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Lawrence B. Lindsey — Conspiracies of The Ruling Class: How To Break Their Grip Forever — Videos

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Lawrence B. Lindsey

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Lawrence B. Lindsey
Governor Lawrence B Lindsey 140501.jpg
4th Director of the National Economic Council
In office
January 20, 2001 – December 12, 2002
President George W. Bush
Preceded by Gene Sperling
Succeeded by Steve Friedman
Personal details
Born July 18, 1954 (age 64)
PeekskillNew YorkU.S.
Political party Republican
Spouse(s) Susan Lindsey (Divorced 2013)
Children 3
Residence Clifton, Virginia
Education Bowdoin College (BA)
Harvard University (MAPhD)

Lawrence B. “Larry” Lindsey (born July 18, 1954) is an American economist. He was director of the National Economic Council (2001–2002), and the assistant to the president on economic policy for the U.S. President George W. Bush. He played a leading role in formulating President Bush’s $1.35 trillion tax cut plan, convincing candidate Bush that he needed an “insurance policy” against an economic turndown. He left the White House in December 2002 and was replaced by Stephen Friedman after a dispute over the projected cost of the Iraq War. Lindsey estimated the cost of the Iraq War could reach $200 billion, while Defense Secretary Donald Rumsfeld estimated that it would cost less than $50 billion.[1]

 

Biography and achievements

Lindsey was born on July 18, 1954 in Peekskill, New York. He graduated from Lakeland Senior High School in Shrub Oak, New York in 1972. An alumnus of Alpha Rho Upsilon fraternity at Bowdoin College, he received his A.B. magna cum laude and Phi Beta Kappa from Bowdoin and his A.M. and Ph.D. in economics from Harvard University.

He is the author of The Growth Experiment: How the New Tax Policy is Transforming the U.S. Economy (Basic Books, New York, 1990, ISBN 978-0465050703), Economic Puppetmasters: Lessons from the Halls of Power (AEI Press, Washington, D.C., 1999, ISBN 978-0844740812), What A President Should Know …but most learn too late: An Insiders View On How To Succeed In The Oval Office (Rowman & Littlefield Publishers, Inc., Maryland, 2008, ISBN 978-0742562226), and Conspiracies of the Ruling Class: How to Break Their Grip Forever (Simon & Schuster, 2016, ISBN 978-1501144233). Also he has contributed numerous articles to professional publications. His honors and awards include the Distinguished Public Service Award of the Boston Bar Association, 1994; an honorary degree from Bowdoin College, 1993; selection as a Citicorp/Wriston Fellow for Economic Research, 1988; and the Outstanding Doctoral Dissertation Award from the National Tax Association, 1985.

During the Reagan Administration, he served three years on the staff of the Council of Economic Advisers as Senior Staff Economist for Tax Policy. He then served as Special Assistant to the President for Policy Development during the first Bush administration

Lindsey served as a Member of the Board of Governors of the Federal Reserve System for five years from November 1991 to February 1997. Additionally, Lindsey was Chairman of the Board of the Neighborhood Reinvestment Corporation, a national public/private community redevelopment organization, from 1993 until his departure from the Federal Reserve.

From 1997 to January 2001, Lindsey was a Resident Scholar and holder of the Arthur F. Burns Chair in Economics at the American Enterprise Institute in Washington, D.C. He was also Managing Director of Economic Strategies, an economic advisory service based in New York City. During 1999 and throughout 2000 he served as then-Governor George W. Bush’s chief economic advisor for his presidential campaign. He is a former associate professor of Economics at Harvard University.

Lindsey is Chief Executive Officer of the Lindsey Group,[2] which he runs with a former colleague from the National Economic Council and writes for The Wall Street JournalWeekly Standardand other publications. He was a visiting scholar at the American Enterprise Institute.

Controversies

Lindsey is famous for spotting the emergence of the late 1990s U.S. stock market bubble back in 1996 while a Governor of the Federal Reserve. According to the meeting transcripts for September of that year, Lindsey challenged the expectation that corporate earnings would grow 11½ percent a year continually. He said, “Readers of this transcript five years from now can check this fearless prediction: profits will fall short of this expectation.” According to the Bureau of Economic Analysis, corporate profits as a share of national income eroded from 1997 until 2001. Stock prices eventually collapsed, starting their decline in March 2000, though the S&P500 remained above its 1996 level, casting doubt on the assertion that there was a stock market bubble in 1996.

In contrast to Chairman Greenspan, Lindsey argued that the Federal Reserve had an obligation to prevent the stock market bubble from growing out of control. He argued that “the long term costs of a bubble to the economy and society are potentially great…. As in the United States in the late 1920s and Japan in the late 1980s, the case for a central bank ultimately to burst that bubble becomes overwhelming. I think it is far better that we do so while the bubble still resembles surface froth and before the bubble carries the economy to stratospheric heights.” During the 2000 Presidential campaign, Governor Bush was criticized for picking an economic advisor who had sold all of his stock in 1998.[citation needed]

According to the Washington Post,[3] Lindsey was on an advisory board to Enron along with Paul Krugman before joining the White House. Lindsey and his colleagues warned Enron that the economic environment was riskier than they perceived.

Cost of the Iraq War

On September 15, 2002, in an interview with the Wall Street Journal, Lindsey estimated the high limit on the cost of the Bush administration’s plan in 2002 of invasion and regime change in Iraq to be 1–2% of GNP, or about $100–$200 billion.[4][5] Mitch DanielsDirector of the Office of Management and Budget, discounted this estimate as “very, very high” and Defense Secretary Donald Rumsfeld stated that the costs would be under $50 billion.[1] Rumsfeld called Lindsey’s estimate “baloney”.[6]

As of 2007 the cost of the invasion and occupation of Iraq exceeded $400 billion, and the Congressional Budget Office in August 2007 estimated that appropriations would eventually reach $1 trillion or more.[7]

In October 2007, the Congressional Budget Office estimated that by 2017, the total costs of the wars in Iraq and Afghanistan could reach $2.4 trillion. In response, Democratic RepresentativeAllen Boyd criticized the administration for firing Lindsey, saying “They found him a job outside the administration.”[8]

Presidential Campaign Leadership

Lindsey has been a senior advisor to several Republican campaigns. He led the economic team for then Governor George W. Bush’s successful presidential campaign in 2000, earning the trust of the future President who said at the time “I am very fond of Larry Lindsey and I value his advice”. [9] During the 2008 Presidential election, Lindsey served as Fred Thompson’s Senior Economic Advisor. [10] In 2012, Lindsey predicted on election day that Republican Mitt Romney would defeat President Obama. [11] In April 2016, Lindsey supported Ted Cruz over his only remaining opponent, current President Trump, explaining that Cruz was the best candidate because he had an economic program deserving of the “top grade”. [12]

References

  1. Jump up to:ab Wolk, Martin (2006-05-17). “Cost of Iraq war could surpass $1 trillion”. MSNBC. Retrieved 2008-03-10Back in 2002, the White House was quick to distance itself from Lindsey’s view. Mitch Daniels, director of the White House budget office, quickly called the estimate “very, very high.” Lindsey himself was dismissed in a shake-up of the White House economic team later that year, and in January 2003, Defense Secretary Donald Rumsfeld said the budget office had come up with “a number that’s something under $50 billion.” He and other officials expressed optimism that Iraq itself would help shoulder the cost once the world market was reopened to its rich supply of oil.
  2. Jump up^ http://www.thelindseygroup.com/bios/
  3. Jump up^ Once a Friend and Ally, Now a Distant MemoryWashington Post
  4. Jump up^ Davis, Bob (September 16, 2002). “Bush Economic Aide Says the Cost Of Iraq War May Top $100 Billion”The Wall Street Journal. Reprinted in Congressional Record, vol. 148, issue 117, 107th Congress, pp. S8643-S8644.[dead link]
  5. Jump up^ Engel, Matthew (September 17, 2002). “Cost of war put at $200bn, but that’s nothing, says US adviser”The Guardian. Retrieved July 23, 2011.
  6. Jump up^ Bryne, John (2008-03-18). “Price of Iraq war now outpaces Vietnam”. The Raw Story. Archived from the original on 2008-03-21. Retrieved 2008-03-18.
  7. Jump up^ Bender, Bryan (2007-08-01). “Analysis says war could cost $1 trillion”The Boston Globe. Retrieved 2008-03-10.
  8. Jump up^ “Congress told of war costs up to $2.4 trillion by 2017”The Register-Guard. October 25, 2007. Retrieved 2007-10-25.[dead link]
  9. Jump up^ Gosselin, Peter “Bush’s Economic Advisor Lindsey Is Man of Contradictions”LA Times, 02 January 2000.
  10. Jump up^ “Larry Lindsey Named as Fred Thompson’s Senior Economic Advisor”, 17 September 2007.
  11. Jump up^ “Larry Lindsey Changes Election Prediction”,CNBC, 6 November 2012.
  12. Jump up^ “Grading the candidates: Larry Lindsey”,CNBC, 18 April 2016.

External links

https://en.wikipedia.org/wiki/Lawrence_B._Lindsey

Lawrence B. Lindsey

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  • Tax policy
  • Monetary policy
  • Fiscal policy
  • International economic development
Lawrence B. Lindsey has held leading positions in government, academia, and business. He has been assistant to the president and director of the National Economic Council at the White House. He also served as a governor of the Federal Reserve System, special assistant to the president for domestic economic policy, and senior staff economist for tax policy at the President’s Council of Economic Advisers. Mr. Lindsey taught economics at Harvard University and is currently president and CEO of the Lindsey Group. He is the author of Economic Puppet Masters (AEI Press, 1999) and The Growth Experiment (Basic Books, 1990).

Experience

  • President and CEO, Lindsey Group, 2003-present
  • Assistant to the President for Economic Policy and Director of the National Economic Council, White House, 2001-2002
  • Chief Economic Adviser, George W. Bush Campaign, 1999-2000
  • Arthur F. Burns Scholar in Economics, AEI, 1997-2001
  • Managing Director, Economic Strategies, 1997-2001
  • Chairman, Board of the Neighborhood Reinvestment Corporation, 1993-97
  • Governor, Federal Reserve System, 1991-97
  • Special Assistant to the President for Domestic Economic Policy, White House, 1989-91
  • Associate Professor, Harvard University, 1984-89
  • Citicorp/Wriston Fellow for Economic Research, 1988
  • Senior Staff Economist for Tax Policy, President’s Council of Economic Advisers, 1981-84

Education

Ph.D., M.A., economics, Harvard University
A.B., Bowdoin College

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Angelo Codevilla — The Ruling Class vs. Country Class — Videos

Posted on June 16, 2018. Filed under: American History, Blogroll, Books, Central Intelligence Agency (CIA), College, Communications, Congress, Constitution, Corruption, Crime, Crisis, Cult, Culture, Data, Defense Intelligence Agency (DIA), Defense Intelligence Agency (DIA), Documentary, Economics, Education, Elections, Employment, Entertainment, Essays, Faith, Family, Federal Bureau of Investigation (FBI), Federal Bureau of Investigation (FBI), Federal Government, Federal Government Budget, Fiscal Policy, Foreign Policy, Freedom, Friends, government, government spending, Heroes, history, History of Economic Thought, Law, liberty, Life, Links, Macroeconomics, Mastery, media, Movies, Movies, National Security Agency (NSA), National Security Agency (NSA_, Newspapers, Non-Fiction, People, Philosophy, Photos, Politics, Radio, Radio, Raves, Raymond Thomas Pronk, Security, Speech, Spying, State, Strategy, Success, Talk Radio, Tax Policy, Television, Television, Video, War, Wealth, Weapons, Welfare, Wisdom, Work, Writing | Tags: , , , , |

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  • ANGELO M. CODEVILLA

July 16, 2010, 10:09 am

After the Republic

September 27, 2016

In today’s America, a network of executive, judicial, bureaucratic, and social kinship channels bypasses the sovereignty of citizens. Our imperial regime, already in force, works on a simple principle: the president and the cronies who populate these channels may do whatever they like so long as the bureaucracy obeys and one third plus one of the Senate protects him from impeachment. If you are on the right side of that network, you can make up the rules as you go along, ignore or violate any number of laws, obfuscate or commit perjury about what you are doing (in the unlikely case they put you under oath), and be certain of your peers’ support. These cronies’ shared social and intellectual identity stems from the uniform education they have received in the universities. Because disdain for ordinary Americans is this ruling class’s chief feature, its members can be equally certain that all will join in celebrating each, and in demonizing their respective opponents.

And, because the ruling class blurs the distinction between public and private business, connection to that class has become the principal way of getting rich in America. Not so long ago, the way to make it here was to start a business that satisfied customers’ needs better than before. Nowadays, more businesses die each year than are started. In this century, all net additions in employment have come from the country’s 1,500 largest corporations. Rent-seeking through influence on regulations is the path to wealth. In the professions, competitive exams were the key to entry and advancement not so long ago. Now, you have to make yourself acceptable to your superiors. More important, judicial decisions and administrative practice have divided Americans into “protected classes”—possessed of special privileges and immunities—and everybody else. Equality before the law and equality of opportunity are memories. Co-option is the path to power. Ever wonder why the quality of our leaders has been declining with each successive generation?

Moreover, since the Kennedy reform of 1965, and with greater speed since 2009, the ruling class’s immigration policy has changed the regime by introducing some 60 million people—roughly a fifth of our population—from countries and traditions different from, if not hostile, to ours. Whereas earlier immigrants earned their way to prosperity, a disproportionate percentage of post-1965 arrivals have been encouraged to become dependents of the state. Equally important, the ruling class chose to reverse America’s historic practice of assimilating immigrants, emphasizing instead what divides them from other Americans. Whereas Lincoln spoke of binding immigrants by “the electric cord” of the founders’ principles, our ruling class treats these principles as hypocrisy. All this without votes or law; just power.

Foul is Fair and Fair is Foul

In short, precisely as the classics defined regime change, people and practices that had been at society’s margins have been brought to its center, while people and ideas that had been central have been marginalized.

Fifty years ago, prayer in the schools was near universal, but no one was punished for not praying. Nowadays, countless people are arrested or fired for praying on school property. West Point’s commanding general reprimanded the football coach for his team’s thanksgiving prayer. Fifty years ago, bringing sexually explicit stuff into schools was treated as a crime, as was “procuring abortion.” Nowadays, schools contract with Planned Parenthood to teach sex, and will not tell parents when they take girls to PP facilities for abortions. Back then, many schools worked with the National Rifle Association to teach gun handling and marksmanship. Now students are arrested and expelled merely for pointing their finger and saying “bang.” In those benighted times, boys who ventured into the girls’ bathroom were expelled as perverts. Now, girls are suspended for objecting to boys coming into the girls’ room under pretense of transgenderism. The mainstreaming of pornography, the invention of abortion as the most inalienable of human rights and, most recently, the designation of opposition to homosexual marriage as a culpable psychosis—none of which is dictated by law enacted by elected officials—is enforced as if it had been. No surprise that America has experienced a drastic drop in the formation of families, with the rise of rates of out-of-wedlock births among whites equal to the rates among blacks that was recognized as disastrous a half-century ago, the near-disappearance of two-parent families among blacks, and the social dislocations attendant to all that.

Ever since the middle of the 20th century our ruling class, pursuing hazy concepts of world order without declarations of war, has sacrificed American lives first in Korea, then in Vietnam, and now throughout the Muslim world. By denigrating Americans who call for peace, or for wars unto victory over America’s enemies; by excusing or glorifying those who take our enemies’ side or who disrespect the American flag; our rulers have drawn down the American regime’s credit and eroded the people’s patriotism.

As the ruling class destroyed its own authority, it wrecked the republic’s as well. This is no longer the “land where our fathers died,” nor even the country that won World War II. It would be surprising if any society, its identity altered and its most fundamental institutions diminished, had continued to function as before. Ours sure does not, and it is difficult to imagine how it can do so ever again. We can be sure only that the revolution underway among us, like all others, will run its unpredictable course.

All we know is the choice that faces us at this stage: either America continues in the same direction, but faster and without restraint, or there’s the hazy possibility of something else.

Imperial Alternatives

The consequences of empowering today’s Democratic Party are crystal clear. The Democratic Party—regardless of its standard bearer—would use its victory to drive the transformations that it has already wrought on America to quantitative and qualitative levels that not even its members can imagine. We can be sure of that because what it has done and is doing is rooted in a logic that has animated the ruling class for a century, and because that logic has shaped the minds and hearts of millions of this class’s members, supporters, and wannabes.

That logic’s essence, expressed variously by Herbert Croly and Woodrow Wilson, FDR’s brains trust, intellectuals of both the old and the new Left, choked back and blurted out by progressive politicians, is this: America’s constitutional republic had given the American people too much latitude to be who they are, that is: religiously and socially reactionary, ignorant, even pathological, barriers to Progress. Thankfully, an enlightened minority exists with the expertise and the duty to disperse the religious obscurantism, the hypocritical talk of piety, freedom, and equality, which excuses Americans’ racism, sexism, greed, and rape of the environment. As we progressives take up our proper responsibilities, Americans will no longer live politically according to their prejudices; they will be ruled administratively according to scientific knowledge.

Progressivism’s programs have changed over time. But its disdain for how other Americans live and think has remained fundamental. More than any commitment to principles, programs, or way of life, this is its paramount feature. The media reacted to Hillary Clinton’s remark that “half of Trump’s supporters could be put into a ‘basket of deplorables’” as if these sentiments were novel and peculiar to her. In fact, these are unremarkable restatements of our ruling class’s perennial creed.

The pseudo-intellectual argument for why these “deplorables” have no right to their opinions is that giving equal consideration to people and positions that stand in the way of Progress is “false equivalence,” as President Obama has put it. But the same idea has been expressed most recently and fully by New York TimesCEO Mark Thompson, as well as Times columnists Jim Rutenberg, Timothy Egan, and William Davies. In short, devotion to truth means not reporting on Donald Trump and people like him as if they or anything they say might be of value.

If trying to persuade irredeemable socio-political inferiors is no more appropriate than arguing with animals, why not just write them off by sticking dismissive names on them? Doing so is less challenging, and makes you feel superior. Why wrestle with the statistical questions implicit in Darwin when you can just dismiss Christians as Bible-thumpers? Why bother arguing for Progressivism’s superiority when you can construct “scientific” studies like Theodor Adorno’s, proving that your opponents suffer from degrees of “fascism” and other pathologies? This is a well-trod path. Why, to take an older example, should General Omar Bradley have bothered trying to refute Douglas MacArthur’s statement that in war there is no substitute for victory when calling MacArthur and his supporters “primitives” did the trick? Why wrestle with our climate’s complexities when you can make up your own “models,” being sure that your class will treat them as truth?

What priorities will the ruling class’s notion of scientific truth dictate to the next Democratic administration? Because rejecting that true and false, right and wrong are objectively ascertainable is part of this class’s DNA, no corpus of fact or canon of reason restrains it or defines its end-point. Its definition of “science” is neither more nor less than what “scientists say” at any given time. In practice, that means “Science R-Us,” now and always, exclusively. Thus has come to pass what President Dwight Eisenhower warned against in his 1960 Farewell address: “A steadily increasing share [of science] is conducted for, by, or at the direction of, the Federal government.… [T]he free university, historically the fountainhead of free ideas and scientific discovery, has experienced a revolution…a government contract becomes virtually a substitute for intellectual curiosity.” Hence, said Ike, “The prospect of domination of the nation’s scholars by Federal employment, project allocations, and the power of money is ever present—and is gravely to be regarded.” The result has been that academics rise through government grants while the government exercises power by claiming to act on science’s behalf. If you don’t bow to the authority of the power that says what is and is not so, you are an obscurantist or worse.

Under our ruling class, “truth” has morphed from the reflection of objective reality to whatever has “normative pull”—i.e., to what furthers the ruling class’s agenda, whatever that might be at any given time. That is the meaning of the term “political correctness,” as opposed to factual correctness.

It’s the Contempt, Stupid!

Who, a generation ago, could have guessed that careers and social standing could be ruined by stating the fact that the paramount influence on the earth’s climate is the sun, that its output of energy varies and with it the climate? Who, a decade ago, could have predicted that stating that marriage is the union of a man and a woman would be treated as a culpable sociopathy, or just yesterday that refusing to let certifiably biological men into women’s bathrooms would disqualify you from mainstream society? Or that saying that the lives of white people “matter” as much as those of blacks is evidence of racism? These strictures came about quite simply because some sectors of the ruling class felt like inflicting them on the rest of America. Insulting presumed inferiors proved to be even more important to the ruling class than the inflictions’ substance.

How far will our rulers go? Because their network is mutually supporting, they will go as far as they want. Already, there is pressure from ruling class constituencies, as well as academic arguments, for morphing the concept of “hate crime” into the criminalization of “hate speech”—which means whatever these loving folks hate. Of course this is contrary to the First Amendment, and a wholesale negation of freedom. But it is no more so than the negation of freedom of association that is already eclipsing religious freedom in the name of anti-discrimination. It is difficult to imagine a Democratic president, Congress, and Supreme Court standing in the way.

Above all, these inflictions, as well as the ruling class’s acceptance of its own members’ misbehavior, came about because millions of its supporters were happy, or happy enough, to support them in the interest of maintaining their own status in a ruling coalition while discomfiting their socio-political opponents. Consider, for example, how republic-killing an event was the ruling class’s support of President Bill Clinton in the wake of his nationally televised perjury. Subsequently, as constituencies of supporters have effectively condoned officials’ abusive, self-serving, and even outright illegal behavior, they have encouraged more and more of it while inuring themselves to it. That is how republics turn into empires from the roots up.

But it is also true, as Mao Tse-Tung used to say, “a fish begins to rot at the head.” If you want to understand why any and all future Democratic Party administrations can only be empires dedicated to injuring and insulting their subjects, look first at their intellectual leaders’ rejection of the American republic’s most fundamental principles.

The Declaration of Independence says that all men “are endowed by their Creator with certain unalienable rights” among which are “life, liberty, and the pursuit of happiness.” These rights—codified in the Constitution’s Bill of Rights—are not civil rights that governments may define. The free exercise of religion, freedom of speech and assembly, keeping and bearing arms, freedom from warrantless searches, protection against double jeopardy and self-incrimination, trial by jury of one’s peers, etc., are natural rights that pertain to human beings as such. Securing them for Americans is what the United States is all about. But today’s U.S. Civil Rights Commission advocates truncating the foremost of these rights because, as it stated in a recent report, “Religious exemptions to the protections of civil rights based upon classifications such as race, color, national origin, sex, disability status, sexual orientation, and gender identity, when they are permissible, significantly infringe upon those civil rights.” The report explains why the rights enumerated in the Declaration of Independence and the Bill of Rights should not be permissible: “The phrases ‘religious liberty’ and ‘religious freedom’ will stand for nothing except hypocrisy so long as they remain code words for discrimination, intolerance, racism, sexism, homophobia, Islamophobia, Christian supremacy, or any form of intolerance.”

Hillary Clinton’s attack on Trump supporters merely matched the ruling class’s current common sense. Why should government workers and all who wield the administrative state’s unaccountable powers not follow their leaders’ judgment, backed by the prestige press, about who are to be treated as citizens and who is to be handled as deplorable refuse? Hillary Clinton underlined once again how the ruling class regards us, and about what it has in store for us.

Electing Donald Trump would result in an administration far less predictable than any Democratic one. In fact, what Trump would or would not do, could or could not do, pales into insignificance next to the certainty of what any Democrat would do. That is what might elect Trump.

The character of an eventual Trump Administration is unpredictable because speculating about Trump’s mind is futile. It is equally futile to guess how he might react to the mixture of flattery and threats sure to be leveled against him. The entire ruling class—Democrats and Republicans, the bulk of the bureaucracy, the judiciary, and the press—would do everything possible to thwart him; and the constituencies that chose him as their candidate, and that might elect him, are surely not united and are by no means clear about the demands they would press. Moreover, it is anyone’s guess whom he would appoint and how he would balance his constituencies’ pressures against those of the ruling class.

Never before has such a large percentage of Americans expressed alienation from their leaders, resentment, even fear. Some two-thirds of Americans believe that elected and appointed officials—plus the courts, the justice system, business leaders, educators—are leading the country in the wrong direction: that they are corrupt, do more harm than good, make us poorer, get us into wars and lose them. Because this majority sees no one in the political mainstream who shares their concerns, because it lacks confidence that the system can be fixed, it is eager to empower whoever might flush the system and its denizens with something like an ungentle enema.

Yet the persons who express such revolutionary sentiments are not a majority ready to support a coherent imperial program to reverse the course of America’s past half-century. Temperamentally conservative, these constituencies had been most attached to the Constitution and been counted as the bedrock of stability. They are not yet wholly convinced that there is little left to conserve. What they want, beyond an end to the ruling class’s outrages, has never been clear. This is not surprising, given that the candidates who appeal to their concerns do so with mere sound bites. Hence they chose as the presidential candidate of the nominal opposition party the man who combined the most provocative anti-establishment sounds with reassurance that it won’t take much to bring back good old America: Donald Trump. But bringing back good old America would take an awful lot. What could he do to satisfy them?

Trump’s propensity for treating pronouncements on policy as flags to be run up and down the flagpole as he measures the volume of the applause does not deprive them of all significance—especially the ones that confirm his anti-establishment bona fides. These few policy items happen to be the ones by which he gained his anti-establishment reputation in the first place: 1) opposition to illegal immigration, especially the importation of Muslims whom Americans reasonably perceive as hostile to us; 2) law and order: stop excusing rioters and coddling criminals; 3) build a wall, throw out the illegals, let in only people who are vetted and certified as supporters of our way of life (that’s the way it was when I got my immigrant visa in 1955), and keep out anybody we can’t be sure isn’t a terrorist. Trump’s tentative, partial retreat from a bit of the latter nearly caused his political standing to implode, prompting the observation that doing something similar regarding abortion would end his political career. That is noteworthy because, although Trump’s support of the pro-life cause is lukewarm at best, it is the defining commitment for much of his constituency. The point here is that, regardless of his own sentiments, Trump cannot wholly discount his constituencies’ demands for a forceful turn away from the country’s current direction.

Trump’s slogan—“make America great again”—is the broadest, most unspecific, common denominator of non-ruling-class Americans’ diverse dissatisfaction with what has happened to the country. He talks about reasserting America’s identity, at least by controlling the borders; governing in America’s own interest rather than in pursuit of objectives of which the American people have not approved; stopping the export of jobs and removing barriers to business; and banishing political correctness’s insults and injuries. But all that together does not amount to making America great again. Nor does Trump begin to explain what it was that had made this country great to millions who have known only an America much diminished.

In fact, the United States of America was great because of a whole bunch of things that now are gone. Yes, the ruling class led the way in personal corruption, cheating on tests, lowering of professional standards, abandoning churches and synagogues for the Playboy Philosophy and lifestyle, disregarding law, basing economic life on gaming the administrative state, basing politics on conflicting identities, and much more. But much of the rest of the country followed. What would it take to make America great again—or indeed to make any of the changes that Trump’s voters demand? Replacing the current ruling class would be only the beginning.

Because it is difficult to imagine a Trump presidency even thinking about something so monumental as replacing an entire ruling elite, much less leading his constituency to accomplishing it, electing Trump is unlikely to result in a forceful turn away from the country’s current direction. Continuing pretty much on the current trajectory under the same class will further fuel revolutionary sentiments in the land all by itself. Inevitable disappointment with Trump is sure to add to them.

We have stepped over the threshold of a revolution. It is difficult to imagine how we might step back, and futile to speculate where it will end. Our ruling class’s malfeasance, combined with insult, brought it about. Donald Trump did not cause it and is by no means its ultimate manifestation. Regardless of who wins in 2016, this revolution’s sentiments will grow in volume and intensity, and are sure to empower politicians likely to make Americans nostalgic for Donald Trump’s moderation.

http://www.claremont.org/crb/basicpage/after-the-republic/

Senior Executive Service (United States)

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Senior Executive Service
SES Emblem.svg

Seal of the U.S. Senior Executive Service
Flag of the United States Senior Executive Service.svg

Flag of the U.S. Senior Executive Service

The Senior Executive Service (SES) is a position classification in the civil service of the United States federal government, somewhat analogous to general officer or flag officer ranks in the U.S. Armed Forces. It was created in 1979 when the Civil Service Reform Act of 1978 went into effect under President Jimmy Carter.

Origin and attributes

According to the Office of Personnel Management, the SES was designed to be a corps of executives selected for their leadership qualifications, serving in key positions just below the top Presidential appointees as a link between them and the rest of the Federal (civil service) workforce. SES positions are considered to be above the GS-15 level of the General Schedule, and below Level III of the Executive Schedule. Career members of the SES ranks are eligible for the Presidential Rank Awards program.

Up to 10% of SES positions can be filled as political appointments rather than by career employees.[1] About half of the SES is designated “Career Reserved”, which can only be filled by career employees. The other half is designated “General”, which can be filled by either career employees or political appointments as desired by the administration. Due to the 10% limitation, most General positions are still filled by career appointees.[2]

Senior level employees of several agencies are exempt from the SES but have their own senior executive positions; these include the Federal Bureau of InvestigationCentral Intelligence AgencyDefense Intelligence AgencyNational Security AgencyTransportation Security AdministrationFederal Aviation AdministrationGovernment Accountability OfficeMembers of the Foreign Service, and government corporations.

Pay rates

(Effective on the first day of the first applicable pay period beginning on or after January 1, 2015)[3]
Minimum Maximum
Agencies with a Certified SES Performance Appraisal System $121,956 $183,300
Agencies without a Certified SES Performance Appraisal System $121,956 $168,700

Unlike the General Schedule (GS) grades, SES pay is determined at agency discretion within certain parameters, and there is no locality pay adjustment.

The minimum pay level for the SES is set at 120 percent of the basic pay for GS-15 Step 1 employees ($121,956 for 2015). The maximum pay level depends on whether or not the employing agency has a “certified” SES performance appraisal system:[4]

  • If the agency has a certified system, the maximum pay is set at Level II of the Executive Schedule ($183,300 for 2015).
  • If the agency does not have a certified system, the maximum pay is set at Level III of the Executive Schedule ($168,700 for 2015).

Total aggregate pay is limited to the salary of the Vice President of the United States ($230,700 for 2015).

Prior to 2004, the SES used a six-level system. It was replaced with the current open band system on January 1, 2014.[5]

See also

References

  1. Jump up^ Piaker, Zach (2016-03-16). “Help Wanted: 4,000 Presidential Appointees”Partnership for Public Service Center for Presidential Transition. Retrieved 2016-11-16.
  2. Jump up^ “United States Government Policy and Supporting Positions (The Plum Book)” (PDF). U.S. House of Representatives Committee on Oversight and Government Reform. 2012-12-01. p. 201. Retrieved 2016-11-16.
  3. Jump up^ Obama, Barack (2014-12-19). “ADJUSTMENTS OF CERTAIN RATES OF PAY” (PDF). EXECUTIVE ORDER 13686. The White House. Retrieved 2015-09-18.
  4. Jump up^ “Performance & Compensation – Salary”U.S. Office of Personnel Management. Retrieved 2011-09-24.
  5. Jump up^ “Senior Executive Service Pay and Performance Awards”U.S. Office of Personnel Management. 2004. Retrieved 2018-03-31.

External links

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March 16, 2018, Story 1: National Debt Hits $21,000,000,000 and Rising Rapidly Burdening American People — Government Spending Is Out of Control — Videos

Posted on March 16, 2018. Filed under: American History, Articles, Banking, Blogroll, Business, College, Computers, Congress, Constitution, Corruption, Crime, Crisis, Culture, Documentary, Economics, Education, Elections, Employment, Faith, Family, Federal Government, Federal Government Budget, Fiscal Policy, Fraud, history, History of Economic Thought, Illegal, Immigration, Inflation, Internal Revenue Service (IRS), Investments, IRS, Journalism, Law, Legal, liberty, Life, Links, Macroeconomics, media, Microeconomics, Monetary Policy, Money, Money, People, Philosophy, Photos, Police, Politics, Radio, Rants, Raves, Raymond Thomas Pronk, Regulations, Spying, Strategy, Talk Radio, Taxation, Taxes, Technology, Terrorism, Trade Policiy, Unemployment | Tags: , , , , |

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U.S. Debt Clock

http://www.usdebtclock.org/

 

David Stockman – 1980’s growth was debt fueled by the Junk bond fiasco

Trump’s tax plan won’t generate revenue: David Stockman

Can Trump slow down the national debt?

Donald Trump’s $20 Trillion Problem

THIS is How the U.S. Accumulated $21 Trillion in Debt Without COLLAPSING!

Japans Debt Problem Visualized

National debt hits $21 trillion

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Hezbollah Drug Ring Not Pursued To Save Iran Nuclear Deal — Project/Operation Cassandra Stopped By Obama — Drug and Nuclear Proliferation Obama’s Appeasement of Radical Islamic Terrorism — Junk Journalism At Big Lie Media Ignored The Story –Videos

Posted on December 20, 2017. Filed under: American History, Articles, Blogroll, Business, College, Communications, Computers, Congress, conservatives, Constitution, Crime, Crisis, Documentary, Drug Cartels, Economics, Education, Elections, Employment, Energy, Essays, Family, Federal Government, Federal Government Budget, Fiscal Policy, Foreign Policy, Freedom, government spending, history, History of Economic Thought, Illegal, Immigration, Islam, Islam, Law, Legal, liberty, Life, Links, Literacy, media, Natural Gas, Natural Gas, Newspapers, Nuclear Power, Nuclear Proliferation, Oil, Oil, People, Philosophy, Photos, Police, Political Correctness, Politics, Radio, Rants, Raves, Raymond Thomas Pronk, Religion, Resources, Strategy, Talk Radio, Tax Policy, Television, Video, War | Tags: , , , , , , , , , , , , , |

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Hezbollah Drug Ring Not Pursued To Save Iran Nuclear Deal — Operation Cassandera Stopped By Obama — Drug and Nuclear Proliferation Obama’s Appeasement of Radical Islamic Terrorism — Videos

Politico: Obama Admin Blocked Efforts To Dismantle Hezbollah Drug Ring – Tucker Carlson

Rpt: Obama Admin Protected Terrorist Drug Ring To Secure Iran Nuclear Deal – Story

Did Obama let Hezbollah off the hook to seal Iran nuke deal?

Obama derailed campaign against Hezbollah to secure Iran deal: report

Rush Limbaugh: Bombshell, that nobody will read: Obama let Hezbollah run cocaine into the U.S.

Mark Levin Show: Obama let Hezbollah run cocaine into U.S. to facilitate the Iran Deal getting done

Obama Helped Hezbollah Sell Cocaine shield From DEA and CIA to Save Iran Nuclear Deal

Rpt: Obama Blocked pursuit of Hezbolllah’s Drug Ring to protect Iran Deal – The Five

At what cost was the nuclear deal with Iran reached?

Politico: Obama Admin Shielded Hezbollah Drug Ring From DEA To Save Iran Nuclear Deal – Cavuto

Joe Lieberman: Iran deal was bad for America

Giuliani on Iran deal: I call that money laundering

New details about $400M cash payment to Iran

Obama’s $400M Ransom Payoff Evidence of Iran Deal Fraud | “Dana”

Obama paid Iran $1.7B, two days after $400M cash payment

Oliver North: The U.S. administration lied about payment to Iran

Did the Obama admin break law in alleged Iran ‘ransom’?

Shane Smith’s Debrief on the Nuclear Deal in Iran

Dobbs: The Obama legacy has become one of shame

The Middle East’s cold war, explained

Proxy war between Iran and Saudi Arabia intensifies

 

 

The secret backstory of how Obama let Hezbollah off the hook

An ambitious U.S. task force targeting Hezbollah’s billion-dollar criminal enterprise ran headlong into the White House’s desire for a nuclear deal with Iran.

PART I

A GLOBAL THREAT EMERGES

How Hezbollah turned to trafficking cocaine and laundering money through used cars to finance its expansion.

In its determination to secure a nuclear deal with Iran, the Obama administration derailed an ambitious law enforcement campaign targeting drug trafficking by the Iranian-backed terrorist group Hezbollah, even as it was funneling cocaine into the United States, according to a POLITICO investigation.

The campaign, dubbed Project Cassandra, was launched in 2008 after the Drug Enforcement Administration amassed evidence that Hezbollah had transformed itself from a Middle East-focused military and political organization into an international crime syndicate that some investigators believed was collecting $1 billion a year from drug and weapons trafficking, money laundering and other criminal activities.

Over the next eight years, agents working out of a top-secret DEA facility in Chantilly, Virginia, used wiretaps, undercover operations and informants to map Hezbollah’s illicit networks, with the help of 30 U.S. and foreign security agencies.

They followed cocaine shipments, some from Latin America to West Africa and on to Europe and the Middle East, and others through Venezuela and Mexico to the United States. They tracked the river of dirty cash as it was laundered by, among other tactics, buying American used cars and shipping them to Africa. And with the help of some key cooperating witnesses, the agents traced the conspiracy, they believed, to the innermost circle of Hezbollah and its state sponsors in Iran.

They followed cocaine shipments, tracked a river of dirty cash, and traced what they believed to be the innermost circle of Hezbollah and its state sponsors in Iran.

But as Project Cassandra reached higher into the hierarchy of the conspiracy, Obama administration officials threw an increasingly insurmountable series of roadblocks in its way, according to interviews with dozens of participants who in many cases spoke for the first time about events shrouded in secrecy, and a review of government documents and court records. When Project Cassandra leaders sought approval for some significant investigations, prosecutions, arrests and financial sanctions, officials at the Justice and Treasury departments delayed, hindered or rejected their requests.

The Justice Department declined requests by Project Cassandra and other authorities to file criminal charges against major players such as Hezbollah’s high-profile envoy to Iran, a Lebanese bank that allegedly laundered billions in alleged drug profits, and a central player in a U.S.-based cell of the Iranian paramilitary Quds force. And the State Department rejected requests to lure high-value targets to countries where they could be arrested.

December 15, 2011

Hezbollah is linked to a $483,142,568 laundering scheme

The money, allegedly laundered through the Lebanese Canadian Bank and two exchange houses, involved approximately 30 U.S. car buyers.

Read the document

“This was a policy decision, it was a systematic decision,” said David AsherDavid AsherVeteran U.S. illicit finance expert sent from Pentagon to Project Cassandra to attack the alleged Hezbollah criminal enterprise., who helped establish and oversee Project Cassandra as a Defense Department illicit finance analyst. “They serially ripped apart this entire effort that was very well supported and resourced, and it was done from the top down.”

https://www.politico.com/interactives/2017/obama-hezbollah-drug-trafficking-investigation/

Obama protected Hezbollah drug ring to save Iran nukes deal

 

 

 

 

 

 

 

 

 

 

 

 

The Obama administration stymied a sprawling investigation into the terror group Hezbollah — and its highly lucrative drug- trafficking networks — to protect the Iran nuclear deal, according to a bombshell report.

A team at the Drug Enforcement Administration had been working for almost a decade to bring down the Iran-backed militant organization’s sophisticated $1 billion-a-year drug ring, which laundered money and smuggled cocaine into the United States, Politico reported.

But the departments of Justice and Treasury repeatedly undermined agents’ efforts to arrest and prosecute key members of the criminal network — because the Obama White House feared upsetting Tehran ahead of the nuclear agreement, according to Politico.

Former Treasury official Katherine Bauer even admitted in little-noticed testimony to the House Committee on Foreign Affairs last February that “under the Obama administration . . . these [Hezbollah-related] investigations were tamped down for fear of rocking the boat with Iran and jeopardizing the nuclear deal.”

When the Iran agreement took effect in January 2016, the investigation — dubbed Project Cassandra — was effectively dismantled.

“This was a policy decision, it was a systematic decision,” said David Asher, an expert in illicit finance who helped found the project. “They serially ripped apart this entire effort that was very well supported and resourced, and it was done from the top down.”

The task force worked for eight years out of a top-secret facility in Virginia, with the help of 30 American and foreign security agencies, to unravel the global crime syndicate that was funding Hezbollah’s jihadist operations.

Politico also reported that late Venezuelan President Hugo Chavez was in cahoots with then-Iranian President Mahmoud Ahmadinejad and Hezbollah in cocaine trafficking and other activities meant to undermine US influence.

In 2007, Venezuela’s state-run Conviasa airline was ferrying drugs and cash from Caracas to Tehran via Syria each week, according to Politico.

DEA agents nicknamed the airline “Aeroterror” because the planes would come back carrying weapons, along with Hezbollah and Iranian operatives.

But the Obama administration never fought to have two major players in the scheme extradited to the United States to face charges when it had the opportunity, task force members charged.

Others the team sought to bring to justice were Abdallah Safieddine, Hezzbollah’s envoy to Tehran, and a shadowy operative nicknamed “Ghost,” whom it considered one of the biggest cocaine smugglers in the world.

“Hezbollah operates like the Gambino crime family on steroids, and [Safieddine] is its John Gotti,” ex-DEA agent Jack Kelly, who created the task force, told Politico. “Whatever Iran needs, Safieddine is in charge of getting it for them.”

Safieddine was ultimately linked to a massive drug-smuggling and money-laundering network allegedly led by Lebanese businessman Ayman Joumaa.

Agents discovered Joumaa had smuggled tons of cocaine into the States — then laundered $200 million a month by buying used cars from American dealers.

The cars were sent to Benin in West Africa, where satellite photos taken in 2015 showed rows upon rows of used cars in a lot.

But the Obama administration repeatedly thwarted efforts to prosecute Safieddine, Politico reported.

An Obama spokesman denied the operation was derailed for political reasons, noting several Hezbollah members were arrested.

Other administration officials suggested those involved were blind to the bigger picture.

“The world is a lot more complicated than viewed through the narrow lens of drug trafficking,” one official said. “So you’re not going to let CIA rule the roost, but you’re also certainly not going to let DEA do it either.”

https://nypost.com/2017/12/18/obama-protected-hezbollah-drug-ring-to-save-iran-nukes-deal/

Report: Obama ‘Derailed’ DEA Probe into Hezbollah in Latin America to Save Iran Deal

Former U.S. President Barack Obama’s administration “derailed” a DEA operation targeting Hezbollah’s multi-million-dollar drug trafficking activities in Latin America to secure approval of the controversial Iran nuclear deal, reports Politico.

Iran’s narco-terrorist proxy Hezbollah is involved in a plethora of criminal activities in Latin America, ranging from money laundering to massive drug trafficking.

“This was a policy decision, it was a systematic decision,” David Asher, a veteran Pentagon illicit finance expert deployed to combat the alleged Hezbollah criminal enterprise, told Politico, referring to the DEA operation, dubbed Project Cassandra. “They [Obama administration] serially ripped apart this entire effort that was very well supported and resourced, and it was done from the top down.”

For years, the U.S. military has been sounding the alarm on the threat against the United States posed by the presence of Iran and Hezbollah in America’s backyard — Latin America.

However, the Obama administration argued that Iran’s influence in the Western Hemisphere was “waning,” reported the Government Accountability Office (GAO), Congress’ watchdog arm, in late September 2014, months before world powers and Iran approved the nuclear deal in July 2015.

In its determination to secure a nuclear deal with Iran, the Obama administration derailed an ambitious law enforcement campaign targeting drug trafficking by the Iranian-backed terrorist group Hezbollah, even as it was funneling cocaine into the United States, according to a POLITICO investigation.

The campaign, dubbed Project Cassandra, was launched in 2008 after the Drug Enforcement Administration amassed evidence that Hezbollah had transformed itself from a Middle East-focused military and political organization into an international crime syndicate that some investigators believed was collecting $1 billion a year from drug and weapons trafficking, money laundering and other criminal activities.

Rep. Robert Pittenger (R-NC), the chairman of the Congressional Task Force on Terrorism and Unconventional Warfare, chastised the Obama administration for undermining the DEA operation.

In a statement, Pittenger, the vice chairman of the House Financial Services Committee Task Force to Investigate Terrorism Financing, declared:

The nexus between terrorists organizations, including Hezbollah, and Latin American drug cartels is a subversive alliance which provides hundreds of millions of dollars to global jihad. “The witnesses providing account of the Obama administration derailing and stonewalling the prosecution of this illicit funding investigation has resulted in the most serious consequences of the misguided and injudicious actions of President Obama and his team.”

In June 2016, Michael Braun, a former DEA agent, told lawmakers that Hezbollah is generating hundreds of millions from a “cocaine money laundering scheme” in Latin America that “provides a never-ending source of funding” for its terrorist operations in the Middle East and elsewhere.

Iran has deployed thousands of Hezbollah militants to fight on behalf of Syrian dictator Bashar al-Assad, a move that has allowed the ruthless leader to remain in power.

Both the U.S. military and State Department have warned against the menace that Hezbollah and Iran’s presence in Latin America represents.

Politico reveals:

As Project Cassandra reached higher into the hierarchy of the conspiracy, Obama administration officials threw an increasingly insurmountable series of roadblocks in its way, according to interviews with dozens of participants who in many cases spoke for the first time about events shrouded in secrecy, and a review of government documents and court records. When Project Cassandra leaders sought approval for some significant investigations, prosecutions, arrests and financial sanctions, officials at the Justice and Treasury departments delayed, hindered or rejected their requests.

The Justice Department declined requests by Project Cassandra and other authorities to file criminal charges against major players such as Hezbollah’s high-profile envoy to Iran, a Lebanese bank that allegedly laundered billions in alleged drug profits, and a central player in a U.S.-based cell of the Iranian paramilitary Quds force. And the State Department rejected requests to lure high-value targets to countries where they could be arrested.

Soon after U.S.-led world powers and Iran approved the nuclear pact, Obama predicted that Iran would use sanction relief funds to boost its terrorist proxies, namely Hezbollah, saying in August 2015:

Let’s stipulate that some of that money will flow to activities that we object to … Iran supports terrorist organizations like Hezbollah. It supports proxy groups that threaten our interests and the interests of our allies — including proxy groups who killed our troops in Iraq.

A day after the deal’s approval, Obama also said:

Do we think that with the sanctions coming down, that Iran will have some additional resources for its military and for some of the activities in the region that are a threat to us and a threat to our allies? I think that is a likelihood that they’ve got some additional resources. Do I think it’s a game-changer for them? No.

They are currently supporting Hezbollah, and there is a ceiling — a pace at which they could support Hezbollah even more, particularly in the chaos that’s taking place in Syria. So can they potentially try to get more assistance there? Yes.

According to the Jerusalem Post, Iran has dramatically increased its financial support to Hezbollah from $200 million to $800 million per year, two years after the nuclear deal was signed by Iran and world powers.

In 2010, John Brennan, Obama’s top counterterrorism adviser and then CIA director, confirmed that former president’s administration was trying to build up “moderate elements” within Iran’s terror proxy Hezbollah.

“Hezbollah is a very interesting organization,” Brennan told a Washington conference, saying it had evolved from “purely a terrorist organization” to a militia and, ultimately, a prominent Shiite political party in Lebanon, reported Reuters.

http://www.breitbart.com/national-security/2017/12/18/obama-sabotaged-dea-operation-targeting-hezbollah-in-latin-america-to-secure-iran-nuclear-deal/

Ex-CIA Adviser Denies Report That Obama Thwarted anti-Hezbollah Operation to Save Iran Deal
Brian O’Toole, who was a senior officer in the U.S. Office of Foreign Assets Control, calls the Politico report ‘a grand conspiracy led by Hezbollah’

Haaretz Dec 19, 2017 9:54 PM
read more: https://www.haaretz.com/us-news/1.829978

Obama administration reportedly shielded Hezbollah from DEA and CIA to save Iran nuclear deal
Nasrallah: Hezbollah to focus on Jerusalem, best response to Trump would be third intifada
Israeli intel minister to Saudi media: Israel can strike Iranian missile plants in Lebanon, ‘as is happening in Syria’

A former CIA adviser denied a Politico report in a series of tweets on Tuesday, calling it “a grand conspiracy led by Hezbollah.” According to the Monday report, the Obama administration thwarted a covert operation against the militant Lebanese group in order to save the Iran nuclear deal.
In a tweet, Brian O’Toole called Politico’s sources “malcontents” who turned to the press despite the fact that no one in the civil service agreed with them.
skip – Brian O’Toole Tweets
According to the Atlantic Council think tank, O’Toole was a CIA adviser and worked in the intelligence department of the Department of the Treasury from 2009 until this year, and then became senior members of the U.S. Office of Foreign Assets Control and a specialist on sanctions.

O’Toole wrote that he would be careful with what he reveals, because “unlike the many sources cited by name here, I actually intend to honor the non-disclosure agreement I signed with the CIA and treasury.”
“What this story and these people allege is a grand conspiracy led by Hezbollah. They’d have you believe it involved multiple world leaders and centers around Hezbollah actively trafficking in narcotics. They’ve based these assessments on classic analytical overreach, however,” added O’Toole.

According to Politico’s Monday report, the White House directly prevented actions by the United States Drug Enforcement Administration (DEA) to battle Hezbollah drugs and weapons trafficking operations in order to avoid hurting what was then a delicate emerging nuclear agreement with Iran.
“It disgusts me that they would go public with this conclusion because no one else in the career civil service would agree with them. These weren’t politicals at every turn, but seasoned analysts who knew much more than they did,” wrote O’Toole.

He added that in his opinion, the Politico report was possible due to the fact that the sources knew that they would receive “no rebuke” from the Trump administration, which he called “deparate to hammer Iran and unwilling to discuss classified info in public.”
He further said the report “may well end up helping Hezbollah.”

Other independent journalists have begun investigating into who the quoted sources are in the Politico report. One of them may be Katherine Bauer, who worked in the U.S. Ministry of the Treasury during the Obama Administration. The report quotes statements made by Bauer to the House Committee on Foreign Affairs, in which she said that “these investigations were tamped down for fear of rocking the boat with Iran and jeopardizing the nuclear deal.”

The report, however, did not say that Bauer currently works at a research institute founded by AIPAC, which opposes the nuclear deal. David Asher, one of the founders of the operation against Hezbollah, called the Cassandra Project, was also quoted, as saying that the closer they got to a deal with Iran, the more operations were cancelled. Today Asher works at the Foundations for the Defense of Democracy, a think tank that testified before Congress 17 times against the nuclear deal.

The Politico report was based on a number of interviews, according to which the DEA tracked Hezbollah’s criminal activities including cocaine trafficking and money laundering for eight years. They evidence showed that Hezbollah’s inner circle and Iran’s supporters were involved in these activities — but that the administration prevented or delayed arrests and investigations into Hezbollah operatives.

 https://www.haaretz.com/us-news/1.829978

 

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House Passes Tax Cut 227-203 and Senate Expected To Vote Tonight — Tax Cuts Yes — Absolutely Not Tax Reform: Income Tax Complicated, Inefficient, Unfair With 7 Brackets — Two Party Tax Tyranny — Fair Tax Less The Answer — Simple, Fair, Efficient and Replaces All Federal Tax With A Single Broadbased Consumption Spending Tax — Videos

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 House Passes Tax Cut 227-203 and Senate Expected To Vote Tonight — Tax Cuts Yes — Absolutely Not Tax Reform: Income Tax Complicated, Inefficient, Unfair With 7 Brackets — Two Party Tax Tyranny — Fair Tax Less The Answer — Simple, Fair, Efficient and Replaces All Federal Tax With A Single Broadbased Consumption Spending Tax — VideosSee the source imageSee the source imageSee the source image

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U.S. Debt Clock.org

The House Must Revote On Tax Bill

Tax bill debate: Media hates it, lying about it: Grover Norquist

Gingrich: The media are lying about the GOP tax bill

House Passes Tax Bill; Senate Expected To Vote Tonight – Cavuto

House, Senate Plan Tuesday Votes to Pass Tax Bill

Sen. Mitch McConnell, Senate Republicans address the media ahead of tax vote. Dec 19, 2017

FairTax: Fire Up Our Economic Engine (Official HD)

Freedom from the IRS! – FairTax Explained in Detail

Pence on the Fair Tax

Published on Apr 17, 2009
Congressman Mike Pence responding to a question about the Fair Tax resolution. Asked during a Town Hall forum in Anderson, IN, on 4/16/09

Lower Taxes, Higher Revenue

Milton Friedman – Why Tax Reform Is Impossible

Milton Friedman – Is tax reform possible?

The War on Work

The Progressive Income Tax: A Tale of Three Brothers

BREAKING: House passes GOP tax cut bill by vote of 227-203

LIVE: US Senate Votes on Historic Trump Tax Bill Vote LIVE Stream 12/19/17

CNN Wolf Blitzer 12/19/17| HOUSE TO VOTE ON MASSIVE TAX REFORM BILL

The History of Taxation | Charles Adams

Taxes in American History | Thomas J. DiLorenzo

The Income Tax: Root of all Evil? or Necessary Evil?

For Good and Evil: The Impact of Taxes Charles Adams discussed the research behind his book, For Good and Evil: The Impact of Taxes on the Course of Civilization published by Madison Books. The book examines the role of taxation in several historical events, including the fall of Rome, the American Revolution and the signing of the Magna Carta. Mr. Adams spoke on the history of tax policy throughout human civilization, as well as various aspects of taxation policies around the world and social policies’ relationship with taxes.

https://www.c-span.org/video/?40556-1/for-good-evil-impact-taxes

A New History of Taxation, Lecture 1: The Making of a Tax Historian | Charles Adams

A New History of Taxation, Lecture 2: The Bible’s World of Taxes | Charles Adams

A New History of Taxation, Lecture 3: The Kaleidoscopic Romans | Charles Adams

A New History of Taxation, Lecture 4: The Middle Ages | Charles Adams

A New History of Taxation, Lecture 5: The Swiss: From William Tell to No Tell | Charles Adams

A New History of Taxation, Lecture 6: Tax Revolt in the Netherlands | Charles Adams

A New History of Taxation, Lecture 7: After the Magna Carta | Charles Adams

A New History of Taxation, Lecture 8: The Civil War | Charles Adams

A New History of Taxation, Lecture 9: American Taxation | Charles Adams

A New History of Taxation, Lecture 10: Learning from the Past: What History Teaches | Charles Adams

Middle Class to Get 23% of Tax Cuts for Individuals Under GOP Bill

Benefits mostly peter out after a decade, joint committee on taxation finds

President Donald J. Trump, shown in Washington, D.C., on Monday, plans to sign the Republican tax-overhaul bill this week.
President Donald J. Trump, shown in Washington, D.C., on Monday, plans to sign the Republican tax-overhaul bill this week. PHOTO: JIM LO SCALZO/EPA/SHUTTERSTOCK

That amounts to 23% of the tax cuts that go directly to individuals. By 2027, however, these households would get a net tax increase, because tax cuts are set to expire under the proposed law.

The calculations are based on JCT estimates of cuts going to households that earn $20,000 to $100,000 a year in wages, dividends and benefits. Those households account for about half of all U.S. tax filers, with nearly a quarter making more and a quarter making less.

The Trump administration has emphasized the benefits of the tax plan for middle-income households.

What the Tax Bill’s Passage Will Mean for 2018 Politics
Senate Republicans have lined up behind the final version of a tax-overhaul bill, setting the stage for final passage this week. WSJ’s Gerald F. Seib explains the immediate political impact the bill will have. Photo: AP

America’s most-affluent households, those earning $500,000 or more a year, which account for 1% of filers, would also get $61 billion in cuts in the first year, according to the JCT analysis. They would get a cut of $12 billion by 2027.

That includes income earned by pass-through businesses such as partnerships and S-corporations that pay taxes on individual returns. It doesn’t include the benefits of estate-tax reductions.

Much of the rest would go to businesses in the form of corporate tax cuts, according to the JCT analysis.

The tax plan took another step toward passage Monday, when Maine Republican Sen. Susan Collins, who had been on the fence, said she would support the bill. Mr. Trump plans to sign the bill later this week.

Trump administration officials argue the business tax cuts will help individuals, too, because it will induce companies to hire more and boost workers’ wages.

“I don’t think it necessarily changes my life one way or another,” said Lisa Joles of Concord, Ohio, who runs the heat and air-conditioning repair shop her parents started in the 1970s. Her business brought in about $1.5 million this past year, and she takes home about $50,000 a year. “It could give me or someone else in the middle class that little bit of extra money that they may go out and spend, and it may boost the economy, but I almost feel like that would be a short-term effect.”

The muted reaction is consistent with polls showing that the tax cuts aren’t very popular. A Quinnipiac University poll released last week found that 55% of those surveyed disapprove of the tax plan, compared with 26% who support it. Republicans were the only group who supported the tax plan, with the support of 66%.

Biggest Benefits to Biggest Earners

Taxpayers earning $500,000 or more a year would see the biggest cuts in average tax rates under the Republican tax plan, while lower-income households would see smaller cuts in the early years of the decade and then petering out or reversing as tax cuts expire.

Average federal tax rates for these income categories would be cut by 1.4 to 3.1 percentage points at the outset before returning to about where they would be under current law.

Rates for lower-income households would see smaller decreases and by 2027 would actually be higher than under existing tax policy because the individual tax cuts largely

expire after 2025.

Note: For all federal taxes, including payroll taxes and corporate taxes, but excluding the estate tax. Some of the changes are due to the repeal of the mandate to have health insurance.

Source: Joint Committee on Taxation

Many households are still weighing how the complicated plan will affect them. The plan recasts many features of the individual tax code—doubling a child tax credit and the standard deduction for households, while narrowing deductions for state and local taxes, mortgages and the personal exemption. That means it will play out differently for many, depending on factors such as whether they live in high-tax states, have big mortgages or have many children.

Cory Dahl, 59, a pastor who lives in Sturgeon Bay, Wis., said that even though a few extra hundred dollars a year won’t make much difference, he is happy to get it. “Five hundred dollars is not a ton of money, but I’d rather have it in my bank account than in my tax payment,” he said.

Mr. Dahl has taken the standard deduction in recent years, and he lives in a church-owned home, so he has no mortgage. He thinks raising the standard deduction will help middle-class households like his.

His niece, Katie Dahl, who lives 20 miles away in Baileys Harbor, Wis., is apprehensive. She said her biggest concern is the repeal of the Affordable Care Act requirement that individuals buy health insurance. Both Ms. Dahl, 34, and her husband, Rich Higdon, who is a musician and a potter, rely on the ACA exchange for a heavily subsidized health-insurance plan. They pay $12 a month for a silver-level plan that covers both of them. With an income of about $41,000 a year, Ms. Dahl says the ACA has made them both confident that they could survive as self-employed artists.

“I’m worried what the mandate will do to premiums, and if it will go so far as to start the unraveling of Obamacare, which has been a big boon to us financially,” she said.

 While the middle class as a whole will see benefits, some people will end up worse off. Using an alternative measure of household income, the Tax Policy Center found that of those households in the very middle of the income distribution, making $48,600 to $86,100 a year, 91.3% would receive a tax cut next year. But 7.3% would receive a tax increase. By 2025, 10.9% would receive a tax increase.

Many taxpayers are worried that they will fall into that latter group. Jon Rose, 45, who runs a car-detailing shop in Carlisle, Pa., could see a cut from his current top tax rate of 25% because he runs an S corporation, a pass-through business that is eligible for a 20% deduction from business income if it meets certain conditions. His accountant told him he would likely save about $3,000 as a result of tax changes. The problem, he said, is that his accountant also said he has about $16,000 worth of personal exemptions that he would no longer be able to claim.

It’s Taxmas! The Winners and Losers of the GOP Tax Bill
WSJ’s Richard Rubin takes us to a weird, wacky Santa’s workshop to explain who’s getting Christmas presents and who’s getting coal with the GOP tax bill. Photo/Illustration: Adam Falk/The Wall Street Journal

Congress has raised the child-tax credit to $2,000 a child, but he was even dubious about how much that would help him. “I only have two kids, it’s not like I have 16,” said Mr. Rose, whose wife is a high-school teacher. “It doesn’t sound great.”

He said that if he somehow ends up saving an extra $500 or even $1,000, that wouldn’t mean too much to him. “I wouldn’t even notice,” he said. “It wouldn’t make any difference, especially if it’s just coming out gradually over time. If it’s $1,000, it’s $40 a paycheck. That’s dinner.”

Corrections & Amplifications 
An earlier version of this article incorrectly reported that middle-income households would receive $144 billion in total tax cuts over a decade under the Republican tax plan, or 10% of the total net tax cut. It also incorrectly reported that affluent households making more than $500,000 would receive $171 billion in total tax cuts over a decade. Those calculations were based on an incorrect reading of tables released Monday by the Joint Committee on Taxation. The article also incorrectly reported that households making $500,000 or more comprise 6% of total filers. They comprise 1% of total filers.

write to Siobhan Hughes at siobhan.hughes@wsj.com and Shayndi Raice at shayndi.raice@wsj.com

Appeared in the December 19, 2017, print edition as ‘Tax Cuts’ Impact Assessed.’

https://www.wsj.com/articles/middle-class-to-get-23-of-tax-cuts-for-individuals-under-gop-bill-1513644268?tesla=y

The brutal reviews for the GOP tax bill are piling up

Poll: Majority oppose GOP tax bill

A strong majority of polled voters oppose the Republican tax bill passed by the Senate earlier this month, a new poll finds.

The latest Harvard CAPS-Harris survey found that 64 percent of respondents oppose the bill. While 72 percent of Republicans support the GOP’s tax reform efforts, 89 percent of Democrats and 70 percent of independents oppose it.

Many respondents — 34 percent — believe the bill will raise their taxes, while 23 percent said they don’t believe it would impact them, and 21 percent said they believed it would result in a lower personal tax bill.

House and Senate negotiators struck an “agreement in principle” on Tuesday for a tax overhaul after each of the chambers passed their own versions of tax reform earlier this month.

While a majority oppose the GOP tax bill, a finding in line with other polls, Harvard CAPS-Harris co-director Mark Penn noted that the poll finds more support when people are asked about some of its specific provisions.

There is broad support for reducing the overall individual tax rate, for example, and 60 percent of voters support eliminating the mandate that requires people to buy health insurance or pay a penalty.The final version of the bill is expected to lower the top individual rate from 39.6 percent to 37 percent.

But a majority oppose lowering the corporate tax rate — the bill’s signature issue. The bill is expected to reduce the corporate tax rate from 35 percent to 21 percent under the House-Senate conference agreement that has tentatively been reached.

Fifty-nine percent of voters oppose lowering the corporate tax rate from 35 percent, the poll found.

Republicans argue cutting the corporate rate will unshackle an economy they say has been stagnant and create jobs.

Among the provisions that have majority support: The GOP bill will nearly double standard deductions for individuals; double the child tax credit from $1,000 to $2,000; cut the tax rate on small businesses; reduce overall tax rates for individuals; eliminate the ObamaCare mandate; and get rid of the alternative minimum tax for most people, while keeping it for companies.

Harvard CAPS-Harris asked voters about each of these provisions and found majority support.

Among the provisions that a majority oppose: Eliminating deductions for state and local taxes beyond $10,000 of local property taxes; doubling the exemption for the estate tax while leaving it in place for large estates; and significantly lowering the corporate tax rate.

When voters are told about each of those specific provisions in the bill, support for the bill goes up to 51 percent, with 49 percent opposing — a finding that could give some comfort to GOP lawmakers.

“While two thirds initially say they oppose the bill, that flips to 51 percent support after [being] read a full list of its features, suggesting the Republicans are losing the spin war but not necessarily the policy war,” said Penn.

However, voters polled were told the bill would not make any changes to the popular mortgage interest deduction, which is now likely to be capped at $750,000.

As it stands, most voters say the bill does not cut taxes enough on the middle class and that it cuts taxes too much for companies.

In addition, a plurality said the tax cuts would have a large impact on the federal deficit, while having only a small effect on economic growth.

“The public would like the final bill to do more for individuals and small business and less for big business,” said Penn. “They have concern over the deficit increases but that again all but evaporates once they are told the overall size of federal expenditures in the next decade is $43 trillion. Overall, the public supports lower taxes and lower government spending.”

The Harvard CAPS-Harris Poll online survey of 1,989 registered voters was conducted Dec. 8-11. The partisan breakdown is 36 percent Democrat, 32 percent Republican, 29 percent independent and 4 percent other.

The Harvard CAPS-Harris Poll survey is an online sample drawn from the Harris Panel and weighted to reflect known demographics. As a representative online sample, it does not report a probability confidence interval.

http://thehill.com/homenews/administration/364781-poll-majority-oppose-gop-tax-bill

The Internal Revenue Service has recently released new data on individual income taxes for calendar year 2014, showing the number of taxpayers, adjusted gross income, and income tax shares by income percentiles.[1]

The data demonstrates that the U.S. individual income tax continues to be very progressive, borne mainly by the highest income earners.

  • In 2014, 139.6 million taxpayers reported earning $9.71 trillion in adjusted gross income and paid $1.37 trillion in individual income taxes.
  • The share of income earned by the top 1 percent of taxpayers rose to 20.6 percent in 2014. Their share of federal individual income taxes also rose, to 39.5 percent.
  • In 2014, the top 50 percent of all taxpayers paid 97.3 percent of all individual income taxes while the bottom 50 percent paid the remaining 2.7 percent.
  • The top 1 percent paid a greater share of individual income taxes (39.5 percent) than the bottom 90 percent combined (29.1 percent).
  • The top 1 percent of taxpayers paid a 27.1 percent individual income tax rate, which is more than seven times higher than taxpayers in the bottom 50 percent (3.5 percent).

Reported Income and Taxes Paid Both Increased Significantly in 2014

Taxpayers reported $9.71 trillion in adjusted gross income (AGI) on 139.5 million tax returns in 2014. Total AGI grew by $675 billion from the previous year’s levels. There were 1.2 million more returns filed in 2014 than in 2013, meaning that average AGI rose by $4,252 per return, or 6.5 percent.

Meanwhile, taxpayers paid $1.37 trillion in individual income taxes in 2014, an 11.5 percent increase from taxes paid in the previous year. The average individual income tax rate for all taxpayers rose from 13.64 percent to 14.16 percent. Moreover, the average tax rate increased for all income groups, except for the top 0.1 percent of taxpayers, whose average rate decreased from 27.91 percent to 27.67 percent.

The most likely explanation behind the higher tax rates in 2014 is a phenomenon known as “real bracket creep.” [2] As incomes rise, households are pushed into higher tax brackets, and are subject to higher overall tax rates on their income. On the other hand, the likely reason why the top 0.1 percent of households saw a slightly lower tax rate in 2014 is because a higher portion of their income consisted of long-term capital gains, which are subject to lower tax rates.[3]

The share of income earned by the top 1 percent rose to 20.58 percent of total AGI, up from 19.04 percent in 2013. The share of the income tax burden for the top 1 percent also rose, from 37.80 percent in 2013 to 39.48 percent in 2014.

Top 1% Top 5% Top 10% Top 25% Top 50% Bottom 50% All Taxpayers
Table 1. Summary of Federal Income Tax Data, 2014
Number of Returns 1,395,620 6,978,102 13,956,203 34,890,509 69,781,017 69,781,017 139,562,034
Adjusted Gross Income ($ millions) $1,997,819 $3,490,867 $4,583,416 $6,690,287 $8,614,544 $1,094,119 $9,708,663
Share of Total Adjusted Gross Income 20.58% 35.96% 47.21% 68.91% 88.73% 11.27% 100.00%
Income Taxes Paid ($ millions) $542,640 $824,153 $974,124 $1,192,679 $1,336,637 $37,740 $1,374,379
Share of Total Income Taxes Paid 39.48% 59.97% 70.88% 86.78% 97.25% 2.75% 100.00%
Income Split Point $465,626 $188,996 $133,445 $77,714 $38,173
Average Tax Rate 27.16% 23.61% 21.25% 17.83% 15.52% 3.45% 14.16%
 Note: Does not include dependent filers

High-Income Americans Paid the Majority of Federal Taxes

In 2014, the bottom 50 percent of taxpayers (those with AGIs below $38,173) earned 11.27 percent of total AGI. This group of taxpayers paid approximately $38 billion in taxes, or 2.75 percent of all income taxes in 2014.

In contrast, the top 1 percent of all taxpayers (taxpayers with AGIs of $465,626 and above) earned 20.58 percent of all AGI in 2014, but paid 39.48 percent of all federal income taxes.

In 2014, the top 1 percent of taxpayers accounted for more income taxes paid than the bottom 90 percent combined. The top 1 percent of taxpayers paid $543 billion, or 39.48 percent of all income taxes, while the bottom 90 percent paid $400 billion, or 29.12 percent of all income taxes.

Figure 1.

High-Income Taxpayers Pay the Highest Average Tax Rates

The 2014 IRS data shows that taxpayers with higher incomes pay much higher average individual income tax rates than lower-income taxpayers.[4]

The bottom 50 percent of taxpayers (taxpayers with AGIs below $38,173) faced an average income tax rate of 3.45 percent. As household income increases, the IRS data shows that average income tax rates rise. For example, taxpayers with AGIs between the 10th and 5th percentile ($133,445 and $188,996) pay an average rate of 13.7 percent – almost four times the rate paid by those in the bottom 50 percent.

The top 1 percent of taxpayers (AGI of $465,626 and above) paid the highest effective income tax rate, at 27.2 percent, 7.9 times the rate faced by the bottom 50 percent of taxpayers.

Figure 2.

Taxpayers at the very top of the income distribution, the top 0.1 percent (with AGIs over $2.14 million), paid an even higher average tax rate, of 27.7 percent.

Appendix

Year Total Top 0.1% Top 1% Top
5%
Between
5% & 10%
Top 10% Between 10% & 25% Top 25% Between 25% & 50% Top 50% Bottom 50%
Table 2. Number of Federal Individual Income Tax Returns Filed 1980–2014 (Thousands)
Source: Internal Revenue Service.
1980 93,239 932 4,662 4,662 9,324 13,986 23,310 23,310 46,619 46,619
1981 94,587 946 4,729 4,729 9,459 14,188 23,647 23,647 47,293 47,293
1982 94,426 944 4,721 4,721 9,443 14,164 23,607 23,607 47,213 47,213
1983 95,331 953 4,767 4,767 9,533 14,300 23,833 23,833 47,665 47,665
1984 98,436 984 4,922 4,922 9,844 14,765 24,609 24,609 49,218 49,219
1985 100,625 1,006 5,031 5,031 10,063 15,094 25,156 25,156 50,313 50,313
1986 102,088 1,021 5,104 5,104 10,209 15,313 25,522 25,522 51,044 51,044
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
1987 106,155 1,062 5,308 5,308 10,615 15,923 26,539 26,539 53,077 53,077
1988 108,873 1,089 5,444 5,444 10,887 16,331 27,218 27,218 54,436 54,436
1989 111,313 1,113 5,566 5,566 11,131 16,697 27,828 27,828 55,656 55,656
1990 112,812 1,128 5,641 5,641 11,281 16,922 28,203 28,203 56,406 56,406
1991 113,804 1,138 5,690 5,690 11,380 17,071 28,451 28,451 56,902 56,902
1992 112,653 1,127 5,633 5,633 11,265 16,898 28,163 28,163 56,326 56,326
1993 113,681 1,137 5,684 5,684 11,368 17,052 28,420 28,420 56,841 56,841
1994 114,990 1,150 5,749 5,749 11,499 17,248 28,747 28,747 57,495 57,495
1995 117,274 1,173 5,864 5,864 11,727 17,591 29,319 29,319 58,637 58,637
1996 119,442 1,194 5,972 5,972 11,944 17,916 29,860 29,860 59,721 59,721
1997 121,503 1,215 6,075 6,075 12,150 18,225 30,376 30,376 60,752 60,752
1998 123,776 1,238 6,189 6,189 12,378 18,566 30,944 30,944 61,888 61,888
1999 126,009 1,260 6,300 6,300 12,601 18,901 31,502 31,502 63,004 63,004
2000 128,227 1,282 6,411 6,411 12,823 19,234 32,057 32,057 64,114 64,114
The IRS changed methodology, so data above and below this line not strictly comparable
2001 119,371 119 1,194 5,969 5,969 11,937 17,906 29,843 29,843 59,685 59,685
2002 119,851 120 1,199 5,993 5,993 11,985 17,978 29,963 29,963 59,925 59,925
2003 120,759 121 1,208 6,038 6,038 12,076 18,114 30,190 30,190 60,379 60,379
2004 122,510 123 1,225 6,125 6,125 12,251 18,376 30,627 30,627 61,255 61,255
2005 124,673 125 1,247 6,234 6,234 12,467 18,701 31,168 31,168 62,337 62,337
2006 128,441 128 1,284 6,422 6,422 12,844 19,266 32,110 32,110 64,221 64,221
2007 132,655 133 1,327 6,633 6,633 13,265 19,898 33,164 33,164 66,327 66,327
2008 132,892 133 1,329 6,645 6,645 13,289 19,934 33,223 33,223 66,446 66,446
2009 132,620 133 1,326 6,631 6,631 13,262 19,893 33,155 33,155 66,310 66,310
2010 135,033 135 1,350 6,752 6,752 13,503 20,255 33,758 33,758 67,517 67,517
2011 136,586 137 1,366 6,829 6,829 13,659 20,488 34,146 34,146 68,293 68,293
2012 136,080 136 1,361 6,804 6,804 13,608 20,412 34,020 34,020 68,040 68,040
2013 138,313 138 1,383 6,916 6,916 13,831 20,747 34,578 34,578 69,157 69,157
2014 139,562 140 1,396 6,978 6,978 13,956 20,934 34,891 34,891 69,781 69,781
Year Total Top 0.1% Top 1% Top 5% Between 5% & 10% Top 10% Between 10% & 25% Top 25% Between 25% & 50% Top 50% Bottom 50%
Table 3. Adjusted Gross Income of Taxpayers in Various Income Brackets, 1980–2014 ($Billions)
Source: Internal Revenue Service.
1980 $1,627 $138 $342 $181 $523 $400 $922 $417 $1,339 $288
1981 $1,791 $149 $372 $201 $573 $442 $1,015 $458 $1,473 $318
1982 $1,876 $167 $398 $207 $605 $460 $1,065 $478 $1,544 $332
1983 $1,970 $183 $428 $217 $646 $481 $1,127 $498 $1,625 $344
1984 $2,173 $210 $482 $240 $723 $528 $1,251 $543 $1,794 $379
1985 $2,344 $235 $531 $260 $791 $567 $1,359 $580 $1,939 $405
1986 $2,524 $285 $608 $278 $887 $604 $1,490 $613 $2,104 $421
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
1987 $2,814 $347 $722 $316 $1,038 $671 $1,709 $664 $2,374 $440
1988 $3,124 $474 $891 $342 $1,233 $718 $1,951 $707 $2,658 $466
1989 $3,299 $468 $918 $368 $1,287 $768 $2,054 $751 $2,805 $494
1990 $3,451 $483 $953 $385 $1,338 $806 $2,144 $788 $2,933 $519
1991 $3,516 $457 $943 $400 $1,343 $832 $2,175 $809 $2,984 $532
1992 $3,681 $524 $1,031 $413 $1,444 $856 $2,299 $832 $3,131 $549
1993 $3,776 $521 $1,048 $426 $1,474 $883 $2,358 $854 $3,212 $563
1994 $3,961 $547 $1,103 $449 $1,552 $929 $2,481 $890 $3,371 $590
1995 $4,245 $620 $1,223 $482 $1,705 $985 $2,690 $938 $3,628 $617
1996 $4,591 $737 $1,394 $515 $1,909 $1,043 $2,953 $992 $3,944 $646
1997 $5,023 $873 $1,597 $554 $2,151 $1,116 $3,268 $1,060 $4,328 $695
1998 $5,469 $1,010 $1,797 $597 $2,394 $1,196 $3,590 $1,132 $4,721 $748
1999 $5,909 $1,153 $2,012 $641 $2,653 $1,274 $3,927 $1,199 $5,126 $783
2000 $6,424 $1,337 $2,267 $688 $2,955 $1,358 $4,314 $1,276 $5,590 $834
The IRS changed methodology, so data above and below this line not strictly comparable
2001 $6,116 $492 $1,065 $1,934 $666 $2,600 $1,334 $3,933 $1,302 $5,235 $881
2002 $5,982 $421 $960 $1,812 $660 $2,472 $1,339 $3,812 $1,303 $5,115 $867
2003 $6,157 $466 $1,030 $1,908 $679 $2,587 $1,375 $3,962 $1,325 $5,287 $870
2004 $6,735 $615 $1,279 $2,243 $725 $2,968 $1,455 $4,423 $1,403 $5,826 $908
2005 $7,366 $784 $1,561 $2,623 $778 $3,401 $1,540 $4,940 $1,473 $6,413 $953
2006 $7,970 $895 $1,761 $2,918 $841 $3,760 $1,652 $5,412 $1,568 $6,980 $990
2007 $8,622 $1,030 $1,971 $3,223 $905 $4,128 $1,770 $5,898 $1,673 $7,571 $1,051
2008 $8,206 $826 $1,657 $2,868 $905 $3,773 $1,782 $5,555 $1,673 $7,228 $978
2009 $7,579 $602 $1,305 $2,439 $878 $3,317 $1,740 $5,058 $1,620 $6,678 $900
2010 $8,040 $743 $1,517 $2,716 $915 $3,631 $1,800 $5,431 $1,665 $7,096 $944
2011 $8,317 $737 $1,556 $2,819 $956 $3,775 $1,866 $5,641 $1,716 $7,357 $961
2012 $9,042 $1,017 $1,977 $3,331 $997 $4,328 $1,934 $6,262 $1,776 $8,038 $1,004
2013 $9,034 $816 $1,720 $3,109 $1,034 $4,143 $2,008 $6,152 $1,844 $7,996 $1,038
2014 $9,709 $986 $1,998 $3,491 $1,093 $4,583 $2,107 $6,690 $1,924 $8,615 $1,094
Year Total Top 0.1% Top 1% Top 5% Between 5% & 10% Top 10% Between 10% & 25% Top 25% Between 25% & 50% Top 50% Bottom 50%
Table 4. Total Income Tax after Credits, 1980–2014 ($Billions)
Source: Internal Revenue Service.
1980 $249 $47 $92 $31 $123 $59 $182 $50 $232 $18
1981 $282 $50 $99 $36 $135 $69 $204 $57 $261 $21
1982 $276 $53 $100 $34 $134 $66 $200 $56 $256 $20
1983 $272 $55 $101 $34 $135 $64 $199 $54 $252 $19
1984 $297 $63 $113 $37 $150 $68 $219 $57 $276 $22
1985 $322 $70 $125 $41 $166 $73 $238 $60 $299 $23
1986 $367 $94 $156 $44 $201 $78 $279 $64 $343 $24
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
1987 $369 $92 $160 $46 $205 $79 $284 $63 $347 $22
1988 $413 $114 $188 $48 $236 $85 $321 $68 $389 $24
1989 $433 $109 $190 $51 $241 $93 $334 $73 $408 $25
1990 $447 $112 $195 $52 $248 $97 $344 $77 $421 $26
1991 $448 $111 $194 $56 $250 $96 $347 $77 $424 $25
1992 $476 $131 $218 $58 $276 $97 $374 $78 $452 $24
1993 $503 $146 $238 $60 $298 $101 $399 $80 $479 $24
1994 $535 $154 $254 $64 $318 $108 $425 $84 $509 $25
1995 $588 $178 $288 $70 $357 $115 $473 $88 $561 $27
1996 $658 $213 $335 $76 $411 $124 $535 $95 $630 $28
1997 $727 $241 $377 $82 $460 $134 $594 $102 $696 $31
1998 $788 $274 $425 $88 $513 $139 $652 $103 $755 $33
1999 $877 $317 $486 $97 $583 $150 $733 $109 $842 $35
2000 $981 $367 $554 $106 $660 $164 $824 $118 $942 $38
The IRS changed methodology, so data above and below this line not strictly comparable
2001 $885 $139 $294 $462 $101 $564 $158 $722 $120 $842 $43
2002 $794 $120 $263 $420 $93 $513 $143 $657 $104 $761 $33
2003 $746 $115 $251 $399 $85 $484 $133 $617 $98 $715 $30
2004 $829 $142 $301 $467 $91 $558 $137 $695 $102 $797 $32
2005 $932 $176 $361 $549 $98 $647 $145 $793 $106 $898 $33
2006 $1,020 $196 $402 $607 $108 $715 $157 $872 $113 $986 $35
2007 $1,112 $221 $443 $666 $117 $783 $170 $953 $122 $1,075 $37
2008 $1,029 $187 $386 $597 $115 $712 $168 $880 $117 $997 $32
2009 $863 $146 $314 $502 $101 $604 $146 $749 $93 $842 $21
2010 $949 $170 $355 $561 $110 $670 $156 $827 $100 $927 $22
2011 $1,043 $168 $366 $589 $123 $712 $181 $893 $120 $1,012 $30
2012 $1,185 $220 $451 $699 $133 $831 $193 $1,024 $128 $1,152 $33
2013 $1,232 $228 $466 $721 $139 $860 $203 $1,063 $135 $1,198 $34
2014 $1,374 $273 $543 $824 $150 $974 $219 $1,193 $144 $1,337 $38
Year Total Top 0.1% Top 1% Top 5% Between 5% & 10% Top 10% Between 10% & 25% Top 25% Between 25% & 50% Top 50% Bottom 50%
Table 5. Adjusted Gross Income Shares, 1980–2014 (percent of total AGI earned by each group)
Source: Internal Revenue Service.
1980 100% 8.46% 21.01% 11.12% 32.13% 24.57% 56.70% 25.62% 82.32% 17.68%
1981 100% 8.30% 20.78% 11.20% 31.98% 24.69% 56.67% 25.59% 82.25% 17.75%
1982 100% 8.91% 21.23% 11.03% 32.26% 24.53% 56.79% 25.50% 82.29% 17.71%
1983 100% 9.29% 21.74% 11.04% 32.78% 24.44% 57.22% 25.30% 82.52% 17.48%
1984 100% 9.66% 22.19% 11.06% 33.25% 24.31% 57.56% 25.00% 82.56% 17.44%
1985 100% 10.03% 22.67% 11.10% 33.77% 24.21% 57.97% 24.77% 82.74% 17.26%
1986 100% 11.30% 24.11% 11.02% 35.12% 23.92% 59.04% 24.30% 83.34% 16.66%
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
1987 100% 12.32% 25.67% 11.23% 36.90% 23.85% 60.75% 23.62% 84.37% 15.63%
1988 100% 15.16% 28.51% 10.94% 39.45% 22.99% 62.44% 22.63% 85.07% 14.93%
1989 100% 14.19% 27.84% 11.16% 39.00% 23.28% 62.28% 22.76% 85.04% 14.96%
1990 100% 14.00% 27.62% 11.15% 38.77% 23.36% 62.13% 22.84% 84.97% 15.03%
1991 100% 12.99% 26.83% 11.37% 38.20% 23.65% 61.85% 23.01% 84.87% 15.13%
1992 100% 14.23% 28.01% 11.21% 39.23% 23.25% 62.47% 22.61% 85.08% 14.92%
1993 100% 13.79% 27.76% 11.29% 39.05% 23.40% 62.45% 22.63% 85.08% 14.92%
1994 100% 13.80% 27.85% 11.34% 39.19% 23.45% 62.64% 22.48% 85.11% 14.89%
1995 100% 14.60% 28.81% 11.35% 40.16% 23.21% 63.37% 22.09% 85.46% 14.54%
1996 100% 16.04% 30.36% 11.23% 41.59% 22.73% 64.32% 21.60% 85.92% 14.08%
1997 100% 17.38% 31.79% 11.03% 42.83% 22.22% 65.05% 21.11% 86.16% 13.84%
1998 100% 18.47% 32.85% 10.92% 43.77% 21.87% 65.63% 20.69% 86.33% 13.67%
1999 100% 19.51% 34.04% 10.85% 44.89% 21.57% 66.46% 20.29% 86.75% 13.25%
2000 100% 20.81% 35.30% 10.71% 46.01% 21.15% 67.15% 19.86% 87.01% 12.99%
The IRS changed methodology, so data above and below this line not strictly comparable
2001 100% 8.05% 17.41% 31.61% 10.89% 42.50% 21.80% 64.31% 21.29% 85.60% 14.40%
2002 100% 7.04% 16.05% 30.29% 11.04% 41.33% 22.39% 63.71% 21.79% 85.50% 14.50%
2003 100% 7.56% 16.73% 30.99% 11.03% 42.01% 22.33% 64.34% 21.52% 85.87% 14.13%
2004 100% 9.14% 18.99% 33.31% 10.77% 44.07% 21.60% 65.68% 20.83% 86.51% 13.49%
2005 100% 10.64% 21.19% 35.61% 10.56% 46.17% 20.90% 67.07% 19.99% 87.06% 12.94%
2006 100% 11.23% 22.10% 36.62% 10.56% 47.17% 20.73% 67.91% 19.68% 87.58% 12.42%
2007 100% 11.95% 22.86% 37.39% 10.49% 47.88% 20.53% 68.41% 19.40% 87.81% 12.19%
2008 100% 10.06% 20.19% 34.95% 11.03% 45.98% 21.71% 67.69% 20.39% 88.08% 11.92%
2009 100% 7.94% 17.21% 32.18% 11.59% 43.77% 22.96% 66.74% 21.38% 88.12% 11.88%
2010 100% 9.24% 18.87% 33.78% 11.38% 45.17% 22.38% 67.55% 20.71% 88.26% 11.74%
2011 100% 8.86% 18.70% 33.89% 11.50% 45.39% 22.43% 67.82% 20.63% 88.45% 11.55%
2012 100% 11.25% 21.86% 36.84% 11.03% 47.87% 21.39% 69.25% 19.64% 88.90% 11.10%
2013 100% 9.03% 19.04% 34.42% 11.45% 45.87% 22.23% 68.10% 20.41% 88.51% 11.49%
2014 100% 10.16% 20.58% 35.96% 11.25% 47.21% 21.70% 68.91% 19.82% 88.73% 11.27%
Year Total Top 0.1% Top 1% Top 5% Between 5% & 10% Top 10% Between 10% & 25% Top 25% Between 25% & 50% Top 50% Bottom 50%
Table 6. Total Income Tax Shares, 1980–2014 (percent of federal income tax paid by each group)
Source: Internal Revenue Service.
1980 100% 19.05% 36.84% 12.44% 49.28% 23.74% 73.02% 19.93% 92.95% 7.05%
1981 100% 17.58% 35.06% 12.90% 47.96% 24.33% 72.29% 20.26% 92.55% 7.45%
1982 100% 19.03% 36.13% 12.45% 48.59% 23.91% 72.50% 20.15% 92.65% 7.35%
1983 100% 20.32% 37.26% 12.44% 49.71% 23.39% 73.10% 19.73% 92.83% 7.17%
1984 100% 21.12% 37.98% 12.58% 50.56% 22.92% 73.49% 19.16% 92.65% 7.35%
1985 100% 21.81% 38.78% 12.67% 51.46% 22.60% 74.06% 18.77% 92.83% 7.17%
1986 100% 25.75% 42.57% 12.12% 54.69% 21.33% 76.02% 17.52% 93.54% 6.46%
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
1987 100% 24.81% 43.26% 12.35% 55.61% 21.31% 76.92% 17.02% 93.93% 6.07%
1988 100% 27.58% 45.62% 11.66% 57.28% 20.57% 77.84% 16.44% 94.28% 5.72%
1989 100% 25.24% 43.94% 11.85% 55.78% 21.44% 77.22% 16.94% 94.17% 5.83%
1990 100% 25.13% 43.64% 11.73% 55.36% 21.66% 77.02% 17.16% 94.19% 5.81%
1991 100% 24.82% 43.38% 12.45% 55.82% 21.46% 77.29% 17.23% 94.52% 5.48%
1992 100% 27.54% 45.88% 12.12% 58.01% 20.47% 78.48% 16.46% 94.94% 5.06%
1993 100% 29.01% 47.36% 11.88% 59.24% 20.03% 79.27% 15.92% 95.19% 4.81%
1994 100% 28.86% 47.52% 11.93% 59.45% 20.10% 79.55% 15.68% 95.23% 4.77%
1995 100% 30.26% 48.91% 11.84% 60.75% 19.62% 80.36% 15.03% 95.39% 4.61%
1996 100% 32.31% 50.97% 11.54% 62.51% 18.80% 81.32% 14.36% 95.68% 4.32%
1997 100% 33.17% 51.87% 11.33% 63.20% 18.47% 81.67% 14.05% 95.72% 4.28%
1998 100% 34.75% 53.84% 11.20% 65.04% 17.65% 82.69% 13.10% 95.79% 4.21%
1999 100% 36.18% 55.45% 11.00% 66.45% 17.09% 83.54% 12.46% 96.00% 4.00%
2000 100% 37.42% 56.47% 10.86% 67.33% 16.68% 84.01% 12.08% 96.09% 3.91%
The IRS changed methodology, so data above and below this line not strictly comparable
2001 100% 15.68% 33.22% 52.24% 11.44% 63.68% 17.88% 81.56% 13.54% 95.10% 4.90%
2002 100% 15.09% 33.09% 52.86% 11.77% 64.63% 18.04% 82.67% 13.12% 95.79% 4.21%
2003 100% 15.37% 33.69% 53.54% 11.35% 64.89% 17.87% 82.76% 13.17% 95.93% 4.07%
2004 100% 17.12% 36.28% 56.35% 10.96% 67.30% 16.52% 83.82% 12.31% 96.13% 3.87%
2005 100% 18.91% 38.78% 58.93% 10.52% 69.46% 15.61% 85.07% 11.35% 96.41% 3.59%
2006 100% 19.24% 39.36% 59.49% 10.59% 70.08% 15.41% 85.49% 11.10% 96.59% 3.41%
2007 100% 19.84% 39.81% 59.90% 10.51% 70.41% 15.30% 85.71% 10.93% 96.64% 3.36%
2008 100% 18.20% 37.51% 58.06% 11.14% 69.20% 16.37% 85.57% 11.33% 96.90% 3.10%
2009 100% 16.91% 36.34% 58.17% 11.72% 69.89% 16.85% 86.74% 10.80% 97.54% 2.46%
2010 100% 17.88% 37.38% 59.07% 11.55% 70.62% 16.49% 87.11% 10.53% 97.64% 2.36%
2011 100% 16.14% 35.06% 56.49% 11.77% 68.26% 17.36% 85.62% 11.50% 97.11% 2.89%
2012 100% 18.60% 38.09% 58.95% 11.22% 70.17% 16.25% 86.42% 10.80% 97.22% 2.78%
2013 100% 18.48% 37.80% 58.55% 11.25% 69.80% 16.47% 86.27% 10.94% 97.22% 2.78%
2014 100% 19.85% 39.48% 59.97% 10.91% 70.88% 15.90% 86.78% 10.47% 97.25% 2.75%
Year Total Top 1% Top 5% Top 10% Top 25% Top 50%
Table 7. Dollar Cut-Off, 1980–2014 (Minimum AGI for Tax Returns to Fall into Various Percentiles; Thresholds Not Adjusted for Inflation)
1980 $80,580 $43,792 $35,070 $23,606 $12,936
1981 $85,428 $47,845 $38,283 $25,655 $14,000
1982 $89,388 $49,284 $39,676 $27,027 $14,539
1983 $93,512 $51,553 $41,222 $27,827 $15,044
1984 $100,889 $55,423 $43,956 $29,360 $15,998
1985 $108,134 $58,883 $46,322 $30,928 $16,688
1986 $118,818 $62,377 $48,656 $32,242 $17,302
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
1987 $139,289 $68,414 $52,921 $33,983 $17,768
1988 $157,136 $72,735 $55,437 $35,398 $18,367
1989 $163,869 $76,933 $58,263 $36,839 $18,993
1990 $167,421 $79,064 $60,287 $38,080 $19,767
1991 $170,139 $81,720 $61,944 $38,929 $20,097
1992 $181,904 $85,103 $64,457 $40,378 $20,803
1993 $185,715 $87,386 $66,077 $41,210 $21,179
1994 $195,726 $91,226 $68,753 $42,742 $21,802
1995 $209,406 $96,221 $72,094 $44,207 $22,344
1996 $227,546 $101,141 $74,986 $45,757 $23,174
1997 $250,736 $108,048 $79,212 $48,173 $24,393
1998 $269,496 $114,729 $83,220 $50,607 $25,491
1999 $293,415 $120,846 $87,682 $52,965 $26,415
2000 $313,469 $128,336 $92,144 $55,225 $27,682
The IRS changed methodology, so data above and below this line not strictly comparable
2001 $1,393,718 $306,635 $132,082 $96,151 $59,026 $31,418
2002 $1,245,352 $296,194 $130,750 $95,699 $59,066 $31,299
2003 $1,317,088 $305,939 $133,741 $97,470 $59,896 $31,447
2004 $1,617,918 $339,993 $140,758 $101,838 $62,794 $32,622
2005 $1,938,175 $379,261 $149,216 $106,864 $64,821 $33,484
2006 $2,124,625 $402,603 $157,390 $112,016 $67,291 $34,417
2007 $2,251,017 $426,439 $164,883 $116,396 $69,559 $35,541
2008 $1,867,652 $392,513 $163,512 $116,813 $69,813 $35,340
2009 $1,469,393 $351,968 $157,342 $114,181 $68,216 $34,156
2010 $1,634,386 $369,691 $161,579 $116,623 $69,126 $34,338
2011 $1,717,675 $388,905 $167,728 $120,136 $70,492 $34,823
2012 $2,161,175 $434,682 $175,817 $125,195 $73,354 $36,055
2013 $1,860,848 $428,713 $179,760 $127,695 $74,955 $36,841
2014 $2,136,762 $465,626 $188,996 $133,445 $77,714 $38,173
Source: Internal Revenue Service.
Year Total Top 0.1% Top 1% Top 5% Between 5% & 10% Top 10% Between 10% & 25% Top 25% Between 25% & 50% Top 50% Bottom 50%
Table 8. Average Tax Rate, 1980–2014 (Percent of AGI Paid in Income Taxes)
Source: Internal Revenue Service.
1980 15.31% 34.47% 26.85% 17.13% 23.49% 14.80% 19.72% 11.91% 17.29% 6.10%
1981 15.76% 33.37% 26.59% 18.16% 23.64% 15.53% 20.11% 12.48% 17.73% 6.62%
1982 14.72% 31.43% 25.05% 16.61% 22.17% 14.35% 18.79% 11.63% 16.57% 6.10%
1983 13.79% 30.18% 23.64% 15.54% 20.91% 13.20% 17.62% 10.76% 15.52% 5.66%
1984 13.68% 29.92% 23.42% 15.57% 20.81% 12.90% 17.47% 10.48% 15.35% 5.77%
1985 13.73% 29.86% 23.50% 15.69% 20.93% 12.83% 17.55% 10.41% 15.41% 5.70%
1986 14.54% 33.13% 25.68% 15.99% 22.64% 12.97% 18.72% 10.48% 16.32% 5.63%
The Tax Reform Act of 1986 changed the definition of AGI, so data above and below this line not strictly comparable
1987 13.12% 26.41% 22.10% 14.43% 19.77% 11.71% 16.61% 9.45% 14.60% 5.09%
1988 13.21% 24.04% 21.14% 14.07% 19.18% 11.82% 16.47% 9.60% 14.64% 5.06%
1989 13.12% 23.34% 20.71% 13.93% 18.77% 12.08% 16.27% 9.77% 14.53% 5.11%
1990 12.95% 23.25% 20.46% 13.63% 18.50% 12.01% 16.06% 9.73% 14.36% 5.01%
1991 12.75% 24.37% 20.62% 13.96% 18.63% 11.57% 15.93% 9.55% 14.20% 4.62%
1992 12.94% 25.05% 21.19% 13.99% 19.13% 11.39% 16.25% 9.42% 14.44% 4.39%
1993 13.32% 28.01% 22.71% 14.01% 20.20% 11.40% 16.90% 9.37% 14.90% 4.29%
1994 13.50% 28.23% 23.04% 14.20% 20.48% 11.57% 17.15% 9.42% 15.11% 4.32%
1995 13.86% 28.73% 23.53% 14.46% 20.97% 11.71% 17.58% 9.43% 15.47% 4.39%
1996 14.34% 28.87% 24.07% 14.74% 21.55% 11.86% 18.12% 9.53% 15.96% 4.40%
1997 14.48% 27.64% 23.62% 14.87% 21.36% 12.04% 18.18% 9.63% 16.09% 4.48%
1998 14.42% 27.12% 23.63% 14.79% 21.42% 11.63% 18.16% 9.12% 16.00% 4.44%
1999 14.85% 27.53% 24.18% 15.06% 21.98% 11.76% 18.66% 9.12% 16.43% 4.48%
2000 15.26% 27.45% 24.42% 15.48% 22.34% 12.04% 19.09% 9.28% 16.86% 4.60%
The IRS changed methodology, so data above and below this line not strictly comparable
2001 14.47% 28.17% 27.60% 23.91% 15.20% 21.68% 11.87% 18.35% 9.20% 16.08% 4.92%
2002 13.28% 28.48% 27.37% 23.17% 14.15% 20.76% 10.70% 17.23% 8.00% 14.87% 3.86%
2003 12.11% 24.60% 24.38% 20.92% 12.46% 18.70% 9.69% 15.57% 7.41% 13.53% 3.49%
2004 12.31% 23.06% 23.52% 20.83% 12.53% 18.80% 9.41% 15.71% 7.27% 13.68% 3.53%
2005 12.65% 22.48% 23.15% 20.93% 12.61% 19.03% 9.45% 16.04% 7.18% 14.01% 3.51%
2006 12.80% 21.94% 22.80% 20.80% 12.84% 19.02% 9.52% 16.12% 7.22% 14.12% 3.51%
2007 12.90% 21.42% 22.46% 20.66% 12.92% 18.96% 9.61% 16.16% 7.27% 14.19% 3.56%
2008 12.54% 22.67% 23.29% 20.83% 12.66% 18.87% 9.45% 15.85% 6.97% 13.79% 3.26%
2009 11.39% 24.28% 24.05% 20.59% 11.53% 18.19% 8.36% 14.81% 5.76% 12.61% 2.35%
2010 11.81% 22.84% 23.39% 20.64% 11.98% 18.46% 8.70% 15.22% 6.01% 13.06% 2.37%
2011 12.54% 22.82% 23.50% 20.89% 12.83% 18.85% 9.70% 15.82% 6.98% 13.76% 3.13%
2012 13.11% 21.67% 22.83% 20.97% 13.33% 19.21% 9.96% 16.35% 7.21% 14.33% 3.28%
2013 13.64% 27.91% 27.08% 23.20% 13.40% 20.75% 10.11% 17.28% 7.31% 14.98% 3.30%
2014 14.16% 27.67% 27.16% 23.61% 13.73% 21.25% 10.37% 17.83% 7.48% 15.52% 3.45%
  1. For data prior to 2001, all tax returns that have a positive AGI are included, even those that do not have a positive income tax liability. For data from 2001 forward, returns with negative AGI are also included, but dependent returns are excluded.
  2. Income tax after credits (the measure of “income taxes paid” above) does not account for the refundable portion of EITC. If it were included, the tax share of the top income groups would be higher. The refundable portion is classified as a spending program by the Office of Management and Budget and therefore is not included by the IRS in these figures.
  3. The only tax analyzed here is the federal individual income tax, which is responsible for more than 25 percent of the nation’s taxes paid (at all levels of government). Federal income taxes are much more progressive than federal payroll taxes, which are responsible for about 20 percent of all taxes paid (at all levels of government), and are more progressive than most state and local taxes.
  4. AGI is a fairly narrow income concept and does not include income items like government transfers (except for the portion of Social Security benefits that is taxed), the value of employer-provided health insurance, underreported or unreported income (most notably that of sole proprietors), income derived from municipal bond interest, net imputed rental income, and others.
  5. The unit of analysis here is that of the tax return. In the figures prior to 2001, some dependent returns are included. Under other units of analysis (like the Treasury Department’s Family Economic Unit), these returns would likely be paired with parents’ returns.
  6. These figures represent the legal incidence of the income tax. Most distributional tables (such as those from CBO, Tax Policy Center, Citizens for Tax Justice, the Treasury Department, and JCT) assume that the entire economic incidence of personal income taxes falls on the income earner.

[1] Individual Income Tax Rates and Tax Shares, Internal Revenue Service Statistics of Income, http://www.irs.gov/uac/SOI-Tax-Stats-Individual-Income-Tax-Rates-and-Tax-Shares.

[2] See Congressional Budget Office, The Budget and Economic Outlook: 2017 to 2027, Jan. 2017, https://www.cbo.gov/sites/default/files/115th-congress-2017-2018/reports/52370-outlook.pdf.

[3] There is strong reason to believe that capital gains realizations were unusually depressed in 2013, due to the increase in the top capital gains tax rate from 15 percent to 23.8 percent. In 2013, capital gains accounted for 26.6 percent of the income of taxpayers with over $1 million in AGI received, compared to 31.7 percent in 2014 (these calculations apply for net capital gains reported on Schedule D). Table 1.4, Publication 1304, “Individual Income Tax Returns 2014,” Internal Revenue Service, https://www.irs.gov/uac/soi-tax-stats-individual-income-tax-returns-publication-1304-complete-report.

[4] Here, “average income tax rate” is defined as income taxes paid divided by adjusted gross income.


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Charles Adams

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Charles Adams (1930-2013) was an attorney in private practice and a specialist in international taxation. He wrote extensively on taxes and their impact on civilization, for outlets including the New York TimesWashington Post, and Wall Street Journal. He was also an adjunct scholar at the Mises Institute and the Cato Institute. Among other books he was the author of For Good and Evil: The Impact of Taxes on the Course of Civilization.

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Those Dirty, Rotten Taxes

Big GovernmentTaxes and Spending

01/08/2009AUDIO/VIDEO
Sponsored by the Mises Institute and held in Newport Beach, California; January 24-25, 1997.

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Resistance to Taxes: Then and Now

Taxes and SpendingU.S. History

12/20/2008AUDIO/VIDEO
1998 Mises Institute Supporters Summit, Palm Springs, California; February 27-28, 1998. [24:03]

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The Rocky Road of American Taxation

Taxes and SpendingU.S. HistoryWar and Foreign PolicyFiscal TheoryPolitical Theory

04/15/2006MISES DAILY ARTICLES
No modern revolution was deeper rooted in taxation than the revolt of the Thirteen Colonies in British North America, writes Charles Adams.

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The Rich Won’t Be Soaked

Taxes and Spending

11/01/2004THE FREE MARKET
The middle classes have always been the only dependable source for taxes. If a government really wants revenue, that is where they have to go.

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8. The Civil War

Taxes and SpendingU.S. HistoryWar and Foreign Policy

09/06/2004AUDIO/VIDEO
A tariff set the stage for the American Civil War. The quarrel between the North and the South was a fiscal quarrel, not a war over slavery. The tariff of 1828 was called the tariff of abomination. Nullification was a strong argument to void unconstitutional federal laws.
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The Pronk Pops Show — Week in Review — November 14-22, 2017 — Videos

Posted on November 25, 2017. Filed under: American History, Ammunition, Banking, Blogroll, Bomb, Books, Business, Central Intelligence Agency (CIA), Communications, Computers, Congress, conservatives, Constitution, Corruption, Crime, Crisis, Culture, Defense Intelligence Agency (DIA), Documentary, Drones, Economics, Employment, Energy, Entertainment, Environment, European History, Faith, Family, Federal Bureau of Investigation (FBI), Federal Communications Commission, Federal Government, Federal Government Budget, Films, Fiscal Policy, Foreign Policy, Fraud, Freedom, Friends, government, Government Land Ownership, government spending, Health, Health Care, History of Economic Thought, Homicide, Illegal, Immigration, Inflation, Internal Revenue Service (IRS), Investments, Islam, Islam, Journalism, Language, Law, Legal, Life, Links, Love, Macroeconomics, media, Medicine, Missiles, Mobile Phones, Monetary Policy, Money, Movies, Movies, Music, Music, National Security Agency (NSA), National Security Agency (NSA_, Natural Gas, Natural Gas, Newspapers, Non-Fiction, Nuclear, Nuclear Power, Obamacare, Oil, Oil, People, Philosophy, Photos, Police, Political Correctness, Politics, Press, Psychology, Quotations, Radio, Radio, Rants, Raves, Raymond Thomas Pronk, Religion, Religious, Resources, Reviews, Security, Shite, Speech, Spying, Strategy, Success, Sunni, Talk Radio, Tax Policy, Taxation, Taxes, Technology, Television, Television, Television, Terrorism, The Pronk Pops Show, Trade, Video, War, Water, Wealth, Weapons, Wisdom, Work, Writing | Tags: , , , |

 

 

Project_1

The Pronk Pops Show Podcasts

Pronk Pops Show 1005, November 22, 2017

Pronk Pops Show 1004, November 21, 2017

Pronk Pops Show 1003, November 20, 2017

Pronk Pops Show 1002, November 15, 2017

Pronk Pops Show 1001, November 14, 2017 

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Image result for i am mad as hellImage result for illegal alien invasion of united StatesImage result for branco cartoons on roy mooreSee the source image

 

November 22, 2017 06:55 PM PST

The Pronk Pops Show 1005

November 22, 2017

Story 1: The Fed’s Great Unwind or Rolling Over Into 21st Century Greatest Depression — Videos —

Story 2: Will President Trump Be The Next President Hoover? — Videos

For additional information and videos:

https://pronkpops.wordpress.com/2017/11/22/the-pronk-pops-show-1005-story-1-the-feds-great-unwind-or-rolling-over-into-21st-century-greatest-depression-videos-story-2-will-president-trump-be-the-next-president-hoover-videos/

November 22, 2017 05:12 PM PST

The Pronk Pops Show 1004

November 21, 2017

Story 1: The Illegal Alien Family That Is Deported Together Stays Together — Let The “Dreamers” Go Back To Their Country of Origin With Families– Enforce All Immigration Laws — Remove and Deport The 30-60 Million Illegal Aliens Who Invaded The United States in Last 20 Years — No DACA Fix Needed — Trump Will Lose Many of His Supporters If He Gives Amnesty or Citizenship To Dreamers — Video —

Story 2: Feral Hog Invasion of America — Hogs Eat Everything — Kill The Hogs — Boar Busters — Videos

For additional information and videos:

https://pronkpops.wordpress.com/2017/11/21/the-pronk-pops-show-1004-november-21-2017-story-1-the-illegal-alien-family-that-is-deported-together-stays-together-let-the-dreamers-go-make-to-country-of-origin-with-families-enforce-all/

November 21, 2017 08:25 PM PST

The Pronk Pops Show 1003

November 20, 2017

Story 1: The Great Outing of Sexual Abusers in Big Lie Media and Congress — The CREEP List Grows Longer and Longer — Abuse of Power — Videos —

Story 2: A Two Charlie Day — Charlie Rose, Should Be Fired By CBS, and Charlie Manson, Dead At 83, Should Have Been Executed By State of California — Videos

For additional information and videos:

https://pronkpops.wordpress.com/2017/11/20/the-pronk-pops-show-1003-november-20-2017-story-1-the-great-outing-of-sexual-abusers-in-big-lie-media-and-congress-the-creep-list-grows-longer-and-longer-abuse-of-power-videos-story-2/

November 20, 2017 02:08 PM PST

The Pronk Pops Show 1002

November 15, 2017

Story 1: More on Moore: Roy Moore’s Attorney News Briefing — She Said Vs. He Said — Faulty Memory of Witnesses Leading To Wrongful Conviction — Sexual Abuse — Who Do You Believe? — The Voters of Alabama Must Answer This Question on December 12 — Videos —

Story 2: Will The Senate Pass A Tax Reform Bill?– NO — Tax Cut Bill — Yes — Videos —

Story 3: Who is on the Congressional CREEP List of Sexual Harassers in Congress and Their Staffs ? — Who is next to be outed? — Shout Animal House — Intimacy — Getting To Know You– Dance With Me –Videos

For additional information and videos:

https://pronkpops.wordpress.com/2017/11/16/the-pronk-pops-show-1002-november-15-2017-story-1-more-on-moore-roy-moores-attorney-news-briefing-she-said-vs-he-said-faulty-memory-of-witnesses-leading-to-wrongful-conviction-sex/

November 17, 2017 04:39 PM PST

The Pronk Pops Show 1001

November 14, 2017

Story 1: He Is Back — Let The Screaming Begin — Videos —

Story 2: Trial Balloon of Having Sessions Return To The Senate By Write In Campaign Shot Down By Attorney General Jeff Sessions — Political Elitist Establishment Trying To Overturn Alabama Voters —  Videos —

Story 3: Attorney General Sessions Grilled By House Including Whether There Will Special Counsel For Hillary Clinton Alleged Crimes — Vidoes —

Story 4: Sexual Harassment in The Senate and House — Time To Expose the Exposers — Out Them By Naming Them — Publish The Creep List — Videos

For additional information and videos:

https://pronkpops.wordpress.com/2017/11/15/the-pronk-pops-show-1001-november-14-20017-story-1-he-is-back-let-the-screaming-begin-videos-story-2-trial-balloon-of-having-sessions-return-to-the-senate-by-write-in-campaign-shot-down/

 

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Todd G. Buchholz — Bringing The Jobs Home: How The Left Created The Outsourcing Crisis — and How We Can Fix It — Videos

Posted on August 12, 2017. Filed under: Banking, Books, College, Communications, Economics, Education, Employment, Energy, Enivornment, Faith, Family, Federal Government, Fiscal Policy, Foreign Policy, Freedom, History of Economic Thought, Macroeconomics, media, Microeconomics, Monetary Policy, Natural Gas, Nuclear Power, Oil, Tax Policy, Wealth, Welfare, Wisdom, Work, Writing | Tags: , |

Image result for Todd burhholz

Image result for Todd burhholz bring the jobs back home

Todd Buchholz on Economics

Why rich nations could fall apart

Todd Buchholz

Todd Buchholz: Trump should take a hard line with China

LIVE: Todd Buchholz and “The Price of Prosperity”

Milken Institute Forum: Todd Buchholz

The Price of Prosperity: Why Rich Nations Fail and How to Renew Them – FULL Audiobook

Todd Buchholz on the New Economics

Here’s How Trump Could Start a Trade War With China

Outsourcing American Jobs Consultants Help Companies Outsource

John Stossel & Lou Dobbs – American Free Trade

John Stossel – Why Free Trade Is Better Than “Made In America”!

John Stossel – Economic Myths: Made In America, College, Overpopulation, & More 7/26/12

Exporting America: Atul Vashistha on CNN

 

Todd G. Buchholz

From Wikipedia, the free encyclopedia

Todd G. Buchholz is an economist and has served as White House director of economic policy under George H.W. Bush and a managing director of the Tiger hedge fund. He was awarded the Allyn Young Teaching Prize by the Harvard University Department of Economics and was named “One of the Top 21 Speakers of the 21st Century” by Successful Meetings magazine. Businessweek and Bloomberg have reported that Buchholz is on the short-list for a White House appointment to the Federal Reserve Board.[1]

The Wall Street Journal named Buchholz’s 2016 book The Price of Prosperity: Why Rich Nations Fail and How to Renew Them, one of eight “must-reads” for the summer of 2016.[2] Buchholz is the inventor of the Math Arrow,[3] a mathematical matrix that makes numbers more intuitive to children. He is the CEO of Sproglit, LLC,[4] which develops software and classroom materials based on the Math Arrow. Martin Cooper (inventor), widely recognized as the inventor of the cellular phone, has called the Math Arrow “ingenious.”

Life and career

A founder of the G7 Group consulting firm, Todd Buchholz holds advanced degrees in law from Harvard Law School and in economics from University of Cambridge. He has also served as a Fellow at Cambridge University.

Buchholz frequently contributes commentaries on political economy, financial markets, business and culture to the New York TimesWall Street Journal and Washington Post, as well as PBSNPR and major television networks. He hosted his own special on CNBC and is the only person to guest-host CNBC’s Squawk Box two days in a row.

His books have been translated into over 15 languages and his first book New Ideas from Dead Economists is listed as a “classic” by the American Economic Association.[5] It has been strongly endorsed by such varied thinkers as Milton Friedman and Lawrence Summers.[6]

Buchholz’s newest book, The Price of Prosperity: Why Rich Nations Fail and How to Renew Them was published by HarperCollins in June 2016. The book received endorsements from prominent Democratic and Republican economists, including Lawrence Summers, Alan Blinder, Michael Boskin and Glenn Hubbard. Former Federal Board vice chair Blinder called it a “crackling read…a tour de force.”[1] Buchholz’s 2011 book Rush: Why You Thrive in the Rat Race was named a top ten book in the social sciences by Publishers Weekly, and a book of the year by the New York Post and Los Angeles Times.[7] Rush is a “synthesis of neuroeconomics and evolutionary psychology.” In 2012, Rush was featured on the Charlie Rose television show.[8] Buchholz’s other works include New Ideas from Dead CEOsLasting Lessons from the Corner OfficeFrom Here to EconomyMarket Shock, and Bringing the Jobs Home.

Buchholz resides primarily in San Diego, California and travels the world delivering keynote presentations on economics, finance, and innovation to such companies as MicrosoftIBM and General Electric, as well as to governmental organizations.[2] He has lectured in the U.K. Parliament, as well as at the White House library and the U.S. Treasury.

He is one of the founding producers of the Broadway musical Jersey Boys; is active in entrepreneurial businesses; holds engineering and design patents; and advises investment funds on business and portfolio strategy. In 2011, he co-founded software companySproglit, LLC.

He is also the author of a mystery novel about a boxer and hedge funds, called The Castro Gene, which won a USA Best Books prize.[9] Buchholz is the coauthor of the musical, Glory Ride, which tells the true story of Italians sneaking children out of Fascist Italy on bicycles. Glory Ride was performed in New York in January 2015, starring Tony Award nominee Josh YoungAlison Luff, and Quinn VanAntwerp. [10]

Economic Theories and Policy Proposals

Buchholz has devised a number of economic theories and policy proposals, which have been presented in books, articles, and lectures:

Law of Fertility, Prosperity, and Immigration

In his book The Price of Prosperity, Buchholz shows that when a nation’s annual average GDP rate exceeds 2.5 percent for two consecutive 25-year periods (two generations), the fertility rate will drop to just over the replacement level, that is, 2.5 children per female. If GDP continues to grow for a third consecutive generation, the fertility rate will tend to drop below 2.1 percent and the population will require immigration to maintain a stable working population. As a corollary, if the fertility rate falls below the replacement rate, the nation will find it extraordinarily difficult to pay down accumulated debt.[11]

Locking in Super Low Rates

On the editorial page of the Wall Street Journal [12] in June 2012, Buchholz proposed that the U.S. Treasury lock in record low borrowing rates by issuing 100-year bonds. With the 10-year Treasury yielding just 1.62%, Buchholz called it the “best deal since Pope Julius paid a pittance to have Michelangelo paint his ceiling.” Fourteen months after the article appeared, yields had risen by 78 percent to 2.88%.[13]

Competition Breeds Cooperation

In his book Rush, Buchholz argues through neuroscience and history that competitive societies achieve longer life expectancy, less disease, and greater measures of cooperation than societies that try to quash competitiveness.[14]

Turning Unemployment Compensation into Signing Bonuses[edit]

In 2011, on the front page of the Washington Post Outlook section, Buchholz proposed turning unemployment compensation into signing bonuses.[15] Instead of collecting 99 weeks of unemployment payments, under Buchholz’s proposal, individuals would receive a signing bonus from the government if they accepted a job sooner.

Crime and Interest Rates

The Buchholz Hypothesis holds that crime is strongly correlated with interest rates.[16] This hypothesis helps solve the puzzle of why crime fell during the Great Depression, even though conventional wisdom suggests that a bad economy leads people to commit more crime.

Free-Rider Effect on National GDP

In his book New Ideas from Dead Economists, Buchholz argues that small countries with large social welfare programs may achieve strong GDP gains because they are able to ride on the gains generated by countries that promote a more competitive structure with less governmental intervention.

Economic Forecasting

In his media and speaking appearances, Buchholz frequently makes forecasts about major economic turns and developments, sometimes with surprising accuracy.

Farmland Price Drop 2014-2015

In January 2014, in an essay entitled “Green Acres Turning Red,” Buchholz forecast a sharp decline in farmland prices, following a sharp multi-year rally. Buchholz stated that prices were “teetering on the slope of something ugly and parabolic.”[3] Over the next two years, farmland rental rates dropped by almost 20 percent.[17]

Oil Price Collapse 2014-2015

In April 2014, with the price of oil at approximately $100 per barrel, Buchholz appeared on Fox Business Channel with Maria Bartiromo and forecast (correctly) that the price of oil would plunge to $50 per barrel.[18]

U.S. Debt Downgrade 2011

In 2011, in keynote speeches and in television and radio interviews, Buchholz forecast that the Standard and Poor’s rating agency (S&P) would downgrade U.S. Treasury debt. On August 5, S&P announced the downgrade of U.S. debt from AAA to AA+[19]

Economic Recovery Forecast 2009

In February 2009, Buchholz was among the first well-known U.S. economists to forecast an economic recovery from the “Great Recession.” In a speech to the Americas Lodging Investment Summit, Buchholz forecast that “we’re going to have an economic recovery just in time for back-to-school sales in September” and that “lodging and hospitality is going to benefit from this upswing as well.” In fact, GDP did turn positive in the third quarter of 2009.[20]

April 2008 Commodities Forecast

In April 2008, on the PBS Nightly Business Report, Buchholz forecast that commodity prices, including oil, would climb higher in the short-term but then tumble during the summer of 2008. On July 13, 2008, addressing the Southern Legislative Conference, when oil prices were $137 per barrel and leading Wall Street analysts were forecasting a move to $200, Buchholz predicted that prices would fall by half over the next six months. His comments were met with criticism from other leading economic analysts, but within the next eight weeks, prices of commodities such as oil, grain, and industrial metals started to crumble, and the price of oil fell significantly.

June 2008 Economic Forecast

In an opening keynote speech at Everything Channel’s 2008 VARBusiness 300 Conference in June 2008, Buchholz said he believed that the U.S. economy, while undoubtedly in a slowdown, would avoid two consecutive quarters of negative GDP, the classic definition of a recession. “I’m convinced we’re not going to have any quarters of negative GDP”, he added. Buchholz cited high employment, lean inventories at manufacturers, and strong exports, spurred by the weaker dollar, as reasons for his beliefs.[21]

Instability of the Eurozone

Buchholz’s 1999 book Market Shock warned that the Eurozone was unstable and headed toward political turmoil.[22] In a chapter subtitled “How European Unity Splinters,” Buchholz pointed out that eventually the Mediterranean nations and Ireland would stumble because those countries required a different monetary policy than the core countries of Germany and France.

References

  1. Jump up^http://www.businessweek.com/bwdaily/dnflash/jul2005/nf20050721_2381_db038.htm
  2. Jump up^ “Eight Summer Vacation Must-Reads from the Wall Street Journal”.
  3. Jump up^ https://www.theguardian.com/science/alexs-adventures-in-numberland/2013/jun/07/mathematics
  4. Jump up^ http://www.sproglit.com/
  5. Jump up^ American Economic Association books
  6. Jump up^ Todd G. Buchholz, New Ideas from Dead Economists (New York: Penguin, 2007)
  7. Jump up^ “Spring 2011 Adult Announcements”Publishers Weekly,
  8. Jump up^ Interview with Charlie Rose
  9. Jump up^ The USA Best Books 2007 Awards, USA Book News
  10. Jump up^ http://www.theatermania.com/new-york-city-theater/news/josh-young-stars-in-glory-ride-reading_71191.html
  11. Jump up^ Buchholz, Todd (2016). The Price of Prosperity. HarperCollins. p. 36. ISBN 9780062405708.
  12. Jump up^https://www.wsj.com/articles/SB10001424052702303836404577475060119430638
  13. Jump up^ https://www.bloomberg.com/news/2013-08-18/gold-holds-gains-as-asian-futures-slip-after-u-s-retreat.html
  14. Jump up^ Todd G. Buchholz (2012) Rush: Why You Thrive in the Rat Race. New York: Hudson Street/Penguin.
  15. Jump up^ http://www.washingtonpost.com/opinions/instead-of-unemployment-benefits-offer-a-signing-bonus/2011/06/08/AG46vHPH_story.html
  16. Jump up^ Todd G. Buchholz, (2007) New Ideas From Dead Economists. New York: Plume. p. 200
  17. Jump up^ “Farmland Values and Credit Conditions” (PDF). Chicagofed.org. Chicago Reserve Bank of Chicago.
  18. Jump up^ http://video.foxbusiness.com/v/3418293666001/oil-headed-for-50-a-barrel/?#sp=show-clips
  19. Jump up^ http://www.marketwatch.com/story/us-may-still-face-debt-downgrade-buchholz-2011-07-31
  20. Jump up^ http://www.hospitalitynet.org/news/4040053.html
  21. Jump up^ Whiting, Rick (June 2008). “Buchholz: U.S. Will Skirt A Recession”. VARBusiness28 (6): 18 =.
  22. Jump up^ Todd G. Buchholz, (1999) Market Shock. New York: Harper Collins. p.146.

External links

https://en.wikipedia.org/wiki/Todd_G._Buchholz

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David Stockman — Right On The Money, Economy, Trump and The Warfare and Welfare State — You Have Been Warned — Videos

Posted on April 30, 2017. Filed under: American History, Banking, Blogroll, Books, British History, Business, Communications, Congress, conservatives, Constitution, Corruption, Crisis, Cult, Culture, Economics, Education, Elections, Employment, European History, Federal Government Budget, Fiscal Policy, Foreign Policy, Freedom, government spending, history, History of Economic Thought, Illegal, Immigration, Inflation, Investments, Islam, Law, liberty, Life, Links, Macroeconomics, media, Microeconomics, Middle East, Monetary Policy, Money, Money, Non-Fiction, People, Philosophy, Photos, Politics, Rants, Raves, Raymond Thomas Pronk, Speech, Strategy, Talk Radio, Tax Policy, Taxation, Taxes, Video, Wahhabism, War, Wealth, Welfare, Wisdom, Writing | Tags: , , , , , , , , , , , , , , , , , , , , , , , , , , |

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World’s Greatest Memory and Trump’s La la Land | David Stockman’s Warning

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Stockman: Market Will Not Be Pretty Under Trump

[Ed. Note: To see exactly what this former Reagan insider has to say about Trump and specifically what he believes must be done to drain the swamp, David Stockman is sending out a copy of his book Trumped! A Nation on the Brink of Ruin… And How to Bring It Back out to any American willing to listen. To learn how to get your free copy CLICK HERE.]

As bonds break a three day win streak and the U.S market hitting new record highs with a trifecta of records, CNBC was roaring about what to expect going forward. The Daily Reckoning contributor David Stockman joined Courtney Reagan to discuss what to expect going forward.

After the CNBC host positioned the critiques offered by David Stockman of the Trump administration she asked whether that would continue given the state of the market. Stockman did not mix words beginning the conversation with, “What’s going on today is complete insanity. The market is apparently pricing in a huge Trump stimulus package, when if you just look at the real world out there the only thing that is going to happen is a fiscal bloodbath and a White House train wreck like never before in U.S history.

How much more evidence do these so called traders need? Trump is lost in Twitter-land and he is out of control. He is turning out to be a complete jackass in the Oval Office. Co-President Bannon is off the deep end on terrorism, travel bans, Mexican walls, immigrant bashing and protectionism.”

David Stockman is a former Reagan Administration official who was the Office of Management and Budget Director. He also served as a two-term Congressman from the great state of Michigan. His latest book, Trumped! A Nation on the Brink of Ruin… And How to Bring It Back is out now. It offers his insight and exclusive analysis on exactly what the newly elected president must do in order to succeed in the White House. To get your own FREE copy, CLICK HERE to learn how.

“[They are] having nothing to do with the economic agenda and Trump has got an empty economic bench. He’s got no Secretary of the Treasury, no Office of Management and Budget, no Council of Economic Advisor Chairman. By this time, when I was there with the Reagan Administration, the plan was ready to go and he was going to Congress within a couple of days into February. We have a debt ceiling freight train coming down the road which will hit March 15 and then the cash will start running out and the system will be on edge. All of the continuing resolutions expire in April.”

“They are going to spend the year trying to repeal and replace Obamacare and it will be a fiasco. Nothing is going to happen this year. I don’t even think they can pass the budget resolution. There is going to be no tax action this year. If there is any bill next year it is going to be deficit neutral. Which means it is not going to add $15 to earnings like these crazy people expect.”

“Why would you be trading in this market, with this kind of chaos emerging everywhere at twenty six times trailing earnings? That’s where we are. It is completely crazy and it is only a question of how many more days or weeks that this kind of fantasy land can last.”

David Stockman Market In Text 2

Courtney Reagan then pressed back asking, “At what point do you give in and admit that [Trump] is atypical but maybe he could get things done? I mean, look at all of the CEO’s that Trump has met with.” The former Reagan insider remarked that, “CEO’s come and go with every president. They came in with Reagan, they tell a president what they want to hear. These guys are just selling the song and dance about how many jobs they’re going to create in the next five years. They have no clue.”

“If we have a recession in the next five years, which surely we will, because recessions have not been outlawed and we haven’t had one for ten years. None of this stuff is going to happen. This is meaningless. What is meaningful is that Trump is out of control. This tweeting and getting off track on all of this terrorism stuff. This is a sign that there is going to be no governing coalition and that all of this fiscal stimulus expected by Wall Street is a complete fantasy. It can’t happen.”

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When CNBC then turned over the camera to a day trader who asked about the positive sentiment that exists within the market regarding Trump and his plan to deregulate Stockman stayed true to message. “Trump is just putting out press releases and the guise of Executive Orders. All of this stuff is going to get litigated, it goes through a rulemaking process, that takes years. So the relief on regulation will be important, but it way down the road and it won’t be that impactful.”

“The second thing, is we’re at 92 months in this expansion already. It is running out of gas. You can’t expect it to run forever. That is seemingly what is priced in by the market.”

“The third thing is, we have a giant debt and deficit problem. The debt ceiling is coming back into play it will be 20 trillion when it freezes in on March 15th. I’ll tell you this, people aren’t paying attention to the fact that Trump will never get a debt ceiling increase through the Congress without a government shutdown. When that happens it is, “bar the doors” because nobody is expecting it. We need to look at the facts, not the hopes.”

As the CNBC affirmed, it is not clear that the market is just going to drop tomorrow and history will repeat itself, Stockman repositioned. “The market it clearly factoring in a big Trump stimulus and I think anybody down there would admit if it doesn’t happen, if we get zero tax cuts, if we get a fiscal bloodbath in the Washington I am describing – the market is not going to stay where it is today at these absurd multiples of earnings.”

“This is all based on the idea that there is going to be a surge of economic growth and that profits are going to come back from about $89 a share by basis, where they were during the last twelve months, to a potential $110 or $130. My argument is there is not going to be any economic rebound. There is not going to be any profit surge. Therefore the market will be repricing dramatically downward once it is clear.”

Another CNBC analysis asked why – with the positive trends in jobless claims, manufacturing increasing, interest rates at near record lows – would the market not close out the year near record levels? “The market is assuming that profits are going to rebound. That we are not going to have any market dislocation and that nobody is going to be pushing back on Trump. It is hard to understand how people watching the day-to-day action down there could believe that.”

“Everybody is pushing back on Trump, he can’t even get his cabinet approved. He’s going to be bogged down in a Supreme Court fight, he’s going to be bogged down in a fight over a ridiculous travel ban. The idea that there is not going to be pushback is naive. What there is going to be is a train wreck. It is already clear that the people in the White House have no idea what they’re doing and it is only a matter of time before this honeymoon goodwill evaporates and the politicians get down to doing what they do best. Which is to undermine and obstruct anything that might be positive.”

When finally asked whether there is anything positive that would make him turn bullish in the near future he responded affirmably, “No, because Trump is inheriting thirty years of a disaster created by his predecessors. We have to take this $20 trillion of debt seriously. There is $10 trillion more built in under current policy, and that is without a dime of Trump tax cuts, infrastructure or stimulus. There is going to be a tremendous fiscal crisis in the years ahead which will prevent any of the kind of action that the “stimulus junkies” are looking for.

To catch the full interview with David Stockman on CNBC click here. If you would like to claim your own free copy of David Stockman’s bestseller Trumped! Click here to learn how.

Thanks for reading,

Craig Wilson, @craig_wilson7
for the Daily Reckoning

https://dailyreckoning.com/stockman-market-under-trump/

David Stockman

From Wikipedia, the free encyclopedia
David Stockman
David Stockman by Gage Skidmore.jpg
Director of the Office of Management and Budget
In office
January 21, 1981 – August 1, 1985
President Ronald Reagan
Preceded by Jim McIntyre
Succeeded by Jim Miller
Member of the U.S. House of Representatives
from Michigan‘s 4th district
In office
January 3, 1977 – January 21, 1981
Preceded by Edward Hutchinson
Succeeded by Mark Siljander
Personal details
Born David Alan Stockman
November 10, 1946 (age 70)
Fort Hood, Texas, U.S.
Political party Republican
Spouse(s) Jennifer Blei (1983–present)[1]
Education Michigan State University (BA)
Harvard University
Website Official website

David Alan Stockman (born November 10, 1946) is a former businessman and U.S. politician who served as a Republican U.S. Representative from the state of Michigan (1977–1981) and as the Director of the Office of Management and Budget (1981–1985) under President Ronald Reagan.

Early life and education

Stockman was born in Fort Hood, Texas, the son of Allen Stockman, a fruit farmer, and Carol (née Bartz).[2] He is of German descent, and his family’s surname was originally “Stockmann”.[3] He was raised in a conservative family, and his maternal grandfather, William Bartz, was a Republican county treasurer for 30 years.[4][5] Stockman was educated at public schools in Stevensville, Michigan. He graduated from Lakeshore High School in 1964[6] and received a B.A. in History from Michigan State University in 1968. He was a graduate student at Harvard University, 1968–1970 studying theology

Political career

Stockman’s Congressional portrait

He served as special assistant to United States Representative and 1980 U.S. presidential candidate John Anderson of Illinois, 1970–1972, and was executive director, United States House of Representatives Republican Conference, 1972–1975.

Congress

Stockman was elected to the United States House of Representatives for the 95th Congress and was reelected in two subsequent elections, serving from January 3, 1977, until his resignation January 21, 1981, to accept appointment as Director of the Office of Management and Budget for U.S. President Ronald Reagan.

Office of Management and Budget

Stockman was one of the most controversial OMB directors ever appointed, also known as the “Father of Reaganomics.” He resigned in August 1985. Committed to the doctrine of supply-side economics, he assisted in the passing of the “Reagan Budget” (the Gramm-Latta Budget), which Stockman hoped would curtail the “welfare state“. He thus gained a reputation as a tough negotiator with House Speaker Tip O’Neill‘s Democratic-controlled House of Representatives and Majority Leader Howard Baker‘s Republican-controlled Senate. During this period, Stockman became well known to the public during the contentious political wrangling concerning the role of the federal government in American society.

Stockman’s influence within the Reagan Administration was weakened after the Atlantic Monthly magazine published the infamous 18,246 word article, “The Education of David Stockman”,[7] in its December 1981 issue, based on lengthy interviews Stockman gave to reporter William Greider.

Stockman was quoted as referring to Reagan’s tax act in these terms: “I mean, Kemp-Roth [Reagan’s 1981 tax cut] was always a Trojan horse to bring down the top rate…. It’s kind of hard to sell ‘trickle down.’ So the supply-side formula was the only way to get a tax policy that was really ‘trickle down.’ Supply-side is ‘trickle-down’ theory.”[7] Of the budget process during his first year on the job, Stockman was quoted as saying, “None of us really understands what’s going on with all these numbers,” which was used as the subtitle of the article.[7]

After “being taken to the woodshed by the president” because of his candor with Greider, Stockman became concerned with the projected trend of increasingly large federal deficits and the rapidly expanding national debt. On 1 August 1985, he resigned from OMB and later wrote a memoir of his experience in the Reagan Administration titled The Triumph of Politics: Why the Reagan Revolution Failed in which he specifically criticized the failure of congressional Republicans to endorse a reduction of government spending to offset large tax decreases to avoid the creation of large deficits and an increasing national debt.

Fiscal legacy

President Jimmy Carter’s last fiscal year budget ended with a $79.0 billion budget deficit (and a national debt of $907,701,000,000 [8] as of September 30, 1980), ending during the period of David Stockman’s and Ronald Reagan’s first year in office, on October 1, 1981.[9] The gross federal national debt had just increased to $1.0 trillion during October 1981 ($998 billion on 30 September 1981, up from $907.7 billion during the last full fiscal year of the Carter administration[8]).

By 30 September 1985, four and a half years into the Reagan administration and shortly after Stockman’s resignation from the OMB during August 1985, the gross federal debt was $1.8 trillion.[8] Stockman’s OMB work within the administration during 1981 until August 1985 was dedicated to negotiating with the Senate and House about the next fiscal year’s budget, executed later during the autumn of 1985, which resulted in the national debt becoming $2.1 trillion at fiscal year end 30 September 1986.[8] Reaganomics had just begun.

In 1981, Stockman received the Samuel S. Beard Award for Greatest Public Service by an Individual 35 Years or Under, an award given out annually by Jefferson Awards.[10]

Business career

After leaving government, Stockman joined the Wall St. investment bank Salomon Brothers and later became a partner of the New York–based private equity company, the Blackstone Group.[11]:125–127 His record was mixed at Blackstone, with some very good investments, such as American Axle, but also failures, including Haynes International and Republic Technologies.[11]:144–147 During 1999, after Blackstone CEO Stephen A. Schwarzman curtailed Stockman’s role in managing the investments he had developed,[11]:146 Stockman resigned from Blackstone to start his own private equity fund company, Heartland Industrial Partners, L.P., based in Greenwich, Connecticut.[12]

On the strength of his investment record at Blackstone, Stockman and his partners raised $1.3 billion of equity from institutional and other investors. With Stockman’s guidance, Heartland used a contrarian investment strategy, buying controlling interests in companies operating in sectors of the U.S. economy that were attracting the least amount of new equity: auto parts and textiles. With the help of about $9 billion in Wall Street debt financing, Heartland completed more than 20 transactions in less than 2 years to create four portfolio companies: Springs Industries, Metaldyne, Collins & Aikman, and TriMas. Several major investments performed very poorly, however. Collins & Aikman filed for bankruptcy during 2005 and when Heartland sold Metaldyne to Asahi Tec Corp. during 2006, Heartland lost most of the $340 million of equity it had invested in the business.[13]

Collins & Aikman Corp.

During August 2003, Stockman became CEO of Collins & Aikman Corporation, a Detroit-based manufacturer of automotive interior components. He was ousted from that job days before Collins & Aikman filed for bankruptcy under Chapter 11 on May 17, 2005.

Criminal and civil charges

On March 26, 2007, federal prosecutors in Manhattan indicted Stockman in “a scheme… to defraud [Collins & Aikman]’s investors, banks and creditors by manipulating C&A’s reported revenues and earnings.” The United States Securities and Exchange Commission also brought civil charges against Stockman related to actions that he performed while CEO of Collins & Aikman.[14] Stockman suffered a personal financial loss, over $13 million, along with losses suffered by as many as 15,000 Collins & Aikman employees worldwide.

Stockman said in a statement posted on his law firm’s website that the company’s end was the consequence of an industry decline, not due to fraud.[15] On January 9, 2009, the US Attorney’s Office announced that it did not intend to prosecute Stockman for this case.[16]

Web site

In March 2014 Stockman launched a web based daily periodical, David Stockman’s Contra Corner featuring both his own articles and those from leading contrarian thinkers on geopolitics, economics, and finance.

Personal life

Stockman lives in the Upper East Side of Manhattan in New York City.[12] He is married to Jennifer Blei Stockman and is the father of two children, Rachel and Victoria. Jennifer Blei Stockman is a chairwoman emerita of the Republican Majority for Choice,[17] and President of the Solomon R. Guggenheim Foundation Board of Trustees.[18] In 2013, Stockman signed an amicus brief to the Supreme Court in favor of same-sex marriage.[19]

Quotes

  • “[Social Security] has to be means-tested. And Medicare needs to be means-tested […] Let the Bush tax cuts expire. Let the capital gains go back to the same rate as ordinary income.”[20]
  • “The Republican Party has totally abdicated its job in our democracy, which is to act as the guardian of fiscal discipline and responsibility. They’re on an anti-tax jihad — one that benefits the prosperous classes.”[21]
  • “I invest in anything that Bernanke can’t destroy, including gold, canned beans, bottled water and flashlight batteries.”[22]
  • “Ninety-two percent of the wealth is owned by five percent of the people.” (Bloomberg TV 2013)
  • “[T]he Republican Party was hijacked by modern imperialists during the Reagan era. As a consequence, the conservative party cannot perform its natural function as watchdog of the public purse because it is constantly seeking legislative action to provision a vast war machine of invasion and occupation.” [23]

Bibliography

  • The Reagan Economic Plan, 1981
  • The Triumph of Politics: Why the Reagan Revolution Failed, Harper & Row, 1986, ISBN 9780060155605
  • The Great Deformation: The Corruption of Capitalism in America, PublicAffairs, 2013, ISBN 9781586489120
  • Trumped!: A Nation on the Brink of Ruin, and How to Bring it Back, 2016

References

  1. Jump up^ “LOSING THE BATTLES AND WINNING THE WAR”. Lexington Herald-Leader. April 7, 1985.
  2. Jump up^ Hunter, Marjorie (December 12, 1980). “Office of Management and Budget David Alan Stockman; Strong Support From Kemp Chosen by House Republicans Views on Economy”. The New York Times.
  3. Jump up^ “News65”. 19 June 1998.
  4. Jump up^ “The Tuscaloosa News – Google News Archive Search”.
  5. Jump up^ “The Montreal Gazette – Google News Archive Search”.
  6. Jump up^ Heibutzki, Ralph (2012-06-04). “Stockman Surprise Speaker at Lakeshore’s Graduation”. The Herald-Palladium. Retrieved 2012-06-04.
  7. ^ Jump up to:a b c William Greider (December 1981). “The Education of David Stockman”. The Atlantic Online.
  8. ^ Jump up to:a b c d Treasury Department’s Historical Debt Outstanding – Annual 1950 – 1999
  9. Jump up^ Office of Management and Budget Historical Tablessee Table 1.1 (Excel Spreadsheet)
  10. Jump up^ “Jefferson Awards”. Jefferson Awards.
  11. ^ Jump up to:a b c David Carey & John E. Morris (2001). King of Capital: The Remarkable Rise, Fall and Rise Again of Steve Schwarzman and Blackstone. Crown.
  12. ^ Jump up to:a b “Collins & Aikman seeks to emerge from bankruptcy,” Bloomberg News article by Jeff Bennett, published in the newspaper The Advocate of Stamford and (identical version, perhaps with changes by the local editor in the common business section for both newspapers) in the Greenwich Time on September 5, 2006, page A7, The Advocate
  13. Jump up^ David Carey and Lou Whiteman, “PE firms find buyer for Metaldyne,” The Deal, Sept. 1, 2006.
  14. Jump up^ Levin, Doris (29 March 2007). “Stockman Outsmarts Self in Detroit”. Bloomberg. Retrieved 19 September 2014.
  15. Jump up^ “Ex-Collins Chief David Stockman Charged With Fraud (Update10)”. Bloomberg. March 26, 2007. Retrieved 2010-08-02.
  16. Jump up^ “Fraud charges dropped against ex-Reagan aide David Stockman”. Chicago Tribune. 10 January 2009. Retrieved 19 September 2014.
  17. Jump up^ About Us Republican Majority for Choice
  18. Jump up^ Trustees, Solomon R. Guggenheim Foundation
  19. Jump up^ [1]
  20. Jump up^ “Why David Stockman Isn’t buying it”. CBS News. March 2, 2012.
  21. Jump up^ Dickinson, Tim (Nov 9, 2011). “How the GOP Became the Party of the Rich”. Rolling Stone. Retrieved 2011-11-10.
  22. Jump up^ David Stockman: I Invest In Anything Bernanke Can’t Destroy, John Carney, CNBC, October 6, 2010
  23. Jump up^ Stockman, David (2013). The Great Deformation — the corruption of capitalism in America. PublicAffairs. p. 688. ISBN 978-1586489120.

External links

United States House of Representatives
Preceded by
Edward Hutchinson
Member of the U.S. House of Representatives
from Michigan’s 4th congressional district

1977–1981
Succeeded by
Mark Siljander
Political offices
Preceded by
Jim McIntyre
Director of the Office of Management and Budget
1981–1985
Succeeded by
Jim Miller
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Progressive Interventionist Neoconservative Warmonger Senator John McCain — Let The NATO Nations Defend Themselves and Pay For Their Own Defense — Progressive Democrats and Republicans Have Given The American People The Warfare and Welfare State and Replaced The Constitutional American Republic With A Declining and Falling American Empire of The Two Party Tyranny — $20 Trillion in Debt and Unfunced Liabilities Exceeding $210 Trillion and Growing — A Day of Reckoning — United States Is Bankrupt — Steve Bannon and President Trump Know It — Videos

Posted on March 16, 2017. Filed under: Articles, Banking, Blogroll, Books, Business, Communications, Computers, Congress, conservatives, Constitution, Corruption, Culture, Demographics, Diasters, Documentary, Economics, History of Economic Thought, Investments, Macroeconomics, Microeconomics, Monetary Policy, Money, Non-Fiction, Technology, Unemployment, Video, War, Wealth, Weather, Welfare, Wisdom, World War II, Writing | Tags: , , , , , , , , , , , , , , , , , , , , , , |

 “It is our true policy to steer clear of permanent alliance with any portion of the foreign world”

~George Washington

 “Peace, commerce, and honest friendship with all nations-entangling alliances with none.”

~Thomas Jefferson

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National Debt Clock

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Sen McCain on Sen. Paul: “The Senator from Kentucky is now working for Vladimir Putin.” (C-SPAN)

Rand Paul ‘John McCain is proof we need term limits’

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Steve Bannon Lays Out His AMAZING Political Philosophy

Published on Nov 18, 2016

Speech by Stephen K. Bannon (Steve Bannon), Donald Trump’s senior strategic advisor and architect of his winning 2016 election. In this speech delivered to the Liberty Restoration Foundation, Bannon layed out the poliitical philosophy both he and Trump embrace, and which appealed to the American people in the election. It is conservative, perhaps explaining why the political liberal left has resorted to evidently incorrect allegations of antisemitism or racism to try to derail his appointment. Bannon was a Hollywood producer who invested in the Seinfeld comedy TV series, and later became the chair of the Brietbart News Service, expanding it into one of the leading news sources nationally, as an alternative to liberal media outlets that previously dominated US media. He joined the Trump campaign in June 2016, leading him to victory and the White House. Do you think that Bannon is racist, as the democrats have alleged?

Deficits, Debts and Unfunded Liabilities: The Consequences of Excessive Government Spending

Uploaded on May 10, 2010

Huge budget deficits and record levels of national debt are getting a lot of attention, but this video explains that unfunded liabilities for entitlement programs are Americas real red-ink challenge. More important, this CF&P mini-documentary reveals that deficits and debt are symptoms of the real problem of an excessive burden of government spending. http://www.freedomandprosperity.org

III – Unfunded Liabilities

Rhett Talks – Is the United States Bankrupt?

Laurence Kotlikoff at MTSU November 5, 2015

‘US hides real debt, in worse shape than Greece’

Unfunded Liabilities: James Cox of Silver Bullion interviews Professor Kotlikoff

The Actual Fiscal Gap Is Approximately $210 Trillion Dollars With All The Unfunded Liabilities, The Average Person, Every Man, Woman, And Child Owes……$666,666.667

8 years ago, when Obama took office, the Debt Clock was at 9 TRILLION Dollars.
Today, the US Debt Clock at almost 20 TRILLION Dollars.
http://www.usdebtclock.org/

This is an 87% increase.

The actual Fiscal Gap is approximately $210 TRILLION Dollars.
with all the unfunded liabilities.

With the population of the US is over 315 MILLION People, this means that the average person, every man, woman, and child owes……$666,666.667

Where does this lead?
Look at Brazil, Argentina, Cyprus, Greece, Italy,……

Who ends up with the bill?
THE TAXPAYER!

http://investmentwatchblog.com/the-actual-fiscal-gap-is-approximately-210-trillion-dollars-with-all-the-unfunded-liabilities-the-average-person-every-man-woman-and-child-owes-666666-667/

17 Nobel Laureates and 1200+ Economists Agree with Ben Carson re U.S. Fiscal Gap

I cover economics, personal, national, and international.

Michelle Lee, a fact checker with the Washington Post, just posted a long and, to my mind, highly political column. Her column, read carefully, undermines Presidential candidate Ben Carson’s absolutely correct claim, made in announcing his candidacy, that the true measure of U.S. fiscal debt is not the $13 trillion our government reports as its debt. Instead, our true debt is over $200 trillion. Obviously, most of this true debt has been kept off the books by our politicians.

In this column, I’m going to defend Dr. Carson’s statement. But I want to point out that I don’t know Dr. Carson. I have never spoken with him. And I don’t yet know enough about Dr. Carson’s positions to have a view about his overall suitability for President. I am, however, impressed that out of the gate he is talking about the right measure of our nation’s fiscal condition.

I spoke at length to Michelle Lee prior to her writing her column. She told me she was a fact checker. But when fact checking turns into disguised political commentary, there’s a problem. Fact checkers are supposed to check the facts with experts. When it comes to economics, the experts are PhD economists, not political organizations or people, without real economics training, parading as economists, both of which she quotes in undermining Dr. Carson’s credibility.

Now let me turn to the substance. In referring to $211 trillion in unfunded mandates, Dr. Carson was referencing my calculation of the U.S. fiscal gap. As I explained in a NY Times op ed, the U.S. fiscal gap is $210 trillion. So Dr. Carson was off by $1 trillion – by less than one half of one percent.

The fiscal gap is the present value of all projected future expenditures less the present value of all projected future taxes. The fiscal gap is calculated over the infinite horizon. But since future expenditures and taxes far off in the future are being discounted, their contribution to the fiscal gap is smaller the farther out one goes. The $210 trillion figure is based on the Congressional Budget Office’s July 2014 Alternative Fiscal Scenario projections, which I extended beyond their 75-year horizon.

Dr. Carson referenced $211 trillion as the size of “unfunded mandates.” Michelle Lee correctly points out that Dr. Carson was referencing the U.S. fiscal gap, not the present value of mandatory spending. What she knew (because I told her), but failed to say, is that the present value of mandatory spending is far larger than $210 trillion because the fiscal gap is a net, not a gross number.

Michelle Lee is not a PhD economist. Nor is Bruce Barlett, whose truly absurd statement about the debt being an asset she quotes. Yes, it’s an asset, but it’s an asset that young and future generations must pay off. Social Security benefits are also an asset to their recipients, but again, they must be paid off by people who aren’t getting the benefits.

Michelle Lee apparently takes Bruce Bartell’s views more seriously than the views of 17 Nobel Laureates in economics and over 1200 PhD economists from MIT, Harvard, Stanford, Chicago, Berkeley, Yale, Columbia, Penn, and lesser known universities and colleges around the country. Each of these economists has endorsed The Inform Act, a bi-partisan bill that requires the CBO, GAO, and OMB to do infinite horizon fiscal gap accounting on a routine and ongoing basis.

https://www.forbes.com/sites/kotlikoff/2015/05/13/17-nobel-laureates-and-1200-economists-agree-with-ben-carson-re-u-s-fiscal-gap/#46c13e954d17

National Debt

What You’ll Find

Comprehensive and meticulously documented facts about the national debt. Learn about various measures of the national debt, contributing factors, consequences, and more. For example:


Citation Generator

Introductory Notes

In keeping with the practice of the Congressional Budget Office and other federal agencies that deal with budget policy, many of the federal debt, spending, and revenue figures in this research are expressed as a portion of gross domestic product (GDP). This is because debates about the size of government and the effects of its debt are frequently centered upon how much of a nation’s economy is consumed by government. This measure also accounts for population growth, some of the effects of inflation, and the relative capacity of government to service its debt.

However, the federal government does not have the entire U.S. economy at its disposal to service federal debt. The private sector, which produces the goods and services that comprise most of the economy, utilizes some of these resources, and local and state governments also consume some of the nation’s GDP. Hence, this research sometimes expresses federal debt as a portion of annual federal revenues. This is a more direct measure of the federal government’s capacity to service its debt.

In keeping with Just Facts’ Standards of Credibility, all graphs in this research show the full range of available data, and all facts are cited based upon availability and relevance, not to slant results by singling out specific years that are different from others.

Click here for a video that summarizes some of the key facts in this research.

Quantifying the National Debt

* As of March 1, 2017, the official debt of the United States government is $19.9 trillion ($19,920,418,771,289).[1] This amounts to:

  • $61,365 for every person living in the U.S.[2]
  • $158,326 for every household in the U.S.[3]
  • 106% of the U.S. gross domestic product.[4]
  • 560% of annual federal revenues.[5]
Debt as a Portion of the Economy

[6]

* Publicly traded companies are legally required to account for “explicit” and “implicit” future obligations such as employee pensions and retirement benefits.[7] [8] [9] The federal budget, which is the “government’s primary financial planning and control tool,” is not bound by this rule.[10] [11]

* At the close of the federal government’s 2016 fiscal year (September 30, 2016), the federal government had roughly:

  • $8.5 trillion ($8,542,000,000,000) in liabilities that are not accounted for in the publicly held national debt, such as federal employee retirement benefits, accounts payable, and environmental/disposal liabilities.[12]
  • $29.0 trillion ($29,038,000,000,000) in obligations for current Social Security participants above and beyond projected revenues from their payroll and benefit taxes, certain transfers from the general fund of the U.S. Treasury, and assets of the Social Security trust fund.[13] [14]
  • $32.9 trillion ($32,900,000,000,000) in obligations for current Medicare participants above and beyond projected revenues from their payroll taxes, benefit taxes, premium payments, and assets of the Medicare trust fund.[15] [16]

* The figures above are determined in a manner that approximates how publicly traded companies are required to calculate their liabilities and obligations.[17] [18] [19] The obligations for Social Security and Medicare represent how much money must be immediately placed in interest-bearing investments to cover the projected shortfalls between dedicated revenues and expenditures for all current participants in these programs (both taxpayers and beneficiaries).[20] [21] [22]

* Combining the figures above with the national debt and subtracting the value of federal assets, the federal government had about $84.3 trillion ($84,306,000,000,000) in debts, liabilities, and unfunded obligations at the close of its 2016 fiscal year.[23]

* This $84.3 trillion shortfall is 93% of the combined net worth of all U.S. households and nonprofit organizations, including all assets in savings, real estate, corporate stocks, private businesses, and consumer durable goods such as automobiles and furniture.[24] [25]

* This shortfall equates to:

  • $260,382 for every person living in the U.S.[26]
  • $670,058 for every household in the U.S.[27]
  • 451% of the U.S. gross domestic product.[28]
  • 2,370% of annual federal revenues.[29]

* These figures do not account for the future costs implied by any current policies except those of the Social Security and Medicare programs.[30]

* These figures are based upon current federal law and “a wide range of complex assumptions” made by federal agencies.[31] Regarding this:

  • The Board of Social Security Trustees has stated that “significant uncertainty” surrounds the “best estimates” of future circumstances.”[32]
  • The Board of Medicare Trustees has stated that the program’s financial projections “are highly uncertain, especially when looking out more than several decades.”
  • The Board of Medicare Trustees has stated that the program’s long-term costs may be “substantially higher” than projected under current law. This is because current law includes the effects of the Affordable Care Act, which will cut Medicare prices for “many” healthcare services to “less than half of their level” under prior law. Per the Trustees:
Absent an unprecedented change in health care delivery systems and payment mechanisms, the prices paid by Medicare for health services will fall increasingly short of the costs of providing these services. … Before such an outcome would occur, lawmakers would likely intervene to prevent the withdrawal of providers from the Medicare market and the severe problems with beneficiary access to care that would result.[33]

Causes of the National Debt

Spending and Taxes

Current Expenditures and Receipts

† To measure the entirety of government expenditures and receipts, “total” instead of “current” figures are preferable, but such data (shown in the next graph) only extends back to 1960.[34]

‡ In 2015, receipts consisted of: 97% taxes; 2% premiums, settlements, donations, fines, fees, & penalties; 1% interest & dividends.[35]

[36]

* Data from the graph above:

Year Receipts
(Portion of GDP)
Expenditures
(Portion of GDP)
1930 3% 3%
1940 8% 9%
1950 16% 16%
1960 17% 17%
1970 17% 20%
1980 19% 22%
1990 18% 22%
2000 20% 19%
2010 16% 25%
2015 19% 22%

Total Expenditures and Receipts

[37]

* Data from the graph above:

Year Receipts
(Portion of GDP)
Expenditures
(Portion of GDP)
1960 18% 19%
1970 18% 21%
1980 19% 23%
1990 18% 22%
2000 20% 19%
2010 16% 27%
2015 19% 22%

Spending Distribution

Current Expenditures by Function

† Social programs include income security, healthcare, education, housing, and recreation.

‡ National defense includes military spending and veterans’ benefits.

§ General government and debt service includes the executive & legislative branches, tax collection, financial management, and interest payments.

# Economic affairs includes transportation, general economic & labor affairs, agriculture, natural resources, energy, and space. (This excludes spending for infrastructure projects such as new highways, which is not accounted for in this graph.[38])

£ Public order and safety includes police, fire, law courts, prisons, and immigration enforcement.

[39]

* Data from the graph above:

Category Portion of Total Federal Spending
1960 1970 1980 1990 2000 2010 2015
Social Programs 21% 32% 45% 44% 54% 61% 63%
National Defense 53% 42% 26% 25% 19% 20% 19%
General Government & Debt Service 19% 18% 21% 25% 21% 13% 13%
Economic Affairs & Infrastructure 6% 7% 7% 5% 5% 4% 4%
Public Order & Safety 0% 0% 1% 1% 1% 1% 1%

Tax Distribution

Effective Tax Rates by Income

NOTE: This data does not account for 7% of federal revenues that could not be allocated to households by income group.

[40]

* Data from the graph above:

Average Effective Federal Tax Burdens (2013)
Income Group Household Income Tax Rate Taxes Paid
Lowest 20% $25,400 3.3% $838
Second 20% $47,400 8.4% $3,982
Middle 20% $69,700 12.8% $8,922
Fourth 20% $103,700 17.0% $17,629
Highest 20% $265,000 26.3% $69,695

* Breakdown of the highest 20%:

Income Group Household Income Tax Rate Taxes Paid
81st – 90th $147,100 20.7% $30,450
91st – 95th $201,400 23.0% $46,322
96th – 99th $326,800 26.3% $85,948
Top 1 % $1,571,600 34.0% $534,344

Consequences

* As detailed in publications of the Congressional Budget Office, the Brookings Institution, and Princeton University Press, the following are some potential consequences of unchecked government debt:

  • reduced “future national income and living standards.”[41] [42] [43]
  • “reductions in spending” on “government programs.”[44]
  • “higher marginal tax rates.”[45]
  • “higher inflation” that increases “the size of future budget deficits” and decreases the “the purchasing power” of citizens’ savings and income.”[46] [47]
  • restricted “ability of policymakers to use fiscal policy to respond to unexpected challenges, such as economic downturns or international crises.”[48]
  • “losses for mutual funds, pension funds, insurance companies, banks, and other holders of federal debt.”[49]
  • increased “probability of a fiscal crisis in which investors would lose confidence in the government’s ability to manage its budget, and the government would be forced to pay much more to borrow money.”[50] [51]

* In 2012, the Journal of Economic Perspectives published a paper about the economic consequences of government debt. Using 2,000+ data points on national debt and economic growth in 20 advanced economies (such as the United States, France, and Japan) from 1800–2009, the authors found that countries with national debts above 90% of GDP averaged 34% less real annual economic growth than when their debts were below 90% of GDP.[52]

* The United States exceeded a debt/GDP level of 90% in the second quarter of 2010.[53]

* Per the textbook Microeconomics for Today:

GDP per capita provides a general index of a country’s standard of living. Countries with low GDP per capita and slow growth in GDP per capita are less able to satisfy basic needs for food, shelter, clothing, education, and health.[54]

* In 2013, the Political Economy Research Institute at the University of Massachusetts, Amherst, published a working paper about the economic consequences of government debt. Using data on national debt and economic growth in 20 advanced economies from 1946-2009, the authors found that countries with national debts over 90% of GDP averaged:

  • 31% less real annual economic growth than countries with debts from 60% to 90% of GDP,
  • 29% less real annual economic growth than countries with debts from 30% to 60% of GDP,
  • and 48% less real annual economic growth than countries with debts from 0% to 30% of GDP.[55]

* The authors of the above-cited papers have engaged in a heated dispute about the results of their respective papers and the effects of government debt on economic growth. Facts about these issues can be found in the Just Facts Daily article, “Do large national debts harm economies?

Politics

Responsibility

* The U.S. Constitution vests Congress with the powers to tax, spend, and pay the debts of the federal government. Legislation to carry out these functions must either be:

  • passed by majorities in both houses of Congress and approved by the President; or
  • passed by majorities in both houses of Congress, vetoed by the President, and then passed by two-thirds of both houses of Congress; or
  • passed by majorities in both houses of Congress and left unaddressed by the President for ten days.[56]

* Other factors impacting the national debt include but are not limited to legislation passed by previous congresses and presidents,[57] economic cycles, terrorist attacks, natural disasters, demographics, and the actions of U.S. citizens and foreign governments.[58]


Current Policies

* In 2014, the Congressional Budget Office (CBO) projected the debt that the U.S. government would accumulate under current federal policies.[59] The projection used the following assumptions:

  • Unemployment will incrementally decline from 6.8% in 2014 to 5.8% in 2018 and 5.3% in 2027, where it will remain thereafter.[60] (For reference, the average of the previous 40 years is 6.5%.[61])
  • GDP growth will incrementally decline from an average rate of 3.4% above the rate of inflation in 2015 to 1.9% in 2021 and remain constant thereafter.[62] (The average of the previous 40 years is 2.9%.[63])
  • Federal revenues (i.e., taxes) will incrementally increase from 17.4% of GDP in 2014 to 18.0% in 2024 and remain constant thereafter.[64] (The average of the previous 40 years is 17.4%.[65])
  • Federal spending will incrementally increase from 20.4% of GDP in 2014 to 23.6% in 2025 and 31.8% in 2040.[66] (The average of the previous 40 years is 20.5%.[67])
  • Payments for Medicare services will undergo scheduled reductions that would likely cause “severe problems with beneficiary access to care.”[68] [69]

* Combining these projections with historical data yields the following results:

Revenues and Spending Under Current Policies

[70]

Debt Under Current Policies

† To measure the entirety of the national debt, it would be preferable to show “gross” debt instead of “publicly held” debt, but this data is not presented in this report. Nonetheless, it would make little difference because the excluded debt primarily resides in federal government trust funds that dwindle and become insolvent during the projection period.[71] Facts regarding why and how the federal government keeps its books in this manner are covered in the section of this research entitled “Government Accounting.”

[72]

* Per CBO, postponing action to stabilize the debt will:

  • punish younger generations of Americans, because most of the burden would fall on them.
  • reward older generations of Americans, because “they would partly or entirely avoid the policy changes needed to stabilize the debt.”
  • “substantially increase the size of the policy adjustments needed to put the budget on a sustainable course.”[73] [74]

* The following Ph.D. economists and political scientists have claimed that the level of national debt during World War II is a good reason to not be overly concerned about the modern national debt:

  • Paul Davidson, editor of the Journal of Post Keynesian Economics and author of The Keynes Solution: The Path to Global Economic Prosperity:[75]
Rather than bankrupting the nation, this large growth in the national debt [during World War II] promoted a prosperous economy. By 1946, the average American household was living much better economically than in the prewar days. Moreover, the children of that Depression–World War II generation were not burdened by having to pay off what then was considered a huge national debt. Instead, for the next quarter century, the economy continued on a path of unprecedented economic growth and prosperity….[76]
  • Douglas J. Amy, professor of politics at Mount Holyoke College:[77]
Conservatives are also wrong when they argue that deficit spending and a large national debt will inevitably undermine economic growth. To see why, we need to simply look back at times when we have run up large deficits and increased the national debt. The best example is World War II when the national debt soared to 120% of GDP—nearly twice the size of today’s debt. This spending not only got us out of the Great Depression but set the stage for a prolonged period of sustained economic growth in the 50s and 60s.[78]
  • Paul Krugman, Nobel Prize-winning economist and Princeton University professor:[79]
Right now, federal debt is about 50% of GDP. So even if we do run these deficits, federal debt as a share of GDP will be substantially less than it was at the end of World War II.
Again, the debt outlook is bad. But we’re not looking at something inconceivable, impossible to deal with; we’re looking at debt levels that a number of advanced countries, the U.S. included, have had in the past, and dealt with.[80]

* In the 40 years that followed the end of World War II (1946–1985):

  • federal spending as a percent of GDP averaged 42% lower than the last year of the war.[81]
  • publicly held debt as a percent of GDP decreased by 72 percentage points.[82]

* In 2010, around the time when the statements above were written, the Congressional Budget Office projected that under current policy and a sustained economic recovery over the next 40 years:

  • federal spending as a percent of GDP will average over 78% higher than in the four decades that followed World War II.[83]
  • publicly held debt as a percent of GDP will rise by 277 percentage points.[84]

Alternative Policies

* As alternatives to the CBO’s current policy projections detailed above, the CBO also ran projections for scenarios such as these:

1) Current law:[85]

  • Federal revenues will incrementally increase from 17.6% of GDP in 2014 to 18.0% in 2020, 19.9% in 2044, and 23.5% in 2084.[86] [87] At this point, federal revenues (i.e., taxes) will be 35% higher than the average of the previous 40 years.[88]
  • Federal spending on all government functions will incrementally increase from 20.4% of GDP in 2014 to 21.5% in 2020, and 26.0% in 2040.[89] At this point, spending will be 27% higher than the average of the previous 40 years.[90]
  • Payments for Medicare services will undergo reductions that will likely cause “severe problems with beneficiary access to care.”[91] [92]

2) Republican Congressman Paul Ryan’s 2014 budget resolution, called the “The Path to Prosperity”:[93]

  • Starting in 2024, Medicare beneficiaries will have a choice to enroll in private plans paid for by Medicare or remain in the traditional Medicare program.[94] Also starting in 2024, the eligibility age for Medicare benefits will incrementally rise to correspond with Social Security’s retirement age.[95] Compared to the projections under the current policy scenario, Medicare spending will be 0.5% lower in 2016, 2% lower in 2020, and 4% lower in 2024.[96]
  • Federal Medicaid spending will be converted to an “allotment that each state could tailor to meet its needs, indexed for inflation and population growth.”[97] The expansion of Medicaid manadated by the Affordable Care Act (a.k.a. Obamacare) will be repealed.[98] Compared to the projections under the current policy scenario, Medicaid spending will be 9% lower in 2016, 19% lower in 2020, and 24% lower in 2024.[99]
  • All federal spending related to Obamacare’s exchange subsidies will be repealed.[100]
  • Spending on all government functions except for interest payments on the national debt will incrementally decline from 18.9% of GDP in 2015 to 16% in 2025 before increasing to 16.4% in 2035.[101] (The average of the previous 40 years is 18.3%).[102]
  • Revenues will increase from 18.2% of GDP in 2015 to 18.4% in 2025, 19% in 2032 and stay constant thereafter.[103] (The average of the previous 40 years is 17.4%.[104])

* Combining historical data on the national debt with CBO’s projections for current policy, current law, and the Ryan plan yields the following results:

Debt Under Different Policies

[105] [106]


Public Opinion

* A poll conducted by NBC News and the Wall Street Journal in February 2011 found that:

  • 80% of Americans are concerned “a great deal” or “quite a bit” about federal budget deficits and the national debt.
  • if the deficit cannot be eliminated by cutting wasteful spending, 35% of Americans prefer to cut important programs while 33% prefer to raise taxes.
  • 22% think cuts in Social Security spending will be needed to “significantly reduce the federal budget deficit,” 49% do not, and 29% have no opinion or are not sure.
  • 18% think cuts in Medicare spending will be needed to “significantly reduce the federal budget deficit,” 54% do not, and 28% have no opinion or are not sure.[107]

* Other than interest on the national debt, most of the long-term growth in federal spending (as a percent of GDP) under the CBO’s current policy and current law scenarios stems from Social Security, Medicare, Medicaid, the Children’s Health Insurance Program, and Affordable Care Act (a.k.a. Obamacare) subsidies.[108]

* A poll conducted in November 2010 by the Associated Press and CNBC found that:

  • 85% of Americans are worried that the national debt “will harm future generations.”
  • 56% think “the shortfalls will spark a major economic crisis in the coming decade.”
  • when asked to choose between two options to balance the budget, 59% prefer to cut unspecified government services, while 30% prefer to raise unspecified taxes.[109]

* A poll conducted in July 2005 by the Associated Press and Ipsos found that:

  • 70% of Americans were worried about the size of the federal deficit.
  • 35% were willing to cut government spending.
  • 18% were willing to raise taxes.
  • 1% were willing to cut government spending and raise taxes.[110]

Congresses

* During the first session of the 113th Congress (January–December 2013), U.S. Representatives and Senators introduced 168 bills that would have reduced spending and 828 bills that would have raised spending.[111]

* The table below quantifies the costs and savings of these bills by political party. This data is provided by the National Taxpayers Union Foundation:

Costs/Savings of Bills Sponsored or Cosponsored

in 2013 by Typical Congressman (in Billions)

Increases Decreases Net Agenda
House Democrats $407 $10 $397
Senate Democrats $22 $3 $18
House Republicans $9 $91 -$83
Senate Republicans $6 $165 -$159

[112] [113]

* Click here to look up any member of Congress and see the annual costs or savings from the legislation he or she has sponsored or cosponsored.

* The table below quantifies the net agendas of the political parties in previous Congresses:

Costs/Savings of Bills Sponsored or Cosponsored in the First

Sessions of Congress by Typical Congressman (in Billions)

2011 2009 2007 2005 2003 2001 1999
House Democrats $497 $500 $547 $547 $402 $262 $34
Senate Democrats $24 $134 $59 $52 $174 $88 $15
House Republicans -$130 -$45 $7 $12 $31 $20 -$5
Senate Republicans -$239 $51 $7 $11 $26 $19 -$324
NOTE: Data not adjusted for inflation.

[114]


Presidents

* In February 2001, Republican President George W. Bush stated:

Many of you have talked about the need to pay down our national debt. I listened, and I agree. We owe it to our children and grandchildren to act now, and I hope you will join me to pay down $2 trillion in debt during the next 10 years. At the end of those 10 years, we will have paid down all the debt that is available to retire. That is more debt, repaid more quickly than has ever been repaid by any nation at any time in history.[115]

* From the time that Congress enacted Bush’s first major economic proposal (June 7, 2001[116]) until the time that he left office (January 20, 2009), the national debt rose from 53% of GDP to 74%, or an average of 2.7 percentage points per year.[117]

* During eight years in office, President Bush vetoed 12 bills, four of which were overridden by Congress and thus enacted without his approval.[118] These bills were projected by the Congressional Budget Office to increase the deficit by $26 billion during 2008–2022.[119]


* In February 2009, Democratic President Barack Obama stated:

I refuse to leave our children with a debt that they cannot repay—and that means taking responsibility right now, in this administration, for getting our spending under control.[120]

* From the time that Congress enacted Obama’s first major economic proposal (February 17, 2009[121]) until September 30, 2016, the national debt rose from 74% of GDP to 105%, or an average of 4.0 percentage points per year.[122]

* As of November 4, 2016, President Obama has vetoed twelve bills, one of which has been overridden by Congress and thus enacted without his approval.[123] This bill is projected by the Congressional Budget Office to “have no significant effect on the federal budget.”[124]

Government Accounting

Trust Funds and the Two Main Categories of Debt

* Some federal programs (such as Social Security) have “trust funds” that are legally separated from the rest of the federal government.[125]

* When these programs spend less than the federal government allocates to them, their surpluses are loaned to the federal government. This creates a legal obligation for the federal government to pay money and interest to these programs, thus adding to the national debt.[126] [127] [128] [129] [130]

* The federal government divides the national debt into two main categories:[131] [132]

  1. Money that it owes to federal entities such as the Social Security program.
  2. Money that it owes to non-federal entities such as individuals, corporations, local governments, and foreign governments.[133] Also, money owed to the Federal Reserve is classified under this category, even though the Federal Reserve is a federal entity.[134] [135]

NOTE: Just Facts has identified numerous instances in which politicians and journalists have used terms that technically refer to the overall national debt, when in fact, they are only referring to a portion of it. In order to clear up some of the confusion this has created, below are common terms for the national debt categorized by their proper meanings:

  • Overall national debt: gross debt, federal debt, public debt[136]
  • Portion of the national debt owed to federal entities: debt held by government accounts, government-held debt, intragovernmental holdings[137] [138] [139]
  • Portion of the national debt owed to non-federal entities: debt held by the public, publicly held debt[140][141]

* On September 30, 2016, the national debt consisted of:

  • $5.4 trillion owed to federal entities
  • $14.2 trillion owed to non-federal entities
  • $19.6 trillion owed in total[142]

* The federal law that governs the repayment of the national debt draws no distinction between the debt owed to federal and non-federal entities. Both must be repaid with interest.[143]

* The White House Office,[144] [145] Congressional Budget Office,[146] and other federal agencies[147] sometimes exclude the debt owed to federal entities in their reckonings of the national debt because this portion of the debt “represents internal transactions of the government and thus has no effect on credit markets.”

* Federal programs to which this money is owed, such as Social Security and Medicare, include this money and the interest it generates in their assets and financial projections.[148] [149] [150]

* In the 2000 presidential race, the Gore-Liebermann campaign released a 192-page economic plan that contains over 150 uses of the word “debt.” In none of these instances does the plan mention or account for any of the debt owed to federal entities.[151] The same plan includes the debt owed to federal entities in the assets of the Social Security and Medicare programs.[152]


“Deficits” and “Surpluses”

* During the federal government’s 2010 fiscal year (October 1, 2009 to September 30, 2010[153]), the national debt rose from $12.0 trillion to $13.6 trillion, thus increasing by $1.6 trillion.[154]

* The White House,[155] USA Today,[156] Reuters,[157] and other government and media entities reported that the 2010 federal “deficit” was $1.3 trillion.

* The difference between the national debt increase of $1.6 trillion and the reported deficit of $1.3 trillion is attributable to the following accounting practices:

  • When calculating the reported deficit, the federal government merges the finances of all federal programs into what is called the “unified budget.” Hence, the deficit does not account for the intergovernmental debt that arises when programs such as Social Security loan their surpluses to the federal government.[158]
  • When the federal government lays out money for programs such as TARP and student loans, the outgo is not fully counted in the deficit. The deficit reflects only what the government expects to lose or gain on these loans.[159] [160]

* PolitiFact, a Pulitzer Prize-winning project of the Tampa Bay Times to “help you find the truth in politics,”[161] has stated that there were “several years of budget surpluses” during Bill Clinton’s presidency. This same article cites the rise in “national debt” during the tenure of George W. Bush.[162]

* Using the same criterion PolitiFact applied to Bush’s presidency (change in gross national debt), the national debt rose every year of Clinton’s presidency:

Year National Debt on Inauguration Date†

(billions)

1993 $4,188
1994 $4,501
1995 $4,797
1996 $4,988
1997 $5,310
1998 $5,496
1999 $5,624
2000 $5,706
2001 $5,728
† NOTE: PolitiFact used the inauguration date for its debt baseline.

The national debt also rose every fiscal year of Clinton’s presidency.

[163] [164]

Ownership

* As of September 30, 2016, the national debt consists of:

Amount Owed To: Portion of Total
$14.2 trillion owed to non-federal entities (i.e., publicly held debt) 72%
$5.4 trillion owed to federal entities (i.e., intragovernmental debt) 28%

[165]


Debt Owed to Non-Federal Entities

* Ownership of publicly held debt as of September 30, 2016:

Debt Owed to Non-Federal Entities

* Data from the chart above:

Entities Amount (billions) Portion of Total
Foreign & International $6,148 45%
Federal Reserve[166] $2,462 18%
Other Investors $1,343 10%
Mutual Funds $1,315 10%
State & Local Governments $687 5%
Banks & Savings Institutions $547 4%
Private Pension Funds $540 4%
Insurance Companies $297 2%
U.S. Savings Bonds $172 1%
State and Local Government Pension Funds $164 1%

[167]


Debt Owed to Foreign Entities

* Per the White House Office of Management and Budget (2016):

During most of American history, the Federal debt was held almost entirely by individuals and institutions within the United States. In the late 1960s, foreign holdings were just over $10 billion, less than 5 percent of the total Federal debt held by the public. Foreign holdings began to grow significantly starting in the 1970s and now represent almost half of outstanding [publicly held] debt.[168]

* Ownership of U.S. government debt by foreign creditors as of August 31, 2016:

Debt Owed to Foreign Entities

* Data from the chart above:

Country Amount (billions) Portion of Total
China, Mainland $1,185 19%
Japan $1,144 18%
Ireland $266 4%
Cayman Islands $264 4%
Brazil $256 4%
Switzerland $238 4%
Luxembourg $220 4%
United Kingdom $205 3%
Hong Kong $192 3%
Taiwan $190 3%
Others $2,037 33%
Total $6,196 100%

[169]

* Foreign purchases of U.S. government debt increase the demand for this debt, thus putting downward pressure on U.S. interest rates. Conversely, foreign sales of U.S. government debt place upward pressure on U.S. interest rates.[170] [171]

* Per a 2008 Congressional Research Service report, a “potentially serious short-term problem would emerge if China decided to suddenly” sell its holding of U.S. government debt. Possible effects could include:

  • “a more general financial reaction (or panic), in which all foreigners responded by reducing their holdings of U.S. assets”;
  • “a sudden and large depreciation in the value of the dollar”;
  • “a sudden and large increase in U.S. interest rates”;
  • a stock market fall; and/or
  • “a recession.”[172]

* The same report states:

The likelihood that China would suddenly reduce its holdings of U.S. securities is questionable because it is unlikely that doing so would be in China’s economic interests. First, a large sell-off of China’s U.S. holdings could diminish the value of these securities in international markets…. Second, such a move would diminish U.S. demand for Chinese imports…. A sharp reduction of U.S. imports from China could have a significant impact on China’s economy….[173]

* During a visit to China in February 2009, Secretary of State Hillary Clinton said:

By continuing to support American Treasury instruments [i.e., buy U.S. government debt] the Chinese are recognizing our interconnection. … We have to incur more debt. It would not be in China’s interest if we were unable to get our economy moving again. … The U.S. needs the investment in Treasury bonds to shore up its economy to continue to buy Chinese products.[174]

* In August 2007 during a currency dispute between the U.S. and China, two leading officials of Chinese Communist Party bodies suggested that China use the threat of selling U.S. debt as a “bargaining chip.”[175]

* In February 2009 during a dispute over U.S. arms sales to Taiwan, a Chinese general made the following statements in the state-run magazine Outlook Weekly:

Our retaliation should not be restricted to merely military matters, and we should adopt a strategic package of counterpunches covering politics, military affairs, diplomacy and economics to treat both the symptoms and root cause of this disease. … [W]e could sanction them using economic means, such as dumping some U.S. government bonds.[176]

* One month later while appearing before China’s parliament, the head of China’s State Administration of Foreign Exchange said:

the U.S. Treasury market is important to us. … This is purely market-driven investment behavior. I would hope not to see this matter politicized.[177]

Debt Owed to Federal Entities

* Ownership of intergovernmental debt as of September 30, 2016:

Debt Owed to Federal Entities

* Data from the chart above:

Funds Amount (billions) Portion of Total
Social Security $2,843 53%
Civil Service Retirement and Disability $874 16%
Military Retirement $591 11%
Medicare $256 5%
Department of Defense Retiree Healthcare $213 4%
Postal Service Retiree Health Benefits $51 1%
Other $572 11%

[178]

Media

Budget Cuts

* In April 2011, journalists reported on a $38 billion federal budget cut agreement with the following headlines and phraseology:

  • “New Cuts Detailed in Agreement for $38 Billion in Reductions”; “deep budget cuts in programs for the poor, law enforcement, the environment and civic projects” – Los Angeles Times[179]
  • “Congress Sends Budget Cut Bill to Obama”; “cutting a record $38 billion from domestic spending” – Associated Press[180]
  • “Budget Deal to Cut $38 Billion Averts Shutdown”; “Republicans were able to force significant spending concessions from Democrats….” – New York Times[181]

* None of these articles reported that this figure of $38 billion in cuts was primarily relative to a portion of the budget called “discretionary non-emergency appropriations.”[182] Relative to the entire federal budget, this cut left a projected spending increase of $135 billion from 2010 to 2011. This equates to an inflation-adjusted increase of $49 billion or 0.1 percentage points of GDP:[183]

Federal Outlays

[184]

* None of the articles quoted above contains a budget-wide frame of reference for the cuts. A spending reduction of $38 billion equates to 1.0% of the estimated 2011 budget or 2.7% of the projected deficit:

Budget Cut

[185]


Bush Tax Cuts

* In February 2010, Fareed Zakaria of CNN stated:

Now, please understand that the Bush tax cuts are the single largest part of the black hole that is the federal budget deficit.[186]

* In 2010, the Bush tax cuts lowered federal revenues by about $283 billion.[187] [188] This was equivalent to 8% of the federal budget or 22% of the deficit.[189]

* Per the Congressional Budget Office (CBO), “Most parameters of the tax code are not indexed for real income growth, and some are not indexed for inflation.” Thus, if tax cuts are not periodically implemented, average federal tax rates “increase in the long run.”[190]

* In 2000, the year before the first Bush tax cuts were passed,[191] the federal government collected revenues equal to 20.4% of the nation’s gross domestic product (GDP), the highest level in the history of the United States.[192] Over the previous 30 years, federal revenues averaged 18.3% of GDP.[193]

* In 2000, the stock market “dot.com” bubble burst,[194] the NASDAQ lost 39% of its value,[195] and profits for nonfinancial corporations fell by 18%.[196] In the first quarter of 2001, the nation’s GDP contracted and a recession began.[197] [198]

* In June 2001 and May 2003, Congress passed and President Bush signed laws that implemented various tax cuts.[199] [200]

* After the Bush tax cuts were fully implemented, federal revenues were 17.8% of GDP in 2005, 18.5% in 2006, and 18.6% in 2007.[201] Average federal revenues for the 30 years preceding the Bush tax cuts were 18.4%.[202]

* The Great Recession began in December 2007,[203] and federal revenues declined to 17.7% of GDP in 2008.[204]

* In February 2009, Congress passed and President Obama signed a law that implemented various tax cuts.[205]

* Federal revenues declined to 15.7% of GDP in 2009 and 16.4% in 2010.[206]

* Federal spending rose from 21.0% of GDP in 2007 to 26.5% in 2010.[207] Average federal spending for the 30 years preceding the Great Recession was 21.8%.[208]


The “Do Nothing” Plan

* In April 2011, Ezra Klein of the Washington Post posted a graph of spending and revenue projections based upon CBO’s “current law” scenario and wrote that it:

shows what happens if we do … nothing. The answer, as you can see, is that the budget comes roughly into balance.[209]

* Klein’s graph and commentary omitted the interest and outcome of the national debt under this plan.[210] In the “do nothing” scenario, outlays were projected to exceed revenues every year through 2084, and the publicly held debt was projected to increase from 62% of GDP in 2010, to 74% in 2030, 90% in 2050, and 113% in 2084.[211]

* In the same commentary, Klein wrote that the “current law” scenario is “a pretty good plan” that contains:

a balanced mix of revenues, through returning tax rates to Clinton-era levels and implementing the taxes in the Affordable Care Act, and program cuts … in Medicare….[212]

* Under this scenario:

  • Certain elements of the tax code are not indexed for inflation or wage growth. Consequently, taxpayers are shifted over time into higher tax brackets.
  • According to the Congressional Budget Office, by 2020 revenues “reach higher levels relative to the size of the economy than ever recorded in the nation’s history.”
  • Revenues as a portion of GDP continue climbing through 2084, rising 69% higher than the average of the past 40 years and 47% higher than ever recorded in the history of the United States.[213] [214]
  • As a portion of GDP, federal spending without interest on the national debt rises by 2084 to 68% higher than the average of the past 40 years.[215]

Context

* Without mentioning the role of Congress in taxes, spending, or the national debt,[216] [217] PolitiFact (in the same article cited above) wrote that the national debt increased by $5.73 trillion “under” George W. Bush whereas there were budget surpluses “at the end of the Clinton administration.”[218]

* Below are the fluctuations in national debt organized by the tenures of recent presidents and congressional majorities:

Political Power

Dates

Average Annual Change in National Debt

(Percentage Points of GDP)

Bill Clinton with Democratic House and Senate 1/20/93 – 1/4/95 0.9
Bill Clinton with Republican House and Senate 1/4/95 – 1/19/01 -1.6
George W. Bush with Republican House and Senate 1/19/01 – 6/6/01, 11/12/02 – 1/4/07 0.8
George W. Bush with Republican House and Democratic Senate 6/6/01 – 11/12/02 2.3
George W. Bush with Democratic House and Senate 1/4/07 – 1/20/09 6.5
Barack Obama with Democratic House and Senate 1/20/09 – 1/4/11 9.3
Barack Obama with Republican House and Democratic Senate 1/5/11 – 1/6/15 1.9

[219]

* Other factors impacting the national debt include but are not limited to: legislation passed by previous congresses and presidents,[220] economic cycles, terrorist attacks, natural disasters, demographics, and the actions of U.S. citizens and foreign governments.[221]

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Three Years Behind The Curve Too Late Federal Open Market Committee (FOMC) Increases Target Federal Funds Rate to .75-1.0% — Financial Repression of Savers Slowly Continues — Videos

Posted on March 15, 2017. Filed under: American History, Articles, Banking, Blogroll, Books, Business, College, Communications, Congress, conservatives, Constitution, Corruption, Crisis, Documentary, Economics, Education, Employment, Faith, Family, Federal Government, Federal Government Budget, Fiscal Policy, Food, Foreign Policy, Freedom, government, government spending, history, History of Economic Thought, Language, liberty, Life, Links, Literacy, Macroeconomics, media, Monetary Policy, Money, Movies, Non-Fiction, People, Philosophy, Photos, Police, Politics, Radio, Rants, Raves, Raymond Thomas Pronk, Sociology, Speech, Strategy, Television, Trade Policiy, Tutorials, Video, Water, Wealth, Welfare, Wisdom, Work, Writing | Tags: , , , , , , , , , , , , , , , , , , , , , , , , |

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Yellen Calms Fears Fed’s Policy Trigger Finger Is Getting Itchy

March 15, 2017, 1:00 PM CDT March 15, 2017, 5:02 PM CDT
  • Policy makers still project three total rate hikes for 2017
  • FOMC sticks with ‘gradual’ plan for removing accommodation

Fed Raises Benchmark Lending Rate a Quarter Point

Federal Reserve Chair Janet Yellen sought to reassure investors that the central bank’s latest interest-rate increase wasn’t a paradigm shift to a trigger-happy policy driven by fears of faster inflation.

Speaking to reporters after the Fed’s quarter percentage-point move on Wednesday, Yellen said the central bank was willing to tolerate inflation temporarily overshootingits 2 percent goal and that it intended to keep its policy accommodative for “some time.”

“The simple message is the economy’s doing well. We have confidence in the robustness of the economy and its resilience to shocks,” she said.

As a result, the Fed is sticking with its policy of gradually raising interest rates, Yellen said. In their first forecasts in three months, Fed policy makers penciled in two more quarter-point rate increases this year and three in 2018, unchanged from their projections in December.

Today’s decision “does not represent a reassessment of the economic outlook or of the appropriate course for monetary policy,” the Fed chief said.

Speculation of a more aggressive Fed had mounted in recent days after a host of central bank officials, including Yellen herself, went out of their way to telegraph to financial markets that a rate hike was imminent. The expectations were further fueled by news of rising inflation.

Stocks Advance

Stocks rose and bond yields fell as investors viewed the statement from the Federal Open Market Committee and Yellen’s remarks afterward as a sign that the Fed isn’t in a hurry to remove monetary stimulus. The FOMC raised the target range for the federal funds rate to 0.75 percent to 1 percent, as expected, but Yellen’s lack of urgency to snuff out inflation was a surprise.

R.J. Gallo, a fixed-income investment manager at Federated Investors in Pittsburgh, said the chorus of Fed speakers before this meeting led investors to expect a move up in the number of projected rate hikes this year, and even upgrades by Fed officials in the levels of inflation and growth they anticipated.

None of that materialized.

“You didn’t get any of those things,” Gallo said, which explains why Treasury yields quickly dropped after the Fed released the FOMC statement and a new set of economic projections. “The expectation that Fed was getting more hawkish had to come out of the market.”

The U.S. economy has mostly met the central bank’s goals of full employment and stable prices, and may get further support if President Donald Trump delivers promised fiscal stimulus. Investor and business confidence has soared since Trump won the presidency in November, buoyed by his vows to cut taxes, lift infrastructure spending and ease regulations.

Still, the data don’t show an economy that’s heating up rapidly — a point Yellen herself made after the third rate hike since the 2007-2009 recession ended. In fact, the economy may have “more room to run,” she said.

Stronger business and consumer confidence hasn’t yet translated into increased investment and spending, said Yellen.

“It’s uncertain just how much sentiment actually impacts spending decisions, and I wouldn’t say at this point that I have seen hard evidence of any change in spending decisions,” said the Fed Chair. “Most of the business people that we’ve talked to also have a wait-and-see attitude.”

Retail sales in February grew at the slowest pace since August, a government report showed earlier Wednesday. The Atlanta Fed’s model for GDP predicts an expansion of 0.9 percent in the first quarter, less than a third the pace Trump is aiming for.

Fiscal Stimulus

Asked about the potential for a fiscal boost, Yellen made clear the Fed is still waiting for more concrete policy plans to emerge from the Trump administration before adapting monetary policy in reaction.

“There is great uncertainty about the timing, the size and the character of policy changes that may be put in place,” Yellen said. “I don’t think that’s a decision or set of decisions that we need to make until we know more about what policy changes will go into effect.”

Yellen disputed suggestions that the Fed was on a collision course with the Trump administration over its plans to foster faster economic growth through tax cuts and deregulation. “We would welcome stronger economic growth in the context of price stability,” she said.

She said she had met Trump briefly and had gotten together a couple of times with Treasury Secretary Steven Mnuchin to discuss the economy and financial regulation.

Further underscoring their lack of urgency, Fed officials repeated a commitment to maintain their balance-sheet reinvestment policy until rate increases were well under way. Yellen said officials had discussed the process of reducing the balance sheet gradually, but had made no decisions and would continue to debate the topic.

Policy makers forecast inflation will reach 1.9 percent in the fourth quarter this year, and 2 percent in both 2018 and 2019, according to quarterly median estimates released with the FOMC statement. The Fed’s preferred measure of inflation rose 1.9 percent in the 12 months through January, just shy of its target.

Yellen pointed out, though, that core inflation continues to run somewhat further below 2 percent. That rate, which strips out food and energy costs, stood at 1.7 percent in January. The Fed’s new forecast for the core rate at the end of this year edged up to 1.9 percent, from 1.8 percent in December.

“The committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal,” the Fed said. Discussing the word symmetric in the statement, Yellen said during her press conference that the Fed was not shooting to push inflation over 2 percent but recognized that it could temporarily go above it. Two percent is a target, she reiterated, not a ceiling.

https://www.bloomberg.com/news/articles/2017-03-15/fed-raises-benchmark-rate-as-inflation-approaches-2-target

Changes in the federal funds rate will always affect the U.S. dollar. When the Federal Reserve increases the federal funds rate, it normally reduces inflationary pressure and works to appreciate the dollar.

Since June 2006, however, the Fed has maintained a federal funds rate of close to 0%. In the wake of the 2008 financial crisis, the federal funds rate fluctuated between 0-0.25%, and is now 0.75%.

The Fed used this monetary policy to help achieve maximum employment and stable prices. Now that the 2008 financial crisis has largely subsided, the Fed will look to increase interest rates to continue to achieve employment and to stabilize prices.

Inflation of the U.S. Dollar

The best way to achieve full employment and stable prices is to set the inflation rate of the dollar at 2%. In 2011, the Fed officially adopted a 2% annual increase in the price index for personal consumption expenditures as its target. When the economy is weak, inflation naturally falls; when the economy is strong, rising wages increase inflation. Keeping inflation at a growth rate of 2% helps the economy grow at a healthy rate.

Adjustments to the federal funds rate can also affect inflation in the United States. The Fed controls the economy by increasing interest rates when the economy is growing too fast. This encourages people to save more and spend less, reducing inflationary pressure. Conversely, when the economy is in a recession or growing too slowly, the Fed reduces interest rates to stimulate spending, which increases inflation.

During the 2008 financial crisis, the low federal funds rate should have increased inflation. Over this period, the federal funds rate was set near 0%, which encouraged spending and would normally increase inflation.

However, inflation is still well below the 2% target, which is contrary to the normal effects of low interest rates. The Fed cites one-off factors, such as falling oil prices and the strengthening dollar, as the reasons why inflation has remained low in a low interest environment.

The Fed believes that these factors will eventually fade and that inflation will increase above the target 2%. To prevent this eventual increase in inflation, hiking the federal funds rate reduces inflationary pressure and cause inflation of the dollar to remain around 2%.

Appreciation of the U.S. Dollar

Increases in the federal funds rate also result in a strengthening of the U.S. dollar. Other ways that the dollar can appreciate include increases in average wages and increases in overall consumption. However, although jobs are being created, wage rates are stagnant.

Without an increase in wage rates to go along with a strengthening job market, consumption won’t increase enough to sustain economic growth. Additionally, consumption remains subdued due to the fact that the labor force participation rate was close to its 35-year low in 2015. The Fed has kept interest rates low because a lower federal funds rate supports business expansions, which leads to more jobs and higher consumption. This has all worked to keep appreciation of the U.S. dollar low.

However, the U.S. is ahead of the other developed markets in terms of its economic recovery. Although the Fed raises rates cautiously, the U.S. could see higher interest rates before the other developed economies.

Overall, under normal economic conditions, increases in the federal funds rate reduce inflation and increase the appreciation of the U.S. dollar.

http://www.investopedia.com/articles/investing/101215/how-fed-fund-rate-hikes-affect-us-dollar.asp

Financial repression

From Wikipedia, the free encyclopedia
Not to be confused with economic repression, a type of political repression.

Financial repression refers to “policies that result in savers earning returns below the rate of inflation” in order to allow banks to “provide cheap loans to companies and governments, reducing the burden of repayments”.[1] It can be particularly effective at liquidating government debt denominated in domestic currency.[2] It can also lead to a large expansions in debt “to levels evoking comparisons with the excesses that generated Japan’s lost decade and the Asian financial crisis” in 1997.[1]

The term was introduced in 1973 by Stanford economists Edward S. Shaw and Ronald I. McKinnon[3][4] in order to “disparage growth-inhibiting policies in emerging markets“.

Mechanism

Financial repression consists of the following:[5]

  1. Explicit or indirect capping of interest rates, such as on government debt and deposit rates (e.g., Regulation Q).
  2. Government ownership or control of domestic banks and financial institutions with barriers that limit other institutions from entering the market.
  3. High reserve requirements.
  4. Creation or maintenance of a captive domestic market for government debt, achieved by requiring banks to hold government debt via capital requirements, or by prohibiting or disincentivising alternatives.
  5. Government restrictions on the transfer of assets abroad through the imposition of capital controls.

These measures allow governments to issue debt at lower interest rates. A low nominal interest rate can reduce debt servicing costs, while negative real interest rates erodes the real value of government debt.[5] Thus, financial repression is most successful in liquidating debts when accompanied by inflation and can be considered a form of taxation,[6] or alternatively a form of debasement.[7]

The size of the financial repression tax for 24 emerging markets from 1974 to 1987. Their results showed that financial repression exceeded 2% of GDP for seven countries, and greater than 3% for five countries. For five countries (India, Mexico, Pakistan, Sri Lanka, and Zimbabwe) it represented approximately 20% of tax revenue. In the case of Mexico financial repression was 6% of GDP, or 40% of tax revenue.[8]

Financial repression is categorized as “macroprudential regulation“—i.e., government efforts to “ensure the health of an entire financial system.[2]

Examples

After World War II

Financial repression “played an important role in reducing debt-to-GDP ratios after World War II” by keeping real interest rates for government debt below 1% for two-thirds of the time between 1945 and 1980, the United States was able to “inflate away” the large debt (122% of GDP) left over from the Great Depression and World War II.[2] In the UK, government debt declined from 216% of GDP in 1945 to 138% ten years later in 1955.[9]

China

China‘s economic growth has been attributed to financial repression thanks to “low returns on savings and the cheap loans that it makes possible”. This has allowed China to rely on savings-financed investments for economic growth. However, because low returns also dampens consumer spending, household expenditures account for “a smaller share of GDP in China than in any other major economy”.[1] However, as of December 2014, the People’s Bank of China “started to undo decades of financial repression” and the government now allows Chinese savers to collect up to a 3.3% return on one-year deposits. At China’s 1.6% inflation rate, this is a “high real-interest rate compared to other major economies”.[1]

After the 2008 economic recession

In a 2011 NBER working paper, Carmen Reinhart and Maria Belen Sbrancia speculate on a possible return by governments to this form of debt reduction in order to deal with high debt levels following the 2008 economic crisis.[5]

“To get access to capital, Austria has restricted capital flows to foreign subsidiaries in central and eastern Europe. Select pension funds have also been transferred to governments in France, Portugal, Ireland and Hungary, enabling them to re-allocate toward sovereign bonds.”[10]

Criticism

Critics[who?] argue that if this view was true, investors (i.e., capital-seeking parties) would be inclined to demand capital in large quantities and would be buying capital goods from this capital. This high demand for capital goods would certainly lead to inflation and thus the central banks would be forced to raise interest rates again. As a boom pepped by low interest rates fails to appear these days in industrialized countries, this is a sign that the low interest rates seem to be necessary to ensure an equilibrium on the capital market, thus to balance capital-supply—i.e., savers—on one side and capital-demand—i.e., investors and the government—on the other. This view argues that interest rates would be even lower if it were not for the high government debt ratio (i.e., capital demand from the government).

Free-market economists argue that financial repression crowds out private-sector investment, thus undermining growth. On the other hand, “postwar politicians clearly decided this was a price worth paying to cut debt and avoid outright default or draconian spending cuts. And the longer the gridlock over fiscal reform rumbles on, the greater the chance that ‘repression’ comes to be seen as the least of all evils”.[11]

Also, financial repression has been called a “stealth tax” that “rewards debtors and punishes savers—especially retirees” because their investments will no longer generate the expected return, which is income for retirees.[10][12] “One of the main goals of financial repression is to keep nominal interest rates lower than they would be in more competitive markets. Other things equal, this reduces the government’s interest expenses for a given stock of debt and contributes to deficit reduction. However, when financial repression produces negative real interest rates (nominal rates below the inflation rate), it reduces or liquidates existing debts and becomes the equivalent of a tax—a transfer from creditors (savers) to borrowers, including the government.”[2]

See also

Reform:

General:

References

  1. ^ Jump up to:a b c d “China Savers Prioritized Over Banks by PBOC”. Bloomberg. November 25, 2014.
  2. ^ Jump up to:a b c d Carmen M. Reinhart, Jacob F. Kirkegaard, and M. Belen Sbrancia, “Financial Repression Redux”, IMF Finance and Development, June 2011, p. 22-26
  3. Jump up^ Shaw, Edward S. Financial Deepening in Economic Development. New York: Oxford University Press, 1973
  4. Jump up^ McKinnon, Ronald I. Money and Capital in Economic Development. Washington, D.C.: Brookings Institution, 1973
  5. ^ Jump up to:a b c Carmen M. Reinhart and M. Belen Sbrancia, “The Liquidation of Government Debt”, IMF, 2011, p. 19
  6. Jump up^ Reinhart, Carmen M. and Rogoff, Kenneth S., This Time is Different: Eight Centuries of Financial Folly. Princeton and Oxford: Princeton University Press, 2008, p. 143
  7. Jump up^ Bill Gross, “The Caine Mutiny Part 2”, PIMCO
  8. Jump up^ Giovannini, Alberto and de Melo, Martha, “Government Revenue from Financial Repression”, The American Economic Review, Vol. 83, No. 4 Sep. 1993 (pp. 953-963)
  9. Jump up^ “The great repression”. The Economist. 16 June 2011.
  10. ^ Jump up to:a b “Financial Repression 101”. Allianz Global Investors. Retrieved 2 December 2014.
  11. Jump up^ Gillian Tett, “Policymakers learn a new and alarming catchphrase”, Financial Times, May 9, 2011
  12. Jump up^ Amerman, Daniel (September 12, 2011). “The 2nd Edge of Modern Financial Repression: Manipulating Inflation Indexes to Steal from Retirees & Public Wor

https://en.wikipedia.org/wiki/Financial_repression

Federal funds rate

From Wikipedia, the free encyclopedia

10 year treasury compared to the Federal Funds Rate

Federal funds rate and capacity utilization in manufacturing.

In the United States, the federal funds rate is the interest rate at which depository institutions (banks and credit unions) lend reserve balances to other depository institutions overnight, on an uncollateralized basis. Reserve balances are amounts held at the Federal Reserve to maintain depository institutions’ reserve requirements. Institutions with surplus balances in their accounts lend those balances to institutions in need of larger balances. The federal funds rate is an important benchmark in financial markets.[1][2]

The interest rate that the borrowing bank pays to the lending bank to borrow the funds is negotiated between the two banks, and the weighted average of this rate across all such transactions is the federal funds effective rate.

The federal funds target rate is determined by a meeting of the members of the Federal Open Market Committee which normally occurs eight times a year about seven weeks apart. The committee may also hold additional meetings and implement target rate changes outside of its normal schedule.

The Federal Reserve uses open market operations to influence the supply of money in the U.S. economy[3] to make the federal funds effective rate follow the federal funds target rate.

Mechanism

Financial Institutions are obligated by law to maintain certain levels of reserves, either as reserves with the Fed or as vault cash. The level of these reserves is determined by the outstanding assets and liabilities of each depository institution, as well as by the Fed itself, but is typically 10%[4] of the total value of the bank’s demand accounts (depending on bank size). In the range of $9.3 million to $43.9 million, for transaction deposits (checking accounts, NOWs, and other deposits that can be used to make payments) the reserve requirement in 2007-2008 was 3 percent of the end-of-the-day daily average amount held over a two-week period. Transaction deposits over $43.9 million held at the same depository institution carried a 10 percent reserve requirement.

For example, assume a particular U.S. depository institution, in the normal course of business, issues a loan. This dispenses money and decreases the ratio of bank reserves to money loaned. If its reserve ratio drops below the legally required minimum, it must add to its reserves to remain compliant with Federal Reserve regulations. The bank can borrow the requisite funds from another bank that has a surplus in its account with the Fed. The interest rate that the borrowing bank pays to the lending bank to borrow the funds is negotiated between the two banks, and the weighted average of this rate across all such transactions is the federal funds effective rate.

The nominal rate is a target set by the governors of the Federal Reserve, which they enforce by open market operations and adjusting the interest paid on required and excess reserve balances. That nominal rate is almost always what is meant by the media referring to the Federal Reserve “changing interest rates.” The actual federal funds rate generally lies within a range of that target rate, as the Federal Reserve cannot set an exact value through open market operations.

Another way banks can borrow funds to keep up their required reserves is by taking a loan from the Federal Reserve itself at the discount window. These loans are subject to audit by the Fed, and the discount rate is usually higher than the federal funds rate. Confusion between these two kinds of loans often leads to confusion between the federal funds rate and the discount rate. Another difference is that while the Fed cannot set an exact federal funds rate, it does set the specific discount rate.

The federal funds rate target is decided by the governors at Federal Open Market Committee (FOMC) meetings. The FOMC members will either increase, decrease, or leave the rate unchanged depending on the meeting’s agenda and the economic conditions of the U.S. It is possible to infer the market expectations of the FOMC decisions at future meetings from the Chicago Board of Trade (CBOT) Fed Funds futures contracts, and these probabilities are widely reported in the financial media.

Applications

Interbank borrowing is essentially a way for banks to quickly raise money. For example, a bank may want to finance a major industrial effort but may not have the time to wait for deposits or interest (on loan payments) to come in. In such cases the bank will quickly raise this amount from other banks at an interest rate equal to or higher than the Federal funds rate.

Raising the federal funds rate will dissuade banks from taking out such inter-bank loans, which in turn will make cash that much harder to procure. Conversely, dropping the interest rates will encourage banks to borrow money and therefore invest more freely.[5] This interest rate is used as a regulatory tool to control how freely the U.S. economy operates.

By setting a higher discount rate the Federal Bank discourages banks from requisitioning funds from the Federal Bank, yet positions itself as a lender of last resort.

Comparison with LIBOR

Though the London Interbank Offered Rate (LIBOR) and the federal funds rate are concerned with the same action, i.e. interbank loans, they are distinct from one another, as follows:

  • The target federal funds rate is a target interest rate that is set by the FOMC for implementing U.S. monetary policies.
  • The (effective) federal funds rate is achieved through open market operations at the Domestic Trading Desk at the Federal Reserve Bank of New York which deals primarily in domestic securities (U.S. Treasury and federal agencies’ securities).[6]
  • LIBOR is based on a questionnaire where a selection of banks guess the rates at which they could borrow money from other banks.
  • LIBOR may or may not be used to derive business terms. It is not fixed beforehand and is not meant to have macroeconomic ramifications.[7]

Predictions by the market

Considering the wide impact a change in the federal funds rate can have on the value of the dollar and the amount of lending going to new economic activity, the Federal Reserve is closely watched by the market. The prices of Option contracts on fed funds futures (traded on the Chicago Board of Trade) can be used to infer the market’s expectations of future Fed policy changes. Based on CME Group 30-Day Fed Fund futures prices, which have long been used to express the market’s views on the likelihood of changes in U.S. monetary policy, the CME Group FedWatch tool allows market participants to view the probability of an upcoming Fed Rate hike. One set of such implied probabilities is published by the Cleveland Fed.

Historical rates

As of December 16, 2008, the most recent change the FOMC has made to the funds target rate is a 75 to 100 basis point cut from 1.0% to a range of zero to 0.25%. According to Jack A. Ablin, chief investment officer at Harris Private Bank, one reason for this unprecedented move of having a range, rather than a specific rate, was because a rate of 0% could have had problematic implications for money market funds, whose fees could then outpace yields.[8] This followed the 50 basis point cut on October 29, 2008, and the unusually large 75 basis point cut made during a special January 22, 2008 meeting, as well as a 50 basis point cut on January 30, 2008, a 75 basis point cut on March 18, 2008, and a 50 basis point cut on October 8, 2008.[9]

Federal funds rate history and recessions.png

Explanation of federal funds rate decisions

When the Federal Open Market Committee wishes to reduce interest rates they will increase the supply of money by buying government securities. When additional supply is added and everything else remains constant, price normally falls. The price here is the interest rate (cost of money) and specifically refers to the Federal Funds Rate. Conversely, when the Committee wishes to increase the Fed Funds Rate, they will instruct the Desk Manager to sell government securities, thereby taking the money they earn on the proceeds of those sales out of circulation and reducing the money supply. When supply is taken away and everything else remains constant, price (or in this case interest rates) will normally rise.[10]

The Federal Reserve has responded to a potential slow-down by lowering the target federal funds rate during recessions and other periods of lower growth. In fact, the Committee’s lowering has recently predated recessions,[9] in order to stimulate the economy and cushion the fall. Reducing the Fed Funds Rate makes money cheaper, allowing an influx of credit into the economy through all types of loans.

The charts linked below show the relation between S&P 500 and interest rates.

  • July 13, 1990 — Sept 4, 1992: 8.00%–3.00% (Includes 1990–1991 recession)[11][12]
  • Feb 1, 1995 — Nov 17, 1998: 6.00–4.75 [13][14][15]
  • May 16, 2000 — June 25, 2003: 6.50–1.00 (Includes 2001 recession)[16][17][18]
  • June 29, 2006 — (Oct. 29 2008): 5.25–1.00[19]
  • Dec 16, 2008 — 0.0–0.25[20]
  • Dec 16, 2015 — 0.25-0.50[21]
  • Dec 14, 2016 — 0.50-0.75[22]
  • Mar 15, 2017 — 0.75-1.00[23]

Bill Gross of PIMCO suggested that in the prior 15 years ending in 2007, in each instance where the fed funds rate was higher than the nominal GDP growth rate, assets such as stocks and/or housing fell.[24]

See also

References

  1. Jump up^ “Fedpoints: Federal Funds”. Federal Reserve Bank of New York. August 2007. Retrieved 2 October 2011.
  2. Jump up^ “The Implementation of Monetary Policy”. The Federal Reserve System: Purposes & Functions (PDF). Washington, D.C.: Federal Reserve Board. 24 August 2011. p. 4. Retrieved 2 October 2011.
  3. Jump up^ “Monetary Policy, Open Market Operations”. Federal Reserve Bank. 2008-01-30. Retrieved 2008-01-30.
  4. Jump up^ “Reserve Requirements”. Board of Governors of The Federal Reserve System. December 16, 2015.
  5. Jump up^ “Fed funds rate”. Bankrate, Inc. March 2016.
  6. Jump up^ Cheryl L. Edwards (November 1997). Gerard Sinzdak. “Open Market Operations in the 1990s” (PDF). Federal Reserve Bulletin (PDF).
  7. Jump up^ “BBA LIBOR – Frequently asked questions”. British Bankers’ Association. March 21, 2006. Archived from the original on 2007-02-16.
  8. Jump up^ “4:56 p.m. US-Closing Stocks”. Associated Press. December 16, 2008.[dead link]
  9. ^ Jump up to:a b “Historical Changes of the Target Federal Funds and Discount Rates, 1971 to present”. New York Federal Reserve Branch. February 19, 2010. Archived from the original on December 21, 2008.
  10. Jump up^ David Waring (2008-02-19). “An Explanation of How The Fed Moves Interest Rates”. InformedTrades.com. Archived from the original on 2015-05-05. Retrieved 2009-07-20.
  11. Jump up^ “$SPX 1990-06-12 1992-10-04 (rate drop chart)”. StockCharts.com.
  12. Jump up^ “$SPX 1992-08-04 1995-03-01 (rate rise chart)”. StockCharts.com.
  13. Jump up^ “$SPX 1995-01-01 1997-01-01 (rate drop chart)”. StockCharts.com.
  14. Jump up^ “$SPX 1996-12-01 1998-10-17 (rate drop chart)”. StockCharts.com.
  15. Jump up^ “$SPX 1998-09-17 2000-06-16 (rate rise chart)”. StockCharts.com.
  16. Jump up^ “$SPX 2000-04-16 2002-01-01 (rate drop chart)”. StockCharts.com.
  17. Jump up^ “$SPX 2002-01-01 2003-07-25 (rate drop chart)”. StockCharts.com.
  18. Jump up^ “$SPX 2003-06-25 2006-06-29 (rate rise chart)”. StockCharts.com.
  19. Jump up^ “$SPX 2006-06-29 2008-06-01 (rate drop chart)”. StockCharts.com.
  20. Jump up^ “Press Release”. Board of Governors of The Federal Reserve System. December 16, 2008.
  21. Jump up^ “Open Market Operations”. Board of Governors of The Federal Reserve System. December 16, 2015.
  22. Jump up^ “Decisions Regarding Monetary Policy Implementation”. Board of Governors of The Federal Reserve System.
  23. Jump up^ Cox, Jeff (2017-03-15). “Fed raises rates at March meeting”. CNBC. Retrieved 2017-03-15.
  24. Jump up^ Shaw, Richard (January 7, 2007). “The Bond Yield Curve as an Economic Crystal Ball”. Retrieved 3 April 2011.

External links

https://en.wikipedia.org/wiki/Federal_funds_rate

Monetary policy of the United States

From Wikipedia, the free encyclopedia
  (Redirected from U.S. monetary policy)
United States M2 money supply
% change in money supply
Money supply changes monthly basis

Monetary policy concerns the actions of a central bank or other regulatory authorities that determine the size and rate of growth of the money supply.

In the United States, the Federal Reserve is in charge of monetary policy, and implements it primarily by performing operations that influence short-term interest rates.

Money supply[edit]

Main article: Money supply

The money supply has different components, generally broken down into “narrow” and “broad” money, reflecting the different degrees of liquidity (‘spendability’) of each different type, as broader forms of money can be converted into narrow forms of money (or may be readily accepted as money by others, such as personal checks).[1]

For example, demand deposits are technically promises to pay on demand, while savings deposits are promises to pay subject to some withdrawal restrictions, and Certificates of Deposit are promises to pay only at certain specified dates; each can be converted into money, but “narrow” forms of money can be converted more readily. The Federal Reserve directly controls only the most narrow form of money, physical cash outstanding along with the reserves of banks throughout the country (known as M0 or the monetary base); the Federal Reserve indirectly influences the supply of other types of money.[1]

Broad money includes money held in deposit balances in banks and other forms created in the financial system. Basic economics also teaches that the money supply shrinks when loans are repaid;[2][3] however, the money supply will not necessarily decrease depending on the creation of new loans and other effects. Other than loans, investment activities of commercial banks and the Federal Reserve also increase and decrease the money supply.[4] Discussion of “money” often confuses the different measures and may lead to misguided commentary on monetary policy and misunderstandings of policy discussions.[5]

Structure of modern US institutions[edit]

Federal Reserve[edit]

Monetary policy in the US is determined and implemented by the US Federal Reserve System, commonly referred to as the Federal Reserve. Established in 1913 by the Federal Reserve Act to provide central banking functions,[6] the Federal Reserve System is a quasi-public institution. Ostensibly, the Federal Reserve Banks are 12 private banking corporations;[7][8][9] they are independent in their day-to-day operations, but legislatively accountable to Congress through the auspices of Federal Reserve Board of Governors.

The Board of Governors is an independent governmental agency consisting of seven officials and their support staff of over 1800 employees headquartered in Washington, D.C.[10] It is independent in the sense that the Board currently operates without official obligation to accept the requests or advice of any elected official with regard to actions on the money supply,[11]and its methods of funding also preserve independence. The Governors are nominated by the President of the United States, and nominations must be confirmed by the U.S. Senate.[12]

The presidents of the Federal Reserve Banks are nominated by each bank’s respective Board of Directors, but must also be approved by the Board of Governors of the Federal Reserve. The Chairman of the Federal Reserve Board is generally considered to have the most important position, followed by the president of the Federal Reserve Bank of New York.[12] The Federal Reserve System is primarily funded by interest collected on their portfolio of securities from the US Treasury, and the Fed has broad discretion in drafting its own budget,[13] but, historically, nearly all the interest the Federal Reserve collects is rebated to the government each year.[14]

The Federal Reserve has three main mechanisms for manipulating the money supply. It can buy or sell treasury securities. Selling securities has the effect of reducing the monetary base (because it accepts money in return for purchase of securities), taking that money out of circulation. Purchasing treasury securities increases the monetary base (because it pays out hard currency in exchange for accepting securities). Secondly, the discount rate can be changed. And finally, the Federal Reserve can adjust the reserve requirement, which can affect the money multiplier; the reserve requirement is adjusted only infrequently, and was last adjusted in 1992.[15]

In practice, the Federal Reserve uses open market operations to influence short-term interest rates, which is the primary tool of monetary policy. The federal funds rate, for which the Federal Open Market Committee announces a target on a regular basis, reflects one of the key rates for interbank lending. Open market operations change the supply of reserve balances, and the federal funds rate is sensitive to these operations.[16]

In theory, the Federal Reserve has unlimited capacity to influence this rate, and although the federal funds rate is set by banks borrowing and lending funds to each other, the federal funds rate generally stays within a limited range above and below the target (as participants are aware of the Fed’s power to influence this rate).

Assuming a closed economy, where foreign capital or trade does not affect the money supply, when money supply increases, interest rates go down. Businesses and consumers have a lower cost of capital and can increase spending and capital improvement projects. This encourages short-term growth. Conversely, when the money supply falls, interest rates go up, increasing the cost of capital and leading to more conservative spending and investment. The Federal reserve increases interest rates to combat Inflation.

U.S. Treasury[edit]

Private commercial banks[edit]

When money is deposited in a bank, it can then be lent out to another person. If the initial deposit was $100 and the bank lends out $100 to another customer the money supply has increased by $100. However, because the depositor can ask for the money back, banks have to maintain minimum reserves to service customer needs. If the reserve requirement is 10% then, in the earlier example, the bank can lend $90 and thus the money supply increases by only $90. The reserve requirement therefore acts as a limit on this multiplier effect. Because the reserve requirement only applies to the more narrow forms of money creation (corresponding to M1), but does not apply to certain types of deposits (such as time deposits), reserve requirements play a limited role in monetary policy.[17]

Money creation[edit]

Main article: Money creation

Currently, the US government maintains over US$800 billion in cash money (primarily Federal Reserve Notes) in circulation throughout the world,[18][19] up from a sum of less than $30 billion in 1959. Below is an outline of the process which is currently used to control the amount of money in the economy. The amount of money in circulation generally increases to accommodate money demanded by the growth of the country’s production. The process of money creation usually goes as follows:

  1. Banks go through their daily transactions. Of the total money deposited at banks, significant and predictable proportions often remain deposited, and may be referred to as “core deposits.” Banks use the bulk of “non-moving” money (their stable or “core” deposit base) by loaning it out.[20] Banks have a legal obligation to keep a certain fraction of bank deposit money on-hand at all times.[21]
  2. In order to raise additional money to cover excess spending, Congress increases the size of the National Debt by issuing securities typically in the form of a Treasury Bond[22] (see United States Treasury security). It offers the Treasury security for sale, and someone pays cash to the government in exchange. Banks are often the purchasers of these securities, and these securities currently play a crucial role in the process.
  3. The 12-person Federal Open Market Committee, which consists of the heads of the Federal Reserve System (the seven Federal governors and five bank presidents), meets eight times a year to determine how they would like to influence the economy.[23] They create a plan called the country’s “monetary policy” which sets targets for things such as interest rates.[24]
  4. Every business day, the Federal Reserve System engages in Open market operations.[25] If the Federal Reserve wants to increase the money supply, it will buy securities (such as U.S. Treasury Bonds) anonymously from banks in exchange for dollars. If the Federal Reserve wants to decrease the money supply, it will sell securities to the banks in exchange for dollars, taking those dollars out of circulation.[26][27] When the Federal Reserve makes a purchase, it credits the seller’s reserve account (with the Federal Reserve). The money that it deposits into the seller’s account is not transferred from any existing funds, therefore it is at this point that the Federal Reserve has created High-powered money.
  5. By means of open market operations, the Federal Reserve affects the free reserves of commercial banks in the country.[28] Anna Schwartz explains that “if the Federal Reserve increases reserves, a single bank can make loans up to the amount of its excess reserves, creating an equal amount of deposits”.[26][27][29]
  6. Since banks have more free reserves, they may loan out the money, because holding the money would amount to accepting the cost of foregone interest[28][30] When a loan is granted, a person is generally granted the money by adding to the balance on their bank account.[31]
  7. This is how the Federal Reserve’s high-powered money is multiplied into a larger amount of broad money, through bank loans; as written in a particular case study, “as banks increase or decrease loans, the nation’s (broad) money supply increases or decreases.”[3] Once granted these additional funds, the recipient has the option to withdraw physical currency (dollar bills and coins) from the bank, which will reduce the amount of money available for further on-lending (and money creation) in the banking system.[32]
  8. In many cases, account-holders will request cash withdrawals, so banks must keep a supply of cash handy. When they believe they need more cash than they have on hand, banks can make requests for cash with the Federal Reserve. In turn, the Federal Reserve examines these requests and places an order for printed money with the US Treasury Department.[33] The Treasury Department sends these requests to the Bureau of Engraving and Printing (to make dollar bills) and the Bureau of the Mint (to stamp the coins).
  9. The U.S. Treasury sells this newly printed money to the Federal Reserve for the cost of printing.[citation needed] This is about 6 cents per bill for any denomination.[34] Aside from printing costs, the Federal Reserve must pledge collateral (typically government securities such as Treasury bonds) to put new money, which does not replace old notes, into circulation.[35]This printed cash can then be distributed to banks, as needed.

Though the Federal Reserve authorizes and distributes the currency printed by the Treasury (the primary component of the narrow monetary base), the broad money supply is primarily created by commercial banks through the money multiplier mechanism.[29][31][36][37] One textbook summarizes the process as follows:

“The Fed” controls the money supply in the United States by controlling the amount of loans made by commercial banks. New loans are usually in the form of increased checking account balances, and since checkable deposits are part of the money supply, the money supply increases when new loans are made …[38]

This type of money is convertible into cash when depositors request cash withdrawals, which will require banks to limit or reduce their lending.[39][32] The vast majority of the broad money supply throughout the world represents current outstanding loans of banks to various debtors.[38][40][41] A very small amount of U.S. currency still exists as “United States Notes“, which have no meaningful economic difference from Federal Reserve notes in their usage, although they departed significantly in their method of issuance into circulation. The currency distributed by the Federal Reserve has been given the official designation of “Federal Reserve Notes.”[42]

Significant effects[edit]

Main article: Monetary policy

In 2005, the Federal Reserve held approximately 9% of the national debt[43] as assets against the liability of printed money. In previous periods, the Federal Reserve has used other debt instruments, such as debt securities issued by private corporations. During periods when the national debt of the United States has declined significantly (such as happened in fiscal years 1999 and 2000), monetary policy and financial markets experts have studied the practical implications of having “too little” government debt: both the Federal Reserve and financial markets use the price information, yield curve and the so-called risk free rate extensively.[44]

Experts are hopeful that other assets could take the place of National Debt as the base asset to back Federal Reserve notes, and Alan Greenspan, long the head of the Federal Reserve, has been quoted as saying, “I am confident that U.S. financial markets, which are the most innovative and efficient in the world, can readily adapt to a paydown of Treasury debt by creating private alternatives with many of the attributes that market participants value in Treasury securities.”[45] In principle, the government could still issue debt securities in significant quantities while having no net debt, and significant quantities of government debt securities are also held by other government agencies.

Although the U.S. government receives income overall from seigniorage, there are costs associated with maintaining the money supply.[41][46] Leading ecological economist and steady-state theorist Herman Daly, claims that “over 95% of our [broad] money supply [in the United States] is created by the private banking system (demand deposits) and bears interest as a condition of its existence,”[41] a conclusion drawn from the Federal Reserve’s ultimate dependence on increased activity in fractional reserve lending when it exercises open market operations.[47]Economist Eric Miller criticizes Daly’s logic because money is created in the banking system in response to demand for the money,[48] which justifies cost.[citation needed]

Thus, use of expansionary open market operations typically generates more debt in the private sector of society (in the form of additional bank deposits).[49] The private banking system charges interest to borrowers as a cost to borrow the money.[3][31][50] The interest costs are borne by those that have borrowed,[3][31] and without this borrowing, open market operations would be unsuccessful in maintaining the broad money supply,[30] though alternative implementations of monetary policy could be used. Depositors of funds in the banking system are paid interest on their savings (or provided other services, such as checking account privileges or physical security for their “cash”), as compensation for “lending” their funds to the bank.

Increases (or contractions) of the money supply corresponds to growth (or contraction) in interest-bearing debt in the country.[3][30][41] The concepts involved in monetary policy may be widely misunderstood in the general public, as evidenced by the volume of literature on topics such as “Federal Reserve conspiracy” and “Federal Reserve fraud.”[51]

Uncertainties

A few of the uncertainties involved in monetary policy decision making are described by the federal reserve:[52]

  • While these policy choices seem reasonably straightforward, monetary policy makers routinely face certain notable uncertainties. First, the actual position of the economy and growth in aggregate demand at any time are only partially known, as key information on spending, production, and prices becomes available only with a lag. Therefore, policy makers must rely on estimates of these economic variables when assessing the appropriate course of policy, aware that they could act on the basis of misleading information. Second, exactly how a given adjustment in the federal funds rate will affect growth in aggregate demand—in terms of both the overall magnitude and the timing of its impact—is never certain. Economic models can provide rules of thumb for how the economy will respond, but these rules of thumb are subject to statistical error. Third, the growth in aggregate supply, often called the growth in potential output, cannot be measured with certainty.
  • In practice, as previously noted, monetary policy makers do not have up-to-the-minute information on the state of the economy and prices. Useful information is limited not only by lags in the collection and availability of key data but also by later revisions, which can alter the picture considerably. Therefore, although monetary policy makers will eventually be able to offset the effects that adverse demand shocks have on the economy, it will be some time before the shock is fully recognized and—given the lag between a policy action and the effect of the action on aggregate demand—an even longer time before it is countered. Add to this the uncertainty about how the economy will respond to an easing or tightening of policy of a given magnitude, and it is not hard to see how the economy and prices can depart from a desired path for a period of time.
  • The statutory goals of maximum employment and stable prices are easier to achieve if the public understands those goals and believes that the Federal Reserve will take effective measures to achieve them.
  • Although the goals of monetary policy are clearly spelled out in law, the means to achieve those goals are not. Changes in the FOMC’s target federal funds rate take some time to affect the economy and prices, and it is often far from obvious whether a selected level of the federal funds rate will achieve those goals.

Opinions of the Federal Reserve

The Federal Reserve is lauded by some economists, while being the target of scathing criticism by other economists, legislators, and sometimes members of the general public. The former Chairman of the Federal Reserve Board, Ben Bernanke, is one of the leading academic critics of the Federal Reserve’s policies during the Great Depression.[53]

Achievements

One of the functions of a central bank is to facilitate the transfer of funds through the economy, and the Federal Reserve System is largely responsible for the efficiency in the banking sector. There have also been specific instances which put the Federal Reserve in the spotlight of public attention. For instance, after the stock market crash in 1987, the actions of the Fed are generally believed to have aided in recovery. Also, the Federal Reserve is credited for easing tensions in the business sector with the reassurances given following the 9/11 terrorist attacks on the United States.[54]

Criticisms

The Federal Reserve has been the target of various criticisms, involving: accountability, effectiveness, opacity, inadequate banking regulation, and potential market distortion. Federal Reserve policy has also been criticized for directly and indirectly benefiting large banks instead of consumers. For example, regarding the Federal Reserve’s response to the 2007–2010 financial crisis, Nobel laureate Joseph Stiglitz explained how the U.S. Federal Reserve was implementing another monetary policy —creating currency— as a method to combat the liquidity trap.[55]

By creating $600 billion and inserting this directly into banks the Federal Reserve intended to spur banks to finance more domestic loans and refinance mortgages. However, banks instead were spending the money in more profitable areas by investing internationally in emerging markets. Banks were also investing in foreign currencies which Stiglitz and others point out may lead to currency wars while China redirects its currency holdings away from the United States.[56]

Auditing

The Federal Reserve is subject to different requirements for transparency and audits than other government agencies, which its supporters claim is another element of the Fed’s independence. Although the Federal Reserve has been required by law to publish independently audited financial statements since 1999, the Federal Reserve is not audited in the same way as other government agencies. Some confusion can arise because there are many types of audits, including: investigative or fraud audits; and financial audits, which are audits of accounting statements; there are also compliance, operational, and information system audits.

The Federal Reserve’s annual financial statements are audited by an outside auditor. Similar to other government agencies, the Federal Reserve maintains an Office of the Inspector General, whose mandate includes conducting and supervising “independent and objective audits, investigations, inspections, evaluations, and other reviews of Board programs and operations.”[57] The Inspector General’s audits and reviews are available on the Federal Reserve’s website.[58][59]

The Government Accountability Office (GAO) has the power to conduct audits, subject to certain areas of operations that are excluded from GAO audits; other areas may be audited at specific Congressional request, and have included bank supervision, government securities activities, and payment system activities.[60][61] The GAO is specifically restricted any authority over monetary policy transactions;[60] the New York Times reported in 1989 that “such transactions are now shielded from outside audit, although the Fed influences interest rates through the purchase of hundreds of billions of dollars in Treasury securities.”[62] As mentioned above, it was in 1999 that the law governing the Federal Reserve was amended to formalize the already-existing annual practice of ordering independent audits of financial statements for the Federal Reserve Banks and the Board;[63] the GAO’s restrictions on auditing monetary policy continued, however.[61]

Congressional oversight on monetary policy operations, foreign transactions, and the FOMC operations is exercised through the requirement for reports and through semi-annual monetary policy hearings.[61] Scholars have conceded that the hearings did not prove an effective means of increasing oversight of the Federal Reserve, perhaps because “Congresspersons prefer to bash an autonomous and secretive Fed for economic misfortune rather than to share the responsibility for that misfortune with a fully accountable Central Bank,” although the Federal Reserve has also consistently lobbied to maintain its independence and freedom of operation.[64]

Fulfillment of wider economic goals

By law, the goals of the Fed’s monetary policy are: high employment, sustainable growth, and stable prices.[65]

Critics say that monetary policy in the United States has not achieved consistent success in meeting the goals that have been delegated to the Federal Reserve System by Congress. Congress began to review more options with regard to macroeconomic influence beginning in 1946 (after World War II), with the Federal Reserve receiving specific mandates in 1977 (after the country suffered a period of stagflation).

Throughout the period of the Federal Reserve following the mandates, the relative weight given to each of these goals has changed, depending on political developments.[citation needed] In particular, the theories of Keynesianism and monetarism have had great influence on both the theory and implementation of monetary policy, and the “prevailing wisdom” or consensus view of the economic and financial communities has changed over the years.[66]

  • Elastic currency (magnitude of the money multiplier): the success of monetary policy is dependent on the ability to strongly influence the supply of money available to the citizens. If a currency is highly “elastic” (that is, has a higher money multiplier, corresponding to a tendency of the financial system to create more broad money for a given quantity of base money), plans to expand the money supply and accommodate growth are easier to implement. Low elasticity was one of many factors that contributed to the depth of the Great Depression: as banks cut lending, the money multiplier fell, and at the same time the Federal Reserve constricted the monetary base. The depression of the late 1920s is generally regarded as being the worst in the country’s history, and the Federal Reserve has been criticized for monetary policy which worsened the depression.[67] Partly to alleviate problems related to the depression, the United States transitioned from a gold standard and now uses a fiat currency; elasticity is believed to have been increased greatly.[68]

The value of $1 over time, in 1776 dollars.[70]

  • Stable prices – While some economists would regard any consistent inflation as a sign of unstable prices,[71] policymakers could be satisfied with 1 or 2%;[72] the consensus of “price stability” constituting long-run inflation of 1-2% is, however, a relatively recent development, and a change that has occurred at other central banks throughout the world. Inflation has averaged a 4.22% increase annually following the mandates applied in 1977; historic inflation since the establishment of the Federal Reserve in 1913 has averaged 3.4%.[73] In contrast, some research indicates that average inflation for the 250 years before the system was near zero percent, though there were likely sharper upward and downward spikes in that timeframe as compared with more recent times.[74] Central banks in some other countries, notably the German Bundesbank, had considerably better records of achieving price stability drawing on experience from the two episodes of hyperinflation and economic collapse under the country’s previous central bank.

Inflation worldwide has fallen significantly since former Federal Reserve Chairman Paul Volcker began his tenure in 1979, a period which has been called the Great Moderation; some commentators attribute this to improved monetary policy worldwide, particularly in the Organisation for Economic Co-operation and Development.[75][76]BusinessWeek notes that inflation has been relatively low since mid-1980s[77] and it was during this time that Volcker wrote (in 1995), “It is a sobering fact that the prominence of central banks [such as the Federal Reserve] in this century has coincided with a general tendency towards more inflation, not less. By and large, if the overriding objective is price stability, we did better with the nineteenth-century gold standard and passive central banks, with currency boards, or even with ‘free banking.'”.

  • Sustainable growth – The growth of the economy may not be sustainable as the ability for households to save money has been on an overall decline[78] and household debt is consistently rising.[79]

Cause of The Great Depression

Money supply decreased significantly between Black Tuesday and the Bank Holiday in March 1933 when there were massive bank runs

Monetarists who believe that the Great Depression started as an ordinary recession but significant policy mistakes by monetary authorities (especially the Federal Reserve) caused a shrinking of the money supply which greatly exacerbated the economic situation, causing a recession to descend into the Great Depression.

Public confusion

The Federal Reserve has established a library of information on their websites, however, many experts have spoken about the general level of public confusion that still exists on the subject of the economy; this lack of understanding of macroeconomic questions and monetary policy, however, exists in other countries as well. Critics of the Fed widely regard the system as being “opaque“, and one of the Fed’s most vehement opponents of his time, Congressman Louis T. McFadden, even went so far as to say that “Every effort has been made by the Federal Reserve Board to conceal its powers….”[80]

There are, on the other hand, many economists who support the need for an independent central banking authority, and some have established websites that aim to clear up confusion about the economy and the Federal Reserve’s operations. The Federal Reserve website itself publishes various information and instructional materials for a variety of audiences.

Criticism of government interference

Some economists, especially those belonging to the heterodox Austrian School, criticize the idea of even establishing monetary policy, believing that it distorts investment. Friedrich Hayek won the Nobel Prize for his elaboration of the Austrian business cycle theory.

Briefly, the theory holds that an artificial injection of credit, from a source such as a central bank like the Federal Reserve, sends false signals to entrepreneurs to engage in long-term investments due to a favorably low interest rate. However, the surge of investments undertaken represents an artificial boom, or bubble, because the low interest rate was achieved by an artificial expansion of the money supply and not by savings. Hence, the pool of real savings and resources have not increased and do not justify the investments undertaken.

These investments, which are more appropriately called “malinvestments”, are realized to be unsustainable when the artificial credit spigot is shut off and interest rates rise. The malinvestments and unsustainable projects are liquidated, which is the recession. The theory demonstrates that the problem is the artificial boom which causes the malinvestments in the first place, made possible by an artificial injection of credit not from savings.

According to Austrian economics, without government intervention, interest rates will always be an equilibrium between the time-preferences of borrowers and savers, and this equilibrium is simply distorted by government intervention. This distortion, in their view, is the cause of the business cycle. Some Austrian economists—but by no means all—also support full reserve banking, a hypothetical financial/banking system where banks may not lend deposits. Others may advocate free banking, whereby the government abstains from any interference in what individuals may choose to use as money or the extent to which banks create money through the deposit and lending cycle.

Reserve requirement

The Federal Reserve regulates banking, and one regulation under its direct control is the reserve requirement which dictates how much money banks must keep in reserves, as compared to its demand deposits. Banks use their observation that the majority of deposits are not requested by the account holders at the same time.

Currently, the Federal Reserve requires that banks keep 10% of their deposits on hand.[81] Some countries have no nationally mandated reserve requirements—banks use their own resources to determine what to hold in reserve, however their lending is typically constrained by other regulations.[82] Other factors being equal, lower reserve percentages increases the possibility of Bank runs, such as the widespread runs of 1931. Low reserve requirements also allow for larger expansions of the money supply by actions of commercial banks—currently the private banking system has created much of the broad money supply of US dollars through lending activity. Monetary policy reform calling for 100% reserves has been advocated by economists such as: Irving Fisher,[83] Frank Knight,[84] many ecological economists along with economists of the Chicago School and Austrian School. Despite calls for reform, the nearly universal practice of fractional-reserve banking has remained in the United States.

Criticism of private sector involvement

Historically and to the present day, various social and political movements (such as social credit) have criticized the involvement of the private sector in “creating money”, claiming that only the government should have the power to “make money”. Some proponents also support full reserve banking or other non-orthodox approaches to monetary policy. Various terminology may be used, including “debt money”, which may have emotive or political connotations. These are generally considered to be akin to conspiracy theories by mainstream economists and ignored in academic literature on monetary policy.

See also

https://en.wikipedia.org/wiki/Monetary_policy_of_the_United_States

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Non-accelarating Inflation Rate of Unemployment (NAIRU) — Phillips Curve — Money and Inflation — No Real Tradeoff Between Price Increases and Unemployment Rate In The Long Run — States and Nations Cutting Taxes Resulted In Higher Growth and Lower Unemployment — Videos

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