posted March 26, 2020
US Senate’s Fiscal Stimulus Bill: What It’s Not Enough

Just after midnight March 25, 2020 eastern time the US Senate passed a compromise bill of fiscal spending to address the accelerating economic decline. Both Democrat and Senate Republican leaders agreed on the terms. US House of Representatives Speaker, Nancy Pelosi, indicated she would rush approval of the package seeking a unanimous voice vote of the House.

Here’s what the terms of the stimulus package looks like, according to initial summaries by the Washington Post and CNN released within minutes of the bill passage:

Middle class and worker households would get $500 billion in the form of direct checks ($250B) and increased unemployment insurance benefits for the next four months ($250B)

Corporations and businesses would get $867B–$367B of which would go to small businesses, and another $500B to large corporations like airlines, defense companies, cruise lines, hotels and other companies.

Additional funding of $130B would go to hospitals to purchase needed medical supplies. State and Local governments get $150B. Other funds would be provided by the government’s Small Business Administration ($10B) to help pay their debt. Reference is made in the package as well for another $20 in farm bailout, raising that total from the $30B spent to date during the US-China trade war to $50B. While it appears the $130B for hospitals and $150B for local governments is in addition to the $867B to business and $500B to households, it’s not clear if the $20B farm bailout and $10B additional SBA are included in the $867B or not.

Here’s a further detail in breakdown of these amounts:

$500B to Business

The Airlines get their $58B they’ve been lobbying for. And if past breakdowns still apply, it means roughly half the $58B will take the form of outright grants, not loans, to the airlines and the remainder as loans. It is also unclear if the loans will be ‘forgiven’ after six months, as had been proposed before in past versions of the Senate bill.

Another $17B of the $500B is earmarked for defense companies considered important to national security. No details are released who these are and why such companies, not affected by consumer demand, should receive such an increase. (Possibly to back fill money that has been transferred from them by Trump to help pay for his wall).

Trump has also indicated he intends to have some of the $500B go to cruise lines and hotels which, along with airlines, are critical to his own company’s business.

The remainder of the $500 is designated for spending to support other industries. Whether in the form of loans, grants, or other forms of assistance is still unclear.

$367B to Small Business

The Senate bill always included $350B in loans for small business, and the provision that the loans would change to outright grants if used to pay wages and payroll costs. It won’t take clever accounting to use the $350 to cover wages and compensation (and payroll taxes, etc.), as companies move the money that would have been used for such purposes to other areas of their income statements. So consider the $350B as money without repayment—i.e. not a loan.

In addition to the $350B, another $17B is added now for small business to cover interest on their existing loans for six months. Finally, there’s the $10B from the Small Business Administration to help pay debts, which may or may not be part of the other totals.
Add in the $20B for farm support, the $10B from SBA, and the $130B to hospitals, it means Business Large & Small thus get $1,027B in direct assistance by the government in the new agreed on Senate-House stimulus package.

Another item that the Democrats demanded and received in part was to have an Oversight Board to review how corporations and businesses actually spent the government money. In the previous emergency economic recovery legislation in 2009, much of the direct assistance was ‘gamed’ by businesses that received it. Some even used it to buyback their stock and award bonuses to managers. The Oversight Board is supposed to prevent that. It remains to be seen, however. Who will be chosen to manage the Board will make all the difference. It can be assumed the Republican Senate or Trump will choose corporate-friendly Board members. As Trump has said publicly when asked who will ‘oversee’ the distribution of the funds to business, he replied “I’ll be the oversight”.

Middle class families and workers get a total of $500B under the agreement, which is what it was before. It appears that the money was just ‘moved around’.

Direct Household Cash Assistance

Talk of $3,000 per household is now changed to a check of $1,200 for a single household member, or $2,400 for married couple, plus $500 per child. (It’s unclear if that’s for all children in a family or just up to two).

To qualify for the full $1,200/$2,400 an individual must make no more than $75,000 income annually. Income above $75,000 phases out until $99,000 after which no payment is made. For couples, the phase out is at $199,000 per household.

Increased Unemployment Insurance Benefits

The package includes an increase of $600 to the state’s defined level of unemployment benefits paid (that vary by state quite a bit). But it’s unclear if the $600 applies to the highest paid state benefit payment or to all levels of state benefit payments. For example, in California the top payment is $450/week. The new payment would be $1,050/week. But will those below the top payment level also get $600?

A plus to the unemployment insurance provision is that it will also apply to contingent work: that is, to part time, temp, contract labor not just to full time employed who are laid off due to the effect of the virus on company shutdowns.

On the negative side, all the improvements in unemployment insurance will take effect for only 4 months, then will expire.

It is clear, therefore, that middle class families will receive only the $500 billion that had been allocated before—in the form of cash assistance one time worth $250 billion and improved unemployment benefits for four months costing another $250 billion. It appears some of the cash assistance was redirected toward improvement in unemployment insurance benefits, but no net increase in the total $500B on the negotiating table before.

In other words, in the final stimulus bill businesses get more than twice as much as do households and the working class!

State & Local Governments

An additional $150 billion is allocated in the bill to assistance to state & local governments.


The totals in spending thus appear to be approximately $1,650 billion! It is being reported as a $2 trillion stimulus effect and increase in US GDP overall. AS Trump’s advisor, Larry Kudlow, has said on a previous occasion, the $2T represents the spending plus the ‘multiplier effect’. $2T is not therefore the actual spending. That is less, around the $1,650T estimated here. The difference is a multiplier effect of about $400B.

But that’s a generous estimate of the multiplier. It’s based on normal economic conditions. And the current collapse of the real and financial US economy is anything but normal. The multiplier will be much less. That is because much of the spending by the government, to business and households alike, will be used to pay down debt, hoard the money due to expectations of future profits and employment insecurity, or to cover price gouging by businesses selling necessities.

The US economy spends monthly the equivalent of $1.7 trillion. The Senate’s stimulus package is thus a one month stop-gap at best! As this writer has been arguing in recent days, the stimulus needed to get through the summer will have to be $4 trillion, not $1.65 trillion.
The $2 trillion (spending + multiplier) is estimated at around 9% of US Gross Domestic Product, GDP, at present. A 20% increase of GDP is necessary, raising total government spending in GDP terms from the roughly current 21% of GDP to 40%.

40% of GDP is what the US government raised spending to in 1942, when we went to war at that time. It was an increase from around 15% pre-war. If the fight against the new enemy, the virus, is a kind of ‘economic war’, then the US will have to mobilize its economy again on a war footing. Trump’s activation of the War Production Act, and then doing nothing about it further, is not a war mobilization. Trump is not a ‘war president’, as he claims. Indeed, he allowed the enemy to actually penetrate our shores and spread amongst us with his delayed action to stop airline travel and cruise travel. It’s not an accident that the largest concentrations of the virus infections are in our coastal ports and airports—Washington state, California, New York, and now increasingly New Orleans, Philadelphia, Chicago and Miami.

Trump as ‘War President’ & Other Fictions

Unlike our prior war presidents, Roosevelt and Truman, Trump is not mobilizing production and distribution of key resources and supplies to fight the enemy. He simply asks the private sector to do it and then gives his daily ‘sales pitches’ to the nation press conferences to say what he’s doing when he’s not actually doing it. War supplies (masks, ventilators, PPE) are promised and promised but are slow to appear, if they ever do.

The question follows then whether the current Senate-House stimulus bill represents a sufficient stimulus to protect the US economy. The answer is no. It’s not even half way there for Main St.

In contrast, however, the Federal Reserve US central bank has quickly allocated no less than $6.2 Trillion so far to bail out the banks and investors, even before they fail this time. And promises to do more if needed and for as long as necessary. It is writing a blank check for the bankers and investors.

Meanwhile Congress provides one-fourth that, and only one third of that one fourth, for the Main St., workers, and middle class families.

Finally, it is clear from Trump’s statements in recent days that he knows this stimulus is only a one month hit to the economy. That’s why he—and the capitalist investors who have been lobbying him hard the past week—are turning up the message we should all start going back to work by mid-April.

As Trump put it, the timing is ‘beautiful’, at Easter. But it won’t be so beautiful when a surge in infections and death occur on top of the current surge underway occur by early summer.

But profits and money are more important to this wheeler-dealer, commercial property speculator capitalist in the White House. With the US budget deficit this fiscal year almost certainly to exceed $3 trillion, and his election looming on the horizon, Trump and friends see Wall St. and US business interests as more important than the rising death rate that is inevitable should we return to work prematurely by mid-April. Such action will all but ensure the eventual overwhelming of the US hospital system three months from now, an even higher death rate, and an even greater collapse of the US economy and financial system in the aftermath.

Trump may think he’s at war with the coronavirus, but it is the virus that is winning! And his poor generalship is aiding and abetting that enemy. Unfortunately, the American public—and especially the old and infirm—are becoming the ‘cannon fodder’ in Trump’s phony war.

Jack Rasmus is author of the recently published book, ‘Central Bankers at the End of Their Ropes: Monetary Policy and the Coming Depression’, Clarity Press, August 2017. He blogs at and his twitter handle is @drjackrasmus. His website is

posted March 17, 2020
Economic Recovery Proposals: Theirs & Mine + How to Finance My Plan

The Coronavirus has been wrecking the US and global economies. While focus has been on addressing the biological devastation wrought by the virus, the economic devastation keeps growing.

Failure to properly address the deepening economic impact of the coronavirus has been no less shocking to date than the obvious failure of politicians and policymakers to get a handle on the medical-human impact of the virus.

Trump had called the virus a ‘hoax’, said it would be over by April, declared publicly there were millions of test kits being used when there weren’t, and blamed first the Chinese then the Europeans for the obvious spread of the virus, and rising death toll, in the US.
His answer thus far to the spreading and deepening economic impact of the disease has been to demand US Federal Reserve bank chair, Jay Powell, to drop interest rates further plus advocate a payroll tax cut across the board—the latter a measure that economists almost unanimously say will have no stimulus effect on the economy. Even his own advisers, Steve Mnuchin & Larry Kudlow, reportedly have advised against the payroll tax cut. The payroll tax cut was first enacted under Obama to try to stimulate consumption in the wake of the last 2008 economic crash. It is generally acknowledged not to have had much, if any, effect on economic recovery.

How the Virus is Crushing the Economy

There are at least four major ‘channels of contagion’ by which the virus is driving the contraction of the US, and global economy:

1. Global Supply Chain Disruption

This was the easiest to see. Intermediate and final goods exported from China to the US were halted in many industries. US production began to cut back on final goods delivery in the US economy, already affected by Trump’s trade war with China during 2018-19. Not only goods from China to US directly. But supply chains in which Japan and So. Korea goods, made in China and delivered to those countries, would otherwise be shipped to the US. Or goods shipped to Mexico and then exported as final goods to the US. Or from Asia to Europe, and then to the US. The net effect was a significant drop in US production and therefore sales and the output of the US economy in general. But that channel of contagion is now being dwarfed by another.

2. Collapsing US Consumer Demand

We can see this now spreading and deepening rapidly throughout the US economy. First demand for travel related spending: airlines, cruise & shipping, hotels & leisure, entertainment, etc. were initially impacted. But that’s been spreading to other industries as rapidly as the virus itself. Personal services of all kind are coming to a halt, except for healthcare. Restaurants and bars are shutting down. Education is being driven to an online underground. Malls and stores are virtually deserted. Social entertainment, including sports, is suspended everywhere. Even grocery stores are experiencing empty shelves, and consumption in basic necessities will soon fall off. Then there’s online purchasing, now developing huge backlog and delivery problems.

The consumption sector is coming to a halt in industry after industry, and it’s not over yet. Social distancing required by the virus to slow its spread is, conversely accelerating the spread of the economic impact.

Consumption was the only sector of the US economy in late 2019 holding it up. And it was slowing in that regard as well by year end. Now it is collapsing. Nearly 70% of the US GDP and economy, it is now joining the contraction in business investment and trade that was occurring throughout 2019.

The recession is here, as of March 2020, folks. The only real question now is how deep will it go and how long will it last! And that question depends, in turn, on how quickly and seriously will US politicians respond. And the actions thus far do not portend well for a prompt ‘v-shape’ recovery.

But there is yet a third channel of economic contagion emerging that may dwarf the effect of the supply chain disruption and household consumer demand collapse. It is the condition of the financial system itself.

3. Financial Markets Deflation & Default

Globally and in the US financial markets are churning and fracturing, with a net effect already of having deflated by more than 20% and in some cases 30% or more. Not just stock markets. But oil and commodity futures markets. Foreign exchange currency markets. Corporate bond markets, which are far more important to capitalist economies than stock markets, are showing signs of great stress, to put it mildly. Especially unstable are markets for what’s called junk bonds (especially in oil fracking, retail, and travel & leisure). And what’s called ‘junk loans’—i.e. leveraged loans. In the US the total at risk is a combined more than $7 trillion. Add to that the fact that banks globally are sitting on $10 trillion in non-performing loans. Should prices collapse further, widespread defaults on paying principal & interest on debt will take place. That will result in mass layoffs once again, as in 2008-09; a further collapse of business investment; and a yet further acceleration of contraction of the real economy.

It’s not coincidental that the US central bank, the Federal Reserve, last week pumped an extra $1.5 trillion into the banks via what’s called the Repo market, plus more through traditional bond channels, and is planning in a couple days this coming week to drop interest rates to near zero and re-institute special funding once again, as in 2008, to bail out mutual funds and other ‘shadow’ (i.e. unregulated) banks. Why? Because liquidity is rapidly drying up throughout the economy as businesses drawn down their bank credit lines to zero as well, in order to hoard cash to weather out the storm of consumption and production collapse on the horizon.
The financial markets collapse, the 3rd channel, may prove to have the greatest devastation on the now already recession hitting the US economy. What began as supply chain and household demand problems will be greatly exacerbated by the financial instability.
Is Trump and the politicians preparing for this economic contingency? No, not at all.

Here’s what Trump and even the Democrat leadership (Pelosi-Shumer) are proposing:

Trump’s Failed Economic Stimulus ‘Program’

In the middle of last week Trump addressed the nation on TV and proposed the weakest possible response. It was so weak even investors reacted with a 2,200 point fall in the stock market. There were basically three things Trump proposed:

First, a $50 billion increase in the small business administration loan fund. A hint of some kind of tax deferral extending the normal IRS April 15 deadline. And, third, a payroll tax cut costing the social security trust fund a hit of at least $800 billion.

He then revisited that paltry proposal on Friday, March 14. He proposed an apparent additional $50 billion for the states to spend on emergency measures to address the spreading virus. He clarified the tax deferral would be only for ‘some’, not all. He added a suspension of interest on student debt. But failed to explain if that meant a full waiver of debt for all students, or just a temporary halt to paying interest, which would nonetheless continue to accumulate and for which students would still have to pay later after the suspension was lifted. Trump also added the proposal the US would buy more oil from US producers to fill the US strategic reserve. That was to help oil companies experiencing revenue loss from oil prices falling to the low $30s per barrel. Trump’s statements to the press indicated he still wanted the payroll tax cut, even as the Democrats were saying ‘no way’, it won’t have any effect except to further destroy social security funding.

Pelosi & Democrats Blocked Stimulus Program

As Trump was prevaricating and dribbling out minimalist economic responses to the cratering US economy, Pelosi and the Democrats were trying to address the real scope of the problem, even if not as broadly required as well.

Intense discussions were being held behind the scenes between Pelosi and Trump’s Treasury Secretary, Steve Mnuchin. All that came out of that negotiation by Friday, March 14, however, was an agreement to provide free testing of the virus. But how ‘free’ was defined was not all that clear. Did that mean those sick would have to pay out of pocket and then get reimbursed by the government. If so, millions will hold off getting tested. More than half US households have less than $400 for emergencies, according to the Federal Reserve’s own data research. They can’t afford to get tested.

Pelosi and the Democrats had also been proposing paid medical leave of 14 days, tax credits to small business to help pay for the leave, an increase in unemployment benefit payments in anticipation for all those, maybe not sick, who would soon be laid off or asked by their employers to stay home (on unpaid medical leave). Pelosi &company, to their credit, also refused to cut payroll taxes. They know of Trump’s leaked plans to cut social security and medicare after the November elections.

While there are some good provisions in Pelosi’s proposals, the Democrat economic stimulus doesn’t go far enough as well to address the scope and magnitude of the negative economic impact that’s coming to the US economy: as it shuts down in broad industries and should the financial system crack as it did in 2008.

Furthermore, it appears that both Trump and McConnell in the Senate are intent on doing their worst to refuse to agree on most of the proposals in the Pelosi plan; demanding in particular acceptance of a payroll tax cut in exchange for other proposals. So don’t expect anything big or effective in any agreement coming this week. Trump is determined not to have an effective fiscal stimulus, now that his budget deficit last year exceeded $1 trillion—and that his current budget deficit after only five months is running at a rate of $1.4 trillion for this year.

An economic stimulus must focus on government spending and income restoration. It cannot focus on tax cutting. Nor on interest rate reduction. Neither of those kinds of policies will stimulate investment or consumption. Why? Because there’s a massive shift to hoarding cash underway by business and consumers will not get relief quick enough, or at all if they’re unemployed.

Businesses is selling its financial assets across the board to gather in as much cash as possible, needed to continue to pay interest and principal on its $10 trillion debt run up since 2008, as its prices, sales and revenue drop precipitously in the meantime. There’s a ‘dash for cash’ underway. And no amount of tax cutting will lead to re-investing in production. The tax cuts will simply be hoarded and not spent. Ditto for households and consumers. Any payroll tax cut will be hoarded, not spent, to ensure households have enough to continue paying mortgages and car loans and student loans—assuming they still have jobs. If no jobs, it will be spent on trying to maintain current consumption, not increase it.

The same applies to interest rate reductions by the Fed. Why will businesses borrow even at a lower rate to expand production, when consumers are buying less of their goods or if they can’t get parts from abroad with which to build the goods? And why would households borrow to take the risk to purchase a new auto or even a new home given the current direction of the economy? Cutting the costs of business investment is now the least important variable determining the outcome of investment. Expectations of a collapsing economy and thus falling profitability is what’s driving investment now—and the anxiety of being able to continue to pay for debt accumulated in recent years in order to avoid default.

Yet that’s what exactly Trump will propose: more tax cuts, for business especially, and lower interest rates. It will prove throwing money down a rathole.

(March 15, 2020)

Make no mistake. The US is now in recession. And it will deepen considerably before it is over. Moreover, the great risk is now a spreading crisis of credit, a fracturing of the financial system as in 2008-09, and the potential emergence of another ‘Great Recession’, this time even worse than 2008-09. All the efforts by the Federal Reserve and other central banks to pump trillions of dollars more into the US and their economies may prove futile this time around.

What’s needed is an immediate restoration of consumer household spending power and a protective floor under incomes that may soon also collapse should mass layoffs emerge once again in another couple months. Here’s some measures, a necessary short list, expanding on some of my earlier proposals, to provide that immediate income effect:

I. Paid Medical Leave

A 14 day paid medical leave until vaccines for the virus are generally available, eligible for:

· Those tested with virus
· Those with symptoms
· All those Parents of K-8 students forced to remain home due to school closures

The 14 day paid leave should be renewable by state legislatures’ decision since the economic impact, nor the recovery from the virus, will not occur evenly across all states

II. Company Reimbursement for Paid Medical Leave

· Paid Medical Leave costs should be reimbursed by the federal government to companies with fewer than 500 workers. Reimbursement by tax credits for companies with more than 50 employees; and by means of direct subsidy payments for companies with fewer than 50.

· 50% reimbursement to companies with more than 500 workers by means of tax credits provided the company shows a full restoration of jobs for those laid off within a year of the development of a vaccine for the virus.

· Paid leave shall not result in a reduction of paid sick leave provisions already provided by a company or by union contracts, which shall otherwise remain accrued to workers

III. Employment Guarantees

· Employers are required to restore workers on paid medical leave, who return, and to their former position, pay and benefits.
· All other benefits shall continue to accrue for workers while on paid medical leave

IV. Hospital Testing & Related Costs

· Costs for hospital-clinic-doctor office entry and testing will be billed by the health provider directly to the government, not paid by the worker and then reimbursed

· Provider costs associated with the visit for testing (i.e. labs, emergency or other room charges, out patient, in patient, etc.) will similarly be billed by provider to the government

· Return or follow up visits if needed will be billed directly as well

· Pharmacy and drug costs are waived for patients determined to be infected by the virus, and all their immediate dependents under age 21, or on Medicare, Medicaid, or otherwise uninsured.

V. Health Insurance Companies Responsibility

If a worker is insured and on medical leave, or if otherwise laid off due to the economic effects of the virus on their company of primary employment, the health insurance provider shall waive the worker’s share of monthly health insurance premium. This shall apply as well as for their immediate dependents covered by the company’s insurance benefits program

· If a worker is insured, or if otherwise unemployed due to the economic effects of the virus on their company of primary employment, the health benefits insurance provider will waive all deductibles and co-pays for services for those determined infected or on leave due to school shutdowns. This shall apply as well as for their immediate dependents covered by the company’s insurance benefits program

· Premiums, deductibles, copays and coverage shall remain frozen until the State legislature declares the virus effect is declared over
· State legislatures shall review all insurance company requests to raise rates after the virus effect is over for the next 3 years.

Attempts to recoup costs during the virus period by accelerating price increases or reducing coverage will be denied if greater than the rise in the local consumer price index for the urban region.

VI. Medicare & Medicaid

For those employed while receiving Medicare coverage, the monthly Medicare deductible payment shall be waived until the vaccine for the virus is made available

For those employed while receiving Medicaid, all doctor or hospital costs to the employee or unemployed shall be paid for by the State’s Medicaid authority. All doctors and hospitals shall be required by law to accept Medicaid patients until the vaccine for the virus is made available.

Refusal by doctors, hospitals or clinics to accept Medicare or Medicaid patients will result in fines levied on the health provider’s annual federal tax payment

VII. Unemployment Benefits

· The federal government shall immediately extend unemployment benefits for all layoffs for an additional six months (one year total), effective as of March 1. 2020

· Companies shall be required to continue to pay unemployment benefits taxes to their states for laid off workers for up to a year, commencing March 1, 2020.

· There shall be no suspension of the Social Security 6.2% payroll tax or Medicare 1.45% tax by companies.

VIII. General Company Requirements

· For the duration of the virus crisis period, companies shall be required to continue to pay their workers’ health insurance monthly premiums if laid off, for a period of six months from date of initial lay off

· Banks shall be required to provide lending to business customers at interest rates no greater than the original loan, if extended; or for initial loan, no more than the average rate for the local urban area in which the company is located

· Banks and mortgage companies shall institute immediately a moratorium on mortgage payments for those on paid medical leave, or for those laid off for economic reasons associated with the virus effect on their company for a period of three months or until returning to work, whichever is sooner

· Auto companies’ financial services, credit unions auto financing, and other sources of financing of vehicles shall introduce a moratorium on monthly auto loan payments for those on medical leave, or for those laid off for economic reasons associated with the virus effect on their company for a period of three months or until returning to work, whichever is sooner

IX. Federal Student Loans & School Districts

· For college students who work, but are laid off due to economic effects associated with the virus at the company or institution for which they work, student loan principal and interest payments shall be suspended until returning to work. Suspension shall be defined as permanent waiver of all interest charges. Such interest payments shall not further accrue.

School districts that shut down shall continue to receive per pupil reimbursement from their states on the same schedule as when students were attending sessions

X. Food Provisioning & Delivery System

K-8 students who were receiving meals while in attendance at their school, but are not so doing due to school shutdown, shall continue to have meals delivered to their primary residence daily. State programs providing ‘meals on wheels’ for elderly residents or similar programs shall be expanded to cover K-8 students

All former cuts to the SNAP (food stamp) program since January 2017 shall be restored for all those eligible on paid medical leave, leave from work due to school shutdowns, receiving unemployment benefit payments, or on Medicare or Medicaid

Federal & State governments shall undertake whatever measures necessary to ensure the physical delivery of food to local grocery outlets, and to remove bottlenecks to online ordering and delivery of food and necessary household items to residents or local distribution centers, including if necessary mobilization of state national guard units and requisitioning temporarily of private delivery company facilities and equipment


(March 16, 2020)

Some friends have asked how much would my own fiscal-spending based ‘Economic Recovery Program’ just released earlier today cost? The total cost can’t be quantified exactly, as the impact on working families is spreading rapidly. But here’s some financing, administrating, and implementation principles associated with my proposal:

* First, the amount of financing applied in its first phase should be no less than the same amount that the Federal Reserve bank has already allocated to spend on the banks and investors. That’s $2.2 trillion in just the last week. So if we can spend that on the bankers, why can’t we allocated the same funds to bail out workers and the middle class. Index that $2.2T to whatever further increases the Fed spends on its pre-emptive bailout of bankers and investors already under way. If the Fed can ‘create $2.2 trillion’ out of thin air to give to bankers and investors, why can’t it do the same for Main St. and working families?

*Second, use some of the money to enroll those without health insurance or whose insurance will not cover the costs of health services, apart from the actual tests only, in the Medicare system. Introduce a one page sign up for Medicare online. Create a special ‘temporary’ membership category. Have healthcare providers bill Medicare for the tests costs to workers, and for all other related costs, as well as costs for those on unpaid medical leave or unemployed due to the economic effects of the virus on the economy-i.e. economic layoffs. Immediately enroll the 30 million uninsured. Voluntarily enroll the 87 million who are under-insured with massive deductibles, copays, with no dependents covered, etc. Immediately allocate funds from the $2.2 trillion to bail out Main St. and transfer the allocated funds to the Medicare-Social Security Trust Fund. And hire as many workers in the Medicare administration as needed.

*Third, instead of reimbursing companies for continuing paying wages to workers sent home on unpaid leave, or who are laid off because of the major economic impact that’s coming (there will be mass layoffs starting in May), why not have the government ‘hire’ the laid off for the duration of the crisis–which today Trump admitted will likely continue through August. Adapt the unemployment benefits system to make the payments to those so covered. This would be a 21st century, electronic administered ‘Works Progress Administration’ that provided 8 million government jobs to the unemployed.

The administrative apparatus is there already: Medicare and Unemployment Benefits. Why not use it. And make it clear it is the government that is providing their health care and employment protection–not the private employers or bankers who would otherwise cut them loose to scramble individually to protect them and their families.

*Fourth, immediately create a ‘Public Investment Corporation‘, funded and managed by the government (Federal, State & Local) to invest in alternative energy expansion and other climate crisis mitigation that would hire workers, since the current crisis will mean private business investment will collapse across the board and such much needed investment from the private sector will not be forthcoming for some time.

Let the Federal Reserve pre-emptively bail out its bankers and billionaire private investors! But if they can spend $2.2 trillion, then the government can, and should, pre-emptively bail out Main St. as well for no less!

Further economic measures will be needed to address the current US recession, and the increasing possibility of the recession morphing into another ‘great recession’ (or worse). But the above represents an initial phase of immediate fiscal spending response in the short run to restore incomes being devastated right now.

Dr. Jack Rasmus

Jack Rasmus is author of the recently published book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity Press, January 2020. He blogs at and his twitter handle is @drjackrasmus. His website is

posted March 17, 2020
Trump’s DOA (Dead on Arrival) TV Speech

Tonight, March 11, Trump gave a TV address to the Nation that was to be his program for mobilizing the country to address the growing spread of the Covid-19 virus and its increasing negative impact on the US economy. The proposals landed with a thud. Even the financial markets gasped and went into a tailspin. The Dow Jones stock futures market immediately went into a tailspin, falling 1250 points again even before the markets reopen tomorrow morning, Thursday March 12.

Not only the financial markets, but the rest of the real economy is declining rapidly. The US stock markets now have officially entered ‘bear’ territory, having lost more than 20% in value. That has nearly wiped out all of Trump’s much vaunted stock market gains since he came into office.

Subsidizing Stock Markets with Tax Cuts & Interest Rates

The markets under Trump have been artificially boosted since he assumed office. First by expectations of his 2016 campaign promise he would deliver a $5 trillion business-investor tax cuts immediately once elected. Secondly, his delivering on that promise in January 2018 with his $4.5 trillion tax cut for multinational corporations, businesses, and investors. (To this was added a further $427 billion in business-investor tax loopholes in 2019). And third, as a result of Trump forcing the Fed to reverse course and lower interest rates in 2019 as well.

Working and middle class households end up paying $1.5T in more taxes under as a consequence of Trump’s 2018 tax cuts. That boosted already record profits to still higher profits. For example, 23% of the 27% rise in the Fortune 500 companies’ profits in 2018 were attributed to the Trump windfall tax cuts alone. Flush with record profits, the same Fortune 500 redistributed their profits bonanza to their shareholders. They gave back to shareholders $1.2T in stock buybacks and dividend payouts in 2018, plus another $1.2T in 2019. Most of the $2.4T went right back into the stock markets, driving their price levels still higher.

But that wasn’t all. Added to Trump’s subsidization of Corporate America by means of tax cuts was the subsidization of Banking America. Trump browbeat, threatened and successfully forced the US central bank, the Federal Reserve, to provide cheaper money once again to America’s bankers by lowering interest rates three times in 2019. The cheaper money led to loaning out more to investors, more cheap money to speculate in stock and other financial markets. Cheap money also served to drive up stock prices even more in 2019.

In other words, under Trump tax policy and Trump monetary policy have been in the service of the stock markets ever since he came into office. The tax and interest rate policies artificially pumped up corporate profits, that in turn boosted corporate stock buybacks and dividend payouts to record levels that then enabled the diverting of much of those buybacks-dividends cash into the stock markets. In the end it created an artificial stock market boom.

But it all came crashing down in 2020. After risen for three years, the markets crashed 20% in just three weeks. And another 20% is likely yet to come.

Accompanying the stock market crash has been the collapse of other financial asset prices in the US and worldwide. Stock markets globally have followed the US down. Oil and commodity futures prices have tanked. Oil has fallen into the low $30s per barrel, flirting with the $20s. Ditto other commodity prices. So have foreign currencies. Ditto the US Muni bond market. And corporate junk bonds in the energy sector are well on their way to mass defaults, followed by retail and other high yield bonds.

Meanwhile, the real non-financial economy in the US and globally fare no better. Already slowing before the virus’s impact on global supply chains and domestic demand, only the US household consumer was holding up the US economy at year end 2019. That has now changed dramatically in 2020, however. All the indicators of the real economy are now in freefall too—not just the financial markets.
The US recession, in other words, has arrived as of March 2020. The same recession is spreading now globally: in Europe, So. Korea, Japan, Latin America, Australia, and by many independent forecasts, China perhaps soon as well. Goldman Sachs research is projecting a second quarter 2020 US growth rate of zero. Others are forecasting a China growth between 2% and -2%, depending on the source. In other words, half of the global economy—the US and China—are about to stagnate at best and more likely contract now—as the rest, even weaker, economies in Europe, Japan, Latin America and elsewhere slide even deeper into recession.

So there’s a globally synchronized real economic contraction underway (aka recession), as well as a spreading global contagion of deflating financial asset markets. The last time financial markets and the real economy were similarly synchronized was 2008. But this time the financial price collapse is the fastest on record.

Trump’s DOA TV Address to the Nation

It was in this economic context that Trump came before the cameras tonight, March 11, to tell the nation what he was going to do. But his answers were not well received—by business, the media, and I’m sure the vast majority of Americans looking for leadership and a convincing program. Nor was his delivery convincing. He appeared wooden, subdued, unconvinced of his own words, and, of course, he contradicted himself repeatedly in typical Trump fashion.

Just one week ago he declared publicly that the virus was not a problem in the US. He said only 15 cases had been recorded and that number was going to zero soon. It would all disappear by April when warmer weather returned. Last week he said 43 million test kits for the virus were being distributed. And that everyone should make sure they go to work and carry on life as normal.
But tonight he did not challenge the fact of more than 1200 cases in just one week, and 38 deaths, with both numbers rising rapidly. Instead of ‘going to work’, he reversed himself and said “if sick, stay home”. And normal life, he said, now means not traveling, no mass events or gatherings, closing schools.

Nor did he mention why California governor, Gavin Newsom, complained today that many of the test kits sent to California have been defective and that the most recent kits received by California were sent without the biological ‘reagents’ necessary to make the kits work. As a result, 2500 travelers disembarking today from the Grand Princess cruise ship now docked in Oakland, California were not tested as they left the ship unless they showed direct symptoms of the virus. In other words, thousands were being sent on their way even if they were asymptomatic carriers of the virus because there just wasn’t enough working test kits. Nor did Trump mention New York governor, Cuomo, who has had to shut down entire communities in New York because of insufficient test kits. Following Trump’s speech, Cuomo today on CNN TV added “we don’t have testing capacity…We are way behind on testing”.

And of course Trump would never say that in four weeks the US has tested fewer than 10,000 nationwide, in contrast to China’s testing 200,000 in a single day or South Korea 15,000 in a day. Nonetheless, according to Trump, the US had carried out an “unprecedented response”, and was “responding with great speed”. Trump’s speech was typical ‘reverse hyperbole’. To refute the facts and critics, just say the opposite and exaggerate to the max. It used to be called the ‘big lie’ when Nazi ideologue, Joseph Goebbels, used to employ it.

In the days immediately preceding his speech, Trump and administration officials began calling the coronavirus the ‘China virus’ or the ‘Wuhan virus’, in a clear Xenophobic attempt to divert blame. But even that was contradicted in his speech tonight. Now it was Europe that was the cause of the spread of contagion in the US. As he put it directly, it was Europe that had “seeded the virus” to the US as its citizens traveled from Europe to the US. So the Europeans were now to blame as well as the Chinese.

In the same breath identifying Europe as the cause, Trump announced he was “suspending all Europe travel to the US for 30 days”. However, he failed to clarify if that included cargo and freight from Europe to the US as well as passengers. If cargo were included, that of course would accelerate recession in the real economy, for Europe as well as the US as global trade between the two came to a halt. In an even more astounding clarification to all that, however, he added that the UK would be exempt from the freeze on all Europe to US travel.

That remark was almost comical. What then would stop European passengers from taking the ‘Chunnel’ (the train tunnel under the English channel) from France to London and then flying to the US after a London connection? Was he trying to help his buddy, Boris Johnson, and his fast weakening UK economy by diverting all Europe travel to the US through London? Was he making a concession to Boris on upcoming US-UK trade negotiations? To point was as silly as it was transparent.

After meeting with US bankers earlier in the day, Trump had made a point to mention that collapsing US stock prices was “not a financial crisis”. Oh yeah? Tell that to Fed chairman Powell who today rushed another $175 billion into the markets overnight. Or to the giant shadow banks, Blackstone and Carlyl Group, who today began telling their clients to quickly draw down their credit lines at their banks because it was likely the banks would freeze their access soon. Or tell it to the various financial analysts who are now increasingly warning of escalating defaults on the way in the junk bond market for oil-gas fracking companies. Oil at $20 a barrel. No crisis really? (Let’s not forget the oil price crash in early 2008 that preceded the collapse of Lehman Brothers and other banks in the fall of 2008).

What working class America got out of Trump’s speech was that something for them was ‘on the way’ but Trump couldn’t say what that was, except there would be “relief soon”. That’s all. A ‘maybe’. Sometime. Perhaps. We’ll see. Just wait.

But US business would not have to wait. What Trump did propose in his speech was a series of measures directed mostly at US small businesses. He said he would add $50 billion to the government’s small business loan fund to provide money capital to small businesses in need. Secondly, he promised deferring of tax payments due April 15. And there was the payroll tax cuts, where all businesses across the board would enjoy an immediate 6.2% tax cut—whether they were negatively affected by the virus or not.

The idea of suspending the payroll tax was first introduced by President Obama in the wake of the 2008-09 crisis, when his other economic stimulus programs weren’t working too well. In retrospect, today most economists agree that Obama’s payroll tax suspension had little to no effect on stimulating the real economy—and would have even less today. What a payroll tax cut did accomplish under Obama was to further undermine the finances of the social security trust fund. But that would serve to support Trump’s announced plans this past January 2020—while talking to billionaires in Davos, Switzerland, at the World Economic Forum—to cut social security and medicare after the November 2020 US elections. Create a deficit in social security in order to order cuts in its benefits.

But where was the assistance to those who needed it most? What about the millions of American workers who would now have to stay home because they were infected. Either voluntary quarantined or ordered to do so by their employers. Or the millions unable to ‘work from home’ due to their occupation. Or those too sick to go to work. What about the more than half of the 165 million US work force who, according to the Federal Reserve research, have less than $400 in emergency savings for such situations? Or the 30 million who have no health insurance whatsoever. Or the 87 million who may have some insurance but have $500, $1000 or even $2000 deductibles, plus copays? Or the millions who have no paid sick leave whatsoever, since the USA is the cheapest provider of paid sick leave among all the advanced economies. Even most union contracts provide only 6 days paid leave on average. That’s 8 less than a 14 day quarantine period. And what about the tens of millions of working class households with Kindergarten through grade 6 children who can’t afford nannys or babysitters? What if their parents have to stay home, not work and not get a paycheck because their school districts shut down? And what about the many millions who will almost certainly have to go on unemployment in the travel industry, hotel workers, restaurant workers, airline and ship workers, those who work in entertainment, sporting, and other ‘social gathering’ industries? Where were Trump’s proposals for them? Trump and his administration advisors keep referring to ‘targeted’ stimulus, but his ‘target’ is businesses whether they need it or not, while working families are not at all a ‘target’ and will have to wait to get “relief soon”.

Dr. Jack Rasmus
March 11, 2020

posted March 17, 2020
Covid-19 and the Working Class

US politicians and media are reporting approximately 500 cases of the virus in the US as of March 8. The actual number is almost certainly much higher, however. Perhaps as much as 10-fold that number, according to some sources. Why?

There’s the problem of reporting only tested cases so far, and there’s still a lack of available tests even to test and to verify all those infected without symptoms.. And even those showing symptoms may have been determined initially as not infected by the tests, since reportedly many of the early test kits were defective. Meanwhile, those without symptoms or pre-symptomatic are not being tested at all.

The Fiction of Voluntary Quarantine

Then there’s the policy of voluntary quarantining those who have come into contact with someone who was tested and found infected. It’s not working very well. Those who have come in contact with carriers of the virus are asked simply to stay home. But do they? There’s no way to know, or even enforce that. The case example why voluntary quarantining doesn’t work well is Italy.

Most of the northern Lombardy region, including the financial center of Milan in that country, is in ‘lock down’ right now. But all that means is voluntary quarantining. People are asked not to leave their town, or the larger region. But is that stopping them traveling around their town in public places? Or within the larger region? And spreading the virus there? Apparently not. Reportedly, infection for those tested have risen in just two weeks to more than 6,000 in Northern Italy. CNBC reports that, in just one day this weekend, that number increased by 1200! So much for voluntary quarantines. There’s no way, no sufficient personnel, not even accepted procedures, with which to daily check on those (in Italy that means hundreds of thousands) in voluntary quarantine.

The Real Costs to Workers

Average working class folks cannot afford to voluntary quarantine themselves. Or to stay home from work for any reason. Even if they have symptoms. They will continue going to work. They have to, in order to economically survive.

Consider the typical scenario in the US: there are literally tens of millions of workers who have no more than $400 for an emergency. As many perhaps as half of the work force of 165 million. They live paycheck to paycheck. They can’t afford to miss any days of work.

Millions of them have no paid sick leave. The US is the worst of all advanced economies in terms of providing paid sick leave. Even union workers with some paid sick leave in their contracts have, at best, only six days on average. If they stay home sick, they’ll be asked by their employer the reason for doing so in order to collect that paid sick leave. And even when they don’t have sick leave. Paid leave or not, many will be required to provide a doctor’s slip indicating the nature of the illness. But doctors are refusing to hold office visits for patients who may have the virus. They can’t do anything about it, so they don’t want them to come in and possibly contaminate others or themselves. So a worker sick has to go to the hospital emergency room.

That raises another problem. A trip to the emergency room costs on average at least a $1,000. More if special tests are done. If the worker has no health insurance (30 million still don’t), that’s an out of pocket cost he/she can’t afford. They know it. So they don’t go to the hospital emergency room, and they can’t get an appointment at the doctor’s office. Result: they don’t get tested, refuse to go get tested, and they continue to go to work. The virus spreads.

Even if they have health insurance coverage, the deductible today is usually $500 to $2000. Most don’t have that kind of savings to spend either. Not to mention copays. So even those insured take a pass on going to the hospital to get tested, even if they have symptoms.

The media doesn’t help here either. Reports are typically that those who are young, middle age, and in reasonable good health and without other complicating conditions don’t die. It’s the older folks, retirees with Medicare, or with serious other conditions, that typically die from the virus. Workers hear this and that supports their decision not to go to the hospital or get tested as well.

Then there’s the further complication concerning employment if they do go to the hospital. The hospital will (soon) test them. If found infected, they will send them home…for voluntary quarantine for 14 days! Now the financial crises really begins. The hospital will inform their employer. Staying at home for 14 days will result in financial disaster, since the employer has no obligation to continue to pay them their wages while not at work, unless they have some minimal paid sick leave which, as noted, the vast majority don’t have. Nor does the employer have any obligation legally to even keep them employed for 14 days (or even less) if the employer determines they are not likely to return to work after 14 days (or even less). They therefore get fired if they go to the hospital after it reports to the employer they have the virus. Just another good reason not to go to the hospital.

In other words, here’s all kind of major economic disincentives to keep an illness confidential, to go to work, not go to the hospital (and can’t go to the doctor). That risks passing on the highly contagion bug to others–which has been happening and will continue to happen.
Here’s another financial hit for the working class: child care. Schools are beginning to shut down. Even where no cases are yet confirmed. Stanford University just decided to discontinue all in class sessions and revert to all online education. But what about K-6 and pre-school? Or even Jr. high schools? When they shut down, kids must stay at home. But most working class parents can’t afford nannys or baby-sitters. Not everyone works in an occupation or company where they can ‘work from home’. Do they send the young kids to grandma’s and grandpa’s, who are more susceptible to the virus? With their kids required to stay home, they must miss work, and risk even losing their jobs. We’re talking about millions of families with 6 to 12 year olds. And who knows how long the schools will remain shut down.

In short, wages lost due to self-quarantining, forced voluntary quarantining after hospital testing, the cost of hospital emergency room visits (whether insured or not), the unknown cost of the tests themselves (the government says it will reimburse them but they don’t have the $1,000 or more cash out of pocket in the first place), the cost of paying for nannys or baby-sitters for young school age children when schools shut down–i.e. all result in a massive out of pocket expense for most workers that they don’t have.

Workers figure all these possibilities of financial disaster pretty quick and know that the virus will mean a big financial hit if they miss a day’s work, or even if they don’t. So they keep working, hoping they’ll recover on their own, refusing to get tested because of the potential loss of work, wages, and income, and crossing their fingers that their kids’ school districts don’t shut down.

Economic Contagion Channels: Supply Chains, Demand, Asset Deflation, Defaults & Credit Crunch

What this all means for the US economy is obvious. Household consumption was already weakening at the end of last year. Most of consumption was driven by accelerating stock valuations, which affect those in the top 10% who own stocks; or by taking on more credit–credit cards, which affects the middle class and below.

Over $1 trillion in credit card debt is what has been largely driving middle income and below consumption. Mainstream economists argue that defaults on credit card debt are only 3% or so, and thus not a problem. But that’s a gross average across all 130 million households. When this data are broken down, middle income and below family credit card debt is around 9%, a very high number more like 2007 when the last economic recession began.

Then there’s auto debt. As of 2018, reportedly 7 million turned in their keys on their auto loans. As in the case of credit cards, auto debt defaults will rise as well in 2020. Then there’s student debt, over $1.6 Trillion now. Defaults there are much higher than reported as well, since actual defaults (defined as failure to pay either principal or interest) have been redefined to something else other than actual default.

Add to all this the likelihood is very high that job layoffs will now begin by April, as the global supply chain crisis due to virus-related cuts in production and trade. More job loss means less wage income and thus less household spending and more inability to deal with the costs of the virus for most working class families.

Let’s not also forget the price gouging for certain products that is beginning now to appear, both online and in stores. That reduces working class real incomes and thus consumption too. Meanwhile, certain industries are already taking a big hit and layoffs are looming in travel companies of all kinds (airlines, cruise ships, hotels, entertainment). In places where the virus effect is already large, a big decline in restaurant, sports and concerts, movies, etc. has also begun.

The two big economic contagion channels impacting employment thus far are supply chain production and distribution reductions, and local demand for certain services (travel, retail, hospitality, etc.).

But a third major channel has just begun to emerge: that’s financial asset deflation in stocks, oil & commodity futures, junk bonds & leveraged loans, and currency devaluations.

Stocks’ price collapse leads to business shelving investment and even cutting back production. That means more job loss, reduced wage incomes, less spending, and economic slowdown.

Oil and commodity prices now collapsing also lead to energy industry layoffs. More importantly, in turn that will lead to energy junk bond market collapse–potentially spreading to all junk bonds, leveraged loans, and even BBB grade corporate bonds (which are really redefined junk bonds not investment grade bonds).

In other words, the collapse of supply chains, production-distribution, and industry by industry demand in the US may become even worse should the financial markets price collapse can lead to a general credit crunch. And that translates into a general economic real contraction. That’s precisely what happened in 2008, in a similar chain reaction from financial crisis to real economic crisis.
Workers are aware of all this possibly leading to longer run economic stress. In the short run, they consider possible wages loss if they reveal or report they have the virus, or get tested: i.e. lost wage incomes: the cost of immediate medical care; the cost of child care, etc. Better to tough it through and continue to go to work is a typical, and rational, response.

This is already going on. Hundreds of thousands with, and without, symptoms are not being tested; nor will most of them volunteer to be. Except for those on cruise ships who are forced to be tested (and they’re mostly retirees and elderly), few workers can afford to allow themselves to be. The infection rate is thus already much higher and will continue to rise. Voluntary quarantining doesn’t work much (again just look at Italy, or even Germany, where in one week cases (tested) rose from 66 to more than 1000). So out of economic necessity and to avoid personal economic devastation, they continue to work. But that doesn’t have to be.

US Policy Response: No Help for Working Class

US policy has been, is, and will continue to be a disaster. Trump’s cuts to health and human services in the past seriously hampered the US initial response. Tests had to be sent to Atlanta and the CDC for processing. Early test kits often failed. Only now are they getting to the states–to late to have a positive initial effect on the spread. Those suspected of exposure to others confirmed infected were simply sent home for ‘voluntary quarantine’. Initial legislation of $8.3 billion just passed by Congress provides for ‘reimbursement’ for voluntary testing, with no clarification if that covers the $1,000 hospital visit as well or just the cost of the actual test!

There could be, however, a government response that financially supports workers and allows them to be properly tested and treated.
An Alternative Policy Response

Why doesn’t the government simply say ‘go get tested for free’ and the hospital will bill the government for the costs? Not the worker pay up front with money he/she likely doesn’t have. Why isn’t there emergency legislation by Congress or the states to require employers to provide at least 14 days of paid sick leave, like other countries? And law guaranteeing employers can’t fire a worker sick with the virus for any reason? Or tax credits to working class families for the full cost of child care–paid to a nanny or to the worker–if they have to stay home in the event of a school district shutdown?

While business-investor tax cuts will almost certainly be the official government response, few of the above measures for working class Americans are likely. In America working class folks always get the short end of the economic stick. Congress and presidents pass trillions of dollars in tax cut legislation ($15 trillion since 2001 to investors, businesses and the 1%), but have raised taxes on the working class. Companies with billions of dollars in annual profits pay nothing in taxes–and actually get a subsidy check from the government to boot. Just ask Amazon, IBM, many big banks, pharmaceutical companies and more!

It can be expected the virus will have a large negative impact the standard of living and wages of millions of working class families. They will have to bear the burden of the cost with little help from their government. Meanwhile, businesses and investors will get bailed out, ‘made whole’, once again. In the process Consumption spending–the only area holding up the economy in 2019–will take a big hit. That means recession starting next quarter is more than a 50-50 likelihood.

In fact, the investment bank, Goldman Sachs, has just forecast that the effect on the US economy in the coming second quarter of this year will be a collapse of GDP to 0% growth.

Jack Rasmus is author of the recently published book, ‘The Scourge of Neoliberalism;US Economic Policy from Reagan to Trump’, Clarity Press, January 2020. He blogs at and his twitter handle is @drjackrasmus. His website is

posted March 13, 2020
Global Financial Asset Deflation Underway: Prelude to Next ‘Great Recession’?

This morning, Monday, March 9, financial asset markets continue to implode: US stocks are further collapsing -6% (Dow down 1650, Nasdaq >500 mid-day). Ditto Asian and Europe stock markets -6%. They were already declining sharply last week due to coronavirus induced supply chain shocks (reducing production) and expanding demand shocks (consumer spending contraction in select industries like travel, hotels, entertainment)–all of which are being forecast by investors to whack corporate earnings in 2Q20 big time. But imposed on the equities market crash of the past 2 weeks now is the acceleration of the global oil price deflation that erupted yesterday as the Saudis deal with Russia last year to cut production and prop up prices fell apart. Collapsing oil & commodities futures prices are now feeding back up equities and other financial asset prices. Financial price deflation is spreading, including to currency exchange rates. Money capital is fleeing everywhere into ‘safe havens’ (gold, Treasuries, Yen). Historic decline of US Treasuries that are now below 1% (30 yr.) and .5% (10 yr).

Will the financial asset markets deflation soon spill over to the credit system (especially corporate bonds) and accelerate the decline of real economies worldwide in turn? Are traditional monetary & fiscal policy tools now less effective compared to 2008-09? If so, why? Is the global economy on the precipice of another ‘great recession’?

Financial Asset Markets Imploding

So we have oil futures market prices–i.e. another financial asset market–collapsing now and impacting the stock markets. In other words, a feedback contagion underway on stocks market prices in turn. Feedback is occurring as well on other industrial commodity futures prices that are following oil futures prices downward in tandem. But that’s not all the financial contagion and deflation underway.

The freefall in financial assets (stocks, oil, commodities) is also translating into currency exchange price deflation in turn, especially in emerging market economies in Latin America, Africa, Asia highly dependent on commodity sales with which to earn needed foreign exchange with which to finance their past debt (e.g. case of Argentina whose negotiations with IMF on how to restructure their debt will now break down, I predict).

Currency exchange rates are in sharp decline everywhere as a result. For emerging market economies that means money capital is more rapidly flowing out of their economy, toward safe havens globally like the US dollar, US Treasury bonds, gold, and the Japanese Yen currency.

In short, stocks, oil-commodity futures, and forex currency markets are all imploding and increasingly feeding back on each other in a general deflating downward spiral. This is a classic ‘cross-contagion effect’ that occurs in financial asset market crashes. And crashing financial markets eventually have the effect of contracting the real economy in turn, by freezing up what’s called the credit markets. Businesses can’t roll over their loans and refi their corporate bonds. Banks stop lending. The rest of the real economy then contracts sharply. It starts in the financial markets, spreads to credit markets (corporate junk bonds, BBB corporate bonds, then top grade bonds).

Coronavirus Effect as Precipitating Cause

But it even earlier begins in a slowing real US and global economy that precedes the markets crash. The global economy was already weakening seriously in 2019. The US economy at year end 2019 was also weak, held up only by household consumption. Business investment had already contracted nine months in a row in 2019 and inventories built up too much. And, of course, the Trump trade war took its toll throughout 2018-19.

Then came the Coronavirus which shut down supply chains in China, and then in So. Korea and Japan in turn. That then began impacting Europe, already weakened by the trade war (especially Germany) and Brexit concerns. The supply chain economic impact of the virus developed into a consumer demand economic impact as well, as travel spending was reduced (airlines, cruise ships, hotels, resorts, etc.) and now, in latest development, other areas of consumer spending too. Both supply chain (production cutbacks) and demand (consumption cutbacks) are interpreted by investors as leading soon to a big fall in corporate earnings–which translates in turn into stock price collapse we see now underway. Investors have decided the 11 year growth cycle is over. They’re cashing in and taking their money and running to the sidelines, moving it from stocks to cash or Treasuries or gold or other near liquid financial assets.

So the Coronavirus event is really a ‘precipitating cause’ of the current markets crash. The real economy weakness was already there. The virus just accelerated and exacerbated the process big time. (see my 2010 book, ‘Epic Recession:Prelude to Global Depression’ for explanation how financial causation comes in different forms as precipitating causes, enabling causes, and fundamental causes. Book reviews are on my website). Again, worth repeating: global and US economies were weakening noticeably in late 2019. The virus further impacted supply chains (production) and demand (consumption), reduced corporate earnings in the near term and thereby simply pushed stock markets over the cliff.

Mutual Feedback Effects: Real & Financial Economies

But financial crashes have the effect of feeding back into the real economy as well, causing it to contract further in turn. What starts as a weakening of the real economy that translates into financial markets crashing, in turn feeds back into a further weakening of the real economy. Mainstream economists don’t understand this ‘mutual feedback effect’; don’t understand the various causal relationships between financial asset cycles and real investment cycles. (For my explanation of this relationship there’s my 2016 book, ‘Systemic Fragility in the Global Economy’ and specifically chapters on the need to distinguish between financial asset investing and real investing and how late capitalism’s financial structure has changed such that the inter-causal effects of financial-real investment have deepened and intensified.) Financial crashes accelerate and deepen the contraction of the real economy. Recessions turn into ‘Great Recessions’ as in 2008-09. They may even turn into bona fide ‘Depressions’ as in the 1930s should the banking system not get bailed out quickly.

Corporate Bonds & Credit Markets Next?

The feedback effect of the current financial asset price deflation–now underway in stocks, commodity futures, forex, (and derivatives)–on the real economy will soon emerge as the financial markets deflation affects the various credit markets. The key credit market is the corporate bond market. Bond markets are far more important to capitalism than equity-stock markets. The credit markets to watch now are the corporate junk bonds (sometimes called high yield corporates). Junk bonds are debt issued to companies that have been performing poorly for years. They are kept alive by banks helping them issue their bonds at high interest rates. Investors demand a high rate because the companies may not survive. In good times they do. But when markets and economies turn down, companies over loaded with junk financing typically default–i.e. can’t pay the interest or principal on their bonds. They go under. The investors that bought their risky bonds are then left holding their debt that becomes near worthless. The US junk bond market today is ‘worth’ more than $2 trillion. At least a third of that is oil & energy (fracking) companies. A large part of their bonds must be rolled over, refinanced, in 2021. But many of them will not be able to refinance. Why? Because global oil prices have just collapsed to $30 a barrel, perhaps falling further to $20 a barrel. At that price, the oil-energy junk bond laden companies will not be able to refinance. They will default.

That will spread fear and contagion to other sectors of the $2 trillion junk bond sector–especially big box and other retail companies (e.g. JC Penneys, etc.) that also loaded up on junk financing in recent years. Investors will disgorge themselves of junk bonds in general.
The fear of a crash in junk bonds will almost certainly spread to other corporate bonds, first to what’s called BBB grade corporates. That’s another $3 trillion market. But most of BBBs are really also junk that’s been improperly reclassified as BBB, the lowest (unsafe) level of corporate Investment grade bonds (the safest). So at least $5 trillion in corporate credit is at risk for potential default. If even a part defaults, it will send shock waves throughout the corporate economy that will have very serious implications–for both the financial and real economies, US and global, which are increasingly fragile.

Is Another ‘Great Recession’ on the Horizon?

For example, Japan is already in recession as of late last year. Now it’s contracting, reportedly, by 7% more. Europe was stagnant at best, with Italy and Germany slipping into recession before the virus hit. So. Korea and Australia are in recession now, as other economies in Asia and Latin America are now contracting as well. China economy reportedly will come to a halt in terms of GDP this quarter, or even contract, according to some sources. Meanwhile, Goldman Sachs forecasts the US economy growth will stall to 0% in the second quarter 2020.

So a collapse in risky corporate bonds will occur overlaid on this already weak real economic scenario. Should that happen, then the recession could easily morph into another ‘great recession’ as in 2008-09; maybe even worse if the banking system freezes up and central banks cannot bail them out quickly enough. Or if banks in a major economy elsewhere experience a crash–as in India or even Europe or Japan where more than $10 trillion in non-performing bank loans exist–and the contagion spreads rapidly to banking systems elsewhere

Failed Monetary & Fiscal Policies, 2009-2019

Which leads to the question can central banks now do so? After the 2008-09 crash, the Fed bailed out the US banks by 2010. But it kept interest rates near zero under Obama for six more years. Banks could still get free money from the Fed at 0.15% interest. (The Fed then paid them 0.25% if they left the money with the Fed). The Fed bailed out other financial companies to the tune of $5 trillion more as it bought up bad loans and Treasuries from investors at above then market rates. That is, it subsidized them. And did so for six more years. All this free money flowed, mostly into financial markets in the US and worldwide, creating the stock bubbles that are now imploding. So the Fed and other central banks went on a binge subsidizing banks for years, and in the process broke their own interest rate tool needed for instances like the present crisis. The Fed tried desperately to raise interest rates in 2017-18 so it could have a cushion for times like this. But it then capitulated to Trump and began reducing interest rates again in 2019–as it had under Obama for six years.

The free money from the Fed artificially boosted stock prices. On top of this Trump added a further subsidization of banks and non-bank corporations, businesses, and investors with his $4.5 trillion 10 year tax cuts passed January 2018. Most of that went as a windfall to corporate-business bottom lines. 23% of the 27% rise in corporate profits in 2018 is attributable to the windfall tax cuts. And where did that go? It too was redirected to stock and other financial markets, further inflating the bubbles. Here’s the channel and proof: Fortune 500 corporations in the US alone spent $1.2 trillion in both 2018 and 2019 in stock buybacks and dividend payouts to their shareholders. The stock buybacks inflated the stock markets, and most of the dividend payouts did as well. (Buybacks+dividends under Obama were nearly as generous, averaging more than $800 billion a year for six years).

In other words, the 25% run up in US stock markets in 2017-19 under Trump was totally artificial, driven by the tax cuts and by the Fed capitulating to Trump and lowering rates again in 2019. Very little of the annual $1.2 trillion went into the real US economy. For the past year real investment in structures, plant, equipment, etc. actually contracted for nine months in 2019, and is now contracting even faster in 2020.

Just as the Fed has busted its own interest rate monetary tool as it continually subsidized banks and businesses with low interest rates for years, the chronic corporate-investor tax cutting has busted fiscal policy responses to recession as well. Since 2001 the US has provided $15 trillion in tax cuts, the vast majority of which have gone to corporations, banks, and wealthy investors. That has led to government deficits averaging more than $1 trillion a year since 2008. And accelerated the US federal debt to more than $22 trillion. Fiscal policy is now seriously constrained by the deficits and debt–just as monetary policy as interest rates is now constrained by virtually all Treasury bond rates below 1% in the US and negative rates in Europe and Japan.

Interest rate policy responses to today’s emerging crisis is thus dead in the water. (As this writer predicted it would become in 2016 in the book, ‘Central Bankers at the End of Their Rope: Monetary Policy and the Coming Depression’). After years of monetary policy used as a tool to subsidize banks, it is now ineffective as a tool to stabilize the economy. Ditto for fiscal policy as tax policy. Used by Obama and even more so by Trump to subsidize corporations, stock buybacks, and financial markets, it is confronted by massive annual US budget deficits and accelerating national debt.

The likely responses by politicians and policy makers to the current emerging financial crisis and recessions in the real economy will be to cut taxes even further for businesses. It will have little effect, however. But will exacerbate levels of deficit and debt. That means the follow up will be to attack and reduce government spending, especially targeting social security, medicare, healthcare and education in 2021. Trump has already publicly indicated his intent to do so. On the Fed side, expect more injection of money directly into the economy and failing businesses by means of another major round of ‘quantitative easing’ (QE). That’s coming soon. Ditto for Europe and Japan where negative rates already exist. Watch China too should its economy contract for the first time in 30 years. And watch India, where it’s banking system is already fracturing due to causes totally separate from the virus effect. A banking crash in India is on the agenda. It could result in yet another financial blow to the global economy, adding to the current Saudi-produced oil price shock and the virus effect on supply chains and demand.

Summary and Conclusions

In summary, the global capitalist economy is unraveling financially, and soon further in real terms. Massive job layoffs in coming months in the US are a growing possibility. That will drive the US economy deep in contraction as household consumption, the only area holding up the US economy in 2019, now joins the contraction. It remains to be seen how US monetary and fiscal policy can restore economic stability given its self-destruction by US politicians since 2008. Trump policies have been no different than Obama’s-just more generous to corporate America and investors. Trump’s policies are best described as ‘Neoliberalism 2.0’ or ‘Neoliberal on steroids’. (see my just published 2020 book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’).

The US and global economies are well on their way to a repeat of the ‘great recession’ (or worse) of 2008-09. Only this time traditional monetary-fiscal policy is much less effective. More radical policy responses will likely be developed to try to stabilize the capitalist economies both in USA and elsewhere (where problems are even more severe). Watch closely as the crisis on the financial side moves on from equity (stock), commodities, and forex financial markets into derivatives markets and credit markets–especially junk bond and other corporate bond markets. Watch as the Fed tries desperately to provide liquidity to business and markets via its Repo channel and QE since its traditional rate channels are now ineffective. And watch as US and global capitalist advanced economies try to coordinate new fiscal policy responses to the general dual crisis in financial and real economic sectors of global capital.

Dr. Jack Rasmus
March 9, 2020

Dr. Rasmus is author of the just published book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity Press, January 2020. His website is He blogs at and tweets @drjackrasmus. Dr. Rasmus hosts the weekly radio show, Alternative Visions, on the Progressive Radio Network, fridays, at 2pm eastern.

posted February 24, 2020
Coronavirus Global Economic Contagion Channels: From China to ROW

posted February 15, 2020
2 on US Neoliberalism in Crisis

by Dr. Jack Rasmus, Z Magazine, December 2019
copyright 2019

“Hundreds of books and articles, perhaps thousands, have been written to date on the meaning and consequences of what’s called Neoliberalism. But clarity as to what it means, what has driven its evolution for the past four decades, and what’s its likely future trajectory remain insufficient at best.

Critics of Neoliberalism have yet to explain it fully or adequately. They are therefore unable to say little about its future evolution.
Some key questions that remain unanswered are: Has Neoliberalism been unraveling since the 2008-09 recent economic crisis and the slow growth, often stagnant recovery that followed? Is it being restored under Trump? Will it survive the next capitalist crisis almost certain to occur by the early 2020s? What are the material forces maturing within 21st century capitalist economy that will precipitate and drive that next crisis, and will Neoliberalism be able to successfully adapt? If not, what ideas and policies might replace the current Neoliberal era (1979-2019) of capitalism?

Most analyses concur that Neoliberalism represents an economic shift introduced by capitalists and their political elites—initially in the US and UK—in response to the crisis capitalism encountered in the 1970s decade. In other words, it has something to do with capitalist economy in crisis.

Other accounts attempt to explain its origins and evolution primarily from the perspective of an Idea that inspired, defined, and enabled US and UK capitalist-elites’ to respond successfully to the 1970s crisis.

Still others explain Neoliberalism as an historical practice, i.e. as a new regime of policies introduced in the late 1970s in the US and UK—later adopted by other capitalist economies worldwide to varying degree and form—that emphasizes austerity in government spending and reliance in policy matters on free markets.

But all that doesn’t really tell us much. Defined that way leaves its meaning still opaque and ambiguous—and therefore unable to predict where and how Neoliberalism may evolve in the future.

The analysis of Neoliberalism to date has produced so many interpretations, often contradictory, that readers remain confused as to what exactly it means. Is it about introducing free market principles into economic and social policy? Is it about austerity in fiscal spending? Is it just a substitute term for what was formerly referred to as Imperialism abroad and class exploitation at home? As one analysis concluded, “imprecision would seem to characterize its use, sometimes even among those for whom the concept is central to their analysis, and its over-use is seen to have resulted in a loss of analytical value.”

The Ideology of Neoliberalism

According to those approaching Neoliberalism from the perspective of the evolution of an Idea, the Neoliberal Idea originates around mid-10th century among ultra conservative intellectuals like Friedrich Hayek and Milton Friedman in economics; in the philosophy of radical individualism by Karl Popper and Robert Nozick; and in policy proposals from right wing pundits like Charles Krauthammer, William Kristol and Robert Kagan—to name but a few or the more notable.

As these intellectual originators viewed it, their task was to adapt, repackage and resell some of the main tenets of classical liberalism. To plant and nurture the seeds of new ideas, and counterpose those ideas to the prevailing dominant Keynesian economic and otherwise social compact views that prevailed post world war II. The new ideas would be resurrected, classic Liberal ideas adapted to the post-war environment. New ideas that were new-Liberal or Neoliberal, designed to displace the dominant Keynesian-social compact-collectivist ideas of the period and encourage and usher in a new set of policies based on the new ideas that would, in effect, represent pre-Keynesian, pre-social compact ideas once again. It was to be old classic Liberal wine in the new Neoliberal bottle.

But is Neoliberalism actually ‘Liberal’? How does it compare with the classic liberal economic and social theory of the 17th-18th century? Neoliberalism as an Idea claims it is based on classic liberal ideas of free markets and individual freedom. It claims that by adapting classic liberal principles and propositions to new economic and social policies the new policies will succeed in promoting economic growth and stability, whereas the old Keynesian-collectivist policies failed to do so. Thus it is Neoliberal Ideas that drive the eventual policies that came to be known as ‘Reaganomics’ in the US and ‘Thatcherism’ in the UK.

But Neoliberal Ideas have actually little in common with the classical Liberal; and it is an intellectual conceit to argue that Neoliberal Ideas drove and determined the Neoliberal policies that were eventually introduced in the late 1970s-early 1980s. In fact, a reasonable argument may be made to the contrary: it is Neoliberalism in Practice that reached back and adopted Neoliberal Idea propositions in order to justify and legitimize its policies. But what exactly are the basic propositions of Neoliberalism as Idea? What congruence is there between those propositions and the 17th-18th century Classic Liberalism? And do either—i.e. Classic Liberal and Neoliberal Ideas—have anything to do with Neoliberalism in Practice?

The Basic Propositions of Neoliberalism as Idea

• Markets should always be free of government interference and the economy and policies should be based on free markets

• Free markets require deregulation of business, as well as privatization of all public ownership of production of goods or services

• Free markets are always and everywhere more ‘efficient’ than regulated markets or government provided goods and services

• Free trade should always and everywhere govern the exchange of goods and services between economies and countries

• Government should never intervene in markets—whether to provide public works, correct negative ‘externalities’ created by those markets, or even to provide public education, health care, or other services

• Taxes should be cut to stimulate economic growth—especially taxes on business and investors. Cutting taxes creates additional investment and therefore employment and growth

• Government budgets should always be ‘balanced’, avoiding deficits and therefore accumulation of government debt

• To ensure stable economic growth, the money supply should be increased according to a ‘monetary growth rule’—i.e. a set amount every year.

But these elements of the Neoliberal Idea have very little to do with Classic Liberalism. And have even less to do with Neoliberalism in actual practice.

The Basic Ideas of Classic Liberalism:

• Markets should be free only to the extent that they fostered superior moral behavior and enable the development of the individual.

• Free markets were more efficient only if they promoted competition among capitalists, resulting in goods being produced at the lowest cost, and therefore lowest price, while providing the greatest possible amount of goods to the greatest number of individuals.

• Not all business activity should be deregulated or privatized. Some things markets would not produce, even if socially necessary and demanded by the public; or they would produce them for only a wealthy minority who might afford them only at the much high prices that markets might have to charge a smaller, privileged number of buyers.

• Markets sometime behave badly and at times must be regulated. Not all government services should be privatized. In fact, services like public education must be provided by government since markets would not find it profitable to provide them.

• Free trade is not always appropriate everywhere. Nor beneficial to all.

• Economic growth is stimulated by raising taxes on business, not cutting taxes. Higher taxes force business to introduce more efficient ways of producing to offset the cost of the tax increase. New technology that results actually increase jobs and stimulate economic growth.

• Budget deficits are justified for purposes of spending on defense, public safety, and critical social services (education) and public works that markets may not provide

• Money is ‘neutral’. An increase in its supply cannot, by itself, lead to economic growth and stability. Growth is generated only by increasing available land, labor, and capital and by raising its productiveness.

A close reading of the actual works of 17th-18th century Classic Liberal economists like Adam Smith, David Hume, and others shows the preceding points represent fundamental ideas of Classic Liberalism. But, as a comparative reading clearly shows, they are in sharp contrast to the basic propositions that define Neoliberalism as of the late 1970s. In short, in so far as classic liberalism is concerned, Neoliberalism is not ‘Liberal’ at all. Neoliberalism is not ‘new’ Liberalism or any kind of Liberalism. What it represents is something quite the contrary.

Comparing Neoliberalism as Idea with Neoliberalism in Practice

But what about Neoliberalism in actual, historic practice? How does it compare—to Classic Liberalism as well as Neoliberalism as Idea? Neoliberalism in Practice differs from both. It is even further removed from Classic Liberalism. And in a number of ways it is even the opposite of Neoliberalism as Idea.

1. First, Neoliberalism in practice is not at all about expanding free markets. There are few, if any, free markets under Neoliberal capitalism. The fiction is created by Neoliberalism as Idea writers is that, just because industry is deregulated and public goods privatized, deregulation is equivalent to the creation of ‘free markets’. Neoliberal capitalism is about the destruction of market competition and the concentration of economic power among fewer and fewer remaining businesses in an industry. It is about eliminating ‘free markets’ whenever and wherever possible. Capitalism always drives toward eliminating competition, and without competition there are no ‘free’ markets in the Liberal sense. So Neoliberalism in Practice is the antithesis of free markets.

It is also different in that, in practice, Governments in the Neoliberal era of capitalism are deeply and increasingly involved in the economy on behalf of capitalist interests in general, and in particular involved in assisting mergers and acquisitions and thus in advancing the concentration of capital and business into fewer producers and sellers. And the larger and fewer the remaining producers, the less ‘efficient’ they become. That is, the higher costs of their production and in turn the higher the prices they charge consumers. Markets in effect become more concentration, less efficient, and less ‘free’ as a consequence of Neoliberalism in Practice.

2. One might add to Neoliberalism’s contribution to ‘micro’ level inefficiency the even more massive macro inefficiency of capitalist Neoliberalism. How efficient is Neoliberal capitalism when it creates economic crashes like 2008-09, when 14 million homeowners in the US alone were foreclosed and lost their homes? Or when 20 million were left unemployed, and then underemployed for years more after 2009. Or when $4T in lost interest income occurred for retirees as a result of the near zero interest rate policy of the central bank, the Federal Reserve, in effect from 2009 to 2016? Or the additional $4T in collapsed retirement benefit program values. Meanwhile the same central bank zero rates resulted, in contrast, to more than a $1T a year on average in stock buybacks and dividend payouts to shareholders every year from 2010 through 2019. Corporations borrowed virtually ‘free’ money at near zero interest rates—either from loans or by issuing corporate bonds—and turned around and distributed most of it to shareholders at the rate of $1T plus a year. Or what of the macro-inefficiency of spending $7 trillion in US war products that were either blown up or dumped in deserts when declared obsolete. The ‘macro-inefficiencies’ of Neoliberal capitalism are massive and almost incalculable in the US economy alone.

In short, there is nothing ‘free’ or ‘efficient’ about markets in the Neoliberal era in practice. The founding intellectuals of Neoliberalism as Idea, when promoting that notion, are therefore simply peddling a lie—i.e. they are promoting the ideology of Neoliberalism not its reality. They are peddling a notion of Neoliberalism that doesn’t exist in the real world of Neoliberal practice. What Neoliberalism in Practice has done is simply used the lie that free markets are more efficient in order to justify and to ‘sell’ the actual policies of industry deregulation and public goods privatizations. In other words, deregulation and privatization have nothing to do with free and efficient markets. The latter are just the intellectual veil, the cover to justify the Neoliberal policy.

3. Nor is the Neoliberal idea that tax cuts create jobs and economic growth any more the case in fact. Tax cutting under in the Neoliberal era since 2000 alone has amounted to more than $15 trillion—80% of which has accrued to investors, businesses, and the wealthiest households. In turn, that $15 trillion has resulted in the weakest rate of investment, job creation, wage increases, and general economic growth in the US in the past half century. In other words, business-investor tax cuts did not create jobs. They destroyed them, as tax incentives strongly encouraged US multinational corporations to move operations offshore. Trump’s 2018 tax cuts—the latest iteration of this ‘business tax cuts create jobs’ shell game alone provide another $2 trillion for US multinational corporations over the next decade. They can now produce offshore tax free. Why then should they expand production and jobs in the US, one might ask, when they can henceforth produce offshore and pay no taxes?

4. Neoliberalism as Idea further maintains that free trade should be the norm everywhere. But in Neoliberal Practice free trade means incentives to further move US production offshore. US businesses then produce offshore at lower cost and ship the goods produced back into the US, now without tariffs, for US workers to buy, now with lower paid service jobs replacing the higher paid manufacturing jobs that were offshored due to free trade. Instead of higher wages, workers are now allowed to borrow (credit) to buy the products, incurring debt, the interest of which they now pay banks and stores issuing the credit cards. Free trade also means banks and finance capitalists, who get to borrow at near zero interest rates, invest the money offshore instead of in the US. Free trade is more about such international money flows from the US as it is about goods and product flows produced abroad back to the US. All this is the reality of Neoliberal free trade, compared to the fiction of the Neoliberal Idea of free trade where all parties somehow benefit from free trade—workers, consumers, as well as capitalist producers and bankers.

5. Perhaps nowhere is the distinction between the Neoliberal Idea on deficits and debt greater from the practice of Neoliberalism. The former declares the objective is to balance the budget and reduce government debt; whereas Neoliberalism in Practice is about allowing the uncontrolled escalation of annual budget deficits and therefore government debt. At barely $1 trillion when Neoliberalism in Practice began in 1979-80, deficits and debt had escalated to $4T by 2000, rising to $10T by 2009, and to nearly $23T by year end 2019. Trump 2018 tax cuts and annual war spending escalation will raise debt to more than $35T by 2028.

6. The monetary growth rule of Neoliberalism as Idea also contrasts sharply with the practice of Neoliberalism. Instead of allowing the central bank to slowly and steadily increase the supply of money in the economy according to an objective rule, or fixed formula, the practice of Neoliberalism has been to have the central bank continually inject massive amounts of money into the economy. In times of banking crises and after as well. The result is chronic, low interest rates, which enable lending at low cost to investors and corporations alike, much of which borrowed is then diverted to offshore investments, to re-investment in stock, bond and other financial markets, to distribution to shareholders in the form of stock buybacks and dividend payments, or into merger and acquisition of competitors by businesses. The Idea of Neoliberalism thus has little in common with its practice so far as money is concerned.

What the foregoing paragraphs reveal is that Neoliberalism as Idea has little in common with Classical Liberalism, but even less in common with Neoliberalism as Practice. The function of Neoliberalism as Idea is therefore to provide logic and pro-individual, pro-personal freedom arguments in order to justify the Neoliberal policies that occur in practice—i.e. policies that are often quite contrary to those arguments and that Idea. The practice of Neoliberalism is thus neither classical liberal nor even Neoliberal.

Contrary to many accounts of Neoliberalism, the Idea of Neoliberalism does not give rise to, or enable Neoliberalism as actual historical practice. The role of Neoliberal Ideas is to legitimize—after the fact—the actual policies and practice of Neoliberalism.

A problem with many accounts and analyses of Neoliberalism is that they assume that Neoliberalism as an Idea is what gave rise from the mid-1970s on to Neoliberalism as an actual historical practice. Somehow the ideas are what convince capitalists, their lobbyists, their business organizations, their trade associations, etc. to propose to their political elites in Congress and legislatures the actual Neoliberal policies, The policies are thus a reflection of their ideas. However, as just shown, Neoliberal ideas have little in common with the actual policies and practices of Neoliberalism that get introduced and implemented. So how can the ideas drive the actual historical practice, i.e. the policies, if they are different?

Perhaps the causation is actually the reverse: the policies and practices are developed by the capitalists and their political elites. The ideas of Neoliberalism—a strange amalgam of classic and non-classic liberal propositions—are after the fact then employed as justifications and legitimization of those policies. Embalmed in a veneer of personal freedom, individualism, efficiency, benefits from employment, etc., the dead body of Liberalism is resurrected in decayed form to argue that the corpse is still alive and liberal even though it has long deceased.

Nonetheless, many critics of Neoliberalism simply slip back and forth between the Idea and the Practice of Neoliberalism, with little explanation of how the one, the Idea or the Practice, causally determines the other.

Neoliberalism in Practice

What then are the actual policies associated with actual, historical Neoliberalism? Here too critics of Neoliberalism fail to provide a comprehensive explanation. As noted previously, major attention is given to Neoliberalism as Austerity policy, or as industry deregulation and privatization, or as free trade. But little attention is paid to Neoliberal monetary policy or Neoliberal external policies apart from trade—i.e. currency exchange rate policy or what is called the ‘twin deficits’ policy solution. Nor is much explanation given to how Neoliberal policy promotes the financialization of the global economy, financial deregulation, and cross border money capital flows. While fiscal policy and industrial policy (i.e. deregulation, privatization, de-unionization, wage compression, etc.) are addressed in most accounts of Neoliberalism, not much in the way of analysis and critique is given to External Policy and Monetary Policy. But Neoliberalism in Practice, i.e. as policy, is more than just Fiscal Policy and Industrial Policy.

Neoliberalism in Practice represents a particular policy regime, consisting of Fiscal policy (tax, spending, deficit-debt management), Industrial policy (deregulation, privatization, de-unionization, wage compression, financialization), Monetary policy (excess liquidity injection, chronic low interest rates), and External Policy (trade, low US dollar exchange rate, twin deficits).

Neoliberalism represents a particular mix of these policies. Before Neoliberalism, the four main policy areas also existed but in a different mix and different relationship to each other. It was a different policy ‘regime’.

The policy regime before the Neoliberal policy shift originated in the wake of of the second world war, originating roughly in the period, 1944-53. A still different policy regime was created in the US just prior to world war one, in the period 1908-13. Thus the US experience has been to restructure the economy in a major way at least three times in the last century: 1908-13, 1944-53, and 1979-88. The latter, 3rd restructuring is simply called the Neoliberal. Its policy mix or regime differed from the two prior regimes.

The policy restructuring in all three cases was designed to change policies in order for US capitalism to confront a challenge or crisis. In 1908-13 US capitalism prepared to restructure its economy in anticipation of becoming a more or less equal competitor with the UK and European capital in general on the stage of the world economy after world war one. In 1944-53, capitalists restructured once again as the US became the sole hegemon in the global economy following world war two. Both restructurings represent US capital shifting policy fundamentally in order to confront a major crisis and opportunity. In each case the restructurings were accompanied by a particular policy reordering. That reordering occurred a third time as a response to the crisis of the 1970s, not war. In that sense it differed from the earlier two restructurings and policy shifts.

In the Neoliberal case, the US re-established itself as the hegemon in the global capitalist economy for at least several more decades. Challenges domestically and abroad in the 1970s were successfully contained, and US capital emerged once again globally and internally as the key dominant player in the global economy.

Neoliberalism in Practice—i.e. as a particular new policy mix of the four areas—continued to expand and evolve throughout the 1990s and after 2000. The global crash of 2008-09 halted its development and evolution, however. As argued in this writers’ book, ‘The Scourge of Neoliberalism’, Neoliberal policy evolution hit a wall with the 2008-09 crash. Obama tried but failed to restore it and regain its momentum. Trump’s policies should be viewed as a future attempt to restore Neoliberalism as policy, albeit in a new virulent and aggression form that is still in progress.

Whether Trump will succeed remains to be seen. However, there are fundamental real and material forces in development—involving changes in technology, AI & machine/deep learning, the nature of money, production processes and distribution channels, new business models, product-capital-labor markets, and in political resistance both domestic and foreign—that may well prevent Trump’s restoration attempt.

Over the past four decades Neoliberal policy has evolved and expanded. It has also begun to develop its own internal contradictions—as discussed in more detail in the aforementioned book. As a partial summary of Neoliberalism in Practice at this point, the following elements may be said to now constitute Neoliberalism in Practice as of 2019:

• Social program policy cuts, focused heavily on reducing and eliminating government programs introduced from 1934 through 1965;

• Aggressive deregulation of industries, especially banking & finance, communications, public and private transport, education and healthcare;

• Privatization of employer contributed healthcare and retirement services introduced with the 2nd restructuring, privatization of military services, and privatization of public goods and services including federal lands access;

• Deep reduction of business-investor-wealthy household taxation on profits and capital incomes (interest, dividends, business rent, etc.);

• Chronic escalation of war and defense spending amidst social spending austerity;

• Tolerance of rising budget deficits, the national debt, and interest on that debt;

• Central bank monetary policies based on chronic liquidity injections designed to ensure long term low bank interest rates that subsidize business costs of investment;

• Incremental de-unionization and weakening of collective bargaining, as well as compression of wage incomes;

• Promotion by government of radical changes in the labor markets, creating millions of contingent labor employment, low paid service jobs, atrophy of minimum wages, massive offshoring of manufacturing employment, and encouragement of on-shoring of skilled labor visa policies;

• Substituting free trade for traditional trade policy measures based on tariffs, quotas, and administrative measures as the primary means to maximize US corporate exports;

• Acceptance of US trade deficits in exchange for a ‘twin deficits’ solution ensuring US offshore dollar recycling arrangements with major allies and global trading partners;

• Encouraging a long term low US dollar exchange rate and US money capital outflows and foreign direct investment;

• Promotion of financialization of the US economy at the direct expense of real asset investment based economic growth;

Thus Neoliberalism in Practice is not simply a set of policies associated with social program cutbacks and fiscal austerity, or industry deregulation or privatization, as many identify. It is much broader than that. It represents a basic economic system restructuring that involves a resurgence and aggressive expansion at the expense of both foreign capitalist competitors as well as domestic working classes. It is an attempt to re-establish US economic hegemony in the late 20th century and well into the 21st. In that it succeeded…until the crash of 2008-09, from which it is yet to fully recover.

What’s Missing in Critiques of Neoliberalism

Apart from not adequately addressing the material origins of the restructuring that gives rise to Neoliberalism, critics of Neoliberal policy fail to address key elements of its unique policy and program mix. To begin with there’s the lack of analysis of what’s called external policy—i.e. twin deficits, external debt, currency exchange rates, foreign direct investment and global money capital flows—are often largely missing. Neoliberalism is characterized by a particular set of external policies that differ from prior restructurings.

Consideration of trade or goods flows, and perhaps free trade treaties, are the limited focus of most critiques. Another area where critics fall short is a superficial treatment of Industrial policy. While de-unionization, job offshoring, general wage compression, and industry deregulation are addressed by critics, fundamental developments like the rise of contingent labor and the even more destructive now just emerging phenomenon—artificial intelligence and machine learning—are ignored for their effects on labor markets and the shift in capitalist vs. worker relative power they represent. Also missing, in all but minor terms, is the financialization of the global capitalist economy. Here the role of capital markets, shadow banks, derivatives, the rise of the new global finance capital elite, and the relative shift to financial asset investing, crowding out real investment, are left largely unconsidered; in other words, that which might be classified as the new phase of imperialism and US vs. global capitalist class competition and conflict is not adequately addressed. Not least, what is also missing in most accounts of Neoliberalism is how its advance is closely correlated with the atrophying and decline of Democracy in America—i.e. the norms, practices, parties, the electoral system, and even government institutions.

Dr. Jack Rasmus is author of the just released book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity Press, October 2019, which is available for purchase at discount from the author’s blog,, and website, Jack hosts the weekly radio show, Alternative Visions, and tweets at @drjackrasmus.

by Dr. Jack Rasmus, Z Magazine, February 2020

The following is a continuation of the analysis of contemporary US Neoliberalism in practice that was begun in Part 1 in the preceding issue of Z Magazine. In Part 2 the arguments is made US Neoliberal policy experienced a crisis in 2008-09 US and the historic weak recovery that occurred thereafter under the Obama regime. The Trump administration should be understood as an effort to restore the Neoliberal offensive in a more virulent, aggressive, ‘2.0’ form.

Once again the four key areas that define Neoliberalism are considered: Fiscal policy, Monetary policy, Industrial policy, and Trade-External policy. And after three years of Trump it has become clear that Trump has restored momentum to Neoliberalism in the US, although only partially and in only select policy areas. The Trump restoration to date is thus incomplete.

In areas of Trade-External policy he has clearly failed to date, clearly succeeded in Fiscal-Tax policy, while in still others—such as Monetary policy—a restoration effort still ‘in progress’. Looking into the future, material forces that have been developing within US and global capitalism make it increasingly unlikely Trump will be able to success in fully restoring US Neoliberal policy momentum such as existed in the 1979-2007 period.

What will follow Trump’s failed restoration is yet to be determined. But whatever it is, it is unlikely to conform to the definition or character of Neoliberalism as it has been known up to now. What follows will either be something more radical and aggressive on behalf of capitalist America—at the expense of American capitalism’s domestic and global challengers—or else a return to a more progressive policy regime that will reverse the worst legacies of Neoliberalism.

(The following analysis of Trump Neoliberalism is an excerpt from the long chapter 8 in ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, by Dr. Jack Rasmus, published by Clarity Press, January 2020.)

Trump’s Reactionary Neoliberalism

Trump’s election and his economic policies that have followed is best understood as a reaction to the Neoliberal policy regime’s failure under Obama to successfully address the economic crisis of 2008-09, both domestically and globally. Furthermore, Trump’s attempt to resurrect Neoliberalism has more in common with the original neoliberal project initiated by Reagan: i.e. in both cases, their economic policies represent an attempt to confront a preceding period of extended stagnation of the US economy. With Reagan, the 1970s economic stagnation and crisis; with Trump, the weakest recovery from recession in the past fifty years that occurred 2008-2016. .
It remains to be seen, however, whether Trump can still succeed in resurrecting neoliberal policies by restoring to full effect the following twelve hallmark characteristics of neoliberal economic policy:

• significant expansion of US war-defense spending;

• subsidization of investors’ and businesses’ profits via business-investor tax cuts;

• shifting of total tax burdens to payroll taxes and other regressive taxes;

• reductions in social program and social benefits spending;

• restructuring of external trade and currency relationships with US global capitalist competitors, allies and adversaries alike;
• expansion of free trade treaties, whether multilateral or bilateral;

• long term low dollar exchange rate to maximize profits of US multinational corporations’ offshore operations and competitiveness of US corporate exporters;

• continuation of the ‘twin deficits’ solution to enable financing of ever larger US budget deficits and national debt;

• continuation of central bank policies ensuring chronic low interest rates via traditional bond buying operations, and/or Quantitative Easing (QE), to subsidize profits of the private banking system and financial markets;

• expansion of industry deregulations and privatizations of public goods, services and programs;

• destruction of unions and collective bargaining to compress nominal wage and negotiated fringe benefits;

• wage compression by means of delay of minimum and protective wage legislation inflation adjustments, by encouragement of growth of contingency labor employment, by offshoring of jobs, by encouraging displacement of labor with capital by automation, and by policies permitting importation of lower paid skilled labor by H1-B and L1-2 visas;

These are the major policy offensives that together have defined the US neoliberal policy regime since 1980. They are policies that in turn have facilitated the induced restructuring of US capitalist economic relations in the Neoliberal era— with both other capitalist economies as well as with US domestic non-capitalist groups and classes. Not least, they are also the policies that brought about the deleterious conditions faced by large masses of working people, which were responsible for Trump’s election victory.

Trump’s Neoliberalism: Successes, Failures, Work Still In Progress

After nearly three years of Trump policy initiatives it is evident that several of the key elements of neoliberal economic policy have been successfully resurrected and restored by Trump after the crisis of neoliberal policy experienced post-2008. These are:

• business-investor tax cutting,

• defense-war spending escalation,

• industry deregulation and privatizations, and

• labor compensation compression and union destruction.

The restoration of other neoliberal elements is a work still in progress:

• the restoration of chronic low interest rates (i.e. central bank monetary policy) and

• ensuring a low US dollar valuation (i.e. exchange rate policy).

But still other neoliberal policies thus far have been proving difficult for Trump to restore. These include, in particular:

• deep cuts to entitlement and other social program spending,

• the restructuring of US trade relationships, and

• ensuring the continuation of the ‘twin deficits’ solution required to continue to successfully finance US budget deficits and the US national debt.

Trump’s failure to restore neoliberal policy across all these fronts simultaneously is in part due to the fundamental contradictions between the four dimensions that constitute the Neoliberal policy mix and regime—i.e. fundamental contradictions lie at the heart of the neoliberal policy regime itself.

But Trump’s failure to date is not due only to these fundamental contradictions between Neoliberal policies. It is also due to the resistance, both domestic and foreign, that Trump’s attempted restoration has been generating, both home and abroad. Trump has launched a more aggressive, virulent form of neoliberalism in his effort to continue an ultimately untenable neoliberal policy regime for yet another decade. Hence, it’s a nastier, 2.0 version, introduced in the increasingly desperate effort to overcome the neoliberal contradictions and the resistance to it.

Trump Neoliberalism: Restructuring Economic & Social Relations

Trump’s more aggressive, nastier form of Neoliberalism requires not only launching new neoliberal initiatives—like global trade restructuring—but also requires fundamental structural change in US political-governmental institutions and US political culture.. Political change under Neoliberalism is thus necessary in order to achieve more aggressive economic policy objectives.

In other words, just as Neoliberal policy evolution drives economic restructuring, and economic restructuring requires ever more aggressive Neoliberal policy—so too does Neoliberal policy in turn drive political restructuring in order to address the resistance to its continuation as it becomes more virulent and aggressive.

Late stage neoliberal evolution thus requires a change in the relations within and between formal US government institutions (Congress, Executive, Judiciary), between the electorate and those institutions, within and between traditional political parties, and between new political rules and norms and traditional civil liberties and democratic practices protected by the Bill of Rights. Change in international political institutions is also driven by the effort to make way for, extend and expand Neoliberalism. Institutions like the IMF, World Bank, NATO, G7, G20, and national security arrangements among US and its allies, etc., become targets for restructuring by the US as the American empire reacts to its waning influence and power on the global stage.

Has Trump Restored Neoliberalism?

After nearly three years in office, Trump’s restoration of the Neoliberal policy regime is a mixed picture. On the one hand, Business-Investor tax cuts and War-Defense spending fiscal policies have clearly been set back on an accelerating growth course established under George W. Bush. In fact, they are being pursued even more aggressively. What we have here is clearly a more virulent Neoliberalism 2.0. The faltering of War-Defense spending under Obama—which was necessary to justify an even greater $1.-$1.5 trillion reduction in social program discretionary spending—has been especially restored. In addition, Trump’s tax cuts have exceeded in two years what Obama had achieved in eight. So its restoration—and then some—with regard to these two Neoliberal policies.

A similar case may be made for Trump’s Industrial Policy as it applies to deregulation and privatization. Other elements of Industrial Policy represent more of a continuation of preceding trends prior to Obama, and an elimination of Obama’s softer approach in some areas of wage, de-unionization, and other industrial policy programs. While Obama slowed and in some cases rolled back the privatization of public lands and public goods, Trump has succeeded in reversing those rollbacks. On the other hand, Obama was an advocate of privatizing education through Charter schools and his ‘No Child Left Behind’ program. Nor did he lift a finger to defend the attack on teachers unions and collective bargaining in the public sector. Industrial policy associated with wage compression and jobs under Trump represents a return, after Obama, to blocking federal and other legislated wage minimums, while reigniting the Neoliberal attack on reducing eligibility for overtime pay. But wage levels for most workers consistently fell under Obama, and under Trump have proved the same even as the high end of wage earners may have improved under Trump.

But there are three area of Neoliberal Policy where Trump restoration has clearly been failing to date. He has not been able to achieve even token reductions in social program spending and other non-defense discretionary spending. He has clearly been willing to forego those cutbacks in exchange for agreement by Democrats to allow his escalating War-Defense spending. Nor has he been willing to take on a fight to cut mandatory spending programs like social security retirement and Medicare as yet. Should he win another term in office, however, that attack is almost guaranteed as forthcoming after 2020.

His two highly successful restorations—i.e. War-Defense spending and Business-Investor ta cutting—combined with failure to cut social program-nondefense discretionary spending has resulted in a rapid rise of $1 trillion dollar annual budget deficits and accelerating US national debt. That too must be acknowledged as a failure at Neoliberal restoration.

The two areas of Neoliberal Policy where Trump’s restoration has failed most dramatically to date, however, are Monetary Policy and External Policy—the latter in particular with regard to trade relations restructuring and ensuring a low dollar exchange rate. Neoliberal Monetary Policy defined as ensuring chronic, long term low Federal Reserve interest rates might be called a fight over policy in process. Thus neither Monetary Policy nor External (especially trade) Policy to date represent a restoration of Neoliberalism by Trump by any definition.

The question is whether the contradictions inherent in these various elements of Neoliberal policy will, or even can be, overcome. As the beginning of this chapter indicated, Trump has clearly successfully restored some of the key elements of Neoliberal policy regime, has just as clearly failed to restore other elements, and other key elements remain a ‘work in progress’. Some long standing contradictions within Neoliberal Policy that have been there since the beginning under Reagan still remain—such as the difficulty achieving Neoliberal external/trade policy objectives without undermining Neoliberal fiscal and monetary policy elements; or new contradictions emerging and intensifying—such as the growing contradictions within fiscal policy between deficits & debt financing, on the one hand, and Neoliberal tax cutting and defense spending on the other. Or within Neoliberal monetary policy—in the form of central bank engineering lower interest rates while still selling Treasuries at an attractive rate yield in order to finance budget deficits. Contradictions within Neoliberal external/trade policy are also growing—such as keeping the dollar exchange rate low while simultaneously raising tariffs, even as the latter slows the global economy and raises demand (and therefore value) of the dollar.

Another long standing contradiction inherent in Neoliberalism since the beginning, under Reagan, has been the inability of U.S. capitalist economy to reconcile rising War-Defense spending with business-investor tax cutting while deepening Austerity in social program expenditures. Domestic resistance has prevented the latter, except for a brief period during the last crisis in 2011-13 under Obama. Neoliberalism’s ‘alternative solution’ to this was to establish the ‘twin deficits’ that would in effect provide the revenues (from borrowing) to cover the deficits created by Neoliberal continued War-Defense escalation and ever greater Business-Investor tax cutting. But this fiscal policy contradiction solution, by means of External policy (running trade deficits and introducing free trade agreements), has spawned a further and perhaps even more serious contradiction: namely, rising global capitalists’ opposition to Trump’s trade wars policy which itself threatens the twin deficits solution to the fiscal policy contradiction.

Thus domestic US popular opposition to austerity in social spending (which will certainly intensify should austerity apply to mandatory social programs like social security), on the one hand, and capitalist competitor opposition to Trump Neoliberal trade policy, on the other, together represent a political reflection of the contradictions that exist today within the Neoliberal policy regime and the opposition to which it gives rise. Neoliberalism cannot have it three ways: it can’t have social program austerity amidst escalating War-Defense spending and Business tax cutting. It can’t have its cake and eat it without having a bad bout of deficit-debt indigestion. And its effort to restore US hegemony via External policy (aka trade restructuring) may no longer be possible either. If so, the US twin deficit will be the eventual casualty.

Overlaid on all this is the realization that Neoliberal Monetary Policy has run its course and is exacerbating all of the above. Neoliberal low interest rates—so important to US multinational corporations’ foreign profits realization and to a low dollar exchange rate—appears increasingly unsustainable. Neoliberal Monetary Policy since the mid-1980s has been in the service of providing low cost money for US business, low dollar valuation for US multinational corps, cheap money for US bankers and borrowers, and a source of annual trillion dollar income redistribution for capitalist investors via stock buybacks and dividend payouts. In short, it has subsidized capital to the tune of trillions of dollars—in the process artificially boosting financial asset markets and speculative profits. In so doing, however, the chronic nearly four decades of cheap money & credit (and therefore the massive debt increase) ultimately engineered by the Federal Reserve and other central banks, has in effect ‘broken the back’ of monetary policy as a force for stimulating the real economy during periods of economic slow growth and recession. The chronic long term and artificially low interest rates have had several effects. One is provoking intensified inter-capitalist competition in the form of ‘competitive devaluations via central bank monetary policy’.

In the 1930s decade, competitive devaluations by government declaration or fiat played a major role in preventing the global capitalist economy from economic recovery from depression. Today the same is occurring, but through the intermediary of central bank monetary policy. As the US attempts to drive interest rates down, other world economies do the same and more so by central bank rate policies as well. The result is currency instability outside the US and capital flight to the US as other currencies fall. That capital flight’s destination drives up the value of the dollar. And that disrupts US trade restructuring objectives. So the nearly four decades of US central bank massive liquidity injections in the economy, designed to drive down interest rates, actually results in a rising dollar instead of its decline in response to interest rate cuts.

What the foregoing represents is that Neoliberal Monetary Policy increasingly contradicts Neoliberal trade restructuring and low dollar neoliberal policy objectives. Just as contradictions prevent the three objectives of Neoliberal Fiscal Policy, so too is Neoliberal Monetary Policy today serving as a contradiction to Neoliberal trade restructuring. The reflection of this contradiction on a personalities level is Trump’s simultaneous attacks on China president, Xi, as the US is thwarted in trade restructuring, and on US Federal Reserve chair, Jerome Powell, as he is blocked in the area of driving down interest rates.

Contradictions of Neoliberalism

At the highest level, Neoliberal Fiscal, External, Industrial, and Monetary Policies are ‘out of synch’. Or, more accurately, are increasingly in contradiction to one another. Ultimately this combined ‘grand contradiction’ is due to the financial restructuring and globalization of the international capitalist system since the 1980s, as well as the multiple other material forces that have been evolving within global capitalism during its current four decade Neoliberal phase. In other words, the evolution of the US and global capitalist economy itself is at the heart of the growing contradictions within the Neoliberal policy mix. This is no different than prior capitalist policy regimes that arose in the early and mid-twentieth centuries in the US. The new policy mix, associated with the prior natural restructuring of capitalism, at first serves to integrate and stabilize that restructuring. But the policy mix eventually comes into contradiction with the real evolution of the capitalist system. Under the new natural restructuring and changes in the system the prior new (now old) policy regime becomes a drag on the continued evolution of the system. It slows its growth. It destabilizes both its real and financial sectors. Capitalist agents—i.e. investors, corporate leaders, politicians and policy makers come to realize a more structural change must occur in the policy regime as well. Thus the 1907-16 policy regime, new at the time, eventually no longer serves its purpose. It gives way, after a crisis period, to a new and different 1944-53 policy regime. And that too begins to serve its purpose, as it did by the 1970s, to be replaced by the Neoliberal policy regime that followed.

The question today is whether the Neoliberal policy regime has now ‘run its course’. If not, then perhaps the Trump restoration might be successful. But if Neoliberalism has reached ‘the end of its rope’ (meaning it no longer continues to serve capitalist expansion and interests), then the Trump current attempt to restore Neoliberalism—even in a more aggressive 2.0 version—is doomed to fail.

In the 1970s decade, a particular evolution of material forces gave rise to, and drove the evolution, the Neoliberal policy regime from roughly 1978 up to the onset of the crisis of 2008-09. Some of the forces that gave rise to Neoliberalism are inherent to the evolution of capitalism itself—i.e. are thus ‘natural’. Others are due to changes in the character of US capitalism brought about by Neoliberal Policy—i.e. are ‘induced’. How then might have these ‘old’ material forces changed over the past four decades of Neoliberal policy regime hegemony? What new material forces have already emerged since 2000? Or are about to emerge next decade? What might these various material forces look like in the decade to come? Will they render Neoliberal Policies increasingly contradictory in the 2020s decade ahead, and therefore make Neoliberal policies even more ineffective? And more contradictory? To put it alternatively, will the new emerging material forces result in the continued, and even more fundamental, failure of Trump policies; and any similarly-minded successors to Trump attempting to restore the Neoliberal policy regime?

It is becoming increasingly cleaer that the material forces—whether old, new, and emerging—likely present a challenge that Neoliberalism cannot resolve. That means the new policy mix of the 2020s will be even more aggressive and violent in its implementation and effect than has Trump’s 2.0 failed restoration thus far. Or, whatever replaces Neoliberalism as we have known it, will be fundamentally different, including perhaps more progressive than imagined.

(Note: Part 3 in this series, ‘The Scourge of Neoliberalism’, will address the material and technological changes that have been developing in recent decades within US and global Capitalism—i.e. forces that constitute a source of contradictions that, next decade, will result in the demise of the Neoliberal policy regime that has dominated US Capitalism since the late 1970s).

Dr. Jack Rasmus
January 2020

Dr. Rasmus is the author of the ‘Scourge of Neoliberalism’, published by Clarity Press, January 2020, and other recent books on late US and global capitalism, including ‘Central Bankers at the End of Their Ropes’, ‘Systemic Fragility in the Global Economy’, ‘Looting Greece: A New Financial Imperialism Emerges’, Obama’s Economy: Recovery for the Few’, and Epic Recession: Prelude to Global Depression. Dr. Rasmus’ website is, his blog, and his twitter handle is @drjackrasmus.

posted February 6, 2020
Trump’s State of the Union Speech: US Political Crisis Deepens

On Tuesday, February 4, 2020 Donald Trump delivered a State of the Union speech that revealed his election 2020 strategy, designed to roil and mobilize his political base, and to declare to the Democrats that his political war with them will now escalate further.

If anyone thinks the recent impeachment and Senate trial was the high point of the growing conflict between the two political parties, Republican (correct that: Trumpublicans now) and Democrat, they haven’t seen anything yet. The worse, much worse is yet to come in the months leading up to the November 2020 elections.

The visual personification of this intensifying conflict was evident during Trump’s speech: As he began speaking Trump turned to vice president Pence and House of Representatives leader, Pelosi, both sitting behind him on a dais. Trump handed them his written speech, as is the tradition. He then abruptly turned away from Pelosi refusing to shake her extended hand—as traditional decorum has always required. Pelosi, shocked by the snub, after Trump finished, in turn symbolically tore up the written speech. All this was caught on national TV. The event was symbolic of the fight will now escalate and get even more vicious in the run up to November.

If Trump’s speech summarized the conflict up to this point, the exchange between him and Pelosi reflected the ‘gloves off’ political conflict now about to begin. As the saying goes, “We ain’t seen nothing yet”!

It is not difficult to understand the true meaning of Trump’s SOTU. Above all, it represents a toss of ‘red meat’ to his radical political base. There was very little in it about what he proposes for the country in the future, as is normal for a SOTU speech. Instead, what we got was a speech designed to agitate and mobilize his political base based on themes of fear (of the immigrant) and hate (of Pelosi and the Democrats). The dish of fear/hate was sauteed with a large dose of lies and misrepresentations, and served up with a new recipe of racism designed to help Trump hold on to the swing states that delivered his electoral college majority in 2016. The speech marks what will be a significant escalation of extraordinary political attacks by Trump and his movement against his Democrat opponents in the election. And if past practice is any clue, the Democrat leadership is likely unprepared for what is to come.

The ‘Red Meat’ to the Base

The speech was replete with what Trump’s base wants to hear, with no punches pulled. Once again, as in 2016, the immigrant is the dangerous criminal and killer. The immigrant is of course anyone of color, but especially Latinos crossing the southern US border, and anyone sympathetic in any way to them or even those already legally here. Trump wants to protect us from the immigrant. And according to Trump’s appeal to this base: the Democrats want to embrace him, protect him with taxpayer money, and thereby identify themselves with the criminal-killer element among us.

In the same breath as he reiterated his politically successful anti-Latino racist appeal, Trump touted his “long, tall and very powerful” wall, claiming 100 miles have already been built and another 500 coming next year. More money for the wall will thus by inference be necessary. Or else we may all suffer the fate of the anecdotal killer-criminal-immigrant, who of course is Latino.

A variation on this illegal (read: Latino) ‘enemy within us’ theme is the Sanctuary Cities movement and, by association, the entire state of California which has declared itself a sanctuary state. Trump spent a good deal of time in his speech attacking sanctuary cities. In the past, his bete noir was a person (Hillary, Pelosi, etc.) Now it’s a geography, even a state. Watch out California. Trump is about to swing his ax, far and wide, and in your direction!

Like most demagogues, Trump likes to make his case with anecdotal, emotional appeals. Thus, with a fear-mongering, melodramatic anecdotal example early in his speech he cited a criminal illegal running amuck, shooting everyone in California. That cleared the way for his proposal for legislation to go after Sanctuary Cities, in particular in California. The legislation proposed was the ‘Justice for Victims of Sanctuary Cities’ Act that would allow individuals to sue Sanctuary Cities. It is clearly a move to open the door for radical elements of his base to protest and engage in even more militant, perhaps even violent, action—-not unlike how anti-abortion radicals were encouraged in the past to physically attack abortion clinics and threaten and assault doctors and nurses.

Like all extreme nationalist and proto-fascist movements, there must be an ‘enemy within’ that is identified as the source of the country’s problems—including those who might defend them.

Another ‘red meat’ toss to his base in his speech was his proposal for legislation to bar late term abortions. Still another dish offered up was allowing prayer in public schools, which he followed up with a pledge to increase federal funding to promote it.

Another fresh bone thrown to the base was Trump’s strong endorsement of 2nd amendment gun rights. In contrast, throughout the speech not a word was said about mass killings at US schools or the fact that studies show a shooting and killing goes on in schools in America at least once every day somewhere.

His base was no doubt pleased as well with his solution to the growing climate crisis: somehow business and the public will plant 1 trillion more trees, he proposed. That would presumably create enough oxygen to prevent the oceans from acidifying, glaciers from melting, and Australia and California from burning.

There was also an attack on public schools. Trump claimed they were failing everywhere and that every parent should have the choice of sending their kid to whatever school they wanted, and receive scholarship money paid by the taxpayer to send them to a private school of their choice. Trump touted the ‘Educational Freedom & Scholarship Act’. In one of at least a half dozen examples, best described as ‘gallery melodrama’, he turned to the gallery in the House chamber and introduced a young black girl and her mother, announcing on the spot he personally was giving her a scholarship under the Act.

One of the more disgusting examples of ‘gallery melodrama’, that has become ready fare apparently in these SOTU speeches in recent years, was Trump’s introduction of the right wing radical talk show pundit, Rush Limbaugh. Long an ideologue of the radical, extreme right who has dished up lies and misrepresentations on a daily basis, Limbaugh was introduced as having stage 4 lung cancer. That was to set up the sympathy appeal, of course. Trump then announced he was giving Rush the Presidential Medal of Freedom. Rush acted surprised. The person next to Rush then immediately pulled out the medal and draped it around Limbaugh’s neck. We’re supposed to believe it was all unrehearsed and spontaneous. Not a dry eye in the gallery. Trump’s message: all you liars and hate mongers on the right out there, you too can become a hero under Trump. Just keep up the good work in the coming election year!

The New Racism Card

Democrats should take note of Trump’s new racism strategy. He clearly is now appealing to the African-American voter—even as he writes off and declares the Latino as the illegal alien threat.

In at least six episodes of ‘gallery melodrama’, Trump’s subject was a black American. In addition to the young girl and her mother, noted above, Trump introduced a black former drug user who became a businessman, enabled by Trump’s ‘opportunity zone’ legislation—in fact a piece of legislation designed to give special tax cuts to businesses in certain cities. Then there was the black kid who wants to become an astronaut. He was introduced with his 100 year old grandfather, a former Air Force officer, Charles McGee, who served in Korea and Vietnam, next to him. Trump announced he just made McGee a brigadier general. That kills ‘three birds with one stone’, as they say: a kudo to senior citizens, to blacks, and to the military all in one melodrama bundle. Trump then proposed an increase in funding for black colleges.

In only one, and very brief, ‘gallery melodrama’ episode during the speech was a Latino introduced. Unlike all the black kids and moms, he was a Latino ICE officer. Not as much emotional sympathy appeal there.

See where this is going? Up with blacks; down with Latinos? Split the minority vote.

Why the strange pro-black strategy? A strategy launched, by the way, a few days earlier in his unprecedented election Ad in the super-bowl, where Trump took credit for the bipartisan criminal reform legislation just passed, by showing a middle aged black women crying in relief now that Trump had released her relative from prison. Trump now a defender of African-Americans? A reformed former racist? Trump the declarer that Africans lived in shithole countries?

It’s not that Trump has overnight given up his racist attitude against African Americans. What he’s doing is counting the electoral votes in the swing states. The new appeal to blacks is designed to provide him a margin of extra votes in those swing states, a safer margin in the red states, especially the south in places like Georgia, all to ensure he wins the electoral college votes in those states as he did in 2016. That black vote margin is needed to offset the possible loss of middle class white women in the swing states that are, according to polls, put off by Trump’s aggressive and off the cuff tweets and statements.

Manipulate blacks. Mobilize white nationalists by vilifying Latinos and other peoples of color. Split the minority vote, in other words.

Trump’s Lies by Commission

As heard so often from Trump, much of his SOTU speech was laden with outright lies. In the roughly one-third of it devoted to the economy, this was especially the case. (Another one third of the speech was devoted to domestic issues and another third to foreign policy).

First there was Trump’s claim that the under him the US economy is “the best it has ever been” in US history. But what are the facts? Not so in terms of US GDP. Trump’s roughly 2% growth rate today is not that much different from the average since 2000. Nevertheless he said “Families are flourishing”. Oh? What about the more than half of families today who have less than $400 to their name for emergencies? Or the more than half in each of the last two years who say, in polls, they received no wage increase at all in either year? Or what about the tens of millions of millennials and youth indentured with $1.6 trillion in student debt and can’t get homes or families even started?

In the speech, Trump claimed the unemployment rate was the lowest ever. But that’s the so-called U-3 rate which covers only full time workers, whose employment ranks by the way have been declining in absolute terms. It further excludes altogether the roughly 60 million US part time, gig and temp workers. If they were accurately estimated and included in unemployment figures, the true unemployment rate would be 8%-10%.

And what about wages? In the speech Trump repeated the oft-heard statistic that wages have been rising on his watch. But behind that figure lay several deeper facts: first, there’s the more than half of the labor force who acknowledge they received no wage increase at all last year or the year before. That suggests it is the top 10% of tech, professional, and other workers who are getting most of the wage gains. Moreover, the wage figures and gains noted by Trump are an average: if those at the top get more, those at the middle and below are getting less or even nothing. In addition, the numbers are for full time workers, leaving out the 60 million part time and temps. Finally, they’re wages not adjusted for inflation.

The real picture is that unemployment is much higher and wages are stagnating for the vast majority or worse. But this didn’t stop Trump in his SOTU speech from saying “companies are coming back to the US” and creating jobs. Or that this is a ‘blue collar boom’ with wages rising.

Trump also declared in his SOTU that he would protect social security and Medicare. But in his recent speech to the billionaire crowd in Davos, Switzerland he let it slip to the well-heeled in attendance he would be going after both once he won the election again. One wonders which audience he’s speaking the truth of his real intentions to.

In the SOTU he also gave support to infrastructure spending. But his prior proposals define ‘infrastructure investment’ as tax cuts for real estate developers.

He also declared in the SOTU speech that his recent proposals would lower prescription drug prices. But by this he really meant consumers being gouged by the Pharma companies would get to see how much the various drugs were being raised, in order to choose which one that would gouge them less. Market transparency does not mean lower drug prices. Big Pharma is not a competitive market where the consumer can choose among multiple offerings.

An even more outrageous, blatant lie was Trump’s declaration he was giving his “ironclad” guarantee that those with health related, pre-existing conditions would have access to health care–when in fact what he has proposed to date are various measures to roll back pre-existing conditions guarantees.

Trump’s most ridiculous lie was that Medicare was socialist. Here he was obviously attacking the growing support for a Medicare for All solution to the health crisis, increasingly supported both by the public and within the ranks of the Democrats. As he put it, 180 million Americans love their private health insurance. And he promised not to let the socialists take that away, even though it’s quite clear that 70% of the US population is now dissatisfied with private health insurance and want something better. And if Medicare is socialist, does that mean the 50 million seniors on Medicare and Social Security are socialists as well? Add the millennials and seniors, and America must have already gone socialist!

One of the more disgusting outright lying claims of Trump was his comment that, under his regime, 7 million on food stamps had left the program. But what he didn’t mention was he and the Republicans just declared 700,000 no longer eligible for food stamp support, including single moms with kids.

Trump’s SOTU: Lying by Omission

Lies may be committed by carefully not elaborating on topics. Here Trump excelled as well in his SOTU speech. For example, he boasted that the stock markets had risen in value by $12 trillion on his watch. But what he didn’t say is that more than $1 trillion every year has been passed on by corporations to investors and stock holders in the form of stock buybacks and dividend payouts. That’s what drove the $12 Trillion, making the 2% of the voters who own most of the stock richer than ever in history.

He then glossed over the recent signed China-US phase 1 trade deal as well as the NAFTA 2.0 USMCA trade deal. he said they were great achievements, but refused to indicate in what sense. In recent weeks he has declared China would buy $100 billion more in US goods this year as part of that deal. But the fact is China never agreed to that and most economists estimate it will be well less than $50B, and maybe not even that now that the coronavirus is undermining US-China trade.

And so far as the USMCA is concerned, Trump in the SOTU speech reported it will produce 100,000 new US jobs. But even a cursory reading of the terms of that deal show there are no measures designed to bring back jobs from Mexico to the US. In both the trade deals, there’s really ‘no there there’, as economists are now beginning to determine. Both the China and USMCA trade deals are just old wine in new bottles, as they say, corked up with a lot of bombast, hyperbole, and factual misrepresentation.

Missing totally from the SOTU speech was any reference how Trump’s multi-trillion dollar tax cuts for corporations and investors and war spending have driven the US budget deficit in excess of $1 trillion a year, with trillion dollar additional deficits for another decade! In short, unlike all Republican presidents before him, in his SOTU speech Trump said nothing about the accelerating deficit, and in turn the $23 trillion national debt, or how he proposed to address it in the coming year or beyond.

In yet another example of lying by omission, in the speech Trump claimed that low wage workers had experienced an increase of 16% in wages on his watch, but then didn’t bother to explain that most of that was due to the raising of minimum wages by governors and legislatures in the ‘blue’ Democratic states.

Lying by omission means taking credit for things you never did, or were done by others. That’s become a norm for Trump, and he kept up that practice throughout the SOTU speech.

Foreign Policy Fantasies

Trump has had no actual foreign policy accomplishment during his entire term in office. Nothing came of the North Korea deal. He was able to get only a few token European countries, like Greece, to increase their NATO spending a little, but not much. His attempted support for a coup in Venezuela collapsed. (That didn’t stop him by bringing to his speech the US selected puppet, Guido, and introducing him in the gallery). His trade deals produced very little in actual gains for the US ballooning trade deficit. He achieved nothing in Syria or Turkey except to allow Russia to increase its influence in both. And he failed to get Iran to the bargaining table to renegotiate the nuclear deal.

What he did declare in his SOTU speech as victories in foreign policy was his reversal of the Obama administration’s opening to Cuba. His recent launch a new Mideast Israel-Palestine initiative that was dead on arrival. The claim he destroyed ISIS, when in fact it was mostly the Iranians, Kurds, Russians, and Turks that did it. And his declaration that peace talks in Afghanistan to end that conflict were making “tremendous progress”, when in fact a deal isn’t even close. And, not least, his assassination of the Iranian general, Soleimani, that almost pushed both countries over the brink of war. Not much there in foreign policy either.

The SOTU Message: Domestic Political Warfare

Where Trump has succeeded is in his domestic political war with the Democrats. As he noted in the SOTU speech, he has approved 187 new Federal Court judges and two Supreme Court judges, giving him a clear majority in the Judiciary. The US Senate has become no less myopically committed to him than his political grassroots base and media machine. Senate leader, McConnell, has proven to be one of the most obsequious Senate leaders in history. With the Judiciary and one house of Congress firmly in his pocket now he has not been reluctant to break whatever rules and norms he deems necessary.

Having outmaneuvered the Democrats in the Mueller Report and Russia interference affair, and now as well in the impeachment attempt, Trump is now even more confident no doubt that he can run roughshod over Pelosi and the Democrats in this election year. And he will.

His SOTU speech was in effect a declaration of his intent to do so. And the confrontation at the end of the speech between himself and Pelosi—-Trump refusing to shake her extended hand and Pelosi then ripping up his speech—is symbolic of the political dogfight about to come. Throughout it all, Trump’s approval rating has survived in safe territory. His red state allies are intent on ensuring his electoral vote majority via both gerrymandering and voter roll suppression. His grass roots minions are itching to release more aggressive protests, demonstrations and action. His strategists are formulating a new racist appeal to split Democrats’ historical minority base of support.

Meanwhile, the Democrats themselves are sliding into their own internal conflict, with the corporate wing planning to scuttle Sanders by any means necessary and replace him with Bloomberg as their candidate at the convention.

In short, Trump’s SOTU speech was less about the state of the union and more about the state of Trump’s re-election and the Trump strategy to win a second term in November. And it appears he may succeed in domestic politics, while having clearly failed in economics and foreign policy.

Jack Rasmus
February 5, 2020
copyright 2020

posted January 21, 2020
Trump’s Feeble Phase 1 US-China Trade Deal

With the announcement today, January 16, 2020 of the signing of the US-China Phase 1 ‘mini’ trade deal, and the US Senate’s simultaneous ratification of the USMCA ‘NAFTA 2.0’ trade agreement, Trump’s so-called ‘trade wars’ are at an end. In election year 2020 nothing of additional significance will be achieved by Trump with regard to restructuring US and global trade relations. While Trump himself will make further threats and claims, likely aimed at the Europeans, no country will agree to any changes this year when the possibility exists of Trump leaving the presidency next November 2020. To repeat once again, the Trump trade wars are over. As the comedian once said: ‘what you see is what you get, baby’.

And what do we see in the much-hyped and grossly exaggerated Phase 1 US-China trade deal?

China Phase 1 Deal: A Feeble Deal on Trade

Behind the typical Trump bombast, hyperbole, and outright lies, the China Phase 1 deal was perhaps best summed up in the front page of the Wall St. Journal on January 13, 2020, by the Ben Steil, Director for International Economics for the Council on Foreign Relations (i.e. the major think tank for the US capitalist class): “China is set to do little more than restore agriculture purchases and offer some nice words on financial services and intellectual property…Trump could have had that two years ago without the tariff damage”.
What’s really in the Phase 1 deal? What has Trump actually achieved through nearly two years of negotiations, tariffs, and threats and intimidation in the nearly two year long China trade negotiations? And what have been the consequent negative impacts on US households, businesses, farmers, and the US and global economy?

(51% Majority Ownership)

First, in Phase 1 there’s the claim that US business, especially US bankers, now have more access to China markets. They can have 51% ownership control of their operations in China. Trump claims he achieved that. But it’s just another Trump lie. The fact is China began implementing the 51% financial ownership rule back in 2018. European banks have already set up full ownership operations there. So has Goldman-Sachs, the premier US investment (shadow) bank. Trump didn’t get anything there China already offered and gave to others.

(Currency Manipulation)

Trump says the deal means China has agreed to no longer ‘manipulate’ its currency. Trump this past week then officially removed the US declaration that China was a currency manipulator. The importance of currency manipulation is that Trump wants to block China’s potential to devalue its currency, the Yuan, which would offset any US tariffs easily. But China has not been a currency manipulator at all. In fact, it has been entering global money markets to buy and sell its currency to ensure that it remains within a stable range of exchange to the US dollar no greater than 7.1 to the $. If anything China has committed significant resources to ensure the Yuan does not devalue. That’s the opposite of a currency manipulation to devalue and offset US tariffs. China could have easily done so throughout the last 22 months of trade negotiations with the US, but it didn’t. The claim of China as currency manipulator has been a lie from the beginning, used by Trump (and others before) to try to label China as the problem with the American media and public. It’s worth noting as well that while China has spent billions to ensure its currency does not devalue or rise, the US dollar has been allowed to rise significantly the past two years. That has caused other global currencies, especially those of emerging market economies like Latin America, to devalue dramatically and plunge those economies into recession. The US has been the great currency manipulator and destabilizer—not China.

(IP and Tech Transfer)

Trump also claims the China Phase 1 deal means new limits on China forcing technology transfer of US companies doing business in China and on intellectual property. (Protecting intellectual property mostly means for the US that US pharma companies will enjoy better patent protection—i.e. prevent competition).

But whether IP or tech transfer, there have been no details released by the Trump administration as to how this is so. In fact, as if January 15, 2020 the text of the Phase 1 deal is still not available in either English or Chinese, according to the New York Times.
All we’ve got in the Phase 1 deal, according to those who have had access to date, is China’s promise to punish China firms that obtain sensitive tech information via acquisitions; or stop requiring that foreign companies turn over technology to China as a condition of doing business in joint ventures in China.

But certainly in any joint venture tech information can be obtained by means other than formally turning it over to China government officials. And doesn’t a company that acquires another have legal right to all its product information? According to a Derek Scissors of the American Enterprise Institute, in the Phase 1 deal the Chinese “have committed to continue doing the same thing they have always been doing”. What China refused to agree to is to refrain from engaging in cybertheft of companies—since of course the US refused to agree to the same.

So forget about any big breakthrough in the Phase 1 deal associated with IP and/or tech transfer as well.

($100B in US Farm Goods Purchases?)

Trump’s big claim about Phase 1 is that China has agreed to buy $200b more in goods over the next two years, $100b a year roughly divided between $50b for farm and $50b nonfarm goods and services. But was this a new gain from negotiations and tariff intimidation? And will it be actually realized over the next two years? And is it really $50b a year more in farm purchases?

First, China had already offered in 2018 to increase its purchases of US goods and services by $1 trillion over the next five years. So it already put that number, $200b a year, on the negotiating table. But that was two years ago.

But most economists today doubt that China will buy anything near $50b a year in additional farm products from the US. According to the January 15, 2020 New York Times, those who have actually seen the agreement indicate China has actually agreed to buy only $16b more a year over two years. The $50b claim by Trump thus quickly lowered to $40B. Furthermore, the $40B was not new additional purchases.

That $40b is comprised of $24B/yr in farm goods bought by China in 2017, plus the $16B more commitment per yr. for 2020 and 2021. Farm purchases fell in 2018 and 2019. So the $32B just mostly makes up for the shortfall the last two years. At one point in spring 2019 China farm purchases were as low as $7B a year.

So the $16B more per yr. represents a restoration of what China was buying in 2017, adjusted to make for the declines while the trade war was underway, and it all expires after just two years. So Trump’s boast of $100B in farm goods reduces to $32B in fact, which mostly makes up for reduced purchases the past two years, and returns to the pre-trade war 2017 level of $24B! Nearly two years of trade war to return to the status quo ante of 2017!

Moreover, trade experts are also saying that even the $16b more in farm good purchases will be difficult to achieve. During the last two years China has diverted its purchases of soybeans and other farm goods to Brazil and other countries. And China has said the Phase 1 will not mean any change in its prior contracts with other countries. It won’t cancel Brazil in order to fulfill US commitments under Phase 1. So where’s the big surge in China purchases of US farm goods? It’s more like a restoration, with no commitment to increase after two years. And it leaves US farmers with a lot of uncertainty as to future sales plus not enough time, and thus greater risk, to invest in expanded production to meet China’s purchases
Furthermore, China sees even Phase 1 farm purchases as a goal, not a firm absolute commitment. Its chief trade negotiator, Liu He, has been quoted as saying purchases will occur “according to the needs of the (Chinese) consumer and as market conditions determine”. Think of the latter phrase “as market conditions determine” as a code word that means China may purchase more depending on whether Trump reduces US tariffs more in tandem.

(Trump $370B Tariffs Remain)

Trump has declared he won’t reduce tariffs on China any further. It now stands as 7.5% on $120B and another 25% on $250B. Trump says he needs to retain the tariffs in order to ensure China abides by the other terms of the agreement. But he can’t have his cake and eat it—i.e. China purchases $100B more a year but Trump keeps $370B. China has made it clear, more purchases are linked to lower tariffs.
So long as Trump’s $370B tariffs remain, it will become increasingly clear that China intends to purchase far less than the $100B a year. It just won’t happen regardless what Phase 1 says. Farm purchases in particular won’t come anything near to even the $32B more ($16B/yr), reported January 15 in the New York Times, let alone to Trump’s inflated claim of $40-$50B.

Trump may believe he needs the continued tariffs to enforce the agreement’s terms by China. But China’s quid pro quo enforcement ‘tool’ is to simply slow or delay its official purchases “as consumer demand and market conditions” dictate. Its tariffs vs. not fulfilling purchase commitments due to ‘market conditions’.

(Manufacturing & Services)

In addition to the $32B more in farm purchases, reportedly Phase 1 calls for another $78B in manufacturing and $38B services purchases over next two years as part of the Phase 1 deal as well. But that too might not be realized. Most of China’s manufacturing purchases is for Boeing planes, now plagued with shipment cancellations worldwide due to the 737max; and the $38B in services purchases involve mostly Chinese purchase of US education services and tourism, both of which are being sharply cut back by Trump as the US policy now is to discourage Chinese students and research academics coming to the US, and as China tourism to the US slows as relations between the two countries continue to deteriorate.

US auto exports to China will not be affected much either. There’s a major slump in China auto sales, China is committed to rapidly building up its own auto industry, and US companies are racing to move production to China anyway, all of which would reduce the need for China to import autos from the US over the next two years.

Finally, there’s the commitment of China to buy $27B a year more in US energy products, oil and natural gas. The US benefits having an outlet for its rising glut of natural gas and oil, which it is betting on exporting in order to keep supply and prices high in the US market. But should a global recession occur in 2020 or after, China ‘market needs’ and demand for US oil and gas will certainly decline and the commitment to buy in this area will likely fall far short of the annual $27B as well.

(Nextgen Tech War)

Behind the trade was with China has always been the more important tech war between the two countries. The tech war is not be confused with IP or even with tech transfer by US companies in China. It’s much bigger. It’s about next generation technologies like Artificial Intelligence, Cybersecurity, and 5G wireless. These are the technologies of the industries of the next decade. They are also the military technologies of the future. Which country dominates these technologies achieves military hegemony by 2030. Both China and the US know it. And the ‘war’ between them has been occurring behind the cover of tariffs and trade war.

But with the Phase 1 trade deal it is clear that the tech war has been now decoupled from the trade war. It will be (and has continued to be) conducted by other means than tariffs. The US will continue to go after its allies with sanctions should they adopt China tech in these areas. The offensive against the giant China telecom company, Huawei, now the world leader in 5G, is the harbinger of a much greater, wider, and longer conflict between the US and China over nextgen tech.

The China-US tariff/trade war may be over, but the China-US tech war has just begun and will now accelerate.

Trump believes he can engage China over tech in Phase 2 negotiations. But Phase 2 is a fiction. It will not happen. Even if the two countries’ representatives meet it will be a fruitless discussion. Neither will ever come to an agreement. China will never trade next gen technology for tariff reduction. It won’t trade tech for anything the US can offer.

Artificially Intelligence and 5G are key to the development and functioning of next generation hypersonic missiles and hyper-smart torpedoes; for future military drone technology and targeting; and for future battlefield communication and coordination between machine and human. So far the US is ahead in AI but behind in 5G. It has no latter product of its own. Globally, its Huawei and Europe’s Ericsson that are leaders in the product development. The US once premier tech company, AT&T, is now preoccupied with investing in entertainment software and content, driven by its shadow bankers demanding more profits sooner than later. The US is thus forced to try to stop Huawei instead of out-competing it in tech development of 5G.

(Subsidizing State Owned Enterprises)

Not in the Phase 1 deal is the Trump-US complaint that China continues to subsidize its government owned enterprises by enabling low priced costs and inputs to production paid for by China government. But the US engages in massive subsidization of US companies worldwide as well. It does so by other means. Consider the massive $5.5 trillion tax cut of 2018 for corporations, businesses and investors. The US subsidizes and aids US corporate competitiveness worldwide by tax relief. It also subsidizes the cost of financing exports with the US Export-Import bank. It provides business virtually free R&D from US taxpayer financed technology developed by DARPA, the NSA, National Institutes of Health, and many other means. So it’s really a joke for the US to charge China is engaging in uncompetitive subsidization of its government owned companies.

The Cost of China-US Trade War

Any proper assessment of the Phase 1 deal requires consideration not only of what has been gained (or not gained) but also what has been the cost of the 22 month trade war to the US economy.

Has the trade war actually reduced the US trade deficit—with China and with the rest of the world? Not really.
The deficit in goods with China was just under $350b when Trump assumed office, according to the US Census Bureau. It surged to about $410B by end of 2018. It has since come down to about $350B again. So Trump has merely reduced the trade deficit with China equal to the amount of the deficit increase he oversaw in 2017-18! With the Phase 1 deal the deficit will almost certainly begin to rise once again.

On a global scale, as the deficit with China ballooned and then leveled off at pre-Trump levels, under Trump the US goods trade deficit with the rest of the world continued to accelerate rapidly under Trump and still continues to do so. From roughly $375B when Trump entered office in January 2017, the US deficit has surged beyond $500B by end of 2019. So much for Trump’s trade wars apart from China!

What was the cost of reducing the surge in the China trade deficit he created?

The US National Bureau of Economic Research estimated that Trump’s China tariffs were fully passed on to US companies in all industries except steel, where half were passed on. It cost US businesses $42 billion. And they passed most of it on to consumers and US households.

A study by the Federal Reserve Bank of New York (authors Weinstein and Redding), “found that approximately 100 percent of import taxes fell on American buyers” (New York Times, January 7, 2020, p. B4).

US farmers took a big hit. Trump provided $28B to the farm sector in new subsidies, the cost of which added to the US budget deficit (now more than $1 trillion) and rising national debt (now more than $23 trillion). Most of the subsidy went to large farmers and agribusiness, however. Farm income contracted throughout 2018-19. Farm loan delinquency rates have now risen to a six year high, per the FDIC, and Chapter 12 farm bankruptcy filings are highest since 2012.

The trade war devastated US business confidence with the result that business investment in the US contracted throughout 2019.
US consumer households experienced a reduction of $806 dollars in real income spending due to the tariffs.

And estimates are that Trump’s trade wars have reduced global investment and GDP by as much as $700 billion.

Concluding Remarks

Trump administration spokespersons—Larry Kudlow Trump’s Economic Advisor and Steve Mnuchin, Treasury Secretary—are, per latest report, peddling the prediction that the US economy will grow by up to 0.75% more in GDP terms in 2020 as a result of the Phase 1 China deal. But that is based on the absurd assumption that China will buy $100B-$150B more in US imports in 2020—a misrepresentation which, as was explained above, is as ridiculous as it is false.

No doubt the media will continue to spin the exaggerations, although nearly all economists’ estimates of the Phase 1 deal conclude ‘there’s no there there’, at best.

As minimal are the gains from the Phase 1 agreement with China, Trump’s ‘other’ trade wars and deals, including the also much heralded USMCA (NAFTA 2.0), produce even less in net terms. Whether the US-South Korea free trade agreement, the Trump tariffs on steel and aluminum worldwide, Trump’s recent tariffs on European wine and spirits, or his verbal understandings with Japan on trade—all represent even less achieved than the minimal recent agreement with China.

Dr. Rasmus is author of the just published book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity Press, January 2020, where chapter 8 addresses the origins and evolution of Trump’s trade wars in further detail. The book is now available at, Clarity Press, Amazon, and other locations. Dr. Rasmus hosts the Alternative Visions radio show on the Progressive Radio Network, blogs at, and tweets at @drjackrasmus. His website is

posted January 14, 2020
Trump’s Iran ‘Punching Bag’: US Provocations to Continue in 2020

Dr. Jack Rasmus
copyright 2020

“Trump’s assassination of Iran’s general and senior diplomat, Soleimani, was a clear provocation by the US, designed to produce a further escalated military response by Iran. That did not happen. Iran did not take the bait. It responded minimally and appears to have done so in a way to avoid US deaths or even major US asset destruction.

If Iran had escalated militarily, which it was capable of doing, it would have fallen into Trump’s trap. Trump was prepared to unleash a greater military response on Iran. He would have had his ‘war’, i.e. his great distraction from his pending impeachment trial, as well as a major boost to his political base in the current election year.

Trump’s Baiting Iran To Escalate

Had Iran taken the bait, Trump would also have been able to bypass the War Powers Act before militarily escalating. The Act allows an unlimited and immediate US attack on an adversary that has attacked US forces. Up to now, Trump has had to explain to Congress, especially the US House of Representatives, why he had assassinated Soleimani in the first place. That was clearly an ‘act or war’ according to international law. And Trump had bypassed Congress before doing so, which the Act and prior precedents have required. A major Iran counterattack on the US would have put the issue of Trump’s bypassing the Act by assassinating Soleimani without discussing with Congress to bed. The new escalation and conflict would have become the center of debate in the US–not the assassination and how Congress was bypassed and ignored.

Iran’s missile launch yesterday against two Iraqi bases, one of which reportedly had no US forces, was clearly a measured and minimal response. It appears the missile launch may have been purposely designed to do minimal damage even to US military assets. That no photos of any damage have been released by the US suggests there wasn’t much. And no US forces were killed. Either Iran’s missiles and targeting are worthless; or Iran purposely intended minimal, or even no, effective damage.

Without physical evidence of extensive damage, and no American deaths from the missiles, it was, and remains, difficult for Trump to escalate military action further thereafter. Moreover, Iran’s statement after the launch that it had “concluded” its response made it further difficult for Trump to escalate a US military response after the launch.

Trump therefore trotted out before the cameras and declared a ‘victory’ in the exchange: a successful assassination in exchange for a dozen missiles that largely missed their targets and did no damage. In other words, Iran had done little in response to the US assassinating it leading general. Trump got to look tough to his political base at home after engaging in a foreign policy adventure, as the 2020 election takes off.

But the Trump/US/Neocon assault on Iran is not over. As neocon John Bolton has recently tweeted, the US was planning to assassinate Soleimani for some months now and had its plan ready to go. It just now pulled the trigger. Trump and the US were escalating the conflict steadily throughout December, as the US launched attacks on Iranian militia bases in Iraq, provoking the desired response of the militias assault on the US embassy in Baghdad. Trump in turn escalated the confrontation by assassinating Soleimani. Time will reveal what happened between the period of the US successful provocation of the militias and the subsequent assassination.

As the 2020 election year in the US continues, Trump will almost certainly replay this Iran provocation card again. It’s proved successful thus far. Iran is in a box: if it responds minimally, Trump declares a short term victory and looks good to his base in the election year; if it responds in kind militarily, Trump gets an even bigger distraction–both from the impeachment and all the growing concerns about his personal instability coming to the fore in the election season. A major war with Iran will rally support by the American people and push all other issues and Trump policy failures to the background. Trump will therefore undoubtedly resort once more to a major provocation, or even several, before the election.

Iran knows it is Trump’s foreign policy punching bag. It has been since Trump came to office. More blows against Iran are yet to come in this election year.

Iran’s Response: Past and Future

Iran has responded minimally to date. No doubt it will publicize and declare domestically that its missiles did great damage and more is to come to drive the US out of the middle east. But that’s for domestic consumption. Iran’s strategy is to wait out the Trump presidency. And to continue to use its refusal to escalate as evidence to the Europeans that it is the sane party in the US-Iran confrontation.Why? Iran wants Europe to continue to trade with it, to buy its oil. More importantly, it wants Europe to implement what it had suggested with regard to establishing a more independent international payments system.

The current system is called SWIFT, and is controlled by the US and US banks. With SWIFT the US can see who is complying with its sanctions on Iran (or sanctions on any other country). SWIFT is a key institution for US imperialism globally–along with the dollar, the global trading currency, US control of the IMF, dominance of the US central bank, the Federal Reserve, influencing global money flows and interest rates, and so on. Europe and Iran had been discussing setting up an independent international payments system, called INSTEX. The Europeans have been balking, however. Trump has been threatening them with sanctions should they do so. (Or should they install 5G wireless systems by China’s Huawei company. Or should they go forward with new Russian gas pipelines in the Baltic sea. And so on.)

In the 21st century, especially since 2008-09, the USA has been acting increasingly aggressive against allies and adversaries alike as US global economic hegemony begins to weaken. Thus we see tariffs as a more frequent foreign policy tool, economic sanctions imposed by the US increasingly the rule, US actions to destroy adversary economies’ currencies (e.g. Venezuela) as central to US goals of regime change, US direct assistance to indigenous capitalists to overturn democratic governments (Argentina, Brazil, Ecuador, Bolivia), and use of the SWIFT as a means to enforce sanctions and deny dollar access to targeted adversaries.

Should Europe and Iran establish an alternate INSTEX payment system it would mark a major blow to the US global economic empire and hegemony. Such an alternative payments system would likely be joined quickly by Russia, China, and others.

Iran therefore is keeping an eye on a possible agreement with Europe on such an alternative payment system that would enable it to avoid US sanctions. The US would then have no alternative but to blockade Iranian shipments physically. And that would be another act of war by Trump per international law.

Iran had much to lose, in other words, by escalating the conflict militarily with the US. And it didn’t fall for the Trump-Neocon provocation. Not yet. Its minimal response in recent days has made it impossible for Trump to escalate further, in turn, and unleash a greater US military conflict with Iran. Trump may have gained a propaganda victory in the election year with his base, but Trump’s inability to escalate still further means he won’t get his big distraction from his upcoming impeachment trial. Nor will he be able now to bypass the War Powers Act or smother the charge he has already ignored the Act’s limits by unilaterally assassinating a foreign government representative without consulting Congress first.

Iran will continue to avoid an all out war with the US, which Trump’s neocon advisers would prefer to see before the US November 2020 election. Iran leaves the door open to the Europeans. That door would have closed had it, Iran, escalated the conflict.

Trump and the neocons running US foreign policy had to acknowledge today the limits on any further US escalation, given Iran’s minimal response. Had the Trump decided to ratchet up the conflict military in reply to Iran’s minimal response, he would have reaffirmed himself to the world as the aggressor. Political concern about Trump bypassing the War Powers Act would have increased. He would have appeared even more ‘out of control’ to US allies and US voters. Trump has therefore declared a ‘victory’ by assassinating Soleimani and getting away with it. And since it ‘worked’, Trump will no doubt attempt it all again.

If Trump really wanted to renegotiate a new deal with Iran, this would have been an opportunity. He could have declared he was removing some sanctions as a offer to start negotiations. Instead, he ‘doubled down’, as he said, imposing new sanctions on Iran. Trump does not want a new deal with Iran. He never did. Trump has always planned to use Iran and a possible attack on it as his foreign policy punching bag for re-election. So he will keep on ‘punching’ as the 2020 election year progresses.

Every time Iran does not escalate, Trump can declare a partial victory and look tough on foreign policy to his base. And should Iran finally escalate in turn, then Trump has his excuse to intensify his military response.

Trump and his advisers see escalating the confrontation with Iran as a win-win situation. That’s why the provocations will continue. US provocations of Iran will not stop with the Soleimani assassination. They have only just begun.

The year ahead will tell whether Iran has the will to successfully wait out Trump until the US election, or whether US further provocations will result in Iran’s eventually responding more aggressively in kind in turn–i.e. whether Iran takes Trump’s bait and falls into the trap the US has set. This writer’s guess is they will find a way to wait him out, regardless of US efforts to continue to escalate the confrontation.

Provoking Iran is all about the US 2020 election. Trump is in the tradition of a long line of US Presidents (or would be-presidents), facing election or domestic troubles, who choose their own careers over War and the death of others: from Lyndon Johnson (Vietnam), to George H.W. Bush (Panama, 1st Gulf War), Bill Clinton (Bosnia), George W. Bush (Iraq war), and Hillary Clinton (Libya). None of these countries constituted a strategic threat to the USA. But all of them a convenient target to help them advance their political careers.”

Dr. Jack Rasmus
January 8, 2020

Dr. Rasmus is author of the just published book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity Press, January 2020, available at discount on this blog, and on Amazon and other sources as of January 15, 2020. He hosts the Alternative Visions radio show on the progressive radio network. His website is: His twitter handle @drjackrasmus.

posted January 7, 2020
2 Articles on Trump v. Iran: #1: Has the US Crossed the ‘Escalation to War Rubicon’? + 2: ‘Trump’s Deja Vu US Wartime Playbook’

by Dr. Jack Rasmus, January 6, 2020

History repeats itself, as they say. But in the age of American empire, not just twice. Or even three times. But with disturbing regularity.
The past half century shows two things about how America goes to war:

First, it creates a provocation based on a lie. Second, it then makes its target adversary a ‘demand they can only refuse’, as the final justification for US military action once the adversary rejects the unacceptable offer.

Here’s how it has worked in the past half century–a playbook to war that Trump is now clearly following in the case of Iran with his recent ordered assassination of that country’s general and government diplomat.

As for the initial provocations based on a lie:

1. In 1964 there was the infamous ‘Tonkin Gulf’ incident that provided then president Johnson the cover to escalate US involvement in Vietnam. Later Pentagon documents made public revealed the alleged attacks on US ships off Vietnam by North Vietnamese patrol boats was a total fabrication. 58,000 US and 2 million Vietnamese deaths later, the evidence came out that it was all a hoax.

2. Then there was the 1991 Gulf War. The convenient provocation that turned out to be a lie once again was the Bush administration claim that Iraq was killing babies in incubators in Kuwait. That too turned out to be false, propagated by a family member of the Kuwaiti royal elite who stood before US cameras showing the broken incubators. The US media of course did not properly identify her, instead depicting her as a concerned woman protesting the deaths of premature babies. The US media flooded the American evening news to create final public support for the subsequent US invasion. After the invasion of Kuwait and Iraq forces it was revealed it was all a staged event. Also revealed afterward was how the Bush Sr. administration, through the US ambassador, had told Saddam Hussein, that the US would not intervene if Saddam invaded Kuwait in the first place.

3. In 2001 immediately after 9-11 events in the US the excuse for invading Afghanistan was that the Taliban government in power at the time had assisted Bin Laden in attacking New York and Washington. It later came out the Taliban had nothing to do with planning or launching the attacks of 9-11. And little was said in the weeks, after 9-11 and preceding the US invasion of Afghanistan, that 18 of the 20 or so terrorists who flew the planes into the Twin Towers in New York and the Pentagon were in fact Saudi Arabian Wahhabi sect terrorists aided and supported by the Saudi government. Saudis in the US at the time of 9-11 were quickly flown out of the US by a plane arranged by the George W. Bush administration. Who left on the US aided flight is still publicly unknown to this day. The US ‘unacceptable offer’ to the Taliban was the demand it turn over Bin Laden and all his supporters in Afghanistan–i.e. something impossible without the Taliban provoking its own internal civil war.

4. Then we have the 2003 decision by Bush Jr. invading Iraq. Now the cover lie was that Iraq had weapons of mass destruction, having amassed ‘yellow cake’ uranium material with which to make a nuclear weapon. That too proved totally false after the fact. After the US invasion, nothing remotely representing weapons of mass destruction could be found anywhere despite intense US military efforts to discover such. But in the run-up to war in 2002-03 the lie provided the cover to start the war. And the US demand that Saddam allow US military personnel to roam free anywhere in Iraq–i.e. accept the invasion without resistance–constituted the ‘unacceptable offer’ that the US bet Saddam would reject.

All these lies as bases for provocation represent the standard approach by the US when it wants to go to war. The provocations are then followed by extending an unacceptable ‘offer they cannot accept’ to the targeted adversary. The unacceptable offer is the signal the US has already decided to go to war and is setting up a pretext to justify military action. By refusing the unacceptable offer, the adversary thus gives the US no alternative but to commence the military action.

In the case of the 2nd Gulf War the unacceptable offer was the US demand that US forces be allowed to enter Iraq, roam free unannounced wherever they wanted, and inspect all military bases and other government institutions without interference. In the first Gulf War, it was the similar demand that Saddam pull out all his forces from Kuwait,redeploy far from its borders, and permit US coalition inspectors into Iraq. In Vietnam, it was the Vietcong should disband and both it and North Vietnam should accept a permanent two-state solution, forever dividing North and South Vietnam.

In all cases the US way to war is to make an offer it knows will be refused so that it appears further negotiation or diplomatic efforts are fruitless. Thus only military action is left.

Trump’s Deja Vu Provocation

Trump’s recently ordered assassination of Iran’s senior military leader (who was also a senior Iranian diplomat, Soleimani, is being justified by the Trump administration based on claims that Soleimani and Iran were planning widespread terrorist actions that would have killed scores, if not hundreds, of Americans, if he weren’t assassinated. But no evidence of such a threat is being produced by Trump or his government to date. Evidence of the threat was not even given to members of Congress, after the fact over this past weekend, as Trump post-hoc gave Congress an initial briefing on the action already taken. According to the War Powers Act, and well established precedent, Trump was required to consult Congress before the action, not after. And it has been leaked, though not picked up much by the US press, that that post-hoc briefing was considered seriously insufficient by many members of Congress in attendance.
Evidence lately is leaking out that Trump and his neocon foreign policy radical advisors have been planning the assassination at least since late December, and probably earlier. The Trump administration has been escalating its provocations since at least then. A mercenary US contractor was killed and the US compound in Baghdad was ‘attacked’ by protestors. That in itself was insufficient to launch the assassination provocation. For that, we now have the story of imminent threat to hundreds of Americans that Soleimani and Iran were planning.

In the case of Vietnam there at least was something tangible, in the false photos of the Tonkin Gulf incident. In the first Gulf War they flooded the US media with pictures of broken baby incubators. In 2003 we had then ambassador Colin Powell showing the United Nations his fake placards of installations in Baghdad where ‘yellow cake’ might be stored. Now with Trump all we get is to believe his claim widespread terrorist operations against the US were being planned. Claims from an administration already notorious for its lying, fake news, and fantasy tweets.

What’s Trump’s ‘Unacceptable Demand’?

Events in the days and weeks ahead (surely not months) will reveal what will be Trump’s ‘unacceptable offer’.
Following the assassination, Trump is now clearly waiting on Iran to take some kind of military action against US forces first. The US will use that attack by Iran as an excuse to reciprocate, which is what it apparently has decided to do in the first place back in late December. Since December Trump has been clearly engaged in escalating acts of provocation. The US is betting on Iran falling into the trap–a trap it can hardly avoid given its domestic politics and international commitments.

But in the current domestic US political climate, Trump cannot take military action first. He is prevented by the War Powers Act from doing so. He is also engaged in a domestic political fight over impeachment. A violation of the War Powers Act could potentially add another article of impeachment for violating the War Powers Act law. So he needs to provoke further military action by Iran. That will enable him to actually use the War Powers Act to reciprocate militarily against Iran, and remain still within the War Powers Act. For the Act permits the president to ‘protect US forces’ immediately and later come back to Congress for justification of the action. Trump will launch an attack on Iran should the latter attack US forces, and he’ll then argue his response was protected by the War Powers Act and not a violation of it.

Trump’s latest tweets identifying Iranian targets, including cultural targets, are also designed to threaten and infuriate Iran and get them to attack US forces first. Iran has already indicated it considers the assassination an ‘act of war’. Having said such, for it to do nothing would be politically unacceptable. Iran has publicly declared, however, its targets would be only US military. The likeliest military targets are in Iraq. Once Iran makes the next move, and where, and how, will define what Trump America’s ‘unacceptable offer’ as a prelude to war might well be.

The provocation (assassination of Soleimani) has been made. The US ‘unacceptable demand’ may not be long in coming.

Postscript On the Origins of War in the Period of Late American Empire

The past half century shows that America’s wars are more often than not precipitated by its presidents and their bureaucrat-intellectual advisors. The reasons are some combination of ideology, over-estimation of US power (and under-estimation of adversaries), and decisions by politicians to divert attention from domestic troubles, economic or political, to buttress their political standing or re-elections.

In the case of LBJ in the 1960s, it was clearly ideological in part. LBJ was obsessed with not losing Vietnam on his watch, as Truman ‘lost China’ on his, as he often said. Stop communism and the ‘domino theory’ was widely held by politicians and bureaucrats alike. LBJ was also surrounded by bureaucrat-intellectuals who believed US military power was omnipotent. How could jungle guerrillas in pajamas and sandals dare to resist US military might! Like the Japanese attack on the US in 1941, the thinking was to overwhelm them (guerrillas or USA) with a massive initial force and attack and they’d sue for peace and negotiate. The war would be short. But the USA in 1965 made the same miscalculation as did the militarists in Japan in 1941.

In 1991 the domestic political scene clearly played a role. The US had just experienced a deep financial crisis and a recession in 1990-91. The first Gulf War was a convenient distraction, and a way for then president George Bush Sr. to hopefully boost his re-election bid in 1992–by boosting the economy with war spending and by wearing the mantle of war victor.

In 2003 George W. Bush faced a similar economic and re-election dilemma. The recovery from the 2001 recession was weak. Military spending in Afghanistan was limited. There was no clear military victory. While US forces took over Kabul, the Taliban simply slipped away into the mountains to fight another day. The US economy began to weaken noticeably in 2002 once again. Bush and his neocon advisors had identified and targeted what they called an ‘Axis of Evil’ of countries that were not willing to abide by its rules of American global empire. The countries were: Libya, Iraq, Syria, and North Korea. Except for the latter, they were all easy military targets.

Moreover, little evidence of ‘defeat’ of terrorists post 9-11 called for a necessary military action before the 2004 elections. Invading Iraq in 2003 would also boost the US economy in 2004. Bush Jr. would enter the 2004 race with a military-spending boosted economy and with military victory under his belt. Once again, distraction from domestic problems and/or boosting re-election were the main determinants–along with neocon-ultra conservative ideological rationalization for military action.

Something of a similar scenario exists today with Trump. Despite Trump hyperbole on the economy, deep weaknesses exist and threaten to emerge more full blown in an election year. Trump’s trade wars have produced little economic gain after two years. Domestic politics have left Trump with a pending impeachment hanging over his head, and unknown developments about his personal finances, deals made with foreign powers, and failures to deliver in foreign policy nearly everywhere.

Precipitating a war in his final year in office–should impeachment move forward and the economy move backward–is a card Trump the reckless, high risk taker, convinced of his own personal ego and superiority is very likely to play. He is clearly setting the stage for his big bet: will war with Iran boost his re-election plans and re-energize a weakening economy? Or will it lead to his political demise–as in the case of Johnson or Bush Sr.?

Which road will Trump take? (Which has he already decided to take?). Given the nature of his pre-war provocation in the recent assassination–and Iran’s apparent decision to take Trump’s bait–the odds are great that Trump is ‘rolling the dice’ and willing to engage in a risky military adventure. The ‘unacceptable offer’ when it comes will not be difficult to identify. It appears just a matter of time, and more likely sooner rather than later.

Trump’s imminent military adventure holds little in strategic gain for the USA, and great possible loss globally politically as well. But Trump has always been most concerned with his own personal interests, in this case his political re-election. He will, as he already has, sacrifice US long term interests. Trump is about Trump. And nothing else. Americans will not be made safer but less so. So too the world. And before it’s all over, political instability as we enter the current 2020s decade may well precipitate economic instability on a scale not yet seen.

Dr. Rasmus is author of the just published, January 2020 book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity Press, available on his blog at discount at He hosts the Alternative Visions radio show on the Progressive Radio Network and tweets at @drjackrasmus.

by Dr. Jack Rasmus, January 5, 2020

Wars often occur when ideologues and/or reckless leaders in position of power are willing to engage in high risk brinksmanship in foreign policy military adventures–often as a distraction from their growing domestic problems. Their megolomania often leads them to misread the potential response of their targeted adversary, setting off a process of unavoidable tit for tat escalation by both sides until war actually breaks out.

The historical examples are undeniable of the role of personality in the precipitation of War in the 20th-21st Century:

Germany’s Kaiser 1914 mobilization of allies in response to Serbian archduke’s assassination that set in motion quid pro quo escalations; Hitler’s assumption that Britain-France would do nothing in the case of Poland as they in Czechoslovakia; Japan Tojo’s belief that war with the USA would be short should the US navy’s pacific forces be decimated in Hawaii and driven from Philippines; South Korea president Syngman Rhee’s incursion into North Korea in 1950 that started the Korean war. LBJ’s Tonkin Gulf lie and subsequent military escalation in Vietnam to destroy the Vietcong, based on the assumption that North Vietnam forces would thereafter not join the conflict. Saddam Hussein’s miscalculation to invade Kuwait, based on (false) assurances from the US that the US would not respond. Osama bin Laden’s and Taliban’s assumption US would not mobilize and invade after 9-11. George W. Bush’s embracing of US neocons’ advice that military conquest of Iraq would mean the end of war there, not just the beginning. And now Trump’s provocation of war with Iran by assassinating its most senior military general. Miscalculations all, by reckless, high risk-taking political leaders, with little understanding of the dynamics that often lead up to war.

Three questions to consider in light of the recent US killing of Iran’s top general:

Does anyone doubt what would be the response of the USA if its top general and commander in Europe were assassinated by Iran–and Iran followed it up with a declaration that they did it and he deserved it?

Is it just coincidence that Trump’s ‘crossing the Rubicon latest escalation’ has nothing to do with the timing of impeachment proceedings in Congress? Or what appears to be an increasing probability of US economic recession in an election year.

Trump could not unilaterally go to war with Iran without US Congress approval beforehand, given the US War Powers Act. Were he to do so it would constitute yet another violation of the US Constitution. But he could provoke Iran to start one, attack US military forces, which under that same Act would allow him to respond militarily with as much force as he wanted. Is Trump trying to provoke Iran, in order to have it precipitate an equivalent response so that he, Trump, can bypass a Congressional vote to go to war he knows he won’t get?

Who’s Running the Trump Foreign Policy Show?

Trump has already fired or driven out all the military generals and advisers from his administration who might have cautioned him on his growing military brinksmanship. US foreign policy for months has now been the policy of US neocons now running his administration in State, Defense, and elsewhere. (And recall it was the Neocons back in 2002-03 that advised and drove Bush to attack Iraq).

In all the foregoing historical cases, wars are precipitated by radical ideologue and non-military intellectuals and bureaucrats who advise the high risk taking and brinksmanship action by political leaders willing to ‘roll the dice’ on military adventures. Politicians who are short sighted about the dynamics of how wars are started, and once started aren’t easily stopped (if at all). Politicians and intellectuals-advisers precipitate the conflict; but the conflict soon sets in motion forces of its own that are not controllable. The reckless, high risk politicians are then dragged along by the forces of war, controlled by it instead of controlling it.

Trump is dragging the US toward war, whether by choice (by creating a distraction from domestic troubles); or by advice (by intellectuals-advisers Neocons whose ideologies serve their fantasy imaginations of wielding power and advancing empire); or by the inevitable accident forthcoming once escalation passes a point of no return (as it always does if allowed to continue).

Know Them by the Company They Keep

Trump is now in infamous company: with the Kaiser, Tojo, Hitler, and all the others after who have always miscalculated and pushed their countries to the brink of war–and over.

All reckless, high risk taking, believers in their own egos, and over-estimators of their ability to judge their opponents, the course of events, and their outcomes.

The similarity in personalities–and the errors they typically make that lead to war and destruction–is not easily ignored.
You can know the person by the company they keep! And that goes for Trump, as well.

posted January 1, 2020
Book Review: ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, by Dr. Jack Rasmus, Clarity Press, January 2020

As the New Year begins, and the final year of Trump’s first term commences, readers may be interested in the following review of my just released book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump‘, Clarity Press, 2020, by David Baker.

The book takes a different perspective than most to date on the subject of Neoliberalism. One of its major themes is that Neoliberal policies, which had dominated US economic policy since the late 1970s decade, entered a crisis with the crash of 2008-09 and the weak global recovery that followed. The Obama administration could not fully restore the Neoliberal project in original form, and the material conditions responsible for Obama’s failure to restore Neoliberalism on its original trajectory, it is argued, gave rise to the ascendance of Trump in 2016. Trump should therefore be understood as representing a more aggressive attempt to restore US Neoliberalism, albeit in a new, more virulent ‘neoliberalism 2.0′ form.

After three years of Trump, the book assesses the Trump more aggressive restoration effort, its ’successes’ and where it still has thus far failed to restore. Nearly 100 pages of the book’s analysis addresses the evolution of Trump policies in Neoliberalism’s four major dimensions of Neoliberalism: Industrial Policy, Fiscal Policy, Monetary Policy, and External-Trade-Currency Policy.

The book also critiques most prior accounts of Neoliberalism and their excessive estimation of the role of Ideas in lieu of the role of material forces in its rise, evolution, and now emerging crisis as its internal contradictions have multiplied since 2000. Most accounts to date fail to distinguish the Ideology of Neoliberalism from its actual, historical practice, it is argued.

The book thus places more causation on material factors and forces explaining the rise, evolution, and now emerging crisis of Neoliberal policies in the US. It predicts Trump’s 2.0 restoration will ultimately fail.

The next to last chapter describes the material-technological forces emerging and developing in the US and global capitalist economies that will bring about that failure, now in development and soon to emerge in the 2020s decade full blown.

And in the final chapter, the unstable relationship between Neoliberal economic policy and the US political system is addressed. It is argued that Neoliberalism has always been incompatible with even the limited form of capitalist democracy in the US and the ‘west’. And that incompatibility has been intensifying since 2000 in the US. As it has entered a crisis, it is now becoming more clear that democratic forms, norms, and institutions are now giving way–creating Constitutional Crises in the ‘heartland’ of Neoliberalism (USA and UK)–that will lead to a US political system crisis next decade as well as economic.

The following is David Baker’s early review of the book, which is available at discount on this blog via Paypal, and available on Amazon and other public outlets by mid-January 2020:

Dr. Jack Rasmus
January 1, 2020

The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump, by Dr. Jack Rasmus, Clarity Press, January 2020 ; A REVIEW by David Baker, (forthcoming next issue of Z magazine)

At 272 pages, Dr, Jack Rasmus’s new book “The Scourge of Neoliberalism: US Economic Policy From Reagan to Trump” is a big little book. To understand its importance a comparison to another big little book by John Maynard Keynes entitled The Economic Consequences of the Peace, “Economic Consequences” is helpful.

Economic Consequences grew out of Keynes’s participation in the post-World War I peace negotiation as an English representative. When Keynes discovered the extraordinary punitive nature of the peace being imposed upon Germany he walked out in protest. His book explains why.

Economic Consequences begins with a careful, common sense explanation as to how the economies of Germany France and England had become interlocked and interdependent which we would now describe as a global economy in the making. So to punish one, in this case Germany, was to punish all. Likewise, the punitive economic sanctions imposed upon Germany were so severe that Keynes predicted that a political monster would arise in Germany. That political monster was ultimately embodied in the person of Adolf Hitler.

Although our present political monsters, Trump and the Republican Party, have not reached the level of Hitler, it was not a rhetorical flourish when Noam Chomsky called them worse than ISIS. The Scourge describes how our home-going grown political monsters came into being.

Rasmus excels at economic history. His brief account of American economic history since 1900 rings true. His baseline is that economic structures are not static but constantly changing to control an evolving economy as well as political changes.

He divides the American economy since 1900 into three periods; roughly Pre World War I, during and after World War II, and the Reagan era which kicked off neoliberalism. In the two World War eras, America faced a happy challenge: how to manage America’s growing economic might so it would become an unsurpassed superpower. The first restructuring, the Pre WWI restructuring was to make the US capitalists a co equal partner with Britain and European capital; the second, during and immediately after WWII, was to make the US a global economic superpower. The third era, was and is, an unhappy time for America’s policymakers because they are and were faced with real challenges and real decline; the goal was to defeat domestic challengers, such as unions, as well as global challengers, such as Japan and Germany, for decades to come.

The stage was set for the third era in the early 1970s. Unions were extremely powerful and had made unprecedented wage gains of up to 25% in the early as 1970’s . Meanwhile America could not compete with Japan and Europe due to its lagging and aging industrial infrastructure. So the policymakers faced a real dilemma: what to do? Their choice came to be called neoliberalism which is neither new or liberal but a marketing term exploited by an all too compliant intellectual class.

Neoliberalism is essentially a set of crude policies that maintains high short-term profits at the expense of long-term profits and prosperity for all. The policymakers did not want to plunge say 35% of GDP into research and development and infrastructure upgrades because that would cut into their profits. Instead they took the easy way out: they cut taxes for businesses and the wealthy; they destroyed unions; the offshored US manufacturing to low-wage countries; they repealed decades of important regulations; they destroyed real pension plans for the lower 90%; robbed Social Security; they onshored cheap high-tech help from foreign country; they unleashed rivers of capital across the globe; they let the banks gamble with esoteric financial instruments; they destroyed public education and crippled the young with more than $1.5 trillion in student loans; they poured at least $5 trillion of virtually free money into the banks and investors from the Fed and on and on and on.

The Democratic Party’s response to all this was appalling: one campaign promise after another was broken and the lower 90% were faced with an active enabler of neoliberal policies—— Bill Clinton—– or a passive enabler of neoliberal policies, Barack Obama.

Rasmus also excels at the economic consequences of these policies: stagnating incomes and standard of living for the lower 90%; grotesque income inequality; a rotting infrastructure; lack of access by the lower 90% to adequate housing, healthcare, transportation and education. America has become a second rate country with an angry precariat.

Rasmus is also gifted at demonstrating how this intricate web of policies create negative feedback systems and leads us into an economic and political dead end. Two important issues may help demonstrate how this is occurring. His discussion of war/defense spending is illuminating. At no time since 1900 was any country a military threat to the United States. That ended in 1812. And yet, beginning with Reagan and continuing through Obama/Trump war/defense spending has gone through the roof. Why? A variety of reasons.

First, war/defense spending is an easy money conduit for the Fortune 500 since by definition there is no foreign competition. Likewise, it is a major way of funding research and development without calling it that: who would be willing to pour tens of billions of tax dollars into IT to make, say, Bill Gates rich? So we label it defense spending. But third and finally there was a tacit acknowledgment that since America could not compete economically then it would continue to compete militarily. Rasmus excels at demonstrating how this is a complete policy dead-end.

This war/defense policy created the dilemma of double deficits. That is, how can America cut taxes and increase war/defense spending? Answer: the double deficit. The US agreed to allow its allies to import significantly more to the US than the US was exporting to them but to fund this chronic and growing trade deficit the allies agreed to buy by large quantities of US debt to close the gap in deficit spending. Likewise taxes for businesses and wealthy investors have been cut by $15 Trillion since 2001 which also pushed the domestic deficit through the roof. But this rising debt generated huge interest payments, which the Congressional Budget Office estimates in ten years will be about $1 trillion in interest payments alone per year. Meanwhile the lack of real research and development investment by the US led to low productivity growth which in turn led to the further compression of wages/income for the lower 90%. The US economy has become a zero-sum game where the gains of the upper percentiles are taken from the lower 90% and is part of the reason we have the grotesque inequality of income and wealth we have.

Then finally there is what I call the China Challenge which demonstrates the dead end of this policy choice. Several years ago, China announced its 2025 policy plan which would put China in the lead of new IT development such as G5, cybersecurity and artificial intelligence. This is a real and significant threat to military leadership by the US because new IT developments have obvious and long-term military applications. This in turn prompted Trump’s trade war with China that ultimately collapsed.

As trade war talk intensified, the purchase of American debt by Asian countries slowed; equally important the Chinese stopped buying American agricultural products which was one of the core political constituencies of Trump: Midwest farmers, large and small, many of whom went bankrupt, started screaming at the Trump administration to back off from China. So Trump backed off despite his public announcements that he had won the trade war. The Chinese will steam ahead to become the world leader in IT while the US falls farther and farther behind which critically impairs even its grotesque military supremacy.

The Chinese Challenge is just one example of how Rasmus demonstrates the long-term failure of neoliberal policy. Another important policy dead end is the Greenspan “put”. The Greenspan put is to maintain low interest rates through the Federal Reserve. Those low interest rates allows multinationals to achieve high profits on their foreign manufacture subsidiaries. How? Low rates keep the value of the US dollar low and therefore the exchange rate value of the foreign currency of multinationals in the country of their operation high. This in turn allows the multinationals to “buy” more dollars and thus return more profits in US dollars to their main offices. It also allows US exporters to other countries to sell more, raise profits, and beat out competitors. But the low interest rate also allows financial institutions to gamble in financial instruments which has prompted one asset spike after another and the inevitable collapse of the same, such as bust, the savings-and-loan collapse, the subprime meltdown. Each collapse becomes more severe than the prior but the regulated banks and the unregulated banks—-shadow banks—— continue to speculate in financial assets because of the billions of dollars in immediate profits.

Likewise, the low interest rates benefits major businesses by allowing stock buy backs, dividend payouts, mergers and acquisitions and offshoring of jobs. Little if anything goes into the real economy in the US to improve productivity and create full time jobs for Americans.

This makes financial markets more more unstable and requires the Federal Reserve to pump more and more money into the system——– trillions of dollars which should have gone into real jobs in the real economy in the US. Instead, they went into stock buybacks, mergers and acquisitions, dividend payouts, off shoring of manufacturing units, and the hoarding of hundreds of billions of dollars offshore by major multinationals. Apple alone is hoarding over $250 billion in various countries outside of the US.

And then the problem becomes that even a modest spike in interest rates causes a collapse in assets such as 35% decline in the stock market in 2018 which prompted a fight between the Fed and Trump which Trump “won” so the Fed lowered rates which only means the next collapse will be more severe than the last one as the scared bankers well understood who protested against Trump’s non negotiable demand to lower interest rates.

Rasmus has a wonderful way of describing the natural and structural changes that are coming to the economy. The key driver is energy production which has moved from water, to coal, to gas and oil, and is now moving toward solar and hydrogen production. At each stage of this transformation of energy production, the economy has to be retooled and refitted to meet the challenges of the transformation in question. This in turn stretches many businesses to the breaking point, i.e. bankruptcy.

The energy component is changing at the same time that IT development is pushing economic structures into a whole new dimension through artificial intelligence, cybersecurity, G5 Communications Systems, and biotechnology. The problem is that neoliberalism has no answer to these significant problems and has no means of dealing with for example what I’ve called the China Challenge. Bloated with debt the major multinationals cannot and will not make the necessary investments required to meet the challenges of these new developments and remain competitive. It is a bizarre situation where one of the most undemocratic countries in the world is leaping ahead of us toward the new challenges that we are facing while the US becomes a second and perhaps even third rate country.

But Rasmus pushes the future even farther and describes how our political institutions are becoming more and more distorted and less and less democratic. The means of making America oligarchic is through a multitude of devices such as the electoral college, the US Supreme Court, gerrymandering, voter suppression, and the rivers upon rivers of money that flow from the 1% throughout our political institutions utterly corrupting them.
Even a great book has flaws. Missing from The Scourge is a discussion of how the war on drugs originally launched by Reagan which continues to this day is a potent weapon of neoliberalism to permanently disenfranchise tens of millions of poor people of color from any meaningful participation in US society by labeling them felons. The obvious economic and political use of the drug wars is to criminalize a potentially political disruptive segment of our society and make sure that the US has no obligation to help them with decent jobs, housing, education or healthcare. See The New Jim Crow.

The New Jim Crow brings up a related issue re Neo Liberalism: over determination of policies, that is a policy has multiple uses. As with the drug wars, students loans now at $1.5 trillion have the same result of disabling a large potentially politically disruptive element of society that the “drug wars” have: student loans disable the young from political activism, forcing them to spend much of their adult lives just managing debt. Likewise, as David Stockman observed the unrelenting march toward the ocean of debt called the deficit is a weapon to destroy socially important programs such as social security and Medicare.

Rasmus’s relentless drumbeat that the future only holds endless job losses to automation is true but there is a deeper issue. Automation, artificial intelligence and other IT developments, could free up critical and needed human resources to meet the challenges of the future. Think about climate change. Think about the tens of millions of jobs that could be created that are not only necessary but fundamental to avoid the coming environmental collapse. Every building and every parking lot in the United States should have solar panels on them; all of the hundreds of oil refineries must be dismantled; all of the tens of thousands of miles of gas and oil lines must be removed. Please see Bill McKibben’s description of this job creation which he has called World War III to emphasize the huge job creation and necessary fiscal injections on the level of WWII which soared from 35% to 70% of GDP.

Rasmus is a powerful advocate for Medicare for all but should also consider that this also would demand huge human resources—-the training of thousands of healthcare workers in the US. Healthcare workers, like IT workers, are on shored by the thousands. We must train our own to take on the difficult task of caring for all throughout the country and not just in wealthy areas along the coasts. The lack of access to quality health care by the rural poor is criminal; it is not a “mistake” that many of Trump’s most ardent supporters are the rural poor.

Finally, I wish Rasmus would provide a glossary. Such terms as median versus average income and negative interest rates, continuously escape me despite the fact that I’ve read about them in context at least 10 times.
The Scourge a powerful, important book. We ignore it at our peril. The utter daily degradation which results in the stunted lives of hundreds of millions of Americans is at stake, who now lash out at each other about such nonsense as race and gender while Trump and his kind laugh and the world spins out of control into environmental hell. In many of his other writings Rasmus has given a clear road map out of the dead end of Neo-Liberalism; at the risk of repetition it would help to have that map articulated again.

David Baker
December 2019

posted December 17, 2019
A Post-Mortem on the UK Election: Brexit & the Collapse of British Labour

Last week the British parliamentary election gave conservative Boris Johnson a big victory, and leveled an historic defeat on the British Labour Party not witnessed since 1935. Johnson now has an absolute majority in Parliament and his quick march to a hard Brexit is now very likely.

Once the leading global capitalist economic world power, Britain is now doomed eventually to decline economically to a force in the global economy more or less equal to that of northern Italy in terms of GDP. Its last major role in the global economy, as a world financial center, will now atrophy as well, as finance capital exits Britain the aftermath of the election and Brexit to points elsewhere: to Frankfurt, Paris, Singapore, and New York.

It is important to understand why Boris won big, why Brexit is now on the fast track once again, and what are the likely consequences. One immediate consequence is Jeremy Corbyn has already announced he will not lead the party further after its crushing defeat. That means the ‘moderate’ interests will now ascend to control of the Labour party again and purge the progressives that were behind Corbyn. It also means the Scottish Nationalist Party will demand a second vote on leaving the UK. Its leaders have already so declared. The British Constitutional crisis is again on the agenda.

It is important not only to assess the short term failures or success of the Conservative vs. Labour parties’ respective election strategies, but to understand the longer term historical forces at work that have been undermining Social Democracy and social democratic politics (and thus the Labour Party) in the advanced economies in recent decades. Those long term historical forces have been building and accumulating for decades. They have played at least as great a role as election strategy and tactics in Labour’s now historic defeat.

There are no doubt several reasons why British voters handed Labour its defeat and opened the door again, now even wider, to Boris Johnson to leave the European Union. The election shows that a large number of voters still wanted to leave the EU, despite three and a half years of British Parliamentary maneuvering and delay. Another voter block that weren’t so sure of leaving the EU perhaps probably voted conservative because they just wanted to ‘get the damn thing over with’. Three and half years of debate and parliamentary maneuvers since the original 2016 Brexit vote have left many disgusted with the political efforts of the British elite to block the 2016 democratic vote of the will of the majority in the country. Another short term factor in the election outcome no doubt is that Johnson cleverly manipulated voter sentiment with promises he would protect–and even expand–social programs, add more government spending, end austerity, save the health service, etc. That’s a cynical tactic directly out of the Trump playbook. Another factor probably was the slanderous business-media campaign to depict Corbyn and the Labour party as anti-semitic. As in the US with Trump, manipulating the ‘jewish vote’ and painting Corbyn-Labour as discriminating, or even racist, played a role in Boris’ victory. Corbyn and Labour fell for the ploy and spent too much time defending against it, instead of pushing their own proposals more forcefully. They were caught off guard and didn’t know how to respond, and did so only after losing valuable time. Of course, having the capitalist media and press running interference on the issue on behalf of Boris and the Conservatives didn’t help either. As in France in support of Macron, British capitalists rallied and united together against Corbyn, terrified that if he and Labour won it would mean the re-nationalization of industries long privatized under British Neoliberalism since the 1980s. Finally, Labour’s strategy was itself equivocating at times and on a number of fronts insufficiently differentiating from the Conservatives. In many voters’ minds, especially youth, Labour was viewed as still the junior partner in pro-business Neoliberal policies and not to be fully trusted. The legacies of Blair and Gordon continue to haunt the part (just as Clinton and Obama do in the USA for the Democrats).

But there’s more than just electoral strategies and tactics that explain yesterday’s vote outcome and Labour’s historic defeat in the British Parliamentary election.

In Britain, as well as in the USA and Europe and elsewhere, the capitalist system has clearly entered an era of ‘nationalist reaction’ to the declining growth prospects of global capitalism. Nationalism is the ideological reaction to that decline. More prescient and clever members of capitalists, and political class that represents them, have grabbed on to nationalist appeals and policies and are riding that horse into office on the backs of growing economic discontent. Brexit thus represents a nationalist response to Britain’s economic decline. “Its the fault of those Europeans and the EU. If only we can leave the EU, Britain will return to its glory days of economic power”. So goes the political refrain–in the UK and elsewhere.

Overlaid on this ideological appeal in England, Wales and Northern Ireland is the curious counter ideological ‘nationalist’ appeal of the Scots, who employ Scottish nationalism as the justification for staying in the EU instead of leaving it. So we have two nationalisms–one countering the other–in the case of the UK and Brexit. Scotland will no doubt soon vote somehow again to leave the UK–becoming a kind of ‘Catalonia Writ Large’. Unlike the latter, however, it is unlikely that members of the Scottish Nationalist party will be successfully charged with treason and jailed. Watch for Boris and his conservatives to try to cleverly structure some solution similar to the so-called Northern Ireland ‘backstop’ for Scotland in relation to the EU. Boris and buddies will try to keep Scotland politically in the UK by allowing it to economically remain in the EU. Or allow Scotland to keep all the North Sea oil and US trade revenue for itself, which is also what Scotland staying in the EU is mostly about.

Nationalism is undermining national unity in the UK–just as it is doing so in the USA…and in Spain, Italy, and elsewhere in Europe, and let’s not forget India and Kashmir, and other locales in Asia. Capitalism in crisis always turns to nationalism as a shield to divert blame for its economic and social troubles on ‘the others’. The extreme version of this nationalist ‘blame it on the outsiders game’ is called Fascism.

There’s another longer term historic force also at play here in the Brexit phenomenon–apart from Nationalism and the short term electoral strategy and tactic failures. That’s the decline and collapse of traditional Social Democracy and social democratic parties. That decline is partly due to decades of mis-leadership by the social democratic parties’ leadership who have aligned themselves with the Neoliberal policies of the business parties in their countries. By partnering with business interests, in the hope of obtaining some minor concessions, they have painted themselves with the consequences of those Neoliberal pro-business, pro-investor policies. Those policies for their social democratic constituencies have meant: declining job opportunities, stagnant wages, privatization and loss of social insurance and benefits, loss of retirement and pension guarantees, and destruction of their unions that once protected those war time and post-1945 gains of the early 20th century. Of course, social democracy party leaders personally gained by securing a junior role at the political table with business and their capitalist parties. The Tony Blairs and Bill Clintons are today multi-millionaires serving on corporate boards and as business consultants being nicely rewarded for their past services. But they traded that role and personal gain for the the living standards of their working class members.

At its extreme, and in the worst case, the collaboration of the social democratic parties over the last 40 years with their business party ‘opponents’ has meant allowing the mass reverse immigration–i.e. deportation–of tens of millions of industrial working class jobs from the UK, the USA, Europe, and Japan to emerging market economies. (Where their respective corporations also migrated for cheap labor, open markets, and indigenous local politicians on the make). Ultimately, that reverse immigration of jobs and deportation of living standards is explains in large part the collapse of electoral support for the social democratic parties in the ‘West’.

Entire generations of workers in the UK, USA, and Europe–who are today condemned to part time, temp, gig, and precarious work, to small service company employment, and with no experience of belonging to unions–no longer see any affinity to the traditional social democratic parties. This development is not only relevant to the UK and the collapse of British Labour as an electoral force. It is true of that even weaker and lesser ‘social democratic’ party organization called the Democrat Party in the USA. As it is true for the Socialist Party in France that was recently defeated and has all but disappeared from the electoral scene. And as it is becoming as well for the SPD party in Germany, as it continues its partnership and collaboration with business parties and interests in that country. The Social Democratic parties in the west have been hollowed out by the deportation of their industrial jobs (aka offshoring or sometimes euphemistically called by the business media as ‘supply chain relocation’). And parallel structural changes in western economy labor markets have chipped away at the margins of what working class support that remained for those parties by throwing many not deported into precarious and contingent work that fragments and de-politicizes the class.

The core industrial working class backbone of those parties has thus been shipped offshore in the Neoliberal era and otherwise captured by nationalist appeals or who see nothing in it for them to vote for anyone. Social Democratic party leaders in recent decades have thus participated in, and presided over, the destruction of their own organizations and their own erstwhile political-electoral base. And as they allowed the decimation of their own industrial working class, the atrophy and disappearance of the unions as an organized electoral support force followed.

Today neither the class nor the unions existed to deliver the vote for Labour (or for the Democrats, or the Socialist Party, or the SPD, etc.) in strategic contests like the recent British election and Brexit votes.

Corbyn in the UK represented a last futile effort to re-transform the British Labour party, trying to turn the clock back into what it was once. But the core and base for that reconstitution no longer exists. And that’s also, at least in part, why Labour suffered the historic defeat yesterday. And why Nationalism is on the ascend once again.

And why, after the next crisis, even ascendant Nationalism as we see it today may not be sufficient for the continuation of late Neoliberal rule for global capitalism.

Jack Rasmus is author of the recently published book, ‘The Scourge of Neoliberalism: US Economic Policy From Reagan to Trump’, Clarity Press, January 2020, and‘Central Bankers at the End of Their Ropes: Monetary Policy and the Coming Depression’, Clarity Press, August 2017. He blogs at and his twitter handle is @drjackrasmus. His website is

posted December 12, 2019
Trump vs. Democracy

The US House of Representatives marked a milestone today, November 6, 2019, as it decided to report out articles of impeachment on Trump. But there’s a bigger picture to consider. The impeachment represents a new stage in the political ‘food fight’ between the two wings of the political-economic elite in the USA. It also represents a further escalation in the crisis and decline of American Democracy–a decline that’s been going on since at least the early 1990s, when Newt Gingrich and the radical right took over the House of Representatives and declared publicly that their objective was to create a dysfunctional US government. In retrospect, Gingrich certainly succeeded.

But it’s not just since Newt. US Democracy has been in decline on a number of fronts since the late 1970s, which corresponds to the rise of Neoliberal economic policies in the US. Late stage Neoliberalism today, 2019, is in crisis. Since the 2008 crash political elites and policy makers have been attempting to restore its pre-2008 momentum but have failed. Obama failed throughout his eight year term in office. And Trump’s regime should be viewed as an attempt to restore it in a new, virulent aggressive Neoliberalism 2.0 form.

But Trump has been only partially successful to date as well, and will likely fail as well regardless of the 2020 election outcome. A new crisis is around the corner in the 2020s, driven by accelerating fundamental changes in the nature of capitalism itself that have been ripening and developing in the last decade.

At least three forces will further exacerbate the internal contradictions developing since 2008 within the neoliberal policy regime. They are 1) the deepening of Artificial Intelligence technologies that will further devastate and already rapidly changing labor market, eliminating or reducing tens of millions of simple decision making jobs. AI will radically transform as well product markets and distribution systems of 21st century capitalism. It will also change the nature of money itself. All these trends are already well underway and will continue to intensify in the years immediately ahead. 2) Indications are growing that Neoliberal capitalism will also not be able to resolve the climate crisis. Third, 3) 21st century capitalism has already generated a level of unsustainable debt—corporate, financial, household and government—which inevitably must lead to the next general financial markets implosion sometime early in the next decade.

These basic material forces will generate a long term crisis in the 2020s, as contradictions within the neoliberal policy regime continue to intensify as well. There are four elements that constitute the Neoliberal policy regime—i.e. Neoliberalism in practice. They are Fiscal Policy (tax, war spending, social program spending, deficit-national debt management); Monetary Policy (low interest rates, money supply); Industrial Policy (deregulation, privatization, de-unionization, real wage compression, job restructuring); and External Policy (free trade, Free global money capital flows, currency exchange rate management, and the twin deficits). But since 2008 the advancement of neoliberal policy in one or more of these four elements has been thwarted by its own growing contradictions.

Advancement in one or more of the four policy areas is negating the restoration or advancement of the other three. The contradictions within Neoliberalism are intensifying, in other words, just as technological and capitalist system restructuring is deepening as well.
What the last quarter century in particular has shown is that In order for Neoliberal policies to deepen and expand Neoliberalism has had to restructure the US political system as well and to eliminate long standing elements of Democracy in the political system. Neoliberalism and Democracy, even in the limited American form of Democracy, are essentially incompatible. The historical record since the 1980s confirms this. On a number of levels, as Neoliberal policies have advanced, US Democracy has atrophied. This is not by accident; nor is it a mere correlation.

Democracy in America has been in decline since at least the 1990s, and especially so after 2000. It is evident in the collapse of any semblance of campaign finance reform, in the transformation of the two political parties into vehicles increasingly focused on ensuring corporate and investor wealth subsidization, in the Supreme Court interfering with electoral processes on behalf of corporations and investors, in the spread of voter suppression in various form throughout the so-called ‘Red’ states (i.e. a new Jim Crow also endorsed by the Supreme Court), in widespread gerrymandering concentrated largely in the same region, in a greater role played by the electoral college in preventing popular sovereignty, in the creation of special courts embedded in free trade treaties that further negate popular sovereignty, in the expansion of the ‘lobbyist state’, in the deepening attacks on civil liberties (patriot act, NDAA spying and surveillance, etc.) and undermining of the guarantees of the Bill of Rights, in a transformation of the so-called ‘fourth estate’ of media-press into vehicles of ideology propagation, in the transformation of the two political parties into institutions more tightly controlled by money interests–the list is long and growing. And after the crisis of 2008-09, all these processes of Democracy decline have been accelerating.

The process of decline, moreover, has reached a new milestone with the articles of impeachment of Trump just announced. For the behavior of Trump has clearly violated numerous provisions of the US constitution and is unraveling what Democratic norms and practices that have defined even the limited form of Democracy that exists in America. What we have under Trump is an assault on Representative government itself and, indeed, the US Constitution and the very formal institutions of Democracy.

The decline of Democracy in the US is likely, moreover, to get still worse in the year ahead in the run up to the 2020 November election. It is clear that the 2020 election will be close. Trump probably has an electoral college advantage, even if he loses the popular vote by even more than he did in 2016. His control of Red state electors has solidified further in the wake of more widespread voter suppression, gerrymandering, support by a sycophant Republic party, and a Supreme Court ready to do his bidding. Behind the sycophant Republican party is a base of at least 30% of the population that would vote for him regardless of any crime he has, or might, commit. He has his ideological bullhorn in Fox News, Breitbart, and Twitter and he will use it increasingly aggressively.

Should he lose the election, chances are more than even he will refuse to acknowledge that loss, setting off a constitutional crisis unlike any ever experienced in the US to date. Should he win narrowly, he will likely turn vindictively against those who have opposed him. Even more draconian attacks on government and institutional Democracy will almost certainly follow. Trump is a ‘down and dirty’ street fighter, weaned on the corrupt and questionable practices of New York commercial property speculators. In short, a narrow win or a narrow loss—the likely outcome—will mean there will likely be a constitutional crisis circa the November 2020 election, comparable only to the 1850s American political debacle. (Trump himself has said if he’s not elected there will be a ‘civil war’ again in the USA).

In short, American Democracy and the US political system is about to enter a period of instability it has heretofore not witnessed. Also not witnessed, the political crisis of Democracy in America will likely overlap with the next economic contraction and financial system implosion on the horizon as well. Hold onto your seats, folks, the real show hasn’t even yet begun!

The following passages summarize my views in further detail on the deepening contradictions of Neoliberalism and its fundamental incompatibility with Democracy in the era of Trump. The passages are an excerpt from the concluding chapter, ‘Neoliberalism v. Democracy’, in my recently published book, The Scourge of Neoliberalism: US Economic Policy From Reagan to Trump, Clarity press, January 2020).

Trump’s Neoliberal Assault on Democracy

(From Chapter 10, ‘How Neoliberalism Destroys Democracy’, THE SCOURGE OF NEOLIBERALISM: US ECONOMIC POLICY FROM REAGAN TO TRUMP, by Dr. Jack Rasmus, Clarity Press, January 2020)

“As Neoliberalism has become more aggressive under Trump, so too have the attacks on democracy and democratic government.
After three years in power, and with the House of Representatives and much of the mainstream media challenging him after the November 2018 elections, the President is clearly drifting toward usurping the authority and, in some cases, even the functions allocated by the US Constitution to Congress—specifically to the US House of Representatives—toward a view he is above the law and unimpeachable. Toward a view that his presidency is more than a ‘co-equal’ branch of government. Toward a view he can and should govern when necessary by bypassing Congress. Toward a view the Constitution means he can force states to abandon their rights to govern. And toward a view the president can publicly attack, vilify, insult, coerce, and threaten opponents, critics, and whomever he chooses.

That drift includes the expansion of Executive branch rule-making at the expense of Congress and the legislative branch; the broadening use of ‘national security’ declarations by the president to bypass Congressional authority; and the refusal to recognize US House authority as it exercises its Constitutional responsibility to undertake investigations of corruption in the executive branch.

Usurpation of Legislative Authority

Presidential rule making by Executive Order has been long embedded in the US political system. In the past, however, Executive Orders by presidents have been issued where the president clearly has authority to issue such, or else in cases where Congress has not passed specific legislation—such as Obama’s EOs enabling children born in or brought to the US by non-citizen immigrant parents to have deferment from deportation . EOs have not been typically issued, however, that directly change the intent or the funding authorization of legislation passed by Congress. Not so in the case of Trump.

Passing laws requires their accompanying funding authorization. The monies allocated to a program by Congress are required to be spent on that specific program. However, under the cover of invoking a national emergency, Trump recently unilaterally transferred money allocated by Congress and authorized by the US House for defense spending to fund his border wall. This creates a dangerous precedent. Might Trump now divert authorized spending by Congress to other programs? This is clearly a constitutional issue now. Trump is in effect governing by ‘national security decree’ in direct challenge to Congressional legislative authority. The much heralded ‘separation of powers’ in US government has been undermined to a degree.

Drift Toward Tyranny

In addition to expanding Executive rule-making at the expense of Congress and the legislative branch, and his refusal to cooperate with Congressional subpoena and investigation rights under the Constitution, worrisome signs keep arising that indicate Trump also considers himself personally ‘above the law’.

The US political system has always given the President authority to pardon individuals, which is usually undertaken at the end of their term in office. It’s a curious and decidedly un-democratic practice that has been increasingly institutionalized in recent decades under Neoliberalism, by both Republican and Democrat presidents and governors. A hallmark of American political ideology proclaims to the public that ‘no one is above the law’. Yet, some are, as executive pardons have become increasingly commonplace. But these are presidential (and governor) executive pardons of others. No president to date has publicly suggested that he himself might be above the law or has the right to ‘self pardon’. But Trump has.

The process of usurping legislative authority, to fund his preferred programs at the expense of Congress, may have just begun, but the drift by Trump toward an imperial presidency in domestic legislation may well expand as his confrontation with Congress grows. Second, his suggestion of the right to assume power of self-pardon smacks of Tyranny. These trends—toward usurpation and tyranny—represent decided undemocratic principles that the president feels comfortable with.

Although in early form, the trends suggest a view by Trump that the presidency is an institution ‘more equal’ than the other branches of government. It has long been obvious that, in foreign affairs, the presidency since the 1960s—and even before—has been becoming more ‘imperial’. Presidents go to war without obtaining a war declaration by Congress, as was clearly intended by the US Constitution—token limits by the 1970s era ‘war powers act’ notwithstanding. The Trump presidency may reflect an extension of this imperial attitude to domestic US politics, i.e the emergence of what might be called the imperial presidency in domestic affairs.

Redefining Separation of Powers

The Trump presidency’s disregard for Constitutional norms in its relationship with Congress, and in particular the US House of Representatives, has recently become evident as well in Trump’s outright refusal to allow executive branch employees to testify to Congress, subpoenas notwithstanding. This stonewalling is but another example of the Trump presidency’s view that the Executive and Legislative branches are perhaps not ‘co-equal’ under the Constitution. Constitutional authority clearly provides the US House with investigative powers. Trump’s refusal to cooperate with that Congressional authority represents yet another reinterpretation of Constitutional separation of powers.

Reinterpreting the Constitution’s Supremacy Clause

Trump’s offensive against California’s auto emissions rule exemplifies his reinterpretation of the Constitution’s ‘supremacy clause’ and states’ rights. It has long been accepted that state laws cannot provide less than a similar federal law. For example, states cannot pass a minimum wage lower than the federal minimum wage. But they can pass legislation providing more than the federal minimum wage. Trump’s attack on California emissions in effect means the state cannot pass tougher emission standards than the federal standards, which are far less stringent. If that becomes a legal precedent, states logically could not pass legislation that is either less than or greater than the federal requirements. It’s a violation of the federalism principle in the Constitution.

Assuming the Power of the Purse

Trump’s trade wars represent yet another example of Executive powers expansion. The trade wars have generated tens of billions in additional tariff revenues for the executive branch. These funds have been used in part by the president to issue direct subsidies to US farm interests in the amount of $28 billion over the past year. A constitutional argument can be made that payment of subsidies in such amount should be authorized only by legislation raised and authorized by the US House. The Constitution’s intent gave the US House the authority of ‘power of the purse’ to raise and authorize spending of revenues—and not the Executive.

Disregarding Democratic Norms & Practices

Other disturbing examples abound of the Trump presidency disregard for accepted democratic norms and practices. Never before has a president so blatantly attacked the press and media that criticized him. Or vilified political opponents as ‘traitors’ and ‘criminals’; or publicly demanded candidates be ‘arrested and locked up’; or incited popular mobilizations against protestors and his critics; or launched purges within his own bureaucracy (in particular the intelligence agencies) and political party; or declared if Congress were to try to impeach him it would mean a new civil war in the country. These are not just the verbal railings of an aberrant personality who by chance attained the highest office of US government.

These are actions that reflect a calculated and fundamental disregard for even the limited form of democracy that still prevails in US government institutions today. They are views that reflect a belief that Executive powers of the president should and must be expanded—even if at the expense of the authority of legislative branch of government (Congress or states); even if it at the expense of the legitimacy of the press and ‘fourth estate’; even if it deepens the polarization of US society and incites citizen to citizen violence. Trump believes it is all necessary in order to implement his policies and programs—and this is what we must keep foremost in mind—it’s a Neoliberal program.

The key question for assessing the future of Neoliberalism is whether Trump is a product of the evolution of Neoliberalism and its impact on political institutions and practices—or whether the Trump presidency is an aberration outside that evolution?
Trump: Inevitable or Aberration

Is a Trump-like political figure the inevitable consequence of the need to introduce post 2008-09 a more aggressive, virulent form of Neoliberalism? Would an alternative president have to have moved in the same anti-democracy direction to get his/her agenda passed in the era of deepening domestic and global opposition to Neoliberalism? Perhaps that alternative president might have been less crude, less brash, less apt to ‘shoot from the hip’ on policy and political initiative—less likely to engage in early morning social media excesses; and indeed therefore have been even more clever and effective.

But one should make no mistake. Trump is not a lone wolf who slipped into the US presidency by accident or ineptitude of his opponents. Neoliberalism required a more aggressive restored form following the crisis it faced in the wake of the 2008-09 crash. Certain moneyed interests were in 2016, and are still, behind Trump. And if it wasn’t him, it would have been another chosen to shake up the old political establishment that was beginning to lose control over growing discontent at home and growing capitalist competition abroad.

The problem with Trump in the end has been his style, which has made it impossible for him to unite US business interests, and the traditional political elites, behind him in an effort to jointly restore the Neoliberal policy regime. Instead, he has precipitated an internecine political fight within the ruling class in America—i.e. a classic post-crisis political ‘food fight’ between two wings of the American economic and political elite.

A similar post-crisis split and internecine ruling class conflict has been occurring globally elsewhere as well—not just in Trump’s America. In the UK (Brexit), in France (the National Front), Germany (the rise of Afd), in several eastern European countries (Hungary, Austria, Poland), in various countries in Latin America (Argentina, Brazil, Ecuador), and in Asia in India and Philippines. All are trying to come to terms with slowing economies and an emerging global recession, as Neoliberal policies failed globally after 2008-09, giving rise to right wing autocrats and anti-democratic politicians. And in virtually all cases, including the US, in attempting to re-establish Neoliberalism on firmer ground, democracy, democratic norms, and institutions have been the victims.

The Trump era represents only the deepening of anti-democracy trends in the US that have been evolving since the introduction of Neoliberal policies circa 1980. In the Neoliberal era the two mainstream political parties became more oligarchic in their programs and representation. Money deepened its hold on government and politics steadily over the decades. Electoral processes became more the purview of the rich and powerful. Gerrymandering and voter suppression became more the norm than the exception. Popular sovereignty and representative government for all, more a fiction than fact. Public wants and needs that can only be fulfilled by government have been increasingly ignored, in favor of interests and requests of tens of thousands of paid lobbyists. And citizens’ civil liberties and rights have been increasingly limited, circumscribed, and surveilled.

The correlation between the rise and expansion of Neoliberalism and the decline of democracy in the US is irrefutable. Whether the correlation also represents a direct causation depends on whether each milestone event associated with the expansion of Neoliberalism occurs in tandem with, or in consequence of, an event marking a further deterioration of democracy.

And here the evidence and examples abound: the transformation of the political parties in the 1980s and early 1990s and rise Neoliberal tax and monetary policy. The radical right takeover of the US House in 1994 and advent of free trade. Gore v. Bush, the selection of the president by the judiciary in 2000 and still more tax cuts, war spending, the end of campaign finance reform, the Patriot and NDAA Acts and the attacks on civil liberties and democratic rights, and free trade treaties with their capitalist courts and negation of representative government. Thereafter, Obama followed by the Supreme Court’s Citizens United and related decisions, widespread gerrymandering, intensifying voter suppression, more war spending, more business tax cuts, more deficits, more free money to investors and bankers, more attacks on unions, more wage compression. And now Trump.

It’s more than just a ‘smoking gun’. It’s certainly not just coincidental that democracy in America has been in decline—and on so many fronts—during the era of Neoliberalism. Nor is it coincidental that under Trump the decline of democracy in America has intensified, and has begun to assume an attack on the prevailing constitutional form of government itself.”

Jack Rasmus is author of the just published book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity press, January 2020. (The book is available at discount from his blog,, and his website,, where reviews of the book are also available.

posted November 18, 2019
Europe Today & Tomorrow, Part 2: AI, Uberization, & Sharing Economic Ideology


The Wall St. Journal page one article of November 18, 2019 broadcast: “Europe’s New Jobs Stoke Discontent”.
It asked: ‘why are workers so angry’, when millions more jobs have been created since Europe’s last recessions (2008-09 and 2011-13), when millions more job openings remain, and when minimum wages have been raised in most countries’?
The article then goes on to try to answer some of these questions. It suggested one problem is that the vast majority of new jobs created in Europe have been contingent (i.e. temp, part time, independent contractor, etc.). That has meant, in turn, lower aggregate pay and a lack of insurance, disability, pension (deferred wage) benefits. It also has meant less job security and longer total hours worked and more costs to workers trying to cobble together multiple part time jobs. Europe has developed a two tier labor force, of those that ‘have somewhat’ and those who ‘definitely have not’.

These 2nd tier conditions afflict mostly younger, under 35 years old workers. Apart from the substandard wages and benefits, the contingent work has left them with a sense of hopelessness that they’ll ever be able to get out of the ‘2nd tier worker’ hole, a kind of 21st century indentureship, that they know prevents them from living a normal life, having a family, obtaining reasonable housing, and so on.

The condition is not picked up by mainstream media referring to economy-wide gains in ‘average wages’, which mostly apply to regular, 1st tier workers. Job creation numbers also do not distinguish between the two tiers and the low quality (contingent, precarious) jobs that account for the vast majority of jobs created in recent years in Europe (as well as in the USA and Japan). Nor are contingent jobs reflected in the large number of unfilled job openings, which are for the highly skilled, technical workers that capitalism needs in greater numbers today but which the educational systems have failed to produce. In short, the data that mainstream media articles like the Wall St. Journal keep referencing as indications of a strong labor force and good job gains are irrelevant to the growing problem of temp and part time jobs that official government data either ignore or don’t accurately reflect.

Furthermore, the official mainstream press and media don’t connect the mass protests and demonstrations breaking out worldwide to the growing problem of contingent employment and its discontent. Beneath the apparent causes of the growing mass demonstrations and protests lies the mass discontent and growing hopeless of young people over their deteriorating work and living conditions.

Look beneath what’s happening with Yellow Vests in France, Hong Kong demonstrations, mass demonstrations across the South American continent, in North Africa and the Middle East, and what you will find is young workers growing desperate over their working conditions, over income inequality, the lack of jobs that provide a basic living, and their sense of hopelessness of change any time soon. In other words, discontent over their fate in emerging 21st century capitalism.

But the worse is still yet to come. Contingent, or so-called precarious, work and its condemning of workers to a ‘new indentureship’—a kind of 21st century capitalist serfdom—is now being intensified by new capitalist business models and technological change.
The new models are creating even more precarious work. They are what I call the ‘Amazon Effect’ and the ‘Uber Effect’. But these new business models are not the worst of it. Overlaid on contingency, precarious work, and the intensification by these new business models is the even greater negative impact now just emerging due to Artificial Intelligence. AI promises to exacerbate the problems of low pay, long hours, job insecurity and general hopelessness caused by precarious work, and the revolutions in capitalist business models from Amazon and Uber that are making that precarious employment even worse.

Europe’s economy has been even more devastated than America’s by the recent contingent-precarious job trends of capitalism. And AI will prove even more destructive when it comes.

This past spring 2019, this writer was interviewed for a book of interviews to be published soon in Poland. The following excerpt from the interview addresses the destruction of labor markets, jobs, incomes and lives of workers in Europe in the decade ahead. AI will come later in Europe than in the US and Asia. Its introduction will therefore be more intense and its effects therefore even more disruptive.


I was talking with Aleksandr Dugin, he is one of the top ideologists for Kremlin right now and he told me something quite interesting. He said that, the problem in Europe is not so economical problem, there is a deeper problem. He said that firstly, the whole population of Europe will be replaced by people from Africa and Middle East, and all these people will be replaced by robots, the whole labor will be replaced by automation, what do you think about that.


Yes, well I don’t agree that you’re going to have a mass immigration into Europe. Europe is already closing off its’ borders in various ways from the immigration from North Africa and the Middle East. The problems in North Africa are part of the problems of global lack of real global economic recovery and the greater ease of transportation and communication of recent decades, so these folks are coming to Europe but that’s a symptom of the bigger problem. Not the problem itself.

The second part of your point is much more fundamental and structural, and that is what we are seeing now is changes in the labor markets and product markets globally and capitalist economies changing at a very rapid rate. What that means is that in order for capitalists to compete with each other globally and individually they have got to cut costs even more rapidly and the new technologies and business models are enabling it to do just that.

Artificial intelligence is the next wave of massive change in the labour markets, We’ve already seen the change in Europe where we’ve already had a shift to contingent employment, part time and temp jobs, in recent decades. Over the last ten years, most of the jobs created in Europe have been these second tier kind of jobs, part time, temp contingent jobs. Low paid, service jobs with no rights, less benefits than first tier. That labor market change is behind a lot of the yellow vests and protest in Europe. It’s economic, it’s jobs, hopeless jobs and hopeless futures and the elite’s ignoring that as it erupts. That’s already a big problem in Europe, where even in Germany 60% to 70% of the jobs created, according to data I’ve seen, have been these second-tier jobs and these second-tier workers are rebelling now.

Their unions are tied into the state apparatus, pretty much, so workers just expressing this individually, spontaneously. So that problem of widespread 2nd tier employment already exists in Europe, but now we’re going to have overlaid on it this new wave of technology, driven by A.I. that will make it much worse. And what is Artificial Intelligence? It’s simply eliminating decision making, simple decision making in the economy. More sophisticated decision making, more complex will still be there. In fact you’ll see an increase in jobs in data science and statistical analysis and so forth but these are high level and highly skilled jobs and not everyone can do them. And the education system has not been preparing people to do those jobs. So we’re going to see the jobs that were simple decisions jobs, a lot of these second tier contingent jobs, are even going to disappear.

A McKinsey report in the United States, McKinsey Consultants, recently came out this year and said in the U.S alone AI will mean 30% of the occupations will either be eliminated or significantly reduced in terms of hours worked. 30% of occupations, that’s roughly of one third of 165 million jobs in the US, are going to be either eliminated or reduced in hours and therefore pay. The same thing’s going to happen in Europe. This is artificial intelligence, which is simply large databases, massive computing power and statistical analysis to develop machine learning so that the machinery, the automation, makes the decisions and you don’t need simple people making simple decisions. Well that’s going to have a massive impact by the middle of the next decade to the economies. It’s going to allow business that make this shift—those who don’t will go under—to be more profitable and to survive the new capitalist competition that will continue to intensify. But it’s going to wipe out a lot of businesses and a lot of jobs in the process. Now all that AI effect is coming on top of the crisis of slow economic growth since 2009 that already exists as well as the economic recession that’s just around the corner. How will they deal with that, how will the elites of these countries in Europe, and the U.S and Japan, deal with this convergence of AI, slow growth, and recession is going to be interesting because we are going to have far more people unemployed and under-employed and we’re going to be in a situation of very low growth in general with segments, pockets, of explosive economic growth by those companies and industries that are able to exploit these changes in technology. It will be a very ‘dual track’ world economy, with the gap between haves and have nots growing even more than today.


I’m still wondering what will happen with this working class in Europe, and basically everywhere, who cannot compete with Artificial intelligence. Young people are going to study something, but they know they cannot compete in one decade or two decades, they won’t be able to get any job in the market because the Artificial Intelligence can just replace you. So, I was talking with people who are involved deeply with artificial intelligence, they are building artificial intelligence at MIT or wherever and they just told me “OK, maybe the government will send you some money every month and that will fix the problem” but this from my perspective sounds like bullshit to be honest.


Well you know, there will be more chronic unemployment and especially underemployment. We will have a larger based of unemployed in relationship to the employed. There will be many more underemployed than we have now, that’s going to get even worse. The question is how that affects the consumption potential of the system when we don’t have job growth. We already see a chronic slow economic growth since 2010. It will mean there will be more debt-financed consumption. They will allow more people to survive more on borrowing, more on credit. Which is just a way of taking away your future wages, but they’ll rely on debt much more. More underemployed, more unemployed, and more credit and household debt. Some people are talking that a universal basic income will have to occur.

I think that might be a partial solution in theory but it will never fly politically, at least not in the USA. The political forces will never agree to UBI, universal basic income, as long as they have control of the political system to the extent they do. So I don’t see that actually happening over the next decade. Not in the USA. I think the recession is coming soon and it will accelerate AI. You know the McKinsey study predicted that by 2025 you’re going to have maybe thirty to fifty percent of all the companies implementing some form of AI. And again, just a new business model to reduce cost even more. That’s what it’s all about. AI is very much like Amazon and it’s very much like the sharing economy. See this is the new product revolution in capitalism.

Capitalism is evolving and changing more rapidly than ever before.

It’s always been a dynamic system. But It’s accelerating in its rate of change and we see this is in the labor markets and we see this in the product markets and these new business models now emerging. And we see it in changes in fiscal and monetary policy and we’re seeing it in trade policy. What is Trump’s trade offensive all about? Well it’s about positioning the U.S capitalist class, and U.S business elite, to maintain hegemony over the global economy as all these changes occur over the next decade. They are restructuring particularly the relationship with China, the biggest US competitor, so the U.S business elite can remain dominant and the dollar, the global trading currency, can remain dominant. They are preparing for this and that’s how I see all this Trump trade war.

Trade is a response to capitalist restructuring underway. Changes in trade relations have to occur after we have had all these structural changes in the finance markets, product markets and the labor markets. Capitalism is changing.

Capitalist change means that if you’re not a capitalist, you’re going to make even less, they’re going to squeeze you with these new business models, you the worker, and they’re going to squeeze their capitalist competitors to whatever extent they can with these new business models. If you look at France, what are all the changes Macron is trying to do? Well he wants to change the product market, he wants France to become more like the U.S in terms of Uber, Amazon and A.I. and that’s true for all of Europe.

They are all trying to do this. Germany is still based on the old business model largely, i.e. to make things, but it knows it’s going to have to change more rapidly in the future. Europe knows this, they know they’ve got to make these changes and they know they are behind the global curve.

They’re playing catch up to the USA and China. The changes are coming rapidly in China and in the U.S. Britain wants to attach itself more to the U.S, that’s partly why you have this Brexit thing. It knows what the future is going to be, France knows, but they can’t make the change fast enough you see because they don’t have the banking system, the financial system, to pull off the financial restructuring. They don’t have the higher education system to prepare the labor markets for AI and the new models, and to be able to do this on the massive scale necessary, that’s already occurring in the U.S and China.

So Europe is the weak link, as I said, because it’s not been able to make this capitalist evolution fast enough in product markets, and its attempts to radically change labour markets in favor of capitalists is producing blowback and discontent and creating working class eruptions both in the streets, like in France, and at the ballot box, like in Brexit in England and other places, in Italy.


Well it sounds like some dystopian movie from the future, so what do you think is inclusive capitalism is some kind of solution for this? For example, like Lynn Forester de Rothschild she’s proposing inclusive capitalism as a solution for economy right now, so what do you think about that, is it a real solution or some kind of hoax?


Well I think that’s an ideological phrase, we’re all inclusive in capitalism, we’re all a part of capitalism. If she thinks that the solution is to make everyone a capitalist, that’s nonsense. That kind of ideology has always been around in one form or another, in other words. It’s a way of deflecting the problem of capitalism itself by saying we’re going to reform capitalism and you can all be capitalists. In other words you’re all going to make more money. It’s an ideological response to a crisis of the system itself in my view. You know, it’s a phrase, sounds nice: inclusive. You don’t have to be a worker and worry about whether you’ve got a job or you can feed your family, you can be a capitalist too. How that actually works, I don’t know. It’s more a way of deflecting discontent than any realistic solution
What do you think is the real solution here, because people are proposing the sharing of the economy which is new.

The sharing economy, or the gig-economy, whatever you want to call it, this is one of the new business models at the leading edge of capitalism. Whether or you talk about Uber or Airbnb or all the other “sharing”. What is the essence of the sharing economy? Well it’s a way of capitalist businesses to figure out how to pass their cost of production off to the work themselves. Let’s take Uber. It’s model makes them more profitable than other businesses models. With the changes of technology, we’re getting new business models. Uber is an example of a new business model of the gig-economy. Amazon is an example of a new kind of business model as well.

Artificial intelligence, and the businesses and industries they will spin off, are the ‘next generation’ of the shift to new capitalist business models. The old industrial business model where you make things, make goods, where you have a chain of suppliers and you hire workers to make the things… that is dying. It is not dead by any means, but the leading edge of capitalist evolution are the new business models. Take the Uber business model. Think about it right, Uber has software and Uber has control of the customer, but instead of Uber building a physical infrastructure or investing in physical capital, i.e. the transport equipment, it gets their worker to use his physical capital, his car and to use his working capital meaning paying for insurance and gasoline and so forth. So they are making the worker bear the cost of the physical and working capital, which reduces the money wage Uber pays the worker. It’s a form of intensifying exploitation. Uber sits back, and it controls the cost, it has no cost of goods. It’s a service that doesn’t have to produce anything physical. It doesn’t have to pay the worker a higher union wage, in fact the laws prevent the workers from organising as workers because they’re supposedly small businesses themselves you see. It’s a new form of more intense exploitation of the working class, that result in greater profits for Uber. Why do you think Uber is able to raise billions of dollars? Because investors know the business model is so profitable.

And this is what all the sharing economy is about, whether it’s Airbnb or whatever. In Airbnb, you get the homeowner to use his own physical capital, his home, as the hotel. The sharing economy company has the software that identifies the customers and puts the customer in connection with the ‘worker’, whether he is the car-driver or the homeowner, and reaps super profits off the top. You see it’s a much more efficient, much more profitable business model and that’s why it’s booming. We’re going to see the same thing happen with Amazon where you’ve got a new business model as well. Where you don’t have brick and mortar and no worries of the cost of facilities and so forth. You just have transport and moving goods around, that’s another new business model that’s already wiping out other big box retail stores and small retailers everywhere in the cities it does business. It will soon destroy millions of trucking jobs as well and automate out its warehouse jobs. That’s a new business model. Then we’re going to see newer business models with AI, because it’s all software manipulation and eliminating the cost of production, the cost of goods, and putting that cost on the backs of workers, who are hired as small business people. That’s the AI model.

Exactly, so it is in other terms the person who is involved in that kind of sharing economy is in some way a capitalist.


Yeah, In other words you make the worker assume the worst part of being a capitalist, in other words, the costs. You don’t let the worker, who becomes a kind of blended worker, part worker/part small businessperson, share in the profits. It’s the company sitting on top of it all, the Uber, the Airbnb, whatever that skims off the lion’s share of the profits, and you don’t even allow the new worker businessperson to organize collectively amongst themselves to negotiate a share of the super profits for themselves. You use the laws to prevent that. Maybe that’s what this other person meant by inclusive capitalism. The worker becomes a businessperson in the view of the law, and his exploitation is intensified in the process. You know it’s simply a justification for the intense exploitation these new business models represent.


So what is the solution here for this sharing economy, to be shareholder of Airbnb or other platform or whatever it is, I’m not just a worker who is involved with Airbnb, I am a shareholder of this stock of this company, maybe this is the solution if you know what I mean?


Yeah, well I know what you mean but individual share holding of stock of a company doesn’t give you any control over their business practices and strategies and policies of that company. It just means you’ve given some of your money to someone else to invest somewhere. You need to have sufficient control of the stock, 5 or 10 percent to affect the business policies of the company. So just owning stock, if you’re a small stockholder, doesn’t provide any control, it’s control that we should be talking about not ownership of a piece of paper and a formal, infinitesimal share of a company.

What needs to happen is that the laws need to change so that the worker-employee/small businessperson, whatever this new blend of worker is in the labour market, can organize collectively to get a collective voice to defend themselves. That hasn’t happened yet, and you’re not going to stop this new business model of capitalism, but the question is how vulnerable do you leave those whose are being exploited by it. I really think they need to unionize in a new form of union. Not the old form of union based on the old company structures, but some kind of new form. But the capitalist states are making sure that they block that by legal means. And as far as the rest of society is concerned, what we got in the 21st century here is the state, and the government, engaging increasingly in subsidizing business and capital incomes. Both with monetary and fiscal policy. With monetary policy they’ve bailed out the banks and investors, then they’ve given them free money for ten years now. Everywhere in the advanced economies, and especially in Japan, and to some extent in Europe, they’re propping up bond and stock markets by central banks buying private securities. That increases the demand for bonds and stocks that keeps up the price of both that protects the wealth of investors.

Financial assets like stocks and bonds keep rising, but it’s all artificial. They’re being subsiding more and more by the state. Fiscal policy in the form of tax cuts for corporations, investors, and the rich more and more. In the U.S in 2018 they’ve passed four trillion dollars in tax cuts for businesses and investors. So the state, fiscal and monetary policy and other forms of policy, like trade policy, are being employed by states to subsidize capital incomes like never before. we now see a trade war with Trump who is trying to restructure the global trading system for that purpose. The state is increasing propping up the capitalist economy and capital incomes.

Before, state policies would share with labor, and small businesses, but now you’ve got capital, big capital, particularly finance capital which has absorbed more and more political control, and thus we see fiscal monetary policies more and more reflecting the interest of corporations, professional investors, and the wealthy at the expense of the rest, until you get an eruption like the yellow vests in France. There the government had to back off a little, Macron backed off a little, threw a few crumbs to pacify it. Teresa May backs off a little bit, reduces austerity just a little, and throws a few crumbs, to the working classes of Britain. These responses are temporary responses, however, to relieve the pressure while the main policies continue to subsidize with monetary and fiscal measures, i.e. subsidize the business class. How long can that go on, well history will tell.

Dr. Rasmus is author of the just published book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity Press, October 2019. The book is available at discount from this website, and from the author’s blog at

posted October 14, 2019
US-China Mini Trade Deal: Trump Takes the Money and Runs

After months of escalating tit-for-tat tariff increases, and bringing the global economy to the precipice of a global currency war, the US and China agreed to a partial deal on their trade dispute this past week.

Trump heralds the deal as Phase 1 of an historic agreement, subsequent phases to follow. But is this the end of the US-China trade conflict? Will phase 2, to begin after the signing of Phase 1 five weeks from now, wrap up the remaining issues? Or will Phase 1 just announced be all that the parties will agree to over restructuring their trade relations (and money capital flows)? Other questions of import include: who got the better end of the Phase 1 deal—China or Trump? Why did Trump settle for the partial deal that China was calling for, and not the ‘big deal’ that Trump was declaring publicly he wanted or else there’d be no deal? Why did Trump concede to a lesser partial deal now instead of pressing for his ‘big deal’? Not least, what is the likelihood the remaining, unresolved issues will be concluded before the US 2020 elections?

A Brief Historical Recap

The US-China trade dispute erupted publicly in March 2018. Its origins, however, go back to August 2017, when the Office of US Trade Representative (USTR) issued a preliminary report charging that China’s ‘2025 Plan’ projected passing the US in next generation technology development (5G wireless, Artificial Intelligence, Cybersecurity). China’s plan represented a fundamental challenge to US global economic—and military—hegemony next decade, according to the USTR. That initial USTR report was followed by a second report released in March 2018 that concluded and confirmed what the first had raised: i.e. China represented a threat in nextgen technology development that the US could not ignore. The trade war with China only then commenced, with Trump imposing an initial $50 billion in tariffs on China imports.

An initial tentative agreement was reached between the main negotiators, the US team led at the time by US Treasury Secretary, Steve Mnuchin, in May 2018. That tentative deal was quickly scuttled, however, as US neocons, China hardliners, Pentagon, and the US Military Industrial Complex and friends in Congressional defense appropriations committees organized their forces and got Trump to nix the deal. The scuttled deal included China agreeing to buy $1 trillion more in US farm goods over five years and agreeing to allow US banks and financial institutions to have 51% ownership control of their operations in China. China reiterated the concessions over the summer of 2018, to no avail. The main issue was not the US trade deficit. Nor IP guarantees. Nor tech sharing of US companies in China. Nor even majority ownership of US operations in China. The main issue was the development of nextgen technologies—AI, 5G, and cyber. US Neocons aligned with the Pentagon-Military Industrial Complex, now led by Robert Lighthizer, the head of the USTR, Peter Navarro, special trade adviser to Trump, and subsequently later in 2019, John Bolton, demanded China slow, and even share its nextgen technology development with the US, or else no deal!

Negotiations stalled thereafter as Trump turned his focus to the NAFTA 2.0 negotiations and the 2020 midterm elections approached. Negotiations were restarted in January 2019 after the midterm elections, and another five months of negotiations between the parties took place until another tentative deal was reached in May 2019. That tentative deal once again was blown up at the last minute by the Lighthizer-Navarro neocon faction now in control of negotiations, with Mnuchin in tow as a co-chair. As the China delegation prepared to come to the US to sign off in May 2019, the US raised new demands: China had to share its nextgen technology development with the US, cease subsidizing its state owned enterprises, and provide assurances it would not devalue its currency to offset US tariffs (which now totaled $200 billion). Furthermore, US tariffs would remain in effect even if an agreement were reached, according to the US. All these demands were publicly communicated in the week prior to the May 2019 meeting in Washington D.C. when the deal was scheduled to be signed off. Understandably, the China delegation came and returned home in a day. The Neocons had scuttled a deal once again. Nextgen technology was the crux. Either China capitulated on nextgen tech or there was no deal, according to the Neocon-Pentagon position.

Trump thereafter met China president, Xi, in Osaka Japan at the G20 meeting and both agreed once again to restart negotiations. Both also agreed to keep a hold on the level of existing tariffs and not raise them further in the meantime. But Trump broke the pledge in late July 2019 when, on advice of his neocon trade negotiators, he raised tariffs on the remaining $250 billion of China imports. The understanding with Xi not to raise more tariffs was thus shattered. China raised tariffs of its own on US goods in response.

Trump threatened to raise existing tariffs by another 5%, to 25% and 30%, and levy more on all remaining China imports in December 2019. The trade war was intensifying. China stopped intervening briefly in global money markets to prevent its currency, the Yuan, from devaluing and allowed it to fall 5%-7%–a move that essentially negated Trump’s additional 5% tariff hike. Stock and bond markets swooned on the prospect of a trade war now morphing into a currency war. The trade war, based mostly on tariff hikes, was about to expand the economic conflict beyond mere tariff measures. Tariffs were already slowing the global economy; a currency war would quickly spread beyond US and China and inject even more instability into the slowing global economy. Both China and Trump peered over the cliff of a pending broader economic war between the two economies—and then backed off.

Trump’s September 2019 Retreat

Fast forward, the outcome by September 2019 was yet another resumption of negotiations between the two parties, followed by the announcement last week of a ‘Phase 1’ deal on trade.

So why did Trump ‘stand down’ and agree to a deal now, after escalating his threats and actions over the summer? The reasons clearly have to do with the US economy softening in the 3rd quarter combined with a growing discontent in the farm sector over Trump’s handling of a trade dispute that was beginning to bite hard on US farm sector sales that were heavily dependent on exports to China.

As the trade dispute between the countries had intensified over 2018-19, Trump had placated farm interests by providing an extra $28 billion in direct farm subsidies. But it wasn’t enough. According to some sources, no fewer than 12,000 farms went bankrupt in 2018 alone. The $28 billion was going mostly to agribusiness and not getting down to independent farmers who needed it most. Farm sector trade associations were demanding Trump settle the trade dispute and their voices grew louder after the August escalation between the US and China.

So too were other notable business groups, like the US Chamber of Commerce and Business Roundtable, raising their complaints about the now rapid deterioration of the negotiations. The trade war was beginning to clearly impact general business investment and manufacturing in the Midwest US, and not only in the US but worldwide. US business investment on new plant and equipment turned negative in the 2nd quarter and promised to continue to slump, while business inventory investment was also being pared. The trade war was beginning to impact beyond the farm sector. By August the US manufacturing sector began to contract, joining what had now become a global manufacturing recession. Moreover, at the end of August it was also beginning to appear that the manufacturing contraction in the US was potentially spilling over to the larger services sector. While manufacturing PMIs were contracting in the US, the even larger Services sector PMI had begun to decelerate sharply in terms of growth rate. Of equal concern, the new round of Trump tariffs on consumer goods now threatened to slow US consumer spending—the only sector of the economy still holding up in terms of growth. Chase bank research was estimating that, with the new Trump tariffs on China consumer good imports set for September and December, consumer spending would be reduced on average by no less than $1,000 per household.

It was this growing economic slowdown in the US—combined with the growing political discontent in the farm sector and from other major non-farm business organizations—that pushed Trump to concede into last week’s Phase 1 deal. Trump’s 2020 election interests had become more paramount than the concerns of the neocons and militarists who were demanding China capitulate on the nextgen tech issue or no deal. A rapid about face by Trump occurred by late August-early September and China was once again invited to resume talks in Washington in early October.

The content of the Phase 1 deal reached October 11, 2019 last week reveals that Trump abandoned his ‘big deal or no deal’ position and retreated from the neocon ‘non negotiable’ demand, that was holding up a deal since May 2018, that China capitulate on the nextgen tech issue or no deal.

Placating his farm sector political base to get China to resume purchases, and taking China’s 51% ownership concession desperately wanted by US big banks (i.e. the primary demand of the Mnuchin faction on the US negotiating team), became Trump’s new priority demand in Phase 1. The nextgen technology issue so critical to the neocons was clearly demoted and removed from the bargaining table by the US. In Phase 1 China got its ‘partial’ deal—and absent any concessions on the nextgen tech issue. That was left for a Phase 2 or even Phase 3, as Trump put it in his press conference the same day. Trump got what the China delegation had already offered way back in 2018: i.e. 51% ownership and resumption of big purchases of US farm products.

In short, Trump caved in and in effect “took the money and ran”. His 2020 re-election interests took precedence over the neocon-military concerns over China’s nextgen tech development.

What’s In the Phase 1 Deal?

Important to note, the Phase 1 deal itself is not yet a signed agreement. It’s a verbal understanding between Trump and China’s vice-premier and chief negotiator, Liu He. In his press conference announcing the deal on October 11, Trump admitted the parties were yet to sign off even on Phase 1 but hoped that it could be done within 5 weeks; that is by the time Trump and Xi meet again at the APEC conference in Chile in November.

Trump boasted repeatedly the Phase 1 deal included up to $40-$50 billion in new US farm purchases by China. Over what period was not clear, however. Trump vacillated from saying current levels of China farm purchases were $8 billion, or maybe $16 billion, or was $17 billion at prior peaks. He really didn’t know. Or maybe it was $20 billion, as one side comment was made in the press conference. It sounded like $40 billion was the target agreed to in principle and over the course of the next two years. But that was the ceiling apparently. Trump declared there’s “never been a deal of this magnitude for the American farmer”. Of course that wasn’t true. But the Trump hyperbole and spin was in.

Another major agreement area in Phase 1, according to Trump, was China’s confirmation it would allow US companies to own 51% of their operations in China. As Trump put it, “banks will be very very happy”. More US multinational corporations could now shift even more production to China.

What was agreed to in ‘IP, or intellectual property’ protections was left vague in Phase 1. Trump admitted only some IP issues were included in Phase 1 but didn’t say what. IP was mostly left to Phase 2, per Trump.

Equally vague was the understanding in Phase 1 on how China might agree not to devalue the Yuan, its currency. That was key to the US since devaluation would offset Trump tariffs. Trade representative, Lighthizer, provided some vague commentary during the Trump press conference about how China and the US would meet to work out some rules in that regard. But the devaluation issue itself was irrelevant. China had consistently over the preceding 15 months of trade war intervened in money markets to keep its currency from devaluing, and did so even as the rising US dollar was the primary cause of the pressure on the Yuan to devalue, as it other currencies worldwide as well. If anything was driving the devaluation it was the rising US dollar, not a policy action by China to enact a devaluation.

On the important tariff front, in Phase 1 Trump agreed only to suspend his threatened 5% tariff hike (raising rates from 25% to 30%) due the following week of October.

What’s NOT In Phase 1

What’s not in Phase 1 reveals clearly that Trump clearly capitulated on the nextgen tech issue in exchange for resumption of farm purchases and the 51% US bank ownership in China offer.

Tech issues were in general put off. As Trump declared, would be “largely done in Phase 2”, or maybe even a Phase 3. And Phase 2 would not begin until and if Phase 1 verbal understandings were ‘signed off’ in writing five weeks from now by Trump and Xi in Chile.

Further revealing no agreement on the strategic nextgen tech issue, Trump indicated the US would continue its policy attacking China’s 5G tech company, Huawei, as well as selectively ‘blacklist’ other Chinese AI companies in the US. That was, he added, “a separate process”. So the nextgen tech issue is now a separate track, in effect decoupled from the trade negotiations. It is very unlikely it will be reintroduced in Phase 2, should that subsequent round even occur, which is not likely in any substantive way before the 2020 US elections.

Also left out of Phase 1 was any US reduction of existing tariffs on China imports. That continuation of tariff levels included the $160 billion of China consumer goods exports to the US scheduled for December 15, 2019.

The US also apparently failed to attain its demand that China reduce its subsidies to its state owned enterprises—a strange proposal given that the US just subsidized its business sector with trillions of dollars with Trump’s 2018 tax cuts.

Some Predictions

For more than a year now this writer has been predicting that there would be no deal with China so long as the US negotiating team was dominated by the neocons and they continued to insist China capitulate on nextgen tech, or else no deal.

The related prediction, however, was that Trump would abandon the neocon-military interests’ prioritization of tech issues, and Trump would settle for concessions China already offered concerning US 51% majority ownership and farm purchases. The shift would occur, it was predicted, when the US economy significantly weakened—i.e. threatening Trump’s support in the farm sector and among US big business, and therefore his election in 2020.

The Phase 1 deal reflects just those predictions: Trump has decided to forego resolution of the tech issue and decided to take the money (farm purchases) and run. He has the full support of US big banks and manufacturing in so doing for their priority demand has always been the 51% ownership concession by China.

It is highly unlike there will be a ‘Phase 2’ in anything but a token discussion level. And if there is, it is extremely unlikely it will include any meaningful concessions by China on next gen tech—i.e. AI, 5G, cybersecurity. China has now clearly prevailed in blunting Trump and the neocon offensive in that regard. For their part, Trump and US military-industrial-Pentagon interests will continue to pursue blocking China on the tech issue in ways decoupled from trade negotiations. Various other measures will now be the focus, such as attacking and blacklisting China tech companies in the US and even elsewhere among US allies. Perhaps even delisting them from US stock exchanges, as a recent Washington ‘trial balloon’ proposed. Trump did not go there on the eve of the recent negotiations. It would certainly have ‘blown up’ the trade deal once again if he had. But that—blacklisting and delisting—remain as likely US tactics in the months to come. For the technology war—i.e. the real war behind the tariffs and trade war—has only just begun between the two countries. And a broader economic war involving non-tariff measures is almost certain to erupt after the 2020 elections.

A ‘Phase 2’ follow up negotiations is tentatively set for after the Phase 1 sign off in November in Chile. Not much will come of it, however, so long as Trump insists on maintaining the current level of 25% tariffs on China imports to the US. Trump likes the current level of tariffs and the revenue it brings in, which allows him a somewhat independent source of financing for his domestic programs independent of the US Congress passing legislation and authorization bills which he now won’t get. On the other hand, Trump may temporarily suspend the planned tariff hikes on $160 billion of consumer goods due December 15, 2019 should the US economy continue to weaken in the 4th quarter, which is more likely than not. But it will be a temporary suspension, not a dropping of the tariffs.

The 15 month long US-China so-called trade war is over. There will be further discussions but no significant changes before the US 2020 election. What Trump got in Phase 1 is all he’s going to get. He’s probably promised the neocons, who have lost out on this Phase 1 deal, even more aggressive action against China companies doing business in the US. That’s there ‘concession prize’. Worst case, Phase 1 might not even be finalized, should the neocon-Pentagon-Military Industrial Complex faction regroup and try to scuttle the deal, once again for a third time. There’s always that possibility. Especially should Trump’s legitimacy fade further due to impeachment proceedings. It’s not impossible the Phase 1 verbal deal might also collapse but not likely at this point.

A Failed Trump Trade Policy

Trump’s trade war with China is clearly a net failure. Trump could have gotten the same deal back in 2018, more than a year ago. Instead, the dispute was allowed to escalate, with the effect of causing business uncertainty and slowing investment in the US and worldwide due to the 15 month trade war. The trade war has clearly played a part in the global manufacturing recession now underway, which threatens now to spread to services and consumption and precipitate a general recession in the US economy and possibly even worldwide.

Trump has pushed the global economy to the brink of a worldwide currency war in the process as well. He has drained $28 billion thus far from business and consumer spending in order to collect tariff revenues that he’s diverted in turn to the farm sector in subsidies that otherwise might not have been necessary. Small business, household consumers, and failing small farmers have paid the price and will continue to do so in higher prices from continuing tariffs.

Despite 15 months of trade war with China—and a series of ‘softball’ trade deals with South Korea, Japan, and Mexico-Canada—the US trade deficit as of August 2019 has reached record deficit levels of $55 billion that month and an annual rate of nearly $700 billion a year. The trade wars have been totally ineffective in reducing the US trade deficit—if that was ever the goal.

Who Benefits?

In net terms, the Trump trade wars have produced little for US capitalist business interests compared to what they already had going into the conflict in March 2018. Conversely, China has clearly prevailed in protecting its nextgen technology plans—i.e. the main target behind the US trade war identified back in August 2017 and launched March 2018 by the USTR and Trump. US agribusiness got their farm purchases renewed—and $28 billion in subsidies to boot. US big banks and multinational companies got their 51%. Trump got an independent executive branch source of revenue flow in the form of tariffs. The US consumer and small goods manufacturers and businesses get to pay for much of it all in the form of rising prices. And more US multinational companies will likely move more productions—and jobs—to China now that they have 51% ownership control.

In a broader picture of ensuring US global economic hegemony in the years ahead, if the Trump trade wars were to be about restructuring global capitalist trade relations favoring the US for another decade, then the outcome is also clearly a dismal failure. The Trump trade war with China has produced few net results in that sense. China prevailed this round in the technology war and will now seriously challenge the US in the 2020s in nextgen technology and the new industries it would create—as well as the new military technologies it portends. Meanwhile, Trump’s ‘other trade wars’ with US allies has similarly produced few net strategic results. They have been thus far ‘token softball’ deals that have merely tweaked existing trade relationships.

Trump’s trade wars have proven to be a lot of bombast, hyperbole, and smoke with no fire. Trump set up straw men opponents, to knock down and allow him to declare he has out-negotiated his president predecessors by rearranging global trade and money flow relations. But this is in fact not so, as history and the next decade will undoubtedly show.

Dr. Rasmus is author of the forthcoming book, ‘The Scourge of Neoliberalism: US Policy from Reagan to Trump’, Clarity Press, October 2019. He blogs at, his website is, and he tweets at @drjackrasmus. Listen to his weekly radio show at

posted October 9, 2019
Europe Today & Tomorrow: Weak Link in Global Economy, Part 1


So, I think the most important question now is the question about Europe. What will happen in Europe, in terms for example: Look what’s happening right now in France.


Well, Europe is indeed troubled and it’s going to get deeper. It’s the sick man of the global capitalist economy, right now. As you probably know, it’s already slowed down. It’s almost stagnant and it’s only growing at two tenths of one percent, last quarter and it’s heading towards a recession that I have been predicting.

I have been predicting a recession in the U.S late 2019 or early 2020 as well. But Europe is the even weaker link and of course with Brexit, with the UK is going to have a negative effect and it looks increasingly like it may be a hard Brexit.
And what’s happening in Italy is important. In Italy the new parties are trying to stimulate the economy with fiscal policy, but the Euro Zone rules and regulations prevent a fiscal stimulus above a certain deficit amount. Italy may break that mold, and if it does then the Euro Zone could unravel into a smaller Euro Zone. We have problems with not only Italian banks but other European banks; Greek banks, Portugal Banks, even Deutsche Bank, Commerce bank in Germany.

What you are seeing in France with yellow vest protests is the consequence of the kind of weak recover policy that’s been in place since 2010 and then the double dip recession in 2011-2013 that followed. To what extent there’s been a recovery, that’s been engineered by the European central bank and purely monetary policy, and that hasn’t worked. It’s bailed out the banks, but European banks are still in trouble. There are Trillions of dollars of non-performing bank loans still overhanging the economy. Whenever the European Central Bank, ECB, stimulates the economy by buying bonds and injecting liquidity into it a lot of that liquidity largely flows out of Europe to emerging markets or the United States, so it hasn’t had much of a stimulus effect. And because of that there hasn’t been a real recovery in Europe. It’s the same for the United States, but even more for Europe, since 2008. And the employment growth in both economies has been mostly contingent labor. In other words, a low paid, part time, second class citizens, whatever.

In addition to failed central bank monetary policy the solution has been by policy makers in Europe and politicians to engage in what’s called internal devaluations, in other words because you have a common currency you cannot otherwise devalue your currency to stimulate your economy. All you can really do is lower your wage costs and other costs. In other words, internal devaluation. That policy of internal devaluation, i.e. reducing wages and labor costs, across Europe has been implemented under the cover of labor market reforms. Which are really a way of “Let’s reduce our wages and costs to make our products more competitive” in the world economy. Europe depends much more on exports than the United States, and Germany depends on half its GDP on exports to other European economies and globally. What was set up with the Euro was very preferential to Germany and Northern European economies which have really exploited the periphery economies and benefited from it. I wrote about this in my book - Looting Greece: A New financial Imperialism Emerges. It’s Internal Imperialism, you might say, but through the Euro exploiting the rest of the periphery of the Euro Zone in particular.

Those policies in other words, i.e. internal devaluation, labor market reforms, monetary policy of the ECB, have bailed out the banks and made a small percent of the population, that is the wealthier part, wealthier. But those policies have left behind most of the rest of the economy and people. That’s why you see this uprising going on and this nationalism going on. You know the “Brexit, let’s leave Europe” that was really driven by working class Midlands, England folks who are discontent with the recovery. And then you have immigration laid on top of the poor recovery, so it looks like the immigrants are the cause of it and you get this anti-immigration and growth of right-wing parties as a result. But it’s the economic policies of the elites in Europe that are responsible for this. Europe is now experiencing the consequences in nationalist Catalonia, “Let’s leave Spain”, in Scotland, in Italy. All the nationalist solutions to the crisis which are not solutions at all.

Of course, I see the eruption of working classes and middle classes in France as a harbinger of things to come elsewhere as the next recession hits, which could be even more serious than the last one. So, Europe is in a very precarious state, you see, and the symptoms of its problems are this nationalist trend which reflects itself in various ways, you know separatism and anti-immigration and Brexits, and maybe an Italian exit from the Euro, if the situation gets much worse there over the next couple of years and the economic growth is just not there. That’s why Europe is in a very precarious state, it’s the weak link in the global capitalistic economy and you know future is very unstable, economically and politically, for Europe, as I see it going forward.

posted September 22, 2019
3 Articles on US Wages, Jobs, and GDP Stats

Article 1. Surveys Show US Wages Are NOT Rising and Job Growth 500,000 Fewer

What’s the condition of the US working class on this Labor Day 2019? Wages and Jobs are of course the best indicators of that condition. So let’s look at wages and jobs today in America.

What we see is that—contrary to Trump, US government, and mainstream media hype and reporting—a growing number of independent surveys show that wages have not been rising as they claim. And 500,000 fewer jobs were actually created last year than initially reported.

The media’s oft-quoted figure for rising wages is about 3.1% over the past year. But there are at least five reasons why 3.1% is not accurate and in fact grossly over-estimated. First, the 3.1% is not adjusted for inflation. Second, it represents an average only, which reflects higher wages for the top 10% of the workforce and higher salaries for professionals, managers, and supervisors. Third, it applies to full time workers only and therefore leaves out the 60 million or so part time, temp, and gig workers. Fourth, it does not factor into the 3.1% average the fact that the millions of unemployed are getting no wages whatsoever. Fifth, it defines wage narrowly, excluding the lack of any increase in deferred wages (pension payments) and social wages (social security pay for retirees).

    Why Wages Are Not Rising 3.1 Per Cent

Considering the first point, the 3% figure is what’s called a ‘nominal’ wage. If adjusted for the 1.6% inflation rate, then the real wage gain is only 1.5% a year. (It’s even less real wage gain for workers at the median household income level ($50K/yr.) and below—where inflation is even higher than 1.6% due to housing and rent cost, local utility fees and taxes, medical insurance premiums and drugs costs escalation, education and other costs escalation).

The second problem overestimating the wage gains for the vast majority of workers in the ‘bottom 80%’ of the workforce is that the 3.1% represents an ‘average’. Averaging means the highest paid wage earners (which include most salaried workers) are getting more than the 1.5% and therefore, in turn, those at the median or below are getting much less than 1.5%. And in most cases they’re not even getting that 1.5%.

A survey by the finance site found that “more than 60% of Americans said they didn’t get a pay raise or get a better-paying job in the last 12 months”. So if 60% didn’t get any wage increase at all, how could wages be rising 3.1% or even 1.5%? Unless of course workers in the best paid 10% of the labor force are getting 10% or more in wage increases last year. These are occupations like software engineers, data scientists, physicians assistants, professionals with advanced degrees, and of course middle and upper managers paid mostly by salary. Perhaps they were getting 10%+ last year, but that’s highly doubtful.

Here’s another mainstream respected survey that challenges the 3.1% wage increase myth peddled by the government and media: Focusing on the median wage—not the average wage—“according to figures from the PayScale Index…the median wage increases, when adjusted for inflation, were only 1.1% since last year and 1% over the past year”.

The Payscale survey is corroborated further by a recent study by McKinsey Global Institute which shows that median wages have not risen at all since 2007. By 2017 they were the same level as in 2007, rising less than 1.1%.

Comparing McKinsey with Payscale, there’s been no wage change under Trump. In fact, the Payscale survey concluded that real wages from June 2018 to June 2019 have shrunk by -0.8% and by 9% since 2006.

But that’s still not the whole picture.

There’s another adjustment necessary, even to the 1.1% real wage. Whether 1.5% or 1.1%, that figure applies only to the full time employed workers. It therefore does not take into account the lower wages, and more typical lack of any wage increases, for the 60 million plus ‘contingent’ (part time, temp, gig) workforce that exists now in the US. That’s 37% of the total workforce of more than 160 million who are not factored into the 3.1% estimate at all!

And the numbers for the part time/temp/gig part of the total work force may be much larger than the government is estimating. US Labor Dept. statistics count part time, temp and gig workers for whom their work is a primary job. It doesn’t accurately account those who have a primary part time job (or a primary full time job) AND who have also taken on second and even third part time, temp, or gig jobs to make ends meet. The aforementioned Bankrate survey showed, for example, that while the government data estimates less than a fifth of all workers are part time, the Bankrate survey found 45% of all US workers had second or third jobs. That included 48% of Millennials, 39% of GenXers, and even 28% of Boomers.

The real picture that appears, therefore, is NOT one of traditional full time workers getting annual 3.1% wage increases in their base pay every year. That’s the US labor force of the 1950s and 1960s, not the 21st century.

The real picture is little or no wage increases for the vast majority those workers, especially those below the 80th percentile of the US labor force, and especially those at the median and below, who are being increasingly forced to take on second and third jobs to make ends meet. Meanwhile, a small percentage of the total workforce, likely well less than 10%, comprised of professionals, managers, tech, and advanced degreed special occupations are realizing wage gains well above the average. In fact, those at the very ‘top’, earning more than $150,000 a year may be getting exceptionally large wage increases. That’s because the US Dept. of Labor employs a methodology in which it ‘top codes’ weekly earnings. Top coding means any raises for those earning above $150,000 a year are not being recorded at all.

What all the foregoing analysis strongly suggests is that wages under Trump have not been rising anywhere near close to 3.1%, or even near the inflation adjusted 1.5%. They are not rising at all for the vast majority of the US workforce since 2016.

To repeat the Payscale survey: real wages have actually fallen by -0.8% between 2018-2019.

The disjoint between the 3.1% and the -0.8% is due to the averaging in wages and salaries for the very top occupations and salaries of managers and professionals; due to accounting for only full time employed; and by ignoring most of the part-time/temp workers—the numbers for whom are also much larger than the official government data now indicate.

Add to these reasons for the gap between 3.1% and -0.8% the fact that monthly pension benefits and social security retirement payments—i.e. deferred wages—are never included in the 3.1% figure by the government. They are really wages as well. They are ‘deferred’ wage payments which are foregone by workers while they were actively in the labor force, to be paid out upon retirement. These wage payments are fixed and are therefore constantly declining in real terms. Nor of course have official wage statistics ever considered calculating wages the millions of unemployed workers who, without jobs, get no wages and therefore no wage increases whatsoever. If deferred wages and unemployed with no wages were included in calculating total wage change for the working class, the Bankrate, Payscale, McKinsey and other independent surveys would show annual wage gains—for all but the very highest paid—have been contracting ever faster than -0.8% under Trump.

    Business-Investor Tax Cuts Haven’t Created Jobs

A hallmark claim of Neoliberalism in general is that business tax cuts create jobs. This is part of the economic ideology notion called supply side economics. Cutting business taxes raises business disposable income, which it is assumed business then spends largely and instantaneously on new investment that boosts production and therefore hiring. But this is a deceptive misrepresentation (i.e. ideology) of reality. Businesses don’t necessarily spend the tax windfall on investment. They may divert the tax savings into investing in financial markets that don’t produce any jobs. They may distribute it to shareholders in the form of stock buybacks and dividend payouts. They may use it for buying up competitors via mergers and acquisitions. They may simply hoard the savings to boost their balance sheets. Or they may invest it on expanding production—but in their offshore subsidiaries. All this is what in fact actually happens, not that business tax cuts create jobs.

In January 2018, once again, Trump and Congress ‘sold’ the economic lie that business-investor tax cuts create jobs. But there is no empirical evidence that such tax cuts causally result in job creation. In fact, even a correlation between Neoliberal tax cuts and job creation does not exist. Witness Trump’s massive $4.5 trillion tax cuts of 2017. (Yes, $4.5 trillion, not his reported $1.5 trillion). What has actually happened to investment in expanding plant and equipment and therefore employment? After a very brief boost in early 2018, business investment in the US fell to only 2.7% (10% rate is historically average). In 2019 it fell further into negative territory by mid-year, as ‘Business investment contracted in the second quarter for the first time since the first quarter of 2016”. That means if investment—i.e. the mechanism for job creation per the supply side theory—has not risen, then the claim cannot be substantiated in turn that business tax cuts, by creating investment, in turn create jobs.

But hasn’t there been actual job creation since Trump took office? Yes, there has. 1.1 million according to government official stats. However, its causation cannot be attributed to the tax cuts. So where have the 1.1 million jobs come from?

    Are ‘Contingent’ (Part-Time/Temp/Gig) Job Greater Than Reported?

US Labor stats do not really report the number of workers finding employment when the Dept. reports job gains each month. It reports jobs—not people—growth. So jobs can be increasing (as second and third jobs added) but employment by real people may not be actually growing by the same number of jobs that were created. Jobs may be increasing by 1.1 million but those newly employed may be far less. Why? Because most of the 1.1 million jobs may represent already employed taking on second and third part time jobs. Recall the prior Bankrate survey which reported that 45% of all American workers indicate they are working second and third jobs to make ends meet! Or the Marketwatch survey that 33% need a gig side job in order to meet living expenses! But the Labor Dept. shows numbers not rising as high for part time and temp work. That may be due, however, to its reporting of part time/temp as the primary job of part time/temp workers. They may be working second and third additional part time jobs and the government is not picking that up—its only accounting for part time/temp jobs that are primary for the person.

    Labor Dept. Revises Jobs Down 500,000 for Last Year

The confusion in the Labor Dept.’s job stats is perhaps further suggested by recent revisions in its job creation numbers. Annually the Labor Dept. adjusts its past year job numbers after more data is made available from States’ unemployment insurance records. In its just latest report, prior to the Labor Dept. downward revisions, the Dept. indicated it had over-stated 2018 jobs by no less than 500,000. That brings 2018 monthly job creation numbers well under 200,000, which is about the 180,000 monthly creation in 2017. In other words, no actual increase due to Trump’s tax cuts introduced in January 2018.

The Labor Dept. stats indicate employment rose from July 2018 through July 2019 by 1.1 million jobs. Does that mean the Labor Dept. had erred by nearly 50% in its job growth numbers? If so, it’s such a gross margin of error it makes Labor Dept. job reporting under Trump highly suspect or else something is fundamentally wrong with US job creation stats. What’s wrong is that the stats are failing to accurately reflect contingent job creation as second and third jobs.

    Conclusions: A Much Different Wage & Job Picture Than Reported

A deeper look at the official wage and job numbers shows wages rising no where near the official 3.1%. In fact, most of the wage gains are highly skewed to the very top. At the median they’re barely rising, if at all. And certainly contracting below the median (except perhaps for the few millions in blue states where minimum wages have been adjusting some). When defined more broadly and therefore accurately, wages have been contracting under Trump—as they have been since 2006. Various independent surveys that are not based on the Labor Dept.’s questionable assumptions or definitions, or even errors, in its estimation bear this out that wages are not rising.

Reliability of official jobs data is also a growing concern. Changes in the US labor market structure in recent decades means the growing number of contingent and gig jobs that are second and third jobs are not being reflected in the official job numbers. The Labor Dept.’s recent adjustment reducing last year’s job gains by a whopping 500,000 raises further concerns about the methods by which it reports out monthly job gains. And actual job gains, after its adjustment, suggest that most of these may actually represent part time/temp/gig jobs that are second and third jobs taken on by workers who just can’t make ends meet any more with the first contingent job, or even current full time job. Yet Trump and friends keep peddling the myth that more business-tax cuts are needed to create jobs.

Jack Rasmus is author of the forthcoming book, ‘The Scourge of Neoliberalism: US Policy from Reagan to Trump’, Clarity Press, October 1, 2019, of which the preceding material is an excerpt. His website is and twitter handle, @drjackrasmus. He hosts the Alternative Visions radio show on the Progressive Radio network weekly, podcasts available are available at

Article 2. What Is the True Unemployment Rate in the USA?
By Dr. Jack Rasmus

“The real unemployment rate is probably somewhere between 10%-12%. Here’s why: the 3.7% is the U-3 rate, per the labor dept. But that’s the rate only for full time employed. What the labor dept. calls the U-6 includes what it calls discouraged workers (those who haven’t looked for work in the past 4 weeks). Then there’s what’s called the ‘missing labor force’–ie. those who haven’t looked in the past year. They’re not calculated in the 3.7% U-3 unemployment rate number either. Why? Because you have to be ‘out of work and actively looking for work’ to be counted as unemployed and therefore part of the 3.7% rate.

The U-6 also includes what the labor dept. calls involuntary part time employed. It should include the voluntary part time as well, but doesn’t (See, they’re not actively looking for work even if unemployed).

But even the involuntary part time is under-estimated, as is the labor Dept’s estimate of the ‘discouraged’ and ‘missing labor force’.

The labor dept. also misses the 1-2 million workers who went on social security disability (SSDI) after 2008 because it provides better pay, for longer, than does unemployment insurance. That number rose dramatically after 2008 and hasn’t come down much (although the government and courts are going after them).

The way the government calculates unemployment is by means of 60,000 monthly household surveys but that phone survey method misses a lot of workers who are undocumented and others working in the underground economy in the inner cities (about 10-12% of the economy according to most economists and therefore potentially 10-12% of the reported labor force in size as well). The labor dept. just makes assumptions about that number (conservatively, I may add) and plugs in a number to be added to the unemployment totals. But it has no real idea of how many undocumented or underground economy workers are actually employed or unemployed since these workers do not participate in the labor dept. phone surveys, and who can blame them.

The SSDI, undocumented, underground, underestimation of part timers, etc. are what I call the ‘hidden unemployed’. And that brings the unemployed well above the 3.7%.

Finally, there’s the corroborating evidence about what’s called the labor force participation rate. It has declined by roughly 5% since 2007. That’s 6 to 9 million workers who should have entered the labor force but haven’t. The labor force should be that much larger, but it isn’t. Where have they gone? Did they just not enter the labor force? If not, they’re likely a majority unemployed, or in the underground economy, or belong to the labor dept’s ‘missing labor force’ which should be much greater than reported. The government has no adequate explanation why the participation rate has declined so dramatically. Or where have the workers gone. If they had entered the labor force they would have been counted. And their 6 to 9 million would result in an increase in the total labor force number and therefore raise the unemployment rate.

All these reasons–-i.e. only counting full timers in the official 3.7%; under-estimating the size of the part time workforce; under-estimating the size of the discouraged and so-called ‘missing labor force’; using methodologies that don’t capture the undocumented and underground unemployed accurately; not counting part of the SSI increase as unemployed; and reducing the total labor force because of the declining labor force participation-–together means the true unemployment rate is definitely over 10% and likely closer to 12%. And even that’s a conservative estimate perhaps.”

Addendum Note: The Labor Dept. monthly survey counts ‘jobs’ not workers employed. If in its survey it is counting 2nd and 3rd part time jobs for a single worker, then it is over-estimating employment levels and thus under-estimating the unemployment rate still further since the unemployment rate is a ratio of total employed to unemployed).

Article 3. Why Wages Are Lower, Inflation Higher, and GDP Over-Stated
By Dr. Jack Rasmus

In a post last week I took issue with the Trump administration’s claim–repeated ad nauseam in the media–that wages were rising at a 3.1% pace this past year, according to the Labor Dept. In my post I explained the 3 major reasons why wage gains are much lower, or even negative.

First, the 3.1% refers to nominal wages unadjusted for inflation. If adjusted even for official inflation estimates of 1.6%, the ‘real wage’, or what it can actually buy, falls to only 1.5%.

Second, the 1.5% is an average for all the 162 million in the US work force. The lion’s share of the wage gain has been concentrated at the top end, accruing to the 10% or so for the highly skilled tech, professionals, those with advanced degrees, and middle managers. That means the vast majority in the middle or below had to have gotten much less than 1.5% in order for there to be the average of 1.5%. More than 100 million at least did not get even the 1.5%. In fact, independent surveys showed that 60 million got no wage increase at all last year.

Third, the 1.5% refers to wages for only full time employed workers, leaving out the 60 million or so who are part time, temp, gig or others, whose wages almost certainly rose less than that, if at all. Other surveys noted in my prior post found wage gains last year only between -0.8% of 1.1%, depending on the study, and not the 3.1%.

But here’s a Fourth reason why even real wages are likely even well below 1.5%.

As I suggested only in passing only in my prior post, the 1.6% official US government inflation rate is itself underestimated. Not well known–and almost never mentioned by the media–is the fact that Labor Dept. stats do not include rising home prices at all in its estimation of inflation! Incredible, when home prices are among the fastest rising prices typically and always well above the official 1.6% or whatever. And the ‘weight’ of home prices in the budgets of most workers is approximately 30% or more of their total spending. So that weight means the effect on households is magnified even more. If appropriately included in inflation estimates, housing prices would boost the reported inflation rate well above the official 1.6%. How much more? Some researchers estimate it would raise the official inflation rate of 1.6% to as high as 4%. (see the discussion n the August 30, 2019 Wall St. Journal, p. 14).

If the inflation rate is higher, then the nominal 3.1% adjusts to a real wage even less than 1.5%.

If the inflation rate were 4%, not 1.5%, then real wages adjusted for inflation would be -0.9%. And when the ‘averaging’ and ‘full time employed’ effects are considered, real wages for the majority of US workers last year almost certainly fell by as much as -2.0% to 3.0%.

Since we’re talking about housing, here’s another official government stat related to housing that should be reconsidered since it makes US GDP totals higher than they actually are:

US GDP is over-estimated because gross national income (i.e. the income side to which GDP must roughly equal) is greatly over-stated. How is national income and therefore GDP over stated? The US Commerce Dept., which is responsible for estimating GDP, assumes that the approximately 50 million US homeowners with mortgages pay themselves a rent. The value of the phony rent payments boosts national income totals and thus GDP as well. But no homeowners actually pay a mortgage and then also pay themselves an ‘imputed Rent’, as it is called. It’s just a made up number. Of course there’s a method and a logic to the calculation of ‘imputed rent’, but something can be logical and still be nonsense.

Government stats–whether GDP, national income, or wages or prices, or jobs–are full of such questionable assumptions like ‘imputed rents’. The bureaucrats then report out numbers that the media faithfully repeat, as if they were actual data and fact. But statistics are not actual data per se. Stats are operations on the raw or real data–and the operations are full of various assumptions, many questionable, that are explained only in the fine print explaining government methodology behind the numbers. And sometimes not even there.

Here’s another reason why US and other economies’ GDP stats should be accepted only ‘with a grain of salt’, as the saying goes: In recent years, as the global economy has slowed in terms of growth (GDP), many countries have simply redefined GDP in order to get a higher GDP number. Various oil producers, like Nigeria, have redefined GDP to offset the collapse of their oil production and revenue on their GDP. In recent years, India notoriously doubled its GDP numbers overnight by various means. Some of ‘India Statistics’ researchers resigned in protest. Experts agree India’s current 5% GDP number is no more than half that, or less.

In Europe, where GDP growth has lagged badly since 2009, some Euro countries have gone so far as to redefine GDP by adding consumer spending on brothels and sex services. Or they’ve added the category to GDP of street drug sales. But any estimate for drug spending or brothel services requires an estimate of its price. So how do government bureaucrats actually estimate prices for these products and services? Do they send a researcher down to the brothel to stand outside and ask exiting customers what they paid for this or that ’service’ as they leave? Do they go up to the drug pushers after observing a transaction and ask how much they just sold their ‘baggie’ for? Of course not. The bureaucrats just make assumptions and then make up a number and plug in to estimate the price, and therefore the service’s contribution to GDP. Boosting GDP by adding such dubious products or services is questionable. But it occurs.

The US Commerce Dept. that estimates US GDP has not gone as far as some European countries by adding sex and illicit drug expenditures. But in 2013 the US did redefine GDP significantly, boosting the value of business investment to GDP by about $500 billion a year. For example, what for decades were considered business expenses, and thus not eligible to define as investment, were now added to GDP estimation. Or the government asked businesses to tell it what the company considered to be the value of its company logo. Whatever the company declared was the value was then added to business investment to boost that category’s contribution to GDP. A number of other ‘intangibles’ and arbitrary re-definitions of what constituted ‘investment’ occurred as part of the re-definitions.

Together the 2013 changes added $500 billion or so a year to official US GDP estimates. The adjustments were then made retroactive to prior year GDP estimates as well. Had the 2013 re-definitions and adjustments not been made, it is probable that the US economy would have experienced three consecutive quarters of negative GDP in 2011. That would therefore have meant the US experienced a second ‘technical recession’ at that time, i.e. a second ‘double dip’ recession following the 2007-09 great recession.

The point of all these examples is that one should not blindly accept official government stats–whether on wages, inflation, GDP, or other categories. The truth is deeper, in the details, and often covered up by questionable data collection methods, debatable statistical assumptions, arbitrary re-definitions, and a mindset by most of the media, many academics, and apologists for government bureaucrats that government stats are never wrong.

Dr. Rasmus is author of the forthcoming book, ‘The Scourge of Neoliberalism: Economic Policy from Reagan to Trump’, Clarity Press, October 2019. He blogs at and tweets @drjackrasmus. His website is and podcasts from his Alternative Visions radio show are available at

posted August 27, 2019
Trump’s Other Wall

Trump brags about the ‘wall of money’ now flowing into the US from abroad–from Europe, Asia, emerging market economies–as the global economy slides into recession there faster than in the US. He thinks that is great news for the US economy. But it’s quite the opposite.

Trump’s trade war, his provoking of a global currency war, his monetary policy of forcing the Fed to lower rates all exacerbate the Wall of Money inflow to the US which hastens the decline of the global economy.

Behind the Wall of Money inflow is $17 trillion in negative interest rates in Europe and Japan that is driving money out of those economies and into US Treasuries as a ‘safe haven’, causing a rise in the dollar relative to other currencies and causing currencies worldwide outside the US to fall in turn. As other currencies fall, capital flight from their economies (Europe, Latin America, Asia) sends still more dollars to the US–driving the dollar higher still. A vicious cycle ensues: declining currencies leads to more capital flight, to more demand for US$, to rising dollar value, to further decline in other currencies, etc. Investment collapses and recessions deepen further outside the US.

US Multinational corporations doing business in other countries see their profits rapidly eroding in those economies, as the currencies in the countries in which they’re doing business collapse. They then rush to convert their Pesos, Euros, Rupees, etc. into dollars as quickly as possible and repatriate their offshore profits back to the US. The result: the US$ rises still more.

Trump’s trade war has a similar negative compounding effect as negative rates offshore, capital flight, and multinational corporation repatriation: Today’s slowing global economy (already in a manufacturing recession everywhere including the US) is largely driven by business investment contracting in the face of uncertainty due to Trump’s trade war. That uncertainty and declining investment leads to central banks worldwide reducing their interest rates in a desperate effort to stimulate their economies, which is now happening. But lower interest rates in Europe, Emerging markets, etc. has the negative effect of depressing the value of their currencies still further–leading to even more capital flight to the US, buying up more US Treasuries, and driving up the US $ even more. In other words, Trump’s trade war is also driving the Wall of Money to grow further.

But the Wall of Money is a symptom and represents the global economy outside the US sliding deeper into recessions–a global economic decline that is now spilling over to the US economy.

What’s Trump’s solution? Trump browbeats the Federal Reserve to get Powell, its chair, to lower rates, in the hope lower rates will discourage capital inflow to the US (i.e. the Wall) and thus slow the rise of the dollar. But global recession and the ‘wall of money’ now more than offset any Fed rate cuts effect on the US$. Meanwhile, Trump’s monetary policy (lower interest rates) accelerates the wall of money inflow further by forcing the central banks of other economies to lower their rates still further.

Trump policies have also set off a global currency war, which is about to intensify as he targets China’s Yuan-Reminbi. China is already responding by allowing the Yuan to slowly devalue to offset Trump’s tariffs on China exports. Devaluation of the Yuan forces other economies to devalue their currencies further, as their central banks lower their interest rates further, in Europe and Japan that means even deeper negative rates and more capital flight to US Treasuries and an even higher US$.

In short, Trump’s trade war, his provoking of a global currency war, his monetary policy of forcing the Fed to lower rates all exacerbate the Wall of Money inflow to the US and hasten the decline of the global economy.

Trump has not only clearly now lost control of trade negotiations with China. He has lost control of US monetary policy with the Fed that now refuses to be stampeded, he has lost control of any stabilization of the US dollar, and he has accelerated forces that are driving the global economy into recession.

And it’s only a matter of time–a short time–before it’s also clear he’s lost control of the US economy as well.

Jack Rasmus is author of the forthcoming book, ‘The Scourge of Neoliberalism: US Policy from Reagan to Trump’, Clarity Press, October 1, 2019. His website is http;// and twitter handle @drjackrasmus.

posted August 13, 2019
Argentina & the Next Global Financial Crisis

On August 12, 2019, financial markets in Argentina crashed. The stock market contracted 38% in just one day. The currency, the Peso, fell 20% after falling as low as 30% and recovered to 20% only when Argentina’s central bank raised its interest rate to 75%. Watch next for bond prices, both government and corporate, and especially dollarized bonds which Argentina has loaded up on in recent years, to freefall as well.

What’s going on in Argentina? What’s likely to happen next? And what do the events in Argentina have to do with falling financial asset prices—i.e. stocks, currencies, derivatives, commodity futures, real estate prices, etc.—now underway globally as well?

The precipitating cause of yesterday’s crash in Argentina stocks, peso, bond rates, etc. was the primary presidential election results over the weekend. The election was a preview for the general election that will happen this October. Macri, the current president, a businessman whose election in 2015 was assisted by US interests, lost heavily to his challenger, Alberto Fernandez. Fernandez got 48% of the vote; Macri only 32%. A gap that is likely insurmountable for Macri. It’s almost certain now that Macri will now lose in October. That prospect has global bankers and investors quite worried. For Fernandez is associated with the Kirchner government that held office prior to Macri from 2002 to 2015, and that government refused to pay US hedge funds and other investors the exorbitant rates on Argentina bonds they demanded ever since the last crisis in 2001-02.

The US media and business press today expressed deep confusion over the weekend’s political results. They just can’t understand how Macri could have done so poorly in the primary. As the talking heads put it, ‘Macri’s been putting the economy in order’, why did he lose so badly to Fernandez?

But all the perplexed ‘talking heads’ in the US media needed to do was to look at the facts: Inflation has been running at 56% per year, one of the highest in the world. The pundits say Macri has done well, bringing inflation down from 70% in 2018. But annual inflation rates, whether 56% or 70%, have been devastating real incomes of workers and small businesses. The currency has also been collapsing for two years now, having fallen from an exchange rate of roughly 16 to the US$ in 2017 to 52 to the dollar, after hitting a 60 to the dollar low yesterday. That falling will almost certainly continue in coming weeks. And with the 20% collapse of the peso this past weekend, inflation will now accelerate even faster once again.

Add to that the Argentine real economy has been in recession, contracting the past four quarters on average by more than -5%, with unemployment officially at double digit levels and likely much higher. Industrial production has fallen nearly -10% over the past 12 months, with manufacturing double that, at around -20%.

In other words, living standards have been falling sharply due to both accelerating inflation and chronic double digit job loss for the vast majority of workers and small businesses ever since Macri took office in 2015 and instituted his austerity reforms demanded by the IMF. That austerity has included cutting pensions, slashing government jobs, raising utility costs, eliminating past household subsidies. A third of all Argentina households now officially live in poverty. Is it any wonder then that Argentinians expressed their discontent in the primaries this past weekend? US business media and pundits of course don’t choose to look at this human cost of US neoliberal policies and its corollary of Argentina austerity. For them, it’s just about whether Argentina continues to service its debt to global bankers and whether the stock market in Argentina, the Merval, continues to produce capital gains profits for investors.

But wait. Didn’t Argentina recently receive a record $56 billion loan from the IMF? Isn’t that boosting the economy? No, it isn’t. Because the $56 billion is not going into the real economy. So where is the $56B IMF loan going? It’s going to pay the debt that Argentina owes to global bankers and investors, including the ‘vulture capitalist’ hedge funds, who Macri welcomed back in 2015 after he took office.

The IMF never gives money to a country to spend on stimulating its real economy. Quite the opposite. It extends loans with the condition that the country introduces austerity measures that reduce government spending or raise taxes. So what if that does the opposite—i.e. slows and contracts the real economy. That’s not its objective.

The IMF officially says it lends money to help stabilize a country’s currency. Translated, however, that means lending with the understanding the country first pays off foreign investors to whom it owes money. In fact, IMF loans never even get routed directly to the country. The IMF loan goes directly to paying of principal and interest to the investment banks, hedge funds, and billionaire ‘vulture capitalists’ who get the country indebted in the first place. The IMF actually pays them off and then send the ‘bill’ to the country for repayment—i.e. payment of the principal and interest on the debt it owes the IMF now instead of the private investors. And the debt payments are made with the money extracted from austerity programs levied on workers and the real economy. The IMF is thus the bill collector for big finance capital, and transfers the debt owed from their private investor and banker balance sheets onto its own IMF balance sheet.

The IMF recently loaned Argentina the largest amount it has ever loaned a country, the $56 billion. But it wasn’t the first time it did so. In 2001, caught in a recession that originated in the USA, Argentina couldn’t repay interest on the $100 billion debt it had incurred with private investors in the late 1990s. The IMF stepped in and did its duty. It loaned Argentina money to bail out the private investors. But some of them—led by hedge fund US billionaire Paul Singer—didn’t think the IMF loan terms didn’t pay them enough. Singer and his consortium of vulture capitalist hedge funds kept demanding Argentina pay more. The dispute went on until 2015, when the pre-Macri government was replaced by Macri, an election engineered with the assistance, financial and otherwise, of the Obama government on behalf of Singer and his buddies.

The first thing Macri did when he took office was to pay off Singer and friends the full amount they were demanding since 2001. Where did he get the money for that? From the IMF of course, which loaned Argentina the $56 billion. The payoff also opened the door for Macri & his business friends to get more private loans from US investors. They immediately trotted off to New York, met with the US bankers, and came back with a bag full of private loans. In other words, they loaded up on more private investor debt after ‘borrowing’ from the IMF to pay off the old private investor hedge fund debt.

So how is it that Macri—with big loans from not only the IMF but from New York bankers as well—couldn’t get the Argentina real economy back on its feet the past four years? The IMF money went directly to the hedge funds and vultures. But where did the new private money go? It certainly didn’t go into the real economy—i.e. investment, jobs, household income for consumption, and thus GDP. Likely it’s been skimmed off the top by Macri and his friends in part. The rest diverted to financial markets in Argentina, in the USA, or Europe.

Despite the nearly $100 billion in capital provided by the IMF and New York investors, the Argentina economy has performed poorly ever since Macri took office. In 2016 the Argentina economy contracted. It recovered briefly and slightly from recession in 2017. But in 2018-19 it has fallen into recession once again, this time more deeply as its currency has collapsed, from 16 to the dollar to more than 50 to the $US—with more collapse to come. The loans it arranged since 2015 from New York investors, moreover, have been heavily denominated in US dollars. Argentina has one of the worst run-ups in dollarized private bond debt in the world. That means as the US dollar rises the cost of making payments on that debt also rises.

Not only is the prospect of default on the IMF $56 billion debt in the near future now rising, but the parallel default on corporate debt is also rising. The value of a US dollar denominated bond dropped since last week to 58 cents on the dollar, from 77 cents. Defaults are on the horizon, both government and private, in other words.

The peso’s precipitous collapse also has further ‘knock on’ negative effects that are now intensifying the crisis in the country. Here’s how: As currencies fall in relation to the dollar, what happens is capital flight accelerates from the country. That reduces investment further in the country, in turn exacerbating the recession and layoffs even more. To slow the capital flight from the country, its central bank then typically raises interest rates dramatically. Argentina’s central bank benchmark rate is now an amazing 75%. Rising domestic interest rates further slow the real economy. In turn, the slowing real economy results in domestic stock and bond markets collapsing further—thus feeding back into the financial sector and making it even more unstable and driving financial asset price deflation even more.

What results, in other words, is a negative feedback effect between all financial markets in the country, an effect that dries up the availability of credit in general forcing more layoffs and a deeper recession. That’s what is going on now in Argentina.

But Argentina is just the leading edge of a similar general process of global financial asset price deflation. Argentina is just an intense example of financial asset markets declining everywhere globally. And in that sense its current financial and economic collapse may be the harbinger of things soon to come.

USA and other emerging market economies’ stock markets are now contracting sharply since the beginning of August. The 20%-30% decline of US stock markets last November-December 2018 has resumed. We are beginning to see November-December 2018 events déjà vu all over again. The 2018 stock market contraction was halted temporarily by the US central bank, the Fed, capitulating in late December to Trump and financial interests demanding the bank stop raising interest rates. The Fed halted raising interest rates in January 2019 and both US and emerging market economies’ financial markets regained their losses in the first quarter 2019. Aiding the halt of rate hikes by the Fed was the appearance of an imminent agreement between the US-China on trade, as negotiations resumed between February to May 2019, which also helped to restore stock market losses of 2018.

But two events happened in late July-early August 2019 that have resulted in stock and other financial markets resuming their trajectory of decline of last November-December 2018: the US Federal Reserve cut rates on July 28 by only a token 0.25% when financial markets expected more aggressive action by the Fed; and Trump a day later scuttled the prospect of a trade deal with China by raising more tariffs on $300 billion of China imports. Add to these two events the rise of Boris Johnson as the new UK prime minister and the almost now certain ‘hard Brexit’ coming after October 2019; evidence of German and Italian banks increasingly in trouble; and central banks around the world in a ‘race to the bottom’ to cut their domestic interest rates to lower their currencies exchange value to boost exports as global trade stagnates—now growing at only 0.5% annually and is about to contract for the first time since the 1930s.

Together, all these current events have translated into investors worldwide selling their stocks and other financial assets, and diverting the money into ‘safe havens’—like US Treasuries, the Japanese Yen, and gold. Argentina’s economic mismanagement by Macri has occurred in the context of a global financial asset deflation that only exacerbates Argentina’s crisis—and makes it increasingly difficult to deal with by Argentina alone, notwithstanding the record $56 billion IMF loan.

Look around. The global economy is on the precipice of a potential financial asset market price deflation not seen since 2008. It’s not quite there yet. But the momentum is now clearly in that direction.

Not only have stock prices globally contracted sharply worldwide in just a few weeks, but so too have other financial market prices:

Government bond interest rates are falling rapidly everywhere in the advanced economies. More than $15 trillion in bonds globally are now yielding negative rates. Trillions of Euro bonds are now in negative territory, up more than a $trillion in just the past year, including in Germany, and are continuing to fall further. Currencies are also contracting everywhere (driving up the value of the US dollar). Property prices are leveling off, and have begun to drop. Global oil futures, a financial asset, have fallen 20% again, from $75 a barrel to the low $50s and may soon to fall below $50. The same for many other commodities.

Financial asset prices are deflating across the board and investors are dumping them and converting to cash—i.e. a sure sign of pending global recession. What’s rising in price are the ‘safe havens’ into which the cash is flowing: gold, the Yen, US Treasuries, high end residential properties in select markets in the advanced economies, art works, and even cryptocurrencies. Also rising sharply is the cost of insuring bonds with credit default swap derivatives. In Argentina the CDS cost has accelerated to $38 for every $100 of Argentina debt, and that’s in addition to regular debt principal and interest payments.

But Argentina is just the ‘worst case’ scenario of this global financial asset deflation underway. Its financial asset prices are deflating faster and deeper than others at the moment. It is just the worst case of a more general scenario emerging globally. Global trade volumes have already collapsed, and a recession in the global economy will necessarily follow. Global manufacturing is already in recession. And a global recession tomorrow will only exacerbate Argentina’s current recession today.

Argentina today is therefore likely a harbinger of things to come, i.e. the canary in the global economy coal mine, and the victim of a ‘made in the USA’ global slowdown driven by Trump trade and US monetary policies. Of course, Argentina’s economic crisis can’t be explained alone by US government policies. Macri’s austerity and loading up again on private foreign investor debt and IMF loans since 2015 is also responsible. And Macri’s recent austerity policies to pay for that debt by cutting more pensions, social subsidies, raising utility costs and taxes on households has contributed heavily to Argentina’s current crisis. But that debt and austerity too can be traced back to US vulture capitalists and their friends in the IMF and among New York bankers.

Dr. Jack Rasmus is author of the forthcoming book, ‘The Scourge of Neoliberalism: US Economic Policy from Reagan to Trump’, Clarity press, October 1, 2019. He blogs at and his website is He tweets at @drjackrasmus and hosts the Alternative Visions radio show weekly on the Progressive Radio network.

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