Economy

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  • Slate Highlights How Trickle-Down Economics Wreaked Havoc In Kansas

    Kansas Transportation Secretary Resigns After Tax Cuts Put Agency In Financial Peril

    Blog ››› ››› ALEX MORASH

    Slate has joined The New York Times and The Kansas City Star in highlighting what’s wrong with Kansas’ “insane right-wing experiment” of drastically cutting taxes, explaining that the Republican-led state “is about to destroy its roads.”

    In 2012, Republican Kansas lawmakers led by Gov. Sam Brownback enacted a series of tax cuts -- described by the Star editorial board as “disastrous” and the Times editorial board as “ruinous” -- that deeply cut revenue streams without generating the strong economic growth conservatives promised would follow. Instead, the state has fallen into financial crisis leading to a painful credit downgrade, a massive budget shortfall, and a “negative” credit outlook for the future. Brownback’s tax cut policies were nonetheless endorsed by right-wing media personalities and created a model for other conservative politicians to follow.

    On June 30, Slate reported that Brownback had announced the resignation of his state’s secretary of transportation, Mike King, marking the latest casualty of Kansas’ failed experiment with trickle-down economics. According to Slate, the reason King is leaving may be that the state has taken $2 billion from the Kansas Department of Transportation’s reserve funds to close gaps elsewhere in the budget. Former Kansas transit secretary Deb Miller cautioned that the “weakened revenue stream” would be “more subject to political whim.” From Slate (emphasis added):

    Kansas has had trouble paying for much of anything since 2012, when conservative legislators decided to implement a bevy of right-wing economic policies—and lead their state into a fiscal crisis.

    In order to keep funding its government despite dramatically decreased tax revenue, the legislature has flipped all their piggy banks. One of them is the Kansas Department of Transportation—or what sarcastic Kansans now call “the Bank of KDOT,” for the stupendous quantity of money that has been diverted from its coffers to the Kansas general fund and state agencies.

    [...]

    On Wednesday, Brownback announced that Mike King, the secretary of KDOT, would be resigning this month. King, who was appointed in 2012, has presided over a rather unusual period in Topeka finance.

    Since 2011, according to the Kansas City Star, the state has diverted over $1 billion in “extraordinary” transfers from KDOT. If you include “routine” transfers, from 2011 through the 2017 budget year the total diversion from the Bank of KDOT will amount to more than $2 billion.

    That’s more than KDOT’s annual expenditures. It’s as if the state, which has the fourth largest number of public road miles in the nation, had taken away a full year of road funding.

    [...]

    King’s predecessor, Deb Miller, told the Topeka Capital-Journal this week that King “started as KDOT secretary at a time when the agency had a well-defined and solidly financed statewide highway program. He exits an agency deeper in debt and with a weakened revenue stream more subject to political whim.”

    Brownback’s legacy will be grander, but we could call this the Mike King doctrine: Plugging holes in the budget; leaving holes in the road.

  • Even This Conservative Columnist Thinks Trump's Plan On Trade Is “A Scam”

    Steve Chapman: “It's A Scam, Skillfully Pitched To Fool The Gullible”

    Blog ››› ››› ALEX MORASH

    Conservative Chicago Tribune columnist Steve Chapman joined a chorus of media and policy experts from across the political spectrum in criticizing Donald Trump’s promise to bring back American manufacturing jobs by curbing free trade.

    Chapman slammed Trump on June 29 in the Chicago Tribune for the policies Trump outlined in a speech on trade one day earlier. Trump advocated against globalization and the lowering of trade barriers brought about by free trade deals like the North American Free Trade Agreement (NAFTA) and World Trade Organization (WTO). Trump referred to his trade policy ideas as a path toward “Declaring America’s Economic Independence,” which he claimed would lead to increased economic activity that would “Make America Wealthy Again.”

    Chapman chided Trump’s simplistic look at global commerce, saying, “It's a scam, skillfully pitched to fool the gullible,” and echoed criticism of Trump from economist and Economic Policy Institute (EPI) president Lawrence Mishel. While Mishel criticized Trump for whitewashing the Republican Party’s free trade legacy and ignoring progressive initiatives that would benefit American workers, Chapman pointed out that manufacturing output in the United States is actually “54 percent higher today” than it was when NAFTA went into effect in 1994 and “27 percent higher” than it was before China joined the WTO in 2001. Progressive organizations like EPI have highlighted the negative consequences that free trade arrangements have had on the American labor market -- specifically with regard to NAFTA and China -- but as Chapman notes, part of the decline in manufacturing employment is the result of greater efficiencies in production stemming from automation and technological advances; “companies have learned to produce more goods with fewer people.” From the Chicago Tribune (emphasis added):

    The vision Trump conjures is one of alluring simplicity. He promises to achieve "economic independence" by abandoning globalization, instead using American workers to produce American goods. This change, he said, would "create massive numbers of jobs" and "make America wealthy again."

    It's a scam, skillfully pitched to fool the gullible. His framework is a house of cards built on sand in a wind tunnel. Its most noticeable feature is a total divorce from basic economic realities.

    [...]

    In the first place, the expansion of manufacturing jobs is not synonymous with prosperity. As countries grow richer, manufacturing's share of employment declines. South Korea, singled out by Trump for killing American jobs, has seen it shrink by nearly half since 1991. Japan and Germany have followed a similar path.

    But U.S. manufacturing output is 54 percent higher today than in 1994 and 27 percent higher than in 2001. Those years are pertinent because 1994 was the year NAFTA took effect and 2001 is the year China gained entry to the World Trade Organization — events Trump portrays as catastrophic for American industry.

    Manufacturing jobs have vanished not because we don't manufacture anything but because companies have learned to produce more goods with fewer people. Higher productivity is what eliminated most of the jobs Trump mourns. He's no more capable of restoring them than he is of bringing back the dodo.

    [...]

    Blaming Mexico and China for the fate of our steel industry is like blaming email for the decline of telegrams. The biggest reduction in steel jobs came before the globalization of the past two decades. The number fell from 450,000 to 210,000 in the 1980s.

    The total today is about 150,000. Even if Trump could manage the impossible feat of doubling the number of steelmaking jobs, it would be a blip in the overall economy — which adds more jobs than that every month.

  • Washington Post Highlights Trump’s Empty Progressive Promises On Jobs, Trade

    The Economic Policy Institute Wants Nothing To Do With Trump's "Scam"

    Blog ››› ››› CRAIG HARRINGTON

    According to The Washington Post, the progressive economic think tank Donald Trump repeatedly cited during a recent speech on his trade policy agenda is slamming the presumptive Republican presidential nominee for distorting the facts and ignoring other initiatives that would boost the economy -- all in an attempt to “scam” hard-working Americans.

    During a June 28 speech at a metal recycling facility in Monessen, PA, Trump outlined a trade and manufacturing policy agenda that draws heavily from research performed by the progressive Economic Policy Institute (EPI). Washington Post reporter Greg Sargent was first to report that EPI president Lawrence Mishel rebuked Trump’s agenda for misleading the public on globalization and wage stagnation -- by blaming our trade policies for flat wages and fewer jobs -- while ignoring progressive initiatives like lifting the minimum wage, expanding overtime protections, and increasing union membership (emphasis added):

    So it’s worth noting that the EPI — in a lengthy statement sent my way — now says that Trump’s account of what has happened to American workers in recent decades is simplistic in the extreme; that Trump is actually a lot more friendly to GOP economic orthodoxy than most observers have noted; and that Trump’s actual prescriptions fall laughably short of what needs to be done to help those workers.

    Trump boasted in his speech that “under a Trump presidency, the American worker will finally have a president who will protect them and fight for them,” and repeatedly accused Clinton and other politicians supported by financial elites of “betraying” American workers by prioritizing globalization over their interests.

    But Lawrence Mishel, the president of the EPI, sent me a critique of the speech. Mishel noted that Trump’s account suggests that only government officials — particularly the Clinton administration and Democrats who supported trade deals such as NAFTA — are to blame for flat wages. He argued that Trump conspicuously left out the role of Republicans in this whole tale, as well as the business community’s use of its power to keep wages down and erode countervailing power on the part of labor.

    As Sargent and Mishel note, Trump has appropriated a populist tone on international free trade agreements, but his other stated positions on tax and economic policy decidedly favor the corporatist right wing. The incongruity of Trump’s positions led Mishel to conclude his response by labeling Trump’s speech for what it was: “a scam.”

    For months, Media Matters has documented how media have tended to gloss over Trump’s extremist positions with a misleading “populist” veneer. According to reports, his top economic policy advisers are discredited right-wing pundits Stephen Moore and Larry Kudlow -- known for their strict adherence to trickle-down economics, their willingness to distort reality for political gain, and their rank professional incompetence. Last September, right-wing media falsely labeled Trump’s tax reform plans a “populist” agenda when it was actually a budget-busting giveaway to the rich that wilted upon closer inspection. In April, experts slammed Trump’s proposal to eliminate the national debt in just eight years as “impossible” and “psychotic.” In May, Trump was criticized for his “insane” plan to default on U.S. federal debt, and then for his “disastrous” suggestion that the U.S. could solve its long-term debt problems by printing money.

    Even in the case of free trade, Trump’s rhetoric may be populist, but experts and media critics argue that his positions are untenable. As CNN’s Ali Velshi pointed on during the June 29 edition of New Day, Trump’s attempt to solely blame the Clinton administration for jobs lost to globalization was “highly dishonest.” On the May 6 edition of New Day, CNN analyst Rana Foroohar slammed Trump’s nascent trade agenda as being “either a bad idea, or impossible.” (Furthermore, Trump’s penchant for comparing trade deals to the horrifying violence of “rape” leaves him far outside the rational mainstream of political discourse.)

    As Sargent noted, Trump’s June 28 policy speech seemed to be an attempt “to stake out positions on trade and wages that are … perhaps even to the left of Hillary Clinton and Democrats.” MSNBC political reporter Benjy Sarlin and Fortune politics writer Ben Geier both argued in June 29 articles that the speech was an overt attempt by the GOP front-runner to court supporters of Sen. Bernie Sanders (I-VT), the runner-up in the Democratic presidential primary. Trump even quoted a common refrain from Sanders’ own stump speeches during a series of attacks on Clinton, saying she “voted for virtually every trade agreement that has cost the workers of this country millions, millions of jobs” -- a claim that PolitiFact labels as “half true” at best.

    Given his previous extremist economic positions, Trump’s statements on trade -- which were chided by both the right-leaning U.S. Chamber of Commerce and left-leaning labor unions including the AFL-CIO -- seem to be born not of conviction, but rather of expedience.

  • Reporters Should Contrast Trump’s “Love” Of Coal Miners With Funder’s Record Of Undermining Them

    ››› ››› DENISE ROBBINS

    Presumptive GOP presidential nominee Donald Trump will attend a fundraiser hosted by coal industry CEO Robert Murray, who has pressured and even allegedly fired employees for political gain and has repeatedly fought against health benefits, safety protections, and labor rights for coal miners. Media covering the event should contrast Trump’s claims of staunch support for coal miners with his willingness to raise money with Murray.

  • Wash. Post Slams Paul Ryan’s “Flimsy” Health Care Reform Plan

    Editorial Board Concludes Ryan’s “Better Way” Could Lead To “Much Higher Costs” For Many, Allow States “With The Skimpiest Regulations” To “Set The National Standard”

    Blog ››› ››› ALEX MORASH

    The Washington Post blasted Speaker of the House Paul Ryan’s (R-WI) outline for replacing Obamacare, which could cut health care for millions of Americans and might lead to more rapidly rising insurance costs for an inferior product.

    Ryan released a health care reform plan on June 22 under the “Better Way” brand that he hopes will become a fixture for Republican policy making in the next Congress. The plan seeks to repeal the Affordable Care Act (ACA) -- commonly referred to as Obamacare -- and replace it with a series of tax credits for Americans to purchase private insurance. The Post picked apart Ryan’s health care agenda in a June 26 editorial, saying the plan would be “hard on the poor, old and sick” and adding that “those in late middle age could face much higher costs.” The editorial board also derided the plan, which offers no cost projections or estimates for the number of Americans who could lose their ACA-compliant insurance, for being yet another vague proposal from a Republican Party that “has no excuse for blank spaces” after so many years of fruitless opposition to the health care law.

    The Post noted that “the rate of uninsured Americans has plummeted to a historic low” since Obamacare was enacted, and Ryan’s plan does not appear capable of maintaining the same low rate. Instead, the plan would create tax credits that increase as Americans age, but it would also let insurers “raise premiums with age much more than the ACA currently allows.” Since “the proposal gives no sense that the two will come close to matching up,” it is possible that the tax credits proposed in the Ryan plan could be much smaller than the actual cost of insurance, making the reform agenda costlier for millions of middle-aged Americans currently benefitting from Obamacare. From The Washington Post (emphasis added):

    House Speaker Paul D. Ryan (R-Wis.) seemed to promise better when he announced that he would roll out an ambitious policy agenda this summer. Instead, last week he released an Obamacare alternative that is less detailed in a variety of crucial ways than previous conservative health reform proposals. The outlines that the speaker did provide suggest that it would be hard on the poor, old and sick.

    Mr. Ryan’s plan would replace Obamacare with a tax credit available to people buying insurance plans in markets regulated by the states, not the federal government.

    [...]

    The proposal hints that the credit would be sufficient to cover the cost of plans that existed before the ACA. This is not reassuring: Pre-ACA, individual-market insurance plans were often thin, with limited benefits, extensive cost-sharing and other elements designed to deter anyone who might actually need care. Without strong coverage requirements, insurers would have limited incentive to offer plans that appealed to people who may be — or may become — sick. States would be hampered in responding to these issues: The proposal would allow insurers to sell plans across state lines, so the state with the skimpiest regulations would likely set the national standard.

    People with money to put into health savings accounts (which the proposal would expand), could cover gaps in thin insurance coverage with tax-advantaged out-of-pocket spending — but this would not be a realistic option for low-income people. As for the old, the plan would scale up the tax credits with age, but it would also permit insurers to raise premiums with age much more than the ACA currently allows. The proposal gives no sense that the two will come close to matching up; as in other conservative plans, those in late middle age could face much higher costs. For the sick, meanwhile, Mr. Ryan’s plan would offer an ultimate backstop by funding high-risk insurance pools. But health-care experts caution that this approach would cost a massive amount of federal money — a fact that has caused Republican lawmakers to balk at policies like it when fleshed out.

    This harsh treatment of Ryan’s health care reform agenda mirrors the tone of criticism he drew from various quarters for each of his recent attempts to rebrand misleading Republican economic talking points as a “Better Way” forward. Ryan’s “Better Way” anti-poverty reform agenda, which was based almost entirely on right-wing media myths rather than professional economic research, was slammed by critics as being “doomed to fail” and “based on faulty assumptions.” His health care reform agenda seems to be drawn from the same right-wing media perspective, which considers the full repeal of the ACA to be of paramount importance despite the law’s continued success and the failure of every right-wing prediction of its demise to come to fruition.

  • Fox News Praises Trump’s Widely Panned Brexit Response Because He Was “In The Right Place”

    Blog ››› ››› ANDREW LAWRENCE

    Fox News’ John Roberts praised Donald Trump’s widely mocked response to the United Kingdom’s vote to exit the European Union, known as “Brexit,” claiming that Trump was “at exactly the right place, at the right time, on the right side of the issue.”

    Following the UK vote which caused worldwide economic turmoil, Trump gave a “bizarre” speech that focused on his new golf course in Scotland instead of the Brexit results. When Trump finally spoke on the referendum after being pressed by reporters, he praised the vote and welcomed the historic crash of the British currency for potentially having a positive financial effect on his Scottish golf course:

    Visiting the golf course he owns in Scotland, he praised the referendum vote, saying the British had chosen to “take their country back,” but only after he touted the sprinkler system, the drains and the luxury suites at his Turnberry resort.

    Even as his campaign sent out a fundraising email hailing the British vote as a “brave stand for freedom and independence,” he seemed at one point to welcome the crash of the British currency that threatened to undermine financial markets, noting that he might gain from it.

    “When the pound goes down, more people are coming to Turnberry,” he said.

    Trump’s response was immediately panned throughout the media. MSNBC’s Nicolle Wallace said she was “gobsmacked” at Trump’s response, noting that it highlighted the way Trump has been using his presidential bid to further his business interests. CNN’s John Avalon described Trump’s response as “completely insane,” and The Washington Post called it “a widely broadcast infomercial.”

    But on the June 26 edition of Fox News’ Special Report, Fox’s senior national correspondent John Roberts had a different view of Trump’s speech, claiming that the referendum offered Trump “the opportunity to say he has his finger on the pulse of national populism” and praised Trump for being “at exactly the right place, at the right time, on the right side of the issue”:

     

    CHRIS WALLACE: Donald Trump seemed to be at the right place at the right time, but some say HRC’s response could have been sharper.

    [...]

    JOHN ROBERTS: Donald Trump’s trip to Scotland was supposed to be all about business, but it quickly became all about politics in a way that may give him a boost back home. It was a trip that was giving Republican leaders fits, ill-timed and unnecessary, they said. Yet in true fashion, Trump found himself at exactly the right place, at the right time, on the right side of the issue.