Hillary Clinton, in the first presidential debate, pointed out that Trump didn’t pay any federal tax one year, and added that he probably didn’t pay in other years as well. Trump responded to her by saying “That makes me smart”.
The appropriate rejoinder is “that makes you corrupt” but Hillary Clinton and Trump, her husband’s former golfing partner, are part of the same legalized scam. The vast majority of the public, no matter how smart, do not inherit millions from their parents, play golf with former presidents or have them at their weddings. Lacking these connections, the majority (unlike Trump) cannot wriggle out of paying their taxes. So the even more honest and appropriate response from Clinton would have been “that shows that we are corrupt”.
Since the 1980s, business people like Trump have boosted their after-tax profits by successfully lobbying politicians and by using the media to bombard the public with what should be called junk economics. Trump’s claim that huge tax cuts for businesses will lead to a surge of private investment and economic growth is preposterous but it has been peddled to the public over and over again for decades.
The charts below show that after–tax business profits as a share of GDP have been on the rise since the 1980s in both Canada and the United States but, at the same time, private investment as a share of GDP has fallen.
Please note, in casual conversation, we all use the word “investment” loosely. If a very rich person buys up all the machine shops in your home town, you may say she has “invested” heavily in the industry, but as far as economists are concerned that represents no investment at all. Your home town still has the same number of machine shops (and the same equipment inside them) as it did before they were all owned by one person. However, if new machine shops are built in your hometown, or if existing ones have their equipment and machinery upgraded, then economists say that “private investment” has taken place.
The charts also exclude the residential property component of private investment. Only spending on structures, machinery and equipment that is intended to make private businesses more productive is included.
U.S. economist Dean Baker has explained “if there is a substantial amount of monopoly power in the economy then it would not be surprising that we don’t see more profits leading to more investment. In that case the high profits are a direct result of restricting supply. The last thing a company wants to do in this context is produce more output, which would then push down its profit margins.”
Baker has written extensively about how governments around the world have increased monopoly power in the economy for decades by strengthening patents and copyrights: government enforced monopolies. Trade deals like the TPP push other countries to make these monopolies stronger.
Canadian economist Jim Stanford elaborated on various unproductive uses for high profits: gambling on short term financial assets, paying for mergers and acquisitions, paying out higher dividends to shareholders among other uses that do not lead to more investment in the economy.
Trump’s success as a candidate has depended on leveraging propaganda that has been spread in the media for decades, in some cases for over a century. Peddling a non-existent link between higher profits and higher private investment is only one example. Another is the glorification of extreme wealth – the idea that it proves a person must be “smart” and hard-working has been a staple of elite propaganda in the United States since at least the heyday of Horacio Alger.
Of course Trump isn’t wrong (he is at least half right anyway) to depict trade deals like NAFTA as rip offs for U.S. workers. Since he is a bigot, he ignores that they have also been a rip off for workers in poor countries like Mexico. Hillary Clinton is also not wrong to point to super rich people dodging taxes as an outrage. However, it is foolish to believe either of these two phonies will actually address those problems. That said, Trump is worse and we should all hope he loses to Clinton even though she is horrible.
The problem is that Trump is standing on the shoulders of so many propagandists for inequality and bigotry that he is very difficult for the U.S. media to take down. He is the U.S. media’s Frankenstein, not Putin’s.
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