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WEEKLY WONK

Originally Published: 6/16/2018

Buyback Economy:  The cause of the 2008 Republican Great Recession was the easy credit taken by households purchasing houses and refinancing mortgages, leading to more than $300 billion in cash pumped into the already roaring economy. Now it’s happening again. Steven Pearlstein at the Washington Post calls it the “mother of all credit bubbles.” Today’s economic boom is not driven by innovation or productivity growth but by “another round of financial engineering that converts equity into debt.” This time it’s not households but corporations that are using cheap debt and the tax cut windfall “to take cash from their balance sheets and send it to shareholders in the form of increased dividends and, in particular, stock buybacks. As before, the cash-outs are helping to drive debt - corporate debt - to record levels. As before, they are adding a short-term sugar high to an already booming economy. And once again, they are diverting capital from productive long-term investments to further inflate a financial bubble - this one in corporate stocks and bonds - that, when it bursts, will send the economy into another recession.” The Buyback Economy “sacrifices future growth for present consumption. And it redistributes even more of the nation’s wealth to corporate executives, wealthy investors, and Wall Street financiers.” [Emphasis added.] Check out this chart showing the growth in net payments to shareholders and the reduction in capital investments - which were supposed to increase under the Republican tax cuts. Yet, with all the cash corporations have on hand, corporate debt is at a record high - and still rising - because money is cheap. They borrow and disburse it to executives and shareholders. They don’t invest in growth or capital projects or anything for workers. As a result of all this corporate borrowing, Daniel Arbess of Xerion Investments calculates that more than a third of the largest global companies now are highly leveraged - that is, they have at least $5 of debt for every $1 in earnings - which makes them vulnerable to any downturn in profits or increase in interest rates. Please note that the Fed just raised interest rates and will again. (See below.) 1 in 5 companies have debt-service obligations that already exceed cash flow - ‘zombies,’ in the felicitous argo of Wall Street.” Highly leveraged companies will be in dire straits when the next economic downturn arrives - and it will. 

 

Another Lawsuit:  Barbara Underwood, the New York state attorney general, filed suit against Trump and his 3 eldest children alleging “persistently illegal conduct” at the president’s personal charity, “saying Trump repeatedly misused the nonprofit - to pay off his businesses’ creditors, to decorate one of his golf clubs, and to stage a multimillion dollar giveaway at his 2016 campaign events.” Underwood has asked a state judge to dissolve the Donald J. Trump Foundation and give the remaining $1 million in assets to other charities. She is also seeking $2.8 million in restitution and penalties. (Washington Post) Isn’t this what Trump accused the Clinton Foundation of doing?

 

Another Report:  The long-anticipated Justice Department’s Inspector General, Michael Horowitz, released his report. It criticizes James Comey for his actions as FBI director during the investigation into Hillary Clinton’s emails, accusing him of being insubordinate in his investigation, but “does not challenge the decision not to prosecute Mrs. Clinton. Nor does it conclude that political bias at the FBI influenced that decision.” (NY Times) Interestingly, the report also revealed that Comey sometimes used a private email account to conduct FBI business while supervising the Clinton investigation into her using a private email account. (NY Times) The report “includes new text messages from FBI personnel conveying political opposition to Donald Trump.” The Washington Post, opined (predicted?) that Trump will use this “to launch fresh attacks against not only Clinton but also the law enforcement officials behind special counsel Robert S. Mueller III’s Russia probe.”

 

Preserving Documents:  There’s a law requiring the White House to preserve every document that comes through. That’s what all the presidential libraries are about. Gotta put all that paper somewhere. But Solomon Lartey, the records management analyst with close to 30 years in this job who’s in charge of Trump’s documents, said he has “never seen anything like this in any previous administration he has worked for.” He has to piece together shredded and torn papers with tape to put them back together. This is because Trump has the “enduring habit of ripping up papers when he’s done with them - what some people described as his unofficial ‘filing system.’” So some staffer must gather up the pieces and take them to Lartey to be put back together. (Politico)

 

The Kushners:  According to their latest financial disclosures, Jared and Ivanka made at least $82 million last year in outside income - while serving in the White House. Ivanka made $3.9 million from her stake in the Trump International Hotel in Washington and - get this - she got a $2 million severance when she left the Trump Organization. Jared reported over $5 million from an apartment complex. Ethics experts warn that this “extraordinary income flow” could create potential conflicts of interests. (Washington Post) Ya think? Where are the people who complained about Hillary Clinton getting paid for speeches after she left office? And how much is Donald making if the kids are making this much?

 

Paul Manafort:  U.S. District Judge Amy Berman Jackson revoked his bail after he was charged - and pleaded guilty to - witness tampering and conspiracy to obstruct justice. (TWW, Paul Manafort, 6/9/18) He had been allowed to wait out his trial on house arrest but now he’ll have to wait in jail. “The judge emphasized to Manafort how she could not make enough rulings to keep him from speaking improperly with witnesses, after he had used multiple text messaging apps and called a potential witness on an Italian cell phone.” She said: “This is not middle school. I can’t take his cell phone. I thought about this long and hard, Mr. Manafort. I have no appetite for this.” (CNN)

 

G7 Meeting:  Trump embarrassed us again at the G7 summit by “delivering his most defiant trade threat yet to his counterparts from around the globe.” In a news conference he described private conversations he had with the other members wherein he “pushed them to consider removing every single tariff or trade barrier on American goods and that, in return, he would do the same for products from their countries. But if the steps are not taken, he said, the penalties would be severe.” (Washington Post) Then he refused to sign a joint statement with our allies, “threatening to escalate his trade war on the country’s neighbors and deriding Canada’s prime minister as ‘very dishonest and weak.’” (NY Times) Why wouldn’t he sign the joint statement? The Toronto Star looked at it in excruciating detail. It was known that there were many issues that Trump would disagree with, such as the declaration on climate change that referenced the Paris Accord. The surprise was that Trump wouldn’t sign onto the oceans charter, which contained targets to tackle plastic pollution in the world’s oceans. The Washington Post said that one photo summed it up. Watch what Stephen Colbert had to say about it. (You Tube)

 

China Summit:  The 2 dictators, as Abby Huntsman at Fox called Trump and Kim Jong-un (RT), met in Singapore. The document they signed on Tuesday, however, “falls some way short of the dramatic billing the president gave it.” (Guardian) Trump said he would suspend the joint military exercises with South Korea and that Kim would begin dismantling his nuclear arsenal “very quickly.” However, economic sanctions against North Korea will remain in place until the North “does more.” The joint statement they signed “did not go much further than previous ones and was short on details, including any timetable or verification measures.” For instance, while Trump said Kim would dismantle his nuclear arsenal, the joint statement said they would hold “follow-on negotiations . . . at the earliest possible date, to implement the outcomes.” It also said that North Korea and the U.S. would “join their efforts to build a lasting and stable peace regime” on the divided peninsula. (NY Times) But North Korea has 141 sites devoted to the production and use of weapons of mass destruction, and its state media has not mentioned the ambitious disarmament targets that Secretary of State Mike Pompeo outlined. (NY Times) And no one is talking about North Korea’s arsenal of chemical and biological weapons, a threat for which the Pentagon admits it is “woefully unprepared.” (Roll Call) Trump said he would be ending the “war games” but this decision doesn’t appear to have been made in consultation with South Korea (Axios) or with Congress (Washington Post), both of whom seem confused. Besides being called (by many) a Trump photo op since the so-called agreement means little, (Washington Post), before the meeting Trump showed a “bizarre Hollywood-style ‘trailer.’” Reporters at first thought it was a North Korean propaganda film. (Washington Post) You can watch it here. (Guardian) The production of the video was credited to Destiny Pictures, but the National Security Council (NSC) admitted that it made the video in an “unorthodox effort to persuade [Kim] of the benefits of denuclearization.” (Guardian) Me? I think he’s maneuvering to get his name on another hotel - the one in Pyongyang which is supposed to be the tallest hotel in the world when it’s completed. But since completion is looking less and less likely, I think it’s possible that Trump was tempting Kim with a promise of investment to finish it. With the name “Trump” on it, of course. (ABC)

 

Britain:  McDonald’s is going to stop using plastic straws in its British restaurants next year, “after nearly half a million people called on the company to ditch them.” They will be replaced with paper straws sourced from suppliers in Northern Ireland and Wales. (Guardian)

 

Washington:  Remember the corporate tax that the Seattle City Council passed last month? It was a $275 tax per employee or a “head tax.” They had slashed the original proposal in half because Amazon complained. The tax was going to be used to help the City’s homeless residents. (TWW, Washington, 5/19/18) Well, Amazon complained so much they withdrew the tax. (Guardian)

 

Voter Rolls:  The Supreme Court, in a 5 to 4 decision, upheld Ohio’s “aggressive” efforts to purge its voting rolls. “The court ruled that a state may kick people off the rolls if they skip a few elections and fail to respond to a notice from state election officials.” (NY Times) Fail to respond to a notice from state election officials? Isn’t this caging? I guess since the DNC vs. RNC Consent Decree was vacated, removing the Republican National Committee's ban against vote caging, the Supremes figured caging is okay now. (TWW, Voter Suppression, 1/13/18)

 

Net Neutrality:  It is now officially gone. The Federal Communications Commission (FCC) voted along party lines last December to repeal it. (TWW, Net Neutrality, 12/16/17) The Office of Management and Budget (OMB) approved it last month. (CNET) The repeal went into effect on June 11th. So now Internet providers will have almost total control over how online content is delivered. It may be harder for the next generation of online services to compete if they have to pay up to be placed in a so-called Internet fast lane. There are things going on to stop this. The Senate is moving on it (TWW, Net Neutrality, 5/19/18), some states have enacted their own net neutrality laws (TWW, Net Neutrality, 4/21/18; Montana, 1/27/18), and there are several lawsuits pending (TWW, Net Neutrality, 2/24/18). But the House is unlikely to pass anything the Senate does and it’s not likely that any judge would stop the implementation based on the lawsuits. So, little by little you can expect to feel the effects. (Slate)

 

Asylum:  Attorney General Jeff Sessions announced that domestic violence and gang violence will no longer be legal grounds for asylum. This is a reversal of a decision by a Justice Department immigration appeals court which granted asylum to a woman from El Salvador who had been raped and abused by her husband. (NY Times)

 

Denaturalization:  L. Francis Cissna, director of U.S. Citizenship and Immigration Services (USCIS) announced that they will be analyzing “decades-old” fingerprints of naturalized citizens “in an unprecedented effort to rescind American citizenship from immigrants who may have lied or falsified information on their naturalization forms.” Revoking citizenship, known as denaturalization, has been very rare. Not any more. (Washington Post)

 

Tariffs:  Trump announced the list tariffs on $50 billion in goods that will be targeted against China. (Reuters) Beijing quickly responded, saying they would impose trade barriers on the “same scale and the same strength.” (Washington Post) The Trump Organization, however, just awarded another major construction contract to a Chinese government company for work on the golf club development in Dubai. (McClatchy)

 

Scott Pruitt:  I just can’t believe this guy still has a job. (TWW, Scott Pruitt, 6/9/18) The Environmental Protection Agency (EPA) Administrator “had a top aide help contact Republican donors who might offer his wife a job, eventually securing her a position at a conservative political group that has backed him for years.” (Washington Post)

 

ACA:  Last week I told you that the Justice Department was refusing to defend the lawsuits against the Affordable Care Act. (TWW, ACA, 6/9/18) This week Joel McElvain, a senior career official at the Justice Department (been there 20 years) submitted his resignation. He and his team had been defending the lawsuit by Texas. (Washington Post)

 

VA Mission Act:  The bill that Trump signed last week (TWW, Veterans’ Healthcare, 6/9/18) had a Signing Statement attached contesting 3 provisions he says infringe on his presidential authority.

 

Antarctica:  A new study published in the journal Nature found that Antarctica's ice sheet is melting at a rapidly increasing rate, now pouring more than 200 billion tons of ice into the ocean annually. It has increased sea levels by almost a centimeter since the early 1990s “in a risk for coasts from Pacific Islands to Florida.” Antarctica has enough ice to raise seas by 190 feet if it ever all melted. Between 1992 and 2017 it lost 3 trillion tons of ice. (Reuters

 

Falling Wages:  For “production and nonsupervisory” workers, wages aren’t just flat, they’re falling. The average hourly wage for some workers fell last year when accounting for inflation. “This pool of workers includes those in manufacturing and construction jobs, as well as all ‘nonsupervisory’ workers in service industries such as healthcare or fast food. The group accounts for about 4/5 of the privately employed workers in America.” (Washington Post)

 

Interest Rates:  The Federal Reserve raised interest rates by .25% and signaled it will raise rates 2 more times this year. (NY Times)

 

ZTE:  Last week I told you about the deal that the Commerce Department had cut with ZTE. (TWW, ZTE, 6/9/18) Apparently the Senate doesn’t agree. They are going to challenge the decision by inserting a measure in the annual defense bill that will block the deal from being implemented. (Washington Post)

 

AT&T:  It’s takeover of Time Warner was approved by U.S. District Judge Richard Leon. The Justice Department had blocked the $85.4 billion deal but Leon said that it didn’t prove “that the telecom company’s acquisition of TimeWarner would lead to fewer choices for consumers and higher prices for television and Internet services.” (NY Times) I wonder what planet Leon lives on.

 

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