On 'Megapolitics'
Beneath the choppy surface lurk deeper, murkier currents...
Bill Bonner, reckoning today from Youghal, Ireland...
We are talking about something our old friends Jim Davidson and Lord Rees-Mogg called ‘megapolitics.’
These are trends and events that are beyond the day-to-day, Republican v. Democrat antics you see on TV. Megapolitics doesn’t care who says what to whom…or how the media spins the news…or who wins an election. But it helps explain some of the things you see happening that otherwise “don’t make sense.” Like a cold, deep, undersea river…megapolitical currents move along, to destinations of their own choosing, no matter what chop or slop is happening on the surface.
Speaking of which…here comes Cap’n Yellen:
"If Congress fails to increase the debt limit, it would cause severe hardship to American families, harm our global leadership position, and raise questions about our ability to defend our national security interests."
They, The Deciders
Really? Suppose US debt really were capped at $32 trillion. Would that cause hardship to American families? How so? Do American families depend on the US government’s rising debt? Does the money go to them…or come from them? And if not from them, who does it come from?
Do we borrow money from Chinese families in order to give it to American families? Or do we borrow from Russians? The English? Indians? Don’t they have hardships of their own to worry about? Of course they do. And even if they lend to the US, who will be on the hook to pay them back?
Money has to come from somewhere. Ultimately, the only place the US government can get money is from the American families who earn it. And according to Ms. Yellen, those families will be in severe distress if they can’t borrow from themselves.
In America, “The People” are supposed to be the deciders. And democracy works plausibly well for running a corporation…or a church vestry…or a small town. But at scale, ‘democracy’ becomes a fraud. Politicians lie. Elections are rigged. Promises are unkept. Whistleblowers are locked up. The media propagandizes; the universities indoctrinate. ‘The People’ are too far from the facts; they know nothing. So, they’re ready to believe anything.
The US has $32 trillion in debt already. What did it get for all that borrowing? Stable prices? No. A more dynamic, faster-growing economy? Nope. Victories against overseas enemies? Hm… Are Americans richer? No, wages have been going down for more than 2 years. Are they healthier? No again, life expectancies are going down too. The average person in a G7 (big) nation can expect to live 81 years. Americans now live 5 years less.
Bipartisan Collusion
Whatever borrowing trillions of dollars was meant to achieve, it failed.
But the deep currents of megapolitics continue. Borrow more? Sure, why not?
What’s it to us?
Yesterday, we saw how Democrats colluded with the FBI and the CIA to prevent fair elections. In 2016, the FBI assisted Hillary Clinton by giving credence to the “Russian interference” claim…
… and in 2020, the CIA, both retired and active-duty operatives, tried to keep the wraps on the Hunter Biden laptop affair.
Aggravated readers, eager to tell us that “the Republicans did it too,” can relax. Of course they did. That’s the point. They all do it because the system invites it. They do it because they want to win an election. They do it because they have principles – new, updated principles – that they put above the “Idea of America.” They do it…well…because everybody does it.
Everybody tries to get an advantage from the tax system too. Like raising the debt ceiling, Donald Trump’s ‘big, beautiful tax cut’ of 2017 was supposed to help “America’s hard-working families.”
Did it?
ProPublica reports:
Proponents touted it as boosting “small business” and “Main Street,” and it’s true that many small businesses got a modest tax break. But a recent study by Treasury economists found that the top 1% of Americans by income have reaped nearly 60% of the billions in tax savings created by the provision. And most of that amount went to the top 0.1%. That’s because even though there are many small pass-through businesses, most of the pass-through profits in the country flow to the wealthy owners of a limited group of large companies.
Tax records show that in 2018, Michael Bloomberg, whom Forbes ranks as the 20th wealthiest person in the world, got the largest known deduction from the new provision, slashing his tax bill by nearly $68 million.
Family Matters
Rigging elections. Gaming the tax system. Like plastic bottles and flipflops floating in a harbor, they are merely the surface flotsam and jetsam. They are largely meaningless. Why shouldn’t Bloomberg get a $68 million tax cut? Why shouldn’t Biden be president? Besides, deep down is where the real corruption flows.
Tax cuts (without parallel spending cuts) are a fraud. They don’t ‘cut’ taxes…they just move the tax burden around. Likewise, raising the debt ceiling will not help American families. Whether the feds borrow or tax…whether the money comes out of salaries or out of price increases…at the end of the day, every penny the feds spend has to come from American families.
But which American families?
Families like those of Michael Bloomberg and Donald Trump? They’ve got the money. But they also have lawyers and lobbyists to make sure they don’t have to give too much of it to the government.
Or the poor families…from inner cities and outer hollows…from tent shelters or Section 8 housing projects? Squeeze them as hard as you want; you will get nothing.
Politicians say they want to ‘protect America’s hardworking families.’ But in the dank and dark of megapolitics…the middle classes will have to pay.
Tune into tomorrow...
Bill Bonner
Joel’s Note: And just how prepared is the average American family, headed into the coming recession? Hmm…
The NY Fed reports total consumer debt was over $17 trillion in Q1. Bonner Private Research’s macro analyst, Dan Denning, forwarded this chart yesterday…
“Mortgages, student debt, auto loans are all up,” observes Dan. “Only credit cards held the line at $968 billion. Only just.”
Let’s see… $1 trillion-plus deficits as far as the eye can see… $1.7 trillion in college loans… $32 trillion in national debt (and counting)… $211 trillion in “unfunded liabilities” (as per Druckenmiller)…
Maybe some more borrowing will help?
Or you could join the team at Bonner Private Research and brace for impact. Here’s how…
Bill, this is so spot on: "But at scale, ‘democracy’ becomes a fraud." I do think many Deplorables are finally realizing the Uniparty is not going to lead them to the promised land. They need to evolve into true Irredeemables. Secession is the only viable way forward. If Democracy is your goal, it will stand a much better chance for success at a State or Local level. Could also be a boon for the environment if we toss all the DC apparatchiks in the wood chipper; a Twofer :-)
Bill is off his game today. While it's impossible to argue with the fact that every penny every level of government collects comes from people and businesses (which are run by people) there are issues with some of his positions.
First, if they are going to cut taxes, who else but the high earners (producers) are they going to give the cuts? Especially when it is a fact that only about 50 percent of Americans pay income tax and the top 20 percent of income earners pay 70 percent of all the income tax that's paid. Not to mention that through various income distribution schemes people that pay no income tax receive "refunds" via tax credits (quite the oxymoron).
Second, though I applaud Bill's mantra that government spending needs to be reduced (bigly), he doesn't make a very good case for his position that "tax cuts (without parallel spending cuts) are a fraud." The reason the government's revenue has increased each time tax cuts were enacted is because it frees up capital for the producers (that would be paying more income tax without the cut) to use those tax savings to invest more in their enterprises. That in turn, produces more income (not just for the high earners, but also for those they employ) and thus more tax receipts.
As Bill points out, those that earn enough for a portion of their income to land in high tax brackets also hire high priced accountants and attorneys whose sole purpose is to figure out how to keep as much money out of those higher brackets as possible. When tax brackets and rates are modified to the benefit of these producers, they become more focused on creating income and less on protecting it. Perhaps in a future missive Bill could expound on his position and make a case for why tax cuts alone are a fraud, because a wise man once told me: If a man can design a tax code, another man can find a way around paying taxes.