Posts Tagged ‘Trump’

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Kevin Hassett and the other members of the president’s Council of Economic Advisers are just like the long-haired preachers Joe Hill sang about more than a century ago. They come out every night to tell us what’s wrong and what’s right. But when asked about something to eat, they answer in voices so sweet:

You will eat, bye and bye
In that glorious land above the sky
Work and pray, live on hay
You’ll get pie in the sky when you die.
That’s a lie

With one notable exception: according to the Council (pdf), that “glorious land above the sky” lies just on the other side of the Trump administration’s proposed tax reform. And workers, whose real wages have stagnated for decades now, won’t have to die to receive their pie in the sky.

Reducing the statutory federal corporate tax rate from 35 to 20 percent would. . .increase average household income in the United States by, very conservatively, $4,000 annually. The increases recur each year, and the estimated total value of corporate tax reform for the average U.S. household is therefore substantially higher than $4,000. Moreover, the broad range of results in the literature suggest that over a decade, this effect could be much larger.

There’s no other way to put it. That’s a lie.

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As is clear from this chart, both corporate profits (the red line) and investment (the blue line) have soared in recent decades. There’s simply been no shortage of investment or investment funds, either from retained earnings or in terms of money borrowed from financial institutions. At the same time, the wage share of national income (the green line in the chart) has fallen precipitously.

So, even if cutting corporate tax rates (and thus permitting higher retained earnings) did lead to more investment, there’s no guarantee workers’ wages would increase as a result. They haven’t for decades now. Why should that change in the future?

Moreover, there’s no guarantee higher retained earnings would lead to more investment. Just as likely (perhaps even more so), corporations would be able to use their profits for other purposes—including higher CEO salaries, increased dividends to stockholders, and more mergers and acquisitions—which have nothing to do with raising workers’ wages.

The only result would be more corporate power and more obscene levels of inequality in the United States.

And that’s no lie.

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When I read about Scott Pruitt’s trip to Hazard, Kentucky to announce the gutting of Barack Obama’s signature policy to curb greenhouse gas emissions from power plants, I immediately turned to Dwight Billings—a West Virginia native, Professor Emeritus of Sociology at the University of Kentucky, and preeminent scholar of Appalachia—to provide some context. I am pleased to publish this guest post by him. (Interested readers might also want to take a look at Billings’s review of J. D. Vance’s Hillbilly Elegy.)

Scott Pruitt, Administrator of the currently misnamed Environmental Protection Agency, and Senate Majority Leader Mitch McConnell (R-Kentucky) traveled to Hazard, Kentucky in the economically depressed coalfields of Appalachia on 10 October to proclaim that the Democrats’ purported “War on Coal” was over—even though it was a war that was barely ever fought.

They came to announce the rollback of President Obama’s Clean Power Plan, his administration’s effort to reduce the 2030 CO2 emissions of electricity-generating plants by 32 percent compared to 2005 levels, a key plank in the United States’ agreement to the 2016 Paris Accord on Climate Change that Trump has since revoked. The Clean Power Plan was to be achieved by cutting back on coal burning, substituting natural gas and renewable power sources (wind and solar), and encouraging conservation. But the EPA plan was never implemented. since it continues to be held up for review in the D. C. Circuit Court of Appeals. As Attorney General of Oklahoma, Pruitt—climate change denier, advocate of fossil fuels, and now head of the EPA—led the charge by 27 fossil-fuel producing states to challenge the Obama EPA policy in court.

Despite Trump’s promise to Appalachian coal miners that they would be “going back to work” if he were elected, industry analysts suggest that annulling the Clean Coal Plan will actually do little or nothing to increase mining jobs in Central Appalachia, where the rollback was announced and where nearly 12 thousand mining jobs in eastern Kentucky (84 percent) have been lost since 2009. Aging coal-fired generating plants are being shuttered due largely to a combination of market factors—not regulation as Republicans and industry spokespersons claim—including the abundance of cheap natural gas (due to a hydraulic fracturing boom) and the rapidly declining costs of renewables. Domestic and international declines in coal demand since the 2008 depression and the longer-term effects of mechanization and surface mining also account for job loss. Further, as Appalachia’s richest coal seams are mostly depleted, Appalachian coal is becoming harder to recover. Surface mines in Kentucky produce on average only 3 short tons of coal per employee hour compared with the rate of 30 short tons per hour in the vast surface mines of Wyoming, Kentucky’s chief rival, which now account for more than 40 percent of the nation’s coal.

So why would Republicans announce their gutting of the Clean Power Plan in Hazard rather than, for instance, Wright, Wyoming? Several factors are at work.

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Black Thunder mine, in Wright, Wyoming

Trump has often proclaimed that he “loves” coal miners. Kentucky employs more miners than any other state except West Virginia. The iconic image of Appalachia’s hyper-masculine, hardworking, and self-sacrificing miners, ready to go back to work if only given the chance, better supports his administration’s public relations stunt in Hazard than would pictures of the monstrous earth-moving machines that dig massive amounts of coal with few employees in Wyoming or Appalachia. After all, the promise of jobs always trumps the environment, even when there aren’t any.

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Mountaintop removal near Hazard

And then there’s Hazard itself. (The irony of its name has not been lost on environmentalists who point out the hazards in the Trump/Pruitt plans to derail efforts to prevent climate change.) Located In the heart of Kentucky’s Appalachian coalfields, Hazard is the county seat of Perry County, eastern Kentucky’s second largest coal producer and once its greatest. Thousands of acres across Perry County have been ravaged by decades of strip mining and mountaintop removal. One fourth of its people live in poverty. Far more of Hazard’s residents are employed in education and healthcare than coal mining, but coal has been the town’s historical lifeline and curse. One of Hazard’s favorite sons is billionaire coal baron Joe Craft, President and CEO of Alliance Resource Partners (ARP), the second largest coal producer in the eastern United States and one of the largest holders of coal reserves in the nation. Craft grew up in Hazard where his father was a coal lawyer and his grandfather, also a coal lawyer, was mayor in the 1920s. Like Pruitt (who also grew up in Kentucky and now lives in Tulsa), Craft is currently a Tulsa, Oklahoma resident (ARP is headquartered there with an office in Kentucky). But he maintains close ties to Hazard and is a major donor to Hazard’s Center of Excellence in Rural Health. Also like Pruitt, Craft is a Republican, a close associate of the Koch brothers, and, through his organizations, a million-dollar contributor to Trump’s presidential campaign. Craft’s hometown may not win any mining jobs from its renewed oath of fealty to King Coal, but its credentials as a foot soldier in Trump’s war on the climate have probably been secured.

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Finally, there is Mitch McConnell. Despite his vast war chest of campaign funds, McConnell is vulnerable. He is on the outs with Trump, and his aura as a Congressional wizard has been tarnished by his failure to bring a legislative end to Obama’s Affordable Care Act. Senators on the Republican right are calling for him to step down from his leadership position in the Senate. And, he is widely despised back home in Kentucky. With an approval rating of only 18 percent there, McConnell is the least popular of any U. S. Senator at home. Currently, only 37 percent of Kentuckians report they would reelect him. Small wonder then that McConnell would jump at the chance to remind Kentucky voters of his role in helping to end the fictive “War on Coal” he had helped to construct.* After all, he did much the same less than three weeks earlier when he toured Kentucky with new Supreme Court Justice Neil Gorsuch whose appointment he had helped to engineer—a trip the Associated Press described as a “home turf victory lap for McConnell.”

Victory laps and theatrical displays of symbolic politics, however, will not bring coal mining jobs back to eastern Kentucky, nor help the region move toward an economic future beyond coal. ** As a Lexington Herald-Leader staff writer asked the day after the Hazard ceremony, “How long will Kentuckians continue to be suckers?”***

 

*Earlier this year, McConnell pushed through Congressional repeal of the Obama Administration’s 2016 “Stream Protection Rule,” which had sought to protect water quality near mountaintop removal mine sites and was eight years in the making.

**Gone now, too, is the Obama Power Plus Plan that would have invested a billion dollars from the Abandoned Mine Lands fund in post-coal redevelopment. Trump has also proposed eliminating funding for the Appalachian Regional Commission which channels federal dollars toward economic diversification and job training in the region.

***Kentucky voters may have been suckered by Trump in the general election, but eastern Kentucky voters in the coal field counties and all West Virginia counties supported Sanders in the presidential primary election, an expression of frustration with politicians’ neglect of rural areas and an indicator of a desire for change.

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Inequality

The latest IMF Fiscal Monitor, “Tackling Inequality,” is out and it represents a direct challenge to the United States.

It’s not just a rebuke to Donald Trump, who with his allies is pursuing under the guise of “tax reform” a set of policies that will lead to even greater inequality—or, for that matter, Republicans in state governments across the country that have sought to cut back on programs targeted at poor Americans. It also takes to task decades of growing inequality in the United States, under both Democratic and Republican administrations.

As is clear from the chart above, the distribution of both income and wealth in the United States has become increasingly unequal since the mid-1970s. The share of income captured by the top 1 percent has more than doubled (from 10 to 20 percent), while it’s share of total wealth has increased dramatically (from 23 percent to 39 percent). Meanwhile, the share of income of the bottom 50 percent has declined precipitously (from 20 percent to 12.5 percent) and it’s share of wealth, which was never very high (at 0.9 percent), is now nonexistent (at negative 0.1 percent).

And what is the United States doing about it? Absolutely nothing. Over the course of the past four decades it’s done very little to tackle the problem of growing inequality—and what it has done has been spectacularly ineffective. Thus, inequality has grown to obscene levels.

What’s interesting about the IMF report is that it raises—and then challenges—every important argument made by mainstream economists and members of the economic and political elite.

Should we worry just about income inequality? Well, no, since “changes in income inequality are reflected in other inequality dimensions, such as wealth inequality.”

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Doesn’t the United States take care of the problem by redistribution? Absolutely not, since only Israel does less than the United States in terms of lowering inequality (as measured by the Gini coefficient) through taxes and transfers.

But doesn’t tackling inequality through progressive income taxes lower economic growth? Again, no: “There is not strong empirical evidence showing that progressivity has been harmful for growth.”

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Nor is there any justification for low tax rates on those at the top in terms of social preferences. Most Americans, according to a recent Gallup survey, most believe that the rich and corporations don’t pay their fair share of taxes. In fact, the IMF notes, perhaps thinking about the United States, “societal preferences may not be reflected in actual policy implementation because of the concentration of political power in certain affluent groups.”

Clearly, much more can be done to lower the degree of inequality in the United States.

As a sign of the times, the IMF even chooses to discuss the role a Universal Basic Income might play in decreasing inequality.

Proponents argue that a UBI can be used as a redistributive tool to help address poverty and inequality better than means-­tested programs, which su er from information constraints, high administrative costs, and other obsta­cles that limit benefit take-­up. A UBI could also help address increased income uncertainty resulting from the impact of technology (particularly automation) on jobs.

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According to its calculations, a Universal Basic Income in the United States (calibrated at 25 percent of median per capita income, in addition to existing programs) would cost only 6.5 percent of national income and achieve a remarkable reduction in both inequality (by more than 5 Gini points) and poverty (by more than 10 percentage points).

What puts the United States in stark relief is the contrast between the whole panoply of inequality-reducing policies that are available—from more progressive income taxes and the adoption of wealth taxes to reducing gaps in education and health programs—and the fact that the United States is moving in the opposite direction.

The United States is simply not tackling the problem, with the inevitable result: current levels of economic inequality are—by any measure, and especially in comparison to what could be but isn’t being done—grotesque.

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