“Deficits mean future tax increases, pure and simple. Deficit spending should be viewed as a tax on future generations, and politicians who create deficits should be exposed as tax hikers.” – Ron Paul

by Glen Reaux

On Wednesday, August 21^st, the American people, poor and middle-class Republicans, Democrats and Independents alike, upon waking up in the morning read the headlines, watched local and cable news and realized that once again Donald Trump’s “Pinocchio Economics™” is the gift that just keeps on giving.  The gift, a trillion-dollar deficit that will fall on their backs, their children’s and grandchildren’s backs to pay while the elite 1/10 of 1% and corporate America lie in waiting to pick the flesh from their bones like the vultures that they are.  Good morning America.  Welcome to Trump land!  Because of this current economic revelation, American voters must understand that “The Trillion Dollar Deficit and Republican “Pinocchio Economics™” by design, have stolen from the poor and middle-class, given to the wealthy, the elite 1%, American oligarchs and corporate America while knowingly bankrupting this country.  Republican tax cuts and their subsequent by-design recessions have accounted for the enormous transference of wealth resulting in the tremendous wealth disparity in this country.  And today, thanks to “King Donald,” the self-proclaimed “chosen one,” the gift of “Pinocchio Economics™” just keeps on giving.

Since a name for these by-design failed Republican economic policies does not exist, Xplicit News now ventures to add to the American lexicon:

Pinocchio Economics^™ (pin-oc-chi-o, ec-o-nom-ics)

Noun

An economic system, treaty or policy or lack of policies based upon a lie or series of lies designed to deceive the poor and middle-class for the purpose of enriching an elite few, oligarchs and corporations while bankrupting a nation or nations

Examples: Reaganomics, voodoo economics, trickle-down economics, North American Free Trade Agreement (NAFTA), Bretton Woods Agreement, General Agreement on Tariffs and Trade (GATT), Trans-Pacific Partnership (TPP), supply-side economics

On Wednesday, the Congressional Budget Office (CBO) revealed the true nature of Trump’s “Pinocchio Economics” which is just another name for Republican failed economic policies that have plagued this nation since the Nixon administration.  Remember Nixon came up with the brilliant idea of transferring American jobs to China.  Nixon’s 1972 trip to China (buffoonery), the earliest recorded example of Pinocchio Economics was directly responsible for creating the second-largest economy in the world which is now America’s greatest economic adversary, China.

On its website, the CBO states:

“In CBO’s projections, federal budget deficits remain large by historical standards, and federal debt grows to equal 95 percent of GDP by 2029. Economic growth is expected to slow from 2.3 percent in 2019 to a rate that is below its long-run historical average.”

In the summary of the report, the following statement stands out:

“CBO regularly publishes reports that present projections of what federal deficits, debt, revenues, and spending—and the economic path underlying them—would be for the current year and for the next 10 years if existing laws governing taxes and spending generally remained unchanged. This report is the latest in that series.”

Deficits: “ In CBO’s projections, the federal budget deficit is $960 billion in 2019 and averages $1.2 trillion between 2020 and 2029. Over the coming decade, deficits (after adjustments to exclude the effects of shifts in the timing of certain payments) fluctuate between 4.4 percent and 4.8 percent of gross domestic product (GDP), well above the average over the past 50 years. Although both revenues and outlays grow faster than GDP over the next 10 years in CBO’s baseline projections, the gap between the two persists.”

So what do these trillions of dollars in the federal deficit mean for you?  How will they impact your life?  In general, economists will tell you that they will cause a rise in interest rates, which will lead to more expensive loans for businesses.  When business loans require higher interest payments, the cost of goods increase, people have less disposable income and in turn, the economy slows down and often times cause a recession.  Many companies that cannot get business loans have to shut down.  This leads to layoffs and firings and a rise in the unemployment rate.  Also, the single most important factor responsible for increasing your standard of living which is education becomes more expensive as the interest rates for student loans rise. But, the deficit can lead to much more dire consequences on an extremely personal and grander scale.  The Great Recession of 2008 was a prime example of deficits caused by tax cuts and Pinocchio economics based upon deregulation of the banks.

When a government doesn’t collect enough tax revenues to cover its operating expenses, it either borrows money to cover the lack of revenues (deficit) or it cuts spending.  Republicans never increase taxes on the wealthy and corporations.  In fact, the Trump Tax Cuts and Jobs Act of 2017 which promised 1.8 trillion in new revenues was a stroke of Pinocchio Economics genius.  While marketing the bill as a middle-class tax cut, nearly all of the $1.5 trillion in benefits went to the wealthy and corporate America.

Spending cuts are right in line with Pinocchio Economics.  Because, when Republicans cut spending, they make it personal by attacking, the poor, the elderly, the sick, children and the middle-class.  Since Reagan, Republicans have always fought against the social safety nets of Medicare, Medicaid and social security that were established by Democratic Presidents Franklin Delano Roosevelt and Lyndon B. Johnson.

Here is a brief look at social security and the benefits that Republicans want to take away as a means to funding their tax cuts:

Democratic President – President Franklin D. Roosevelt signed the Social Security Act on August 14, 1935. Social Security taxes were first collected in January 1937, with workers and employers each paying one percent of the first $3,000 in wages and salary. (Democratic President)

Democratic President – In 1939 President Roosevelt signed legislation establishing benefits for survivors and dependents.

Republican President Dwight Eisenhower – Early retirement benefits, allowing people to draw checks at age 62, were enacted in 1956

Democratic President John F. Kennedy – added the same for women and in 1961 for men.

Republican President Dwight Eisenhower – Disability payments were enacted in 1956 and initially were payable only to workers aged 50-64.

Democratic Presidents Johnson and Carter – Payments to divorced wives began in 1965 and to divorced husbands in 1977.

Republican President – President Nixon signed legislation in 1972 authorizing a 20 percent cost-of-living adjustment (COLA) and making the COLA automatic each year (Republican President).

Republican President – President Reagan signed legislation in 1983 providing for taxation of benefits, and for a gradual increase in the age of full retirement benefits to 67.

Democratic President – President Clinton signed legislation in 2000 eliminating the retirement earnings test for people above the full-benefit retirement age. The earnings test required beneficiaries to give up part of their Social Security benefits when they earned in excess of a certain amount. It still applies to beneficiaries below the full-benefit age.

Based upon this history of social security established, promoted and maintained by Democratic presidents, it is easy to understand the damage that will be done to our security if funding to social is cut for the sake of giving more money to the wealthy in the form of tax cuts.  Just imagine your parents and grandparents retirement income being cut, survivor benefits for children that have lost parents will be impacted.  Cutting the benefits to widows that have lost a spouse and second income will shatter their lives and cause more grief.  Currently, 61 million people collect social security benefits each month.  That’s about 20% of the nation’s population.  In 25% of the nation’s families, at least one person collects social security benefits monthly.

On July 30, 1965, President Lyndon B. Johnson signed into law the bill that led to the creation of Medicare and Medicaid.  The original Medicare program included Part A (Hospital Insurance) and Part B (Medical Insurance.  In 1972, Medicare was expanded to cover the disabled, people with end-stage renal disease (ESRD) requiring dialysis or kidney transplant, and people 65 or older that select Medicare coverage.  More benefits, like prescription drug coverage, have been offered.  Currently, 44 million people or 15% of the nation’s population is enrolled in Medicare.

Originally, Medicaid gave medical insurance to people getting cash assistance. Today, a much larger group is covered which includes low-income families, pregnant women, people of all ages with disabilities, people who need long-term care and children.  As of the end of 2018, 327.7 million people live in the U.S. with 74 million people or roughly 23% of the population receiving Medicaid benefits.

Other social programs that are impacted by the deficit are aid for dependent children, head start, grants to local health departments, after school programs, economic aid for the disabled, school lunch programs and summer recreation and jobs programs and state and local police departments for the purchase of body cams, bulletproof vest, training and other support services.  Also impacted by the federal deficit are infrastructure projects for roads, bridges and schools and unemployment benefits.

The current expanding deficits are a direct result of the Trump Tax Cuts and Jobs Act of 2017 and a continuation of the economic calamities caused by former Republican President George W. Bush.  It was Bush’s two terms that caused the worst economic catastrophe since the Great Depression.  Bush’s gift that keeps on giving is now known as the Great Recession.  Just like his Democratic predecessor, Bill Clinton, Barack Obama had to save the nation.  When former President Bill Clinton left office, he left the nation with a surplus of $86.4 billion in fiscal year 2000.  This budget surplus was due largely to large tax increases passed by Clinton during his first year in office.  That’s right, Bill Clinton’s economic policies left this country debt-free and with excess capital by the time he left office.  But, that wasn’t good enough for Republicans.  Under George W. Bush (“W”), new tax laws were passed in 2001 and 2003.  Immediately, in 2002, the effects of his tax policies began to negatively impact the budget and started a free fall into a deficit.  The end result of his Pinocchio Economics was the Great Recession of 2008 and a deficit that reached $10 trillion by the end of 2009.

Much has been said about the housing crisis as being the cause for the recession.  However, when the effects of the Bush deficits and the deregulation of the banks are examined, a true picture not told by the media comes into focus.  Six months into his administration, Bush’s Pinocchio Economics began to roll back regulations of the banks which had been put in place during the Great Depression.  Depression-era legislation was designed to prevent the banks from ever causing a repeat of the Great Depression.  Yet, Bush rolled them back and without those protections, the banking industry caused the housing crisis by making bad mortgage loans.

Under the Obama administration’s sound economic policies, the American automobile industry which Republican legislatures had abandoned was saved.  Obama with the help of a Democratic Congress despite strong opposition from their Republican counterparts passed the Troubled Asset and Relief Program in 2009, his first year in office.  This $700 billion federal relief program saved the nation’s economy and began to repair the damage done by the Pinocchio Economics instituted by “W.”  By 2015, Obama had reduced the deficit to less than $4 billion.

Looking at just 10 years of Republican economic policy under Bush and Trump, it immediately becomes obvious even to an 11^th grade economics student that Republicans have erased the Clinton $86.4 billion surplus and replaced it with a $5.7 trillion deficit.  Thanks to King Donald aka the self-proclaimed “chosen one,” Pinocchio economics will add another $1 trillion totalling nearly $7 trillion by the end of next year.

Currently, Trump’s deficit dominates the headlines but let’s not forget the Pinocchio Economics of past Republican presidents.

In an attempt to ease mild inflation which he feared, Nixon imposed harmful wage-price controls which almost destroyed the U.S. economy. This move bypassed the free market economy which is what America’s economic system is based on. Nixon ended the gold standard that tied the dollar’s value to gold. Ending the gold standard permitted the U.S. government to print dollars to solve every economic problem ensuring that the dollar’s value would fall indefinitely. This move created a decade of stagnant economic growth, high unemployment and high inflation.  This event was only cured by double-digit interest rates which caused the devastating 1981 recession.

Ronald Reagan’s philosophy was, “Government is not the solution to our problem. Government is the problem.”  His economic policies came to be known as Reaganomics, voodoo economics, trickle-down economics and a mixed bag of other names. The principles of Reaganomics center around what Reagan called the four pillars.  The pillars were:

1. reduce the growth of government spending

2. reduce federal income taxes and capital gains tax

3. reduce government regulation

4. tighten the money supply in order to reduce inflation.

In 1981, Reagan’s first year, he reduced the top tax bracket from 70% to 50%.  Reagan also offset these tax cuts with tax increases which negatively impacted the working class and not the wealthy and corporations.  He raised Social Security payroll taxes and some excise taxes, and he cut several deductions.  These are things that Trump is currently considering.

Reagan deregulated and removed controls on oil and gas, cable television, and long-distance phone service.  In 1982, Reagan deregulated the banking industry.  In 1982 Congress passed the Garn-St. Germain Depository Institutions Act which removed restrictions on loan-to-value ratios for savings and loan institutions.  Reagan’s budget cut also reduced regulatory staff at the Federal Home Loan Bank Board.   Because of this, like under George W. Bush, banks invested in risky real estate ventures. Reagan’s deregulation and budget cuts caused the savings and loan crisis of 1989 which ushered in the 1990 recession.

The Pinocchio Economics of “W” were dominated by the tax cuts of 2001 and 2003 and further deregulation of the banks and easing on the part of federal oversight agencies which eventually led to the Great Recession of 2008.  Bush’s tax cuts decreased many income tax rates, reduced the capital gains tax, increased the child tax credit and eliminated the so-called “marriage penalty.”  Totaling $1.35 trillion, like Trump, Bush argued that the tax cuts would stimulate the economy and create jobs.

Bush passed the 2005 Bankruptcy Prevention Act, preventing people from defaulting on their debts so easily. It protected businesses and had two huge drawbacks for consumers. First, it forced homeowners to take equity out of their homes to pay back their debts. This caused mortgage defaults to rise 14% each year afterward and precipitated 200,000 families losing their homes annually.

Although Republicans from Nixon to Trump have marketed their Pinocchio Economics as tax cuts, they are actually tax increases intentionally designed to burden the poor and middle-class and transfer wealth from the poor and middle-class to the wealthy.  According to former Texas Republican Congressman Ron Paul:

“Deficits mean future tax increases, pure and simple. Deficit spending should be viewed as a tax on future generations, and politicians who create deficits should be exposed as tax hikers.”  

This statement is in keeping with the teachings of many of the world’s top economist including the famed Noam Chomsky.  In light of the Trump deficits caused by the Tax Cuts and Jobs Act of 2017, rest assured that unless he and the Republicans are removed from political power in 2020, the next Great Depression will be just around the corner.  Like the 2008 Great Recession, another incredible sucking sound will resonate around the world as once again there will be another transfer of wealth from the middle-class to the wealthy and you, your children and grandchildren’s backs will bear the burden of trillion dollar deficits, Pinocchio Economics and more Republican Presidents like the self-proclaimed “chosen one,” Donald J. Trump.

https://www.gofundme.com/xplicit-news

Linked sources and Documentation

1. An Update to the Budget and Economic Outlook 2019-2029: https://www.cbo.gov/publication/55551

Copyright © 2019, Glen Reaux, all rights reserved