Vince Dhimos answered a question at the Spanish-language sector of Quora. The following is a translation of the question and the answer.
What is Trump’s secret for maintaining a healthy economy?
If Trump were maintaining a healthy economy, we could speak of a secret by which he is doing so. But is he?
The US is nothing but a gigantic Ponzi scheme, with no attempt at actually building a real economy. Selling Treasury bonds secured by nothing but an endless string of naive buyers – does not make America rich. In fact, if you or I sold unbacked paper promising yields but paying the yields only by selling more unbacked paper to investors foolish enough to fall for the ruse, we would be guilty of perpetrating an illegal Ponzi scheme. We’d wind up in jail.
In fact, despite the hyped “indicators,” Trump has made America even poorer than before because he spent an outlandish amount of money on arms. These arms were not necessary because the US already has several times as much defence weaponry as all the other countries combined. And it uses its arms NOT to defend its people but to fight pretend enemies abroad. But of course, he tells us that he is making America rich in part by keeping the arms manufacturers working and giving people jobs. But the long term results of all these wars is clearly illustrated by the results of the Arab Youth Survey, which shows that, whereas this group once trusted the US most among all non-Arab countries and trusted Russia least, these young Arabs now trust Russia most and America least. http://www.asianews.it/news-en/Arab-youth-are-less-optimistic,-drawn-to-Putin,-and-increasingly-distant-from-the-US-40645.html. This loss of trust makes the American people much less safe. It could make them targets of attacks.
When Trump stops spending tax money to “create jobs,” then you can ask this question again and we can discuss it as a serious matter. At this point in time, however, it is a cruel joke, not a serious question, because much of the salaries paid to workers doing these “jobs” is being paid by the tax payer. And you can’t get rich by selling to yourself any more than you can lift yourself up by grabbing the soles of your shoes and pulling upward.
Let me give you some examples of how Trump has spent money to “boost the economy.”
He gave many very rich companies tax cuts. https://psmag.com/news/trumps-tax-plan-provided-massive-tax-breaks-to-the-oil-industry. In the case of oil companies, his tax breaks were given because most US companies were producing mostly shale oil, which entails higher production costs because: 1) shale contains much less oil than other types of petroliferous rock and therefore 2) the drill holes must be both vertical and horizontal to squeeze out the last drop, which requires hydraulic fracturing (fracking) to extract this scant amount of oil it contains. This implies that the oil will necessarily cost more than oil produced by conventional means, as it is in Saudi Arabia, Russia, Iran, etc. As a result, before the tax cuts went into effect, US oil companies were losing money or showing very low profits.
However, if we want the oil companies to earn profits from the sale of their shale oil, these tax cuts cannot be just temporary, as they might be in the event they were merely an extra cost due to start-up. They must be permanent because the oil fields are short-lived and each time a patch is depleted, a new one must be found by expensive exploration and drilling. Thus there are are frequent start-ups. Therefore the tax cuts are in fact a kind of permanent subsidy and they are paid for by the tax payers, who are saddled with this expense for life. The working people lose money in two ways:
1—they are forced to subsidize rich oil companies, and
2—they must pay more for their gasoline at the pump. Gasoline prices increased by about 20% since the tax cuts went into effect.
Thus, America is parasitizing itself and that is not sound economics, just stupidity.
In fact, incidentally, the WTO has a rule that limits or prohibits the subsidizing of exports, and much of the hydrocarbons produced in the US is exported. Trump constantly criticises China for subsidizing its exports, but he himself is subsidizing many US exports by providing these tax cuts, and even tax credits, to US producers as stated above. At some point in time, an oil-producing competitor country could file a complaint against the US for this practice.
Although the middle class is forced to pay for the tax cuts to big companies, according to a government report, the CEOs of major energy companies are earning astronomical salaries.
“Exxon Mobil $17,495,119
Phillips 66 $23,677,209
Valero Energy $22,532,260
Marathon Petroleum $19,670,807
QUOTE from the above-linked paper:
“This unnecessarily low tax rate gave multinational oil companies a huge tax break. If Republicans had taxed offshore income at their new 21 percent domestic corporate tax rate, they could have raised over $800 million more in revenue from Fortune 500 oil companies.”
“Worst of all, the tax cuts did not help. They just transferred billions of dollars from the middle class to the very rich.
Another outlet reported:
“If the individual cuts are made permanent, the cost will rise to $2.3 trillion.
“Tax cuts aren't effective at boosting economic growth when the economy is already expanding. They also don't work well when tax rates are below the 50% prohibitive range.”
The United States has several sources of credit to keep its economy afloat, but living on credit alone is not a viable practice. Each person or entity that buys US Treasury bonds is a source of credit, and several countries, such as China, Japan and Saudi Arabia, buy bonds from the American government. The problem is that America constantly uses its currency as a weapon, imposing sanctions on countries that to not bow to Washington, ie, do not behave like good vassals. As a result, an increasing number of countries are sick and tired of being kicked around and are selling off their US Treasury bonds so that there is less and less money coming into the US Treasury as a result. Countries that have ditched significant amounts in Treasuries are China, Russia and Japan, as well as Saudi Arabia and India. Eventually, if enough Treasury holders ditch their holdings, there will not be enough money for the government to operate. This will result in a rise in taxes and a devaluation of the dollar.
Thus, while the United States is “creating jobs,” these jobs will only last as long as they are profitable, but as long as they require subsidies (tax cuts), they will not be profitable in a way that helps the average American. They will cause ordinary Americans to bleed cash.
But this failed tax cut scheme is not Trump’s only economic misadventure.
According to Deutsche Bank, his trade wars have so far cost the stock market $5 trillion.
The trade war has prompted China to resort to countermeasures. As a result, American soybean farmers are going out of business. To compensate these farmers, Trump has begun subsidizing them. But here again, the money for these subsidies comes from the American taxpayer and simply costs the people more money. It does not positively affect the bottom line. Not only that, but the subsidies are insufficient to keep the farmers in business and some have already sold their farms.
But there’s much more to this story. Shortly after Trump entered office, he had a discussion with China (back before he made an enemy out of the nation) and signed a memorandum of understanding with China for the sale of a large amount of natural gas. He neglected to mention to the press that this was a MOU, not a binding contract and had no legal effect. Consequently, because they believed in Trump, US natural gas companies built expensive facilities to produce large quantities of liquefied natural gas (LNG), as well as shipping terminals to hold all of this gas. Note that producing and storing LNG is extremely costly because it requires compression and cryogenic treatment (deep freezing) of the gas. Further, this gas is usually shale gas that requires the expensive hydraulic fracturing outlined above. Not only that, the exportation of this gas also requires building specially equipped ships with domes that can hold the gas on its way to China.
Well, since Trump suddenly began to abuse China using tariffs and embargoes, and even tried to ban the Chinese company Huawei, China decided to penalize the United States by not buying its gas. Just imagine, all the expensive facilities for liquefying, storing and shipping the gas to China were built in vain and most likely will never be used! Now it just so happened that at the time China made the decision to stop buying American natural gas, the Russian company Power of Siberia was almost finished laying a huge gas pipeline to China and now China no longer needs the American gas anyway. Yet the US economy is being touted as the work of a genius!
And there is still more. The United States decided in April 2018 to ban the sale of Russian aluminium by the company Rusal to the US. This was a decision made not only by Trump but also by the Congress, which harbours an irrational hatred of Russia. The problem is that American secondary aluminium companies had relied heavily on this Russian aluminium, which provided them with ingots from which they made sheets, tubes, forgings and other products. The American aluminium companies warned Congress and the president that without the Russian aluminium, they would lose money. But the US government does not care about the real world. It only cares about politics and votes. So for almost a year, the American aluminium companies were losing money, and finally, when the situation had become critical, these companies showed their dismal balance sheets to Congress, which finally, quietly, rescinded this terrible law. Even so, some Democrats and Russophobic Republicans in Congress were unhappy and fought to keep the disastrous law.
There is so much more to tell about the total mismanagement of the American economy, and all of this reflects very badly not only on Trump but on the entire US government, which seems hell-bent on destroying not only the world economy but also the United States economy, not only with tariffs and embargoes but also with demeaning treatment and coarse discourse toward friends and non-aligned countries alike.
At any rate, regardless of any ephemeral positive indicators, as long as the United States has a sovereign debt of $22 trillion or more, which is far higher than the safe limit recommended by economists, no one is justified in saying that Trump is in any way improving the economy. Remember what they say about sleight-of-hand artists: keep your eye on the other hand.