Posted on 02/27/2016 8:34:15 AM PST by Kaslin
The good news is that the economy is growing at 2 percent and that there's no recession in sight (barring a complete collapse of profits). The bad news is that the economy is growing at 2 percent. It's been doing so for nearly 15 years under Democratic and Republican administrations.
Coming off a deep recession, real GDP growth is averaging no better than 2 percent. After 25 quarters of so-called recovery under Obama, it has increased a total of only 14.3 percent.
Compare this to earlier periods. After the JFK tax cuts of the early 1960s, the economy grew in total by roughly 40 percent. After the Reagan tax cuts of the 1980s, the economy grew by a total of 34 percent.
And here's the killer: Real middle-class wages are still flat-lining. These folks get nothing out of 2 percent growth.
As I feared, subpar economic growth never really came up in the Republican debate in Houston. Rather than growth, we got more cat fights. It's time to get serious.
In a recent essay, John H. Cochrane, a senior fellow at the Hoover Institution, wrote that "sclerotic growth is the overriding economic issue of our time." He has numbers to back this up.
From 1950 to 2000, the U.S. economy grew at an average rate of 3.5 percent. That generated a massive gain in real GDP per person from $16,000 to over $50,000. A huge win for the middle class.
But as Cochrane noted, if the whole post-WWII period had grown at 2 percent, income per person would have increased from $16,000 to only $23,000 -- about half of what actually happened at 3.5 percent growth.
There is a big difference between 2 and 3.5 percent growth. It's not abstract or theoretical. Essentially, the middle class has not gotten a raise in 15 years. In fact, a new report from Sentier Research finds that median household income of $56,700 (adjusted for inflation) at the end of 2015 is almost exactly where it was at the end of 2000.
Not surprisingly, the middle class is cranky and angry. And they are voting for change. Significant change. As in throw-the-bums-out change. That includes presidents, members of Congress, big-company crony capitalists, and corporate welfarists.
The middle class is saying the system is rigged against them, and they want to change who's running the system.
Much of this gets to the root of the inequality debate. Democrats like Hillary Clinton and Bernie Sanders want to raise taxes on the rich, saying it will solve inequality. It won't. All that will do is significantly reduce incentives to work, save, and invest.
But I say inequality is not the problem. The problem is a lack of growth. Middle-class people who haven't seen a raise in all these years don't want to punish success, and they're not jealous of those who have done well. They just want their piece of the pie.
And while the pie itself has stopped growing, the individual slices have gotten smaller.
Can you blame their anger and desire for radical political change? Nope.
Coming out of the caucuses and primaries so far, the economy has been the number-one issue. There's a message there. And the GOP has to address the issue of growth versus inequality. So far they haven't done it.
With the GDP report for the fourth quarter ended in December, we know that the inflation-adjusted economy is growing at 1.9 percent over the last year. Business fixed investment -- the category that produces good-paying jobs -- is growing at 1.6 percent. Low gasoline prices have helped consumer spending rise by 2.6 percent, but even that's not a wildly optimistic number. The inflation rate, meanwhile, is a measly 1.1 percent.
All this tells me nothing has really changed. But we can change this fast.
Research has shown that middle-income wage earners would benefit most from a large reduction in corporate tax rates. The corporate tax is not a rich-man's tax. Corporations don't even pay it. They just pass the tax on in terms of lower wages and benefits, higher consumer prices, and less stockholder value.
So as I've written a million times: Slash the corporate tax rate to 15 percent for large C-corps and small S-corps, go to immediate tax deductions for new investment, and make it easy for firms to repatriate their overseas earnings.
This would be the single-most stimulative program for reigniting economic growth. Principally, it's a middle-class tax cut. If you combine that with regulatory rollbacks and a stable dollar, within less than a year the U.S. economy can break out of its doldrums.
To all the GOP candidates: Please send this message. To my Democratic friends: Why not revive the legacy of the JFK tax cuts? It would be a whole lot better than punishing success.
“Research has shown that middle-income wage earners would benefit most from a large reduction in corporate tax rates. “
Yeah,, it works just like that./s
Yeah, I missed that one. There are so many lies in this column it’s hard to keep track of them all.
People do get pay raises and promotions over the years, all things being equal.
The economy is still operating at half the level it was when the Democrats took control of Congress in 2007. Real unemployment is at 22.5%. Even leftist media like thy NYT are admitting employment has not recovered to the levels they were at before Obama took office (which was already bad).
If the GOP gets the presidency and keeps Congress the solution isn’t a plan, it’s re enabling the capitalist free market. Back off on too restrictive rules, don’t over regulate or tax the financial system and markets. Businesses will grow and jobs will be available. Back off on the too generous entitlements and maybe the healthy young will go to work.
Trump will be the captain of the ship and his advisers will be the cabinet. He will select, as he says, the best of America, I trust him and by the anti Trump activity by the ignorant I feel more right than ever. The establishment is upset that they might be crushed and the GOPe will be destroyed.
Rather, the Donald!
Provided those "healthy young" don't have to stand too far back in line behind all of those Juan and Mohamed kids have been streamed into the country.
The US economy ain't going much of anywhere until we stop financing every third-worlder can sneak into the place and suck up jobs and/or benefits.
...sure would be nice if we only had to address one problem at a time, wouldn't it?
Trump. I’m voting for him now and hope that I am not duped.
Trump will be the captain of the ship and his advisers will be the cabinet. He will select, as he says, the best of America, I trust him and by the anti Trump activity by the ignorant I feel more right than ever. The establishment is upset that they might be crushed and the GOPe will be destroyed.
How much growth do you think is possible?
How much more can education grow? If it doubled grandchildren might spend 26 to 34 (or 40 or 42) years in school.
The vehicles in the USA are generally big already.
How much more food can America’s generally overweight population eat?
Do you need twice as many TVs? two Iphones?
If new houses get 2% bigger every year, how long will it take for a typical new house to be twice as big?
2016 - 2,000 square feet
~2046 - 4,000 square feet
~2076 - 8,000 square foot
Remember too it only takes about 50% more material (and ~25% more labor hours) to make a house that’s twice as big.
But even that misses a big variable, that being the value of the dollar. What was the income in Zimbabwe? Quadrillions?
“Research has shown that middle-income wage earners would benefit most from a large reduction in corporate tax rates.”
In reality, most leading corporations have more cash than they can use productively.
Apple alone could hire every unemployed engineer or programmer in the entire world for at least a decade.
In fact, Apple might financially be able to hire every engineer or programmer in the entire world for at least five years.
I want the Federal government to get so far away from the notion that they steer or father the economy, that they stop making up and propagandizing phony statistics. Presidents don’t create jobs.
Stop spending to boost GDP
Stop the illegal alien invasion
End Obamacare
Throw out 10% of all regulations each year for 8 years. No one will notice.
End generous welfare hammocks.
And the number one way to boost the economy. Throw liberals out of office.
Minor point, if they hired engineers and programmers in America, that would mean bringing the money in from offshore, at which point the US government would tax the heck out of it, and they'd only be able to hire a fraction of America's engineers and programmers.
Nully's Modest Tax proposal:
1. Eliminate ALL corporate tax.
1a. Eliminate ALL depletion allowances and depreciation allowances.
2. Eliminate ALL current IRS regulations.
3. Set the individual tax rate at 10% regardless of income.
3a. Perquisites at taxed at 10% of cost.
3b. Withhold at the rate of 11%, to get a refund you have to file taxes, but there is no legal imperative to file.
4. Tax ALL money coming into the country at 0% (yes, ZERO%).
5. Tax ALL money leaving the country at 10%.
So in essence we ARE in retraction and were it not for the fake front of fiat currency as opposed to the no-BS gold standard we used to be on, we’d already be seeing the full consequences.
I wish they’d happen already while I’m young enough to get myself and my fiance out of my homecity under my own power when things finally hit the fan. I really, REALLY do not want to be 65 when the collapse finally hits and barely able to dodder down the sidewalk let alone pack the car in a hurry.
Even if we get a magician elected they couldn’t turn things totally around... We need to contract severely, it’s inevitable at this point... We need to fire 50% or more FedGov employees and cut spending by at least that much. Of the remaining employees dedicate 10% of them to identifying and eliminating outdated and harmful regulations... Find a way to let the TBTF banks fail and end the FRB system, confiscate all their stolen wealth starting with GS and Citi. The treasury should control the money... Declare an income tax holiday and implement the only idea that’s less intrusive , the FairTax... Immediately start on fixing the built in flaws ,, delegate power back to the states , no more popular election of senators... get actual constructionists in the SC. ,, purge all Obungholes “pen and phone” edicts and fire anyone that implemented them in any agency they reside in.
We’ll still have a 2-4 years of hell but we’ll survive.
“We are in the beginning stages of a global deflationary depression that is going to be really unpleasant.”
The NYC metro area, including NJ, has never recovered from 2007; we still bleed jobs and American taxpayers (and try to replace them with non-contributing Third Worlders, legal or otherwise). There was never a recovery here - just flight of capital.
There was no recovery in GA either.
There was a little one; Mercedes Benz recently moved their headquarters from northern NJ to Atlanta...
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