Trump’s (Russian-) America

I have never been one to subscribe to conspiracy theories as I almost never take anything at face value. I have been blessed with a good deal of common sense, I’m a pretty good researcher, and I don’t like to play the fool, so I’m careful about what I believe. I check things out thoroughly. That trait served me well during the 2016 presidential election and the barrage of fake news stories in my email and Facebook feeds.

In spite of this resistance to believe in conspiracy theories, I have begun to wonder if Donald Trump is actually working to weaken the United States in the long term, perhaps to please the Russian President and oligarchs. In the process, he would make a fortune.

I know that sounds crazy, but I’ve been thinking about what a Trump America would look like, and I’m worried. In four to six years, the country could be in serious trouble economically and educationally, and could even be at the start of a civil war, albeit with a very strong military. There is a chance, however, that President Trump may actually be able to deliver most of what he promised during the campaign. It will be a nail biter.

Mr. Trump and Russia:

  1. U.S. intelligence agencies reported that Russian actors with ties to the government hacked democratic linked organizations and provided a steady stream to negative information for release by Wikileaks in the run-up to the election. More recently, the CIA has concluded that the goal of the Russian hacking was to help Trump win the election.
  2. Candidate and President-elect Trump has repeatedly denied that Russia was responsible for the hacking.
  3. Trump purchased a Florida mansion at a bankruptcy auction for $41 million in 2004 and sold it to a Russian billionaire for $95 million four years later.
  4. “…Several of Trump’s businesses outside of Russia are entangled with Russian financiers inside Putin’s circle.” (Time, Donald Trump’s Many, Many, Many, Many Ties to Russia, August 2, 2016).
  5. Trump has not released his tax returns which may show evidence of the depth of his Russian business ties.
  6. He has chosen a person for Secretary of State who has a very friendly relationship with the Russian president.

 

The Economy:

  1. The U.S. unemployment rate peaked at 10.0% in October 2008, and has decreased steadily to 4.6% in November 2016.
  2. The chance that children will earn more than their parents has been decreasing since 1940, and now stands at 50%.
    1. Income inequality is a much more important reason for these findings than slower U.S. growth rate.
    2. Income inequality has grown steadily between 1973 and 2013 (latest available data) with the top 1% taking 2.4 times and the top 0.1% taking 6.5 times as much national total income in 2013 as they did in 2007 (i.e., the wealthier you are, the faster your income and wealth has grown).
  3. About 7 million manufacturing jobs have been lost since the peak in 1977 (-36%), but manufacturing output is at a record high, a situation made possible with automation.
  4. Traditionally, consumer spending – largely by Baby Boomers – has accounted for about two-thirds of economic activity in the U.S., but about 10,000 Baby Boomers retire each day, and retirees tend to spend less money.

 

Mr. Trump and His Businesses:

  1. Trump’s businesses are numerous, are in many areas of the country and world, and owe significant sums to banks in Russia and China.
  2. His older children are highly placed managers in Mr. Trump’s businesses.
  3. Trump has not released his tax returns which would show more details about how his businesses are organized.
  4. Richard Painter, who was George Bush’s ethics lawyer, says Donald Trump doesn’t meet the requirements of the Emoluments Clause of the constitution because of his businesses’ foreign ties.
  5. Trump will not sell his businesses to avoid conflicts of interest.

 

Americans:

  1. During the housing bubble, many homeowners refinanced their houses and purchased major items such as large screen TVs, boats and RVs with the equity.
  2. Those who participate in 401(k) retirement savings plans contribute an average of 1.4%, well below the plans’ maximums.
  3. The top 10% save extra money from tax cuts (no stimulus to the economy over two year period following cut), while the bottom 90% spend it.
  4. We can assume the vast majority will spend any extra money earned during a good economy.
  5. We can assume wealthiest Americans will save or invest extra money in businesses that employ few high skilled laborers (nature of the economy – a lot more service industry jobs).
  6. Millennials, many of whom postponed families as a result of the recession, are beginning to start families in larger numbers, and having children means you spend more money.

President-elect Trump has nominated people for his cabinet who are extremely pro-business at the probable expense of the environment, education (school choice tends to help a few and disadvantage many), and workers. His proposed tax plan would substantially cut taxes on the rich and on businesses, while slightly reducing taxes on the middle class and raising taxes on single parents. That tax plan, or the less aggressive tax cut likely to be approved by Congress, would accelerate income inequality in the U.S., and that would further disadvantage the poor and middle-class.

For a short time – four to six years, probably – the economy could be quite good as a result of the federal taxes collected with a likely 10-15% business “tax holiday” for U.S. companies repatriating earnings from overseas operations, and Mr. Trump’s promised infrastructure spending which would generate jobs. During the good times, we Americans will see our earnings rise, and thus our spending will likely go up as well. That will extend the good economic times for a while.

Eventually, however, something will happen – a terrorist attack, a burst bubble in something that we’ve been willing to pay much too much for, a political scandal. First will come the stock market drop. The smart money – rich people’s money – is managed by powerful people with very fast computers programmed with algorithms which will sell immediately if certain factors are observed. The initial drop will be sudden, then it will slow down until the regular people start to worry and dump their investments. When the dust settles, the market may have lost 60% of its value.

Then people will stop spending and a recession will begin. At this point it could go two ways. If banks find themselves weak (insufficient assets) because bank deregulation allows them to make risky bets with too much money, the recession could be very severe. The economy doesn’t function if banks are unable to get companies the money the need. If the banks are sound, the recession could be minor.

In a major recession – President-elect Trump has promised bank deregulation – many people lose their jobs and houses, companies cut benefits and perhaps move operations to other countries, and our very divided country could go to war with itself. Not North vs. South, but a guerilla war of haves vs. have nots, maybe rural vs. urban, perhaps old school vs. new economy. There is so much animosity between the left and right now, what will it be like during a severe recession?

And that is an America that the Russian president wants to see. During the Great Depression, the Soviet Union showed a film to their citizens which highlighted the devastation that happens to the less fortunate in a capitalist system. It backfired though – the scenes showed these miserable people in bread lines or just sitting with nothing to do outside their houses, but it also showed a lot of cars. That’s what the Soviet citizens noticed. No matter how bad things were, there were a lot of cars in America.

If history is any guide, we Americans will enter the next recession with too much stuff and too much debt, and we’ll be looking for someone to blame. The political left will blame the republican controlled Congress and President, and the political right will blame a few bad apples for playing fast and free with other people’s money and for irresponsible people who took on more debt than they should have. The left will complain & the right will say they’re crybabies who made their own mistakes and want to blame others.

And Putin will watch with glee and threaten neighbors who may capitulate because the U.S. is not in a position to help. And in the meantime, Mr. Trump will make a fortune from his businesses during the good economic times, and he will be well situated to snap up distressed properties at the bottom of the market during the recession.

The potential saving grace would be Millennials and the children they are beginning to have. Raising a child to 18-years old is very expensive. As the economic boom proceeds, more people may choose to have children. When the recession starts, those parents cannot cut too much out of their spending because of the children. That will shorten the recession and reduce its effect.

It’s a crap-shoot, and it will be fascinating to see what happens.

About tonyj126

I'm a 50+ married man who always seems to have a large backlog of work to do, but also a lot of flexibility in my schedule. Much of the work I do is volunteer or taking care of extended family members. I suffer from, as my priest calls it, "the sin of self-sufficiency," which means I can figure out how to do most things myself, and consequently, reduce the need for community to solve problems. As a logical extention (at least to me), I find myself called to comtemplate the country's and the world's woes and offer my observations. I hope someone out there will find them useful.
This entry was posted in Economics, Make America Great Series, Uncategorized. Bookmark the permalink.

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