well.

You may have heard that Canadian auto workers typically make a better wage than their American counterparts. German auto workers make even more, a lot more. In the case of the German workers, higher productivity gains are shared across the board, which is virtually nonexistent here, where almost every last cent of productivity gains is hovered straight to the owners.

But in the case of both the Germans and the Canadians, it cannot be ignored that a big reason for better wages has to do with economically absorbed externalities, specifically health care. This is not a brief for or against "Obamacare" -- with or without it, health care insurance is a usurious racket that sucks cash out of the powerless. Even if you have insurance at your job, it's not cheap, and it comes out of your end.

And Drumpf clearly doesn't know what causes trade deficits, but the bottom line is that China and Mexico make things that we want to buy -- or, more accurately (and this is important), that we want to buy at the price available. Currently we purchase more of those goods, than China and Mexico purchase goods from us, in part because American production costs are much higher, certainly higher than the average purchasing power in those countries. Those differences comprise trade deficits with those countries.

Again, keeping in mind that the inexpensive electronics and toys and auto parts and clothes made in these low-wage countries are by nature price-sensitive, by definition hiking the price -- whether by slapping a tariff on imports, or by moving production back here, where various externalities are not accounted for -- would likely result in lower demand for those items. People might pay $600 for an iPhone, but they are much less likely to be willing to pay $1,000 for one.

(In fact, smart phones and flat-screens and such are probably Paretian in demand as technology develops anyway; in other words, if you already have an iPhone 6, you may decide when the iPhone 7 is released to just wait out the 6's lifespan, rather than immediately upgrading, as the differences are largely cosmetic.)

All you really have to do to see this fact in practice is to look at the candidate himself. Aside from his dopey campaign monkey caps, what consumer good bearing Drumpf's name is produced in America? His ties are made in China; his furniture is made in Turkey. Like most things with Drumpf's name on it, he almost certainly has no stake in the factories themselves, he just licenses the name. Even so, he must realize the ramifications of insisting that any signature item be made in the US (meaning the US mainland, not some technically American shithole like Saipan or Guam). There just wouldn't be any takers. The cost of goods produced would kill the profit margin.

The rest of it is the usual Republican sop to their wealthy insect overlords, people who merely use money to keep score, but they'll be goddamned if they'll part with a red cent without a fight. Now it's true that higher income earners pay the majority of taxes, with the top 1% accounting for 35% of tax revenues in 2011. But it should also be noted in that same table that the average tax rate paid for that bracket was about 23.5%, well below the top rate.

So what about this:  you close a few loopholes to bump the average rate at the top to (let's say) 26-27%, and put that extra 2.5-3.5% (which, based on the roughly $365bn top earners paid that year, would amount to around $8-10bn) toward infrastructure projects. Both Drumpf and HFC acknowledge that the country's roads, bridges, communication and power lines, etc. are all in poor condition. Well, that's one place you get some money to fund it, which translates into good paying jobs, which means more people further down the food chain can contribute a larger amount to revenue.

This is just one back-of-the-envelope example that doesn't require raising tax rates on anyone (remember, we're just closing some loopholes to bump the average paid rate up a couple points, but still well below the official top rate). You could also incentivize companies -- Apple and Disney immediately come to mind, but of course there are others -- with tax breaks for hiring homegrown engineers rather than using H-1B guest worker visas to pad their bottom lines.

I get sick of hearing rich assholes whine that they pay all the taxes, yet they do everything to fuck their workers over, apparently not realizing how math works. See, if everyone has a little more of a stake in the country, by definition they pay more in taxes to retain that greater stake. How is this so fucking hard for these greedheads to realize?

Doesn't matter; that's not where Drumpf's at with this. The "meat" of the pitch is just retooled Reaganomics, to try to shore up his eroding support among non-teabaggers. But if you read the actual speech in its entirety, you'll see it's just a dressed-up rally, aimed this time at possible players who might help him squeak out a rust belt state or two, rather than the toothless goobers in the southern states who typically flock to his bumptious nonsense to hoot their assent and sucker-punch protesters.

We'll see if it works or not. Right now it feels like too-little-too-late, and with no details or new ideas, it will probably sink below the radar by the end of the week. But the media needs its horserace to keep ad rates competitive, and a couple of HFC foreign policy myths are gathering steam again. It's hard to imagine those last two doing more than just preaching to the same choir; Benghazi is already played out, and the more you read up on the Iranian scientist story, the more you realize that HFC had nothing to do with him returning to Iran, where he unfortunately met a defector's fate.

But with Drumpf's economic speech, it's still somewhat surprising how pervasive the myths are, how stubbornly they cling, and how easily they are swallowed by the very people most harmed by them. Once you recall the basic truth that every dollar of your debt is someone else's equity, it all makes sense. No equity-holder wants to "fix" the economy, at least not for the peons; it's directly against their vested interest to do such a thing.

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