Jack Rasmus

(This article was published May 7 in TelesurTV, English Edition)

With his win last week in Indiana’s Republican primary, it appears increasingly likely that Donald Trump will now be the Republican nominee to run for president. However, Republican party elites are coming around only slowly to that prospect and are still having a hard time accepting that reality. They could still “shoot themselves in the foot,” as the saying goes, by engineering an 11th hour contested nominating convention. Not likely, but still possible.

Republican Elite Still Undecided about Trump

Or they could accept Trump as the nominee, and withhold their financial support beyond just a token commitment, and instead focus on retaining control of the Senate and US House of Representatives.

Or, they could do what the Democratic party leadership did in 1972, when the Democrat party elite faced a grassroots populist revolution from below in the form of the George McGovern’s challenge to party leaders and McGovern’s eventual winning of the 1972 Democratic party nomination. That is, just as ex-president Lyndon Johnson and other high level Democrat party leaders quietly threw their support behind McGovern’s Republican opponent at the time, Richard Nixon, in the 1972 election, key leaders of the Republican party establishment could indirectly support Trump’s opponent in 2016. They could support Hillary, in other words.

The Republican party elite is quite capable of doing that in Trump’s case. A growing number of Republican party leaders are already coming to believe that Hillary is not all that bad an option for them. More Republican billionaires are considering the same. For example, the notorious Koch brothers, ultra-conservative multi-billionaires in the US, have already signaled publicly they could support Hillary if Trump becomes the Republican nominee. And Hillary’s husband, Bill, is reported to be aggressively courting with some success-other billionaire Republicans, seeking money and support for Hillary in exchange for what in return one can only guess.

The Trump-Ryan Exchange

That the Republican party leaders have still not decided what to do about Trump was reflected in the past week’s verbal exchanges between Trump and Republican U.S. House Speaker Paul Ryan, one of the top leaders of the party. Last month Ryan was clearly being discussed by the “insiders” of the party as the Republican nominee if Trump failed to get the nomination on the first ballot at the convention, and there was a need to select a candidate other than Trump. Ryan was at the top of that list.

Ryan’s initial public statement after Trump’s opponents, John Kasich and Ted Cruz, dropped out of the race this past week was that he, Ryan, could not yet support Trump’s policies or his nomination. Nor would he meet with him. Ryan was clearly speaking on behalf of the rest of the Republican establishment. They were probably testing Trump. Would he come to them and tell them what they wanted to hear, supporting free trade, cutting social security, providing more tax cuts for big business, repeal Obamacare, etc. Refusing to be upstaged by Ryan, however, Trump quickly retorted publicly that he was not ready to support Ryan’s policies either, and was not interested in meeting with Ryan in any event. In short, the Trump-Republican leadership relationship remains fluid, and it is not yet clear what the Republican elite has decided to do with Trump, their presumptive party nominee now that Kasich and Cruz dropped out.

Trump As ‘Outside the Outsiders’

What the Trump-Ryan exchange this past week reflects is that Trump never loses an opportunity to position himself ‘outside’ the two party system, including his own Republican party. U.S. presidential candidates typically like to run as “Washington outsiders” in U.S. presidential elections. Blame all the problems of the country on the “insiders,” i.e. the politicians in Washington. That was Cruz’s strategy, even though he himself was a Washington “insider” as a Senator. But Trump “out-Cruzed” Cruz in the primaries and went one step further, positioning himself as outside the two party system itself, not just the Washington establishment. It’s what voters wanted to hear.

In this year’s election, that’s a theme that has great appeal whether on the left or the right: attack the party system itself as corrupt and non-responsive to average Americans’ interests, not just the Washington establishment. The unresponsive party system has become a kind of proxy for an unresponsive political system itself, which more voters are coming to think is basically corrupt, both politically and economically, undemocratic, and increasingly disregarding of the needs of the majority of U.S. middle and working class households. The parties are only concerned about the interests of bankers, corporations, and the wealthiest 1 percent.

A majority of American voters — on both the left and the right — are increasingly fed up with both political parties. That has become a U.S. voter “hot button” that Trump discovered early in the campaign and has never lost an opportunity to push. Ryan and the rest of the Republican party establishment haven’t quite figured that out yet. They keep playing into Trump and he wastes no opportunity to “push the button” and attack them in return as representatives and reflections of a system that is no longer responsive to average Americans. Sometimes Trump will even bait one of them, charge them with having done great harm to U.S. national security by attacking Iraq when there was no proof of weapons of mass destruction there, as in the case of Trump’s accusation aimed at former president, George W. Bush; or draw out former Republican presidential candidate, John McCain, questioning his former Vietnam prisoner of war status; or some other party “elder” who was previously considered untouchable.

Every time Trump attacked a member of the Republican party establishment — whether Jeb Bush, Cruz, Rubio, or even party leaders not running against him like John McCain, Lindsey Graham, or others — he was de facto attacking the Republican party and its leaders who, with their Democrat counterparts, represent a failed party system in the mind of the U.S. voter. The Republican party elites could not — and still do not — understand why Trump is doing this. But Trump and the voters understood. And every time they criticized Trump in return for his attacks, he comes back at them declaring them part of a corrupt party system. Their criticisms don’t weaken Trump; they strengthen his appeal. And the more abusive of them Trump becomes, the more it resonates with U.S. voters.

Echoes of a Past Election

There are a number of “echoes” of past U.S. elections in this year’s U.S. election. In a number of important respects, Trump’s appeal is reminiscent of Reagan’s back in 1980. Not because their policies are similar. But because of their unabashed attack on what they proclaim is a failed political establishment. Reagan of course was pointing at the Democrats, but also indirectly at the ‘liberal’ Republican establishment in control of that party at the time. Trump attacks both and appeals directly to voters outside both the party structures.

Trump’s appeal should not be underestimated by progressives or liberals. Trump cannot be simply disregarded as “crazy” or some kind of fascist, the latter charge only revealing how little they understand fascism let alone Trump. It is true that Trump is more brash, crude, and outlandish in his public statements and his pandering to the ignorant ultra-conservative base in the US, when compared to Reagan. All that difference in tone reflects, however, is the general deterioration of U.S. public and political discourse in recent decades. Progressives and liberals today, who were not around in 1980 to experience the 1980 election, should know that Reagan in 1980 was no less “shocking” for the time with some of his extreme positions and proposals.

One of the several things that are unique in this 2016 electoral cycle is that a majority, if not a big plurality, of American voters are becoming increasingly fed up with the two party system — which is perhaps better described as two wings of a single Corporate Party of America system. Both wings, Republican and Democrat, have been flapping in unison the past 36 years, both delivering neoliberal economic policies that have been devastating average Americans’ standard of living, while enriching the wealthiest 1% households and their corporations to an obscene degree.

As a recent study by University of California, Berkeley professor, Emmanual Saez, has revealed using IRS data: no less than 97% of all the net gains in national income since 2008 have been captured by the wealthiest 1 percent households. That compares to 65 percent captured by the same during 2000-2008, and 48 percent captured in 1992-1999.

It may be the two party (aka two wings-single party) system today is the target of U.S. voter wrath in this particular election. But it may also be that the party system itself is a proxy for a growing, deeper discontent with the system itself that could eventually manifest more quickly than some think. It is not coincidental that in polls nearly half of young workers in the U.S. today speak sympathetically about, or identify in some way, with Socialism. They may not have a clear or historical understanding of the term, but to them it means “anything but the present” in some fundamental way.

Jack Rasmus is author of ‘Systemic Fragility in the Global Economy’, Clarity Press, January 2016, and the forthcoming ‘Looting Greece: An Emerging New Financial Imperialism’, Clarity Press, July 2016. He blogs at jackrasmus.com.

To listen to Dr. Rasmus’s analysis and comment on most recent US Jobs and wage numbers, released today by the Labor Dept. Go to the ‘Alternative Visions’ show on the Progressive Radio Network at:

http://prn.fm/category/archives/alternative-visions/

or:

http://www.alternativevisions.podbean.com

SHOW ANNOUNCEMENT:

Jack comments on today’s US job creation numbers for April, which show a significant decline in new jobs created, to 160,000, compared to previous months. Some problems with how jobs are calculated are explained, including how new business creations, missing labor force, and the US labor department surveys often fail to account for jobs accurately or timely changes. Recent wage gains articles in the mainstream press are then challenged as well. Jack explains the differences in wages as a share of national income, total compensation, average hourly earnings, and average hourly wages all have their limits as indications of how American workers are actually doing in terms of take home pay after inflation. Economic Policy Institute studies show median worker real earnings in the US have been declining every year since 2010. Gains in wages have been skewed to the top 10%, pulling up ‘averages’ which are not an accurate indicator of wage income declines for the US working class. The show concludes with a review of global economic developments, including growing splits among economic elites in Europe and in Japan, as their economies continue to languish despite QE and negative rates. And how China continues to struggle with bringing its shadow banks and speculators under control.

(The following article was published April 30, 2016, by TelesurTV media. For more audio commentary, listen to the Alternative Visions radio show, of April 29, listen below this blog entry)

This past week the U.S. government announced the country’s economy rose in the January-March 2016 at a mere 0.5 percent annual growth rate. Since the U.S., unlike other countries, estimates its GDP based on annual rates, that means for the first quarter 2016 the U.S. economy grew by barely 0.1 percent over the previous quarter in late 2015.
Growth this slow indicates the US economy may have “slipped into ‘stall speed’, that is, growth so weak that the economy loses enough momentum and slides into recession”, according to economists at JPMorgan Chase.

Has the U.S. economy therefore come to a halt the past three months? If so, what are the consequences for a global economy already progressively slowing? What will an apparently stagnating US economy mean for Japan, already experiencing its fifth recession since 2008? For Europe, stuck in a long term chronic stagnation? And for emerging market economies, struggling with collapsing commodity prices and currencies, rising unemployment, and long term capital flight trends? Once heralded as the only bright spot in the global economy, the US economy now appears to have joined the slowing global trend.

Some Interesting Trends

Last quarter’s 0.5 percent U.S. GDP may indicate the nation’s economy is even weaker than it appears. The economy of the United States’ recent 0.5 percent growth rate is the latest in a steady declining U.S. GDP growth trend over the past year. In the previous fourth quarter 2015, the US economy grew 1.4 percent, which was down from the preceding quarter’s growth of 2 percent and before that 3.9 percent. So the U.S. economy appears to be slowing rapidly over the past year.

Over an even longer period of more than eight years, since the previous peak growth in late 2007, the U.S. economy has grown by a cumulative total of only 10.1 percent. That’s a paltry annual growth of only 1.2 percent a year on average for the past 8+ years.

But even those figures are overestimated. In 2013, the U.S. redefined the way it estimated GDP, adding categories like R&D expenses and other intangibles that artificially boosted U.S. GDP estimates simply by redefining it. That “economic growth by redefinition” raised GDP by around 0.3 percent annually, and in dollar terms by roughly US$500 billion annually. So the real U.S. GDP may be actually growing by less than 1 percent on average per year since 2007; and during the most recent quarter, January-March 2016, the economy may not have grown at all, but may have stagnated, collapse, and come to a halt.

Behind the Wizard’s Curtain

The media and press like to define recessions as two consecutive quarters of negative GDP growth. Actually, U.S. economists tasked with declaring when a recession has begun or has ended don’t rely totally on GDP estimates, which are notoriously inaccurate and have become increasingly so, given U.S. and other governments’ penchant for changing how they define GDP.

Redefining GDP to boost the appearance of growth is not just a problem in the US in recent years. For example, there are few independent research sources that think China is growing at its officially announced 6.8 percent GDP rate. To note but a couple, both Capital Economics and Lombard Street research estimate that China’s GDP is growing at only around 4-4.5 percent based on close examination of other indicators like electricity usage, power generation, local transport volumes, and so forth. In recent years India officially nearly doubled its GDP overnight by redefining it. So did Nigeria. India bank researchers, whom this writer has talked to, say they have a rule of thumb: take the official government GDP rate and half it and that’s probably close to India’s actual GDP. In Europe, a number of economies, including Britain, which have been desperate to raise their GDP in recent years, now include drug smuggling and prostitution services in their estimates of GDP. How they come up with such estimates and the pricing of such services is, of course, interesting.

Not satisfied with the media-press definition of a recession as two consecutive quarters of negative GDP, US economists at the National Bureau of Economic Research, who are tasked with declaring the beginning and end of a recession, look at various economic indicators — like industrial production, retail sales, exports-import trends, and other sources. A recession may occur in just one quarter; or may require more than two.

Looking at these other indicators for this past January-March 2016 period, the US economy appears even more likely headed for a recession and sooner rather than later.

US industrial production (manufacturing, mining and utilities) declined at an annual rate of -2.2 percent this past quarter, after having declined -3.3 percent the preceding quarter. Industrial production has fallen six of the last seven months. US industrial capacity is now at its lowest point since 2010.

Business investment is another trouble spot. Investment in business structures fell by -10.7 percent and investment in new equipment by -8.6 percent, the latter the biggest drop since the 2007-09 recession. Business inventories rose barely, by the smallest amount in two years, continuing a slowing trend of the past nine months.

And what about consumption, which constitutes about two thirds of the total US economy? US consumer spending has been growing at an average monthly rate of only 0.1 percent. Retail sales, the largest element of consumer spending, has fallen every month on average during the quarter. After having sustained retail sales in previous years, auto sales, a large component of retail sales, declined for the second consecutive quarter during the January-March period. The outlook for U.S. consumer spending recovery is also not too bright. A recent Gallup poll reported that 60 percent of those interviewed indicated the U.S. economy was “getting worse.” Reflecting the poor demand for consumer goods, U.S. consumer prices now hover on the brink of deflation, falling at an average monthly rate of -0.1 percent for the quarter.

Exports are declining, residential housing construction recently plummeted. In other words, not many of the economic indicators that comprise GDP show a promising picture. GDP should probably be even lower than the recently reported 0.5 percent annual and 0.1 percent quarter to quarter growth rates. The U.S. economy has obviously “stalled.” But it’s not the first time. In fact, it’s the fifth time it has since the official end of the last recession in June 2009.

What’s a Relapse?

The performance of the US economy this past January-March, a trend that appears is continuing into April, represents what this writer has called an ‘economic relapse’. A relapse is a collapse of economic growth for a single quarter, to near zero or even negative growth.
The U.S. economy has experienced now five such single quarter relapses since the 2007-09 recession was officially declared over. The economy collapsed to 0.1 percent in early 2011, to 0.2 percent in late 2012, declined again by -2.2 percent in 2014 and collapsed to 0.2 percent in 2015.

Relapses are the consequence of “epic” recessions such as occurred in 2007-09, which are typically characterized by short, shallow recoveries that slip repeatedly into periodic bouts of renewed stagnation. They are the result of near total reliance on central bank monetary policies that are designed to boost stock, bond and other financial markets — and thus the incomes of rich investors — but which fail to generate a sustained real economic recovery. Fiscal policies designed to stimulate consumption and good paying jobs are rejected. That almost perfectly describes U.S. economic policy the past eight years.

Politicians Wearing Rose-Colored Glasses

Despite the facts, U.S. government politicians and Federal Reserve bank officials continue to run around declaring that the U.S. economy is performing well. They like to cite the 200,000 jobs allegedly created in recent months. But a closer examination shows the jobs being created are part time, temp, contract, low paid, no benefit service jobs. Jobs that generate no overall wage increase for the economy and no real income gains for working people.

Young workers 30 years old or less are especially hard hit by this “‘well performing US economy.” A recent study by the Center for American Progress, for example, showed that 30 year old workers earn today the same pay, adjusted for inflation, that 30 year olds earned back in 1984.
Despite all that, President Obama continues to tour the country complaining that he doesn’t get enough credit for bringing the US back from the worst recession since the 1930s depression. He should tell that to the millions of millennial young workers, with low paid crappy service jobs, with no medical insurance, having to live at home with relatives because they can’t afford to rent an apartment, loaded with debt and with no prospects for meaningful change on the horizon. No wonder they’re rallying around Bernie Sanders, who continues to capture 85 percent of their votes in the presidential primaries. Obama (and Hillary) will have a hard time convincing them “all is well” — and an even harder time getting them to vote Democrat in the coming election in November.

Jack Rasmus is author of the recent, 2016 book “Systemic Fragility in the Global Economy,” by Clarity Press, soon translated into a Chinese edition, and the forthcoming June 2016 book, “Looting Greece: The Emerging New

For my analysis (and confirmed prediction) that the US economy would collapse to virtual zero growth this past quarter, listen to my April 29 Alternative Visions radio show, at:

http://prn.fm/category/archives/alternative-visions/

or at:

http://www.alternativevisions.podbean.com

SHOW ANNOUNCEMENT:

Dr. Jack Rasmus dissects the latest report on US economic growth for first quarter 2016, showing a mere 0.5% annual GDP growth rate. The collapse confirms his prediction of early January 2016, and confirms the US economy remains on a ‘stop-go’ trajectory, having again slipped into a ‘stall speed’ that raises risks of US sliding into recession. Rasmus explains the longer term trends behind the 0.5%, and why the US 0.5% annual growth rate, when compared to the previous quarter, is an even lower 0.1% GDP or less. Averaging over 8+ years, the US economy has grown only 10.1%, or barely 1%, or even less per year after adjustments. Jack explains how the US and other countries have been redefining GDP to help the appearance of growth—including China, India and Europe as well as US. The more fundamental trends behind 1st quarter US GDP are then reviewed–including business investment, industrial production, exports, consumption, and prices, all of which suggest the US economy nearing the brink of another recession. Why the US economy keeps ‘relapsing’ periodically since 2009 is discussed, as well as the likely impact of the 1st quarter US slowdown on other global economies and markets. (For more information, listeners should read Jack’s recent Telesur media article on US GDP posted on the PRN network website—‘Is the US Economy Heading for Recession?’)

(This article was published by the author in Telesur Media English Edition, April 17, 2016)

Last August 2015, after eight months of intense negotiations with Europe’s Troika financial institutions—the IMF, European Central Bank, and European Commission—the Greek Government capitulated to the Troika’s demands imposing more austerity on Greece and its people in exchange for another $98 billion in additional loans.

The $98 billion did not represent economic assistance to Greece, to stimulate its economy, but was earmarked almost exclusively to pay back interest to the Troika, Europe banks, and Europe investors for prior loans made to Greece in 2012, 2010, and before. But while the Greek people would see little real benefit, they would have to pay the price. In exchange for the $98 billion in new credit, the August 2015 debt restructuring deal required Greece to even further cut pensions, axe more government jobs and cut wages, raise taxes, accelerate the sales of public works (ports, airports, utilities, etc.) to private investors, and to in effect turn over Greek banks to the Troika and its northern Europe banker and investor friends.

To ensure Greece would not renege on the August 2015 deal, it would now also have to submit to vetoes by Troika representatives sent to Greece to oversee virtually all policy decisions made by Greece’s democratically elected Parliament or local governments. The Troika last year thus tightened its grip on Greece both politically and economically to ensure it would receive debt payments from Greece no matter how harsh the austerity terms.

The Greek government may have thought it had a debt deal, albeit a dirty one, last August 2015; but recent developments are now beginning to reveal it was only temporary. Worse is yet to come. The Troika grip on Greece is about to tighten still further, as revelations in recent weeks show Troika plans to renege on last year’s terms and demand even more draconian austerity measures. Leading the Troika attack on Greece once again is the International Monetary Fund, the IMF, one of the Troika’s three institutional partners.

IMF Secret Plans to Impose Further Austerity on Greece

This past April 2, 2016, Wikileaks released transcripts of a secret teleconference among IMF officials that occurred on March 19. In it, leading IMF directors expressed concern that discussions between Greece and the IMF’s Troika partner, the European Commission, on terms of implementing last August’s deal were going too slowly. The Eurozone and Greek economies have been deteriorating since last August. Still more austerity would thus be needed, according to the discussions among the IMF participants in the teleconference. And to get Greece to agree, perhaps a new ‘crisis event’ would have to be provoked.

The original August 2015 deal called for Greece to introduce austerity measures that would result in a 3.5% annual GDP budget surplus obtained from spending cuts, tax hikes, and public works’ sales needed to make the debt repayments to the Troika. But the IMF’s latest forecast for 2016 is that Greece in 2016 would have a -1.5% GDP budget deficit, not a 3.5% budget surplus. And 2015, for which numbers are not yet available, was probably even worse. Getting from -1.5% or worse to 3.5% was thus virtually impossible, according to the IMF discussants on March 19, and therefore additional austerity measures were necessary.

According to the IMF, the additional austerity would have to occur in the form of ‘broadening the tax base’—a phrase typically associated with making households with lower incomes pay more taxes instead of just raising tax rates on the top income households. The IMF thus rejected taxing the rich further, and instead taxing middle and working classes more. In addition, still more pension cuts would also prove necessary, as well as other measures.

The IMF secret teleconference further revealed that the IMF was increasingly concerned that the European Commission, in the midst of discussions with Greece on the details of the implementation of the August deal with Greece, might agree prematurely to grant some kind of ‘debt relief’ to Greece. The IMF was strongly opposed to ‘up front’ debt relief. All talk of debt relief should be postponed for at least another two years, according to the IMF’s secret discussions.

The private teleconference also revealed the IMF was growing increasingly concerned that Greece’s major debt payment to the Troika due this coming July 2016 might not be paid. The default on the payment would come within weeks of a possible United Kingdom exit (Brexit) from the European Union, scheduled for a vote in the UK on June 23, 2016. If the UK exited, and Greece could not pay, it might raise renewed interest—the IMF feared—in a Greek exit (Grexit) as well as a UK ‘Brexit’. The IMF’s March 19 teleconference therefore raised the idea that further austerity should be considered and proposed on Greece and quickly, before the June 23 UK ‘Brexit’ referendum in that country.

The IMF’s April 15, Press Conference

The ‘firestorm’ over the leak of the IMF’s plans for new and more austerity for Greece, prompted public responses by Greece, as well as a clarifying press conference by the IMF’s European directors on April 15, 2016.

Greece’s prime minister, Alexis Tsipras, publicly replied, noting Greece was already undertaking “an ambitious reform of income tax and a major overhaul of the Greek pension system”—the former providing a revenue of 1% of GDP and the pension reform and even greater 1.5% by 2018. With pensioners carrying the greatest burden of the austerity terms, why should the very rich be given relief with more taxation imposed on the middle and working classes by ‘broadening’ the tax base—i.e. making it less progressive, Tsipras inquired?

Wolfgang Schaueble, hard line German finance minister, who led the forces imposing even more austerity on Greece in August 2015, responded that debt relief was “not necessary” and ruled out any debt relief whatsoever for Greece, in 2018 or at any time. Schauble added that IMF refusal to participate in the August 2015 Greek debt deal unless the terms of the deal were changed to suit the IMF (which did not sign the deal as yet), would collapse the 2015 deal altogether.

In the IMF’s press briefing of April 15, 2016 Poul Thomsen, head of the IMF’s European department, responded that the IMF could not participate in the bailout without debt relief in some form, but left the door open as to what debt relief actually meant. Thomsen repeated his proposal to “broaden the tax base” and not raise taxes further on the rich.

Behind the apparent Schauble vs. IMF disagreement is the implication that ‘debt relief’ would require some kind of what is called ‘haircut’ and reduction in interest and/or principal for those investors holding bonds issued by the Troika on Greek debt. That’s what Schauble and European bankers don’t want. The IMF thus assured that debt relief did not require ‘haircuts’.

The Meaning of the IMF’s New Attack on Greece

What the new developments reveal is that fractures are emerging within the Troika and the Euro elites in general over the Greek debt deal of last August, as Europe’s economy continues to falter. New crises have emerged in Europe, including the cost of refugee settlement and the great economic uncertainty associated with the possible UK ‘Brexit’ this June. Europe’s central bank monetary policies are also clearly failing in the face of a steadily slowing global economy.

At the same time, the IMF itself is facing additional challenges supporting an even worse economic crisis in the Ukraine, which it has also committed to bail out but which is collapsing faster than predicted. Meanwhile, on the horizon are growing stresses in emerging market economies that have accumulated $50 trillion in additional debt since 2009, which threaten to lay claims on the IMF in the not too distant future. The IMF is no doubt looking over its shoulder at even greater potential challenges than Greece.

In short, the deteriorating conditions in the global economy are beginning to converge, and the Troika, Europe, IMF are all feeling the heat as the economic temperature rises. Another debt crisis in Greece is inevitable. But it may occur at a juncture at which it appears the least of the economic problems facing the global economy.

Jack Rasmus is author of the recent book, ‘Systemic Fragility in the Global Economy’, Clarity Press, January 2016, and the forthcoming, ‘Looting Greece: The Emerging New Financial Imperialism’, Clarity Press, June 2016. He blogs at jackrasmus.com.

To listen to this Alternative Visions Radio show, host Dr. Jack Rasmus, interview of Pablo Vivanco, Director of Telesur Media TV, Quito, Ecuador, on eyewitness events in South America, go to:

http://prn.fm/category/archives/alternative-visions/

Or go to:

http://alternativevisions.podbean.com/

SHOW ANNOUNCEMENT:

Jack Rasmus welcomes Pablo Vivanco, political commentator in Quito, Ecuador to provide a latest update on the right wing economic and political forces in ascendance in South America, focusing on the latest developments in Argentina, Brazil and Venezuela. As the economic crisis deepens throughout the region due to forces beyond the control of progressive governments in the region—i.e. falling oil and commodity prices, collapsing currencies, capital flight, slowing global economy—right wing forces (with assistance of US government and elite) have launched in the past year an intense attack throughout South America to reverse the tide of progressive governments that came to power since 2000. Vivanco describes the strategies and tactics, economic and political, currently being employed by the nascent Right Wing Offensive, including efforts to depose recently duly elected governments in Venezuela and Brazil and the launching of intense austerity measures, shutting down of independent media, mass layoffs, while rewarding of global bankers and investors by the new right wing government of billionaire, Mauricio Macri, in Argentina. New popular movements of resistance are described by Vivanco, as are efforts of the new right wing forces and governments to stifle independent journalists and media outlets throughout the region.

Biography: Pablo Vivanco is currently Director of the English Division of Telesur Media in Latin America, a consortium of progressive Latin American countries. A former radio host of ‘Voces Latinas’, he is a long time activist in movements for progressive change in Latin America, living and working in Quito.

For timely reports in English on daily Latin American political events, go to: http://www.telesurtv.net/english/index.html

As U.S. presidential candidate Bernie Sanders has gained momentum in the presidential primaries, the attacks on his proposed economic programs have grown proportionally.

Leading the assault have been supporters of Hillary Clinton, especially Paul Krugman, and other “stars” of the economics profession like Christine Romer, Laura Tyson, Alan Kreuger, and Austan Goolsbe — all of whom have served in past Democratic administrations and are no doubt looking to return again in some capacity in another Clinton administration. Sometimes referred to as the “gang of four,” in recent weeks all have been aggressively attacking Sanders’ economic programs and reforms. However, the target of their attacks, which began in February and continue today, is Sanders’ proposals for financing a single-payer universal health care program by means of a financial transactions tax.

The irony of the Krugman/Gang of Four attack is that Sanders’ proposals represent what were once Democratic party positions and programs — positions that have been abandoned by the party and its mouthpiece economists since the 1980s as it morphed into a wing of the neoliberal agenda.

Sanders’ critics have been especially agitated that their own economic models are being used to show that Sanders’ proposals would greatly benefit the vast majority in the U.S. But debating Krugman and his neoliberal colleagues on the grounds of their faulty economic model — a model that failed miserably under Obama to produce a sustained, real economic recovery in the U.S. — is not necessary. Their model has been broken for some time. Some straightforward historical facts and recent comparative studies are all that’s need to show that a real financial transaction tax can generate more revenue than is needed to fund a single-payer type program. Here’s how.

A Real Financial Transaction Tax

Let’s take four major financial securities: stocks, bonds, derivatives, and foreign currency purchases (forex).

A European study a few years ago involving just 11 countries, whose collective economies are about two-thirds the size of the U.S. economy, concluded that a miniscule financial tax of 0.1 percent on stocks and bonds plus a virtually negligible 0.01 percent tax on derivatives results in an annual tax revenue of US$47 billion. In an equivalent size U.S economy that would be about US$70 billion in revenue a year.

Wealthy investors’ buying of stocks and bonds is essentially no different than average folks buying food, clothing or other real ‘goods and services’. Why shouldn’t investors pay a sales tax on financial securities purchases? In the U.S., average households pay a sales tax of 5 percent to 10 percent for retail purchases of goods and many services. So why shouldn’t wealthy investors pay a similar sales tax rate for their retail financial securities’ purchases?

A 10 percent “sales tax” on stock and bond buying and a 1 percent tax on derivatives amounts to a 100x larger tax revenue take than estimated by the European study. The US$70 billion estimated based on the European study’s 0.1 percent stock-bond tax and 0.01 percent derivatives tax yields US$7 trillion in tax revenue with a 10 percent and 1 percent tax on stocks and bonds and derivatives.

Too high, Krugman and the Gang of Four would no doubt argue. Wealthy stock and bond buyers should not have to pay that much. It would stifle raising capital for companies. Okay. So let’s lower it to half, to 5 percent tax on stocks and bonds and 0.5 percent on derivatives. That reduces the US$7 trillion tax revenue to a still huge US$3.5 trillion annually.

Still too high? Okay, half it again, to a 2.5 percent tax on stocks and bonds and a 0.25 percent on derivative trades. That certainly won’t discourage stock and bond trading by the rich (not that that is an all bad idea either). The 2.5 percent and 1 percent tax still produces US$1.75 trillion a year in revenue.

But what about an additional financial tax on currency trading, like China is about to propose? Currency, or forex, trades amount to an astounding US$400 billion each day! Not all that is U.S. currency trading, of course. However, the U.S. dollar is involved in 87 percent of the trading. A 1 percent tax on U.S. currency trades conservatively yields approximately US$3 billion a day. Assuming a conservative 220 trading days in a year, US$3 billion a day produces US$660 billion in financial tax revenue from U.S. currency financial transactions in a year.

US$1.75 trillion in revenue from stock, bonds, and derivatives trades, plus another US$660 billion in forex trade tax revenue, amounts to US$2.41 trillion in total revenue raised from a financial transaction tax of 2.5 percent on stocks and bonds, 0.25 percent on derivatives, and 1 percent on U.S. dollar to currency conversions.

So how much will that US$2.41 trillion a year cover is needed to fund a single payer-Medicare for All program in the US?

Paying for Single Payer Health Care

Nearly every advanced economy in the world provides a version of single payer health care to its citizens—except the U.S. On the other hand, no country spends as much on health care as the US. The UK spends 9 percent of GDP, Japan about 10 percent, France and Germany 11 percent, for example. The U.S., in contrast, pays 17 percent plus of its GDP on health care. Given that the most recent US GDP is about US$18 trillion a year, 17 percent of US$18 trillion equals just over US$3 trillion a year.

If the U.S. spent, like other advanced economies with single payer, about 10 percent of its GDP a year on health care, it would cost US$1.8 trillion instead of US$3 trillion a year. The U.S. would save US$1.2 trillion.

Where does that current US$1.2 trillion go? Not for health services for its citizens. It goes to health insurance companies and other “middlemen,” who don’t deliver one iota of health care services. They are the “paper pushers” who skim off US$1.2 trillion a year in profits that average returns of 20 percent a year and more. They are economic parasites, or what economists refer to as “rentier capitalists” who don’t produce anything but suck profits and wages from those who do actually produce something. They then used the US$1.2 trillion a year to buy up each other, expand globally, and deliver record dividend and stock buybacks for their shareholders.

In other words, a true financial transactions tax, that is still quite reasonable at tax rates of 0.25 percent to 2.5 percent, can pay for all of a single-payer health care program in the U.S. and still have hundreds of billions left over — US$641 billion to be exact (US$2.41 minus US$1.8 trillion).

That US$641 billion residual could then be used to better fund current Medicare programs. It could eliminate the current 20 percent charge for Medicare Part B physicians services and provide totally free Part D prescription drugs for everyone over 65 years. The savings for seniors over 65 years from this, and the tens of thousands of dollars saved every year by working families who now have to pay that amount for private company health insurance, would now be freed up with a single payer system, to be spent on other real goods and services.

A financial transaction tax and single payer program would consequently have the added positive effect of creating the greatest boost in real wages and household income, and therefore consumption, in US economic history. More consumer demand would mean more real investment.

Yes, there would be less spending by the wealth speculating in stocks, bonds, derivatives, forex and other financial securities. But so what? If rich and wealthy investors don’t like that, well then let them eat cake — or some other four letter word.

Jack Rasmus is author of the just published book, “Systemic Fragility in the Global Economy,” by Clarity Press, 2016. He blogs at jackrasmus.com.

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To listen to why Mainstream economists allied with the Democratic Party are attacking Bernie Sanders’ economic program–and Jack Rasmus’s defense and explanation how a financial transactions tax would more than pay for single payer-universal health care (Medicare for All)–listen to the March 25 Alternative Visions radio show. Go to:

http://prn.fm/category/archives/alternative-visions/

or go to:

http://alternativevisions.podbean.com/

SHOW ANNOUNCEMENT:

(Note: first half hour reviews the global economy. second half hour of show describes how a financial transactions tax pays for single payer with billions left over to expand social security Medicare)

Dr. Jack Rasmus explains how his version of a Financial Transaction Tax on stocks, bonds, derivatives, and currencies could raise far more than sufficient revenues to pay for a single payer-national health care program and still leave hundreds of billions to expand social security Medicare and other programs. In the second half of the show, Rasmus shows how a single payer system would save $1.2 trillion a year out of the current health care cost of $3 trillion today. Based on a tax study done in Europe in 2013, Rasmus shows a US financial tax of 5% on stocks & bond trades, a 1% tax on derivatives sold in the US, and 1% on non-government US currency sales raises $3.89 trillion a year, or about twice the revenues needed for a comparative single payer system. Rasmus then reviews and debunks the debates by neoliberal economists like Paul Krugman, and Clinton’s ‘gang of four’ economists, who have been attacking Sanders’ proposals for a financial tax and single payer health care. In the first half of the show, reviewing recent events in the global economy Rasmus addresses the fallout from the European Central Bank’s recent decision to expand its quantitative easing and negative interest rate programs and why they will fail; the growing default risk in the US energy junk bond markets; the preliminary agreements by Russia, Saudi Arabia and others to freeze oil prices; China’s continuing desperate moves to deal with the massive bad corporate debt problem; French retreats on introducing labor market reforms in response to mass demonstrations: the doubling in average prescription drug prices in the US: and why millennials (age 25-34) in the US now earn take home pay today in 2016 less than they did in 1984.

To listen to my March 11, 2016 Alternative Visions radio show on this topic, go to:

http://prn.fm/category/archives/alternative-visions/

or to:

http://www.alternativevisions.podbean.com

SHOW ANNOUNCEMENT:

Last month the Bank of Japan (BoJ) expanded its QE program and negative interest rates (NIRP) in a desperate attempt to reboost its stock market and Yen exchange rate. This past week the European Central Bank (ECB)went a step further, as both the ECB and BoJ continue to engage in ‘dueling QEs’ that are intensifying global currency wars and slowing global trade. ECB chairman, Mario Draghi, lowered the Eurozone’s negative rate on government bonds another notch, now to -0.4%. Reportedly half of all government bonds in Europe now trade at negative rates. In addition, the ECB raised its monthly buying amount from $66 billion to $88 billion, and now will buy corporate bonds as well. The move subsidizes Euro corporations, lowering their costs of borrowing and insurance (CDS) on bonds, a move to offload the $1.5 trillion in corporate non-performing loans in Europe. Jack Rasmus explains why this won’t have any effect on the Eurozone real economy but will temporary boost stocks and currency. Jack also reviews why global oil prices have risen recently to $40 a barrel, Japan’s official return to recession after doctoring GDP numbers last 3Q2015, China’s latest ‘mini-stimulus’, the US deepening control of Ukraine’s economy, and the significance of the ‘Socialist’ government in France new attack on eliminating the 35 hr. workweek, where 90% of all jobs created in 2015 were part time and temp, and the mass protests now emerging there. Jack concludes with brief introduction to his forthcoming May 2016 book, ‘Looting Greece: The Emergence of a New Imperialism’, and his next book out October 2016 entitled, ‘Central Bankers on the Ropes’, both from Clarity Press. (see his blog, jackrasmus.com and Clarity Press for more information).

With every televised U.S. presidential debate, listeners are fed a line of bull by candidates about how great previous United States presidents were and how the country needs to return to their policies in order to “make America great again!”

All that’s needed, the Republican candidates say, is to resurrect Reagan policies and today’s U.S. problems will be solved. “Vote for me, and I’ll return to Reagan and restore U.S. greatness,” we’re told.

With the Democrats, it’s a bit more subtle but the underlying message is the same. Under Hillary’s hubby, Bill Clinton in the 1990s, the U.S. created a record number of jobs, incomes were rising, the healthcare crisis was contained, and the U.S. had achieved a “new economy” of prosperity that would only improve further in the 21st century. Under Bill, we were on the right track. George W. Bush screwed it up by reversing course. All we need then is to get back to that “Clinton track” and good times will return again.

But what are the facts? Were Clinton policies a diversion from Reagan? A continuation? Worse?

About Incomes?

During Bill Clinton’s two terms in office, 1992-2000, 45 percent of all the income growth during the period went to the wealthiest 1 percent of families in the US, according to IRS data gathered by economist, Emmanuel Saez, of the University of California, Berkeley.

The S&P 500 stock index rose 234 percent, providing the wealthiest 1 percent households most of that 45 percent gain. Bill’s big tax cut handout to the 1 percent enabled that income growth by reducing capital gains taxation in 1997 from 28 percent to 20 percent. Executives’ direct pay also rose — on average from US$4.5 million in 1992 to US$11.1 million by 2000, for a 342 percent increase. CEO pay was equal to about 90 times the pay of the averaged paid worker; by the end of his second term, CEO pay had risen to more than 300 times the average worker’s pay.

How did the average worker do over the same period? Adjusted for inflation, in 1982 real dollars, average hourly pay rose by a paltry 5.8 percent over eight years. At the bottom of the work force, the minimum wage, measured in real terms, rose by a mere 4 cents an hour to US$5.50. The 5.8 percent and 4 cents an hour were more than offset by workers’ rising contributions to continue their pensions and healthcare insurance coverages.

Tax Rip-Offs

Apart from reducing capital gains taxes for wealthy stock and bond owners, Clinton exempted the top 10 percent households from tax hikes in 1993. Thereafter, in his big tax cut act of 1997, he raised the threshold for paying any estate tax, cut gift taxes (so the rich could give more to relatives), repealed the alternative minimum tax for small businesses and reduced it for larger corporations. Meanwhile, the effective corporate tax rate — i.e. the rate at which they actually paid a percent of their profits — fell from 18 percent in 1995 to 12 percent. In his second term, 1996-2000, no fewer than 63 percent of all corporations in the U.S. paid no corporate income tax whatsoever, amounting to a US$2.5 trillion tax windfall.

Income inequality trends, topical in the U.S. and the current 2016 presidential campaign today, actually accelerated under Clinton, and even more than under Reagan.

Job Creation

OK, so the rich got significantly richer on Bill Clinton’s watch. But at least U.S. workers were able to enjoy significant job creation, according to the Clinton camp.

Hillary and Democrats like to talk a lot about the jobs created in Bill’s second term. Admittedly, jobs were created, but they were mostly in low pay service occupations. Meanwhile, higher paid manufacturing jobs were being lost in the millions as a result of Bill Clinton free trade policies alone. Clinton proved an even fiercer “free trader” than Reagan. In 1993, he rammed through Congress legislation to expand the North American Free Trade Agreement (NAFTA) to include Mexico. One million, higher paid U.S. manufacturing jobs were lost due to NAFTA on Clinton’s watch, another 880,000 lost to China due to Clinton giving that country what is called “preferred nation trading rights” (PNTR), and another 1.2 million due to the U.S.’s exploding trade deficit in general — according to research by the Economic Policy Institute in the U.S. Corroborating the Institute, the U.S. Commerce Dept. in the 1990s estimated that 13,000 jobs are lost for every US$1 billion trade deficit — and that trade deficit rose from US$118 billion in 1993 to US$436 billion by 2000 under Bill Clinton.

Another problem with jobs during Bill’s term in office was the rise in what is called ‘contingent’ jobs, which means part time, temp, contracting, and other “alternative” forms of employment that typically pay 60 percent of full time regular jobs and very few benefits. Considering just part time and temp agency jobs, such low paid, tentative employment rose from about 22 million in 1995 to 27 million by 2000. In other words, when and if jobs were created on Bill’s watch, they were often low paid contingent jobs.

Healthcare and Health Insurance

Then there’s health care. The Clintons like to brag about how Hillary’s 1995 reforms, called “managed health care” (MHC), were successful in keeping healthcare costs down. Health care spending cost increase slowed a little in the 1990s. Instead of a 400 percent increase, as during the 1980s, health spending rose by only 60 percent from 1990 to 2000. However, that slower rate of increase was likely because the percent of corporations providing health insurance declined from 63 percent to 45 percent. Obviously, with 18 percent fewer companies offering health insurance, without coverage many workers had no choice but to forego spending on health care. The U.S. Census population survey shows that 31 million citizens lacked any health insurance in 1987. By 1998, this had grown to 44 million — a total which was then “redefined” by Clinton thereafter and reduced to “only” 39 million uninsured by 1999.

Pension Plans

Retirement benefits fared no better under Clinton. True pension plans, called Defined Benefit Plans, which guarantee retirement payments, were abandoned by the tens of thousands by companies in the 1990s. They were replaced by pseudo pensions called “401k” plans, under which workers may lose every penny of their contributions. As companies dropped defined benefit for 401k plans, enrollment in 401ks rose from 18 to 42 million workers . In addition, Clinton also allowed corporations to declare “pension contribution holidays,” during which they need make no mandatory contributions to their pension funds. Another Clinton move was to allow corporations to withdraw cash from their pension funds to cover 20 percent of their, the corporations’ share of the cost of health care insurance.

The Clinton campaign’s frequent claims today that Bill’s two terms in office were days of exceptional economic good times for U.S. workers is just plain false. On several policy fronts, Bill Clinton was actually worse than Reagan — especially with regard to free trade and benefits like health care and pensions. At best, Bill Clinton’s presidency and legacy therefore represents a continuation of Reagan’s — not a shift from his predecessor.

We shouldn’t expect anything less from Hillary — i.e. her continuation of Obama’s economic policies, which have brought very little benefit to U.S. workers while providing massive income shifts even more generous to the wealthiest 1 percent and their corporations.

During Bill Clinton’s term in office, 45% of all the income gains went to the wealthiest 1%. But under Barack Obama, 97% of all income gains went to the wealthiest 1%, according to IRS data. And Hillary says she wants to continue BO’s work as well as Bill’s.

Reagan, the Bushes, the Clintons, Obama–they’re all representatives of the two wings of the Corporate Party of America–aka Republicans and Democrats. Time to end the one party system in the USA don’t you think?

Jack Rasmus is author of the recently released book, “Systemic Fragility in the Global Economy,” Clarity Press, January 2016, which is available on Amazon, in bookstores, and from the publisher, Clarity Press.