People keep buying, so the economy keeps moving....for now

With the bond market flashing recession signs and the stock market moving wildly in August, what does the actual economy tell us in the last week?

Thursday also gave us a few early indications on that 3rd quarter outlook. One report showed the US’s trade deficit for goods narrowed a bit in July.

The international trade deficit was $72.3 billion in July, down $1.8 billion from $74.2 billion in June. Exports of goods for July were $137.3 billion, $0.9 billion more than June exports. Imports of goods for July were $209.7 billion, $0.9 billion less than June imports.

I’d throw a bit of caution on that export number, as the raw amount of exports dropped, but since they usually drop in July, it’s listed as an increase with a seasonal adjustment. So let’s wait for future months to see if any trend is in place.

On the flip side, the same report showed inventories on the rise.

Wholesale inventories for July, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $679.4 billion, up 0.2 percent (±0.2 percent)* from June 2019, and were up 7.1 percent (±1.1 percent) from July 2018. The May 2019 to June 2019 percentage change was unrevised at virtually unchanged (±0.2 percent)*.

Retail inventories for July, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $666.1 billion, up 0.8 percent (±0.2 percent) from June 2019, and were up 4.5 percent (±0.7 percent) from July 2018. The May 2019 to June 2019 percentage change was unrevised at down 0.3 percent (±0.2 percent).

Not a great sign, and somewhat surprising given the strong retail sales figure for July. But short-term, it likely gives a boost to Q3 GDP, and is an OK thing if consumer demand follows to clear those inventories.

There also was this odd number from the housing market.

Pending home sales fell 2.5% in July month to month and were 0.3% lower compared with July 2018, according to the National Association of Realtors. Pending sales are signed contracts to buy existing homes, so it is a future indicator of closed sales for August and September.

This weaker-than-expected result came after two months of sales gains and may be a sign of just how sensitive today’s borrowers are to even the smallest moves in mortgage rates.

The average rate on the 30-year fixed fell from around 4.2% at the start of May to around 3.8% at the start of July, according to Mortgage News Daily.

That brought a late surge of buyer interest to the spring market. The rate then reversed course and rose as high as 3.95% by mid-July. It then fell back to around 3.85% at the end of the month and fell more sharply through August.

This is basically a snapback from a good June, so not much to be drawn yet. But as the article hints, let’s see if the lower interest rates of this month causes the pending home sales to go back up. If not, then we’ll be seeing evidence that the economic concerns are bleeding into consumer behavior.

On Friday we got other evidence showing that consumers still spent in other areas for July in the face of slowing growth in other areas.

Americans boosted spending in July on recreational goods and vehicles as well as energy to run their air conditioners, but inflation remained low enough to give the Federal Reserve room to cut interest rates next month.

Consumer spending jumped 0.6% last month, the government said Friday, matching the MarketWatch forecast.

Incomes rose just 0.1%, however, marking the smallest gain in nearly a year. Americans had to dip into their savings to cover their expenses….

Americans spent more in July on new cars and trucks, especially recreational vehicles. They also ate out more and incurred bigger bills for gas and electricity during an especially hot month.

To pay for their purchases Americans cut back on what they saved. The savings rate fell to 7.7% from 8% — the lowest level since last November.

It’s worth mentioning that in July, the stock market was hitting record highs amid “trade optimism”….right before the DOW dropped 1,400 points in a week after that optimism crashed back into reality.

Sure enough, another report on Friday showed that consumers were shaken by August’s stock market volatility and other signs that recession may be on the way.

The numbers: A measure of how Americans view the strength of the economy fell to the lowest level in almost four years, reflecting growing worries about the U.S. trade war with China that’s led to higher and higher tariffs.

The final consumer sentiment survey fell to 89.8 in August from an early estimate of 92.3 and a 98.4 reading in July, the University of Michigan said Friday.

It’s the lowest mark since October 2016. Just a year and a half ago, the index hit 101.4 to mark the highest level since 2004.

What happened: The sharp decline in consumer sentiment stemmed from increasingly negative views of the one-third of respondents that brought up the tariffs on their own. They worry the dispute will increase inflation, reduce incomes and raise unemployment.

It’s going to be intriguing to see what wins out over the next month as August’s economic reports come out. Does the low consumer sentiment and weakness in income growth cause people to slow down their spending spree, which would make a recession almost imminent? Or does the strong consumer spending continue, which may allow for businesses to keep pumping out products to meet that demand, and keep the economy moving ahead?

This week, markets seemed soothed by more indications of “trade optimism”, so stocks gained back around 1/2 of the losses that had been compiled in the first 3 weeks of August. Except that much of those reports of optimism have been was largely BS, driven by the Trump Administration’s desire to keep stocks )and his re-election chances) afloat.

Doing this for just one stock could get you fined or land you in a federal penitentiary. Trump manipulated the entirety of the equity markets with blatantly false information. https://t.co/eMPUMYQI2d

— George Conway (@gtconway3d) August 30, 2019

Going forward, let’s trust the fundamentals, folks. Not the rumors that oligarchs and coked-up hedge funders want us to believe.

More tax dollars for less justice. GOP Lame Duck laws keep biting back

The fallout from December's rushed and partisan acts from the GOP Legislature and Governor Walker continues to bubble up. This week, it showed when new Attorney General Josh Kaul had to hold up a settlement in a case with the GOP-run Joint Finance Committee, instead of being allowed to complete the case on his own, as all previous AGs had. And since Kaul could not get Finance members to sign a non-disclosure pact regarding the proposed (and not finalized) settlement, nothing proceeded.

After Tuesday’s messy JFC meeting, we found out from the Milwaukee Journal-Sentinel’s Molly Beck that it wasn’t just that case that had been held up due to these new rules. The open cases include the resolution of defaulted debt at UW-Oshkosh Foundation (a scandal that led to the resignation of the university’s chancellor, and felony charges against that chancellor and an Oshkosh Vice-Chancellor), and several other cases that involve big money.

In another case, the state Department of Employee Trust Funds may have only a short time to resolve a lawsuit it brought against IT contractor Vitech Systems Groupbecause Vitech has been purchased by another company, Gibson wrote. Millions of dollars are at issue in the case, which is scheduled to go to trial in January.

Another case centers on a dentist who prosecutors allege owes the government as much as $8 million for cheating it out of Medicaid funds. The dentist has filed for bankruptcy and DOJ is trying to make sure that his filing won’t get him out of having to pay the government.

A fourth case involves a sewer service in Waupaca accused of improperly disposing of waste. A trial is scheduled for September.

The leaders of the committee, GOP Sen. Alberta Darling of Rivers Hills and GOP Rep. John Nygren of Marinette, told Kaul in a letter this month that they didn't consider the cases at a meeting last month because they didn't have enough information about the cases and weren't given enough notice about them.

A more cynical person might think that Nygren and Darling didn’t want some of these cases to go forward, especially if they involved certain friends/donors of WisGOP. And especially since most of the same JFC members tried to remove accountability for themselves 4 years ago by attempting to gut the state's Open Records Laws.

But I won’t be that person.

And then on Thursday, things got even screwier.

Republican leaders of the Legislature's finance committee hired an attorney at taxpayer expense Thursday to sign a secrecy agreement in an effort to end a standoff with Attorney General Josh Kaul.

But it's unclear whether the move will resolve the dispute triggered by new laws requiring the Democratic attorney general to get legislators' permission to settle lawsuits. …

The decision to hire Phillips was made by Darling and Nygren alone. The rest of the committee members didn't vote on the matter.

He will be paid $290 an hour, according to his contract with the committee. That's well below the $500 an hour that other attorneys recently hired by Republican lawmakers are being paid. Phillips specializes in assisting governmental entities, according to the bio on his firm's website.

Darling and Nygren said in a statement the action should meet Kaul's confidentiality needs and requested information related to a settlement he had asked lawmakers to take action on earlier this week but left their meeting empty handed.

But it turns out that there isn't a need for such a confidentiality agreement after all.

That's in a memo today from Rick Champagne, director of the nonpartisan Legislative Reference Bureau.

— Patrick Marley (@patrickdmarley) August 29, 2019

So taxpayers are shelling out $290 an hour on a no-bid contract that was never voted on or even debated in public, to “represent” the entire Joint Finance Committee when discussing settlements with AG Kaul. And it might not even be necessary to do so.

Prior to the Lame Duck laws, the AG got to handle these negotations and settlements, and then the Joint Finance Committee had a chance to review and/or change where the money went. Instead, WisGOPs are now putting in an extra layer of bureaucracy at taxpayer expense, and tying the hands of an AG elected by the people from doing the job he was voted in to do.

Remember when GOPs claimed they were the party of “fiscal conservatism” and “efficiency”? Not this ALEC Crew in Wisconsin! They want to screw up governance, make taxpayers pay more, while shielding their corporate donors from accountability for the damage to society that they have caused.

Maybe this possibility should have been discussed when the Lame Duck Laws were being jammed through back in December. But NOOOOO, GOPs only cared about taking away powers from the newly-elected Dem Governor and AG, and actually figuring out how this was going to work was a secondary thought.

Did you think about this situation, Scotty?

I’ll remind you that every GOP in the Assembly and State Senate but one voted for this garbage. So THEY ALL GOTTA GO.

Crazy weather costing the Midwest a lot

In the fallout of a crazy stretch of heat and severe storms last month, many northern Wisconsin communities will be getting help in repairing the damage.

Gov. Tony Evers says Wisconsin has received a federal disaster declarationfor 17 counties and two tribes that sustained damage during severe storms in July.

Evers made the request to President Donald Trump's administration last week. The governor also had requested Marinette County be included, but Evers' office says the Federal Emergency Management Agency is still reviewing that request.

State and federal agencies have verified more than $19.5 million in damage from thunderstorms, tornadoes and flooding from the storms between July 18 and July 20.

Tuesday's declaration allows local governments affected by the storms to apply for aid. The program is not for businesses or homeowners.

It’ll help for the Feds to pay 75% of that bill, although it still puts some costs back on state and local government. And the storms certainly caused a lot of stress in the meantime, with power outages and roads and buildings needing to be repaired.

Weather is also playing havoc in the Midwest in another way, as fewer crops combined with still-low prices are combining for serious strains for Midwestern farmers.

A survey conducted by Farm Futures showed that 53% of respondents said 2019 is the most difficult year they’ve faced as farmers -- that includes 49% of baby boomers and mature growers, who lived through the 1980s farm crisis, according to the poll of 711 growers carried out from July 21 to Aug. 3. Results of the survey are being released at the Farm Progress Show in Decatur, Illinois, Wednesday.

Growers already suffering from years of depressed prices are now contending with the loss of export markets as President Donald Trump’s trade war with top soybean buyer China drags on. Farm debt is expected to rise 3.9% this year to $427 billion, according to the U.S. Department of Agriculture. And last year, farm debt-to-income was at the highest level since 1984.

“American farmers are under as much or more stress than during the farm crisis, exacerbated by 2019’s extreme weather patterns,” said Holly Spangler, executive editor at Farm Progress and editor of Prairie Farmer…

Two-thirds of the farmers polled agreed that weather disruptions are making financial pressures worse. The survey also found that younger producers are more likely to be stressed than baby boomers or mature farmers as they usually own less land and are less financially secure.

Stress was also correlated with growers ability to plant. Farmers with higher stress reported they weren’t able to sow a greater percentage of their acres than the average grower. American producers were unable to seed a record 11.2 million acres of corn and 4.35 million acres of soybeans, according to the USDA Farm Service Agency’s August report.

But even with all of that unplanted acreage, it hasn’t translated into higher prices. Corn prices have dropped more than 20% over the last 2 months, and soybeans are back at the levels they were at in late Spring.

How does that happen when the lack of acreage should mean a shortage? Becayse farm reports indicate more corn and soybeans can be harvested in each acre. Combine that with a lack of exports, and there’s still surplus crops in this country that is crashing prices.

These Midwest weather issues may be relatively small compared to the Category 4 hurricane that is likely to crash into Florida around Labor Day, but they certainly are causing plenty of inconvenience and economic concerns. And I can’t see the trend of more volatile and costly weather changing any time soon, so maybe our political leaders should care more about this, instead of the GOP mentality of “out of sight, out of mind.”

Can tariffs save Foxconn? Or should we even bother at this point?

We got further confirmation today that the Trump trade wars with China aren't going away any time soon.

The U.S. Trade Representative’s office on Wednesday reaffirmed President Donald Trump’s plans to impose an additional 5% tariff on a $300 billion list of Chinese imports starting on Sept. 1 and Dec. 15.

The USTR will impose a 15% tariff on some of the targeted goods from Sept. 1, with the rest, including cell phones and laptop computers, to get a 15% tariff on Dec. 15, the agency said in a Federal Register notice. The Trump administration had previously planned to impose a 10% tariff on these imports.

Trump announced the tariff increase last Friday on Twitter, in response to Chinese retaliatory tariffs on $75 billion worth of U.S. goods, including crude oil.

The Federal Register notice, however, did not mention Trump’s announcement of his intention to increase the duty to 30% on a $250 billion list of Chinese imports on Oct. 1 that have already been hit with a 25% tariff. USTR has previously said it planned to conduct a public comment period on that increase.

That reality prompted Wisconsin Public Radio to ask an interesting question.
Might Trump's trade war help encourage Foxconn to build in Wisconsin?

More than jobs behind this deal?

Foxconn makes more than half of its money by manufacturing Apple products in China. Because of the tariffs, the company will continue to look for ways to manufacture more products domestically, said Erik Johnson, a professor of economics at Carthage College.

"I think that fit very well into the idea with the trade war of wanting to produce a lot more in the U.S.," Johnson said. "In a very narrow sense, this could be good news for the plant."…

But Johnson emphasized tariffs will hurt Foxconn overall.

"Many of their goods are still imported from China and subject to tariffs," Johnson said. "Most of the iPhones are not assembled in the U.S. and tariffs are involved somewhere in the middle."

That last part seems important, as the Racine County plant is likely to be an assembly plant, so that won’t avoid tariffs.

There is a part in the WPR article that quotes a Foxconn executive that says they might produce "servers, networking products and automotive central controls" in Wisconsin. But there have been a lot of plans for that Foxconn site over the last 2 years, so forgive me if I'll wait and see on that.

And a prominent Fox Valley Democrat has been actively calling on the state to pull the plug on the Foxconn project, and instead help preserve companies that are already operating in Wisconsin.

Outagamie County Executive Thomas Nelson tells NBC 26 he was skeptical of the deal. He says he believes the money and resources going into Foxconn would be better used on homegrown industries and jobs like the pulp and paper industry. He says he feels there have been a lot of promises and not a lot of product.

"We don't even have to spend $3.5 billion,” said Nelson. “I mean, we could spend a very, very small percentage and to help industries like pulp and paper, that have been struggling but have been showing a lot of signs of resilience, that have a great track record."…

He talked about Appleton Coated, saying without much of any state support and very little attention, the company got back on their feet by themselves.

"These are really good example of why we should continue to support and invest in Wisconsin manufacturing, including and especially pulp and paper," said Nelson.

To jump off of that point by County Exec Nelson - even without the jobs incentives, there has already been a lot of money plowed into the Foxconn-sin region. This includes hundreds of millions of dollars in upgraded highways and in making We Energies rate payers shell out another $117 million to pay for new electrical lines and a substation that was intended to power a much larger Foxconn facility that we are going to get (if we get anything at all).

Which again begs the question - "Why did we give away so much to Foxconn compared to any other business?" Especially when Foxconn very well may have needed to locate in America anyway, either as a hedge against trade measures that President Trump might have put up, or as a PR move to entice Trump to exempt the company from to those tariffs (as Trump has done for several companies already).

Wisconsin's extra revenues mean more cushion....and bigger tax cuts?

We already knew that Wisconsin was going to get a major infusion of one-time revenue for the 2019 Fiscal Year, but we found out on Monday that the state took in even more money than we thought we would.

Wisconsin collected $76 million more in taxes than anticipated last fiscal year, prompting lawmakers from both parties to claim credit for a sign of positive economic growth in the state.

The nonpartisan Legislative Fiscal Bureau on Monday announced general fund tax collections for the 2018-19 fiscal year, which ended June 30, were up 7.4% from the previous year.

The $17.3 billion collected in taxes was $75.5 million, or 0.4%, more than anticipated in May when the state was finalizing its 2019-21 budget.
About $31 million of the unanticipated money will be deposited in the Budget Stabilization Fund, a rainy day fund to be tapped in times of recession or fiscal emergency. The remaining $45 million will go into the general fund, which covers the majority of state expenditures.

This is in comparison to the Legislative Fiscal Bureau’s estimates from May, and the increases were pronounced in income and sales taxes, and built on top of big revisions that had already come in May.

It’s also worth remembering why the income taxes had already been revised up in May, because of changes in withholdings and payments as a result of the GOP’s Tax Scam at the federal level.

The reestimate for 2018-19 is influenced by one-time effects. At the end of 2017 (2017-18), there was a surge in estimated payments and pass-through withholding payments that was likely related to the TCJA and the federal limitation on state and local tax deductions beginning in tax year 2018. While a correction was expected in December, 2018, estimated payments and pass-through withholding payments decreased by a greater margin than anticipated. Because these payments reflect taxpayers' actual tax liabilities, the payments were expected to increase in 2019-20, when the collection pattern would normalize. However, this normalization appears to have occurred in March and April of this year. This collection pattern has been experienced by a number of other states.

In addition to realizing the additional estimated payments and pass-through withholding payments, the 2018-19 reestimate incorporates a somewhat higher rate of increase in withholding payments and growth in final payments. These factors result in a 2018-19 growth rate in individual income tax collections of 5.6%, compared to a 1.9% rate of growth assumed in January. This increase is followed by a smaller estimated increase of 1.6% in 2019-20, which is influenced by the implementation of the entity-level tax authorized under 2017 Act 368, resulting in some payments that had been previously recorded under the individual income tax to be reflected under the corporate income/franchise tax instead. For 2020-21, the payments under the individual income tax are estimated to increase by 3.5%.

It also shows how the Tax Scam encouraged some Wisconsin business owners to change their status to pass-through entities, because it gives a giant tax break at the federal level, which makes it more than worth it for them to pay a few more state taxes. I guess that works as a trade-off, since states can’t count on getting more aid from our deficit-wracked federal government.

It’s interesting that state income taxes continue to surprise to the upside, because the ‘gold standard” Quarterly Census on Employment and Wages (QCEW) says job growth in Wisconsin moved to the downside over the same time period, with wage growth being nothing to shout about. I want to see how that conundrum shakes out going forward.

The top two increases in this week’s revenue report are the two biggest sources of state taxes – income and sales taxes. That likely means there’s a smaller increase that’s needed in the next Fiscal Year to reach the estimates in this current budget, although the revenue estimates came before Governor Evers and the Legislature agreed to income tax cuts in the 2019-21 state budget (theoretically, the increased income taxes makes the tax cut bigger).

One other interesting part of the revenue picture was explained in an LFB publication that also discussed the $321.7 million that is to be deposited in the state’s rainy day fund.

On May 15, 2019, this office projected 2018-19 tax collections at $17,265.9 million. Of that amount, it was estimated that collections under Wayfair would total $45.0 million. As indicated, 2018-19 tax collections are $75.5 million above the May estimates and the Wayfair amount for 2018- 19 is estimated at $59.2 million, or $14.2 million higher than projected in May.

The Wayfair case required more online entities to pay sales taxes, and the year-end totals show that even more was collected than expected, likely as part of the shift people have made where they buy things via the Internet as opposed to actual stores.

But also, it seems that the higher online sales tax collections might portend an increase in a second income tax cut that was passed around the same time as the budget. This move clarified a bill passed in the lame duck sessions, but had the unfortunate title of Act 10 for this 2019-21 session.

The tax rate reductions in Act 10 are intended to offset the increased sales and use tax collections attributable to remote sellers and marketplace providers. Under provisions enacted as part of 2013 Wisconsin Act 20, and amended by 2017 Wisconsin Act 368, estimated sales and use tax collected from remote sellers during the 12-month period between October 1, 2018, and September 30, 2019, are to be offset by individual income tax reductions in tax year 2019. Under those acts, the income tax reduction would have been achieved through a proportional reduction in each of the four marginal tax rates based on the amount of gross taxes attributable to each rate. Under Act 10, the tax decrease will be divided into two equal components and targeted as rate reductions for the two bottom tax brackets. The tax year 2019 decrease is estimated at $60.7 million, resulting in an average reduction of $27 for taxpayers receiving a tax decrease.….

In tax year 2020, the rates for the two bottom brackets will be reduced under Act 10 in the same fashion as in tax year 2019. That is, the reduction will be calculated relative to the tax rates currently enumerated in the statutes, rather than the tax rates in effect in tax year 2019, as described above. Also, the amount of the tax decrease would be based on the estimated amount of sales and use tax collected from remote sellers and from marketplace providers during the 12-month period from October 1, 2019, to September 30, 2020. The tax year 2020 decrease is estimated at $120.5 million, resulting in an average tax reduction of $52 for taxpayers receiving a decrease.

If the amount of sales taxes under Wayfair and related measures continue to beat estimates, the state income tax would be reduced further for this year. You might not see it in your paycheck, but it’ll be reflected in a higher tax refund at the state level.

In all, this is a good fiscal situation to be in. But the one-time cushion is being spent out over the next 2 years, as we catch up in 2019-21 to the neglect in state services that happened under the Walker Administration. And if recession hits during that time period, our major increase in revenues and large carryover for Fiscal Year 2019 will become a distant memory, and that Rainy Day fund might have to be tapped sooner than later.

GOPs try to slow down justice, both in Madison and in DC

This is not a way to run a functioning state government.

Republicans on the Joint Finance Committee today rejected Dem Josh Kaul’s request for explicit authority to move forward in settling an undisclosed lawsuit despite the AG’s warning that the state faces a Friday deadline to take action.

In the first example of Kaul seeking legislative approval to settle a suit under lame-duck session laws, a dispute erupted over proposed confidentiality agreements the AG wanted lawmakers to sign.

Dem members said they refused to sign them because they wanted to simply give Kaul the authority to settle the case without interference from lawmakers.

We elected this guy to do his job.

On the other side, Republicans said they wouldn't sign any non-disclosure agreements, even though the case was still pending. Which created a stalemate since Kaul indicated that they couldn't go public on a settlement that hadn't been formally signed.

[Joint Finance Co-Chair John] Nygren said during the hearing the committee received a request late Friday afternoon to convene on the settlement and indicated there had been discussions about a confidentiality agreement, but no agreement was reached.

Kaul said DOJ learned about the possible settlement Thursday and notified the chairs the next day. He said he couldn’t stress enough that a confidentiality agreement needed to be signed by lawmakers before he could brief them on the case.

The vote not to formally proceed happened after the GOPs on Joint Finance decided to close part of the meeting to the public to discuss the lawsuit and issues related to the proposed settlement. Closed sessions like this aren’t unusual in local government, often as a city-hired attorney advises part-time Common Council members about sensitive personnel matters.

But that’s quite a bit different from a taxpayer-funded lawsuit about public issues, and besides, Wisconsinites vote for an Attorney General to do this job on his/her own. And this type of delay and inefficient mess was entirely predictable when the GOP Legislature pulled its Power Grab last December, after Democrats swept all statewide offices. This required incoming AG Kaul to get the go-ahead from JFC before any agreements were finalized.

As Kaul told the JFC members today, it’s difficult to have the AG’s office operate in such a way, as these agreements often come together in short time periods, and not being able to take care of this business without JFC interference could cost taxpayers a lot of money if the settlement falls apart due to the delays.

It sure makes me wonder what the lawsuit is about. I don’t think it’s the rumored settlement of $10-$12 billion with Purdue Pharma on opiods because Kaul said the suit was filed by predecessor Brad Schimel. Crooked GOP Schimel infamously refused to be part of a multi-state suit against GOP donors Purdue Pharma, and Wisconsin only joined that suit this year, after Kaul took office.

Another example of the GOP blocking potential legal action happened yesterday, as the agency that is supposed to oversee elections now cannot take on new cases, due to inaction from Republicans in the White House and on Capitol Hill.

For years, the Federal Election Commission has been barely functional. But at the end of this month—as the 2020 campaign heats up and unprecedented amounts of money flow to candidates for national office—much of the agency’s work will shut down entirely. There will be no new fundraising rules, no punishments for rule-breakers, no decisions about the outcomes of investigations, no advisory opinions issued to candidates who want to know if a specific campaign finance practice is illegal.

That’s because in order to do any of that, the FEC needs a quorum of four of the six members that, by law, make up the commission. As of September, three of those positions will be vacant. Two seats have been unoccupied for months (since 2017 and 2018, respectively). On Monday morning, one of the remaining Republican commissioners announced his resignation as of the end of the month. There’s little indication that Senate Majority Leader Mitch McConnell (R-Ky.) will move the fill the empty seats anytime soon.

The lights at FEC headquarters won’t literally go out—campaigns and political committees will still have to file fundraising reports, and the commission’s staff will still post that information information online. But the commission’s leadership will be unable to take any formal actions. New rules will be frozen. Campaigns and political committees will be unable to get advice from commissioners on how to apply rules. And much of the FEC’s oversight activity will grind to a halt. When commission staff conduct investigations of possible violations, it requires votes from the commissioners for any action to be taken on the outcome of those investigations. Similarly, for fines to be imposed on rule breakers, it requires a vote.

Monday’s resignation of Republican commissioner Matthew Petersen leaves one Democrat, one Republican and one independent commissioner. And the timing couldn’t be worse: The 2020 election is predicted to be the most expensive election in history, and a raft of unresolved questions are facing the FEC when it comes to how to enforce rules to keep foreign influence out of American democracy. Rick Hasen, a prominent election law and campaign finance attorney and professor at the University of California-Irvine, said that without a quorum, any chance of the FEC being able to respond to the threat of outside interference is gone….

Any further discussion on how to increase the transparency of internet ads—on which campaigns are expected to spend as much as $1.2 billion this cycle—was tabled. Thanks to Petersen’s resignation, the tabling will continue for the foreseeable future. Commission members are appointed by the president, and although Trump has made one nomination to the commission since his inauguration, the Senate has not scheduled any confirmation hearings.

This is how Republicans operate, both in DC and in Madison. They want government to be dysfunctional and ineffective, because it advantages them and their oligarch donors if the rest of us are kept in the dark. The dysfunction results in facts being obscured and it protects these amoral crooks (both inside and outside of politics) from the accountability that they badly deserve.

This “dysfunction by design” only ends when we eradicate GOP control of any and all areas of governance. It’s the only way to truly “Drain the Swamp."

Duffy resigns! So what's the next step?

Just a dull, rainy August Monday morning. And then this came along.

Wisconsin GOP Rep. Sean Duffy is resigning from Congress, per several sources.

— Jake Sherman (@JakeSherman) August 26, 2019

WHAT? This was one of those reports that seemed to come from nowhere. But within an hour, it ended up being true.

U.S. Rep. Sean Duffy, who has served his northern Wisconsin district for more than 8 years, has announced he will resign.

The Wausau Republican said he intends to step down from his post Sept. 23 due to complications with his baby due in late October.

"After eight and a half years, the time has come for me to focus more on the reason we fight these battles – family," Duffy said in a post on social media. "Recently, we’ve learned that our baby, due in late October, will need even more love, time, and attention due to complications, including a heart condition. With much prayer, I have decided that this is the right time for me to take a break from public service in order to be the support my wife, baby and family need right now."

My reaction to the sudden timing of it was twofold.

1. When did Sean and Rachel from Reality TV find out their kid had a heart issue? I ask this because here’s Dimwitted Duffy yukking it up on a Fox program last night.

.@RepSeanDuffy on the shift in Beto O'Rourke's media attention between his run for senate and his current campaign:#NextRevFNC pic.twitter.com/AUKmk5rGaZ

— The Next Revolution (@NextRevFNC) August 26, 2019

Just today, Duffy was talking about a new, updated campaign website.

Why did @RepSeanDuffy post this new look on his campaign website today if he is resigning?
He even hast this post about the new plaid look below. #wipolitics #wiright #wiunion https://t.co/nzAl6ZrFBy

— Wisconsin Examiner (@WIExaminer) August 26, 2019

"For Wisconsin", and not the Northwoods? Hmmm...

And his wife was still hosting her "View from Faux News" show as of last Friday.

We're LIVE! Join OLG Tom Homan with hosts @MelissaAFrancis @RCamposDuffy @JessicaTarlov and @KatTimpf!

— Outnumbered (@OutnumberedFNC) August 23, 2019

I seriously doubt the Duffys just found out about this kid’s heart issue today. I know this couple isn’t exactly well-adjusted, but it would be beyond bizarre to hear such awful news and say “We’re out of Congress and changing our lives” within a couple of hours. Someone needs to follow up on when they found out about the baby’s health issue.

2. Given my skepticism about the situation, I also wanted to find out if the timing of Duffy’s announcement was set up so that the vacancy might be filled during the April 2020 election. Given that the presidential primaries will happen on the same day, having a second, higher-profile election in a GOP-leaning area would likely help WisGOP candidate Daniel Kelly in April’s Supreme Court race. And WisGOP would not be beyond this type of trickery.

So I went to the Wisconsin statutes to see what it says about filling vacancies in Congress.

If a special election is held concurrently with the general election or a special election is held to fill a national office, the special election may be ordered not earlier than 122 days prior to the partisan primary or special primary, respectively, and not later than 92 days prior to that primary.

Then the general election to fill the seat would be 4 weeks after that primary.

If Evers wanted it to happen sooner, he theoretically could call the primary election today, have it happen by Thanksgiving and the general election to happen around Christmas. But Holiday weeks seem like a bad time to have an election, and Congress is usually on recess between mid-December and January, so the vacancy wouldn’t be as big a deal if it wasn’t filled during that time.

On the other side, quick math indicates that 150 days (122+28) after September 23 would be February 20. If Evers wanted to save money for communities in that largely rural district, he could wait till late September, then schedule the special election for the same time as the Spring primary on February 19. But that would mean the Northwoods wouldn’t be represented for 5 months, so perhaps an election schedule that falls between those two extremes (like December 10 primary and January 7 general election?) is the best option.

Now we get to see who steps into the 7th district race to hold the seat for at least the next year. This district was gerrymandered after 2010 to try to keep Duffy in office. Between that and the way that older, whiter and lower-educated districts have become more Trumpy in the 2010s, it was greatly successful in turning this into a pro-Republican district.

there was this diagonal of counties there - Sawyer, Price, Lincoln- that all flipped from Baldwin to Vukmir. RIP pic.twitter.com/H7gJfjIZNs

— J. Miles Coleman (@JMilesColeman) July 5, 2019

Doesn’t mean it’s not winnable for Dems – Patty Schachtner won the 10th State Senate district’s seat in a special election in Winter 2018, which lies in much of the western part of WI-7. But it would be a big story if GOPs lost this seat ahead of the 2020 elections, and would make national headlines given Wisconsin’s swing-state status for the presidential election.

It’s also worth mentioning that this area has lost the most people of any district in the state, so when redistricting happens after 2020, you can expect it to either get Dem cities like Eau Claire and/or Stevens Point, or look a lot different geographically than it does now. I’d wonder if that played into Duffy’s decision, as he can avoid a more difficult district in 2022 (if he’s not running statewide), and can pull the Paul Ryan “cash in and lay low” strategy for a couple of years.

I will give my thoughts and prayers to the Duffy family as they deal with the apparently difficult circumstances with their 9th (!) child, but I also expect these lifetime grifters to find themselves cashing in with some right-wing group sooner than later. I find the timing of Duffy’s announcement doubly intriguing given last week’s death of David Koch and Rachel Campos-Duffy’s gig as the spokeswoman for the Kochs’ LIBRE Initiative.

Add that in to the fact that Sean Duffy seemed to spend more time in 2019 campaigning for a job in TrumpWorld than actually giving a damn about the 715, and I’m going with Koch/Fox money as his likely next step. His surprise resignation doesn't add up, otherwise.

CBO says deficit going higher and higher

There was a lot of big economic news this week, and high on the list was Congressional Budget Office’s new budget projections for the next 10 years.

The major headline in this report is that the federal deficit is projected to be even more in the 2019 Fiscal Year than what was projected.

In CBO’s baseline projections, the 2019 budget deficit is $960 billion, which is $181 billion more than the shortfall recorded last year (see Table 1-1). That increase would be smaller if not for a shift in the timing of certain payments. The 2018 deficit was reduced by $44 billion because certain payments that would ordinarily have been made on October 1, 2017 (the first day of fiscal year 2018), were instead made in fiscal year 2017 because October 1 fell on a weekend. If not for that shift, last year’s shortfall would have been $823 billion, and the estimated increase in the deficit in 2019 would be $137 billion, or 17 percent (see Table 1-2).

Later on, the CBO unequivocably says that the GOP’s Tax Scam is not paying for itself, as income tax withholdings continue to be lower than the last fiscal year..

Although wages and salaries are projected to grow by about 4 percent in 2019, individual income taxes withheld from paychecks will decrease by $18 billion (or 1 percent), in CBO’s estimation. That decline reflects two factors: First, the Internal Revenue Service issued new withholding tables in January 2018 to reflect changes made by the 2017 tax act (P.L. 115-97). Those new withholding rates were in effect during all of this fiscal year but for only seven-and-a-half months of 2018. Second, withheld taxes classified as individual income taxes were boosted in 2018 and reduced in 2019 by reallocations made between income and payroll taxes. Specifically, the Treasury recategorized about $21 billion in collections from payroll to individual income taxes during 2018 and about $7 billion from individual income to payroll taxes so far in 2019. The Treasury does not observe a difference between amounts withheld for payroll and income taxes as they are collected, instead initially allocating withheld taxes to one source or the other on the basis of estimates. As detailed tax-return information becomes available, amounts are reallocated between payroll and income taxes. Even though those revisions amend allocations made in prior years, the reallocations are made in the current fiscal year.

But don’t worry, some of that was made up for by smaller tax refunds earlier this year.

Nonwithheld payments of individual income taxes are expected to rise by $9 billion (or 1 percent) in 2019. Those payments include both estimated and final payments for the 2018 tax year, as well as estimated payments for the 2019 tax year. Refunds, largely for the 2018 tax year, are expected to be $23 billion (or 9 percent) lower than last year, further boosting net receipts. The extent to which those changes reflect the effects of the 2017 tax act or other factors will become clearer as detailed tax-return data become available over the next several years.

Another factor in increasing future deficits is a spending and debt ceiling deal that House Dems, Senate Republicans and President Trump agreed to last month. The CBO says this will significantly boost the deficit starting next year.

Projections of discretionary spending for the 2020–2029 period are based on funding provided in 2019 (adjusted for inflation), taking into account limits on such funding required by law. The recently enacted Bipartisan Budget Act of 2019 (P.L. 116-37) raised the limits (or caps) on discretionary appropriations by a total of $171 billion for 2020 and by $153 billion for 2021.9 CBO’s baseline projections for those two years incorporate the new limits, and funding for those two years is projected to be at or slightly below those new caps (see Table 1-5 on page 21). For 2022 and later years, those projections reflect the assumption that funding constrained by the caps keeps pace with inflation. Some elements of discretionary funding are not constrained by the caps—in particular, appropriations designated for OCO, activities designated as emergency requirements, and some or all funding for disaster relief and some efforts to reduce overpayments in benefit programs. In addition, in accordance with the 21st Century Cures Act, a portion of funding for certain authorized activities—up to amounts specified in law— is exempt from the caps. For those elements, funding is generally assumed to grow with inflation from the amounts provided in 2019….

All told, before debt service is taken into account, the changes that CBO made to its projections to account for the enactment of the Bipartisan Budget Act of 2019 increased the cumulative deficit for the 2020– 2029 period by $1.5 trillion. The additional federal borrowing stemming from the larger annual deficits added $200 billion to CBO’s projection of total outlays for interest on federal debt over that period.

So that brings the total price tag of that 2-year move to nearly $1.7 trillion over the next 10 years, because those higher spending levels remain, even if the caps are put in place again starting in 2021.

What’s interesting here is that the CBO says that spending/debt ceiling deal won’t raise spending one dollar in FY 2019, so the increase in this year’s projected deficit is due to things getting worse than expected. Then the spending/debt ceiling deal raises the deficit even more!

So why was that deal agree to in a time of higher deficits? Because CBO says the added spending will help the economy.

CBO’s current economic forecast has some notable differences from the forecast the agency published in January. In particular, CBO has lowered its projections of interest rates in response to new data and recent guidance from the Federal Reserve regarding its outlook for monetary policy. Projected average annual economic growth over the 2020–2023 period was revised upward because of the Bipartisan Budget Act of 2019 (which led CBO to increase its projections of federal discretionary spending over the next decade) and recent economic developments.

The CBO says that this means real GDP growth will be 2.3% for 2019 and 2.1% for 2020, instead of the sub-2% figures projected before (CBO says it’ll drop below 2% in 2021).

Given the increasing chances of recession these days, I’d say that number seems a bit rosy, but you can bet that short-term economic boost in 2020 is what Mitch McConnell and Donald Trump were counting on when they signed on last month to a budget deal that increased spending caps and let the debt ceiling be increased.

They don’t care what happens to the US economy after that. Not that you should need more reasons to want these old men gone from power in DC, but there it is.

Bottom line, a high US budget deficit is set to become even bigger, even if there is no recession.

Since May 2019, CBO has increased its projection of the 10-year deficit by a total of $0.8 trillion. The largest factor in that revision was the Bipartisan Budget Act of 2019, which increased projected deficits for the 2020–2029 period by $1.7 trillion (including debt service costs). A reduction in projected net interest outlays, which stemmed from lower projected interest rates than those in CBO’s January 2019 forecast, offset much of that increase.

That last sentence is also a “WOW.” If you dig into the charts, you’ll see that the CBO says the projected drop in interest rates and a similar decline in projected inflation saves taxpayers more than $1.1 trillion over the next 10 years. And yet, the deficit STILL would go up by $809 billion above where we were a few months ago.

But don't worry, Trump and other Republicans have an idea on how to deal with the deficit if this country is stupid enough to keep him in office after 2020.

Republican lawmakers say they're hopeful Trump will pivot to deficit reduction in a second term. @ESCochrane https://t.co/6bn2eDPJTI pic.twitter.com/xUaPvUmlxI

— Jim Tankersley (@jimtankersley) August 21, 2019

I've got a better idea. When House Dems come back from their too-long vacation, they can use this new information on higher deficits to demand a dollar-for-dollar rollback of the GOP Tax Scam in exchange for this new spending, and possibly combine it with a deficit-neutral move that lowers the Social Security tax for most, while raising the cap on earnings that pay into Social Security.

It's time to make the GOP answer for what they plan to do as a result of their reckless fiscal policy, instead of having them spring it on the public after the 2020 election. A public showdown and possible shutdown connected to the FY 2020 budget next month is the perfect situation to make people think about the mess that has been made due to the Tax Scam and other GOP idiocy.

Hey Donny. STFU!

Yesterday morning, Federal Reserve Chairman Jerome Powell gave a long-awaited speech at a meeting of international banking oligarchs in Jackson Hole, Wyoming, and indicated that the Fed was willing to take more action to help the US economy adjust through the current volatility.

The Fed cut interest rates by a quarter-point in July, for the first time in a decade, a move that Powell called a “mid-cycle adjustment.” He did not repeat that phrase in this speech.

The Fed chairman did argue that the July rate cut has eased financial conditions and helped explain why the outlook for inflation and employment looks favorable.

In one more hawkish passage, Powell said inflation “seems to be moving up closer to 2%.” Some monetary policy doves have pointed to low inflation as one reason for more easing.

But Powell was not closing the door on more easing. He spoke at length about how the strong job market was extending employment to more Americans that were “still left behind.”

“Our challenge now is to do what monetary policy can do to sustain the expansion,” he said.

Wall Streeters looked at that and said
“Rate cuts! MOAR COCAINE!”, and reversed 200 points of losses that had hit after China announced countermeasures against US tariffs.

Dow, Nasdaq, S&P 500 now all in positive territory after Powell speech https://t.co/E5IJkb2nuJ pic.twitter.com/ZxGcdPRj5Y

— CNBC Now (@CNBCnow) August 23, 2019

And then....things changed.

BREAKING: Stocks plunge after Trump tweets that he will respond to new China tariffs today and says "American companies are hereby ordered to immediately start looking for an alternative to China" https://t.co/ewwtEr0ClV pic.twitter.com/mzhueqJPL5

— CNBC Now (@CNBCnow) August 23, 2019

Dow finishes down less than 630 points after falling 745; Nasdaq ends lower by 3%, S&P 500 closes down 2.5% https://t.co/E5IJkb2nuJ pic.twitter.com/T3lm40q0as

— CNBC Now (@CNBCnow) August 23, 2019

He's clueless and irrational. Or he and his buddies are shorting and manipulating the stock market, and trying to reduce debt costs but making interest rates go down.

Either way, this president is disqualified, and he needs to follow the advice of John Goodman.

Wisconsin getting hit worse than most as US manufacturing goes down

We know manufacturing in the US has been struggling so far in 2019, and that especially seems to be the case for one of the most manufacturing-heavy states in America – Wisconsin.

Let's start with this headline that hit the wires today.

BREAKING: Manufacturing sector contracts for the first time in nearly a decade, according to IHS Markit https://t.co/TbbCmUnkeG

— CNBC Now (@CNBCnow) August 22, 2019

That comes from IHS Markit's monthly survey, and the reasons for the drop in manufacturing are especially concerning because future prospects look worse than the mediocre present , both in America and overseas.

The decline in the headline PMI mainly reflected a much weaker contribution from new orders, which offset a stabilization in employment and fractionally faster output growth.

New business received by manufacturing companies fell for the second time in the past four months during August. Although only marginal, the latest downturn in order books was the sharpest for exactly 10 years. Latest data also signalled the fastest reduction in export sales since August 2009.

Survey respondents indicated that a drop in sales often cited a soft patch across the automotive sector, alongside a headwind to manufacturing exports from weaker global economic conditions.

Those headwinds were already hitting the Upper Midwest, as the Milwaukee Business Times told us that a number of economic indicators show business conditions in Wisconsin's largest metro area were already in decline.

The Milwaukee-area manufacturing sector contracted for the second time in three months in July, according to the latest Marquette-ISM Report on Manufacturing.

The Milwaukee-area PMI dropped from 56.11 in June to 46.44 in July. Any reading below 50 suggests the Milwaukee manufacturing sector is contracting. The index has declined in seven of the last 12 months.

The 9.67-point drop is the largest decline in any month since December 2014. It pulled the index’s six-month average down by more than 2 points to 51.76. A 2-point drop next month would pull the six-month average into negative territory.

These are not good trends.

That supplements a report from a few weeks back that showed Wisconsin manufacturing falling faster than the rest of the nation.

Production workers in Wisconsin’s manufacturing sector averaged 39.7 hours per week in July, the lowest level for the month since 2009, according to Bureau of Labor Statistics data.

It was also the first time since February 2014 that production workers logged an average of less than 40 hours per week. The average number of hours worked has dipped below 40 just four times since the start of 2011.

The good news for production workers is that their average hourly wage increased to $21.59 in July, up 5.8% from the same time last year. In the first seven months of 2019, production workers in Wisconsin are averaging a 4.2% year-over-year increase in hourly wages.

The July hours worked number could be just a one-month dip below the 40-hour threshold, but it is the tenth straight month Wisconsin’s average has declined from the previous year.

In the past 12 months, Wisconsin has averaged a decrease of 1.14 hours compared to the prior year. The average decrease is 1.58 hours over the past six months. In both cases, Wisconsin has the sixth largest decrease among all states.

Along the same lines, last week’s Wisconsin jobs report showed manufacturers in the state shed 2,800 jobs in July, and have lost 4,100 total since January. It is reminiscent of the swoon that hit the state in 2015 and 2016, when 3,700 manufacturing jobs went away, and many blue-collars in Wisconsin turned to Donald Trump to turn their flagging fortunes around. Doesn't look like that gamble's paying off, is it?

Hmm, sure seems like Wisconsin's "Big Giveaway" tax cut to manufacturers isn't doing much to keep Wisconsin's factories humming these days, does it? We sure could use that $250 million a year to do something better than stuffing the pockets of "job creators" who aren't creating jobs or products these days.

Good luck having Trump and other GOPs showing up at factories to claim "we're tax-cutting our way to prosperity" by this time next year. Well, unless the workers in those factories are forced to show up at these photo ops in order to get paid.

Recent US job growth revised down 500K, and Wisconsin job growth lamer

Apparently there are fewer jobs in America than we thought.

The U.S. economy had about 500,000 fewer jobs in March 2019 than previously reported, government revisions show, suggesting that hiring was not as strong in the past year as it seemed. Hiring was weaker in retail, restaurants and hotels. The annual revision is much larger than is typically the case. The preliminary revision in 2018, for example, was just 43,000. Every year the Bureau of Labor Statistics updates its figures based on unemployment data that nearly all employers are required to file with the states. The current revision is one of the largest ever.

WHAAAAT?

That news comes from the BLS’s mid-year benchmarking of total jobs, and complements today’s release by the “gold standard” Quarterly Census of Employment and Wages.

Worse, the current monthly jobs reports (the ones you hear the headlines on) claimed that there was a gain of 2.517 million jobs from March 2018 to March 2019. Now, the QCEW says the gain actually was 1.967 million jobs over that time period. That’s a decline in job growth of 550,000 jobs, and the monthly totals are now likely to be reduced by a significant amount next February, when the full-year benchmarking takes place.

A job growth rate of less than 2 million jobs is a growth rate of 1.4%. This may seem OK at first glance, except a 12-month figure of 1.4% job growth would place it as the lowest 12-month rate of US job growth in 7 ½ years.

UW's Menzie Chinn notes this downward revision is reported on job growth that had already slowed down during the Trump presidency. That slowdown came despite whatever stimulus might have come out the GOP's Tax Scam.

And oh yeah, that Tax Scam and the lower job growth led the Congressional Budget Office to tell us today that the US budget deficit will be even larger than the massive levels that were already projected.

Wisconsin also suffers in the QCEW report, as it says we only gained 3,395 jobs between March 2018 and March 2019. That’s less than what was being reported back in April, which was already a low 9,200 jobs, and ranks Wisconsin 46th in America for job growth over those 12 months.

It continues a disturbing trend where Wisconsin job growth has been consistently revised down for Scott Walker’s last year. In additions the year-over-year rate of growth for Wisconsin declined to the lowest levels since the jobs economy began its recovery in 2010.

Wage growth was also muted for Wisconsin in this report, with average weekly wages up 2.6% from March 2019, slightly below the US rate of 2.8%. Our neighbors to the south and west had average salaries go up slightly more on a dollar basis.

Change in average weekly wages, Mar 2018 – Mar 2019
Ill. +$34
Minn +$27
Wis. +$25

That expanded the wage gap that Illinois and Minnesota has had on Wisconsin. All 3 states had wages grow from March 2011 through March 2019 (as you'd expect due to inflation and economic recovery), but Minnesota and Illinois each had their weekly wages grow by approximately $60 more than Wisconsin over those 8 years.

March 2011 is a fitting benchmark, because that was the month that Scott walker signed Act 10 into law. Didn't really make us better off, did it?

We pretty much knew GOP policies weren’t working out for America, but today’s information shows things weren’t even as good as we thought in 2018 and early 2019. And we know things have gotten shakier in the 5 months since then. Hoo boy.

GOP Tax Scam did little in 2018. Dems should drag Trump/GOP in '19 and '20

Not that this should come as a surprise, but CNBC's John Harwood reiterated over the weekend that “Trump’s tax cut isn’t giving the US economy the boost it needs.”

There are a lot of reasons Harwood cites as to why the Tax Scam hasn’t done nearly what was promised. Much of it we already are familiar with -added growth wasn't close to filling the deficit hole created by the tax cuts, and targeting the tax cut to the rich a corporate played a big role in that.

But Harwood says another reason the Tax Scam fell short has to do with changes in how business is run in the late 2010s. These days, economic power is in fewer hands, and because those businesses would rather boost stock prices instead of actually grow their companies, there hasn’t been nearly the growth that one might expect.

The idea that lower taxes would boost business investment sounds intuitive. But in examining lackluster investment growth after the 2017 tax cut compared with earlier ones, International Monetary Fund economists this spring identified an explanation: corporate consolidation has freed dominant firms with high profit margins to invest as they choose with less regard for government tax rates. “In an environment of rising market power, corporate tax cuts become less effective at raising investment,” the IMF economists wrote….

The 2017 tax cut’s international provisions reduced incentives for U.S.-based multinational corporation to attribute profits to overseas subsidiaries taxed at lower rates. Trump had predicted that would jump-start the economy by bringing trillions of dollars back to the U.S.

But a Federal Reserve study of initial results found “no obvious spike in investment” among the 15 companies holding the most cash abroad. Those firms had easy access to investment capital before the tax cut, the study noted, and instead boosted stock buybacks to reward their existing owners.

Basically, Harwood’s article notes that there was a small, one-time bump from the Tax Scam in the first half of last year. And now that this has worn off, there is nothing left to sustain higher growth.

Most broadly, the tax cuts have not generated the promised growth of 3% or more – even in tandem with the additional stimulus of large government spending increases that Congress enacted separately. After an uptick in the second quarter of 2018, growth declined in the next two quarters to end up at 2.9% for the year.

Goldman Sachs economist Jan Hatzius says that second-quarter surge – initially measured at 4.2% but later revised down to 3.5% – represented the tax law’s peak impact. He expects it to vanish altogether by late this year or early 2020, as the economy returns to the same 2% growth levels Trump inherited from President Barack Obama.

Note that while the DC GOPs have given all of these tax breaks to the rich and corporate, they have done nothing to encourage wages to grow for the everyday Americans that need to consume in order to keep the economy moving. The GOP refuses to consider a minimum wage increase that passed the House last month, and the GOP is vehemently against encouraging unionization, which might allow workers to use bargaining power in a time of sub-4% unemployment and slow labor force growth.

Meanwhile, the US budget deficit will likely climb past $1 trillion next month, and while that hasn’t jacked up interest rates or inflation as of yet, it could tie the hands of policymakers for more tax cuts or other economic stimulus if/when we fall into recession in the near future.
So given that the Tax Scam is a failure in giving a sustainable boost to the economy, and because its distortions have put almost all of its benefits into the pockets of a group of people who didn’t need the help, maybe House Dems should consider using the upcoming budget debate for FY 2020 as a place to draw the line on this idiotic policy.

Oh, but now Trump and the rest of the GOPs have an answer as 2020 nears. MOAR TAX CUTS!

BREAKING from WaPo: Senior WH officials are considering a payroll tax cut to stimulate the economy.
Congress would have to approve, but it's another sign of WH worrying about a recession or deeper downturn in 2020.https://t.co/JwUR8YvbdJ Scoop by @damianpaletta #economy

— Heather Long (@byHeatherLong) August 19, 2019

I know, I'm laughing too. But at least this time, the cut would be on Social Security taxes that are only paid on the first $132,900 of income, so at least it'll help all wage earners, and likely give a bigger benefit to lower-income Americans.

However, I don't see plan to offset this tax cut (likely because TrumpWorld just pulled it out of their backsides), which means our already-growing deficit would get even larger.

Small reductions in the payroll tax rate can reduce revenue significantly. The base is broad!

Back of the envelope calculation: A cut in the employee OASDI rate by 1 percentage point would reduce federal revenue by >$65 billion a year.

— Kyle Pomerleau (@kpomerleau) August 19, 2019

So if I'm the Democrats in Congress, I use the GOP's desperation as a way to start getting rid of the worst part of the GOP Tax Scam - the major cut in taxes for the rich and corporate. Remember, the FY 2020 budget needs to be passed by the end of next month. The "budget deal" from last month was just a framework to allow more spending, but it's not specific on what the taxes and spending should be laid out.

That happens with the full-year budget, and Dems should demand a dollar-for-dollar increase in corporate taxes for any payroll tax cut, or expand the cap for paying into Social Security. Why not double it up to $265,800, which likely would allow Social Security to pay full benefits well past 2033, while giving the overwhelming majority of Americans a tax cut? And if GOPs won’t agree to that, then let’s see how Wall Street and Trump like the possibility of another government shutdown.

Likewise, if there is any added spending to be had (as Mitch McConnell and Trump agreed to as an admission that they need government to keep spending to keep the economy growing), then make that a dollar-for-dollar trade in reversing some of the provisions of the Tax Scam that isn't working out, and make the GOPs publicly justify continuing the Tax Scam's money-funnel to corporates in a time of flagging wage, GDP and job growth.

So if the Trump Administration wants to juice the economy in a new way, let’s use that as an opportunity to level the field back to where we have an economy that grows for all. Beats where we're currently headed - having Wall Streeters and corporations grow asset Bubbles that drag the average American along, only to have those bubbles burst and have Americans crash to earth after being cut loose by those same rich, corporate greedheads.

If Kudlow says the economy is fine...then it's time to worry

As the Trump Administration realized they were losing the one item of substance that they might be able to run on in 2020, they sent their economic hacks advisors out to Sunday talk shows to claim “All is well.”

One of those advisors was Larry Kudlow, who showed up on both Fox News and “Meet the Press”, and as usual, Coke-low was cherry-picking and BSing to justify that things were fine.

Well, I'll tell you what. I sure don't see a recession. We had some blockbuster retail sales, consumer numbers towards the back end of last week. Really blockbuster numbers. And in fact, despite a lot of worries with the volatile stock market, most economists on Wall Street towards the end of the week had been marking up their forecasts for the third and fourth quarter. That echoes our view. You know, what we've got here -- consumers are working at higher wages. They are spending at a rapid pace. They're actually saving also while they're spending. That's an ideal situation. So I think actually the second half, the economy's going to be very good in 2019….

Just one theme. We're doing pretty darn well in my judgment. Let's not be afraid of optimism. Let's not be afraid of optimism. It's a sign of our times. And I think there's a very optimistic economy going on out there.

Well sure, the retail sales numbers from last week were decent, up by 0.7% for July. But wage growth isn’t all that great, as real average hourly wages have dropped 3 of the last 5 months, including July.

And I’d like to see who Kudlow is referring to on “economists marking up their forecasts” 3Q and 4Q. Goldman Sachs just knocked down their estimates for Q4 to 1.8%, for example. The only way I could see GDP go “up” this quarter is because prices collapse partly due to the inability to sell products overseas. That usually follows with layoffs due to a lack of profitability, which doesn’t seem like a formula for a strong economy to me.

Show your sources, Lar

Kudlow continued to plead his case to Chuck Todd thusly.

Well, I want to get back to the China thing because there are some positive developments, believe it or not, on that front. But actually, in terms of business spending and business investment spending, which as you know, is a key part of the economy, look, a lot of the slowdown that we've seen in so-called capex, capital investment, is really temporary because oil prices dropped down. And so the big oil patch, fracking, and so forth was not as rapid in the last year. We're down what? $55, $60 a barrel? Which is a good number, I might add. And for consumers, gasoline prices are very low. But the oil, gas, fracking boom has leveled off a wee bit. On the other hand, we're seeing a nice pickup I think in durable goods and manufacturing. And we're also seeing now I think intellectual property, which is scored in GDP, you know, that thing's growing at about a 10, 12% annual rate. Let me come back. The consumer part of this thing, 10% on an annual rate last three months. We're going to get a blockbuster number in the third quarter.

The “intellectual property” item Kudlow rambles about was up 4.7% in q2 and is projected to go up 6.4% for Q3 as it stands today. Plus, IP is a relatively small part of the economy, while the production of goods is 5 times larger. Increases in software development are not going to make up for a recession in manufacturing, a sector that is not “picking up”, as UW’s Menzie Chinn illustrated this weekend (look at the black and red lines in particular).

As for the “consumer”, good luck on that staying strong, as consumer confidence fell hard in August along with the stock market and the 10-year note’s yield. But trying to reverse that flagging confidence is why Kudlow was on TV Sunday, right?

This last part of Kudlow's appearance on Meet the Press, is especially hilarious, and is a great example how Republicans try to shift reality to fit their policies.

…And I must say the president is transforming and rebuilding this economy. He deserves enormous credit. A new policy of lower taxes, and regulation, and energy opening, and trade reform. You know, we didn't quite get to 3%. But, look, Chuck, the first two years of the Obama administration we were just a hair below 3%. We're moving in the same direction. And let's be honest here. We faced severe monetary tightening, seven rate hikes in 2017 and 2018. I don't think all that was necessary. It's a miracle we were able to continue as well as we're doing. And, again, bond rates are falling. 100-basis-point decline. That's good for mortgages. That's good for business. And I think the Federal Reserve is going to now be following through, lower interest rates at the low end, because the bond rates have fallen and that's the way that game usually works. And I think that's going to be a big help.

Maybe those lower interest rates work out if you’ve got a ton of debt, or plan to go into debt. But it sucks if you want to save any money, and if the economy really is as good as Kudlow claims it is, then these rate cuts will only succeed making housing and the stock market even more overpriced than it already is.

It’s also a good insight into the world view of Wall Street dimwits like Kudlow. To them, the “eCONomy” is a confidence game based on stock trading and other casino-like measures that leads to booms and busts, entirely controlled by a few oligarchs. They don’t have a clue about what actually makes an economy sustainable or how everyday Americans try to pay their bills and get by.

The main skill Kudlow and Trump and their ilk have is BSing and keeping the grift going as long as they can. Aaron Blake at the Washington Post ran down how Kudlow has been consistently wrong in the last year over both the ballooning budget deficit and the rate of economic growth.

Back in June 2018, Kudlow saw a declining deficit. “The deficit, which was one of the other criticisms, is coming down — and it’s coming down rapidly,” Kudlow claimed. “Growth solves a lot of problems.”

The problem was that the deficit wasn’t coming down, much less rapidly. So Kudlow clarified to CNBC’s Eamon Javers that he was making a prediction. “I was referring to future deficits,” he said, adding, “I think it will come down in 2018, and the big reductions will come in future years.”

This, yet again, has not come to pass. The deficit rose a full 17 percent in fiscal year 2018, to $779 billion, as projections suggested it was headed toward $1 trillion. That path has continued this year, and, in fact, the rate of growth has increased. So not only did the deficit not “come down in 2018,” but it almost definitely won’t come down in 2019. Any reduction in the deficit appears years away, if it ever happens during Trump’s tenure.

Kudlow also predicted in January 2018 that the GDP would grow to between 3 percent and 4 percent based on the GOP tax cuts. Since then (and including preliminary estimates for the last quarter), it has grown by 2.5 percent.

In April 2018, he said the GDP could hit 5 percent for at least a short period of time. The highest quarterly GDP growth since then was 3.5 percent.

Sure, the stock market has regained some of the losses of last week as Wall Streeters speculate that trade wars and economic instability are settling down for the time being (or they’re covering their shorts). But if Larry Kudlow is saying he sees no recession on the horizon, that tells me you should definitely worry that it’s coming.