Economy-Economic Policy
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A huge study of 50 years of tax cuts for the wealthy suggests 'trickle-down' economics makes inequality worse.
"Our analysis finds strong evidence that cutting taxes on the rich increases income inequality but has no effect on growth or unemployment" in the short and long term, the researchers wrote.After major tax cuts for the rich were introduced, the top 1% share of pretax national income increased by almost 1 percentage point, they found.
The Economy Isn’t Working. That’s Exactly the Plan.
Common Dreams 11/30/2020 by Robert Freeman
Inequality is reaching feudal proportions, where very few own almost everything, and everyone else is crushed under the wheel of engineered destitution.
Social Justice Index ranks U.S. 36th out of 41 developed nations
Make America 36th Out of 41 Developed Nations Again': Social Justice Index of Developed Nations Puts US Near Bottom
The Social Justice Index (SJI), detailed in a 274-page report (pdf) and put out by the Bertelsmann Stiftung foundation in Germany, ranks the more than three dozen European Union and OECD nations based on six key social justice dynamics: poverty, education, the labor market, intergenerational justice, health, and social inclusion and nondiscrimination.
While the group said "the picture is rather bleak across the board," it is the Nordic countries which generally rank highest—with Iceland, Norway, Denmark, Finland, and Sweden the top five. On the other end, the U.S. came in near the very bottom, ranking 36 out of 41 nations overall, only coming out ahead of Chile, Bulgaria, Romania, Turkey, and Mexico.
The risk of poverty in the country remains high at 17.8% – only Israel exceeds this rate. Children and youth (poverty risk of 21%) as well as senior citizens (23.1%) are particularly at risk of poverty. There are no improvements to be expected on the horizon; instead, the recent cuts in social spending taken by the Trump administration raise fears that poverty will increase rather than decrease.
So, Why Has The U.S. Economy Not Sunk Yet? It Is Because The Fed Is Doing A Whole Lot Of Bailing.
Now, take a look at the picture below and you will notice that during the Obama administration, as the economy started to recover, the Fed eventually stopped buying more assets and acquiring more debt and left things relatively constant.
Please keep in mind that the debt the Fed acquired when purchasing these assets during the Obama administration exactly matched the value of assets that it acquired. During the Obama recovery, the Fed acquired roughly $4 trillion in both assets and debt. It really does not need any more of either.
If the Fed starts buying billions of dollars in securities, such as bonds, in order to inject money into U.S. markets, that is Quantitative Easing—no matter how many times the Fed says it is not. Currently, the Fed is buying bonds at the rate of about $60 billion a month. That’s about 720 billion dollars a year, or almost three-quarters of a trillion dollars. If that sounds like a lot of money, it is.
Fed Unveils Plan to Expand Balance Sheet but Insists It’s Not Q.E.
The Federal Reserve said Friday that it would begin buying government-backed securities to expand its balance sheet, a move meant to keep an obscure but critical corner of financial markets functioning smoothly.
Unlike its postrecession bond-buying campaigns, often called quantitative easing, or Q.E., the new effort is not monetary stimulus, the Fed stressed. Instead, the central bank is trying to keep money markets in check after a messy episode in which interest rates for repurchase agreements — essentially short-term loans between banks and other financial institutions — spiked in September. The run-up spilled over into money markets, pushing the Fed’s policy rate temporarily above the range that policymakers were targeting.
The Fed will be growing its balance sheet again, but don’t call it ‘QE4’
In the days, weeks, months and probably years ahead, the Federal Reserve will be conducting operations that look and sound a lot like what it did to pull the economy out of the financial crisis.
Where the Fed under the quantitative easing of a decade ago was buying assets to pull the economy out of the Great Recession, this time it will be looking to meet demand for cash as it tries to calibrate the proper level of reserves that banks need.
The Fed is in the process now of conducting overnight repurchase, or repo, operations to make sure that funding for overnight loans stays constant and the funds rate trades within its targeted range of 1.75%-2%. In announcing the program, officials noted that the last time such a process happened was 11 years ago, amid the grim days of the crisis when liquidity dried up and caused a panic on Wall Street.
US Federal Reserve starts “quantitative easing forever”
On Wednesday, the Federal Reserve began an operation, lasting at least six months, to purchase around $60 billion of Treasury bills a month in response to sharp spikes in interest rates in overnight markets. The following day, in a separate action, the New York Federal Reserve injected $104.15 billion into financial markets to boost liquidity.
Together with the Fed’s decisions to twice cut interest rates, with the prospect of another cut at the end of this month, these moves make clear that, in conditions characterised by the International Monetary Fund as a “synchronised” global slowdown, any efforts to “normalize” monetary policy are well and truly over.
