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So Larry Lindsey, former FOMC member and a man with a long pedigree in Washington economic policy, is out with his "grades" on the various candidate's tax policies -- and he likes Cruz's.

With one problem -- he doesn't like Cruz's rates, and says he needs to "tweak" them.  Oh, and not downward either, up, in the case of the individual rates Cruz is talking about, by a full 50%.

Now of course Cruz will probably tout the "high grade."  He won't mention the qualifier; that to obtain the revenue Cruz claims he'd have to increase the individual tax rate by 50%, which means for those who are currently under the 15% threshold (and that's a lot of people) their taxes would go up by half instead of down!

But there's a bigger problem in that Cruz also sticks a VAT into the mix which nobody is paying attention to.  VATs are a tax you pay on domestic consumption, but an attempt to make international competitiveness better since they're not charged on goods for export.

Here's the problem that Lindsey is ignoring (probably because he's paid to ignore it): None of this matters if we don't get the spending side of the ledger under control, and Cruz has no plan to do that since that problem is all in one area of the budget, as I've repeatedly pointed out.

know nobody wants to deal with this because of the political implications with certain pressure groups (that is, about 20% of the economy!) but we have to or this nation is irrevocably screwed.

I am talking, of course, about this sort of thing.

CENTENNIAL, Colo. -- A Centennial man went to get a sinus infection checked out and ended up with a medical bill of $11,251.

It sounds like the cost of major surgery.

It wasn't.  It was for an office visit, effectively, and carried a "facility charge" of over $6,000, none of which the patient was told about in advance.

If you ran a gas station and didn't post a price for your gasoline, refusing to give anyone a price until after the gas was pumped into the tank you'd be in prison right now.  Utterly no business can get away with that in America today, other than one -- the medical industry, which does exactly that every single day to thousands of people.

Further, if you and your gas-station buddies colluded to figure out how many gas pumps to have and how much gasoline to stock in your town you'd also go to prison because that's black-letter illegal under laws that have stood for a hundred years -- collectively found in 15 USC.  The medical industry does this every single day in America and no, there is not an exemption for them either.

This is why someone can get a $11,000 bill for a doctor visit because he's tricked into it.

The medical industry argues that EMTALA, a law I remind you Ronald Reagan argued for and got passed, is responsible for this outrageous financial rape. While EMTALA is an unmitigated disaster it is not the driver of this sort of policy, rather, it's a convenient foil to pull out and scream about all the "poor people" who wouldn't be able to get any medical care if screwing the common citizen was stopped.

The simple fact of the matter is that we spend twice on a percentage of GDP basis what every other major industrialized nation spends on medical care and the rest of them are all socialist medical systems in whole or part.  Socialism always loses to capitalism when the two are allowed to compete because a socialist system provides no incentive to lower cost and improve service, where a capitalist system gradually (or not-so-gradually) winds up with the business going to the better-performing firm and the other loses, eventually being forced to either reform or close.

Without addressing this in full any sort of so-called "Tax reform" is a waste of time because at a 7.2% compounded rate of increase, which is what we've seen over the last 20 years in this regard among just government spending the Federal Budget will collapse, and it will do so within the next ten years irrespective of "tax reform" because right now more than one dollar in three is spent in this area.  You cannot possibly have that go from one dollar in three to two dollars in three and have the federal government's fiscal stability survive because the next doubling literally eats up more than the whole.  

We won't get there, just as you won't get to the end-point around the Lily Pad either.

This, and only this, is the issue that must be addressed.  The only candidate who has put anything on the table to do so is Trump.  Unfortunately while it is clear that he understands it he hasn't articulated what he intends to do in detail, nor has he pointed out that The Executive already has the power to fix this in full under existing law, specifically, 15 USC, never mind "strongly encouraging" states to enforce their existing consumer-protection statutes.

McCarren-Ferguson, which protects insurance companies from most of 15 USC (but not all) needs modification too, but that is an actual law that requires updating (and thus Congressional involvement.)  Enforcing existing law, however, requires no Congressional involvement and in fact Congress can't stop it since the law is already on the books.

Four years ago I was raising Holy Hell in the Presidential season after it became clear in 2009 that Obama's plans would not only do nothing to address the issue despite his lofty speeches he would make it worse.  He did.

This election is, quite-possibly, the last clear chance to stop it since if we do not start posting up some high 3, 4 or 5% GDP rates we don't have ten years left before the budget crisis comes, we have five and due to how the fiscal year aligns with inauguration we won't get to the next Presidential election budget before the bovine excrement hits the fast-moving air handler.

Unless there is real action on this point, not talk, I'm going to go enjoy the last few years of relatively calm and reason in this country -- not tilt at windmills.

It is the body politic as a whole , that is, you dear reader, along with everyone else you know, that decides this outcome by your action or inaction as the case may be.

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Two articles pertinent to this, both from The Washington Post.

First, this:

Trump appears to blend economic conspiracy theories with magical-thinking accounting: Stocks are a bubble inflated by "easy money"; government regulators have taken control of banks and choked off lending to everyone but the rich; the "real" unemployment rate is closer to 20 percent than 5 percent, and his crowd sizes prove it; cutting taxes and renegotiating the terms of trade will reinvigorate the economy and the middle class and somehow pay off the federal debt within eight years.

Magical thinking accounting eh?  You mean like the premise that deficits are free?  Uh, no -- they immediately increase the number of dollars in the economy and that is the definition, from a monetary perspective, of inflation.

Now you might think not, but gee, just because you can't control what prices go up (without using guns) doesn't mean they didn't go up in aggregate.  If CPI doesn't show it, well, that's because CPI only looks at some prices, and then weights them according to what is truly a magical formula for most people; it overstates housing, transportation and food, for example, for those that make well north of $100,000 a year while dramatically understating those same expenses (as a percentage of the whole) for those who make $20,000/year. Indeed, by using "owners equivalent rent" instead of actual house prices it also dramatically falsifies the actual impact for those who own houses -- in both directions.

If stock prices go up that is a price increase but it doesn't show up in CPI-U or CPI-anythingelse.

And you have be blind to not bother looking at U6, which is 10.9%.  That's "formally unemployed" plus part time for economic reasons (that is, they want a full-time job and can't find one), plus "marginally attached" to the workforce.  What is "marginally attached"?  It's people who are sort of trying to get a job.

The participation rate is 62.8%.  The employment:population ratio, that is, the percentage of persons 16+ that are working, is 59.6%.  About 15% of the population is over the age of 65 in the United States; if we assume none of them want to work and can't, adjust for those under 16, and subtract that from the employment:population ratio we wind up with approximately..... 20% of the working-age people are unemployed.

Oops... Trump is right.  Damn.

As for trade, he's right again.  I think he might be a bit ambitious but halving the trade deficit is certainly possible if we were to stop giving away everything to China and Mexico.  It's simple: Any current trade deal that resulted in an increased trade deficit with that nation is ripped up.

What happens if you do this?  You win twice; first with the decreased trade deficit and then again with the increased tax revenue without raising rates because as more people go back to work (from production moved here) tax revenues rise.

But then there's the 900lb Gorilla in the room: Entitlement and private health spending.  Trump has an actual plan to stop the ripoffs, and if he does perform (most of which can be done in the executive, I remind you) we run a $400 billion a year surplus instead of a $400 billion a year deficit.

Add all this up and can you kill the debt in eight years?  Maybe.  To get the rest of the way there you'd need a roughly 5-6% economic expansion from these policy shifts.  I think you'd get it, perhaps more for the first few years.  In fact I think you could get some 10% years in there, which would blow by these estimates.

Trump is not speaking out his ass, nor simply lying for popular support.  I know how he got his numbers because by using his policy pronouncements I can reproduce them and get close enough to the same outcome to call it a "yes."

The medical side of this I have been documenting almost since starting The Ticker; the math has not only remained consistent as reported by the US Treasury the impact of doing it each year has gone up as has the amount of spending.  So yes, that's very real.

The trade numbers are less-deterministic, but not fanciful by any means.

In short these claims by Trump are achievable and he is the only candidate that has put forward economic policies that can be in any way tested against existing hard figures from Treasury and validated.

You can hate Trump for a lot of reasons, but this isn't one of them.  Trump has clearly run a business and knows how to read a balance sheet.  The US Treasury produces one every month of every year; it is not a secret, and the trade balance figures are likewise published.

There is no pie-in-the-sky required for these figures to work -- just aggressive prosecution of acts that under any reasonable reading of the law are already illegal and the tearing up of deals that amount to literally shoveling nearly a half-trillion dollars a year out the door, net-net compared with where it should be.

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