Many Corporations are like Teenagers

The current bank failures were NOT caused by WOKE policies nor were they totally the responsibility of Donald Trump. Although he signed the bill into law that rolled back regulation of the banking industry (and safety regulations in trains- more on that later) these were not executive orders. They both passed congress with bipartisan support.

The banks which failed simply made some business mistakes and took risks they shouldn’t have. Smarter people than me will be figuring out this for a while. The banking industry as well as the transportation (Rail) industry lobbied congress to roll back regulations. Regulations put in place to prevent incidents like what just happened.

Now that there was a major train derailment which poisoned a town and a couple bank failures these companies want the government to come in and clean up the mess.

As a gymnastics coach, I have seen thousands of teens grow up. I had two children of my own and teen age years can be troubling. Your child wants independence. They want to be free of your rules. They want to police themselves. BUT- when there is a mess, they want you to come in and clean it up.

Luckily, there are some parenting books out there. Books which I feel every member of congress (as well as CEOs) should read.


House Republican use First Vote to Gut IRS Funding.

In a meaningless vote because it cannot pass the senate and if it did would face certain veto the new GOP led House of Representatives used their first vote (221-210) to claw back more than $70 billion — or nearly 90 percent — of new funding for the IRS making easier to cheat on taxes.

The republicans said that they were fighting against the weaponization of the IRS and fighting for the middle class. Does it matter who is cheating on their taxes? Obviously a large company or wealthy individual is going to have a team of accountants and lawyers to skirt their taxes. This is money that goes to pay for infrastructure. For schools. For defense. Things which benefit every American.

Much of the funding will go to much-needed improvements to the agency’s computer systems. “Or should we have an IRS that operates the way Southwest Airlines did last week, to the dismay of the American family,” quipped former Ways and Means Chair Richard Neal (D-Mass.).

According to the Committee For a Responsible Federal Budget The IRS Funding Repeal could cost over $100 BILLION and encourage tax cheating. Does the tax code need to be made more fair? Absolutely. BUT- it is also our responsibility as American citizens to pay what we owe. Whether you are an individual; A small business; or a giant corporation. No one likes to pay taxes. But no one wants to drive over a bridge that may fall down or have their children attend schools in need of basic supplies.

The GOP talk about a balanced budget but in their first piece of legislation put us potentially in a $100 billion hole. I just wish the House would stop wasting time.

How Four Decades of Tax Cuts Fueled Inequality

As average people struggle, the wealthy and big businesses benefit

Bloomberg Law

James B. Steele 

This story is a partnership between the Center for Public Integrity, a newsroom that investigates inequality, and Bloomberg Tax.

As a dense fog rolled over his California ranch, Ronald Reagan strolled to a table set up outside his adobe farmhouse and flashed photographers a radiant smile.

The president had much to smile about. Stacked on the table, awaiting his signature, was ERTA, the 185-page Economic Recovery Tax Act of 1981 that fulfilled his campaign promise to cut taxes in a big way.

The beneficiaries were largely high-net-worth individuals and corporations. What followed was a $750 billion hole in the federal budget, cuts in multiple public programs and a ballooning deficit.

But that was just the beginning. The bill signing on that foggy day set in motion a trend in tax policy that is supercharging America’s escalating income inequality. In the past four decades, Congress after Congress has cut taxes on the richest people and corporations —billions of dollars that would otherwise have gone to the federal till for spending that could help the rest of the public get ahead. 

Soon a new and politically split Congress will make decisions, by action or inaction, that will ripple for years to come. Leave the tax system as is? Rework it to the benefit of struggling people? Or keep cutting? The result could help determine which Americans can build up savings, how bad the racial wealth gap gets and whether longstanding pressure to cut safety-net programs succeeds.

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There have been some income tax increases over the past two generations, most recently the Inflation Reduction Act signed by President Joe Biden in August that levied a 15% minimum tax on corporations and a 1% excise tax on stock repurchases by public companies. But the trajectory has been in the opposite direction.

In 1980, the top income tax rate for individuals was 70%. Today it’s 37%.

The political forces behind that seismic shift haven’t stopped pushing for more. Already, House Republicans are proposing to extend or make permanent some of the most recent tax cuts.

President Reagan shows off his cowboy boots at the signing of the Economic Recovery Tax Act in 1981. 

Photo: Bettmann Archive/Getty Images

Setting the Pattern

In the four decades since ERTA was signed, Republicans — with some assists from Democrats — have worked to dismantle a system where the wealthiest people pay substantially higher rates. They’ve tucked large breaks for the rich into proposals with small cuts for millions of other Americans. They’ve promoted tax cuts with claims about economic benefits that have not panned out.

“It’s vastly oversold that tax cuts will generate job and economic growth,” said William Gale, co-director of the Urban-Brookings Tax Policy Center. “When you cut taxes for the upper income, you give them more after-tax income, but you don’t do anything for growth.”

ERTA charted the course in 1981. It cut the top tax rate from 70% to 50% on so-called unearned income — dividends from stocks and interest on bonds and savings. While modest tax breaks sprinkled throughout the bill affected millions of taxpayers, the top rate cut had just one constituency. Only the richest 2% of taxpayers were subject to taxes up to the 70% rate

Lowering that rate had long been a Republican goal, but the party’s lawmakers had been reluctant to propose it in ERTA for fear that voters would see them as favoring the rich. Instead, it was the Democrats who proposed it. It was a trade, a way to get Republican support for other provisions in the bill.

ERTA gave the wealthiest Americans who received dividend and interest payments a hefty yearly tax cut of $6.7 billion, the equivalent of $21 billion today. Out of 95 million taxpayers who filed that year, this bounty went to just 82,000: the richest sliver of the top 1%.

People in this group who received $250,000 in dividends owed $175,000 in taxes on them for the 1981 tax year. ERTA gave them a tax cut of $50,000 the next year — more than twice what the majority of American families lived on at the time. It was a gift that kept giving, year after year.

To fully understand the amount of money involved, think of it this way:

If the 70% rate were still on the books, taxpayers with more than $1 million in income in 2019 could have owed $87.9 billion more in taxes that year, according to a Center for Public Integrity analysis of IRS data. That’s more than enough money to rebuild and repair all the bridges and water systems across the country slated for work under the Infrastructure Investment and Jobs Act passed by Congress in 2021.

Cutting taxes for the rich over the past 40-plus years has had a huge impact, leaving less money for public programs that benefit millions of Americans while enriching a tiny percentage of the population. Where once the code strove for a certain balance — the more you earned, the more you paid — the rates have been reduced so much that there’s not nearly as much difference now between the top tax rate a billionaire investor pays on their income and what a middle-class salaried professional pays on theirs.

Income inequality in America is at heights not seen for a century. A variety of factors have contributed, including the erosion of good-paying manufacturing jobs, deregulation, a weakened trade union movement and the elimination of pensions and other rungs in the safety net. But taxes have been a principal engine of worsening economic inequality simply because the wealthy, thanks to their success in Congress, now have more money — to buy stocks, invest in real estate, build megayachts, blast off into space and make campaign contributions to politicians so the cycle isn’t interrupted.

It wasn’t always this way.

For decades leading up to 1980, all incomes from top to bottom rose at nearly the same pace. But that changed dramatically afterward. While median family income was largely stagnant, top incomes soared.

In 1980, the top 4% of taxpayers earned as much as the bottom 39%. By 2019, the top 4% earned as much as the bottom 57%, according to a Public Integrity analysis of the most recent IRS data.

As more money flowed upward, the gap in accumulated wealth widened. In 2019, the top 10% of Americans had three times the wealth of everyone else in the country combined.

The Tax Reform Game 

The Tax Reform Act of 1986 was supposed to curb most tax shelters used by big corporations and well-to-do people — and it did. But in exchange for that, Democrats gave Republicans something they wanted: lowering the top rate on wages, salaries and all other personal income from 50% to 28%, the largest single drop in the history of the federal income tax.

Proponents contended that was justified. Thanks to tax shelters, they said, few wealthy people were paying the top rate.

However, the data shows that not every wealthy taxpayer was loaded with tax shelters, and the 1986 act gave them a big break.

In 1985, all taxpayers reporting income of $1 million and up had an average income tax of $910,931, according to IRS data. In 1988, the first year showing the full impact of the law, that same group paid $226,000 less on average.

For Reagan, the low rates were the heart and soul of the bill.

“Our Founding Fathers … never imagined what we’ve come to know as the progressive income tax,” Reagan said while signing the bill on Oct. 22, 1986. He said it “struck at the heart of the economic life of the individual, punishing that special effort and extra hard work that has always been the driving force of our economy. … I feel like we just played the World Series of tax reform — and the American people won.”

Some won much more than others.

IRS data shows that taxpayers with upwards of $40,000 in income received on average a modest tax cut of $603 a year. Upper-income Americans earning $500,000 to $1 million took home an average of $73,617. And those at the top received far more.

To those who knew how the benefits of tax reform had been oversold to average Americans, this came as no surprise. Daniel Halperin, a former assistant treasury secretary, told a congressional committee as the bill was being considered: “Over 40% of American families will either have a tax increase or no change.” People with the highest incomes, he said, would be “the biggest winners.”

Republicans claimed that the 1980s tax cuts would stimulate so much economic activity that tax receipts and budgets wouldn’t suffer. But by the end of the eight-year Reagan presidency, revenues were an unprecedented $1.3 trillion short of federal spending. That was more than three times the deficits for the eight years before Reagan — combined.

For years, Republicans have pointed to deficits as a reason to cut spending on Social Security, Medicare and Medicaid. But there’s another way to deal with deficits: raise more revenue. In the 1990s, that’s what Congress did, increasing the top income-tax rate instead of cutting it.

Both hikes came from a Democratic-controlled Congress. The first lost Republican President George H.W. Bush re-election after he agreed to it. Then Democratic President Bill Clinton engineered an increase to 39.6% in 1993 that Republican lawmakers and conservative pundits said would kill jobs and sink revenue collection.

President Clinton, with Vice President Gore at his side, in 1993 signs a budget bill that included tax increases. 

Photographer: Renaud Giroux/AFP via Getty Images

Instead, the economy took off. Revenue jumped. Finally, there were budget surpluses for the first time in 30 years.

The federal government went back to running deficits again after President George W. Bush put through two tax cuts in 2001 and 2003.

While those tax bills contained modest cuts for most Americans, the benefits once again flowed largely to the rich: The top 1% of households received an average tax break of $570,000 for the eight-year period that followed the second bill, according to the Center on Budget and Policy Priorities.

It wasn’t just a result of lowering the top rate to 35%.

For decades, dividends paid to shareholders — predominantly wealthier people — were taxed like salaries and wages. But the 2003 law created a new category called “qualified dividends.” What constituted such a dividend was complicated, largely how long the stock was held, but its main benefit was that it would be taxed at 15% rather than 35% for upper-income people.

An auto worker in Detroit who received $5,000 in qualified dividends might have saved $500 under the new law. An auto executive who received $100,000 in such dividends would have saved $20,000.

This tax break, narrowed since then but only modestly, has cost the U.S. Treasury an estimated $350 billion since 2004. Upper-income taxpayers have benefited the most.In 2019 alone, it was worth $16.2 billion to taxpayers earning $1 million or more.

To put that $16.2 billion in perspective: It’s the equivalent of the federal income taxes paid by everyone earning $50,000 or less in California, Idaho, Iowa, Kansas, Minnesota, Nebraska, New Hampshire, Oklahoma, Pennsylvania, South Dakota, West Virginia and Wisconsin — combined.

President Barack Obama later signed legislation that made the tax break permanent, but he also steered tax increases through Congress, pushing the top rate back to where it had been under Clinton.

All this led to what would be the signature legislative triumph of the Trump presidency, the Tax Cuts and Jobs Act of 2017. The sheer magnitude of the tax cuts it gave to the wealthy and corporations made the law the most significant since the Reagan era.

In 2019 alone, the tax cuts cost the U.S. Treasury $259 billion. Virtually half that money flowed to those earning $200,000 or more

Corporate Clout 

As Congress cut the taxes of wealthy Americans, it also slashed taxes on corporations. Their rate plummeted from 35% to the present 21% — the lowest in 80 years.

When the rate was higher, the largest U.S. companies avoided paying it through tax loopholes, one of the most lucrative of which let them stash their overseas income in offshore tax havens.

As billions and billions of corporate profits piled up offshore and began to approach $1 trillion, the companies fretted. A group that included Microsoft, Intel, Apple and Coca-Cola formed a lobby called the Homeland Investment Coalition to pressure Congress to change the law so they could bring that money back to the U.S. — at a lower tax rate than domestic corporations pay.

For example, while a local construction company in Des Moines might pay 35% on profits from building a high school in Iowa, the coalition proposed in 2003 that multinationals with foreign earnings would pay only 5.25% in U.S. taxes on profits earned from selling products or services outside the country.

Lawmakers were happy to help.

“We want job creation,” Sen. Gordon Smith, a Republican from Oregon, said when the American Jobs Creation Act of 2004 was being considered with a provision he helped insert to make the tax holiday happen. “We want this to get to the shop floor, not to the corporate boardroom. … We want it to go to those things that will improve the productive capacity of American industry and the rehiring of American workers. We don’t want it to be part of some financial flimflam.”

But flimflam it was. After the bargain-basement tax break became law, companies did bring money back to the U.S. Nearly half the repatriated $312 billion came from just 15 companies, including Hewlett-Packard, Pfizer and Merck. The U.S. Treasury later estimated that the tax break benefited only 4% of American corporations.

How many jobs were created by the American Jobs Creation Act of 2004?


That’s according to a 2011 report by a subcommittee of the U.S. Senate Homeland Security committee. In fact, it found the 15 largest repatriating corporations cut jobs and reduced their overall U.S. workforce by 20,931 people.

The top companies increased stock buybacks, rewarding shareholders and boosting their executives’ pay — despite provisions of the 2004 law prohibiting use of the repatriated cash for those purposes.

It’s another way that tax changes are worsening both income inequality and the racial wealth gap, because stock buybacks disproportionately benefit high-income white Americans.

The 2004 repatriation “not only failed to achieve its goal of increasing jobs and domestic investment in research and development,” concluded the subcommittee’s report, “it did little more than enrich corporate shareholders and executives while providing an estimated $3.3 billion tax windfall for some of the largest multinational corporations.”

Congress responded by doing it all over again in 2017, giving the same group of companies a variation on the tax break it had awarded them in 2004.

The Tax Cuts and Jobs Act of 2017 lowered the tax rate on most repatriated funds to 15% — not as bargain basement as in 2004, but still a dramatic cut — and gave multinational corporations a much longer holiday to bring the money home: eight years.

Promising that the tax break would “turn America into a job magnet,” President Donald Trump claimed that no less than $4 trillion would come back to the States. “This is money that would never, ever be seen again by the workers and the people of our country,” he said.

The money is coming back — but not to American workers or communities thirsty for corporate investment. Instead, just as in 2004, it is flowing to shareholders and executives. A report by the Federal Reserve found in 2019 that share buybacks for the 15 largest corporations holding offshore cash “rose sharply” after the law passed.

Money helps explain why this sort of thing keeps happening.

Every year corporations spend more than 85% of the total reported expenses associated with lobbying Congress. By contrast, labor unions, which represent interests of working people, account for less than 2%.

And though corporate donors lean Republican as a rule, they give generously to both parties. Over the past six election cycles, business-related donors contributed roughly $7 billion to Democrats and Republicans apiece, according to OpenSecrets, a nonpartisan body that tracks contributions.

Ellen Miller, who long oversaw Washington-based nonprofits that tracked the influence of money in politics, thinks that’s why Republican zeal to cut taxes was long met by less-than-energetic opposition.

“The campaign finance system we have that is inundated by corporate donors has kept Democrats asleep on this issue,” she said in an interview.

The so-called carried interest loophole is a perfect example of how companies use the influence they’ve bought.

Democrats and some Republicans have railed for years against the provision, which lets private-equity and hedge fund executives pay taxes on their pay at nearly half the going rate. Even Trump called for its end. The Inflation Reduction Act negotiated this year by Sens. Chuck Schumer and Joe Manchin would have narrowed the loophole, but even that was too much for the private-equity industry.

Company lobbyists turned to Sen. Kyrsten Sinema of Arizona, a Democrat to whom investment firms have contributed $2.7 million in the past five years.

She killed the provision. The carried interest loophole lives on.

The ‘Angel of Death’ Loophole

Washington’s restructuring of another tax — one that affects only a handful of Americans — may best show how elected officials have shaped the tax system for the few.

In place since 1916, the estate tax has been defended by Democrats and some Republicans for many years to prevent what President Franklin D. Roosevelt once described as the “transmission from generation to generation of vast fortunes by will, inheritance, or gift.” Andrew Carnegie, one of the richest Americans and an income tax foe, had this to say about the estate tax: “Of all forms of taxation, this seems the wisest.”

But laws enacted by Republican-controlled Congresses slashed the number of taxpayers paying it from 27,568 in 1982 to 2,584 in 2021.

Collections, adjusted for inflation, were virtually unchanged over that period — even though household wealth among the rich exploded during that time.

That dramatic reduction in estate tax filings is the result of highly successful campaigns over the years by Republicans labeling it the “death tax” and advancing specious arguments about alleged injustices. One of the most popular was the claim that it forces the sale of family farms.

“They have wonderful farms, but they can’t pay the tax, so they have to sell,” Trump said in 2017.

But according to the Urban-Brookings Tax Policy Center, several analyses have not turned up “a single farm that went out of business due to estate tax liability.”

Because of favorable laws and clever tax planning, the number of estate tax returns continues to plummet. “Only morons pay the estate tax,” Trump White House advisor Gary Cohn is said to have told congressional Democrats in 2017 when they were calling for a rate increase.

Even before cuts in the estate tax, the wealthy long ago figured out how to pass along the family fortune tax free: It’s called the “angel of death” loophole, the vehicle by which great wealth is passed from one generation to the next and allowed to compound tax free into even greater value. It is the foundation on which the wealth of some of America’s richest families is built.

It works like this.

Say you bought 1,000 shares of Widget Company stock at $50 a share in 1980. By 2022, the stock is worth 10 times as much. If you sell those shares, you’ll owe capital-gains taxes of $100,000. But if you die and leave those shares to your favorite niece, no tax is owed and your niece has escaped a $100,000 tax bill.

Estimates put the amount of lost tax revenue from this loophole as high as $54 billion a year.

Closing it is on Biden’s agenda, as it was on Obama’s, as it has been on tax reform agendas for decades. But still it exists, having avoided any serious challenge in recent years.

Contrast that plum preserved by Congress for the rich with what Congress took away from the middle class in the so-called SECURE Act in 2019 (Setting Every Community Up for Retirement Enhancement).

Prior to the law, someone who inherited an IRA could withdraw payments from that retirement account over their entire life, thus stretching out taxes owed over many years, possibly decades. But SECURE mandated that withdrawals from an inherited IRA be taken within 10 years. Now a much larger portion of inherited IRAs will go to taxes because many beneficiaries will have to withdraw the money while in a higher tax bracket, before their own retirement.

That means a middle-class worker who inherits a $1 million IRA might pay $240,000 to $320,000 in taxes. A scion of a wealthy family who inherits $100 million in stock, meanwhile, pays no capital-gains taxes at the time and can cash it out whenever desired.

Activists take part in a 2021 demonstration at the US Supreme Court involving the Poor People Campaign, which has called for action on poverty, including higher taxes on wealthy people and big businesses.

Photographer: Jemal Countess/Getty Images for MoveOn

The Bottom Line 

The earnings of the majority of American families have been mostly stagnant since 1981, just barely keeping up with inflation. Think of it as standing still financially for 40 years.

No group of working Americans has paid a steeper price for income inequality in the tax-cutting past four decades than African Americans. Their median household income of $45,870 is nearly 40% lower than that of white households. Over the decades, “next to no progress has been made in closing the black-white income gap,” concluded a report for the Federal Reserve Bank of Minneapolis in 2018. “The typical black household remains poorer than 80 percent of white households.”

Because Black families have fewer opportunities to set aside money and accumulate assets, the wealth gap between white and Black families is even worse. White families on average have six times more wealth than Black families: $983,400 for whites; $142,500 for Blacks, according to Federal Reserve data. Half of African American families have assets of less than $25,000.

And those numbers were compiled before COVID-19, a bigger financial hit to African Americans than any other racial or ethnic group, according to the Census Bureau.

For most of the period when the country had a more progressive tax system, racial discrimination was legal. By rule and practice, the U.S. government largely blocked Black families from accessing federal programs that helped white families build generational wealth.

In the past four decades, meanwhile, wealth-building opportunities for people with modest resources have been in short supply. Sixty percent of the country — the people on the less-income side of the scale — have a lower share of total assets in the U.S. now than in the late 1980s, according to the Federal Reserve.

It would take big change to turn that around. The tax provisions in the Inflation Reduction Act are only a modest step in that direction.

Biden’s original tax proposals were much more ambitious than what wound up in that law. He called for raising top tax rates on individuals back to the Clinton-era 39.6% and on corporations from 21% to 28%, taxing capital gains like wages, eliminating the “angel of death” loophole that allows the wealthy to pass their stock holdings to heirs tax-free, and many other provisions to shift more of the tax load to those at the top.

President Biden signs the Inflation Reduction Act on Aug. 16 as members of Congress look on. 

Photographer: Drew Angerer/Getty Images

Public opinion polls show significant support for most of his tax proposals. But there’s virtually no hope for their adoption by the incoming Congress. As control of the House of Representatives shifts, Republicans can stymie Biden’s ambitions for a tax system that does more to blunt inequality. They can push to lock in Trump-era changes that would otherwise expire.

They can keep the trend Reagan set in 1981 going.

To Chuck Collins, a senior scholar at the Institute for Policy Studies who has been tracking income inequality for years, it is more urgent than ever that the U.S. do something about the growing chasm between those at the top and everyone else — something besides making it worse.

“Our current policies are propelling us toward a society that even the rich don’t want,” he said, “with the ultra-wealthy living in walled, gated communities driving bulletproof Mercedes, a precarious middle class with a larger percentage of people with no financial reserves.

“You don’t want your children growing up in an apartheid society. It creates volatility and social and political instability. Which is what we are wading into now.”

Journalist James B. Steele reported this story for the Center for Public Integrity in partnership with Bloomberg Tax. He has twice won the Pulitzer Prize for coverage of federal taxes and is the co-author most recently of America: What Went Wrong? The Crisis Deepens.

To contact the reporter on this story: James B. Steele at

To contact the editors responsible for this story: Jamie Smith Hopkins at; Bernie Kohn at

The Dystopian Myths of Red America

Paul Krugman

By Paul Krugman

Opinion Columnist

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From NY Times

Desensitization is an amazing thing. At this point most political observers simply accept it as a fact of life that an overwhelming majority of Republicans accept the Big Lie that the 2020 election was stolen — a claim with nothing to support it, not even plausible anecdotes.

What I don’t think is fully appreciated, however, is that the Big Lie is embedded in an even bigger lie: the claim that the Democratic Party is controlled by radical leftists aiming to destroy America as we know it. And this lie in turn derives a lot of its persuasiveness from a grotesquely distorted view of what life is like in blue America.

Urban elites are constantly accused of not understanding Real America™. And, to be fair, most big-city residents probably don’t have a good sense of what life is like in rural areas and small towns, although it’s doubtful whether this gap justified the immense number of news reports interviewing Trump voters sitting in diners.

But I’d argue that right-wing misperceptions of blue America run far deeper — and are far more dangerous.

Let’s start with the politics. The other day The Washington Post’s Dave Weigel, reporting from the campaign trail, noted that many Republican candidates are claiming that Democrats are deliberately undermining the nation and promoting violence against their opponents; some are even claiming that we’re already in a civil war.

Some (many?) of these candidates have been winning primaries, suggesting that the G.O.P. base agrees with them. Actually, I’d like to see some surveys along the lines of those showing that most Republicans accept the Big Lie. How many Republicans believe that President Biden and other leading Democrats are left-wing radicals, indeed Marxists?

Relatedly, I’d like to know how many Republicans believe that Black Lives Matter demonstrators looted and burned large parts of America’s major cities.

Now, the reality is that the modern Democratic Party is a mildly center-left coalition, consisting of what Europeans would call social democrats, and relatively conservative ones at that. To take one measure, I can’t think of any prominent Democrats — actually, any Democratic members of Congress — who have expressed admiration for any authoritarian foreign regime.

This is in contrast to widespread conservative admiration for Hungary’s Viktor Orban, who recently denounced other Europeans for “mixing with non-Europeans” and declared that he doesn’t want Hungary to become a “mixed-race” country.

On the domestic violence front, a study by the Anti-Defamation League found that 75 percent of extremist-related domestic killings from 2012 to 2021 were perpetrated by the right and only 4 percent by the left.

Finally, about B.L.M.: The protests were, in fact, overwhelmingly peaceful. Yes, there was some arson and looting, with total property damage typically estimated at $1 billion to $2 billion. That may sound like a lot, but America is a big country, so it needs to be put in perspective.

Here’s one point of comparison. Back in April, Greg Abbott, the governor of Texas, pulled a political stunt at the border with Mexico, temporarily imposing extra security checks that caused a major slowdown of traffic, disrupting business and leading to a lot of spoiled produce. Total economic losses have been estimated at around $4 billion; that is, a few days of border-security theater appear to have caused more economic damage than a hundred days of mass protests.

Yet pointing out these facts probably won’t change many minds. Nor does there seem to be any way to change the perception, also alluded to in that Post article, that a lax attitude toward law enforcement has turned America’s big cities into dangerous hellholes. It’s true that violent crime rose during the pandemic, but it rose about as much in rural America as it did in urban areas. And despite that recent rise, violence in many cities is far lower than it was not long ago.

In New York City, homicides so far this year are running a bit below their 2021 level, and in 2021 they were 78 percent lower than they were in 1990 and a quarter lower than they were in 2001. As Bloomberg’s Justin Fox has documented, New York is actually a lot safer than small-town America. Los Angeles has also seen a big long-term drop in homicides, as has California as a whole. Some cities, notably Philadelphia and Chicago, are back to or above early 1990s murder rates, but they’re not representative of the broader picture.

But who among the Republican base will acknowledge this reality? Whenever I mention New York’s relative safety, I get a wave of mail saying, in effect, “You can’t really believe that.”

The fact is that a large segment of the U.S. electorate has bought into an apocalyptic vision of America that bears no relationship to the reality of how the other half thinks, behaves or lives. We don’t have to speculate about whether this dystopian fantasy might lead to political violence and attempts to overthrow democracy; it already has. And it’s probably going to get worse.


I have been living in Switzerland for the last 4 months. From the Outside looking in, I have been worried about the state of America. It seems like there is just no common ground. During the 1980’s I was a university student. There were conservatives and liberals. Democrats and Republicans. We could agree to disagree but we could also find common ground. I am a democrat but I have also voted for some republicans. My conversations with colleagues in Europe made me realize how much the GOP has changed. Never before has there been one side so divorced from reality. They seem to believe that their personal liberties extend to create their own facts regardless of what the science says. For me personally- I believe that climate change is real and that there are things we can do to slow it’s progress. I also believe that everyone who can, should get vaccinated to protect those who cannot get vaccinated. Choosing to be vaccinated CAN be a choice. BUT choices have consequences. If you make the decision to not be vaccinated, you may also be making the choice to not get on a plane, not travel to some countries, not eat indoors and possibly not work in some places. It is a choice you make. You face the consequences. If you get Covid, I wish you a speedy recovery and the best possible care. When you are struggling to breath, realize that yes, the medical staff is pretty pissed at you but they are going to do their job.

When I returned back to the USA I was out getting a coffee and I heard the people at the next table talking. They were clearly more conservative than I am. I listened because I do not have all the answers and I want to hear the opinion of others. What I discovered is that they really were not talking about policy or ideas. The only thing they had was what they could do to “trigger the libs”. It made me think, is the GOP’s policy agenda hidden or nonexistent?

I was trying to put my thoughts into my notebook when I read Sunday’s paper. On the opinion page of Seacoast Sunday there was a piece by John T. Broderick Jr., the former dean of UNH Law and the founder of the Warren B. Rudman Center for Justice, Leadership and Public Policy. He put it better than I ever could.

Make no mistake. America is broken. The entire idea behind democratic rule is subverted every day by a minority of our population who distrust any government they don’t control, ignore science they don’t understand yet don’t like while callously putting others at risk, disparage and restrict voters of a color different than their own and despise immigrants striving to be free. Their view of our Constitution is most often fanciful, contradictory and uninformed and their idea of freedom is twisted and self-absorbed. They live in a self-interested, imaginary world with no social compact and no reciprocal responsibilities. They disgrace the service and sacrifice of so many Americans who unselfishly gave so much to protect rights they neither understand nor honor. They support the Big Lie with zero proof; a Lie that any rational American would reject. Every federal judge found no evidence because there was none. It is the same Big Lie that even President Trump’s hand-picked Attorney General William Barr disowned. Incredibly, according to some recent polls, sixty percent of Republicans still believe that the election was stolen, too. They have zero proof as well. Do facts matter anymore? Is truth too inconvenient to be honored? For an increasing number of Americans, facts don’t exist or at least facts that don’t serve their ends.

Too many Americans live in a conspiracy-laden echo chamber of their own creation and embrace the American flag while supporting those who used that same flag as a spear to attack Capitol police in an effort to subvert our democratic election. These are the same people who allegedly support the police 100 percent. Many of those people presented with clear and graphic proof that misguided Trump supporters attacked our government on January 6th have concocted the bizarre notion that the FBI or Antifa were behind the insurrection. They have zero proof of that as well yet they hold to it senselessly even as the Proud Boys and others are being prosecuted or plead guilty. How far have we fallen? How dangerous is our descent? How much destructive nonsense, ill-will and subversive conduct can we tolerate and still sustain democratic rule in America? Free speech is protected and cherished under our Constitution but not efforts in plain sight to subvert or destroy our country. Actions speak louder than words.

The Republicans in Congress and in Republican-controlled legislatures across the country are actively working to grind our democratic process to a halt and replace it with autocratic rule. Where are the Republican voices with the courage to speak up? Why are so many good Republicans remaining silent or objecting only in whispers or among a small circle of safe friends? Where are they? Conservative Republicans cheer Kyle Rittenhouse, who, whatever the verdict, took two lives with an automatic weapon. Cheering seems tone deaf and classless to me. I have never heard a police officer cheer if he/she takes another life in self-defense. I’ll bet you haven’t either.

Where have all the statesmen gone? When did truth die? When was finding out who organized and funded the January 6th assault on our free elections a petty partisan exercise to be disparaged by virtually every elected Congressional Republican? Unless things change, America will continue its sorry decline from being a democratic beacon to a world yearning to be free to just a sad example of a noble yet failed experiment in self-government. I take nothing for granted. In current circumstances silence is dangerous.

Putin must be smiling in Moscow.

John T. Broderick Jr. is the former dean of UNH Law and the founder of the Warren B. Rudman Center for Justice, Leadership and Public Policy.

How the GOP Blew It’s Chance

The window for Republicans to create a multiracial working-class party closed this weekend when 49 senators nixed COVID-19 aid.

They Senate on Saturday passed President Biden’s $1.9 trillion coronavirus relief package which includes a $1400 stimulus check so go out and buy yourself something nice.  Like November‘s rent. 

The $1.9 trillion Covid relief bill passed by the Senate this week while the Republicans spent most of the weekend trying to derail it while still whining about Dr. Seuss. 

The past few months have offered a deeply revealing look at the state of American democracy and the course it could take over the next few years without major reforms. On the one hand,  we saw a political faction which represents a minority of American voters try to overturn an election they lost and then sell a violent insurrection interfere with a lawful counting of electoral votes. Then about two months later we saw 50 senate Democrats who represent about 41 MILLION MORE Americans than the 50 senate Republicans vote to deliver one of the largest rescue bills in history.  The relief bill has been massively popular in poll after poll. Not a single Republican joined them in the Senate or in the house seemingly because they were too busy doing jobs like reading Green Eggs and Ham. 

The Republican Party has become (once again) the party of NO. And their brand is pearl clutching over reaction.

While the Democrats are working to help real people. The Republican are all up in arms about The Muppets, Dr Seuss and Mr Potato Head.  They used every delay tactic they could to actually delay stimulus checks going out to 80% of Americans.  

The GOP wants all children back to in person learning in schools but they do not support the bill to get vaccines to everyone.  

They spend more time trying to make voting more difficult than they did in confirming Trump’s last minute supreme court justice. 

Politics will ALWAYS be part of the process. But maybe the GOP could take a stand on something a little more substation that Mr Potato Head?!  

While you wait for your stimulus check- remember the GOP delayed it. 

While you wait in line to vote in the next election- remember it was the GOP that made it harder. 

It was less than two weeks ago that Texas Sen. Ted Cruz, a past and future presidential hopeful for the Republican Party, stood before an annual confab of conservative fanatics and proclaimed he could see the future of the Grand Old Party. In Orlando, a stone’s throw from Walt Disney’s Fantasyland, Cruz promised CPAC that the GOP will be “the party of steel workers and construction workers and pipeline workers and taxi cabdrivers and cops and firefighters and waiters and waitresses and the men and women with calluses on their hands who are working for this country.”

Yet on Saturday afternoon, Cruz and 48 of his Republican colleagues raised their uncalloused, millionaire hands and flipped a giant middle finger to the American middle class who could have returned their party to power in Congress in 2022. In unanimously — and futilely — opposing the Democrats’ 50-49 passage of the $1.9 trillion COVID-19 relief bill that will likely be signed by President Joe Biden later this week, Cruz and his fellow GOPers went on the record opposing $1,400 checks for struggling taxi drivers, expanded jobless benefits for waiters and waitresses whose jobs were obliterated by the pandemic, and local aid to stop the feared layoffs of cops and firefighters.

Even before this weekend’s historic vote that will define America’s politics of the 2020s, the Republicans provided a giant metaphor for its drop-dead message to the working class when a party stalwart — Wisconsin Sen. Ron Johnson, who concedes his “preference” is not even running for another term next year —dug deep in the Senate rulebook to force clerks to read aloud the entire 628-page relief bill. The goofy parliamentary stall took some 10 hours and 43 minutes, finally ending around 2 a.m. Friday morning as an anguished Johnson — required to be present — buried his exhausted face in his hands. How bad were “the optics” — in Beltway lingo — of the Wisconsinite’s stunt? While the move held up billions to speed up coronavirus vaccines, approximately 750 more Americans died from COVID-19.

The father of the now lost-in-the-wilderness American right, William F. Buckley, wrote famously that the modern conservative “stands athwart history, yelling Stop.” The political and moral bankruptcy of that philosophy was on full display this weekend, as Republicans planted their flag as the party of obstruction and celebrators of broken, gridlocked D.C. politics, while the Democrats voted to keep history moving forward, with a bill supported by about 70% of the American people, including millions of rank-and-file GOP voters.


Sen. Ron Johnson (R., Wis.) tried to hold up the coronavirus relief bill.

Greg Nash / MCT

Yes, there were moments when the Democrats — still no more of an “organized political party” than when Will Rogers told that joke a century ago — looked determined to snatch defeat from the jaws of victory, confronted with a bill that, with the arguable exception of Obamacare in 2010, does more for the U.S. middle class than any legislation since Lyndon Johnson’s Great Society since the mid-1960s. The macho posturing of West Virginia Sen. Joe Manchin — for whom getting on the Sunday talk shows matters more than his state’s high rate of poverty — nearly toppled the bill, and the Democrats’ blind spot on the $15 minimum wage is deeply disappointing to leftists who voted for Biden last November.

But in the end, the Democrats’ resolve and unity among its one-vote Senate majority was a stunning victory for a new American political reality in the 2020s. It involves forging an all-new definition of “bipartisanship” around hardball politics for measures that are supported by majorities of citizens, rather than negotiating with a Republican Party that continues to rally behind a Big Lie around nonexistent voter fraud and the 2020 election that threatens our democracy.

Saturday’s bold vote didn’t change the overriding dynamic behind America’s warring political tribes. The Democrats’ base is still college-educated voters, while Republicans’ toxic stew of both class and racial resentments will continue to amp up white people without diplomas. But Democrats just passed a bill that, frankly, does more for the nation’s broad, multiracial working class and the less-advantaged than for upscale suburbanites who put Biden over the top in 2020. In doing so, the party has a great chance to stop the slow bleed of working-class voters — especially a shift of Latinos and some Black voters to Donald Trump last fall — and ride a booming post-pandemic economy in 2022, thus bucking the powerful trend of a party in power losing seats in a midterm election.

After a half-century or so of watching American politics, it’s hard for me to overstate what an epic flub we are witnessing from today’s GOP. Trump’s reckless, demagogic presidency riled up voters on both sides; even in losing badly to Biden, the 45th president increased his turnout from 62 million in 2016 to more than 74 million, in a way that suggested a path forward for a new kind of right-wing populism. Indeed, many voters on the long lines in pro-Trump precincts cited their initial $1,200 stimulus check, and there’s little doubt that the GOP standard-bearer would be serving his second term if he’d forced through a second $2,000 check before Nov. 3, as Trump himself realized after it was too late.

The tragedy of the coronavirus had offered Republicans an opportunity to show a kind of economic empathy for the “essential workers” of the blue-collar electorate that would have doubled down on its current limited strategy, which is mostly cultural warfare. But — other than a laudable child tax credit offered by Utah Sen. Mitt Romney, who’s not super popular among the party’s pro-Trump base these days — GOP politicians have only offered the middle class empty platitudes and pale light beer versions of Democratic social welfare, much as the Dems looked utterly lost trying to sell watered-down Republican ideas for 30 years after Ronald Reagan.


In this image from video, the vote total of 50-49 on Senate passage of the COVID-19 relief bill, is displayed on screen in the Senate at the U.S. Capitol in Washington Saturday.


The Republicans do have a plan but it’s as dumb as it’s morally repellent — doubling down on its scheme to try to win national elections with just 46-47% of the popular vote, aided by the anti-democratic aspects of the Constitution and our political norms as reflected in the makeup of the Senate, its arcane rules and, in presidential years, the Electoral College.

This week showed us both what the GOP is incapable of doing — aiding the middle class — but also its fundamental three-prong strategy for the elections of 2022 and 2024. First, burn a lot of empty political calories on cultural outrage such as the supposed banning (not really) of Dr. Seuss and (also not really) Mr. Potato Head, with the subliminal messages that what leftists really want to cancel is their white supremacy. Second, muddy the waters on the pandemic with “free-dumb” policies like Texas and Mississippi ending mask mandates and other restrictions just as new variants appear. Third — and this is really the centerpiece — is to fall back on Trump’s 2020 Big Lie to pass a slew of voting restrictions targeting Black voters, Latinos, or the young, to win in 2022 not on the best ideas but by picking the voters.

The fact that the current Republican Party is so quick to fall back on racism, xenophobia and misogyny makes me happy that its leaders seem to have also flunked Poly-Sci 101. The opportunity for the GOP to become a true majority national party as a foil to the increasingly diploma-wrapped image of the Democrats — in a nation where just 37% of adults currently hold four-year college degrees — was right there, if the party had been willing to put its money where its mouth was, on Cruz and his phony-baloney rhetoric about cabdrivers and the wait staff.

Instead, the 2022 election will turn on Republicans’ success as an anti-democratic (with a small “d”) party trying to keep as many legitimate voters away from the ballot box as possible. For Democrats, the ultimate lesson of this weekend may prove less about economics and more about courage in using just 51 votes to make the tough calls for saving America. Giving aid to the working class was a good first step for the Democrats, but whether it matters at the polls in 20 months depends on their bravery in abolishing the filibuster and passing laws to make sure that the working class can still vote.


Will Bunch

Will is the national columnist — with some strong opinions about what’s happening in America around social injustice, income inequality and the government

The 1920s Roared After a Pandemic, and the 2020s Will Try

A year ago I was faced with an incredibly difficult decision. Do we close the gyms because of the pandemic or do we fight to remain open. Yesterday I wrote an e-mail to my staff and posted it on the Atlantic Gymnastics Blog. Just to help them keep things in perspective. Not on what we have lost- but on how far we have come.

Today I was reading Bloomberg Business Week and I came upon an article from a couple weeks ago. 2020s Will Try To Roar Like The 1920s by Peter Coy. It gave me a lot to think about.

The 1920s Roared After a Pandemic, and the 2020s Will Try

The day was cold and windy. Standing outside the Capitol, the just-sworn-in president called for “a new unity of spirit and purpose” to bind together a nation that had been wracked by a pandemic and high unemployment. His predecessor wasn’t on stage. The inauguration of Warren G. Harding on March 4, 1921, marked the inauspicious, unofficial start of an historic decade. The somber mood gave no hint that America was about to go on a tear.

The Roaring Twenties saw widespread adoption of the assembly line, the automobile, radio, motion pictures, indoor plumbing, and labor-saving electric appliances. Consumerism and mass culture took shape. It was the decade of art deco and jazz, Coco Chanel and Walt Disney, The Great Gatsby and the Harlem Renaissance. It was “the first truly modern decade,” says retired Marquette University economic historian Gene Smiley.

As the U.S. suffers through another pandemic, it’s tempting to ask whether history will repeat itself. Once the virus passes, will the 2020s roar the way the 1920s did?

It’s not impossible. The past year demonstrates that the economy and society can change shape quickly. We’ve seen multiple Covid-19 vaccines developed in record time and an almost-overnight transition to remote work. Tesla Inc. delivered just shy of a half-million electric vehicles in 2020 despite the pandemic. A London-based unit of Alphabet Inc. solved a half-century-old scientific puzzle, using artificial intelligence to predict accurately how proteins fold, which could revolutionize drug discovery.

In all probability, though, the U.S. will continue to wrestle with “secular stagnation,” an economic plague of developed nations. Preconditions include an aging population, slow labor force growth, and weak demand for credit, which is why the disease is resistant to traditional monetary remedies. The latest evidence that investors aren’t holding out much hope the coming decade will break out of that mold: The yield on inflation-protected 10-year Treasury notes is around negative 1%, down from 4% during the ’90s tech boom.

Despite the differences, by copying what was done right in the Roaring Twenties and avoiding what went wrong, Americans can make the 2020s a success—by today’s standards, anyway.

The world of 2021 is “a muddled mix of the Twenties in a lot of ways,” says Rutgers University economist Eugene White. Stock prices are high in relation to corporate profits, as then. Today’s suspicion of international institutions such as the United Nations and World Health Organization would be familiar to a traveler from the 1920s. Race relations are once again strained, though Black Americans are in a far better position than they were a century ago. Tariffs rose under President Donald Trump, as they did in the 1920s. Americans continue to complain about overbearing government, as they did during Prohibition. The 1920s was the first decade in which the rural population was smaller than the urban one; in the 2020s, rural White America is feeling disenfranchised after having gone strong for Trump’s failed reelection.

“There is no chance of sustained decade-long growth that matches the achievement of the 1920s”

The 1920s didn’t get off to a good start. The Spanish flu pandemic, which killed about 675,000 Americans out of a population of 100 million, was over, but the U.S. was deep into an 18-month downturn marked by the sharpest one-year decline in wholesale and consumer prices in 140 years of record-keeping. The economic miracle of the Twenties didn’t really begin until July 1921, when the recession ended and boom psychology set in.

This summer, depending on how vaccinations progress, there will likely be a flicker of that mania as people emerge from their Covid-19 bubbles, ready to party. Economists surveyed by Bloomberg are predicting above-average growth in gross domestic product after a difficult first quarter, with the median forecast peaking at an annualized 4.7% in the third quarter.

Indications of pent-up demand are abundant. Carnival Corp., in a sign of confidence in the public’s desire to socialize again, plans to begin boardings in April for its biggest ship ever, the 5,200-passenger Mardi Gras. Finally free to do as they please, Americans may make like the Lost Generation, who chose to “live in the pure moment, live gaily on gin and love,” as the literary critic Malcolm Cowley wrote.

Gin and love make a powerful cocktail but won’t sustain a decade’s worth of growth. The bull case for a repeat of the 1920s is that the pandemic lockdown has accelerated the adoption of technologies such as videoconferencing and digital commerce that will keep paying dividends long after the virus is vanquished. McKinsey & Co. says a global survey of executives revealed that they were a “shocking” seven years ahead of where they planned to be in terms of the share of digital or digitally enabled products in their companies’ portfolios. And there’s still headroom. Cowen Research reports that almost half the corporate technology buyers it interviewed said they were in the early stages of a transition to cloud computing.

What’s hard about forecasting technological progress is figuring out where we are on the adoption curve. Take robots. The word was coined in 1920 by a Czech playwright, Karel Capek, but a century later robots haven’t lived up to hopes—or fears. It took 13 years, from 2005 to 2018, for the number of installed robots in the U.S. to double, according to the International Federation of Robotics. To a pessimist, that’s almost a plateau. To an optimist, it means robots are still on the bottom of the S-shaped adoption curve and are poised for takeoff at any moment.


Bearish forecasters say labor-force expansion and gains in schooling don’t match those of the 1920s, and information technology and biotech breakthroughs, while impressive, don’t measure up to the transformative, general-purpose technologies—electrification and the internal combustion engine, to name two—that powered growth a century ago. As investor Peter Thiel famously said, “We wanted flying cars, instead we got 140 characters.” (It’s 280 characters now, but still.)

For the average American, life changed more from 1920 to 1929 than it’s likely to change from 2020 to 2029. Electrification gave us refrigerators (instead of ice boxes), washing machines (instead of washboards and hand-cranked wringers), and radio (instead of your sister at the piano). With electrification, factories no longer had to rely on power from a single engine that was connected to machines via noisy, inefficient belts and pulleys.

The internal combustion engine came into its own in the 1920s, powering cars, trucks, farm equipment, and airplanes. The number of registered drivers almost tripled during the decade. The automobile’s rise sparked investment in roads and suburbs as well as production of rubber, steel, glass, and oil.

Two Decades Far Apart

Robert Gordon, an economist at Northwestern University, is a leading proponent of the argument that these modern times don’t live up to those modern times. At the request of Bloomberg Businessweek, he assembled figures on labor productivity for the entire economy from 1893 through 2019, clustering the data into roughly equal spans that begin and end at high points in the business cycle. The data up to 1948 come from a book he wrote, The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War. For the rest he relied on government figures.

The data compiled by Gordon demonstrate that productivity growth jumped in 1920 and remained high for a half-century before slumping after 1973. “While it is likely that productivity growth will revive somewhat in the 2020s from the dismal record of the 2010s,” Gordon wrote in an email, “there is no chance of sustained decade-long growth that matches the achievement of the 1920s.”

One lesson, then, is that timing matters. The 1920s roared because technologies that had been nurtured for several decades were finally ready for mass deployment. That may not be the case today.

It’s easier to spot social similarities between the decades than economic similarities. Then as now America was divided between a fast-moving, multiethnic, urban society of immigrants and a predominantly White, conservative, rural society pining for a past that it perceived as purer and less tumultuous. Americans elected three Republican presidents in the 1920s—Harding, Calvin Coolidge, and Herbert Hoover. Harding vowed a “return to normalcy,” while Coolidge, a taciturn Vermonter, “appeared to be a reluctant refugee from the previous century,” wrote Nathan Miller in New World Coming: The 1920s and the Making of Modern America.

The reformist Progressive Era that began around 1900 had lost its moxie, and the big-government New Deal hadn’t yet arrived. Business was given free rein. “Never before, here or anywhere else, has a government been so completely fused with business,” the Wall Street Journal wrote in 1928. Said Coolidge: “The man who builds a factory builds a temple. The man who works there worships there.” Elon Musk slots in nicely as this century’s answer to Henry Ford, though our society is more skeptical that what’s good for business is good for the country.

Gordon calls the 1920s “a Janus-faced decade that defies simple characterization.” It was a time of liberation, in which women got the vote and dared to wear short skirts, smoke cigarettes, and drink bathtub gin, while Black poets, authors, and musicians found wide audiences. “It was the period when the Negro was in vogue,” poet Langston Hughes wrote.

But women still faced discrimination, and Black Americans and immigrants faced that and worse. In 1921 a White mob burned more than 1,200 homes in a Black neighborhood in Tulsa, Oklahoma. In 1925 thousands of unmasked Ku Klux Klan members marched down Pennsylvania Avenue in Washington.

The Immigration Act of 1924 barred the gates to immigrants from Asia and seriously restricted immigration from southern and eastern Europe—drawing the admiration of none other than Adolf Hitler, who wrote approvingly in Mein Kampf, “The American Union categorically refuses the immigration of physically unhealthy elements, and simply excludes the immigration of certain races.”

The 1920s was a time of rising prosperity on the whole but also rising inequality of incomes and wealth and deepening divisions in society. Prohibition, which took effect in 1920, drove a wedge between “drys” and “wets” and fueled organized crime. Factory workers, stock investors, and Big Business mostly did well, but the still-sizable agriculture economy was shocked by a 53% decline in farm product prices in the 1920-21 recession and would take years to recover.

The first three years of Trump’s term were likewise marked by a tide of strong economic growth that lifted many boats, though not all. The unemployment rate for Black Americans, for instance, reached a record low. The pandemic has wrecked much of that progress. Bringing the economy back to its potential to lift up the less fortunate is a second reason, after saving lives, for President Biden to accelerate the distribution of vaccines.

Perhaps the most important lesson the 2020s can learn from the 1920s is the peril of isolationism. The U.S. emerged from the Great War of 1914-18 as the world’s most powerful economy as well as its biggest creditor, having lent heavily to the Entente Powers to finance the war effort.

Yet the U.S. resisted taking on the responsibilities of global leadership. Fed up with Europe and its bloody quarrels, isolationists in Congress prevented the U.S. from joining the League of Nations. With stringent fiscal and monetary policy, the U.S. forced its deflation onto other countries. Washington also insisted that the U.K. and France repay their war debts to the penny. In a vise, those countries raised the money to pay the Americans by exacting reparations from Germany. That fed the resentment among Germans that contributed to the rise of Hitler.

Much has changed since then. The U.S. is now a debtor nation, consuming more than it makes. Trump was correct that this is a problem: The U.S. is accumulating debts, while its productive capacity is being hollowed out.

What’s similar is that today, as in the 1920s, the U.S. can’t escape the special obligations that go along with being the world’s biggest economy. Americans learned that lesson after the twin disasters of the Great Depression and World War II. The U.S. was instrumental in the founding of the UN, the International Monetary Fund, and the World Bank and led the push to lower tariff barriers, which enabled poor countries and those ravaged by war to prosper through trade. Nations such as Germany and France set aside imperialist dreams and focused on quality of life. “If you ask an average European man what he cares about, it’s very often soccer,” says Columbia historian Adam Tooze, author of the 2014 book, The Deluge: The Great War, America and the Remaking of the Global Order, 1916-1931.

In four years in office, Trump revived isolationism, even resurrecting the “America First” motto that Harding campaigned on in 1920—and that was embraced by the anti-Semitic, fascist-sympathizing America First Committee that fought to keep the U.S. out of World War II.

In the absence of U.S. leadership, nations such as Kenya, Ethiopia, Nigeria, Malaysia, and Vietnam are at risk of falling into the orbit of China, says Tooze. “As in the Twenties, we are our own worst enemy,” he says. Biden must attempt to demonstrate that the U.S. is once again a reliable partner.

Meanwhile, the notion that the Covid-19 pandemic is some kind of trampoline that will bounce the U.S. toward a bright future is not only off-putting, but wrong. Pandemics enduringly damage societies in ways that go beyond the death toll. In October the IMF released a working paper by senior economist Tahsin Saadi Sedik and economist Rui Xu that uncovered a vicious cycle: Pandemics reduce output and increase inequality, stoking social unrest, which further lowers output and worsens inequality. The study was based on disease outbreaks in 133 countries from 2001 to 2018. “Our results suggest that without policy measures, the COVID-19 pandemic will likely increase inequality, trigger social unrest, and lower future output in the years to come,” the authors wrote.

A final lesson of studying the 1920s is simply that history does have something to teach us—a point that the movers and shakers of that frenetic decade sometimes had trouble grasping. “History is more or less the bunk,” Ford said in 1916. “It is tradition. We don’t want tradition. We want to live in the present, and the only history that is worth a tinker’s damn is the history we make today.”

Introspection wasn’t the forte of the Roaring Twenties. “Torn nerves craved the anodynes of speed, excitement, and passion,” Frederick Lewis Allen, looking back from the near remove of 1931, wrote in Only Yesterday: An Informal History of the 1920s.

Our nerves, too, are torn. But learning from the past can help the healing begin.

It May Be Time To Sell Your Stock

From Jim Collins at  FORBES

The yield curve has inverted and you should sell your stocks.  That is a simple, declarative statement, and yet one that I have not read anywhere this morning.  Having awakened to the news that the yield on the 2-year U.S. Treasury note had risen above that on the 10-year U.S. Treasury note, I have enjoyed this morning’s sell-off in the equity markets.  I founded a new asset management firm, Excelsior Capital Partners, a month ago to initiate short positions on stocks, and so far the timing has worked out well.

There seems to be a basic misunderstanding of the meaning of the inverted yield curve and its meaning for equity markets.  I am making a few bucks on this confusion, to be sure, but I would rather see an educated investing public. Some of the articles I have read this morning in the financial media are wildly misleading.  So here are a few answers to basic questions:

What is an inverted yield curve?  The yield spread is a simple calculation that involves subtracting short-term interest rates from long-term interest rates.  The yield curve is a plot of interest rates for government bonds of all maturities in a given country. Bond yields represent, in percentage terms, the price investors are willing to pay for those securities.  When demand for bond purchases rises, prices rise, and thus yields (interest rates) fall. When long-term bond yields are lower than short-term yields, the spread is negative and the yield curve is inverted.

Money has a time value.  A dollar today should always be worth more than a dollar tomorrow.  I think most investors grab that basic fact.  There’s a second derivative there, however.  At most times in economic history, a dollar two days from now has been worth more than tomorrow’s dollar, which is worth more than today’s dollar.  Similarly, a dollar a year from now is worth more than that two-day dollar and the dollar five years from now is worth more than the dollar one year from now, and on and on and on.  If I am lending you a dollar for five years not five days, I want an extra incentive to do that. Five years gives you much more time to default on that loan, plus—in a concept known as duration among bond investors—there is a much larger chance that the interest a lender will earn over a longer time period can be rendered less valuable by inflation, always the biggest factor impacting bond pricing.

The rate of inflation in the U.S. probably won’t change much in three months.  In ten years, though, it could show a marked difference.  The Federal Reserve and other central banks have consistently referred to the fear of deflationary pressures as the biggest worry facing financial markets.  This morning’s bond markets are telling you that inflation is going to be much much lower in 2029 than it is in 2019.

That is the key meaning of an inverted yield curve.  Inflation expectations for future periods are lower and that can only mean a slowing, and perhaps contracting, global economy.  Stocks are valued based on growth, and the colossi that are Amazon, Facebook, Netflix, etc. have all been built on rapid rates of growth in revenues and earnings.  If the bond market is telling us the global economy is slowing, the stock market should price in lower rates of growth for individual stocks.  That is why shares of those tech titans—and the vast majority of stocks around the globe–are falling sharply today.

Isn’t lower inflation a good thing?  If it costs me less to buy things outright and lower interest rates also result in lower costs to finance purchases made over time (house, car, etc.) how is that a bad thing?  Simply put, it’s not a bad thing for consumers. At the same time it is a horrible, terrible, awful thing for financial institutions such as banks. If it costs a bank more to finance the money underlying a loan than the interest that bank can earn on the loan, the bank would take a loss on that loan.  Obviously bankers are not stupid, and loan growth can be expected to decline when short-term funding costs are higher than long-term loan prices.

The global economy in 2019 is based on access to credit, and it has been for the past 50 years.  This is what we should have learned from 2008. Jamie Dimon’s balance sheet at JPMorgan is much more important than the one based on your household’s financial situation.  I am sorry if that offends you from a political standpoint, but please do not misunderstand. There have been zero real changes in policy or statute since 2008 that would change that.  If credit conditions dry up, we could just easily see a meltdown in 2019 as we did in 2008-2009. These are basic facts, not conspiracy theories or political slogans.

For the past 10 years, naysayers have been calling for another global financial crisis and yet my stock portfolio has gone up, up, up…what is different now?  The biggest development in the world economy over the past decade has been the astounding growth of the financial system in China.  China’s economy, which was barely dented by the financial crisis that ravaged Western economies in 2008-2009, is now, ten years later, just as dependent on credit as that of the U.S. and in fact more so, by certain measures.  The Chinese only really embraced state-sponsored capitalism in the early 1990s and it took them 20 years to embrace the concept of leverage. But, man, have they done it in a big way.

In December 2008 the total assets of the Chinese financial system were $9.1 trillion.  That compared to $12.2 trillion in U.S. financial system assets. As of June 30, 2018, the latest data available, Chinese financial system assets totaled $39.0 trillion dwarfing the U.S.’ total of $17.5 trillion.  So, the Chinese financial system has more than quadrupled in the past decade. Does that worry you? It should.

That’s why pictures of protestors occupying the airport in Hong Kong are so scary.  That’s why the Chinese government’s decision to let the yuan/dollar exchange rate rise above 7:1 (making Chinese financial assets worth less in dollar terms) is so scary.  That’s why President Trump’s trade tweets can and will move the markets significantly—in either direction. Anything that makes Chinese companies less likely to repay their loans is a decided negative for global bond markets.  Each of those three factors certainly qualifies.

That’s also why the yield curve in the U.S. has inverted.  Any measure of U.S. current economic activity or financial system liquidity looks fine or even better than fine.  But the bond market looks like the world is in the middle of a global catastrophe. Why? Because global markets are interlinked.

You can’t just sit in Peoria, Illinois and say the fact that Danish banks like Jyske are now offering negative rates on 30-year mortgages doesn’t affect you.  It does. Some financial institution you use will have exposure to European bonds and when those bonds mature refunding them at negative rates is going to lead to losses.  You can’t just sit in Rexmont, Pennsylvania and say that the fact that assets in China’s financial system now represent more than half of the world’s GDP doesn’t concern you. If you have a 401k, it damn well should.

So, wake up, smell the coffee and lessen your holdings of equities.  The bond market and its inverted yield curve are telling you that economic growth is slowing—or perhaps even contracting.  The valuation of stocks, above all else, depends on estimates for rates of earnings growth. Anyone who is telling you “don’t panic” or “you can’t time the market” is a complete buffoon and should be ignored.  That includes many of the talking heads on CNBC, by the way.

Selling stocks into an economic downturn isn’t panic, it is just smart investing.  Practice it.