New Jersey Wants Federal Dollars

But it’s not a bailout, Governor Phil Murphy (D) insists.

“I wouldn’t call it a bailout. I would just say this is a war, we’re at the front lines,” Murphy said, stressing that his state does not want federal help at this time for “legacy” budget issues that predate the pandemic.
“We know what we got to do with the old legacy stuff, we need help with the here and now: educators, police, fire, EMS, the front-line stuff.”

Bernie Budget

Progressive-Democratic Party Presidential candidate and Senator Bernie Sanders (I, VT) has released the outline of his budget, which he claims would pay for all of his Free Stuff spending.  Here are a couple of the high points of his budget.

  • tax the investing process
    • 5% tax on stock trades
    • 1% fee on bond trades
    • 005% fee on derivative trades
  • wealth tax on the “top 0.1%”

These, without inhibiting investments, including those of the mutual funds in our 401(k)s, 403(b)s, etc, are supposed to raise more than $6 trillion over ten years, and—poof—there go all college expenses and housing costs. Never mind that this would drive up the cost of investing by a factor of five—but no, there’d be no effect on investing.

Contradictions

Japan raised its sales tax—consumption tax/value added tax—and promptly saw a 6.3% year-on-year drop in GDP in the last quarter of 2019. Consumer spending (did I mention that the tax was a consumption tax?) fell by 11.5% that quarter.

Color me—and hosts of others much smarter than me—unsrurprised.

Now come the contradictions, from the just US Congress-revived IMF, yet.

The International Monetary Fund thinks the consumption-tax rate will have to rise to 15% over the next decade, and to 20% by 2050. But first the fund’s wizards say Tokyo must expand its Keynesian spending to make the economy “strong” enough to bear the tax hikes to pay for the spending.

Protections through Cuts

That’s how President Donald Trump’s budget proposal represents support for his campaign commitment to protect programs like Medicare and Medicaid.

[The proposal] targets $2 trillion in savings from mandatory spending programs, including $130 billion from changes to Medicare prescription-drug pricing, $292 billion from safety-net cuts—such as work requirements for Medicaid and food stamps—and $70 billion from tightening eligibility access to federal disability benefits.

Medicare is threatened with bankruptcy nearly as badly as is Social Security, but that doesn’t mean Medicare would disappear—only that benefit payouts would be reduced to what payroll tax revenues could support, rather than what’s currently available from those tax revenues plus earnings and principle from its trust funds.

A Cost of Impeachment

It seems the Progressive-Democrats’ attempt to impeach President Donald Trump was not all that fiscally expensive as such things go.

According to an estimate from the Heritage Foundation in December, the [Progressive-]Democrat-led House of Representatives inquiry, and eventual impeachment of Trump for abuse of power and obstruction of Congress on December 18, cost taxpayers an estimated $3.06 million.

That compares with the effort against ex-President Bill Clinton (D):

According to CNN, the independent probe into Clinton cost taxpayers $80 million in 1994.

That bill includes the Senate trial, while the Heritage Foundation estimate doesn’t include the Senate’s in-progress impeachment trial, but it’s unlikely that the Senate trial will cost $77 million.

Medicaid Block Grants

The Trump administration is planning to set up procedures for allowing States to convert the Medicaid funding they receive from the Federal government from matching funds to block grants.

The new procedures would represent a large change.

Medicaid funding is open-ended, meaning the federal government matches state spending. If that funding is converted to a block grant, a state could get a limited, lump sum of federal money instead.

There are two key differences here. One is that the funding would go from strings-attached matches to no-strings block grants. The other is that the decision to go to block grants would be each requesting State’s, resulting in less Federal control over that State’s internal affairs.

Universal Basic Income

It’s creeping ever more deeply into the Progressive-Democratic Party’s psyche and ideology. It’s an idea that was first dreamed up in the ’70s, and it remains an idea that can only fail were it to be implemented.

Giving everyone a basic income won’t improve anyone’s income; it’ll only incentivize employers to pay a wage diminished by the amount of the guaranteed government payment.  But the failure runs much deeper than that.

Such a scheme is inflationary: the outcome can only be a spike in inflation followed by price stabilization at a higher price level.

European Keynesianism

Europe’s investors are hoping for some Keynesian stimulus—or what passes for Keynesian stimulus—in the coming year to continue 2019 boomlet in stocks.

Getting stocks to propel higher however, may require faster growth. Some see that slug of faster economic activity coming from a possible government ramp up in stimulus spending.
“Whichever way you slice it, there is a much greater burden on governments to do more” said Anik Sen, Global Head of Equities at PineBridge Investments.

Great Britain’s Socialist Party

Nominally, it’s the Labour Party, but its MFWIC, Jeremy Corbyn is moving to make it overtly socialist.  He’s jumped onto the Free Stuff, Higher Taxes, and Pay Raises for Government bandwagon with both feet. Sure, these things have been staples of Labour for generations, but Corbyn really intends to outdo his forebears. Corbyn intends to nationalize enormous sectors of the British economy:

  • fixed line network of telecoms provider BT [British Telecom] to provide free broadband
  • rail
  • water
  • mail delivery services.

Having taken over the economy, Corbyn then would raise taxes even higher than they are already, reorganize what would remain of private enterprises, and increase spending:

An Economic Misunderstanding

The Congressional Budget Office said Wednesday that the two-year budget deal will increase our annual deficits significantly over the next ten years.  That puts a premium on Republicans regaining the majority in the House, retaining/expanding its majority in the Senate, and retaining the White House, with an emphasis on Conservative Republicans in that mix.  That’s for another post, though.

What…triggered…me was this bit at the end of the article CBO Director Phillip Swagel:

The nation’s fiscal outlook is challenging. To put it on a sustainable course, lawmakers will have to make significant changes to tax and spending policies—making revenues larger than they would be under current law, reducing spending below projected accounts, or adopting some combination of those approaches.