Republican economic policies are building to fiscal calamity in September

Adding to the mountain of statistical evidence showing the severity of U.S. inequality, an analysis published last Friday found that the top one percent of Americans gained $21 trillion in wealth since 1989 while the bottom 50 percent lost $900 billion.

Jake Johnson writes at Common Dreams, ‘Eye-Popping’: Analysis Shows Top 1% Gained $21 Trillion in Wealth Since 1989 While Bottom Half Lost $900 Billion:

Matt Bruenig, founder of the left-wing think tank People’s Policy Project, broke down the Federal Reserve’s newly released “Distributive Financial Accounts” data series and found that, overall, “the top one percent owns nearly $30 trillion of assets while the bottom half owns less than nothing, meaning they have more debts than they have assets.”

income growth of wealth inequality over the past 30 years, Bruenig found, is “eye-popping.”

“Between 1989 and 2018, the top one percent increased its total net worth by $21 trillion,” Bruenig wrote. “The bottom 50 percent actually saw its net worth decrease by $900 billion over the same period.”

“Enormous crisis,” Rep. Pramila Jayapal (D-Wash.) tweeted in response to Bruenig’s analysis.

“We have the worst inequality in this country since the 1920s,” wrote Jayapal, co-chair of the Congressional Progressive Caucus. “Three wealthiest people in America have as much wealth as the bottom 50 percent.”

This is what faith based supply-side “trickle down” GOP economics has created — just as it was intended to do.

POLITICO reports Federal tax payments by big businesses are falling much faster than anticipated in the wake of the Republicans’ 2017 corporate welfare tax cuts. Big businesses paying even less than expected under GOP tax law:

The U.S. Treasury saw a 31 percent drop in corporate tax revenues last year, almost twice the decline official budget forecasters had predicted. Receipts were projected to rebound sharply this year, but so far they’ve only continued to fall, down by almost 9 percent or $11 billion.

Though business profits remain healthy and the economy is strong, total corporate taxes are at the lowest levels seen in more than 50 years.

Analysts expected corporate payments to fall in the wake of the Tax Cuts and Jobs Act, which slashed the corporate tax rate by 14 percentage points, to 21 percent, and expanded breaks for buying machinery and equipment.

In April 2018, less than four months after the cuts were signed into law, the nonpartisan CBO predicted corporate receipts would drop that year to $243 billion, which would have been an 18 percent decline from 2017. But payments ended up coming in at $205 billion, a nearly one-third decline from the previous year.

Then, in January, CBO projected receipts would bounce back this year, increasing by 20 percent or $40 billion. But through last month, they’re down 8.7 percent.

CBO says it isn’t sure what’s happening.

At the same time, overall taxes paid by individuals under the new tax law are up so far this year by 3 percent, thanks to higher wages and salaries, according to the Congressional Budget Office. Last year tax payments by individuals went up 4 percent.

* * *

[Some] analysts see other possibilities.

Companies may be making greater use of so-called expensing, an incentive that allows them to immediately write off the cost of investments rather than having to stagger them over a number of years. Having more stuff to deduct means smaller tax bills. If that’s the case, it could mean receipts will rebound in coming years because companies will not have those write-offs available to them in the future.

Another potential explanation: Trump’s tariffs, which could hurt corporate tax revenues in two ways. If a U.S. company that relies on components made in China suddenly sees the cost of those items increase, it will have more to deduct as business expenses. Alternatively, if a company is seeing fewer sales because it is passing along the cost of the tariffs to its customers, it will have fewer profits to tax.

“You either reduce business receipts or increase deductible costs, and either of those things reduce corporate taxable income,” said Pomerleau. “It may mean corporate tax liability is lower than we expected not because our projections of the TCJA were wrong, but maybe because we didn’t account for the fact that tariffs were going to lower corporate receipts.”

A fourth possible factor: The law isn’t reducing profit shifting by multinational corporations as much as forecasters expected. By cutting the corporate rate, the Tax Cuts and Jobs Act was supposed to reduce the incentive for companies operating in multiple countries to stockpile profits abroad, out of the reach of the IRS.

Overall corporate revenues last year amounted to 1 percent of GDP, a level they’ve dipped to only twice since 1965. Both of those previous instances, in 2009 and 1983, came in the wake of recessions, when business profits had cratered.

About those tariffs “Trump taxes” on goods made in China. “Dear Leader” is threatening to impose a new round of “Trump taxes,” this time on consumer goods made in China. The retail apocalypse that has already closed thousands of retail stores, with thousands more slated for closure this year will expand exponentially as a result of these new tariffs “Trump taxes.” ‘Catastrophic,’ ‘Cataclysmic’: Trump’s Tariff Threat Has Retailers Sounding Alarm:

Already battered by the e-commerce revolution, traditional retail stores are bracing for another blow — new tariffs on $300 billion worth of Chinese imports that the Trump administration is threatening to impose.

Retailers and analysts warn the impact will be disastrous for an industry already tormented by vacant storefronts and deserted malls. The reason: Unlike earlier tariffs that mostly targeted industrial and commercial products, the next round is aimed squarely at consumer goods like footwear, toys and apparel.

Even for healthy chains, like Walmart and Costco, the new duties threaten the business formula that helped speed their rapid rise over the last few decades: Import cheap products from Asia and sell them at rock-bottom prices. The National Retail Federation estimates that China supplies 42 percent of all apparel, 73 percent of household appliances and 88 percent of toys sold in the United States.

The government has already imposed tariffs on $250 billion worth of Chinese goods. President Trump has said he will decide on whether to impose duties on the remaining $300 billion in imports but hasn’t set a firm deadline.

Mr. Trump’s trade representative [began] hearings on those proposed tariffs on Monday.

* * *

The impact will be greater on traditional retailers because they can’t adjust prices as quickly as online retailers, Mr. Cohen said. “This is going to cause more stores to close and more people to lose their jobs,” he added.

So far in 2019, American retailers have announced plans to shut more than 7,000 stores, after announcing nearly 6,000 closings last year, according to Coresight Research. Those numbers include liquidations of chains like Payless ShoeSource and Gymboree and store closings by healthier companies like Gap Inc. and Victoria’s Secret.

By the end of 2019, announced closings could climb to 12,000 stores, Coresight estimated.

The tariffs could also hurt the broader economy at a time when recession worries have moved to the forefront. The retail sector has shed 50,000 jobs since January.

Torsten Slok, chief economist at Deutsche Bank, estimated that if the duties did take effect and remained in place, they would add 0.4 percent to the inflation rate and reduce economic growth by the same amount over the next year.

“That may not sound like much, but consumer spending equals 70 percent of G.D.P.,” he added. “It’s Economics 101 that as prices rise, people will spend less.”

As bad as all of this sounds, a real economic disaster is looming at the end of September when the federal fiscal year ends. Just as I warned you earlier this year, “Dear Leader” is once again pursuing the GOP hostage taking strategy: demanding $5 billion in border wall funding as part of any deal that would put limits on federal spending (budget sequestration caps) and raise the federal debt ceiling. GOP nervous that border wall fight could prompt year-end shutdown:

A senior administration official on Friday said the Senate should put together appropriations bills that funds the president’s border wall request. The GOP Senate could then negotiate with Democrats in the House on a compromise version of the spending bills later this year.

Senate Appropriations Committee Chairman Richard Shelby (R-Ala.) and other Senate Republicans see that as a risky strategy that could lead to another stalemate and potential government shutdown at the end of the year.

Senate Majority Leader Mitch McConnell (R-Ky.) and other Senate Republicans are eager to avoid the chance of another government shutdown, but Trump is more focused on revving up his conservative base ahead of the 2020 presidential election. He wants to show he’s doing everything to deliver on his top campaign promise: building the wall.

Shelby doesn’t think Democrats will agree to $5 billion for a border wall, even if some Republicans think the allocation can be euphemistically described or “massaged” as funding for “border barriers” or “border infrastructure.”

A meeting Wednesday afternoon between Shelby, McConnell and several senior GOP appropriators and senior White House officials failed to yield a breakthrough.

“I think the biggest problem is the wall funding,” said a GOP lawmaker familiar with the talks. “They want $5 billion. I don’t think they’re going to get $5 billion for the wall.”

Which means we are at a budget impasse. GOP in disarray as budget impasse threatens shutdown, deep cuts — and default:

Senate Republicans and the Trump administration are struggling to reach an agreement on a path forward on critical budget and spending issues, threatening not only another government shutdown and deep spending cuts but a federal default that could hit the economy hard.

GOP leaders have spent months cajoling President Trump in favor of a bipartisan budget deal that would fund the government and raise the limit on federal borrowing this fall, but their efforts have yet to produce a deal. And the uncertain path forward was underscored a few days ago at the Capitol, when a budget meeting between key Senate Republicans, including Majority Leader Mitch McConnell (R-Ky.), and senior White House officials left out Democrats, whose votes will be imperative to avoid a shutdown and an economy-shaking breach of the federal debt limit.

“We’re negotiating with ourselves right now,” said Senate Appropriations Chairman Richard C. Shelby (R-Ala.). “The president, the administration, has some views, maybe, that are a little different sometimes than the Senate Republicans have. So we’re trying to see if we can be together as best we can.”

The GOP dysfunction — coupled with a new House Democratic majority with its own priorities — leaves the sides much farther apart than they were at this point in last year’s budget process, which ended in a record-long government funding lapse.

Trump and Congress face a trio of difficult budget issues. Congress must pass, and Trump must sign, funding legislation by Oct. 1 to avoid a new shutdown. They need to raise the federal debt limit around the same time, according to the latest estimates. Failure to do so would force the government to make difficult decisions about which obligations to pay, and could be considered a default by investors, shaking markets and an economy already showing some signs of alarm.

And by [fiscal] year’s end, they also need to agree on how to lift austere budget caps that will otherwise snap into place and slash $125 billion from domestic and military programs.

Senate Republicans and the administration thus far have not agreed on how to proceed on any of the issues, making it all but impossible for them to enter into substantive negotiations with Democrats. That has left the Capitol in a state of suspension over what the coming months will hold.

Tensions between key Senate Republicans and White House acting chief of staff Mick Mulvaney have been on display for months, and GOP lawmakers and aides partially blame that frayed relationship for the halting pace of talks. Mulvaney was a member of the conservative House Freedom Caucus before he joined the administration, first as White House budget director before becoming acting chief of staff, and he has advocated dramatic spending cuts opposed by lawmakers of both parties.

Mulvaney has been slow to come around to the need for a bipartisan budget deal that would raise domestic and military spending caps, even after McConnell met privately with Trump last month and got the president’s blessing to proceed with such a deal, said a senior GOP Senate aide who spoke on the condition of anonymity to describe private conversations.

“The problem with Mulvaney is sometimes he forgets he’s a staffer now, so he’s looking to execute on his own vision instead of the president’s, and that slows down the process,” the aide said.

* * *

Mulvaney and the administration favor continuing existing spending levels or striking a one-year deal, over reaching the kind of two-year deal that has been agreed to in the past and that lawmakers in both parties favor now.

The administration also has pushed for raising the debt limit as soon as possible, while House Speaker Nancy Pelosi (D-Calif.) has made clear that a vote on the debt limit is off the table until a spending deal is reached. Senate Republicans, too, favor including the debt limit in a broader spending deal, but some complain that they still don’t know exactly what the White House will support when it comes to any of the financial issues they’re confronting.

* * *

The finger-pointing has transformed Congress’ most basic mandate of funding the government into a high-stakes blame game with potentially devastating consequences. If new spending bills are not passed before Oct. 1, the government will shut down, just as it did this past winter for a record-long 35 days when Democrats refused Trump’s demands to pay for his wall along the U.S.-Mexico border. In one measure of just how many contentious issues lie ahead, funding for the wall, which is certain to be a hot-button issue again, has barely begun to be negotiated between the parties.

At the same time, if a deal is not reached to lift automatic spending caps known as the “sequester,” the resulting automatic cuts would indiscriminately slash vital domestic programs and jeopardize military readiness, members of both parties warn. And the Treasury Department is already employing cash-saving tactics, called “extraordinary measures,” because Congress has failed to act to raise the nation’s borrowing limit, often called the debt ceiling.

If Congress does not act and Treasury runs out of money, which is forecast to happen sometime in late fall, Treasury would be unable to pay all of its bills on time, which could lead to a default on the government’s obligations, a spike in interest rates, a surge in unemployment and a stock market crash. Fitch Ratings warned earlier this year that a shutdown coupled with a battle over the debt limit might damage the country’s Triple-A credit rating.

Lawmakers and administration officials say they are aware of the urgency to act. But recent interactions between Congress and the White House have not been confidence-inspiring.

* * *

House Democrats have gone their own way on spending bills without Republican buy-in, putting a massive $983 billion appropriations package for the Health and Human Services Department, the Pentagon and other agencies on the floor at spending levels Senate Republicans and the White House would never agree to. A bipartisan agreement in the Senate that helped Congress make unusual progress passing spending bills last year — up until the dispute over the wall — has not been resurrected this year, and the Senate Appropriations Committee has not yet passed a single spending bill.

* * *

The result is a messy stew of issues that has longtime lawmakers questioning whether Congress and the Trump White House are up to the job of steering the nation away from fiscal calamity.

Already, “Nearly half, or 48%, of chief financial officers in the U.S. are predicting a recession by mid-2020, according to the Duke University/CFO Global Business Outlook survey, which is conducted quarterly. And more than two-thirds, 69%, are predicting a downturn by the end of next year.” Nearly half of U.S. financial chiefs see recession within a year. And this is without the fiscal calamity that a default on the federal debt and a government shutdown this fall would bring. Republicans are playing with fire.