If there was one thing that we could all agree upon about the Trump Presidency is that it was entertaining. One could not wake up in the morning without reading about the latest Trump gaffe/embarassment/disgrace from a leftist media seeking to undermine his authority. Whether he was commenting on the attractiveness of fellow President’s wives (‘she’s in good shape’ was his comment about the French President’s wife) or advising Americans to use anti-malaria pills to fight Covid or some development relating to the Mexican wall, the daily news feed from Washington was rarely without its shock value. Plus it was entertaining…
Trump has gone and Biden has taken over. The ‘fun’ has left the Presidency and a smug media corps are basically keeping mum about the HORROR that is unfolding in Washington. From an economic standpoint, one of the most destructive policy regimes imaginable has been unleashed on the US and they are pressuring the rest of the World to follow suit or suffer reprisal. Joe Biden and his trusty henchperson, Janet Yellen, are rapidly orchestrating a death-dive for the US economy.
In short, Biden and Yellen have decided to raise the Corporate tax rate from 22% to 28% AND are pressuring their allies to collectively adopt a minimum corporate tax rate of 23%. The first leg of the policy is the standard Socialist wealth redistribution. The second leg is designed to stop the incentive for US wealth creators from opting out by migrating to another, lower taxed jurisdiction.
The surprising villain in the horror movie is Janet Yellen. Her comments and public appearence as Governor of the Federal Reserve did not, on the surface, appear radically left wing. In hindsight, however, Yellen displayed a penchance for unjustifiable policy actions when she uniformly raised interest rates from zero to 2.5% even though there was no hint of inflation. At the time it never occured to me that this was an act of a radical Socialist. At the time she reasoned with the markets that she was reloading the policy canon in case the US suffered a negative shock. She could not stimulate the economy, she argued, if interest rates were already zero. She needed room to lower rates and that could only be attained by raising them. But now that looks like a fabrication. The real objective was to force higher borrowing costs on US corporations.
One of the great insights of New Classical economics is that monetary policy is largely benign whereas Fiscal policy (taxes and spending) is extremely potent. Yellen has armed herself with the canon that she craved at the Fed. A further insight from the New Classicists is that tax-and-spend policies will have strongly negative effects on growth when the taxes reduce the marginal rate of profit and the spending does not compensate for the negative incentives. This ‘killer-combination’ is exactly what the Biden-Yellen combination are delivering. We are witnessing a train crash.
Donald Trump may have been a national embarassment but at least he cared about the little man. Biden and Yellen want to drive businesses broke and put people out of work.
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