Alternative Visions - Trump Tax Cuts and the Fed—Subsidization of Capital Incomes In America -12.15.17
The two major economic US events of the past week were the Trump tax cuts and the Federal Reserve’s latest interest rate hike. What do they have in common? Dr. Rasmus explains both share the common result of an escalating subsidization of capital (corporations, investors, and the wealthiest 1% households) by the State in the 21st century: Congress and the president subsidizing via increasingly massive tax cuts, as the central bank slows its rate of subsidization by raising rates. Rasmus explains how the Fed policy since 2008 has resulted in $6 trillion in direct purchases of investor securities through its ‘QE’ program while enabling, via its low 0.15% interest rate policy, corporate America to issue more than another $6 trillion in low interest bonds. Together with tripling of corporate profits, the $12-$15 trillion has enabled corporations to distribute $6 trillion plus to investors in dividend payouts and stock buybacks. Now that Fed rates are rising (but won’t exceed 3% without a credit crunch), the policy shift is to subsidize corporate America via even more tax cuts--$4.5 trillion in the Trump bill. With corporations hoarding $4.8 trillion still, Rasmus debunks Trump claims the tax cuts will result in more investment, jobs, and $4000 wage increases. If $4.8 trillion hasn’t had the result, why will $4.5 trillion more achieve it? Rasmus debunks the notion of the ‘wage conundrum’, explaining why wages are not really growing. (Next week: dissecting the final version Trump corporate hand out).
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