THE G.O.P. TAX CUT IS DRAINING THE TREASURY EVEN FASTER THAN EXPECTED

 

McConnell photographed in the chamber of the U.S. House of Representatives before the SOTU on January 30th.
By Alex Wong/Getty Images.

 

On February 1, 2018, Bess Levin writes on Vanity Fair:

One of the many things confirmed by the great tax-bill melodrama of 2017 is that Republicans only pretend to care about “fiscal responsibility” when Democrats are in power and tax cuts aren’t on the line. With the opportunity to slash the corporate rate nearly in half, cries of “I won’t endorse a bill that adds one penny to the deficit!” evaporated, and tacking on $1.5 trillion became no big deal. Tax cuts, we will soon be reminded, don’t grow on trees, and the social safety net must be pared back in exchange. For now, though, Republicans are still in the trickle-down honeymoon phase, seeing in every corporate press release more confirmation that America has been made great again. Which makes it somewhat ironic that the Treasury is now burning through its cash reserves at an even more spectacular rate.

According to the nonpartisan Congressional Budget Office, the federal government will run out of money even sooner than expected, thanks to the new tax legislation, which is estimated to lead to a fall in revenue of $136 billion in 2018. A default on debts had originally been forecasted for late March or early April. But now, because of the new withholding tables, “withheld receipts are expected to be less than the amounts paid in the comparable period last year.” That, combined with the fact that the Treasury generally issues a high number of tax refunds in February and March, means that the $272 billion in cash the Department had on hand as of Tuesday will quickly dwindle. If the debt ceiling isn’t increased by the first half of March, the C.B.O. cautioned on Wednesday, “the government would be unable to pay its obligations fully,” and would be forced to delay payments, default on its debts, or both.

Treasury markets are already skittish at the prospect, according to Bloomberg, and the matter may prove contentious in Congress, which is already grappling with an immigration stalemate and another government shutdown vote on February 8. A proposal to raise the debt ceiling may repel G.O.P. deficit hawks, who in the past have pushed for spending cutsbefore allowing a vote. And Democrats may be equally hesitant to support the measure, particularly if there’s been zero progress on the immigration front. (Donald Trump’sState of the Union address, in which he claimed that the the visa lottery and family sponsorships are “deadly loopholes” that allow “criminals and terrorists to enter our country” did not help matters—“He is just setting another bad standard which we have to reject,” House Minority Leader Nancy Pelosi told reporters Wednesday.)

To be fair, the C.B.O. report doesn’t factor in the stratospheric growth Team Trump promised would be spurred by the tax plan, allowing it—per Treasury Secretary Steve Mnuchin—to not only “pay for itself, but . . . pay down debt.” But experts have cast some doubt on that outcome. “That’s wishful thinking,” wrote Bruce Bartlett, a former domestic-policy adviser to Ronald Reagan. “So is most Republican rhetoric around tax cutting.”

https://www.vanityfair.com/news/2018/02/the-gop-tax-cut-is-draining-the-treasury

Gary Reber Comments:

The national debt is debt not associated with productive growth. The current system perpetuates budget deficits and unsustainable government debt, underutilized workers, a lack of financing for financing advanced energy and green technologies, and outsourcing of U.S. industrial jobs to low-wage countries, trade deficits, shrinking consumption incomes among the poor and middle class, and conventional methods for financing productive growth that increase the ownership and power gaps between the top 1 percent and the 90 percent whose combined ownership accumulations are already less than the elite whose money power is widely known as the source of political corruption and the breakdown of political democracy.

If we are to really have “stratospheric growth” to produce inclusive prosperity and pay down the national debt , the Federal Reserve needs to stop monetizing unproductive debt, including, as in the past, bailouts of banks “too big to fail,” Wall Street derivatives speculators, and war, and begin creating an asset-backed currency that could enable every child, woman and man to establish a Capital Homestead Account or “CHA” (a super-IRA or asset tax-shelter for citizens) at their local bank to purposely acquire a growing dividend-bearing stock portfolio to supplement their incomes from work and all other sources of income.

The CHA would process annually an equal allocation of productive credit to every citizen exclusively for purchasing full-voting,  full-dividend payout shares in companies needing funds for growing the economy and private sector jobs for local, national and global markets.

The shares would be purchased using interest-free credit wholly backed by projected “future savings” in the form of new productive capital assets as well as the future marketable goods, products and services produced by the added technology, renewable energy systems, manufacturing factories, rentable space for entrepreneurial endeavor and infrastructure, both repair and new, added to the economy.

Risk of default on each stock acquisition loan would be covered by private sector capital credit risk insurance and reinsurance, but would not require citizens to reduce their funds for consumption to purchase shares.

We need to lift ownership-concentrating Federal Reserve System credit barriers and other institutional barriers that have historically separated owners from non-owners and link tax and monetary reforms to the goal of expanded capital ownership. Removing barriers that inhibit or prevent ordinary people from purchasing capital that pays for itself out of its own future earnings is paramount as an actionable policy. This can be done under the existing legal powers of each of the 12 Federal Reserve regional banks, and will not add to the already unsustainable debt of the Federal Government or raise taxes on ordinary taxpayers.

We need to free the system of dependency on Wall Street and the accumulated savings and money power of the rich and super-rich who control Wall Street. The Federal Reserve System has stifled the growth of America’s productive capacity through its monetary policy by monetizing public-sector growth and mounting federal deficits and “Wall Street” bailouts; by favoring speculation over investment; by shortchanging the capital credit needs of entrepreneurs, inventors, farmers, and workers; by increasing the dependency with usurious consumer credit; and by perpetuating unjust capital credit and ownership barriers between rich Americans and those without savings.

The Federal Reserve Bank should be used to provide interest-free capital credit (including only transaction and risk premiums) and monetize each capital formation transaction, determined by the same expertise that determines it today — management and banks — that each transaction is viably feasible so that there is virtually no risk in the Federal Reserve. The first layer of risk would be taken by the commercial credit insurers, backed by a new government corporation, the Capital Diffusion Reinsurance Corporation, through which the loans could be guaranteed. This entity would fulfill the government’s responsibility for the health and prosperity of the American economy.

Making EVERY citizen productive is the ONLY way that the real economy will grow along with incomes from both wages and dividends to repay the national debt and set our nation on a course of inclusive prosperity, inclusive opportunity and inclusive economic justice.

See my article “Economic Democracy And Binary Economics: Solutions For A Troubled Nation and Economy” at http://www.foreconomicjustice.org/?p=11

See my article “What Is Needed To Resolve The Destruction Of American Jobs Problem?” published by The Huffington Post at http://www.huffingtonpost.com/entry/593adb89e4b0b65670e569e9.

Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice.

Support the Capital Homestead Act (aka Economic Democracy Act) at http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/.

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