Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Category Archives: Economics

Supreme Court’s Non-decision Expands Passenger Ridesharing Freedom

This article appeared online at TheNewAmerican.com on Thursday, April 27, 2017: 

By declining to hear an appeal, the Supreme Court on Monday essentially declared that rules protecting the taxi cartel in Chicago were null and void, thus expanding passenger freedom. As an attorney with the Institute for Justice (IJ), which represented Chicago Uber driver Dan Burgess, explained: “Today’s decision makes clear what [IJ] has said for years. The Constitution does not require [city] governments to stick with outdated protectionist regulations in the face of technological innovation.”

When Uber and other ride-sharing companies entered the Chicago market several years ago, they soon became a thorn in the side of the taxi cartel that had operated under protectionist rules dating back to 1937. Those rules

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Former Heritage Economist Stephen Moore Refutes CBO’s Doom & Gloom

This article appeared online at TheNewAmerican.com on Wednesday, April 26, 2017:

Stephen Moore by David Shankbone, New York City

Stephen Moore

The Heritage Foundation’s Distinguished Visiting Fellow Stephen Moore, now a CNN economics commentator, thinks the latest report from the Congressional Budget Office (CBO) is far too pessimistic. Instead, he believes that most of the nation’s fiscal problems can be solved just by prodding the economy.

The CBO report, “The 2017 Long-Term Budget Outlook,” assumed that little would change politically over the next 10 to 30 years, despite promises from President Trump that his policies would “make America great again.” It projected that the Baby Boomers would exhaust the resources of Medicare and Social Security, and then those costs would be shifted directly to the Department of the Treasury.

If nothing changes, said the CBO, the percentage of the national debt held by the public (pension plans, mutual funds, foreign governments, and wealthy individuals) would double over the next 30 years, which would “pose substantial risks for the nation.”

The problem is exacerbated, said the CBO, not only by an aging population demanding that the government keeps its promises to them, but also

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Trump Floats Trial Balloon on Tax Reform; Wants Feedback

This article appeared online at TheNewAmerican.com on Wednesday, April 26, 2017:

Initially referred to as a statement of general principles, the one-page summary of the Trump administration’s tax reform plan looked more like a trial balloon. Said the White House, the administration “will hold listening sessions with stakeholders to receive their input … [in order to] develop the details of a plan that … can pass both chambers.”

Reiterating Trump’s goals of growing the economy, creating millions of jobs, simplifying the tax code, and providing tax relief to middle-income families, the trial balloon as summarized would

lower the corporate tax rate from 39.6 percent to 15 percent, including Subchapter S or “pass-through” corporations;

 

reduce the number of individual income tax brackets from seven to three: 10%, 25% and 35%, depending on income;

 

double the standard deduction, currently at $6,300 for individuals and $12,600 for married couples filing jointly;

 

expand tax relief to families with child and dependent care expenses;

 

eliminate various tax breaks that apply mainly to the wealthiest taxpayers;

 

keep mortgage interest and charitable deductions while eliminating deductions for state income taxes paid;

 

repeal the Alternative Minimum Tax (AMT);

 

repeal the 3.8% ObamaCare tax that hits small businesses and investment income;

 

allow a one-time “tax holiday” for international corporations holding trillions overseas; and

 

eliminate tax breaks for special interests.

Trump’s Treasury Secretary Steven Mnuchin called it “the biggest tax cut and the largest tax reform in the history of our country,” while his Chief Economic Advisor Gary Cohn said the plan represented a “once-in-a-generation opportunity to do something really big.”

What’s really big is the potential deficits Trump’s plan could cause, with at least one critic estimating that it would result in $6 trillion in deficits over the next 10 years.

The underlying goal of the administration being pushed by Trump is that by cutting these tax rates the economy would awake from its slumber and start generating three percent annual rates of growth of the nation’s GDP. Although the Laffer Curve was not mentioned by Mnuchin or economist Stephen Moore (in his recent critique of the government’s economic outlook), it’s the same principle: lower tax rates to result in higher economic growth which will (in theory) result in higher taxes collected by the government.

The increase in the standard deduction is also designed to allow an estimated 27 million Americans who file a long form listing their mortgage interest and charitable deductions to use a “big postcard” instead. This “simplification” of the tax code has long been a stated goal of Trump as candidate and his administration after he was inaugurated in January.

Wednesday’s announcement is just the opening salvo in what promises to be a long war before anything reaches Trump’s desk. Senate Minority Leader Chuck Schumer is calling it a gift for the already-wealthy Americans who don’t need any more tax breaks. And Mnuchin referred to the Senate strategy of “reconciliation” that is likely to be needed to pass the Senate without Democrat votes. He noted that he hoped that the bill that finally passes Congress and is signed into law by the president will be permanent, but “if we have them for [just] 10 years, that’s better than nothing.”

Reconciliation would allow Republicans to pass it without a single Democrat vote, but would also cause the plan to expire in 10 years if it generates deficits. This is what happened to the tax cuts enacted under President George W. Bush. When the projected revenue growth didn’t meet expectations, his tax cuts for the most part were automatically ended.

The obstacles are substantial, including determined if futile resistance from Democrats and complaints from the energy industry which might see its depletion allowance deductions cut or removed in Trump’s final bill. Those details will be revealed in June and could also negatively impact heavily-indebted public utilities and cable companies that might see some loss of their interest deductions.

On the other hand, winners could include companies that are currently most negatively impacted by high corporate rates in force, including engineering and construction companies, food wholesalers, publishers, and retailers.

The old proverb applies as Trump’s trial balloon gets translated into specific language in the tax reform bill in June: “There’s many a slip ‘twixt the cup and the lip.” A newer one is this from Isaac Boltansky, an analyst at Compass Point Research and Trading, who has been following these events closely:

The sugar high of tax cut headlines could turn into a nagging headache once stakeholders return to the painstaking consideration of process and pay-fors.

Pew Research: Gap Between Promises and Assets Widens for State Pensions

This article appeared online at TheNewAmerican.com on Monday, April 24, 2017:

A RETIRED COUPLE FROM CALIFORNIA STOP TO FISH ...

After reviewing the investment results for 230 public pension plans for the last two years, Pew reported last Thursday that, despite strong recent stock market performance, the gap between liabilities (promises) and assets for those plans widened by 17 percent, to $1.4 trillion. Put another way, those plans should have nearly $4 trillion in assets to enable them to keep their promises. The latest data shows them with just over $2.5 trillion instead.

Said Greg Mennis, director of the project,

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Three Stock Market Indicators Spell Trouble for Pension Fund Managers

This article was published by The McAlvany Intelligence Advisor on Monday, April 24, 2017:

Warren Buffett speaking to a group of students...

Warren Buffett

Michael Lombardi is a bear. Canadian-born, Lombardi has been dishing out investment advice for decades. He is getting nervous. And so should pension fund managers trying to make up for lost time.

In his March newsletter, Lombardi looked at the Warren Buffett Indicator:

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An Inside Look at Venezuela’s Collapse

This article was published by The McAlvany Intelligence Advisor on Friday, April 21, 2017: 

Português: Brasília - O chanceler da Venezuela...

Marxist Nicolas Maduro

Andres Malave grew up in Caracas until Chavez took over. Then he and his family were able to escape – barely – to the US. Wrote Malave, “It was a hard choice, but in hindsight, we were the lucky ones.”

Now he laments the blind eye many Americans turn towards the rioting, the deaths, the crime, the economic devastation, and the ravages of inflation that Venezuela is suffering:

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GM Ceases Operations in Venezuela Following Government Seizure of its Plant

This article appeared online at TheNewAmerican.com on Thursday, April 20, 2017:  

English: Logo of General Motors Corporation. S...

Following the government’s confiscation of its parts plant, General Motors announced on Wednesday it was ceasing all operations in Venezuela. The company said the seizure was illegal and that it would seek legal remedies.

The announcement puts 2,700 workers making replacement parts in the plant out of work, with small comfort coming from GM, which said it would make “separation payments” to those employees.

But what then? Another 3,900 people will likely find their jobs in jeopardy as the 79 car dealers that employ them will also shortly disappear in the aftermath of GM’s decision.

GM joins an ever-growing list of companies that can’t operate in the socialist paradise run by Marxist dictator Nicolás Maduro, including

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Is Trump Pulling a Pruitt – Putting an Anti-Ex-Im Exec in Charge of the Bank?

This article was published by The McAlvany Intelligence Advisor on Monday, April 17, 2017:

English: Export-Import Bank of the United Stat...

Many were surprised when President Trump named the EPA’s fiercest enemy – Oklahoma Attorney General Scott Pruitt – to head up the agency. For years Pruitt has raged against the agency for overstepping its bounds and writing rules, mandates, and regulations that negatively impacted the fossil fuel industry. He sued the agency more than a dozen times in the last eight years.

What was Trump thinking?

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Trump Picks Neocon to Head Council of Economic Advisors

This article appeared online at TheNewAmerican.com on Monday, April 10, 2017:

President Donald Trump announced on Friday that he would nominate Kevin Hassett as chairman of his Council of Economic Advisors. Immediately, Glenn Hubbard, a neocon serving as a visiting scholar at the “conservative” American Enterprise Institute (AEI), piped up to laud Hassett’s nomination and Trump’s wisdom in selecting him for the position: “He’s not just a standard-issue really good economist, [Hassett is] someone who knows how policy works. The tax changes being considered are really aimed at boosting investment, so I think Kevin is exactly the right person.”

He’s the right person if Trump wants someone whose resumé includes stints at the

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Trump Stumbles Again: Appoints Interventionist to head his Council of Economic Advisors

This article was published by The McAlvany Intelligence Advisor on Monday, April 10, 2017:

Cover of "DOW 36,000 : The New Strategy f...

One way to test a hypothesis is to apply it to the real world. Two renowned, highly-regarded, and elite-college trained economists did just that. In 1999 James Glassman, the founding executive director of the George W. Bush Institute (Harvard-trained with a BA in government), and Kevin Hassett, BA in Economics from Swarthmore and Ph.D. in Economics from the University of Pennsylvania, wrote Dow 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market. So sure were they about their prediction they went on the road to promote it, claiming that “stocks are now in the midst of a one-time-only rise to much higher ground – to the neighborhood of 36,000 on the Dow Jones Industrial Average.”

On December 31, 1999 the Dow stood at 11,497. A little over three years later the Dow closed (on March 6, 2003) at 7,673, a drop of 3,823 points, costing those who bought the book and took their advice one-third of their investment.

But both persisted,

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U.S. Trade Gap With China Narrowed in January and February

This article appeared online at TheNewAmerican.com on Thursday, April 6, 2017:

Xi Jinping 习近平

Xi Jinping, the Chinese communist dictator

When the Wall Street Journal reported that, according to the U.S. Department of Commerce, America’s “trade gap” shrank in January and February, it intoned that while this was allegedly good news, over the last 10 years it’s been bad news: the trade gap “remains far higher than a decade ago.” The Journal called it a “mixed trade outlook” that bodes ill for the upcoming talks between U.S. President Donald Trump and China’s communist leader, Xi Jinping.

Josh Mitchell, writing for the Journal, tried to explain why this was bad:

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Jobs Numbers Come in Higher Once Again, Supporting Trump’s Policies

This article appeared online at TheNewAmerican.com on Thursday, April 6, 2017:

Reporters used adjectives such as “torrid,” “solid,” “unexpected,” and “strong” to characterize March jobs growth of 263,000, as reported by ADP/Moody’s on Wednesday, which far exceeded professional economists’ estimates of 170,000 new jobs for the month.

Last month Mark Zandi was uncharacteristically buoyant when commenting on February’s jobs numbers: “February was a very good month for workers. Powering job growth were the construction, mining and manufacturing industries.… Near record high job openings and record low layoffs underpin the entire market.”

Today Zandi extended his comments as the jobs market continues its recovery: “Job growth is off to a strong start in 2017. The gains are broad-based but most notable in the goods-producing side of the economy, including construction, manufacturing and mining.”

During the past eight years economists such as Zandi had much less to be excited about as jobs growth under the previous administration was

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Walmart vs. Amazon: Battle of the Behemoths

This article was published by The McAlvany Intelligence Advisor on Monday, April 3, 2017:

English: Walmart Home Office, the headquarters...

Walmart Home Office, the headquarters of Wal-Mart – Bentonville, Arkansas

In one corner is Amazon, the book-seller that Jeff Bezos founded in 1994 that is now the most valuable retailer in the United States as measured by market cap: $425 billion as of March 31. In the other corner is Walmart, the world’s largest retailer when measured by revenue – $485 billion in 2016.

Amazon’s path to the finals is littered with the bodies of its former competitors, some still twitching but whose death is certain: Sears, J.C. Penney, Abercrombie & Fitch, Macy’s, and Target. Walmart is determined not to be carrion in this epic battle.

Accordingly, Walmart has made some serious moves by

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Harry Dent, Meet Chris Hamilton

This article was published by The McAlvany Intelligence Advisor on Wednesday, March 29, 2017:

For years Harry Dent (shown) has attempted to turn his demographic analyses into investment advice, with middling performance. It seems that when his advice doesn’t turn out well, he writes another book.

Take, for example, his The Demographic Cliff: How to Survive and Prosper During the Great Deflation Ahead. He contends that the economy can be traced and tracked using the behavior of consumers as they grow, mature and age. Young people marry, have families, buy homes, automobiles, and gadgets. Their acquisitions peak at around age 45 or so, and then decline over time into retirement.

His “waves” are like seasons: 

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Wall Street Facing Headwinds as Boomers Forced to Liquidate Their IRAs, 401Ks

This article appeared online at TheNewAmerican.com on Tuesday, March 28, 2017:

New York Stock Exchange on Wall Street in New ...

Under the law those reaching age 70 and a half must start taking their “required minimum distributions” (RMDs) from their various tax-deferred accounts. These include IRAs, 401Ks, profit-sharing plans, and SEPs. The trouble is that there are so many of them, and they control so many assets, that their RMDs are going to put enormous pressure on the stock market, according to Chris Hamilton, writing at his Econimica blog.

The Baby Boom population cohort is nearly 80 million people, and those born in 1946 are now 71, with millions following right behind. The top one percent own or control about one-third of that cohort’s assets, while the top 10 percent own more than two-thirds, according to the Congressional Budget Office.

The real question, according to Hamilton, is this:

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Growing Pension Crisis Looms Over Wall Street

This article appeared online at TheNewAmerican.com on Monday, March 27, 2017:

Logo of the United States Pension Benefit Guar...

Logo of the United States Pension Benefit Guaranty Corporation

The looming state and municipal pension plan crisis, estimated by Moody’s at $1.75 trillion just a few months ago, has now been adjusted upward to  $1.9 trillion. But that number, according to Bloomberg’s Danielle DiMartino Booth, greatly underestimates the level of underfunding. It’s more like $6 trillion “if the prevailing yields on Treasuries were used.”

Instead, most state and local pension plans use a much higher, more generous, and more deceptive assumed rate of return of between six and seven percent, with some still clinging to a “castles in the sky” eight percent. Those assumptions greatly reduce the pressure on plan sponsors to make proper contributions to fund those plans.

And, according to the investment firm GMO (Grantham, Mayo & van Otterloo),

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How Trump Can Accelerate the Failure of ObamaCare

This article appeared online at TheNewAmerican.com on Monday, March 27, 2017:

The seal of the United States Department of He...

With the withdrawal of a House bill to repeal and replace ObamaCare, Market Watch explored the options the Trump administration has to hasten the collapse of the ACA. ThinkProgress has reported that the process has already started.

House Speaker Paul Ryan, in announcing the withdrawal of the bill on Thursday,  said that ObamaCare would remain in place “for the foreseeable future.” He didn’t define that future.

The government healthcare plan is already fraying around its edges. Premiums are rising far beyond original estimates, partly due to the withdrawal of major health insurers UnitedHealth Group, Humana, and Aetna from offering coverages. And those remaining in the market have only until June 21 to submit their bids for offering coverages starting in November. But without certainty, a stable market and a broader pool made up more of healthy customers than those who are sick, those bids are almost certain to push premiums even higher.

Trump’s head of the Department of Health and Human Services (HHS) Tom Price, an opponent of the ACA, has already ordered the ending of the promotion of ObamaCare, which has caused a drop-off of enrollment of 400,000 compared to last year.

In addition,

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Cash-only Medical Care Benefits From IRS Non-enforcement of ObamaCare Mandate

This article appeared online at TheNewAmerican.com on Monday, March 27, 2017:

Exterior of the Internal Revenue Service offic...

Exterior of the Internal Revenue Service office in midtown New York. (Photo credit: Wikipedia)

Following the issuance of President Trump’s executive order in January in which he ordered the Health and Human Services Department to “waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of [ObamaCare, or ACA] that would impose a financial burden on any State, or a cost, fee, tax, penalty, or regulatory burden on individuals, families…” the Internal Revenue Service (IRS) responded last month:

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ObamaCare is Imploding All by Itself

This article was published by The McAlvany Intelligence Advisor on Monday, March 27, 2017:

The Physician

The best person to ask about ObamaCare is not the patient, but the doctor. He’s the one carrying the burden: trying to help his patients with one hand while trying to manage the requirements of the state with the other. One who knows is Jeffery Barke, M.D., a 54-year-old family practice physician in Newport Beach, California. He not only predicted the collapse of ObamaCare (ACA) but wrote that it was planned that way:

As ObamaCare’s troubles mount, I’ve heard my patients and my peers in healthcare ask: How could the law’s authors not have seen this coming?

 

For my part, I think a different question needs to be asked: What if they did? What if ObamaCare was purposely designed to fail?

 

Every day, it seems like there are a dozen new headlines about the crisis facing ObamaCare. Premiums are rising faster than ever. Meanwhile, health insurance companies are abandoning the law’s exchanges left and right, unable to compete in the top-down, regulation-driven environment created by the law. Less than three years into its implementation, the law has never looked so precarious.

He saw firsthand that ObamaCare never did what it was supposed to do:

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Keystone XL Pipeline Granted Approval by State Department

This article appeared online at TheNewAmerican.com on Friday, March 24, 2017: 

Keystone XL demonstration, White House,8-23-20...

With the signing of the cross-border permit by the State Department on Friday, the real work on completing Phase IV of the Keystone Pipeline from Canada to refineries on the U.S. Gulf Coast begins. TransCanada, the owner and operator of the pipeline, still thinks the project is viable economically even though it has been stalled for 16 months by the previous administration. In a press release, TransCanada’s CEO Russ Girling said:

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.