First Br?hma?a: The World as a Sacrificial Horse, of course!
We at last arrive this week at the “real” first actions of the Trump administration.
As we’ve been pointing out for weeks, the President doesn’t get to “make up” laws. To be sure, there was a lot of confusion when Trump in recent days decided to swing the pendulum of Executive Interpretation of exiting laws the other direction from where Barrack Obama did. But, in the end with a few minor over-steps, what he did was within the scope of office.
Now, however, we get down to the real core question that goes something like this:
We know that Trump is not a Swamp Creature.
But I have warned you many times that I fear Paul Ryan is.
You can read about how the grand Kabuki of it all is simmering in the story over here.
Unfortunately for Trump, his discussion of tax cuts as a campaign issue was ill-advised.
The reason that Ronald Reagan’s tax-cuts (sort of) worked was Reagan took office just after the all-time peak of interest rates. The Tax Cuts back then actually DID work.
Here’s a summary from an excellent CATO Institute paper here:
- “Real economic growth averaged 3.2 percent during the Reagan years versus 2.8 percent during the Ford-Carter years and 2.1 percent during the Bush-Clinton years.
- Real median family income grew by $4,000 during the Reagan period after experiencing no growth in the pre-Reagan years; it experienced a loss of almost $1,500 in the post-Reagan years.
- Interest rates, inflation, and unemployment fell faster under Reagan than they did immediately before or after his presidency.
The only economic variable that was worse in the Reagan period than in both the pre- and post-Reagan years was the savings rate, which fell rapidly in the 1980s.
The productivity rate was higher in the pre-Reagan years but much lower in the post-Reagan years.”
We can – unfortunately – look at the historical basis of the Reagan “miracle” and see what’s missing from today’s economic equation.
For one, this was the “Halt and Catch Fire” era of computing. The new technology on the block was exploding.
For another, the hijacking of America jobs for parts unknown, though overseas, had not ramped up to the 1990’s frenzied levels.
And at the macro-econ level, rates were turning down from the peak in the 1981 period.
Today, things are just about the inverse.
Tax cuts were popular as a campaign pledge but Trump now has a delivery issue: Without the support of the House and Senate, which I don’t think he’s likely to get, the promise of a tax cut is likely to be falling into one of those “promises made in the heat of the campaign” slogans that will see no real action.
Mind you, the American public will be confused by all this. The left is bound to go on subverting the Trump momentum at every turn. Unlike Obama’s term, Trump supporters don’t have an easily-played card to shut-up oppositions (“racism”). Instead, Trump will have to negotiate with the GOP as it sits on the Hill.
For a long time, I’ve been thinking that the “right” thing for Trump to do would be to set up a Third Party early in his campaign. The goal of such a centrist party would be to take the old Big Middle in America that included people like John Tower of republican Texas on the one hand all the way to the Scoop Jackson / Warren Magnuson left-coast democrats on the other.
Back in the day, leading into Reagan’s term, America was much more “centered” than it is now and thus, negotiation between the two parties was a lot less violent and disparaging.
Today, on the other hand, we have a much broader “spread to the data” and so the standard deviation of consent is MUCH MUCH bigger and hence, negotiation has become far more difficult.
As students of the Economic Long Wave, we have been curious to see how all this change in thre spread of the middle will translate into what should be a “topping process” in mid March, which would be an idealized time for an initial market peak. A pullback going into summer, then a late summer rally would set up a three wave down (collapse dynamic) for October/November.
As in the historical rhyme, the Herbert Hoover presidency, the consensus should hold for a while longer, but within a month or three the lack of agreement between Trump and Ryan factions seems likely to split. Ryan (and the financial overseers) will be pressing for a budget that is “balanced” though that’s not possible. Trump, more likely, will be far less fearful of inflation since a higher inflation rate (6-8% annualized) is something that is the “real estate President’s” best friend.
Which gets us to the fork in the road immediately ahead. The Trump track would be toward higher inflation, a bigger deficit, but at the same time realizing that it might have a moderate stimulative effect. The Ryan track will likely be to hold taxes where they are, including hanging on to Obamacare taxes and then present a budget whichs is only somewhat larger and hence less inflationary.
Which side is “right?”
Honestly, it can be argued either way, although being a conservative thinker, I would suggest that it’s too early to embrace the higher inflation track because in many ways that’s a “one bullet solution.” In other words, once you fire that round, then it marks the bottom is in.
Instead, the Ryan outcome is more likely. Trump has plausible deniability and the option of evolving a new centrist party. Ryan will keep the “inflation solution” powder dry for when the stock market begins to collapse in earnest (not more than two years out) at which time, the inflation “magic bullet” would be fired big-time in order to reduce the National Debt as a percent of GDP significantly and allowing for a 3 to 10 percent of GDP stimulus as we bottom in the Greater Depression, which is likely going into 2020, or so.
That sets up reindustrialization (which Trump can promote now) and by then due to trade changes, we may start making a lot of things in America so that we will be on a manufacturing footing that will allow us to prevail in the Depression-ending War in the 2022-2025 area.
It’s a complicated mess, but while the mainstream is off vilifying on immigration, remember that’s only a significant sideshow, but it’s not the Ball Game.
Yes, this is a second point of disagreement with Trump on policy, the first being Ajit Pai’s appointment to the FCC Chief role which foreshadows Net content licensing. That’s due in the replay of history within 5-years, or less.
So much for how the Middledom looks on Monday.
“Crisis” Monday and More Trumpsteria
Yep, we’re in a full-blown ‘crisis’ now. And we know this because it’s top middle of the New York Times this morning: “IMMIGRATION BAN PROVOKES CRISIS.”
Then there’s the Washington Post story “Dissent, confusion swirl around refugee ban.”
For those who actually do News Futuring (a science in its infancy) there may be something of a clock ticking on the issue.
Should Trump go silent or Third Party, we would expect him to be ousted by the GOP Swamp creatures on the Hill and/or he simply says “You know what? Screw ya’ll…” and he resigns, puts Pence in charge, and then goes off to play golf.
That would leave America in the hands of vice president Pence and that would lead to a collapse of market confidence and we end up in the Second Depression anyway.
I don’t know why more people don’t pencil out future break points, but they seem not to. Which may be why history repeats. It’s the end of July in 1929, though, if you’re keeping track.
Two Parts Tuesday
Don’t forget tomorrow we have the Case-Shiller Housing data coming out, so tomorrow’s column will be posted as two parts. One part normal, one part breaking with the hot data.\
By my reckoning, Housing will be peaking in the data in the next several reports and it’ll add reason for the markets to come down with a case of Trump skepticism (Trumpticism) in the March-July peaking projected peak.
As always, we “call’s ‘em like we see’s em” and this totally infuriates people who have becomes automaton/parrots of externally-programmed dogma ground into their thinking by media. Not our issue, or yours if you drop by here for regular deprogramming.
With Trump’s clarification of MeshMedia as the new Reality compared to the old Mainstream Media franchise, it’s easier to follow and make sense, this effort at “middledom.”
It’s worth the effort, I believe, since how things work in “middledom” are how things work out in the “endom.”
Today’s Data Burst
Comes from the Bureau of Economic Analysis. Press release, please?
“Personal income increased $50.2 billion (0.3 percent) in December according to estimates released today
by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $43.6 billion (0.3 percent)
and personal consumption expenditures (PCE) increased $63.1 billion (0.5 percent).
Real DPI increased 0.1 percent in December and Real PCE increased 0.3 percent. The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.1 percent.
The increase in personal income in December primarily reflected increases in wages and salaries, personal current transfer receipts, and rental income of persons (table 3).
The increase in real PCE in December primarily reflected increases in spending for both durable goods and services (table 7).
Personal outlays increased $66.4 billion in December (table 3).
Personal saving was $768.4 billion in December and the personal saving rate, personal saving as a percentage of disposable personal income, was 5.4 percent (table 1).”
Markets are quite shaken by the headlines, with the futures down 70 on the Dow. Gold is only up a bit and BTCs were fetching about $919.50 pieces of FedPaper each.
Ah, Monday. Don’tcha love ‘em?