Thread by @kurteichenwald

In 2017, I wrote about why that year's tax cuts were unlike others, were exceptionally dangerous, economically insane, & would prove disastrous.

Now, since we're hitting the disaster wall, I will reexplain. And it will also highlight why the GOP is incapable of governance../1

...tax cuts arent a matter of "I want." People want tax cuts all the time. But tax levels are also at the foundation of fiscal policy - how government adjusts revenue & spending to manage the economy.

As the massive stimulus just adopted shows, fiscal policy is central to.../2

...dealing with disaster. Unfortunately the GOP treats tax cuts as a fire extinguisher they want to play with - they'll shoot if off when there is no fire, and then be shocked that the extinguishers are empty when the house is burning..../3

...that is why there has never in world history been a country with massive debt that gave a huge tax cut in a strong economy. It is the *opposite* of fiscal policy. It is honoring greed over governance.

I had enormous trouble after Trump's election believing they would do.../4

...something so reckless. I underestimated how bereft the GOP was in intellectual heft. It is all dogma now - stupid, unconsidered, incompetent dogma formed by the desires of large contributors.

Make no mistake: The GOP has been manipulating the economy to push a bogus boom../5

...for three years. In a booming economy - which we had - they flooded the USA with more cash. In normal fiscal theory, that was when to RAISE taxes - & cut spending (sorry, dems) - to ensure ability for economic management in the inevitable downturn.../6

...you did NOT want to go into a downturn having blown trillions during a strong economy. Because now - debt is going to explode unlike anything America has ever seen. It *already was* in a strong economy as it blew up debt - something *unheard* of in competent governance.../7

...during the upturn, you wanted also to do a number of things: Cut support for successful industries (thus decreasing spending), do a full assessment of military needs NOT on the "Money spent equals strength" mindset, but by taking all defense and war strategies planned by.../8

... Pentagon (they plan for almost everything) & budget. We pay willy nilly, with no examination of strategies. Its as if we run to the grocery store, saying "We're only getting enough food for the family if we spend $200" but not caring if youre buying meals or only Cheetos.../9

...with the strong economy, spending on long-term investments and national protection needed to go UP. Infrastructure week shouldnt have been a joke declared by Trump and immediately ignored. We should have been making that investment, as well as in pandemic response.../10

...tsunami monitoring systems, and - sorry GOP, you are now learning that science beats dogma every time - addressing climate change.

They did none of this. They did the opposite. They flooded the strong economy with cash, then beat their chests that things were stronger.../11

...because, no shit. Of course they were. They were being pumped up by an irresponsible flood of cash. Worse, that cash windfall for corporations was used for the worst possible investment - stock buybacks. All of this pushed up the market higher and higher. Prices are.../12

...supposed to be based on technicals - like the price of stock derived from a corporations earnings. But because of the fiscal manipulation, this number - called the P/E ratio - was almost double what it is in healthy times. That means the stock prices no longer reflected.../13

...the actual value of the company's performance, as shown by their earnings. (I know this is technical, but people need to know the basics before I slam down on why this shows the GOP is incompetent - besides the obvious.)

So, with stock buybacks fueled by tax cuts.../14

...prices climbed beyond rational values.

Monetary policy from the Federal Reserve - influencing the supply and demand for money through interest rate adjustments - should have led to increasing rates more to slow this down. But it not only was kept low - the opposite.../15

...of what was called for, but Trump kept demanding the Fed cut rates more and more in a strong economy - which is economic madness. He even said he wanted it done so the stock market would go up another 10,000 points, an absolute admission that this has nothing to do with.../16

...economic reasoning, but simply with a desire to push up market prices to an insane level, when earnings already didn't justify prices.

Then, one extra thing that slipped past many: Non-GAAP accounting. If Enron existed today, its frauds wouldve been legal. THAT is how.../17

...bad things got. GAAP - Generally Accepted Accounting Principles - are the standard for reporting earnings. Independent accounting firms sign off on the numbers. BUT, companies were now allowed to announce non-GAAP earnings. Who determined them? The company's own execs../18

...so when the press releases and analyst calls were made, the execs simply said "Our earnings are XXXXX, on a non-GAAP basis." They could virtually pick whatever they wanted. One company - GE - reported multiple different non-GAAP sets of earnings for the exact same quarter../19

...of course, when these companies finally filed their reports to the Securities and Exchange Commission, they had the GAAP numbers. But no one cared about them - stocks were zooming.

The GOP SQUANDERED a strong economy out of greed & stupidity. They threw away our chance.../20

...to fix things, to prepare for the downturn, to invest in America's long-term needs and ignored national security issues (like pandemic response.)

So now, here we are: Economic catastrophe. What *should* be happening? Had we used proper fiscal management, we would have.../21

...dramatically decreased the deficit while things were strong, and started getting out debt house in order. Now, when things are bad, we should be increasing spending and cutting taxes. But we already blew through rational tax cuts. And, with its "money to big corporations"../22

...without any required actions, we're throwing away spending. Corporations arent going to be hiring people with that cash. Theyre going to use it to clean up balance sheets mismanaged in boom times that kept the party going. THAT will push stocks up, at the expense of all../23

...else. Horrible wages has left the vast majority of this country with little to no savings, which means actual cash expenditures in a poor economic environment will come to a standstill.

Make no mistake: COVID-19 would have killed Americans. But, if the GOP was not in.../24

...charge, things would have been far less terrible. And that is provable. Remember H1N1? Probably not. It was a terrible pandemic, one with a virus that was dramatically more infectious than the one that causes COVID-19, and far more deadly. It killed a lot of people, but.../25

...never flew out of control. Why? The day after WHO declared a global health warning, Obama declared a public health emergency which released huge amounts of money for dealign with the epidemic. (The GOP, of course, lies that the declaration of a national emergency showed.../26

...Obama ignored H1N1. Of course, @FoxNews zombies are never told that, by statute, Obama couldn't declare a national health emergency because there were only a couple of states involved at first. Which is why he declared an immediate public health emergency..../27

...and when, by statute, he could declare a national emergency, he did so immediately. The difference between a public health emergency and national health emergency are not particularly major..../28

...now, assume Trump had followed the Obama path in terms of reaction time. He would have declared a public health emergency on January 1, the day after the first notification by the WHO. He would have established a high-level response team of experts, not political hacks..../29

...we would have been prepared when things got bad. But we arent, because the GOP can't govern.

Combine all of this: Cutting funding for pandemic response, exploding the deficit and debt at a time of economic strength, and letting a public health emergency be ignored until.../30

...it was beyond any capacity to manage. THAT is why we are all holed up in our homes. THAT is why businesses are shutting down. And THAT will be why the economy is beyond management, because we sprayed that fire extinguisher when the house wasn't on fire. Having destroyed.../31

...many of our alliances and - as our former great allies are now saying out loud - having abandoned our role as a reliable leader, we are at risk of losing global faith in our ability to make good on our debt. That means we could be FORCED to raise interest rates.../32

...before the economy recovers, pushing it back down, because otherwise our debt will not provide the returns to offset what foreign investors see as the risk.

The deficits will explode beyond comprehension. Debt will become completely unmanageable..../33

... this has been brought about by greed of the GOP, whose incompetence has left us virtually incapable of managing an economic collapse or pandemic monitoring/response.

And as you watch the Trump show, know: Nothing has changed. It will get worse before it gets better.

fin