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What We Read Today 28 April 2017

Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries (and sometimes longer ones) of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.

This feature is published every day late afternoon New York time. For early morning review of headlines see "The Early Bird" published every day in the early am at GEI News (membership not required for access to "The Early Bird".).

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Topics today include:

  • Think That Trade Deficits Are Bad? Think Again

  • Trump Defunding Science a Threat to Civilization

  • Judging the Staying Power of Record Markets

  • The global elite are headed for a fall. And they don't even know it.

  • Court suspends case over Obama climate rule

  • Why the polls are wrong about Trump. Again.

  • Trump’s Tax Plan Giveth, and Taketh Away

  • Economists Fear Trump’s Tax Plan Only Heightens a ‘Mountain of Debt’

  • And More

Articles about events, conflicts and disease around the world

Global

The world is run by an international elite that lives in a rarified world of seemingly boundless power and luxury. Though the members of this elite consider their own power and luxury to be completely legitimate, it is not. It is the product of a system that's rigged to benefit them while everybody else languishes in declining small cities and provincial towns, eking out a dreary existence, toiling away their lives in menial service-sector jobs or scraping by on disability checks while seeking out a modicum of fleeting joy in the dumbstruck haze of a painkiller high.

Unless something fundamental changes, the gap separating these worlds will only increase, economically, culturally, and psychologically. Republicans show every sign of continuing to pursue policies that actively make the economic problems worse. Centrist Democrats, meanwhile, appear to be both unwilling to propose a sweeping critique of the outlook and policies that got us to this point in the first place and inclined to dismiss the populist anger building all around us as an expression of atavistic prejudice.

This cannot last. At this rate, make no mistake: The global elite will fall.

U.S.

  • Court suspends case over Obama climate rule (The Hill)  A federal appeals court is pausing its case over former President Barack Obama’s landmark climate change regulation, notching a major victory for the Trump administration.  The U.S. Court of Appeals for the District of Columbia Circuit on Friday halted the case while the Environmental Protection Agency (EPA) works through the process of repealing the Clean Power Plan.  The decision means that the federal court will not publish its ruling on whether or not the regulation, the main pillar of Obama’s climate change agenda, is legal.

  • Why the polls are wrong about Trump. Again. (The Hill)  (Econintersect:  The author, pollster Mark Penn diminishes his credibility by refering to the Trump victory as an "Electoral College landslide".  There is a ranking of Electoral College margins of victory in Wikipedia:  Donald Trump's margin of victory ranks 46 out of 58 for all of U.S. history.  Graphic below shows the bottom half of the ranking list, lowest margin on the top.

Today we live in a polling bubble – surveys taken from the perches in New York, Washington and Los Angeles may be obscuring rather than illuminating many of the underlying views and trends of the American electorate.

How else can one explain that although many polls showed a close race last November, almost no one (myself included) predicted a lopsided victory for Donald Trump in the Electoral College. Most media analysts and modelers concluded a Hillary Clinton victory was in the bag. One Princeton professor even agreed to eat a bug if Trump won.

electoral.college.margins.bottom.half

  • Trump’s Tax Plan Giveth, and Taketh Away (City Journal)  The Trump administration tax plan just unveiled does cut personal income-tax rates for everyone, including the top rate, which would drop to 35% from 39.6%. Trump’s plan would also slash the rate on business income that gets reported on individual tax returns to just 15%. Currently, that income is subject to tax rates as high as 39.6%.  But to help pay for these cuts, Trump’s plan imposes an expensive penalty on the wealthy. It would eliminate a set of deductions including, crucially, the deduction for state and local taxes, which currently generates as much as $100 billion a year in savings, largely for high-income taxpayers.  And this puts pressure on states to reduce taxes just when the federal government will have less tax revenue to share with the states.

  • Economists Fear Trump’s Tax Plan Only Heightens a ‘Mountain of Debt’ (The New York Times)  During his campaign, Donald J. Trump embraced the cause of fiscal responsibility and accused President Barack Obama of shackling the country with a “mountain of debt”.  Mr. Obama “doubled our national debt. Doubled it,” Mr. Trump claimed in a speech in Virginia Beach.  Then on Wednesday, Mr. Trump unveiled the outlines of his much-anticipated tax overhaul, calling for steep tax cuts with only modest offsetting revenue increases. Economists that author James Smith spoke to this week estimate it would add trillions to the national debt over the next decade.

Other Scientific, Health, Political, Economics, and Business Items of Note - plus Miscellanea

  • Think That Trade Deficits Are Bad? Think Again (Real Clear Markets)  In a tweet Wednesday morning the President directly linked economic growth rates to the trade balance, and lamented: “The U.S. recorded its slowest economic growth in five years (2016). GDP up only 1.6%. Trade deficits hurt the economy very badly.”   This author points out this is not supported by history:

  • The last year the U.S. had a trade surplus was 1975; GDP growth that year was -0.2% as one of the worst three receesions since World War II was ending.

  • Many countries with trade surpluses have very low growth, Japan being a show-case example.

  • In the 1980s and 1990s when the U.S. recorded its highest trade deficits it also had its fastest growth of the last 50 years.

  • Judging the Staying Power of Record Markets (Barry Ritholtz, Bloomberg)  (Econintersect:  "Markets can remain irrational longer than you can stay solvent."  - John Maynard Keynes).  BR is cautious becuase the recent advance of the Nasdaq Composite above 6,000 was promarily the result of the gains in five large stocks.  See graphic below.  (Econintersect:  We want to point out that the average annual return for the Nasdaq Composite from the high in March 2000 to now is a whopping 0.91%.  If you had $1,000 invested in a Nasdaq Composite Index fund in the middle of March 2000, today that would be $1,198 (a gain less than $200 - less than 20% - for a 17-year period), plus whatever dividends were received (low or no dividends for much of the period).

As we have noted before, overvalued stocks can and do stay overvalued for long periods of time. In the mid-1990s, pricey stocks became even pricier, with the S&P 500 notching high double-digit gains for five consecutive years (1995 = 34 percent; 1996 = 20 percent; 1997 = 31 percent; 1998 = 27 percent; and 1999 = 20 percent). If you avoided stocks because they were expensive, you missed a lot of gains. Similarly, in the 1970s, cheap stocks got even cheaper. By the time that decade ended, price-to-earnings ratios were in the single digits -- but you had little or nothing to show for buying cheap equities during the prior 15 years; and that’s before accounting for very high inflation.

nasdaq.vs.big.boys.2017.april.28 


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