Where did the United States go offtrack?

By July 2, 2018Economics
The Hutch Report

While the war between Trump supporters, anti-Trump protestors and the media rages on over everything from Trump policies to Trump tweets, there is an evident truth lurking beneath the surface of all the bravado. The truth is that the country is no longer the land of milk and honey nor the example for everyone else to follow. In spite of what financial media would have you believe regarding full employment and a booming economy, it is not the reality for many. As my uncle used to say, “When your neighbour is out of work it is a recession, when you are out of work it is a depression.”

According to the recent released United Nations Human Rights Council document titled, “Report of the Special Rapporteur on extreme poverty and human rights on his mission to the United States of America,” the United States is a land of “stark contrast.” The report relies principally upon official government statistics, especially from the United States Census Bureau.

According to the report’s findings, it seems to be more clear that the wealth effect promised by Bernanke’s Fed did materialize, only the wealth trickled up and not down. In The Washington Post , Ben Bernanke wrote on November 4, 2010, “the Federal Reserve has a particular obligation to help promote increased employment and sustain price stability.” He went on to say, “Higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending”.

So how did that work out? The report explains:

“…its immense wealth and expertise stand in shocking contrast with the conditions in which vast numbers of its citizens live. About 40 million live in poverty, 18.5 million in extreme poverty, and 5.3 million live in Third World conditions of absolute poverty. It has the highest youth poverty rate in the Organization for Economic Cooperation and Development (OECD), and the highest infant mortality rates among comparable OECD States. Its citizens live shorter and sicker lives compared to those living in all other rich democracies, eradicable tropical diseases are increasingly prevalent, and it has the world’s highest incarceration rate, one of the lowest levels of voter registrations in among OECD countries and the highest obesity levels in the developed world.”

It has become painfully clear for many that Bernanke, student of the Great Depression, made some serious miscalculations about how money would flow and to whom. According to the report, the United States now has the highest rate of income inequality among Western countries.

So there was a slight miscalculation regarding the Fed’s monetary policies. When those don’t work out as planned, you turn to fiscal policies. How is that working out?

The Hutch Report

“The $1.5 trillion in tax cuts in December 2017 overwhelmingly benefited the wealthy and worsened inequality.”

Curiously, since the tax bill was signed, a number of companies have been doing a lot of buybacks. Share buybacks in 2018 have averaged $4.8 billion per day, double the pace from the same period last year, according to an analysis the market data firm TrimTabs provided to CNBC.

It has only been 6 months since the tax cuts have been enacted and it takes time for these moves to make their way through the system, however, according to findings in the report you shouldn’t expect any surprising results.

“The share of the top 1 per cent of the population in the United States has grown steadily in recent years. In 2016 they owned 38.6 per cent of total wealth. In relation to both wealth and income the share of the bottom 90 per cent has fallen in most of the past 25 years. The tax reform will worsen this situation and ensure that the United States remains the most unequal society in the developed world. “

The report addresses the singular optimistic views of new technologies in regard to their benefits yet fail to highlight specific impact of these new technologies on the lives of the poor in American society today. Robotics may help McDonalds create efficiencies by doing away with order takers but will most likely only exacerbate the existing wealth inequality issues.

The current heated debate on Trump’s immigration policies have put the plight of the innocent immigrant children in full view. Nobody wants to see children taken from their families. At the same time that this debate is raging with the constant flow of images from CNN to hammer home the point that it is wrong, they fail to recognize the current situation that many American children experience daily.

“Poor children are also significantly affected by the country’s crises regarding affordable and adequate housing. On a given night in 2017, about 21 per cent (or 114,829) of homeless individuals were children. But this official figure may be a severe underestimate, since homeless children temporarily staying with friends, family or in motels are excluded from the point-in-time count. According to the Department of Education, the number of homeless students identified as experiencing homelessness at some point during the 2015/16 school year was 1,304,803.”

One can argue that there is always the Supplemental Nutrition Assistance Program (food stamps), which was put in place to help this portion of the population. According to findings, the program kept 3.8 million children out of poverty in 2015, and in 2016, the earned income tax credit and the child tax credit lifted a further 4.7 million children out of poverty. However, Trump may just blow up the farm bill over demanding food stamp work requirements. That demand, could mean tens of billions of dollars in cuts to the anti-poverty program.

The report pulls no punches and highlights a number of concerning issues such as, Treatment of the poor in the criminal justice system, Criminalization of the homeless, Environmental pollution, and Confused and counterproductive drug policies.

Not everyone agrees with the way in which the report is written as Fox News highlights in an opinion piece, “UN poverty report blasting Trump, US for ‘hatred for the poor’ uses data from last year of Obama’s presidency.” But once again, regardless of the facts, they spin it into a political positioning attack.

Although the report does list a number of recommendations, we find it hard to believe that the current government parties will put doing the “right and effective thing” in order to get the country back on track, in front of doing what is most effective at getting themselves re-elected.

The Hutch Report

Author The Hutch Report

More posts by The Hutch Report

Join the discussion One Comment