What Will Really Cause The Next Big Crash?

There is a recent article by Matt Taibbi in both Rolling Stone and Common Dreams that predicts a looming economic disaster due to three colliding problems.  And those three problems are as follows:  1) FERAL Reserve monetary tightening, both in terms of raising interest rates as well as the more subtle but significant Quantitative Tightening  (QT), 2) Trump's tax cuts depending on unrealistically high economic growth to "pay for themselves", and 3) Trump's tariffs and the resulting trade war.  And the collision of all three together will not end well, according to Taibbi, and he is probably right for the most part.

But even these are mere sideshows compared to the very biggest underlying root cause of the next looming crash, even if one or more of these problems are in fact the proverbial spark that sets off the financial powder keg.   So what is this underlying powder keg, exactly?  Well, it is the mother of all stock market bubbles, artificially inflated by corporations buying back their own stock to manipulate share prices.  And famous economist Ted Bauman predicts that when it finally bursts, any day now in fact, the market will quickly plummet by 70% or more, causing a crisis that makes 2008 and perhaps even 1929 look like a walk in the park by comparison.

So how did we get here in the first place?  The story begins in the 1920s, when corporate stock buybacks were all the rage, and in fact caused the 1929 Wall Street crash.  The Great Depression soon followed.  In 1934, this highly manipulative practice was rightly outlawed, and the ban remained in effect for nearly half a century until the Reagan administration lifted this ban in 1982 as part of Reagan's deregulation platform.  And since 2010, stock buybacks have accelerated dramatically, artificially inflating the stock market numbers and lulling hapless investors into a false sense of security.  And the recent Republican tax cuts have only accelerated this trend even further (since corporations now have even more money with which to buy back their stocks).

And what goes up, must come down, and the bigger they are, the harder they fall.

Don't say you weren't warned.  On the bright side though, if the crash occurs before the November 6 election, it will essentially guarantee that the predicted Blue Wave will be a Blue Tsunami, washing away the current vile Red Tide of Trump and his sycophantic Republican lackeys, no matter how much GOP cheating occurs (and surely there will be plenty).

Corporate Tax Cuts Won't Boost Wages Or Improve America's Economic Well-Being

A scathing new report by the Economic Policy Institute confirms what progressives have already known:  corporate tax cuts will NOT boost wages or have any practically significant net benefits for the non-rich.  This report is rather timely, given that a massive corporate tax cut is a key component of the Trump-led Republican tax reform agenda that is currently under debate in Congress.

In a nutshell, the top corporate tax rate had hovered around 50% for decades until 1986 when Reagan cut it to 34%, and to this day it remains at 35%.  And while there were always loopholes for both individuals and corporations, the number of loopholes for corporations also increased dramatically since Reagan's 1986 tax code overhaul, to the point where many large corporations pay zero or even negative taxes!  And all the while, workers' wages have lagged behind both corporate profits (since around 1990) and labor productivity gains (since 1973 and especially since 1980), often not even keeping up with inflation for those at the bottom of the scale.  And trade deficits, foreign tax havens, and foreign cash holdings in such havens have only increased, along with outsourcing and offshoring.

Thus, the idea that further tax cuts for large corporations would benefit American workers is nothing but the latest incarnation of trickle-down voodoo economics, plain and simple.  By all means, close all the loopholes.  Give tax breaks and cuts to truly small businesses.  But cutting the marginal rate on large corporations would do nothing but make the already rich even richer, while blowing a massive hole in the federal budget as well.

In the past, the TSAP recommended cutting corporate taxes while simultaneously closing loopholes.  Currently, though, we no longer recommend any tax cuts for corporations whose annual profits are in the seven figures or higher.  In fact, we now recommend making the corporate tax code that much more steeply progressive, with the top bracket restored to 50%, with NO LOOPHOLES this time, and the very smallest businesses paying no tax at all.  We also support the corporate tax applying only to retained earnings (i.e. profits less any dividend payouts) while taxing dividends and capital gains for individuals at the same rate as ordinary income.  And as we have noted before, the top marginal tax rate for individuals should be at least 50% beyond the first million dollars per year and perhaps 70% beyond the first ten million, again with NO LOOPHOLES this time.  Any overhaul of the tax code that we would support should really include all of these features.

The Phony Recovery

A recent study, by the Wall Street Journal of all places, confirms what the bottom 99% of Americans have long suspected for years: the so-called economic "recovery" of the past five years was essentially a joke all along.  In a nutshell, corporate earnings are at a record high, while revenues have been flat for the past five years.  In other words, consumer demand is low because customers are broke, and companies have mainly been "growing" their earnings by cutting cannibalizing their workforce and buying back (i.e. manipulating) their own stock to paper over their flat or declining sales.  All while they sit on trillions of dollars.  It's a zero-sum game, and a vicious cycle.  Thank you, Captain Obvious! 

So how can we break this vicious cycle before the resulting bubble bursts leading to the next big crash?  The answer is really quite clear:  adopt the TSAP party platform ASAP.   But since it is unrealistic to expect either corporate party in Washington to take up an entire platform that threatens their own interests, we have devised a list of the highest-priority measures to take before the inequality-fueled crash of 2016 happens:

1. Raise the top marginal tax rate to at least 50% (if not 70%) for incomes above $1 million, and simplify the tax code by removing loopholes geared towards the wealthy.
2. Reduce the corporate tax rate to 20-25%, remove all loopholes, and tax only retained earnings.
3. Reduce tax rates for the bottom 80% of Americans, and un-tax small businesses with earnings less than $100,000 per year.
4. Raise the minimum wage to at least $10/hour if not higher, and index it to inflation from now on.
5. Remove the "sequester" cuts ASAP, and sharply increase funding for infrastructure, education, green energy, and other crucial goals to put Americans back to work.

Of course, it would even better if the entire TSAP platform were adopted, but doing just these five things alone would probably be enough to, in the words of Paul Krugman, "end this depression now".  Because that's what this "recession" really is.  And ending it is long overdue--five years overdue to be precise.

Flush the TPP Now!

The latest news on the diabolical machinations masquerading as a "free trade" deal known as the Trans-Pacific Partnership (TPP) is that "fast-track" legislation has now been introduced to Congress.  We have previously noted how the TPP is a very, very bad deal for everyone but the elites and mega-corporations.  In a nutshell, it would basically remove all obstacles to complete corporate control over all of us.  From worker rights to environmental protection to food safety to Internet freedom and much more, We the People would lose a massive amount of power to our global corporate masters as a result of this Faustian bargain.  The fact that the TPP will most certainly destroy countless jobs in this country (like NAFTA did) is merely an afterthought compared to the rest of its pernicious effects upon our nation (and any other nations foolish enough to sign it).  And fast-tracking this deal would allow it to easily bypass the usual safeguards that would otherwise kill it before it even has a chance of passing.

So tell your representatives in Congress:  Do NOT allow it to be fast-tracked.  Flush the TPP now, before it's too late!

R.I.P. Net Neutrality

Today on January 15, 2014 at 11 am, Net Neutrality kicked the bucket--for now at least.   A federal court struck down FCC regulations designed to prevent broadband Internet service providers from favoring certain Internet services at the expense of rivals.  Essentially, they can now charge more for some services to have access to higher speeds than others, creating "fast lanes" and "slow lanes", and thus making the formerly open Internet more analogous to what cable TV companies do.  And that's not a good thing at all, since a few mega-corporations would be able to afford to use the "fast lanes", while the rest of us get stuck in the "slow lanes", creating yet another unfair advantage for the wealthiest and most powerful among us.  As if they didn't already have enough privileges as it is.  Even the very concept of free speech is at stake as well.

However, all is not lost just yet.  Rest assured that the ruling will be appealed, and also remember that the FCC can simply write new rules that reclassify broadband as a telecommunications service, which would get around the court ruling entirely and enable them to restore our free and open Internet with the stroke of a pen.   Of course, that would put them at loggerheads with the corporate giants who currently control broadband, and these companies have tremendous lobbying power in Washington.  And given the venality of most members of Congress these days, the corporations could still potentially achieve victory at our expense.  Our job as concerned citizens is to prevent that from happening.

Corporations are People Too?

In a recent Supreme Court decision, Citizens United v. Federal Election Commission,  they essentially ruled the following:

Corporations = people

Money = speech

And thus, corporations were granted unrestricted rights to influence elections via financing political campaigns.  The court's majority opinion claimed that the First Amendment protected such spending as "free speech."

The first one was implied from a largely accidental event:  in Santa Clara County vs. The Union Pacific Railroad (1886), the court's (clerical) Recorder, wrote in his personal commentary that the Chief Justice said that all the Justices agreed that corporations were persons.  This "headnote" had no legal standing, and but future jurists would repeatedly accept it as precedent nonetheless.  And thus corporations were able to claim Fourteenth (and eventually even First) Amendment protections on the basis of a remark in passing (obiter dictum) about the outcome of what would have otherwise merely been an obscure taxation case.

The second one is just downright absurd.  Money is not speech--it is a medium of exchange that also doubles as a form of power.  Such a loose and ambiguous definition of "speech" could potentially be used to invalidate so many other laws, such as minimum wage and those laws that regulate how tall a building is, in the name of the First Amendment.  Most relevant to elections, it is known that 9 times out of 10, the candidate who spends the most money wins.  It is clearly anti-democratic for ultra-rich corporations (or individuals) to use their vast wealth to stack the deck (and drown out the competition) for the candidates that favor their own interests.  In other words, one dollar = one vote.  That is how plutocracies, not democracies, operate.

As for why corporations ought not to be considered persons, I believe that Buckminster Fuller said it best:

"Corporations are neither physical nor metaphysical phenomena. They are socio-economic ploys -- legally enacted game-playing -- agreed upon only between overwhelmingly powerful socio-economic individuals and by them imposed upon human society and its all unwitting members."

Furthermore, corporations (under the current system) simply don't have the same responsibilities as citizens--in practice they are only legally responsible to their shareholders.  They are completely amoral entities.  And they don't die like people inevitably do--like vampires, they are immortal unless killed.  And if they do become "too big to fail" and take suicidal risks, they are bailed out with taxpayer money.  Nevermind that 25% of America's largest corporations pay essentially no income tax despite sales in the trillions.  Of all American corporations as a whole, it was more like 2/3 paid zilch from 1998-2005.  ExxonMobil, one of the largest, paid zero in 2009.  Due to their massive influence, corporations (if big enough) can even, quite literally, get away with murder (think toxic waste and dangerously defective products), not to mention highway robbery.  Thus, lifeless corporations are not entitled to natural rights that living, breathing human beings enjoy.

The founders would not likely have supported this outrageous decision, and Jefferson (you know, the one who wrote the First Amendment) is probably spinning in his grave as we speak.  One thing he hated a great deal was the prospect of corporate monopolies, which by their sheer size were a threat to "we, the people."  So much so that his original version of the Bill of Rights contained an amendment (which never passed) to prohibit "monopolies in commerce."  In addition, Thomas Paine reasoned that any institution created and composed of humans had to be subordinate to individual people, and this applied not just to governments, but also to churches and corporations.  Thus, this original logic was turned on its head by the Supreme Court, a branch of government that the Founders, ironically enough, initially considered to be the "least dangerous" branch.

It goes without saying that the TSAP does not support this perversion of the Constitution either.  We believe that election campaigns should be primarily publicly funded, with all candidates getting an equal amount to spend from the government.  All candidates get an equal voice, and the source of money is transparent.  This is also known as "clean money, clean elections," as opposed to the current dirty system.  While we believe that natural persons (not corporations or other organizations) should also be allowed to contribute, it should be capped at one dollar per person.  Then it really would be one American, one vote, and third parties (such as the TSAP) will finally have a chance to move beyond the blogosphere and into Washington.

All this raises an important question:  if corporations are people, can we now throw them in jail when they commit crimes?  That'll be the day!