Swamp claims first victory over Trump. Next up, tax...
On FRIDAY, the much-hyped Trump/GOP Obamacare reform sank into the swamp, writes Bill Bonner in his Diary of a Rogue Economist.
If anything keeps us from national bankruptcy, it won't be entitlement reform.
Not under Donald J.Trump.
Next up, tax reform.
Here again, readers are advised not to hold their breath.
The same slimy swamp battles – with politicos, insiders, GOP rival factions, and President Trump himself all snapping at each other's tails – will probably kill any serious reform.
Besides, there's a deeper problem. Tax "reform" or tax "cuts" are useless unless spending is also cut.
Otherwise, they just shift the burden from one taxpayer to another...or from taxpayers to consumers...or from targeted tax victims to the general public.
And trying to cut spending is...well...tough.
And if you don't cut the military or entitlements...what's left?
We recall the jubilation in some quarters as the new team sailed up the Potomac and dropped anchor in the Tidal Basin.
The parties...the fanfare...the hopes that, finally, the US government might take a new tack.
US GDP was $14 trillion in 2009. Today, it is $18 trillion. That's a 35% increase, equal to $4 trillion.
Meanwhile, the Dow rose 200%...an increase of $14 trillion.
Per capita, working stiffs saw barely any increase in the value of their main asset: their time. But day and night, the rich got richer and richer...without breaking a sweat.
For every extra Dollar earned by the working class over the past eight years, the financial-asset owners – about 10% of the population – earned three times as much.
This skewing of wealth toward the wealthy didn't "just happen." It wasn't caused by the Chinese or the Mexicans. Or the liberals. Or the conservatives.
Instead, it was the product of a credit-money system that is now firmly supported by Republicans and Democrats...and the entire Establishment.
It is also the main source of funds for the swamp...and for the Deep State critters who live in it.
Mr.Trump promised a change. But already, his administration heads for the rocks.
To deliver on his promises – draining the swamp, making America great again, and giving the average working guy a decent break – his band of buccaneers had to move fast...and boldly trim the sails.
It had to take on the Deep State – the "shadow government" that really controls the levers of power – and make real cuts in bureaucracy and in spending.
It also had to reform the fake-money system. But that was always such a far goal, it was never mentioned.
Typically, a new president has the wind at his back...at least for a few months.
But we're barely two months into the Trump team's program, and the winds have already shifted. There are no cuts to entitlements anywhere on the horizon – including the runaway O'care system.
Mr.Trump now blames the conservative Republicans in the Freedom Caucus (the Tea Party guys) for blocking the GOP health care reform. And he finds it tough to get "Lil' Marco" and "Lyin' Ted" to cooperate.
As for the Democrats, forget it: He accused their outgoing prez of wiretapping him. And their new champion, he suggested, should be locked up.
There won't be many Dems crossing the aisle to help the guy.
Mr.Trump – the self-proclaimed dealmaker extraordinaire – is discovering that getting the ship of state to go where he wants is not easy.
It's one thing to make a deal in the world of business. It's another in the world of politics.
And watch out. A real gale could be blowin' up...
Markets – so benign and helpful up to now – may soon turn on him, too.
From what we see now, it looks as though the US bond market hit its high last July...and US stocks peaked on March 1.
If this is so...and we wait to find out along with everyone else...it could mean a much tougher situation all around.
Falling prices on Wall Street will lead to some long faces. And as they fall, you can expect some calls for the Fed to reverse course – to lower interest rates rather than raise them.
But there's an ill wind stirring.
The latest reading from private inflation tracker PriceStats – which bases its readings on millions of online prices – puts today's prices 3.6% higher than those of a year ago.
At that level, it will be hard for the Fed NOT to continue its rate hikes. And it will be hard for stock and bond prices NOT to fall.
And it will be hard for the Fed NOT to find that it, too, is in conflict with the Trump administration.
We can see the tweet coming: "Stocks and bonds falling. Economy going into a recession. Jobs disappearing. And the Fed won't lower rates. SICK!"