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Trump, Sanders on Recession & Real Estate

 

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Donald Trump says America is on the verge of a “massive recession,” a view which is not just widely shared, it’s a reality for tens of millions of people.

While it may seem strange to the economists who have largely lined up against the Trump perspective, the idea that the American economy is not booming is hardly unique to the presidential candidate. Indeed, economic hard times can be seen as the central issue which both Trump and Bernie Sanders reflect, though with vastly different approaches.

“Americans lost so much in 2008 — jobs and homes, incomes and wealth — that the recession still dominates the public mood three elections later,” says Bloomberg Markets.

For millions of Americans the recession never ended and the economy stinks. It seems like a rigged game to them, one where the rich get richer, jobs go overseas and despite endless complaints about high corporate tax RATES, actual tax PAYMENTS by many large companies are often zero or pretty close to it.

For instance, according to Fox Business, GM “paid just $5 million in federal taxes last year, its SEC filings show. For its total federal, state and local bill, all in, it booked zero taxes, the filings show. Meantime, in 2015, GM paid more than $908 million in taxes to China, due to its profits from its joint ventures there, the filings show.”

Another financial curiosity is the “inversion” trend where US companies move overseas to get lower tax rates and pay less to workers – but continue to generate much of their income from sales within our borders. Shareholders  and executives profit while US taxpayers and workers suffer.

Buffett & Class Warfare


As Warren Buffett explained in 2011, “there’s been class warfare going on for the last 20 years, and my class has won. We’re the ones that have gotten our tax rates reduced dramatically.”

When US companies flee overseas and their US taxes go down it means the people who remain and don’t have overseas offices, such as voters, either need to pay more taxes to make up for the lost revenue or they have to accept less government. The practical result is a declining educational system, failing roads plus plans to reduce Social Security payments and cut health benefits.

The public knows that something is very wrong with a system where the benefits of economic expansion are not flowing in greater measure to them, the people who actually do the work. According to the Census Bureau, median household incomes in 2014 amounted to $53,657 – a figure 7.2 percent lower than in 1999.

RealtyTrac says 6.4 million US properties were seriously underwater at end of 2015. That’s down 616,000 units from a year earlier and half the 2012 peak. However, what’s also true is that more than seven million homes were lost to foreclosure as a result of the mortgage meltdown. There are simply fewer owner-occupied homes to be underwater and one result is that the homeownership level is now at levels seen in the 1960s.

Trump, Sanders & Mortgage Rates

There’s another way to judge the economy: interest rates. The Fed has been trying to raise rates and is essentially getting nowhere. If capital was in demand then the banks would not be holding $2.3 trillion in excess reserves. Lenders can’t get rid of the money they have and they don’t want to make loans at today’s rates — or perhaps even lower rates.

Why are interest rates so low? Because there isn’t enough demand to push them higher.

Could interest rates actually go lower? You bet. In Europe and Asia trillions of dollars are now invested with negative interest rates, less than zero.

Like ’em or don’t like ’em, but Trump and Sanders echo a growing realization that not all is wonderful with the economy, that a college degree or a skilled trade no longer assure prosperity or a middle-class lifestyle. In many households, that’s a horrifying thought, a threat to the perceived way of the life we have come to expect.

Why don’t real questions come up during presidential debates? Instead of talking about walls, glove sizes and presidential wives, why not talk about jobs, downsizing, drug prices, inversions and falling incomes? These are the issues that count – and a growing percentage of the electorate wants straight answers.

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1 Comment on "Trump, Sanders on Recession & Real Estate"

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  1. There is now an “Interfaith Call for Moral Action on the Economy” which parallels many of the issues discussed here. See:

    http://goodjobsnation.org/content/uploads/2016/03/Call-for-Moral-Action-on-the-Economy-Signed-FINAL.pdf

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