James Madison: “We are free today substantially but the day will come when our Republic will be an impossibility. It will be an impossibility because wealth will be concentrated in the hands of a few.”
The tax cut has now been shown the very scam I outlined it to be in 2017. Debt is soaring and so are debt financing obligations. The CBO estimated that the US will have to add $12 trillion in debt over the next 10 years. As growth estimates for GDP keep being revised downward into 2019 and 2020 there is zero evidence that the tax cut has added anything but a 2 quarter temporary bump to GDP, but the financial consequences will linger for years to come. The promises of resulting investments were of course lies:
“The Trump administration’s $1.5 trillion cut tax package appeared to have no major impact on businesses’ capital investment or hiring plans, according to a survey released a year after the biggest overhaul of the U.S. tax code in more than 30 years.
The National Association of Business Economics’ (NABE) quarterly business conditions poll published on Monday found that while some companies reported accelerating investments because of lower corporate taxes, 84 percent of respondents said they had not changed plans. That compares to 81 percent in the previous survey published in October.
The White House had predicted that the massive fiscal stimulus package, marked by the reduction in the corporate tax rate to 21 percent from 35 percent, would boost business spending and job growth. The tax cuts came into effect in January 2018.”
So horrific is the debt explosion that “deficits continue to blow out,” said Brian Edmonds, head of interest-rates trading at Cantor Fitzgerald in New York. “We are going to see more and more supply.”
The Treasury’s total net new issuance in 2018 amounted to $1.34 trillion, more than double the 2017 level of about $550 billion. In 2019, it will be $1.4 trillion, with $1.11 trillion from more coupon-bearing debt and the rest in bills, according to forecasts from Steven Zeng of Deutsche Bank. Annual new issuance will range from $1.25 trillion to $1.4 trillion over the next four years, he says.
The fiscal 2018 U.S. budget gap hit a six-year high of about $780 billion, and the Congressional Budget Office forecasts it will reach $973 billion in 2019 and top $1 trillion the next year. Over the next decade, the U.S. government will spend about $7 trillion just to service the nation’s debt, according to the CBO”.
And guess what happens to discretionary spending when $7 trillion go to service the debt? No cuts to its largest line item, the military, oh no, they’ll cut benefits, social programs, etc. someone has to pay for it.
Indeed Larry Kudlow is already laying it all out there following the now familiar script:
Step 1: Bullshit people with 'tax cuts pay for themselves'
Step 2: Implement tax cut for the top 1% & corporate donor class
Step 3: Watch deficit & debt blow up
Step 4: Make the rest pay for it with services & benefits cuts
Step 5: Demand bailouts during the next recession https://t.co/pAYj7Lh1ip
— Sven Henrich (@NorthmanTrader) January 29, 2019
And the rest of America keeps getting screwed with little real wage growth and exploding debt obligations.
So yea Ray Dalio is right in pointing out the obvious: Capitalism is not working for the majority and it hasn’t in a long time. People may be inclined to blame the current administration for these problems, but they are only doubling down on the same script that has been at play since the early 80s. Nothing has changed in trend, only the actors keep changing.
And nothing will change until this country engages in an informed, fact based debate (in this political climate? Best of luck) on the causes and consequences of our current form of capitalism. Unfortunately those benefitting the most from the current structure have little incentive to change it unless the consequences will force them to. By that time it may be too late.
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