The Growth Of Global Rentier Capitalism And Poltical Discontent

A paper presented at the University of Chicago's Booth School of Business described the "vicious circle" of business concentration which has led to the development of rentier capitalism.  This was a process that started in the US, but has become a global phenomenon.  As the business sector becomes more concentrated it becomes more profitable.  That leads to greater political power which leads to even greater business concentration and more political power.

The study was based on data derived from the financial statements of publically traded corporations in 56 developed nations.  One measure of market concentration used in the study is the market capitalization of publically traded firms.  In 1995 the market capitalization of the top 100 firms was 31 times that of the bottom 2,000 firms.  By 2015 the market capitalization of the top 100 firms grew to 7,000 times the market cap of the bottom 2,000 firms.  That has not been accompanied by employment growth.  The market cap of the top 100 firms grew by a factor of four.  Employment growth was less than half of the growth in their market cap.

They measured economic rents by comparing profits with the return on assets.  Economic rent is the difference between the return on assets and profits.  Economic rent, or surplus profit, was 4% between 1995 and 2000.  It grew to 23% between 2009 and 2015.  Most of the growth in surplus profits or rent occurred in the top 100 firms.  Rents were 16% of total profits 1995-2000.  They were 40% of profits 2009-2015.

Hyper-globalization contributed to market concentration and the growth of economic rents.  The primary goal of corporate executives has been to increase shareholder value.  Much of their compensation is based upon the growth in earnings per share of stock.  That determines their bonuses and stock options constitute the bulk of their total compensation.  Over the last 30 years they have shaped trade and investment agreements; they have captured state regulators and they have increased their market power.  The power of nation states has declined in relation to the growth of market power that is concentrated in our largest global corporations.  That has contributed to much of the public discontent that we see in the US and in Europe.  It has also been a major source of growing income and wealth inequality.

Meet Roy Moore Who Is Republican Nominee For Alabama Senate Seat

Jennifer Rubin has been one of the conservative voices on the Washington Post and a devout Republican.  She has been a Trump critic who has expected her party to temper his bad behavior.  The Republican nominee for the Senate, who is being supported by  Republican leaders, has caused her to give up hope.  She describes Roy Moore's background in this article and delivers her eulogy for her favorite political party.  She can no longer remain part of a party that shares the values of Trump and Roy Moore.  Our country is being defined a small segment of our society which forms Trump's base.  He will not give them what he has promised them, but Trump understands that his base is his most important asset.  No Republican can win an election without support from Trump's base which he has captured from them.  They were concerned that Trump would form a third party with his base after he lost the GOP primary or the general election.  Instead he has taken over the Republican Party after winning the nomination and the presidency. 

David Brooks Describes The Selling of The GOP Soul For A Tax Cut

The Republican Senate bowed down to its beloved leader and smugly told the TV news reporters that they were united over the possibility of passing a tax bill that rewarded their donors, which they pretended to be a victory for its populist base.  They also explained that they had to pass a tax cut bill to avoid being humiliated by Trump's base in the 2018 election cycle. They sold their soul in order to preserve their jobs. It did not occur to them that their jobs would not be the same as they were before Trump. They will no longer perform in the service of their nation or the Constitution. Trump will order them to do his bidding.  He has a weapon to use against any Republican who crosses him.  He will tell his base of true believers not to vote for any of them who refuse to obey his tweets. They have made Congress subservient to the executive branch.  It is no longer an equal branch of the government and a check on the power of the power of the president.

Why Republican Leaders Should Not Decide To Die In The Dark

Ross Douthat is a remnant of the old Republican Party.  He is an intellectual who has used his platform on the NYT to defend conservative principles that once defined his political party.  Jeff Flake's decision not to fight against a Trump inspired primary challenge bothered him for two reasons.  Flake embraced all of the conservative ideals that Douthat has supported durng his career but he concluded that Republicans in Arizona would not vote for a candidate that was critical of Trump.  The other reason for Douthat's disappointment was that Flake decided to "die in the dark".  He believes that Republicans should not defiantly retire like Flake and Bob Coker.  Nor should they cravenly collaborate with Donald Trump.  The battle over the soul of the Republican Party should be fought in the light of a political campaign.  That would be better than dying in the dark as members of the British House of Lords decided to do in 1911 when it gave up the privilege of veto power over bills passed in the House of Commons.

Flake and Coker chose to resign because they understand the battle for the soul of the Republican Party.  The deck is stacked against conservative idealists.  For example, Steve Bannon is leading the Great American Alliance to purge establishment Republicans from the party.  Trump's campaign slogan was to "Make America Great Again".  It is not a coincidence that the name of his alliance resembles Trump's campaign slogan.  Bannon's organization is promoting primary candidates to run against Republican incumbents who are critical of Trump.  He is joined in this battle by alt-right organizations and media outlets which share his vision of Trumpism.  He is also supported by the Mercer family which is willing to share some of its billions to anoint Trump as the Czar of the Republican Party.

The battle for control of the Republican Party is not ideological.  It centers on emotion more than it does about political policies.  Trump continues to attack Obama and Hillary Clinton for a good reason.  His base shares a strong dislike for the Democratic Party.  Affective polarization is one of his weapons.  Loyalty to Trump as a person, and building hatred in his base against Democrats, is the foundation of Trumpism.  Some might argue that Trump's focus on his base will cause more traditional Republicans to leave the party.  Some might become independents but they won't vote for independent candidates or for Democrats.  John McCain selected Shara Palin as his Vice President candidate when he won the Republican nomination for president.  He chose Palin because most of the Republicans, that are now part of Trump's base, have an emotional attachment to her.  Palin's support in the Republican Party has never dropped below 67% despite her absence from government.

The Republican leadership in Congress does not like being attacked by Trump or by Bannon. However, they are more likely to "die in the dark" and to collaborate with Trump while he and Bannon complete the takeover the Republican Party.  After all, they may be able to pass a tax bill that benefits their large contributors with Trump in the White House.  The Koch Brothers are already spending millions against Democratic senators who face re-election in 2018.  The Koch Brother ads assume that Trump's tax policies will create jobs and raise wages just as Trump has falsely proclaimed.  Their ads claim that the Democratic candidate opposes job creation and wage growth.

Trump's takeover of the Republican Party is the first step in his effort to establish a more autocratic form of government in the US.  He has not experience running an organization over which he does not have complete control.  After he gains complete control of the Republican Party he will be better prepared to rid himself of the institutions that have been put in place to constrain presidential power.
 

What Will Republicans Pay For Tax Reform?

This article provides a good answer to the price that Republicans will pay for tax reform.  There is no ceiling on the price they will pay.  They are willing to turn their party over to Trump/Bannon in order to pass a tax reform bill that is still undefined.  Cutting taxes for the rich is consistent with their ideology.  They also believe that they can continue to convince their base to exchange minor cuts, that some  of them will receive, for large cuts to the super rich.  They are also willing to reduce government tax revenue even if the loss of tax revenue produces large budget deficits.  They pretend to be the fiscally responsible party, but that only applies when Democrats are in office.  Deficits are fine when Republicans are in office.  Richard Nixon made that point many decades ago.  He said that "We are all Keynesian's now".  He understood that cutting taxes, and running budget deficits stimulated the economy just as Keynes had stated during the Great Depression.  He also knew that this was a good path to reelection.  Of course, that is why Republicans pretend to hate Keynesian economics when Democrats are in office.  They prefer to take away the Keynesian tool from Democrats even if it might reduce unemployment during a recession.

There is an even more important reason why Republicans want to pass a tax reform bill this year.  They need to show their base, and those that fund their campaigns, that they can get something done before the 2018 election.  This should be easy with control of the House and the Senate.  The only problem that they might have is with a small number of Republicans in Congress who actually believe in fiscal conservatism.  They can't afford to lose three votes in the Senate because of their slim majority.  They will not get any Democratic votes in the Senate for a tax bill that primarily benefits the super rich.  Democrats may be able to use the tax bill against Republicans in the 2018 election but that may not be easy.  Trump's base is almost totally concerned with social, cultural and religious issues. Moreover, the lies that Republicans use to defend their tax policies are not easy to overcome.  There are not many economically literate voters in any democracy, and Trump will criticize the media that provides an honest analysis of his tax bill as "fake news".  Unfortunately, this is the point at which we have arrived today in our nation.  There is no reason not to lie when the price of telling lies has fallen to an historically low level.

Transcript of Jeff Flake's Senate Speech

Jeff Flake, a Republican Senator from Arizona, told his Senate colleagues he could no longer be complicit in supporting the current administration.  He will not run for reelection in 2018.  The full transcript of Flake's speech is posted here.  His elegant and scholarly speech should make many of his colleagues wonder why they are being complicit with this abnormal administration.

Fox News Demonstrates Its Commitment To Fake News

Fox News interviewed a person who claimed to be a former Navy Seal who was wounded several times in action and had received two purple hearts.  During the interview he praised Donald Trump and said that he had created a glass figure that honored Trump.  Fox News was more than happy to run the interview without checking out the claims made by their interviewee who lied about his military background.  Fox News continued to run the story on its Facebook page for ten days after learning about their error.  It had received over a million hits before it was removed.  This is not the first time that something like this has happened on Fox News.  Its first goal is to maintain its leading share of the cable news market.  Its market share is derived primarily from conservative viewers who were targeted in their marketing strategy.

Why Low Skill Manufacturing Jobs Are Not Coming Back To The US

This article is about the largest producer of industrial robots in the world.  Fanuc, located in Japan, with annual sales of $50 billion has a secure position in this market.  It has 25% of the market but it also has a 50% share of the software that is used to control the robots.  This story is about Fanuc, but more importantly it tells us a lot about what is happening in manufacturing.  Between 1990 and 2007 each new robot purchased in the US replaced five low skill workers.  The ratio in Germany was only two workers for each robot because of union participation in management. 

Fanuc got a lot of help from a partnership with GM.  That partnership funded its research and development and GM was its largest customer.  However, GM did a poor job of managing its investment in robots.  It also produced unimaginative new cars which were over priced.  Its share of the US auto market fell from 46% to 33% under Roger Smith who established GM's partnership with Fanuc.  GM sold its share of the partnership back to Fanuc in 1993. 

Fanuc largest market is in China which purchases 30% of the robots sold globally.  Robots are used to provide routine tasks and some jobs are moving to lower wage countries such as Vietnam and Thailand.  Wages in China are increasing, however, because higher skill manufacturing and management jobs have been growing.

The use of robots in manufacturing will continue to grow for two reasons.  Robots are being used to produce robots.  That is driving down the price of robots.  Moreover, artificial intelligence is being used so that robots can learn from their performance and modify their own behavior.  That allows them to perform complex tasks that they were unable to perform in the past. 

The good news in this story is that the cost to manufacture many products will continue to fall.  Higher skill jobs will grow in response to market demand.  The bad news is that even small manufacturers are using robots to perform routine tasks.  Global competition for manufactured products is causing firms to reduce costs.  More routine jobs will done by robots and even some  complex jobs will be done by newer robots that are capable of learning from their experience. Robots are also capable of lifting heavy objects that once required the use of human labor.  The development and use of robots will continue to progress over time.  High wage, routine labor labor demand, will continue to decline.  Some jobs, that had been offshored  to low wage countries, will return but much of the routine work will be done by robots.  The golden age for high paid routine manufacturing jobs in the US is not coming back.  Technological development and  economic globalization will not be reversed.  The ability of national governments to deal with the consequences of events that happen outside of their national borders, many of which are determined by the decisions of firms that compete in a global market,  are being tested today and our political systems have slow to adapt to rapid economic change.  Demagogues will have more opportunities to take advantage of government failures by promising a return to a past that cannot be restored.  They will win unless our political systems show that they can adapt as fast as markets change.

What Do Political Scientists Think About The Rise Trump And Populism

Political scientists across the US have been alarmed by the election of Donald Trump in the US and the rise of populist parties in many European nations.  There have been several political science conferences where the rise of populism has been analyzed and discussed.  This article provides a good summary of the reasons for the rise of populist sentiment and the erosion of democratic institutions that are a real threat to democracy.  The movement from democracy to autocracy is well understood.  It has happened in Poland, Turkey and Hungary.  It begins with attacks on all of the institutions that contain executive power.  It begins with judicial system which preserves the rule of law.  It progresses from there to attacks on other institutions such as the free press.  It is not surprising to see Trump claiming that biased judges have ruled against some of his executive orders.  Nor is it surprising that he attacked his Attorney General for recusing himself in a legal dispute.  Trump expected his Attorney General to defend his interests even if he had to violate the laws which pledged to uphold.  Trump has also been somewhat successful in his attacks on the free press.  Almost half of our citizens believe that the media report false information about him and his policies.  Trump has no regard for the truth.  He lies repeatedly about almost everything and his base is indifferent to facts which disconfirm his falsehoods.  In other words, he has normalized dishonesty.  The erosion of social norms like telling the truth is a big step in the path the autocracy.

There are lots of social and economic reasons for the rise of populism in the US and in Europe.  Many of our citizens are distressed and they do not believe that governments have attending to their needs.  Trump capitalized on their discontent.  He ran against the Republican establishment in his primary campaign and he is still running his campaign.  He blames the Republican Congress when they fail to pass bills that he supports.  He cannot fail.  He always blames others when things go wrong.  He could make things right if he did not have to deal with Congress and other institutions which stand his way.  That is also a path to autocracy that has been successful in several European nations.  Trump will make the Republican Party his party or he will replace its leaders.  Single party rule is the norm in autocratic nations.  Elections are held but minority parties have little influence.

The democratic institutions are stronger in the US than they are elsewhere.  Our situation is not hopeless but as long as large segments of our population remain distressed they will lose faith in our democratic system and look elsewhere for solutions.  Ironically, the policies that Trump is promoting will make things worse for the populists who elected him.  They don't understand that but when government fails again to satisfy their needs they will be on the lookout for a new savior.

Trump Typically Selects A Fox To Manage The Chicken Coop

There are two staples of Republican ideology.  They all want to cut taxes, and they have such faith in the wisdom of the market that they hate most government efforts to regulate the economy.  Donald Trump takes that ideology to a much higher level.  This editorial is about his choice of regulators.  He has typically nominated people to head government regulatory agencies who have been opponents of the agency they are supposed to lead.  More often than not they often have relationships with industries that are supposed to regulate.  He recently selected a member of Congress to oversea the agency responsible for supervising the distribution of dangerous drugs who had sponsored a bill that made it more difficult for the government to manage the distribution of opioids. The drug industry supported his nomination, but Trump had to withdraw his nomination after the Washington Post released a report that damaged his credibility.

There is always a tug of war between government regulators and lobbyists for affected industries who try to shape the efforts of regulators to serve their industries.  This article reviews several of Trump's appointees and they seem to be a lot like the nominee that he had to withdraw after his relationship with the drug industry was revealed.  Trump has filled the swamp instead of emptying it.

Tom Friedman Shows How Trump's Chaos Theory Leads To Chaos And Damage To US Interests

Tom Friedman observes what many well informed Americans have observed.  Trump has no coherent foreign or domestic policies that guide his decisions.  He is still running his campaign rather than governing.  Almost everything he does, or tweets, is directed to the prejudices of the populist base that elected him.   His actions and tweets excite his base but they have consequences which Trump and his base do not understand.  We have a blind president pandering to the prejudices of a poorly informed base. That is not the kind of leadership that we need in a rapidly changing world.  What's good for Trump's ego is short sighted and dangerous to our national interest.  For example, Trump's base was taught to deny that carbon emissions are responsible for climate change.  Trump's decision to exit from the Paris accord pleased his base and some large contributors to his campaign.  The climate changes that we see today in the US and elsewhere have consequences.  The powerful  hurricanes that hit us this year, and the wild fires in California, were no accidents.  Moreover,  China's leadership is not pandering to a poorly informed base.  It is making strategic investments in technologies that will improve its environment and stimulate its economy.  Trump's decision to bolster the coal industry, in order to win the votes of coal miners,  takes us in the wrong direction and it will not produce the jobs that he promised.  Market forces are working against the coal industry.  Most of our large utilities are moving to natural gas in response to falling prices.

According to Friedman, Trump offers chaos instead of an an integrated strategy in several areas. HIs decisions were not informed by the resources that he has available him because he only thinks about how his base will respond to his tweets.  He has decided to unravel so many long standing policies and institutions at once, with little guidance, that it will be hard to put the pieces back together again.  No president has ever decided to transform our trade policies, our healthcare system, and our energy polices simultaneously.  Friedman illustrates the problems in Trump's trade and foreign policy decisions.  He does not say much about the mess he has created in healthcare, which accounts for 17% of the US economy,  or about his plan to make major changes in tax policy at the same time.  This will not change as long as his base is more interested what he promises than in how he will deliver on his promises.

How Our Free Press May Reestablish Our War On Opioids

The Washington Post investigation of the process by which a House Republican neutered the ability of the DEA to perform its job demonstrated the importance of one our most important institutions.  The House Republican who pushed the bill through Congress was forced to withdraw from his nomination to the top job in our government in the war on opioids.  He been appointed by Trump as a reward for defending the drug industry against the DEA's efforts to prevent the free flow opioids to potential addicts.  I posted the investigation story yesterday which tells the full story of how the drug industry worked with Congress to stop the DEA from doing its job.

Watch An Event That Happened 130 Million Years Ago

Two neutron stars in a galaxy 130 million light years away from Earth collided.  A team of over 3,000 scientists collaborated in order to capture this event.  It is one of the most powerful forces in the universe because neuron stars are unimaginably dense.  When they collide they provide the basic elements that have formed the universe.

Paul Krugman Describes Ten Lies Which Are Being Used To Justify Trump's Tax Proposal

In case you would like a simple tutorial, which concisely refutes the lies being used to sell the Trump tax cuts as a plan for the middle class,  Paul Krugman provides readers of the NYT with the top ten lies.  Most of the NYT readers don't need this tutorial.  Trump's base might benefit if they took the time to read "fake news" in the NYT.  They get most of their news from the usual suspects who feed them the lies.  Most of them would rather believe the lies than make an attempt to understand them.  Of course, that is how Trump got elected.  He is a very successful carnival barker.  Many of his supporters voted against Obama's legacy, and against Hillary, more than they did for his economic policies.  He never explained how he would achieve his economic goals.  He just tells his base that he has great goals that are just for them.

Steve Bannon Praises Trump's Executive Order For Repealing Obamacare

Steve Bannon told a conservative group that Trump's executive order to end government subsidies to insurers effectively ended Obamacare.  Trumps order may have that effect, but he told a different story about his order.  Trump claimed that he was forced to act because the Justice Department told him the subsidies were illegal.  He also claimed that it would hurt insurer profits but that it would not affect those who are insured under Obamacare.  Did Bannon praise Trump's executive order wrongly for repealing Obamacare?  Or was this Trump's disguised intent?

What's Really Wrong About Our Government And How Trump Is Filling The Swamp

There have been over 200,000 thousand deaths from opioid over doses in the US.  That is greater than the number of US military deaths in the Vietnam war.  This article describes the efforts of the DEA to prevent the illegal dispersion of opioids by drug distributors and pharmacies in the US.  It is a classic example of the government swamp that Trump promised to drain during his election campaign. Drug industry associations contributed over $106 million to reduce the ability of the DEA to stop the over-dispersion of opioids.  At least 56 officials from the DEA, and the Justice Department to which the DEA reports, decided to earn more money by becoming lobbyists for the drug industry and some accepted executive jobs in the drug firms.  This is the classic revolving door in which government officials take jobs as lobbyists or executives in firms that they had been responsible for regulating.  Trump promised to stop that practice during his campaign.  Instead he has nominated a member of the House, who sponsored a bill that has substantially limited the ability of the DEA to stop the flow of opioids to the street, to the top job in the DEA .  The bill was written by a lawyer who had worked for the DEA division charged with monitoring the dispersion of potentially harmful drugs.  It was a simple thing to do.  Only a slight change in wording was necessary.  The DEA had been able to stop the flow of dangerous drugs by declaring an imminent danger to society.  The new bill approved by Congress, required the DEA to declare that the dispersion of opioids presented an immediate threat to an individual or society.  That is an impossible hurdle for the DEA to satisfy.  It has effectively preventing the DEA from doing its job.  It is no longer able to deal with the dispersion of opioids or limit the number of opioids produced each year by the industry.  The official who led the DEA efforts to fight against over dispersion of opioids was pushed out of his job.

The process by which Congress approved the new bill is well described in this article.  Tom Marino, who represents a district in Pennsylvania that has a high incidence of deaths from opioid over doses,  was the chief sponsor of the bill in the House.  He was joined by Marsha Blackburn who represents a district in Tennessee that also has huge opioid overdose problem.  She intends to run for the senate seat in Tennessee that is currently held by Bob Coker who is not running for reelection.  They were joined by 14 House Republicans and two Democrats from the House.  Their bill claims the intent to insure patient access to drugs and effective enforcement.  Apparently, effective enforcement means zero enforcement given the language change in the bill.  The bill was passed by unanimous consent with no debate in the House and the Senate.  The DEA, under new management, did not oppose the bill.

One would think that the highly visible problem of deaths from opioids would cause Congress to take strong action against a problem in which the street price for 30 opioid pill is $900 because of high demand from addicts.  That is not how our system works.  The drug industry, employing commonly used tactics described in this article, was able to maintain the flow of opioids and industry profits with little regard for their victims. 

How Trump Might Use Executive Orders To Modify The Holy Bible

Dana Milbank is appalled by the Republican candidate for the senate seat in Alabama.  He is a Bible toting candidate who denied that he received any compensation from the Christian  charity that he founded.  It turns out that he is a hypocrite.  He paid himself $118,000 per year while he ran the charity.  Apparently, he believes that charity begins at home and that it is OK to lie about the million dollars that he paid himself.  A Republican member of Congress touted himself as a Christian who opposes abortion.  He was forced to resign when his hypocrisy was uncovered.  He had an affair with a woman half his age and he encouraged her to get an abortion when he learned that she was pregnant with his child.  Apparently, hypocrisy is an effective election tool for politicians running for election.  Dana Milbank decided to  make fun of Trump who is a serial hypocrite. Trump also likes to sign executive orders in front of TV camera's to impress his base with his power.  Milbank describes how Trump could use executive orders to modify passages in the Holy Bible to more accurately reflect his values.  He had to do a lot of research to come up with humorous examples to make his point.

George Will Compares Trump To Stalin Whose Flaws Were Ignored

George Will is one of our most visible conservative journalists.  His column is syndicated nationally and he is often a contributor on TV news shows.  He begins this article with an attack on Vice President Pence who has been performing as Trump's lap dog in his new job.  He builds up to a much stronger point in his concluding paragraph.  He argues that Trump's unfitness for the presidency was obvious two years ago.  Republicans have been covering for him since he took over the White House and started his attacks on our democratic institutions.  He suggests that the pandering Republicans are much like American Communists who supported Stalin while he transformed communism into totalitarianism.  They deserted Stalin, and his version of communism, only after Stalin made a deal with Hitler.  That was too late.  Stalin, like Trump, was unfit for his job well before his deal with Hitler.  Republicans are making the same mistake with Trump.  Trump's unfitness for his job was visible from the beginning of his campaign.

Those are strong words coming from Mr. Republican.  They may be too late.  Trump's control over the GOP base has been being used to scare Republicans who will face primary elections in states with numerous Trump supporters.  Unlike Stalin, Trump has not murdered his dissenting party members.  He has made them fearful of retaining their jobs.  Some may not like their job as they become another one of Trump's lapdogs.  Unfortunately, many may prefer being a lapdog to being unemployed.  

Senator Bob Corker And Paul Ryan Live In Different Trump Worlds

The most interesting part of this article is an imaginary discussion between Bob Corker and Donald Trump over a gentlemanly dinner to resolve their differences.  Paul Ryan has devoted his career to cutting taxes for the rich, which would reduce federal revenue, and justify large cuts in Medicare, Medicaid and Social Security in order to prevent budget deficits.  With Trump in the White House he may get an opportunity to cut taxes for the rich. Ryan, however, seems to forget that Trump does not share his interest in cutting budget deficits, and that Trump promised not to cut Medicare or Social Security during his campaign.  Ryan is just as clueless about Trump when he suggested that Trump and Corker should resolve their differences over a friendly dinner.  This article reports all of the nasty things that Corker and Trump have said about each other.  It doesn't take much imagination to understand why their issues could not be resolved over a friendly dinner.  Paul Ryan lacks the imagination and courage to do his job as the House Majority Leader.  With Republicans like Ryan holding positions of power  there is little hope that Republicans can save their party from Trump's assault on our priceless institutions of government.

But what are Corker’s “issues”? He has asserted that Trump requires constant handling to control his volatility: “I know for a fact that every single day at the White House, it’s a situation of trying to contain him.” Corker has accused Trump of lacking strategic thinking: “A lot of people think that there is some kind of ‘good cop, bad cop’ act underway, but that’s just not true.” Corker has called out Trump’s routine deceptions: “I don’t know why the president tweets out things that are not true.” Corker has talked of Trump’s vacuity: He acts “like he’s doing ‘The Apprentice’ or something.” Corker, who chairs the Senate Foreign Relations Committee, has expressed the fear that Trump’s instability could lead to conflict: “We could be headed toward World War III with the kind of comments that he’s making.”

 Trump has already responded to Corker with a  tweet  that accuses him of being too short.  He referred to him as "Liddle Bob Corker".  That how he deals with criticism.  He fires back with an insult.  

How Steve Bannon Will Turn The Republican Party Into The Trump Party

Richard Nixon started a process that has led the Republican Party to its death.  Lyndon Johnson passed a civil rights bill that allowed Nixon to turn the Dixiecrats in the South into Republicans.  Nixon also invented the "Moral Majority" to oppose the culture of liberalism that had developed in opposition to the Vietnam War.  The Republican Party under Nixon began its transition from the party of big business to the big business party that also opposed civil rights and defended traditional values against creeping liberalism.  That process was almost completed by Donald Trump.  He captured the political base that had been cultivated by the party since Richard Nixon.  This article describes how Steve Bannon plans to turn that base against what remains of the Republican establishment.  Neither Bannon or Trump share the traditional values of the Republican establishment.  Their game is to turn the Republican Party into a party under their control.  The weapon that they are using is the base of Trump supporters that Nixon brought into the party.  No Republican can win an election without their votes.  Trump and Bannon will use their control over 35% of the Republican base to complete the process started by Richard Nixon.  What remains of the Republican establishment has wilted under this pressure.  They hoped to use a Republican president to their advantage.  Bannon and Trump can do without them.  They will put their brand of Republicans into positions of leadership as they assume control over the Republican Party.  The only thing that can stop them is a revitalized Democratic Party that will prevent the destruction of the institutions that had been established by both political parties before the Republican Party became the Trump Party.

Will Trump Join Bannon's Revolt Against The Republican Party?

Donald Trump won the election with Steve Bannon's help.  Bannon developed the populist strategy for Trump's campaign and Trump is happier performing for that base than he is in running the government.  In order to implement his legislative agenda he has to work through the Republican Congress that has been too divided to produce any legislative victories for him.  Steve Bannon is now running the alt-right fake news organization that he operated before joining the Trump campaign.  He has no use for the Republican "establishment". He plans to support his own candidates in Republican primaries against establishment candidates.  In other words, Bannon wants to turn the Republican Party into an alt-right political party that he can control.  That puts Trump on the spot.  He is dependent upon establishment Republicans in Congress to produce legislative victories but he is happier campaigning with his populist base.  He may have to choose between joining Bannon's effort to take over the Republican Party and working with establishment Republicans to operate the government.  Steve Bannon would be pleased to place Trump in the leadership of the alt-right Republican Party that he is developing.

Bob Corker Is An Important GOP Senator Trump Should Not Have Attacked

Bob Corker is an important Senator from Tennessee who chairs an important senate foreign policy committee.  He believes that Trump is ignorant about governing and that he is dangerous because he could trigger a world war.  Trump, of course, has resorted to lying about Corker on Twitter.  Corker dismisses Trump's lies, which are typical Trump responses to criticism.  He also tells us that most of his Republican colleagues in the senate share his concerns about Trump.  They may fear Trump's power over his political base, but they have no respect for him as a person or as our president.

Corker has decided not to run for reelection in 2018 but his position as the chair of the foreign policy committee can block many of Trump's foreign policy proposals.  Trump cannot afford to lose more than two Republican votes in the senate to pass legislation.  Corker is only one of many senators who could vote against Trump on important bills and appointments.  Trump seems to believe that he can operate without cooperation from the Republican senate by blaming Congress for his failed legislation and by threatening them by inciting his base against those who oppose him.

Google Used Twitter Data To Uncover Russian Linked Ads During Election

Google is the latest social media firm to discover Russian ads on its platforms during the election.  Some of the ads were linked to the troll farm that produced many of the Facebook ads used during the campaign.  However, other Russian sources were discovered on Google platforms.  The ads were designed to exploit divisive issues such as racism and anti-immigrant sentiment.  However, they were also designed to discourage Bernie Sanders supporters from voting for Clinton.  They also supported Jill Stein's third party candidacy.  A vote for Stein was a vote lost by Clinton.  There were enough votes for third party candidates in the rust belt states to enable Trump to win a majority of electoral college votes while losing the popular vote.

Congressional committees investigating Russian intervention in the presidential election are demanding more information from the social media giants.  They have determined that Russian involvement in the election was substantial and significant.  Trump, of course denies this, but he denies everything that raises questions about himself.  Unfortunately, many who voted for Trump are unwilling to accept the evidence uncovered by congressional investigators and by US intelligence agencies.  It will also be difficult for the social media firms to prevent the same thing from happening in future elections.  Their platforms are vulnerable to attacks by sophisticated groups. Their business models are based upon ad revenues which encourages open access to their platforms by anyone, including malicious attackers.

An Atrocious Tax Plan From A Dishonest Administration

Larry Summers is a Democrat.  He typically disagrees with Republican economists about tax policy.  That is expected because Democrats and Republicans do not share the same value system.  Even though he often disagrees with respectable Republican economists he understands why they disagree on tax policy and he does not question their honesty.  Summers has no respect for Trump's plan.  He explains why the Trump administration's tax plan is a terrible plan that is based upon dishonest assumptions by his Treasury Secretary and his top economic advisors.  He describes the likely economic consequences of the plan, which will be bad for our economy, and bad for the majority of Americans.  He concludes by arguing that the US will lose its position of economic leadership during the coming meeting of central bankers and international economists.  They don't try to sell terrible economic plans to a poorly informed electorate by telling obvious lies.  The fallacies in the Trump plan and the lies being told to sell the plan will be obvious to everyone at the meeting.

The Economic Policy Institute is a liberal leaning organization that does not share the value system of the Republican Party.  However, it has carefully considered the assumptions that Republicans use to justify their tax policies.  Most of the assumptions do not stand up well to a careful examination.  In particular, the assumption that corporate tax cuts are required to stimulate corporate investment and job creation fall apart upon analysis.

Why The Majority Keeps Losing On Gun Controls

The shoot out in Las Vegas has focused our attention on gun control again.  However, we expect again, that Congress will do little to control the use of guns in the US.  The NRA is an impediment because it funnels millions to members of Congress.  We all expect and understand the power exerted by the NRA.  This article tells a different story.  It explains why the majority of Americans do not get what they want.  The explanation is simple.  We have a non-majoritarian democracy in  the US. 

The over-representation of rural states in the Senate is part of this problem.  Each state is represented by two senators without regard to population.  For example, if 50 senators from our 25 smallest states vote for a bill along with the Vice President,  Senators representing 16% of the population will overrule the 84% majority.  After the shooting of school children in Sandy Hook senators representing 63% of the population were overruled by senators representing only 37% of Americans.

The Senate used the filibuster on numerous occasions to defeat Democratic proposals in the Obama administration.  That was possible even with a Democratic majority in the Senate because several Democratic members of the Senate, from conservative rural states, voted with Republicans to enable filibusters.

The problem of over representation will worsen over time.  By 2040 70% of the population will live in 15 large states. They will be represented by only 30% of the Senate membership.

Donald Trump lost the popular vote in the 2016 election by the largest percentage of any president who won a majority in the electoral college.  His huge majorities in very conservative rural areas overcame the smaller majorities who voted for Clinton in metropolitan areas where 84% of our population chooses to live.  Our electoral college system over represents rural voters.  Trump's campaign took advantage of this disparity by pitting himself against the "cosmopolitan elite" who live in metropolitan areas who do not share the values of rural Americans or their economic interests.

The House of Representatives is also over represented by conservatives by the use of
gerrymandering.  Districts have been redrawn in states controlled by Republican legislatures so that the democratic vote in metropolitan areas is overcome by redrawing districts so that the democratic vote is confined to a smaller number of districts.

There is not much that can be done about the over representation of small states in the Senate without altering the Constitution.  It may be possible to do something about gerrymandering, but don't hold your breath.  The Supreme Court is now hearing a case about gerrymandering in Wisconsin.  There are more conservative votes in the Supreme Court today because the Senate majority refused to consider President Obama's nominee prior to the election.  Trump appointed a conservative to that seat.

One of the consequences of our non-majoritarian democracy is that our government increasingly reflects the values of rural Americans who receive most of their information from talk radio, Fox News and the social media.  That is a big change from days in which the three major TV networks reported the news for most Americans.  It is much easier today for fringe groups to communicate with each other and we have a president who communicates directly to his base via Twitter. He also attacks our major media outlets as sources of "fake  news" that he tells his base to ignore.  Foreign governments have also demonstrated their ability to exacerbate the divisions that exist in our nation by exploiting the business models of the social firms.  They get almost all of their revenue from advertising and their systems have been set up primarily to increase advertising revenue.  Unlike the major media, in which the sponsors of ads are made public, the sponsors of ads in social media are often invisible to the recipients of the ads.  The system has also been set up to encourage messages and images to go viral to users that are easily targeted  by invisible sources of fake news and false conspiracies.  Rural Americans, and less educated Americans, are more susceptible to conspiracy theories and fake news. They are at the center of Trump's minority base which does not represent the values and ideas held by the majority of our citizens. They have been lied to by Republicans in order to win their votes.  That makes it difficult for Trump and the Republican Congress to pass legislation.  They have to continue feeding lies to their base.  Republicans must pretend to build a war; they have to lie about global warming; they have to lie about tax reform; they have to lie about Russian intervention in the election etc. etc. etc.

A Guide To A Narciissist"s Respose To The Misfortunes Of Others

One of my friends asked me for an explanation of narcissism.  The disasters that we had in the last month are a real threat to a narcissist because they encourage those subjected to disaster to focus on themselves instead of the narcissist.  Donald Trump was faced with that problem during his photo op trip to Puerto Rico.  He had to figure out a way to turn the attention to where it really belonged.  That is, to The Donald.  Dana Milbank observed how The Donald shifted all of the attention to himself.  Milbank adapted The Donald's behavior to a book which described how narcissists respond to situations where people are focused more on themselves than they are on The Donald.  Watching a narcissist at work during such a threat tells us all that we need to know about narcissism.  He even brought his trophy wife with him on the trip.  She had no real purpose during the trip.  The Donald uses her to bolster his own image.  Only a very important person like himself can attract and own a trophy wife who shows off the latest fashions even in disaster areas.

What Is The Relationship Between Tax Cuts And GDP Growth?

The US economy is near full employment but the Trump administration has proposed large cuts in taxes to expand the economy.  That raises a general economic question about the use of tax policy to stimulate economic growth.  This article examines the ways in which tax cuts might stimulate economic growth by examining the relationship between taxes and the inputs to the economy.  Republican tax cut proposals are typically based on the assumption that lower taxes will increase the supply of inputs to the economy.

One of the inputs to GDP is the supply of labor.  Supply side economists argue that reducing individual income taxes will increase the supply of labor.  That's a difficult argument to make in full employment economy, but it might be a good way to stimulate growth if there is a strong relationship between the supply of labor and the after tax price paid to labor.  Most of the research on this top shows that the price elasticity of labor supply is close to zero.  That is, increasing net wages by cutting the individual tax rate will not increase the supply of labor.

Capital is another input to GDP.  Its hard to measure the supply of capital but dividends to shareholders are a payment to the owners of capital.  The relationship between dividend payouts and growth in the supply of capital is close to zero.  Business investment in new capital has not grown in response to cuts in the tax on dividends.  Business executives tend to invest in new capital in response to the demand for their products and services.  The fact that interest rates are very low also suggests that the economy is fully capitalized.  Interest rates would rise if businesses were borrowing funds to increase their supply of new capital.

Investments in R&D might increase innovation and productivity.  That would increase the rate of economic growth.  The tax plan proposed by the Trump administration is focused on cutting the corporate income tax.  The elasticity of demand for R&D and the corporate tax rate is close to zero.  However, the proposal to allow corporations to write off capital investments faster might have some effect on capital investment.

Financial transactions such as buying and selling stocks and other assets do not increase output.  However, services are provided for those transactions.  The prices paid for commissions etc. do contribute to GDP.  Reducing the tax on capital gains from financial transactions might increase the number of transactions but this would not have a big effect on GDP.  Some have even argued that a transaction tax that was used to fund government spending would stimulate growth.

In summary, tax cuts in a full employment economy will not increase the rate of economic growth.  Supply side approaches are not the best way to grow the US economy.   

Trump Is Not The Only Liar In His Administration Selling Its Tax Plan By Lying

Steve Mnuchin is Trump's Treasury Secretary.  He is a billionaire who wanted the government to fund part of his honeymoon to Europe by calling it a business trip.  He has also been one of the major architects of the tax framework that Republicans are trying to sell to the public.  One of his problems is that the nonpartisan Tax Policy Center published a report which concluded that 80% of the tax cuts went to the top 1%.  It also reported that the tax cuts would raise federal budget deficits by $2.4 trillion over ten years.  He and others in the Trump administration have been promoting the tax cuts as boon to the middle class.  That required Mnuchin to do two very bad things that should never be done by a Treasury Secretary.

Mnuchin disputed the analysis done by the Tax Policy Center on Fox News by claiming that the tax plan is incomplete and that any analysis would be wrong.  He then argued that the incomplete tax plan would reduce federal deficits by $1 trillion over ten years.  He also claimed that the plan was for the middle class because the corporate tax cuts in the plan went primarily to the middle class.  On Fox News he said that 70% of the benefits went to the middle class.  In a speech in Kentucky he claimed that 80% of the benefits went to the middle class. 

In the first place, his defense against the analysis done by the Tax Policy Center means that the tax framework that the administration released must be worthless.  He argued that details in the plan, apparently which only he knows, turn $2.4 trillion of federal deficits into a $1 trillion reduction in federal deficits.  The details in the tax plan have a Midas touch.  They produce a $3.4 difference between the Tax Policy analysis and his estimate of budget deficits.

Mnuchin's claim that almost all of the gains from the corporate tax would go the middle class also requires a big lie.  For many years it was assumed that 100% of corporate tax cuts went to shareholders.  Economists in the Treasury did a study that showed that only 80% of corporate tax cuts went to shareholders.  The remainder of the tax cuts went to workers.  Since that report conflicts with Mnuchin's claim that 70-80 percent of corporate tax cuts went to shareholders, something had to be done.  So Mnuchin did what any respectable Treasury Secretary would not do.  He buried the internal report done by his own department.  It is no longer available.

Its pretty clear that Mnuchin is willing to do whatever he can to sell the Trump tax plan as a middle class plan.  In order to do that he had to dispute an analysis done by the nonpartisan Tax Policy Center which showed that 80% of the tax cuts went to the top 1% with a claim that the framework the administration is selling is not useful.  He also had to bury an internal study which showed that corporate tax cuts went primarily to shareholders and not to the middle class as he claims.

The Trump tax plan would also eliminate the estate tax.  It defends ending the estate tax by arguing that it must be done to protect small businesses and small farmers from an unfair tax.  The graph below shows that the estate tax is not being cut to protect small businesses and farmers.