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Trickle-Down Economics

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  • News reports on Trump's budget highlight human cost of his broken promises

    Budget proposal will include deep cuts to Medicaid and Social Security, programs Trump promised to protect during campaign

    Blog ››› ››› ALEX MORASH

    Multiple news outlets have reported on the harsh human toll of President Donald Trump’s budget proposal, which is expected to gut programs that guarantee basic living standards, including parts of Medicaid and Social Security. These cuts directly contradict Trump’s promise to save the programs “without cuts.”

    The White House first hinted at slashing programs that help working- and middle-class Americans on February 26 when, according to Bloomberg, Trump floated proposals to increase defense spending by 10 percent while cutting programs including assistance for low-income Americans while still promising not to touch Medicare, Medicaid, and Social Security. The White House claimed these drastic cuts would help spur economic growth, an absurd claim that was resoundingly ridiculed by economists as “deep voodoo” and “wholly unrealistic.” The administration’s initial budgetary proposals were so drastic and poorly thought out that they stunned many observers and experts. The White House even advocated cutting assistance to the Corporation for Public Broadcasting, which would be particularly harmful to “small-town America,” and Meals on Wheels, which “doesn’t make economic sense” and would cruelly deny millions of elderly Americans basic companionship and a hot meal.

    On May 21, The Washington Post reported that the White House will unveil a formal federal budget proposal that goes even further than the administration’s earlier indications by proposing “massive cuts to Medicaid” and other anti-poverty public assistance programs. On May 22, Axios reported that the president plans to cut $1.7 trillion over 10 years from federal assistance programs including the Supplemental Nutrition Assistance Program (SNAP), the Children’s Health Insurance Program (CHIP), and Social Security Disability Insurance (SSDI), which collectively serve tens of millions of people. (Axios incorrectly stated that Trump’s budget plan “won’t reform Social Security or Medicare,” before outlining Trump’s plan to cut SSDI and incorporate massive Medicaid restrictions that would become law if his Obamacare repeal plan is ever enacted.)

    As details of Trump’s budget plan continued to leak, some media outlets explained the devastating consequences for millions of Americans if the White House gets its way and these drastic cuts take effect. They also explained that Trump’s embrace of deep cuts to components of Medicaid and Social Security represent a betrayal of his promises from the campaign.

    CNN chief business correspondent Christine Romans explained on the May 22 edition of CNN Newsroom that much of the money being cut from mandatory spending would come from Medicaid, which could see up to a 25 percent reduction in federal funding, pushing the financial burden onto the states and kicking 14 million people off their health insurance programs. Romans mentioned that protecting Medicaid is one of many campaign promises from Trump “that are turning out not to be true.”

    On the May 22 edition of MSNBC Live, host Chris Jansing went even further in breaking down the human toll of Trump’s budget cuts with NBC News senior editor Beth Fouhy and New York Times national reporter Yamiche Alcindor. The show aired part of an interview with a mother of two young children, who told Fouhy that if these cuts are enacted, the costs of care for her child with cerebral palsy will bankrupt her. Then they showed a clip of Trump on the campaign trail proclaiming that he would “save Medicare, Medicaid, and Social Security without cuts.” Alcindor discussed a report she wrote for the Times earlier this month about the human costs of budget cuts that would lead eliminate programs that help provide small communities with access to clean drinking water, drug rehabilitation centers, and jobs programs:

  • An Overwhelming Majority Of Economists Are Predicting Failure For Trump’s Tax Cut Agenda

    Will Journalists Continue To Take Trump’s Empty Economic Promises Seriously?

    Blog ››› ››› ALEX MORASH

    According to a new survey from the University of Chicago, vanishingly few economists agree with the claim of President Donald Trump’s administration that blowing up the deficit with tax cuts for the rich will pay for itself by generating new economic growth. Professional economists have warned of Trump’s economic agenda for over a year; when will news outlets stop taking his boasts seriously?

    On April 26, the Trump administration unveiled a plan to slash taxes for high-income earners, and Treasury Secretary Steven Mnuchin implausibly claimed the tax proposal “will pay for itself” by stoking latent economic growth. Last week, a new survey by the University of Chicago’s Booth School of Business showed that almost no professional economists agree with Mnuchin’s prediction that the plan will “pay for itself.” A May 4 article in The Washington Post described the findings as proof that “economists aren't buying” the Republican Party’s trickle-down economic agenda while a May 5 article from Vox noted that the results were “a rare display of unanimity” among economists. In statements given to both outlets, Massachusetts Institute of Technology (MIT) economist David Autor described Trump’s tax cut plan as “a fiscal disaster.” The survey results showed only two of 37 economists who answered the question agree with the statement that Trump’s tax proposal “would likely pay for itself.” Both these economists later clarified that they misread the question and had meant to register their disapproval. Stanford economist Kenneth Judd later told the Post, “I screwed up on that one … I meant to say that this is a horrible idea, a bad idea -- no chance in hell.” From the University of Chicago:

    This timely rebuke by economists of Trump’s economic smoke and mirrors seemed to have been lost on CNN, which spent much of May 5 promoting the inexplicable claim that unnamed "economists" think Trump's rhetoric alone had so far been enough to stoke economic growth. CNN host Jake Tapper falsely claimed “many economists credit” Trump’s promise of tax cuts, deregulation, and profligate spending for job creation since he took office. CNN chief business correspondent Christine Romans bizarrely claimed throughout the day that Trump’s “rhetoric” about the economy was responsible for a minuscule uptick in manufacturing sector employment, which rebounded substantially under former President Barack Obama.

    The survey results showing that economists don’t trust Trump’s tax cutting agenda add to a growing body of evidence demonstrating that cutting taxes for the rich is a bad way to boost the economy. Nobel Prize-winning economist and New York Times columnist Paul Krugman called Trump’s trickle-down economic plan a return to the “voodoo economics” of the Bush and Reagan administrations and pointed to numerous examples of previous Republican administrations cutting taxes and not spurring growth. Independent research from the Congressional Research Service and Brookings Institution has been unable to find a causal relationship between tax cuts and economic growth, and many experts who hammered Trump’s fiscal policy proposals have pointed out that his restrictive approach to trade and immigration is likely to dampen economic activity, not enhance it.

    Trump has been pilloried for having only a few credentialed economists on his economic policy team and 370 economists, including eight Nobel laureates, signed a letter denouncing his repeated lies and “conspiracy theories” about the state of the American economy. It is no wonder that Trump could not manage to garner the support of a single former member of the White House Council of Economic Advisers during his presidential campaign. What remains to be seen is why any media outlet, such as CNN last week, would take his positions seriously or accept his policy proposals at face value.

  • CNN’s Stephen Moore Accidentally Confirms Trump Was Lying About Commitment To Protect Medicaid

    Moore: Medicaid Cuts Were “Central To Our Plan All Along,” Contrary To Trump’s Public Statements

    Blog ››› ››› CRAIG HARRINGTON

    Discredited right-wing economic pundit and former Trump campaign economic adviser Stephen Moore accidentally let slip that gutting the Medicaid program “was central” to President Donald Trump’s plan to repeal Obamacare, despite the president’s repeated assertions that he would not touch the program. The statement corroborates admissions Moore made at a private event last July, when he claimed that Trump would fund massive tax cuts and reckless spending by dismantling programs that provide basic living standards for millions of Americans.

    During the May 8 edition of CNN Newsroom, Moore -- CNN’s “senior economics analyst” -- was joined by University of Chicago economist Austan Goolsbee to discuss the merits of billionaire businessman and philanthropist Warren Buffett’s argument that the Trump health care agenda amounts to little more than a tax cut for the rich funded by cuts to health care subsidies for low-income Americans. Goolsbee pointed out that Trump’s health care legislation “cuts taxes for high-income people by hundreds of billions of dollars” at the expense of Medicare and Medicaid, which Trump promised “he would never cut.” Moore interjected falsely: “He never said that we weren’t going to reform Medicaid,” arguing, “That was central to our plan all along”:

    Moore’s claim was debunked on air by co-hosts John Berman and Poppy Harlow, as well as Goolsbee, who cited Trump’s tweets and public statements as proof that he had broken his promise to protect Medicaid. Reporters who tuned in for the performance also noted Moore’s false statement. Moore accepted Berman’s correction before quickly pivoting to talking points extolling the virtues of converting Medicaid to block grants, which would also amount to a massive benefit cut for recipients.

    Moore’s secondary claim that gutting Medicaid was “central to our plan all along” drew little notice from the fact-checkers, but it sheds light on Trump’s real agenda. According to a September 7 article from HuffPost political reporter Christina Wilkie, Moore had outlined Trump’s often contradictory economic plans during a “question-and-answer session” at a private July 14 meeting of the conservative Council for National Policy (CNP) in Cleveland, OH. During the event, Moore suggested that Trump planned to pay for his costly economic agenda by removing supposedly onerous public protections imposed by the federal government and enacting “draconian public assistance reforms and cuts in social services.” Since taking office, Trump has proposed a budget and health care agenda that would fulfill those promises. As the article noted, Moore’s zeal for tearing down anti-poverty programs, including Medicaid, seems to undermine Trump’s claim that he would focus on “looking out for the downtrodden.” It also confirms that imposing this harsh agenda -- and lying about it -- was indeed “central to” the Trump team’s economic plan “all along.”

  • Fox’s Legendary Hypocrisy Is On Full Display With Today’s Underwhelming GDP Report

    Meager Growth Under Obama Meant We Were “Sliding Toward Recession”; For Trump, Fox Predicts A “Bounce Back”

    Blog ››› ››› CRAIG HARRINGTON

    The latest report from the Commerce Department found American economic growth in the first quarter of 2017 fell just short of most economists’ expectations. A virtually identical report one year ago was met with a chorus of outrage and hyperbole from the professional antagonists at Fox News, but their doomsaying has mellowed completely with President Donald Trump occupying the Oval Office.

    On April 28, the Bureau of Economic Analysis (BEA) released a report detailing the rate of change in real gross domestic product (GDP) during the first quarter of the year. The report showed GDP had increased just 0.7 percent during the time frame, which was both below expectations and the “weakest growth in three years.” According to The New York Times, the indicator “upset expectations for a Trump bump at the start of 2017,” while The Washington Post added that underwhelming economic performance “highlights the challenge this administration … will face trying to meet its target rate of 3 percent economic growth.” During a segment on CNN’s New Day, chief business correspondent Christine Romans noted that “the main culprit” holding back economic growth is “some nervousness among consumers,” whose spending accounts for more than half of the economy:

    At Fox News, however, the GDP report was met with muted reactions and renewed criticism of the supposedly weak economy Trump inherited from President Obama. Fox Business host Stuart Varney admitted at the outset of the April 28 edition of Varney & Co., that the report was “very, very weak” before predicting “the Left [will blame] President Trump” for sluggish first-quarter growth while guest John Lonski surmised that the economy would “bounce back” in the second quarter of the year. Later in the program, after a guest complained about the economy settling into a cycle of slow growth, Fox Business anchor Ashley Webster pleaded, “It’s just the first three months, give it time,” before predicting higher rates of growth over the next three months stemming from deregulation. Fox Business contributor Elizabeth MacDonald added that “this is an overhang … of the Obama years” while complaining that “this is what the president has inherited.” From Varney & Co.:

    The measured response from Fox’s cast of characters is a far cry from how they responded to a virtually identical GDP report published by the BEA on April 28, 2016. Varney falsely characterized first-quarter GDP growth of last year -- which at 0.5 percent also missed expectations before being upwardly revised -- as proof that the economy was “sliding toward recession” and ignored other indicators showing the economy was improving. One day later, Varney continued lambasting Obama during an appearance on Fox & Friends in which he pushed the unsubstantiated claim that the post-recession recovery was a historic failure.

    This is not the first time a Fox personality has backtracked on mischaracterizations of the economy in order to hype or defend the Trump administration. The network has completely reversed its tone toward the monthly jobs reports since Trump took office, giving him credit for jobs he didn’t create, fawning over job creation that had become routine under Obama, and heaping praise on economic indicators identical to those they had once excoriated.

  • MSNBC's Ali Velshi Outlines The "Built-In Unfairness" Of Trump's Tax Plan

    Blog ››› ››› MEDIA MATTERS STAFF

    MSNBC outlined the major problems in President Donald Trump's proposed tax cut plan, which drastically reduces the corporate tax rate from 35 percent to 15 percent while lowering personal tax rates for high-income individuals at expense of almost all tax deductions that benefit the middle class.

    On the April 27 edition of MSNBC's MSNBC Live, host Katy Tur discussed Trump's tax outline with correspondent Ali Velshi and conservative economist Peter Morici, outlining how the plan could greatly reduce the president's personal and business tax burden while saving the Trump family billions of dollars in future estate taxes. Velshi argued the proposed reductions in corporate tax rates and creation of a new income loophole for some contractors and business owners created "built-in unfairness" in the tax system. Morici added that Trump's plan would not assist the middle class and complained that the administration had only produced a one-page memo "with a lot of white space" despite having five months to craft substantial tax reform proposals:

    During the next hour of MSNBC Live, Velshi introduced another segment on the proposed tax cuts by noting that Trump is making "a frantic last push for what has eluded him in his first 100 days: a major legislative accomplishment." Joined by MSNBC contributor Charlie Sykes and Democratic strategist Steve McMahon, Velshi noted that "we don't actually know" what Trump's tax agenda is to which Sykes responded, "this is not a bill, it's basically a press release ... there is no meat to the substance." Sykes added that, while he leans toward conservative tax policy, he does not think "there is any rational way" to claim Trump's plan helps the middle class or can avoid "blow[ing] an enormous hole in the federal deficit." After Velshi detailed a laundry list of middle-class tax credits that "could go away" under the plan, McMahon highlighted that Trump's plan "is going to be an absolutely huge windfall for very wealthy people":

  • Broadcast Evening News Programs Pilloried Trump’s Tax Cut Outline

    ››› ››› CRAIG HARRINGTON

    Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn finally unveiled President Donald Trump’s plan for a major overhaul of individual and corporate income taxes in the United States during an April 26 press briefing. The plan, which seemed to many observers like a less detailed version of the budget-busting agenda Trump campaigned on, was assailed by reporters and economic analysts on the major broadcast evening news programs for its sparse details and profligate giveaways to the wealthy, including a likely tax break for the president himself.

  • The Worst Economist In The World Says Trump's Tax Cuts Will Do The Impossible

    Why Does CNN Even Give Stephen Moore A Platform?

    Blog ››› ››› ALEX MORASH

    In response to reports that President Donald Trump would unveil a plan to reduce the corporate income tax rate from 35 to 15 percent, discredited economic pundit Stephen Moore rushed to praise the budget busting corporate giveaway while misleadingly claiming that the tax cuts will help pay for themselves by boosting economic activity.

    On April 24, The Wall Street Journal reported that Trump would release a tax plan on Wednesday focused on cutting the maximum statutory corporate tax rate from 35 to 15 percent -- a 20 percent cut the White House is demanding regardless of the implications it would have for the federal budget deficit. The Journal also reported that Treasury Secretary Steve Mnuchin made the unfounded claim that the tax cut will “pay for itself with economic growth.”

    Economist Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities and who served as economic adviser to former Vice President Joe Biden, called the assertion that Trump’s tax cut would pay for itself “empirically phony” and argued that there is no correlation between cutting taxes and boosting economic growth. Nobel Prize-winning economist and New York Times columnist Paul Krugman derisively referred to Trump’s trickle-down economic agenda as “voodoo economics” and laid out examples of tax cuts failing to generate growth under previous administrations. Krugman also noted that former presidents Bill Clinton and Barack Obama both raised taxes in order to generate sustainable new tax revenues without undermining the growing economy. He concluded by saying that the extreme cuts Trump would propose is the same “voodoo” Republicans have promoted for decades “with extra bad math.”

    On April 25, the conservative-leaning Tax Foundation posted an analysis of the Trump administration’s claims that the tax cut would pay for itself, concluding that the economy could not grow enough to offset the losses in revenue. According to the Tax Foundation’s charitable analysis, cutting corporate tax rates to just 15 percent would stoke economic growth by less than half as much as would be needed to make up for lost revenue and result in long-term deficit increase of at least hundreds of billions of dollars. Those conclusions follow an earlier analysis of Trump’s corporate tax proposal by the nonpartisan Tax Policy Center, which on October 18 found that Trump’s corporate tax agenda alone would reduce federal revenue by $207.6 billion in 2018 and by roughly $2.4 trillion over ten years.

    The idea that tax cuts pay for themselves has been thoroughly debunked by years of research. Yet Moore heaped praise on Trump’s plan while parroting unfounded claims that it would grow the economy and benefit all Americans. On the April 25 edition of CNN’s New Day, Moore pushed Trump’s tax plan claiming it would create a “feedback effect” leading to growth. Moore also published an op-ed in The Wall Street Journal that day promoting the plan while claiming Trump’s tax agenda would help the American economy reach the arbitrary and unrealistic 3 percent annual growth target so-cherished by conservative pundits. On the April 26 edition of New Day, Moore continued his push for the tax cuts only to be debunked by economist and former Obama economic adviser Jason Furman, who reminded Moore that “this plan would actually hurt our economic growth” by adding trillions of dollars to the federal debt reducing long-term economic growth:

    Ever since CNN hired Moore, he has harmed the network’s credibility by spewing lies about the economy while peddling whatever policies are being pushed by the Trump administration. He routinely peddles partisan economic misinformation while being debunked by more reliable experts and his only purpose at the network seems to be recycling right-wing media talking points.

  • Journalists, Experts Agree Trump's Tax Reform Agenda Will Be Even Harder Than Repealing Obamacare

    ››› ››› ALEX MORASH & CRAIG HARRINGTON

    After President Donald Trump and Speaker of the House Paul Ryan (R-WI) failed to garner enough support to pass legislation that would repeal and replace the Affordable Care Act (ACA), Trump declared he had moved on to refocus his legislative priorities on tax reform. In light of Trump’s inability to get the Republican-led Congress to vote with him on health care changes, which had been a major campaign promise of virtually every elected GOP official, journalists and experts are beginning to question if Trump is capable of wrangling his caucus to tackle substantive conservative tax reform proposals that have been stagnant for decades.

  • The Economy Created 2.1 Million Jobs In 2016, But The News Talked About Only 700 Of Them

    Trump’s Misleading Carrier Deal Was A Dominant Narrative During 2016 Coverage Of The Job Market

    Blog ››› ››› ALEX MORASH

    Media Matters research for the fourth quarter of the year found that broadcast evening news fixated on then President-elect Donald Trump’s misleading announcement that he was responsible for saving hundreds of jobs at an American manufacturer while largely ignoring the roughly 2.1 million jobs gained by the U.S. economy in 2016.

    Television news fawned over Trump’s late-November participation in negotiations between state authorities and Indiana-based appliance manufacturer Carrier in which the company decided to move only half of its jobs to Mexico in exchange for tax subsidies. The same outlets continued to fall head over heels for Trump when he misleadingly declared on December 6 that he had brokered a deal with Japanese technology giant SoftBank to create “50,000 new jobs” in the United States. Some journalists were quick to point out that the media may be getting “bamboozled by these announcements,” and the Carrier deal was blasted as nothing more than “crony capitalism” -- a concept that even Sarah Palin understood. ​

    New research from Media Matters revealed that overall coverage of the economy during the fourth quarter of the year spiked after Election Day, in large part driven not by consistently positive economic indicators or discussions of the future of health care reform, but by Trump’s self-serving boasts about his alleged role as a job creator. Of the 275 qualifying economic news segments aired by cable and broadcast programs from October through December, 56 featured a significant discussion of Trump’s supposed deal making with Carrier and Softbank. The media obsession with Trump’s Carrier and Softbank announcements accounted for an absurd 47 percent of evening news segments on the economy for the final 32 days of 2016.

    Television news obsessed over Trump’s claims of saving 700 jobs at one plant and practically ignored the roughly 2.1 million jobs that had been created in 2016 as part the longest stretch of job growth on record. Media Matters identified 119 segments on the economy -- some discussing more than one issue -- from November 30 through December 31; of those, 56 discussed deals supposedly brokered by Trump to save or create jobs via Carrier and Softbank. Broadcast and cable evening news coverage of these deals eclipsed all other economic reporting during this time frame: 41 segments discussed tax policy, 30 segments discussed all other news surrounding economic growth or job creation, 26 segments focused on health care policy, 18 segments explored minimum wage policies, and 16 segments discussed economic inequality.

    Media all but ignored the big picture by staying so focused on Trump’s pronouncements, falling prey to what ThinkProgress editor-in-chief Judd Legum described as Trump’s “formula for manipulating the public.” News outlets have repeatedly learned the hard way not to trust Trump’s proclamations and “nonsense” supply-side economic proposals. Yet television news still gives Trump an exhaustive amount of attention -- the same type of attention that research found played a role in Trump’s political rise. Now, it could influence public perception of his presidency.

  • CNN's New "Senior Economics Analyst" Embarrassed His Network By Spewing Lies About The Economy

    Blog ››› ››› CRAIG HARRINGTON

    Discredited economic pundit and former Trump campaign adviser Stephen Moore -- who currently serves as the “chief economist” at the ultra-conservative Heritage Foundation -- bombarded CNN viewers with debunked right-wing media talking points about the American economy last night. Moore’s prominent role as CNN’s new “senior economics analyst” hinders the network’s credibility, undermining its ability to cover the economy in an honest and accountable way.

    During a February 28 panel discussion analyzing President Donald Trump’s speech before a joint session of Congress, Moore sparred with fellow panelists in an attempt to defend Trump’s reckless budgetary, economic, and fiscal policies. Across a spectrum of issues relating to economic growth, job creation, taxes, and regulations, Moore pushed tired and disproven myths pulled directly from right-wing media.

    When pressed on how Trump could increase spending while cutting taxes for corporations and high income earners without ballooning the deficit, Moore regurgitated the absurd fallacy that tax cuts would pay for themselves by stoking economic growth to at least 3.5 percent annually. Economist Marc Goldwein of the Center for a Responsible Federal Budget dismissed the 3.5 percent growth target as “pie in the sky” and “pretty much impossible” during the presidential campaign. There is a mountain of evidence from the nonpartisan Congressional Research Service, the Brookings Institution, and elsewhere demonstrating that tax cuts don’t generate new revenue through economic growth. Furthermore, economists across the political spectrum view Trump’s proposed restrictions on immigration and international trade as a detriment to economic growth regardless of tax policy shifts.

    Moore’s assertion that the economy can achieve 3.5 percent annual growth isn’t just wrong on the arithmetic, it’s also arbitrary. Former presidential candidates Jeb Bush and Sen. Ted Cruz (R-TX) were chided by economists and experts for floating similar targets, and the fixation on getting economic growth above 3 percent was a core of Fox News’ misinformation campaign against the Obama administration. (Last October, Moore told Fox Business viewers that stronger-than-expected economic growth in the prior quarter was “still pretty lousy” simply because it was measured at 2.9 percent instead of 3.)

    After falsely claiming that Trump could stoke economic growth by following a tax cut strategy supposedly modeled after former Presidents John F. Kennedy and Ronald Reagan, Moore pushed the misleading notion that regulatory burdens are holding the economy back. This claim, popularized by the right-wing editorial board of The Wall Street Journal (a former employer of Moore’s), is also not backed up by the facts.

    After being rebuffed on regulations, Moore tried another right-wing media myth: that it has been “15 years since the average American worker has had a pay raise.” Fox News has spent years blaming President Barack Obama for supposedly stagnant median incomes in the United States, always neglecting to mention that the stagnation began under President George W. Bush and was driven into free fall by the recession Obama inherited. Median incomes are lower than they were 15 years ago thanks to two Bush-era recessions but had gradually improved during Obama’s final years in office -- a fact absent from right-wing coverage of the subject.

    Moore concluded his embarrassing performance by recycling false right-wing media talking points blaming environmental protections for declining employment in the coal industry. The fallacy that protecting the environment is killing jobs in the energy sector is so unsubstantiated that even conservative Forbes columnist Tim Worstall has rebuffed it. A recent study from the Brookings Institution concluded that the overwhelming reason for declining employment in the mining and manufacturing industries is automation, a trend that “has been eating coal jobs over a long period of time -- [since] years before concerns about climate change” stiffened environmental protections. Right-wing pundits, including Moore, love to exaggerate the threat of automation while opposing the minimum wage. They rarely mention that machines, not burdensome regulations, are driving well-paid blue collar mining jobs into extinction.

    Steve Moore’s short tenure at CNN thus far has been a disaster for the network, which decided to hire arguably the world’s worst economist away from Fox News on January 30. Moore’s unflinching partisan agenda colors all of his commentary and can be easily dismantled by any analyst with a basic competency in economics.

    Watch the full segment from the February 28 edition of CNN Tonight here:

  • Economists And Experts Hammer Trump's Plan To Increase Military Spending At Expense Of Nearly Everything Else

    Blog ››› ››› ALEX MORASH & CRAIG HARRINGTON

    President Donald Trump’s plan to beef up the defense budget by an additional $54 billion at the expense of civilian domestic spending, which he will unveil tonight before a joint session of Congress, has been derided by economists and experts for being "wholly unrealistic" and “voodoo” economics.

    Bloomberg reported on February 26, that Trump’s first budget proposal would call for a $54 billion -- more than 9 percent -- increase in defense spending to be paid for with reductions to discretionary domestic spending, which Sen. Chuck Schumer (D-NY) described as the budgetary equivalent of taking “a meat ax to programs that benefit the middle-class.” White House press secretary Sean Spicer confirmed reports of the president’s budget priorities in a February 27 press briefing, adding that Trump would discuss his budget plan in more detail during his February 28 address to Congress.

    Economists and experts have hammered Trump for months for proposing dramatic and seemingly unnecessary increases in defense spending. An October 19 article in New York magazine described Trump’s promises of new defense expenditures as “a random grab bag of military goodies, untethered to any coherent argument” because he lacked any vision or purpose for increasing funding to the military. According to figures compiled by the Peter G. Peterson Foundation, American defense spending already eclipses the military spending of the next seven countries combined:

    The reception for Trump’s new budget outline has been similarly harsh. New York Times columnist and Nobel Prize-winning economist Paul Krugman derided the president’s claim that a “revved up economy” could fund new tax cuts and spending increases as “deep voodoo” -- alluding to Trump’s embrace of trickle-down economics. Washington Post contributor and Center on Budget and Policy Priorities (CBPP) senior fellow Jared Bernstein slammed Trump’s “wholly unrealistic” budget outline in a February 28 column and chided the president for claiming that he can simultaneously increase military spending, cut taxes on high-income earners and corporations, and reduce the federal deficit -- all while leaving vital entitlement programs alone. In order to even approach a balanced budget in 10 years, Trump would have to remove almost everything else in the budget:

    According to a February 27 analysis from the CBPP, Trump's proposal, when coupled with his plan to boost infrastructure investments, would mean nondefense spending would see a whopping 15 percent reduction. The reason for the outsized hit to nondefense discretionary spending is that the programs covered by that part of the federal budget -- education, energy, affordable housing, infrastructure investments, law enforcement, foreign aid, some veterans' benefits, etc. -- only account for a small part of all federal spending. The largest part of the federal budget is mandatory spending for entitlement programs including Social Security, Medicare, Medicaid, other veterans's benefits, and unemployment insurance. From the Congressional Budget Office:

    Trump’s proposed cuts to the State Department are so onerous that more than 120 retired generals signed an open letter to congressional leaders warning of their ramifications. One co-signer told CBS News that such steep cuts would be “consigning us to a generational war,” and the letter itself quoted Secretary of Defense James Mattis, who argued during his time at the head of U.S. Central Command that “if you don’t fully fund the State Department, then I need to buy more ammunition.”

    ThinkProgress blasted Trump’s proposals to cut the State Department along with domestic spending in the name of increasing national defense because such cuts would actually undermine national security. The article cited recent congressional testimony from Center for American Progress senior fellow Larry Korb, who testified that “our national security will suffer” if the federal budget prioritized the Pentagon at the expense of other agencies.

    Trump is notorious for pushing bogus claims about the economy and the federal budget. He has been derided by hundreds of economists for pushing right-wing myths about the economy and the federal debt, and routine criticisms of his unfounded claims were a mainstay of the presidential campaign in 2016. As was the case last year, the budgetary, fiscal, and tax policies Trump has supported since taking office simply don’t add up.

  • Wall Street Journal Columnist Praises Trump’s $100 Billion Gift To Wall Street

    The Journal’s Greg Ip Calls Trump’s Watering Down Of Consumer Protections “Regulatory Relief”

    Blog ››› ››› ALEX MORASH

    The Wall Street Journal’s top financial columnist praised President Donald Trump for issuing executive orders aimed to scale back consumer protections in the financial industry because the rollbacks would boost profits for big banks, ignoring the reality that the rules were put in place to protect the public, not the banking industry.

    The Journal’s chief economics commentator, Greg Ip, hailed recent actions by Trump to curb government oversight of big banks in a February 8 column, claiming this would provide “regulatory relief” by addressing “a serious flaw” in banking regulations that focused merely on “financial stability and consumer protection” and “largely ignored the [regulatory] costs.” Ip noted that consumer advocate Sen. Elizabeth Warren (D-MA) and European Central Bank president Mario Draghi took issue with letting banks have more leeway, but he dismissed their concerns, stating, “The worriers should relax.” From The Wall Street Journal:

    The worriers should relax. In the 10 years since the financial crisis began, the regulatory pendulum has moved relentlessly in the direction of tougher restrictions on finance. Mr. Trump’s order reverses the direction of the pendulum but there is little sign his administration wants it back to where it was in 2007.

    His order does, however, address a serious flaw in the post-crisis regulatory crackdown: In pursuit of financial stability and consumer protection, it largely ignored the costs of forgone lending, economic growth and consumer choice. Mr. Trump has signaled those costs must now be taken into account. He has asked his Treasury Secretary (now awaiting confirmation) to report back in 120 days on how well current regulations promote growth, efficiency and competitiveness. Over time, that could generate a better balanced supply of credit to a wider range of companies and households without making the financial system much riskier.

    Ip continued that the consumer protections built into the Dodd-Frank Act, the CARD Act, and the Department of Labor’s fiduciary rule, which requires financial advisers to work in their clients’ best interests, “have carved into banks’ profitability” since their pre-recession peak. Ip concluded that the rules enacted after the 2008 financial crisis do little to prevent another financial crisis, except for rules that increased the amount of hard money a bank must hold in reserve relative to its debt risks. But Ip claimed the Trump administration “doesn’t appear to plan on rolling [capital requirements] back much.”

    The executive orders that Ip praised directed departments to account for the regulatory costs of consumer protections when deciding which rules to roll back, which the Journal’s own reporting has concluded could create a $100 billion windfall for investors by loosening capital requirements at banks. These capital requirements are the same ones that Ip argued stand “the best chance of preventing another financial crisis.”

    Ip argued that “a serious flaw” in the current slate of consumer protections is that they focus on protecting consumers and “in theory” could “reduce growth,” but in reality the three biggest banks reported strong fourth quarter earnings last year and CNBC reported that banks enjoyed record profits in the second quarter of 2016. These reports coincide with a February 2016 report from the Government Accountability Office (GAO), which found that the regulatory structure created after Dodd-Frank “has contributed to the overall growth and stability in the U.S. economy.”

    Ip’s emphasis on bank profits fails to recognize that Dodd-Frank, the CARD Act, and the fiduciary rule are designed to minimize exploitation, not maximize profit. Dodd-Frank was enacted to protect the economy by empowering the Federal Reserve System with broader banking oversight and created new protections for consumers through the Consumer Financial Protection Bureau (CFPB). The CARD Act created even more protections for consumers, including limiting interest rate hikes on credit cards. The fiduciary rule ensures consumers receive financial advice catered to their best interests rather than their adviser’s bottom line, something that Ross Eisenbrey of the Economic Policy Institute (EPI) characterized as a“no-brainer” given that the investment advice industry “makes billions of dollars from conflicted advice.”

    If Ip really wants the Trump administration to focus on increasing bank profits, heaping praise on executive orders that will weaken the economy and undermine an already profitable financial industry is a bizarre place to start. Jeff Spross of The Week put it bluntly in a February 6 column blasting Trump’s regulatory rollback: “Who on Earth would view deregulating the financial industry as a good idea?” Writing for The Guardian, Nils Pratley didn’t mince words either, characterizing the concept that banks are over-regulated as a “half-baked idea” and “nonsense” while adding that there is little evidence of consumer protections standing in the way of the industry’s growth.

    Ip’s decision to defend Trump’s attempts to deregulate the financial sector may lend credence to reports that the Journal is intentionally taking a softer tone with the president and pressuring reporters “to reflect pro-Trump viewpoints” in articles. The Journal’s behavior is not surprising, as its right-wing editorial board has led a years-long campaign against consumer protections.