Mnuchin Kills Idea Of Tax Hike For The Wealthy

Last week the Republican party was at arms after Axios reported that Steve Bannon was said to be pushing president Trump to raise taxes on the wealthiest Americans. According to the website, Trump’s chief strategist was urging to raise the top tax rate on individuals, with Axios saying the former Breitbart CEO looking for the top rate to have “a 4 in front of it” (currently, the highest income-tax bracket in the US is 39.6% for individuals earning more than $414,000 a year).

Well, they can now sleep easier after Treasury Secretary Steven Mnuchin on Sunday killed that particular idea, saying that the Trump administration is not considering a plan to raise taxes on the wealthiest Americans in order to pay for tax breaks for the middle class. Speaking on ABC’s “This Week,” Mnuchin said the administration plans is “absolutely committed” to releasing its tax plan in early September, and getting it through Congress by the end of the year – and that plan won’t include a 40 percent tax rate for the richest Americans.

“Our plan is to have a full-blown release of the plan in the beginning of September, with being able to vote and getting this passed before the end of the year,” Mnuchin said on ABC’s “This Week” on Sunday.

The “objective” of the proposal is still that no one in the middle class will have a tax increase, Mnuchin said. “We’re finalizing the details of the plan, so there’s certain issues that are still on the table.”

.@stevenmnuchin1 denies report Steve Bannon is pushing tax hike for the wealthy. “I have never heard Steve mention that.” #ThisWeek pic.twitter.com/Tu7q2PSUO4

— This Week (@ThisWeekABC) July 9, 2017

Referring to the Axios report that Bannon was advocating a proposal to raise the highest tax bracket to 40% or above, Mnuchin responded “I’ve never heard Steve mention that” and added that “it’s very clear, kind of, we have a proposal out there that the administration has put out, with a top rate of 35% where we reduce and eliminate almost every single deduction.”

Mnuchin said the administration’s plan would pay for itself, but that’s only if about $2 trillion in increased revenue resulting from projected faster economic growth is included. Yet congressional budget scorekeepers may not agree that tax cuts would produce such growth. Under congressional budget rules, tax cuts can be passed with a simple majority in the U.S. Senate, but only if they don’t increase the deficit after 10 years. That would allow Republicans, who have 52 Senate seats, to pass the bill without any Democratic votes.

The Treasury Secretary also said that the administration is aware of the concerns in high-tax states, where taxpayers could have no tax reductions as well as fewer deductions. “We’ve heard a lot of feedback from New York, California, New Jersey, Connecticut, Illinois, and I think we want to be sensitive to those states and those economies as we shape the plan,” Mnuchin said.

Separately, Mnuchin – who spoke after returning from the Group of 20 meeting in Hamburg – dodged a question about whether President Donald Trump had accepted President Vladimir Putin’s denial of Russian interference in the 2016 U.S. election.

“Why would President Trump broadcast exactly what he said in the meeting?” Mnuchin said, adding that Trump is focused on “strategically negotiating” with Putin.

.@stevenmnuchin1: “Why would President Trump broadcast exactly what he said” in Putin meeting? “Strategically that makes no sense.” pic.twitter.com/VNIU2SEqHQ

— This Week (@ThisWeekABC) July 9, 2017

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North Korea Warns US Bombing Drill Risks Provoking “Nuclear War”

Following North Korea’s first confirmed test of a medium-range ICBM earlier this week, the hermit kingdom and the US have continued to trade provocations and threats, with the North warning on Sunday that the bombing drill led by two US B-1B Lancers in South Korea on Saturday risked sparking an all-out nuclear conflict on the peninsula.

In an editorial published in the North Korean state-run newspaper, the North Korean government said the drill was “a trivial misjudgment or mistake could lead to the outbreak of a nuclear war, resulting in a world war,” and that it posed a direct, and continuing, threat to the DPRK, according to South Korea’s Yonhap News.

“The Korean peninsula is the largest gunpowder area in the world with the highest risk of nuclear war, and is the largest hot spot in the world where there is always a risk of nuclear war. [The US] is surely spreading into a new world war,” the piece reads.

 

The editorial also accuses the Trump administration of using the Korean peninsula to distract from the US president’s “serious crisis of power” at home.

 

The drill posed “a continued threat to the DPRK,” according to the official Korean Central News Agency.

Tensions have continued to rise between the US and one of its primary geopolitical adversaries since the North’s July 4 ICBM test, which NK leader Kim Jong Un sarcastically described as “a gift” to the US on its Independence Day holiday. During his trip to Warsaw earlier this week, President Donald Trump said that he was considering “some pretty severe things” in response to North Korea’s first confirmed firing of a genuine ICBM that could reach as far as Alaska. Though the US has been unable to confirm whether the North has the capability to deliver a nuclear war head, and both the US and Russia said the Hwaswong 14 missile that was launched was at beast an intermediate-range rocket. According to Pyongyang, the test successfully verified the warhead’s atmospheric re-entry.

During Saturday’s drill, two B-1B bombers flew from Andersen Air Force Base in Guam to the Korean Peninsula where the bombers conducted the live-fire exercise at a range in South Korea’s eastern Gangwon province, dropping weapons in a simulated attack on a missile launcher. They were joined by South Korean and U.S. F-16 jet fighters during the mission: South Korean and U.S. fighter jets conducted precision strike drills aimed at attacking enemy targets hidden underground. That drill was the second in a series of displays of strength following the North’s July 4 missile launch; On Wednesday, US and South Korean forces conducted a joint ballistic-missile drill around 7am on Wednesday, shooting rockets into the Sea of Japan.

The Pentagon has been making shows of force in recent months in response to perceived increases in tension on the Korean Peninsula. Twice in May, the U.S. sent B-1B bombers on flyovers near the Korean Peninsula, each coming shortly after a North Korean missile test.

#Breaking: South Korea and the United States conducted a joint ballistic missile drill in response to North Korea https://t.co/DLfQSmDafE pic.twitter.com/n0RfaxpP1C

— The Situation Room (@CNNSitRoom) July 4, 2017

Following the North’s July 4 missile launch, Secretary of State Rex Tillerson issued a statement saying that “testing an ICBM represents a new escalation of the threat to the United States, our allies and partners, the region, and the world.” He added that the “US seeks only the peaceful denuclearization of the Korean Peninsula and the end of threatening actions by North Korea. As we, along with others, have made clear, we will never accept a nuclear-armed North Korea.”

US Ambassador to the UN Nikki Haley said during an emergency meeting of the UN Security Council on Wednesday that the North Korea launch is a clear, sharp military escalation and the US will use the full range of its capabilities in North Korea including military force, “if it must.”

And with that, the drums of war continue to grow louder…

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Tales From The FOMC Underground

Authored by EconomicPrism’s MN Gordon, annotated by Acting-Man’s Pater Tenebrarum,

A Great Big Dud

Many of today’s economic troubles are due to a fantastic guess.  That the wealth effect of inflated asset prices would stimulate demand in the economy.

The premise, as we understand it, was that as stock portfolios bubbled up investors would feel better about their lot in life.  Some of them would feel so doggone good they’d go out and buy 72-inch flat screen televisions and brand-new electric cars with computerized dashboards on credit.

 

The Wilshire 5000 total market index vs. federal debt and real GDP (indexed, 1990=100) – mainly there is an ever wider gap between asset prices and the underlying economic output, and although federal debt has grown by leaps and bounds in the Bush-Obama era, it can’t hold a candle to asset price inflation either. If asset prices were an indication of how an economy is doing, we would have arrived in Utopia by now. Unfortunately that is not the case, as asset prices primarily reflect monetary inflation. Just consider the extreme example of Venezuela’s IBC General Index, which went from 40,000 to 120,000 points, while the economy contracted by 21% in real terms (officially, that is. If one were to apply private sector estimates of inflation, it would look a lot worse). It is certainly true that economic aggregates are benefiting from bubble conditions to some extent, but that is essentially phantom prosperity. If you burn all your furniture, your home will be warm – that this might be problematic only becomes glaringly obvious once all the furniture is gone, because then it will not only be cold, but there will be nothing left to sit on either. When the red line on this chart reverts to the mean (or the “other extreme”), there will be a lot of gnashing of teeth, as many of the mistakes made during the bubble era will be unmasked. [PT] – click to enlarge.

 

Before you know it, gross domestic product would go up – along with wages – and unemployment would go down.  A self-sustaining economic boom would follow.

This fantastic guess, however, has proven to be a critical error in judgment.  Asset prices bubbled up, flat screen televisions and new cars were bought in record numbers, and the unemployment rate – according to the government’s statistics – went down.

On the flip side, real GDP growth only marginally lurched upward, never eclipsing 3 percent during a calendar year, and the great big economic boom that was supposed to save the economy from itself turned out to be a great big dud.

At the same time, the general aura of the Federal Reserve Chair, once held up on high by Bob Woodward, has slipped into irreparable decline.  No public relations exploit or press briefing can correct the damage.  No policy adjustment or balance sheet modification can return the Fed to its former glory.

Quite frankly, the state of disrepute of present Fed Chair Janet Yellen appears to be that of a larcener, near comparable to a United States Congressman.  The transition from maestro to scoundrel in just over a decade has been a sight to behold.  ZIRP, QE, operation twist… you name it.  There’s been one absurdity after another.

 

Consider how much attention is paid to central bankers and their policies these days, as exemplified by how many cartoons about them are drawn about them. In times past no-one thought much about central banks, they were considered boring. That has certainly changed after the introduction of the pure fiat money system in the early 70s and the massive bubbles and busts their policies have triggered in the wake of this event. [PT] – click to enlarge.

 

Sanitized for Public Consumption

No doubt, the Fed has brought their shame upon themselves.  They’ve made their bed.  But they don’t want to lay in it.

Earlier this week the June FOMC meeting minutes were released.  According to the minutes, some FOMC members acknowledged that “equity prices were high when judged against standard valuation measures.”  Some are even “concerned that subdued market volatility, coupled with a low equity premium, could lead to a buildup of risks to financial stability.”

Unfortunately, the minutes are prepared and provided for public consumption in a cleanly sanitized summary form.  Names are not tied to individual discussion points.  Moreover, name calling and vulgarities are omitted from the official record.

Perhaps, good manners and erudite etiquette have been preserved in the hallowed halls of an FOMC meeting.  However, this is highly unlikely.  Because over the last decade or so, in nearly all social dealings, both professional and public, good old-fashioned human decency has devolved to barroom decorum.

 

We hope they haven’t removed the laugh track… (this is from an article we posted in 2014) [PT] – click to enlarge.

 

Thus we’ve taken it upon ourselves to round out a brief excerpt of the FOMC discussion, adding back the warts to better demonstrate the meeting’s dialogue.  What follows, in the best interest of reader edification, is a fictitious adaptation of true events that occurred at the June 14 FOMC meeting.  Enjoy!

 

The most recent laugh track chart we could find is from 2011 – and it is telling as well. The mood turned very somber in November of that year. We will have to hunt for a more recent update. Presumably the laugh track continues to mimic the trend in the stock market. [PT]

 

Tales from the FOMC Underground

“What should we do?” began Yellen.  “A decade of easy monetary policies has turned financial markets into a Las Vegas casino while the economy’s lazed around like my smelly house cats. What the heck was Bernanke thinking?”

“Hell, Janet,” remarked New York Fed President William Dudley.  “He wasn’t thinking.  He soiled his pantaloons and then he soiled them again.”

“So now we must clean up his stinky pile while he promotes his revisionist courage to act shtick.  The reality is we must orchestrate a take-down of financial markets, and we must do it by year’s end.”

“Well, gawd damn Bill!” barked St. Louis Fed President James Bullard.  “With the exception of Neel, the $700 billion dollar bailout boy, don’t you think we all know that?”

“Hey, now!” interjected Minneapolis Fed President Neel Kashkari.  “Don’t blame me.  I was just carrying out Hank Paulson’s will, right Bill?  Saving our boys’ bacon back at Goldman so they could continue doing god’s work.”

“Besides Fish, it was you all who lined up behind Bernanke and tickled the poodle with his crazy QE experiment while I was busy chopping wood at Donner Pass and getting my fanny spanked in the California Governor’s race by retread Jerry Moonbeam Brown, of all people.”

“Fair enough,” continued Bullard.  “The point is, taking down the stock market will cause an extreme upset to the economy’s applecart.  The mobs will come after us with torches and pitchforks.”

“You see, the real trick is to do the dirty deed then disappear behind a fog of confusion.  That’s what Greenspan would do.  How can we pull that off?”

 

The maestro is still up to his old tricks… [PT]

 

After a moment of silent contemplation, and a licked finger held up to the cool political winds drafting across the country…

“Eureka!  We can pin it on President Donald J. Trump!” exclaimed Chicago Fed President Charles Evans.  “Could our good fortune be any better?  Not since Herbert C. Hoover has there been a more perfect scapegoat for an economic depression of the Fed’s making.”

“Hear, hear!” approved Yellen.

“Damn the economy,” they bellowed in harmony… minus Kashkari.  “This one’s on Trump!”

 

Blaming ye olde Trump asteroid should be easy, since he has made the grievous mistake of taking credit for the run-up in the stock market on Twitter. Now he “owns” the bubble he previously denounced – at the very least he has become its co-owner. [PT]

 

“Bill, one last thing,” closed Yellen.  “After the meeting, remember to give the public that shake n’ bake you dreamed up about crashing unemployment.  We have to give off an air of being data dependent.”

“That misdirection should twist them up until NFL football starts.  Shortly after that, our work will be done…”

“…and by the New Year, Congress and Joe public will be begging us to rescue the economy from the Fed’s… I mean… Trump’s disastrous economic program.”

*  *  *

[Ed. note: in the original version of this article Richard Fisher was used in the section about the fictional meeting. We replaced him with James Bullard, as Fisher has retired from the Fed. Besides, we always thought Fisher was one of the more thoughtful Fed presidents; inter alia he was one of the handful of FOMC members who regularly dissented from Ben Bernanke’s mad-cap money printing schemes] 

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“Dumbest Idea I’ve Ever Heard” – Republicans Blast Trump Idea For “Cyber Security Unit” With Putin

While the avalanche of Leftist furore over the fact that President Trump did not wrestle Putin to the ground, make him admit that he is responsible for Hillary not getting elected, and that he is ‘not my president’ was to be expected – no matter what occurred during the meeting between the two world leaders; it is the Republicans that have come outswinging in the last 24 hours against the idea of any rapprochement  – specifically discussions around a joint cyber security unit…

“Putin & I discussed forming an impenetrable Cyber Security unit so that election hacking, & many other negative things, will be guarded and safe,” he said following their talks at a summit of the Group of 20 nations in Hamburg, Germany.

And today, as Reuters reports, Republican Senators Lindsey Graham, an influential South Carolina Republican who is a member of the Senate Armed Services Committee, and Marco Rubio of Florida, who opposed Trump for their party’s presidential nomination, blasted the idea.

Rubio, on Twitter, said:

“While reality & pragmatism requires that we engage Vladimir Putin, he will never be a trusted ally or a reliable constructive partner.

 

“Partnering with Putin on a ‘Cyber Security Unit’ is akin to partnering with (Syrian President Bashar al) Assad on a ‘Chemical Weapons Unit’.”

But it was Graham that really let loose on NBC News’ ‘Meet the Press’… (via The Hill)

“When it comes to Russia I am dumbfounded, I am disappointed, and at the end of the day he’s hurting his presidency by not embracing the fact that Putin is a bad guy,”

 

“He is literally the only person I know of who doesn’t believe Russia attacked our election in 2016,” Graham said of Trump, who has said that “nobody really knows” whether the Russians were behind attempts to hack the 2016 presidential election.

Graham stressed that there is no evidence the Russian meddling influenced the vote, but he said that by denying the conclusion of U.S. intelligence agencies, Trump “throws our intelligence communities under the bus.”

But Graham was not done, he slammed Secretary of State Rex Tillerson and Trump for being “ready to forgive and forget” when it comes to Russian attacks on the 2016 presidential election.

“This whole idea about moving forward without punishing Russia is undermining his entire presidency,” he said. Graham is pushing for increased sanctions on Russia. The Senate passed such a bill, but it is currently delayed in the House. Reports have indicated the White House wants to soften the language.

 

“The more you do this, the more people are suspicious about you and Russia,” Graham warned Trump.

 

“I am intent on punishing the Russians for interfering in our election.”

Of course, the Democrats had their jab…Representative Adam Schiff, the top Democrat on the House Intelligence Committee, told CNN’s “State of the Union” program.

“If that’s our best election defense. We might as well just mail our ballot boxes to Moscow,” Schiff added.

What everyone seems to be missing from all this is the simple fact that there is no evidence – none, zero, zilch – that Putin, directly or indirectly, “hacked” the US election – just speculative dysphoria that has now become fact via propaganda. But saying that would likely make us just another ‘puppet of Putin’ – so we won’t.

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