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We hear a lot lately about the US billionaires increasing their wealth by more than $1 trillion over the past year, as Covid precipitated the most severe recession since the 1930s of the real economy over the past year–from the spring quarter of 2020 last year through the spring quarter 2021.

Over the same period, however, US stock markets surged to record levels. This past week in early August they attained record breaking levels nearly every consecutive day.

Much of that record surge in stock and other financial markets has been due to the US central bank, the Federal Reserve, over the past year pumping almost $4 trillion in virtually free money into the banks and big corporations even though they were flush with excess cash.

The Fed in effect ‘pre-bailed out’ the banks even when they weren’t in trouble.

Moreover, the Fed has indicated its intent to continue to pump free money into the banks and even non-banks at the rate of $120 billion per month, through 2022 at a minimum. That’s more than $2 trillion after the past year’s nearly $4 trillion–even though no banks are in trouble or need it.

But bankers and billionaires were not the only big beneficiaries of government bail out policies over the past year.

So were the vast majority of largest US corporations. Starting in January and February 2020, medium and large non-bank corporations began to raise trillions of dollars in cash by selling their corporate bonds at dirt cheap rates made possible by the Fed driving interest rates to near zero. Added to this cash hoard created by low Fed rates and record corporate bond rates, the same medium-large US corporations drew down hundreds of billions more from their credit lines with banks, then got $650 billion in new tax breaks from Congress in March 2020. They also got to cut their operating costs big time (especially wages and facilities costs) dramatically due to the shutdowns. The combined result was record income gains for big US corporations–not only for US billionaires! How big?

Reports just released in recent days reveal 89% of the Fortune 500 companies increased their revenue this latest quarter (April-June 2021) by no less than 24.7% over the same quarter in 2020 when the Covid induced recession began.

That 24.7% revenue explosion compares, by the way, to an average quarterly revenue gain of 4.5% over the past 5 (non-recession) years; and 3.4% average over the preceding 10 years after the last official recession ended in 2009.

So Corporate America did fantastically well as result of the recession, not just the ‘tip of the wealth receiving iceberg’, US billionaires!

In contrast to the record gains of billionaires, stock shareholders, and big corporations in general, over the same past year, more than 35 million American workers lost their jobs at one time or another. And at least 17 million are still jobless: 12m are still collecting unemployment benefits + 3m dropped out of the labor force + 1.5m are still improperly classified as ‘furloughed but working’ by the US Labor Dept. (which it admits was incorrect but still refuses to correct).

That 17m is twice the ‘official’ number of 8.7m jobless being pushed by the government and parroted by the mainstream media. Both numbers are from government sources, but politicians & media like to cherry pick the best number even though it represents only part of the total picture.

Most of the US work force this past year also experienced big wage cuts, due in part to the massive unemployment (no job equals a total wage cut), or reduced hours of work (millions converted to part time from full time work), or just lower hourly pay over the same period. Wage collapse at the middle to lower end of the structure of wages in the US left the highest paid, still working, receiving their higher salaries and pay. That raised the average pay in general while the vast majority saw their actual wages collapse. (Government & media also like to report this distorted figure of rising wages over the past year as well).

As the economy has begun to reopen again this summer 2021, some workers have returned to work but now it appears that pace is slowing.

The June & July jobs reports by the labor dept reflect a pick up of rehiring as many service industry workers have begun returning to work. But these aren’t ‘job gains’ or new jobs in the economy. They are ‘job returns’. Moreover, signs are now emerging that the rehiring is beginning to slow. Many industries and companies do not have plans to return all laid off this past year back to work. They have already begun to implement AI and other technologies that allow them to displace workers with machines and software. And they are doing so.

Just as important, millions of workers who have returned have done so to jobs providing fewer hours of work per week and therefore less weekly earnings than before the recession. That’s likely a major reason why many laid off service workers are resisting returning to work. They’ll actually see less weekly pay due to hours of work per week reduced. Others can’t return because affordable child care is not available. Others aren’t simply because they’ve come to realize their service occupations were dead-end low paid and unstable jobs. Future waves of Covid could once again throw them out on the street. Who can blame them for not returning!

As for small businesses, they too have been on the negative receiving end of the recession, like the workers and unlike their medium and large corporate cousins.

Most accounts show around a million small businesses have gone under despite the Government’s fiscal bailout having provided about $1 trillion in guaranteed loans and outright grants since March 2020! With nearly a million small business failures, one can only conclude from that much of the $1T loans and grants bailout money did not get to those needing it most. Exposing how much of the bailout of small business was ‘gamed’ and by whom is a work in progress but will certainly be revealed at some point.

Like workers and small businesses, the nearly 75 million renters (in 48 million rental units) have also been bearing the economic brunt of the pandemic. Many have been evicted this past year, despite the CDC-federal govt ‘moratorium’ on rent payments. That moratorium–extended several times but now set to completely end by October 2021–has never been total. It has only covered rental units that have been supported some way by federal subsidies or rules. Millions have already fallen through the moratorium cracks. And the floor will collapse for all come October. (Only six states have supplemental state rent moratoria in place–none in the south or midwest).

In recent weeks the fight over evicting renters has emerged in the media, along with reports that $47 billion of the March 2020 ‘Cares Act’ $52B earmarked for renter assistance has yet to get into the economy. The media likes to portray this as due to government bureaucratic bungling. But it ignores the fact that resistance by landlords to process the rent assistance is likely the real cause of the failure to disburse funds. Some landlords don’t like the fact that the government assistance funds only cover 80% of the back rent. Others don’t want to give up the right to collect all back payments in the future; others want to sell or convert the rental units others want to retain the right to evict even though receiving the assistance payments and others want to continue to evict if even one late payment occurs. The public does not know–and media generally refuses to explain–that rental assistance payments must be filed both by the renter and the landlord. And millions of landlords have refused to file. Thus, the real cause of the $47 billion not being paid.

Then there’s the much publicized child care assistance payments that began this past July, as part of the Biden ‘American Rescue Plan’ (aka March 2021 $1.8T Covid Relief Act). While a positive program to make up for the discontinuation of supplemental unemployment benefits and rent assistance, what most Americans don’t realize it is only to run through December 2021 then expires as well. Furthermore, it is not actual new real money payments to households, but a pulling forward into July-December 2021 child care payments that would have been received anyway from the IRS next April 2022 when filing with the IRS for the 2021 period child care tax credit.

With recent developments–like the cutting off of unemployment benefits, the expiring of rent assistance, the gaming of small business bailouts, and the soon to expire child care benefits and end of student loan forbearance–one can conclude that a period of ‘creeping incremental austerity’ for the many has already begun–exempting of course bankers, businesses & investors for whom it appears the free money will continue to flow. Fortune 500 companies, banks, and US billionaires who have reaped massive income gains over the past year, appear exempted from any future austerity.

Dr. Jack Rasmus
copyright 2021

Follow Dr. Rasmus on his blog, jackrasmus.com, on Twitter at @drjackrasmus, or listen to his Alternative Visions radio show on the Progressive Radio Network every Friday at 2pm eastern time.

2 interviews of the last week on evictions moratorium, smoke & mirrors in Biden’s fiscal spending bills, Sanders’ $3.5T v. Trump’s $4T tax cuts, the crisis of retirement system, elderly care, and other topics.

https://drive.google.com/file/d/1wFTCJDJ2VyphriW_h0sNUS30BObqTQhK/view

https://drive.google.com/file/d/1gdxqEv7Dc0nrbQUniN8e_3m-CzRHUxKc/view

The just issued today Congressional Budget Office Report on income inequality for 129m households in USA in 2018–first year of Trump’s $4T 10 yr. tax cuts–were as follows:

*The richest 0.01% households’ (13k of 129m total US households) average income in 2018 was $44.5m. The richest 0.1% was $5.8m. The remaining richest 0.89% of the richest 1% households was $1.1m.

* Average after tax income for richest 1% households rose 268% since 1979 (almost 7%/yr.). In contrast, for middle classes income rose 53% (just over 1%/yr.) And that’s 1% for the middle income groups on a much smaller total income base than 7% for the richest 1% households on much higher total income base

Listen to my latest 2 radio interviews of this past week on the interim deal reached in the Senate on Infrastructure bill negotiations; and the recent Supreme Court ordered rent evictions moratorium suspension and Biden’s temporary reinstatement.

https://drive.google.com/file/d/1KjCe_MnWoILqvqA8_3jzW0fD2DpHP9Gr/view

https://www.spreaker.com/user/radiosputnik/us-eviction-ban-expires

I was recently asked my view on the expiration of rent moratorium on July 31 and, specifically, the role of the US Supreme Court in the matter. The inquirer wanted to know if the expiration, ordered by the Supreme Court, will precipitate a constitutional crisis, as the Biden administration has extended the moratorium another two months until October 3 nonetheless, despite the Court’s declaration the Executive Order establishing the initial moratorium until July 31 had to be ended on that date. What follows is my initial viewpoint on the evictions scandal set forth in my reply to the inquirer. A further, more comprehensive analysis in a written article, to be posted on this blog, will follow.

INQUIRY:

We’re discussing the announcement by the US Centers for Disease Control and Prevention that it was renewing the ban on evictions that expired on July 31, setting the stage for a constitutional showdown after the US Supreme Court ruled earlier this year that the public health agency didn’t have the authority to issue such a ban. After days of protests outside the US Capitol and appeals by federal lawmakers, US President Joe Biden has bowed to popular pressure and directed the CDC to extend the federal eviction moratorium until October 3. The move will protect perhaps 90% of American renters as more than 11 million people remain behind on their rent payments, according to CNBC. To what extent does the CDC have the right to bypass the Supreme Court decisions, and what’s next for the people who are on the eviction list, after the moratorium expires or is deemed unconstitutional and annulled?

MY REPLY:

I doubt very much this will get to the Supreme Court again by October 3. That’s why, I believe, Biden only extended it a couple months—not until the end of the year. Were it the latter, then SCOTUS might have reviewed it again. In short, I don’t see a constitutional crisis occurring as a result. Of course, there will be numerous lower court actions pushed by Republicans. But no action by the Court for the token two month extension. It won’t want to provide fodder to the commission now authorized to review the Court itself; and growing calls for reducing their terms from life to 14 years, or expanding its numbers. The Court won’t want a direct conflict with Congress or the Executive.

As for the evictions themselves, the 11m is an understatement. As I understand, that’s the potential number for renters whose housing is someway supported by federal financing or other support. There are actually 48m or so rental units in the US, and I’ve heard actual renters about 80 million. Evictions have been going on for millions since the beginning of this year, especially in states (mostly ‘red’) controlled by Republican legislatures and governors who have been engaging in a quiet ‘austerity’ campaign, cutting back rent support for non-federal rental units, pandemic unemployment assistance, small business loans, etc.

As for rental payments in arrears, there are those in forbearance and those not but behind in rent payments more than 60-90 days. The actual numbers are not accurately reported by the press. It depends whether you include forbearance, in arrears 60 days, or 90 days, or more, and if you include federal supported rental units or all rental units. Earlier this year I saw figures that the total back rent owed was $75 billion. Biden’s American Rescue Plan authorized $52B I think. But only $3B has been distributed. All we get from the mainstream press is that it’s due to bureaucracy. That’s too simplistic.

As I’ve been informing my radio show listeners and my blog audience, the $40B or so unspent on rent assistance to date compares to the Federal Reserve’s continuing $120B/mo essentially ‘free money’ being distributed to banks, businesses and investors at negative (real ) interest rates. No one, including SCOTUS, is concerned about that are they? The Fed will continue doing so until at least a year more, probably after that as well. We can make the same point with the $53B in unemployment benefits assistance authorized in the American Rescue Plan that will now be diverted to pay for the Infrastructure bill, along with other diversions and smoke and mirrors financing of Infrastructure in order to avoid restoring a few of Trump’s tax cuts!

The real Constitutional issue is SCOTUS itself. Nowhere in the Constitution is the right given to the court to declare Executive Orders or Laws unconstitutional. But Congress has allowed it to continue. We see a series of decisions in recent decades where the Court it slashing away at what’s left of democracy in America: the evictions case is just the latest. Not long before, there’s the support for voter suppression by further gutting the Voting Rights Act; there’s decisions endorsing further gerrymandering; there’s Citizens United and its further similar decisions; and of course there was the ‘selection’ of George Bush Jr. in 2000. Some refer to the Imperial Presidency. The Imperial SCOTUS is just as much a problem. SCOTUS itself is the constitutional issue. But of course mainstream media won’t go there.

It’s unfortunate the evictions are occurring (notwithstanding the 60 day moratorium extension on some rental units), just as unemployment benefit assistance has been cut (in some states early), as the small business loan programs have ended, and as inflation is growing. Republicans and the corporate wing of the Democrats are betting that the economy, now opening up again (as it did last summer) will be sufficient to generate a sustained recovery this time with the aid of the vaccination campaign. However, the economy growth is slowing, and I’m betting it will relapse again by end of year. We have a ‘rebound’ going on, but not yet a sustained recovery. And we have a premature shadow austerity policy shift emerging as it slows. The American Rescue Plan stimulus is fading. The Infrastructure bill is too small and won’t take effect until well into 2022. And the $3.5T Family plan will never see a budget resolution vote to get it passed. It’s already DOA. And Delta Covid is taking off, in the US and globally. These drags on the recovery may well negate the effects of the reopening eventually. We could have another repeat of the rebound of summer 2020 relapsing by year end once again. Although probably not as strong a relapse this year as in 2020, since there won’t be any closure of business this time.

Dr. Jack Rasmus
August 4, 2021

For my update on key economic events of this past week–i.e. US GDP report, Fed meeting & Powell’s press conference & status of latest infrastructure negotiations–listen to my Alternative Visions radio show today.

Go to:

https://alternativevisions.podbean.com/e/alternative-visions-the-week-that-was-us-gdp-the-fed-free-money-money-firehose-january-6-sideshow/

SHOW ANNOUNCEMENT:

Dr. Rasmus discusses 3 key events of the past week and how they’re related: (1) What does the preliminary report on 2nd Quarter 2021 US GDP really indicate? Is it a ‘V’ or just the first half of a ‘W’ given economic indicators showing a slowing of US recovery in the second half 2021. (2) the Federal Reserve meeting showed chair Powell is intent on continuing pumping in $120B of free money to the banks and investors every month for at least another year. Plus keep a second $1T spigot is now permanently open in the Repo Market for stock speculators as well. Why then are banks and investors continuing to get all the free money, while politicians keep cutting the promised fiscal stimulus for working and middle class households and the poor? Why Sanders’ $3.5T Family Bill Dead on Arrival! (3) Rasmus next addresses the phony Infrastructure deal and the Dems latest concessions to McConnell & Republicans in the name of ‘bipartisanship’. .

My third and final radio show commentary on Marx’s economics vs. contemporary Marxist (and mainstream) economists’ distortion of his views. Discussion focuses on the two historic distortions: the falling rate of profit thesis (contemporary Marxist economists) and the transformation problem thesis (mainstream).

TO LISTEN GO TO:

https://alternativevisions.podbean.com/e/alternative-visions-marx-s-economics-vs-contemporary-marxist-economics-part-3-1627067250/

SHOW ANNOUNCEMENT

In this final 3rd show discussion the differences between what Marx said and what economists today erroneously say he said, Dr. Rasmus addresses two historic issues in Marx’s analysis of capitalism. First is the idea, held by many contemporary economists who consider themselves Marxists, that under capitalism the rate of profit tends to decline over time, leading to ‘crises’ in the form of severe business cycle contractions (recessions, depressions, etc.). Rasmus shows this is incorrect, that Marx’s ‘Falling Rate of Profit’ tendency is a ‘in the long run’ supply side argument about the breakdown of capitalism and not an explanation of short run business cycle ‘crises’ like economic depressions. Rasmus debunks the assumptions in the Falling Rate of Profit tendency argument and explains how 21st century capitalist instability cannot be explained by a singular focus on profits. The second issue addressed is by contemporary mainstream economics critics of Marx, who hold that Marx failed to explain how values get transformed into prices in the real world and therefore Marx’s explanation of how exploitation of labor drives capitalist profits is never proven and thus Marx’s entire body of analysis should be rejected. Again, a single variable (price) is basis for rejection of everything else Marx said, just as a single variable (profit) explains everything he said. Rasmus concludes with commentary why both contemporary Marxists and Mainstreamers fail to understand the financialization of capitalism today as a key source of crises, short run and long.

Listen to my interviews of last week on the state of the US economy, status of infrastructure negotiations, inflation, spending, etc. Will the US economy experience a repeat of last year (2020) growth trajectory–i.e. surge in 3rd Quarter followed by relapse in 4th–as Republican (+ blue dog Dems) coalition halts further fiscal stimulus, bets on reopening of US economy as sufficient, which then proves insufficient for sustained recovery in 4th quarter 2021? Or will Dems & Biden drop bipartisan bullshit and push budget reconcilation? Bet on the former. Biden has already agreed to McConnell position on Infrastructure by dropping all efforts to raise taxes (and abandoning this past weekend his proposal to have IRS recoup $700B in tax avoidance & fraud) to pay for infrastructure. Biden & Dems have now in effect capitulated on infrastructure bill, accepting McConnell’s on spending and taxing. Dems will now turn to hyping their $3.5T new spending proposals (made up of cuts to original infrastructure + family support bill) knowing it too will never pass. Biden won’t use budget reconciliation for either infrastructure or $3.5T. And won’t abandon filibuster (opposed by Manchin-Senema).  In short, fiscal stimulus is over for 2021-22. Covid Relief Act (American Rescue Plan) of last March) will dissipate after 3rd quarter (just as Care’s Act in March 2020 did). Economy will slow again in 4th quarter 2021, as it did last year 2020.

TO LISTEN GO TO:

https://podcasts.apple.com/us/podcast/inflation-housing-infrastructure-still-plague-us-economy/id1130613151?i=1000529081599

Or GO TO:

https://drive.google.com/file/d/1migo5rUOKTSiiVbDjU7719ClrzxbN7tf/view

Dr. Rasmus continues part 2 of the 3 part series explaining how ‘Marx’s Economics’ is not the same as ‘Marxist Economics’, as well as explain what Marx said is quite different from what mainstream economists claim he said. Why Marx’s Economics should be understood as both a continuation and a critique of classical economics that preceded him. Like Keynes later (see prior shows), Marx adopts much of the classical economics conceptual framework, adapts and changes key concepts and propositions of classical economics, but introduces totally new concepts and analysis that fundamentally critiques classical economics as well. But in the final analysis, like classical economists Smith, Ricardo and others, Marx’s analysis is a long run, supply side (production), explanation of how the capitalist economy changes and evolves, and eventually experiences a stagnation and breakdown, driven by an intensification of exploitation of labor. Rasmus explains why intensifying exploitation does not necessarily mean ‘impoverisation’ of labor and why workers’ standard of living under capitalism may rise while their exploitation grows even faster (and thus capitalists grow wealthier and income inequality expands).

TO LISTEN GO TO:

https://alternativevisions.podbean.com/e/alternative-visions-marx-s-economics-vs-marxist-economics-part-2/

SHOW ANNOUNCEMENT

Dr. Rasmus continues the clarification of what Marx really said vs. what contemporary economists (Marxist & Mainstream anti-Marxist) claim as Marx’s economics. Dr. Rasmus explains the 10 conceptual innovations Marx makes on the framework of classical economists before him (Smith, Ricardo, et. al.) to develop his theory of capitalist exploitation that drives the system to a breakdown crisis in the long run. After recapitulating the origins of Marx’s economic analysis and concept innovations on classical economics, begun last week, Dr. Rasmus discusses in Part 2 today the ‘heart’ of volume I of Capital: Marx’s conceptual innovations of Absolute and Relative Surplus Value, which explain how labor is exploited in production, creating a surplus that capitalists appropriate for themselves. Dr. Rasmus provides examples of how both forms of exploitation exist today in 21st century and are in fact increasing, leading to more exploitation of labor, not less. Plus, how ‘secondary’ forms of exploitation are also becoming more widespread. (Next week: Part 3 on the arguments against Marx by mainstream economists and the weak analyses by those calling themselves contemporary ‘Marxist Economists’)

Listen to my Alternative Visions radio show of July 8, 2021 for the first of a three part series on what Marx really said, as opposed to what contemporary economists (marxists & non-marxist) claim he said. (This series follows the preceding three weeks of shows which explained how Keynes’ economics were not ‘Keynesian’ economics)

To listen to the Part 1 of Marx’s economics, GO TO:

https://alternativevisions.podbean.com/e/alternative-visions-marx-s-economics-vs-marxist-economics-part-1/

SHOW ANNOUNCEMENT

Dr. Rasmus continues his analysis of three great economists (Keynes, Marx, Smith) in today’s first of 3 part series on ‘Marx’s Economics’. What are the origins of Marx’s economic thought? How it critiqued classical economics before him, while borrowing and adapting concepts from the classicals. What were the original contributions of Marx’s economics, conceptually and otherwise. Why Marx is about long run, supply side evolution of capitalist economy and the possibility of eventual breakdown of the system (and not about explaining recessions or depressions). Marx’s great innovations in quantifying the labor theory of value and explaining how and why capitalism evolves fundamentally by means of exploitation of labor. (Next week: contemporary examples why exploitation of labor is intensifying in both absolute and relative terms in the USA over at least the last 40 years. What Marx could not see in the evolution of capitalism in the 21st century).