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The Hillary Recession
This economy may be perilously close to recession. That was the message of the second-quarter real-GDP report and its meager 1.2 percent growth rate.
Over the past year, real GDP has slipped to a paltry 1.2 percent. Business investment continues to fall. Building and factory construction has dropped sharply. Productivity is flat. The profits recession is still in force.
And what’s the Hillary Clinton plan? Tax us into prosperity.
In her own words at the DNC on Thursday night, this is the fix: “Wall Street, corporations, and the super-rich are going to start paying their fair share of taxes.” Why? “Not because we resent success. [!] Because when more than 90 percent of gains have gone to the top 1 percent, that’s where the money is.”
Let me get this right. In order to spur growth, Hillary intends to raise taxes on individuals, businesses, capital gains, stock trading, and firms that move overseas (which they do because the U.S. has the most uncompetitive tax system in the corporate world). In addition, Hillary’s door is open for a carbon tax, higher payroll taxes, and a 25 percent gun tax.
She also argued in Philadelphia that the economy is not working the way it should because our democracy isn’t working the way it should.
Huh?
What she’s getting at is appointing Supreme Court justices who “will get money out of politics” and passing “a constitutional amendment to overturn Citizens United.”
Citizens United removed spending limits for super-PACs. And yet those mean and nasty super-PACs have thus far benefited from pro-Hillary hedge-fund contributions to the tune of $48.5 million, according to the Wall Street Journal.
Donald Trump, on the other hand, has received only $19,000 from hedge funds.
Get it? Citizens United, according to Hillary, is the source of our weak recovery and must be overturned. Meanwhile, she is the big beneficiary of the Supreme Court decision to allow unlimited political donations.
Next there are the recurring themes of class warfare and inequality, roots of evil according to Hillary. Turns out that the top 1 percent received a big share of income growth during the recovery. Okay, but it also suffered the biggest loss during the Great Recession.
Research from Scott Winship of the Manhattan Institute shows that during the recession, the top 1 percent lost 36 percent of its income while the bottom 90 percent lost 12 percent. And through 2014, the top 1 percent was still poorer by 18 percent than it was in 2000. That’s compared to a 9 percent decline for the rest of us.
According to Winship, income for the top 1 percenters was basically no higher in 2014 than in 2000. Turns out that group bumped into the same income stagnation suffered by the U.S. middle class since 2000.
And according to new studies by Aparna Mathur of AEI, raising top marginal tax rates reduces growth incentives and yields very few revenues. Yet in addition to higher tax rates, Hillary wants $1 trillion in new spending programs.
The numbers also don’t add up for Obama, who defended his so-called recovery at the DNC and even called Hillary, a 30-year member of the establishment, a change-maker.
Obama’s seven-year recovery averaged 2.1 percent real growth at an annualized rate. For historical comparison, after seven years, JFK’s economy increased by 5.4 percent yearly and Reagan’s by 4.5 percent.
Did JFK and Reagan beget long booms by raising taxes? No. They cut tax rates across the board.
Hillary is a combination of Barack Obama 3.0 and Bernie Sanders 2.0. This is not change. This will not yield strong growth, lift jobs and wages, and make America more globally competitive.
A week prior to the DNC Donald Trump offered a different perspective at the RNC: “America is one of the highest-taxed nations in the world. Reducing taxes will cause new companies and new jobs to come roaring back into our country. Then we are going to deal with the issue of regulation, one of the greatest job-killers overall…. We are going to lift restrictions on the production of American energy…. With these new economic policies, trillions of dollars will start flowing into our country.”
So Trump wants to reduce tax rates and regulations, unleash energy, and make America the most hospitable investment destination in the world. Hillary wants to raise taxes, regulations, and spending, and put the energy sector out of business. (She would abolish coal and oil-and-gas fracking.)
No wonder the blue-collar, hard-hat, Democratic middle class is going for Trump.
Hillary is not an agent of change. Nor does she have any idea how to restore rapid economic growth. Instead, she is a prisoner of the Left. Tax the rich, inequality, redistribution.
If Trump stays on his growth message, he’ll whup her in November.
Published in Economics
An internationally respected person, although retired now, sent me this today. There were graphs too. Donald is going to have a tough time with the mess he inherits.
Today’s data was consistent with continued pressure both for the top and bottom line for earnings as GDP missed estimates (1.2% vs expectations of 2.5%) and the ECI increased 0.6%. While Payroll growth, modest inflation and low rates continue to fuel gains in consumer spending and personal consumption, business investment still remains at recessionary levels. The same low rates that are helping drive demand for homes, cars, etc. are not being leveraged by companies to increase capital expenditures. Unless that trend improves the downward revisions to 2016/’17 U.S. and global GDP growth estimates that we saw in 1H16 are likely to continue in 2H.
At the same time the GDP has disappointed, continued tightening of the labor market has led to increasing labor costs and should put continued downward pressure on S&P profit margins. In an economic backdrop of slowing global growth and earnings estimates dependent on significant profit margin expansion increasing labor costs are a headwind for the overall market
Yes Larry, marginal rates are way too high. But that is not the economy’s major problem. Lowering rates by itself will not get the economy going again.
The problem is that government regulation, interference and crony favoritism has destroyed small business growth. Small business growth not too long ago produced almost two thirds of all new jobs. Now, by some accounts we are losing somewhere between 30- 50,000 small businesses net a year, with a huge loss of jobs, compared to back at the end of the Reagan era where we producing net approximately 20,,000 new businesses a year.
Two things are just killing small business:
Unfortunately, Mr. Crony Big Government, Donald Trump is not the answer. He will never take on the huge task reforming our regulatory system or the banks.
And yet the stock market continually lives in Irrational Exuberance Land. A small number of people continue to get insanely rich while no real wealth is being generated outside of tall buildings where piles of helicopter money are pushed from one place to another, with a fee being made each time. Is it any wonder why common people think the whole economy is a scam?
This quote reveals her inner larceny.
Logically, if there’s something dysfunctional about the economy, the appropriate response is to fix the dysfunction. Instead, Hillary’s attitude is to exploit it. As far as Hillary is concerned, the fact that the economy is so out of balance is …whoo hoo! … a great opportunity to grab all that cash. She has no intention of fixing the problem; after all, it makes for a nice revenue stream.
Besides, it sounds too much like the simplicity of Willis Sutton: he robbed banks because that’s where the money was. (Well yeah. but let’s not forget that Willie was stealing it.)
Research from Scott Winship of the Manhattan Institute shows that during the recession, the top 1 percent lost 36 percent of its income while the bottom 90 percent lost 12 percent. And through 2014, the top 1 percent was still poorer by 18 percent than it was in 2000. That’s compared to a 9 percent decline for the rest of us.
According to Winship, income for the top 1 percenters was basically no higher in 2014 than in 2000. Turns out that group bumped into the same income stagnation suffered by the U.S. middle class since 2000.
This looks highly suspect and not credible, considering the gains in asset values since 2000, despite a couple of bear markets. A better measure would have been net worth. In the case of real estate, stocks and bonds, income is not counted until the asset is sold. So yes, the tax returns of the top 1% may not show it but their wealth is very likely much higher than it was in 2000.
Did JFK and Reagan beget long booms by raising taxes? No. They cut tax rates across the board.
Ok but tax rates are much lower now than when JFK or Reagan started. There is not as much room to cut and our entitlement bite is higher and rising.
Larry is stuck in the 80s. The juice from tax cuts is spent and while rates are still too high the problem with the tax code is that it is corrupt and unknowable except by each piece put in by those who benefit and who will defend it. The code must be tossed and replaced with something flatter, broader and lower. Gore all Oxen. The bigger problem is the regulatory code. It’s all special deals. It can be tossed and replaced with clear simple law and only enough regulation to implement the law. Moreover, Republicans have to get off the one note of defending the one percent. The super wealthy do not pay high income tax because their change in wealth comes from unrealized capital gains. Focus on this as they’re Hillary’s friends but the focus should be on their crony relationships with Democrats, not the fact that they’re worth billions. Secondly, we are not on the verge of a recession. We are stagnating as entrepreneurial activity dies except in the new technologies from which Washington hasn’t figured out fully how to extract rents. This stagnation presents at least two major problems. Fist, we adjust poorly and slowly to changes in technology and trade. Secondly, the Fed has expanded the monetary base by hundreds of percent so if the economy begins to grow through expanded small, medium business and new entrepreneurial activity that monetary base will explode into money through credit expansion, inflation follows.
@iwalton Exactly right. While I am in favor of reduced taxes as a means to boost growth and investment – especially our world-leading corporate tax rates – it’s the suffocating effects of regulation that most urgently require rolling back.
Is it any wonder that American entrepreneurship and innovation are most alive in the sector – tech – that is also one of the least regulated?
As Thatcher so accurately observed on the redistributionists of the left:
“They would rather the poor were poorer provided the rich were less rich.”
When Willie Sutton was asked why he robbed banks, he said, “Because that’s where the money is.” Hmm.
Edit: Didn’t see this already quoted by @kcmulville. Sorry KC. But it’s worth repeating. What Hillary is proposing is stealing money from those who have earned it.
Trump says, “Then we are going to deal with the issue of regulation, one of the greatest job-killers overall.” Maybe he won’t do it, but Hillary is saying the opposite!
This sounds like a statement from the DNC. What’s your point? Eat the rich?
That’s why tax reform should be the goal. Lower rates. Remove loopholes. Win-win.
Very good point!
The code is so vast nobody understands it except the thousands who own little pieces of it. Reform will be a giant log roll. It must be tossed and replaced. The budget and the regulatory regime are the same. Reform, like eliminating waste fraud and abuse is a fool’s errand.
Hammer, nail. Combine this fact with scam that is the computer/quant driven finance sector, toss in our low interest helicopter policy, and in a few paragraphs, you’ve just explained our whole crony-driven economy.
Trump may believe in tax cuts now, but give him a week.
Yep and yep
Hilary and Bernie have the same mantra – and yes, regulation is stifling growth in the private sector as well as the “Affordable Healthcare” nightmare – the real stats are being suppressed and will not be reported during this election cycle – it is helpful that the financially wise writers on Ricochet keep posting the true picture. Look at Caterpillar sales – a company that supplies hardware to almost every industry here and abroad – down last several years! The World Economic Report says we are in a “fragile conjecture”. Here is the Baltic Dry Index quote for today – an indicator of shipping cargo across the world:
http://www.bloomberg.com/quote/BDIY:IND
Two more recent stories:
http://www.businessinsider.com/david-rosenberg-warns-of-recession-2016-6
http://www.cnbc.com/2016/06/21/the-next-recession-is-already-here-and-there-isnt-much-the-fed-can-do-commentary.html
Promote this to the Main Feed please – we need to pay attention to this – Thanks Larry!