Do Graduate Degrees Produce Value?

One of the more contentious aspects of the tax reform bill currently going through Congress is a proposal to treat the value of graduate-student tuition waivers as taxable income. In the US most PhD programs charge tuition, like undergraduate programs, but PhD students are typically granted a waiver of tuition along with a modest stipend to cover living expenses. In the early versions of the tax bill, the value of this waiver — which could be $50,000 to $60,000 at a private university — would be classified as taxable income. University officials, graduate student associations, academics, and most journalists have condemned this aspect of the tax plan. As a university professor I have received multiple communications urging me to write my Congressional representatives, speak out publicly, and otherwise fight to defeat this legislation.
As of this writing, it appears the tuition-waiver piece will not be in the final bill, so university officials, the AAUP, the grad student unions, and other graduate-education supporters can rest easy. Maybe all that lobbying paid off.

This post was published at Ludwig von Mises Institute on Dec 13, 2017.

Fake Tax Reform

After supposedly chomping on the bit for years to pass meaningful tax reform, Republicans are now set to blow an historic opportunity. Whatever version of the Bill that emerges from the House and Senate Conference Committee (which will be signed by President Trump faster than he can down a Filet o’Fish), will be far less than the Republicans envisioned when they finally captured the White House and both Congressional Chambers in 2016. But from what I have seen of the particulars, the revisions to the tax code will offer a marginal, although temporary, win for low income individuals, a major slap for moderately successful wage earners and home owners, (especially in the high tax Blue States) and a huge victory for the extremely wealthy and certain categories of business owners. While it is certain that the plan will add to the growing deficit, its immediate economic and political impact is hard to predict.
For generations, taxpayers and politicians alike lambasted our overly complex tax code for its myriad of economic distorting loopholes that seemed to produce nothing except employment for legions of accountants and tax lawyers adept at gaming the system. As a result, talk about tax reform has always included proposals to make the system simpler, fairer, and more transparent. But on that front, the Republican proposals fail miserably. Trump and Congress will hail this achievement as being a major victory for the American people. But the true winner will be the swamp that Trump promised to drain.
Unlike Ronald Reagan, who passed tax reform in 1986 by striking a deal with Democrat House Speaker Tip O’Neill, Trump and Congressional Republicans faced no particular need to compromise. If Reagan had the benefits enjoyed by Trump, Ryan and McConnell, his tax cuts would have been paired with significant spending cuts and perhaps a balanced budget. But to get O’Neill (and his whopping 71 seat House majority) to go along, Reagan’s ideals of fiscal prudence and smaller government had to be set aside. But Trump is no Reagan, and today’s Republican Party has about as much commitment to shrinking the size of government as did the Democrats in the 1980s.

This post was published at Euro Pac on Thursday, December 7, 2017.

Spend, Cut And Borrow—-How The GOP Is Heading For Fiscal Calamity, Part 1

Ain’t them Republicans something?
They just gifted to American businesses (corporate and pass-thrus) a $1.8 trillion tax cut over the next decade—most of it permanent.
And, seemingly, it was as easy as pie to accomplish. That’s because beforehand they had written themselves the equivalent of a parental note to the teacher saying it was OK to borrow $1.5 trillionof the cost.
This meant, in turn, they didn’t have to squeeze K-Street too hard for offsetting “payfors”. And off-setting spending cuts weren’t even on the table.
Moreover, the fiscal ease of it was aided immensely by the fact that they wrote the big revenue-loss hogs on the individual income tax side in disappearing ink—otherwise known as a “sunset”.
For instance, the GOP pols have been talking up a storm about doubling the standard deduction to $24,000 per family and raising the child credit from $1,000 to $2,000. Absolutely pro working family, that. Woo-woo!

This post was published at David Stockmans Contra Corner on December 5th, 2017.

Catalonia’s Post-‘Independence’ Economic Hangover Sets In

Uncertainty, threats, and counter-threats.
By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET.
Catalonia’s recent declaration of independence may have been a largely symbolic act but the economic hangover it has left in its wake is very real. Last month the number of unemployed in the region rose by 7,391 – the highest rise in a month of November since 2009. During the same period the number of people registered with social security fell by 4,038 – the sharpest fall since November 2013.
The economic pain is already taking a psychological toll. According to a new poll published by Spain’s Center for Sociological Research (CIS for its Spanish acronym), the number of households that fear that their economic situation will worsen in the next six months surged from 14.2% in August to 22.2% in October. By contrast, in Spain as a whole there was hardly any change, with the rate barely budging from 15.1% to 15.6%.
Almost 3,000 firms have shifted the registered address of their headquarters outside Catalonia since the banned referendum on October 1, many to Madrid. Although the exodus has slowed in recent weeks, every day dozens of Catalan companies continue to change their registered office, despite the express appeal of Spain’s Prime Minister, Mariano Rajoy, to stop doing so after the activation of Article 155 of the Constitution.
The Catalan exodus has so far been purely administrative, with companies effectively shifting domiciles, the ‘brass plate’ of the business, to avoid legal and tax complications rather than moving staff or operations, which would have huge cost and logistical implications.

This post was published at Wolf Street on Dec 6, 2017.

Just How Dangerous Is Trumps Latest Fed Board of Governors Pick?

Last week, Pres. Donald Trump nominated Marvin Goodfriend to fill a vacancy on the Federal Reserve Board of Governors. When we reported the news, we called him ‘another swamp creature’ – a member of the Washington D. C./Wall Street clan Trump promised to drain away.
We’re not alone in our thinking. In an article on the Mises Wire, Tho Bishop called Goodfriend’s nomination ‘a dangerous act of outright betrayal to Trump’s core constituency of working-class voters.’
It’s true Goodfriend’s views on monetary policy don’t fit in with the current Fed status quo. But that’s not a good thing. Goodfriend isn’t a fan of the conventional radical policy of quantitative easing. He’s actually a proponent of an even more radical policy.
Following is Bishop’s analysis in its entirety.
Donald Trump nominated Marvin Goodfriend to the Federal Reserve Board of Governors, one of the numerous vacancies that have emerged over the course of the past year. While his prior nominations of Jay Powell as Chairman and Randal Quarles as Vice Chair represented a disappointing commitment to the status quo, his selection of Goodfriend is a dangerous act of outright betrayal to Trump’s core constituency of working class voters.
The timing of the decision is ironic. After all, while Trump is busy lobbying Senate Republicans to support his desired tax cuts, he has decided to nominate a would-be central banker who wants to effectively tax the bank accounts of American citizens.

This post was published at Schiffgold on DECEMBER 5, 2017.

Debt, Taxes, Growth And The GOP Con Job

During more than four decades in Washington and on Wall Street it is quite possible that we never picked up any useful skills. But along the way we did unavoidably acquire what amounts to a survival tool in those fair precincts—-namely, a nose for the con job.
And what a doozy we have going now as a desperate mob of Capitol Hill Republicans attempts to enact something—anything— that can be vaguely labeled tax reform/tax cut. And for a reason that lies only slightly below the surface.
In a word, they are scared to death that the political train wreck in the Oval Office will put them out of business for years to come. So they are attempting to erect a shield of legislative accomplishment that can be sold in 2018 as the work of the GOP Congress, not the unhinged tweet-storm in the White House.
To be sure, some element of political calculus always lies behind legislation. For instance, the Dems didn’t pass the Wagner Act in 1935, the Voting Rights Act of 1965 or the Affordable Care Act of 2010 as an exercise in pure civic virtue—-these measures targeted huge constituencies with tens of millions of votes at stake.

This post was published at David Stockmans Contra Corner on November 30th, 2017.

The GOP Tax Bill: Fuggedaboutit!

The GOP has become so politically desperate that they might as well enact a two-word statute and be done with it. It would simply read: Tax Bill!
Actually, that’s not far from where they are in the great scheme of things. The Senate Finance Committee’s bill is a dog’s breakfast of K-Street/Wall Street pleasing tax cuts, narrowly focused revenue raisers that will be subject to withering attack on the Senate floor, nonsensical vote-driven compromises and outrageous fiscal gimmicks—-the most blatant of which is the sun-setting of every single individual tax provision after 2025.
This latter trick is designed to shoe-horn the revenue loss into the $1.5 trillion 10-year allowance in the budget reconciliation instruction and also comply with the Senate’s “Byrd Rule” which allows a point of order to strike down a reconciliation bill that increases the deficit after year 10. Save for these gimmicks, the actual 10-year cost of the Senate bill would be $2.2 trillion including interest on the added deficits.

This post was published at David Stockmans Contra Corner on Tuesday, November 28th, 2017.

Don’t Close the Tax “Loopholes”

Why do some conservatives and libertarians want some Americans to pay more in taxes?
Oh, they don’t actually come out and say that. Then they would sound like Bernie Sanders or Hillary Clinton.
What they do say is that certain tax deductions are ‘loopholes’ that need to be ‘closed’ because they ‘distort’ the tax code, ‘subsidize’ high-income taxpayers, and encourage people to make ‘economically unwise decisions.’ Although most of them also add that the increased government revenue that would result from the elimination of a particular deduction should be used to ‘pay’ for ‘good tax reform’ by ‘offsetting’ the ‘cost’ of lowering tax rates and making the tax code ‘simpler’ and ‘fairer,’ there is no getting around the fact that some conservatives and libertarians still want certain Americans to pay more in taxes.
The latest deduction under attack is the State and Local Tax Deduction (the SALT deduction).

This post was published at Ludwig von Mises Institute on November 27, 2017.

Fiscal Sundown In America, Part 1

The Senate Finance Committee tax bill is not supply side and it’s not even a tax cut; it’s a gimmick-ridden policy mongrel that smells to high heaven of political desperation and cynicism.
Contrary to the Donald’s delusional promise that the American people will get some tax cut sugar plums for Christmas, we are reasonably confident that this misbegotten exercise in reverse-robin hood economics won’t reach his desk. But whether it passes in some diluted form or not, we are entirely sure that what the American people are actually getting is a giant lump of fiscal coal—-courtesy of the craven capitulation of McConnell & Co to the K-Street lobbies and Wall Street.
And we do mean craven in the very fullest sense of beltway mendacity. Come to think of it, we have witnessed few exercises in raw partisan brinksmanship that were as meretricious and fiscally irresponsible as the current GOP campaign to pass a tax bill—any tax bill— merely for the sake of posting a legislative victory.

This post was published at David Stockmans Contra Corner on Monday, November 20th, 2017.

Jeff Bezos and All He Owns Must Be Destroyed

There is a basic premise behind reporting .vs. editorializing — one is allegedly unbiased, although we all have our personal prejudices while the other is labeled opinion (it’s found on the opinion page and is disclosed as such.)
Jeff Bezos bought the Washington Post, it is now clear, in order to effect a public lobbying strategy much larger than that which Hastings “organized” and led to a five times increase in his firm’s stock price revolving around net neutrality.
That latter event occurred after ISPs, properly recognizing that he was effectively driving semi trucks over the roads built for cars and refusing to pay higher fuel taxes and license plate fees for same, or, if you prefer, opening up a 2″ water connection to a 6″ main and demanding not to be charged by the gallon, resulting in you having no water pressure, started pushing back and demanding that Netflix cover the outsized costs being imposed on said ISPs to prevent service-quality collapses to everyone, including those who didn’t want his service.
In response Hastings got a bunch of left-aligned media to whip the public into a froth and Obama’s FCC obliged by handing him tens of billions of dollars of money literally forced out of non-subscriber’s wallets.
Amazon engages in cross-subsidization of its product sales (on which he makes no profit, particularly when fulfillment along with G&A are included) with other sales, particularly in AWS, where he does. This now includes government sales of AWS which means you’re being forced to subsidize Jeff Bezos’ destruction of retailers all across the United States at literal gunpoint, along with all the jobs that go when those retailers are forced out of business.

This post was published at Market-Ticker on 2017-11-24.

Just in Time for the Holidays, Reckless States Are Coming for Your Online Purchases

If there is anything that gets demagogic politicians and pundits riled up, it’s the closing of tax loopholes, and the tax-hike demagogues might just be getting one of their wishes come December.
Bloomberg reports that most online consumers will pay sales taxes in some shape or form in the next few months.
Currently, consumers pay taxes on goods purchased straight from Amazon, but they can avoid paying taxes on goods if they purchase them through Amazon’s third-party merchants. By the start of December this could all change, as several merchants are expected to start collecting taxes in return for partial amnesty from alleged back taxes.
No stranger to inciting controversy, Donald Trump has even jumped into the fray by stating in an earlier tweet that Amazon has brought ‘great damage to tax paying retailers.’
Those in favor of closing sales-tax loopholes contend that retailers such as Amazon are supposedly responsible for tax-base erosion and other fiscal imbalances in the states that they operate in. Although well intentioned, calls for closing tax loopholes miss the mark. The underlying problems that are overlooked in this discussion are the burdensome tax policies and profligate spending programs already present in many states.
Unbeknownst to many pro-tax politicians, tax hikes not only hurt the businesses themselves through lagging production, they also hurt consumers as companies pass the costs onto consumers via higher prices on goods and services.

This post was published at Ludwig von Mises Institute on November 24, 2017.

Jamie Dimon Bets Trump Will Last Only One Term As President

In an October 2017 interview, Jamie Dimon famously lambasted Bitcoin as a ‘fraud’ and the people who bought it as ‘stupid’ which, temporarily, halted the ascent in the Bitcoin price. It also led to much heated debate in the mainstream media and much anger across the crypto community. In a just as incendiary follow up, Dimon sat down for another interview, this time as ‘The Economic Club of Chicago’.
We wondered whether he would confirm recent reports that JPMorgan Chase would buy and sell Bitcoin futures for clients after the upcoming launch on the CME. Sadly, he wasn’t pressed on this question. Instead, he had some striking comments about the longevity of Trump’s Presidency, as Reuters reports.
Jamie Dimon, chief executive officer of JPMorgan Chase & Co, on Wednesday said he expects to see a new U. S. president in 2021 and advised the Democratic party to come up with a ‘pro-free enterprise’ agenda for jobs and economic growth instead. Asked at a luncheon hosted by The Economic Club of Chicago how many years Republican President Donald Trump will be in office, Dimon said, ‘If I had to bet, I’d bet three and half. But the Democrats have to come up with a reasonable candidate … or Trump will win again.’
Dimon, who in the past has described himself as ‘barely’ a Democrat, has been going to Washington more often since the 2016 elections to lobby lawmakers on issues including changes in corporate taxes, immigration policies and mortgage finance.

This post was published at Zero Hedge on Nov 23, 2017.

“Economic Development” Is a Corporate Welfare Scheme

The Beacon Center, a libertarian think tank based in Nashville, has released a new film highlighting and describing the impact of corporate welfare in Tennessee. Starring University of Tennessee professor Glenn Reynolds, Rigged tells the story of small business owners in Memphis who were harmed by the massive tax breaks which the Shelby County government bestowed upon the furniture giant Ikea for opening a location in the Memphis area. The film has sparked a renewed focus on cronyism across the state.
Just recently, the four largest media firms in the state published the results of a ten month investigation into Tennessee’s subsidy and incentive programs. They found that the volunteer state’s corporate welfare programs amount to $2.5 billion annually. The Times Free Press reports that the Department of Economic and Community Development, whose raison d’tre is to dole out state privileges, has increased its spending by 80 percent since Bill Haslam became Governor.
The investigation also lamented the lack of oversight and accountability. The Times Free Press concludes that it is impossible to conclude if these corporate welfare programs have succeeded even on their own metric, creating jobs. Some officials didn’t even have records of the size of their handouts. However, one does not need to have numbers to prove that cronyism is inherently detrimental to an economy.

This post was published at Ludwig von Mises Institute on Nov 17, 2017.

The Big Money Grab Is ‘On’ As Middle America Collapses

The stock market rejoices the House passage of the tax ‘reform’ Bill as the Dow shot up 187 points and the S&P 500 spiked up 21. The Nasdaq soared 1.3%, retracing its 3-day decline in one day. The tax bill is nothing more than a massive redirect of money flow from the Treasury Department to Corporate America and billionaires. The middle class will not receive any tax relief from the Bill but it will shoulder the burden of the several trillion dollars extra in Treasury debt that will be required to finance the tax cuts for the wealthy. The tax ‘reform’ will have, at best, no effect on GDP. It will likely be detrimental to real economic output.
The Big Money Grab is ‘on’ at the highest levels of of Wall St., DC, Corporate America, the Judiciary and State/local Govt. These people are grabbing from a dying carcass as fast and greedily as possible. The elitists are operating free from any fear of the Rule of Law. That particular nuisance does not apply to ‘them’ – only to ‘us.’ They don’t even try to hide their grand scale theft anymore because the protocol in place to prevent them from doing this is now on their side. This is the section in Atlas Shrugged leading up to the big implosion.
‘When you see that money is flowing to those who deal, not in goods, but in favors – when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you – when you see corruption being rewarded and honesty becoming a self-sacrifice – you may know that your society is doomed.’ – Atlas Shrugged

This post was published at Investment Research Dynamics on November 16, 2017.

Hedge Fund Homebuyers In The Hamptons Already Have A Plan To Game Trump’s Mortgage Cap

One of the key changes in the House GOP tax bill was to implement a cap on home interest deductions to the first $500,000 worth of mortgage debt and eliminate interest deductions from second homes. Of course, given active opposition from some very powerful realtor and homebuilder lobbying groups, it’s unclear whether the changes will find their way into the final tax bill. But, at least according to Bloomberg, New York’s “millionaire, billionaire, private jet owning” hedge fund managers aren’t waiting around to find out and are already taking steps to game any potential tax changes.
Out in the Hamptons, Wall Street’s favored beach resort on Long Island, brokers and buyers already have a workaround for a tax-plan provision under consideration in Congress that would take away the mortgage-interest deduction for second homes.
A client of Brown Harris Stevens broker Jessica von Hagn who works at a hedge fund decided to turn the vacation home he’s buying into an investment property by setting up a limited liability company. That will allow him to deduct the interest and earn rental income at the height of the season from the modern home on Bridgehampton’s Lumber Lane, with four bedrooms, three baths and a swimming pool on an acre of land.

This post was published at Zero Hedge on Nov 10, 2017.

The Fetid Swamp of Tax Reform

The likelihood that either party will ever drain the fetid swamp of corruption that is our tax code is zero, because it’s far too profitable for politicos to operate their auction for tax favors.
To understand the U. S. tax code and the endless charade of tax reform, we have to start with four distasteful realities: 1. Ours is not a representational democracy, it’s a political auction in which wealth casts the votes that count. Those seeking political influence over issues such as taxation place their bids in the political auction via campaign contributions and lobbying. The winner of the political auction gets favorable treatment, and everyone else ends up subsidizing the gains of the winner. 2. The wealthy pay the vast majority of federal income taxes (as oposed to payroll taxes, i.e. Social Security and Medicare), so tax cuts end up benefiting the wealthy. High-income Americans pay most income taxes, but enough to be ‘fair’? (Pew Research Center) In 2014, people with adjusted gross income, or AGI, above $250,000 paid just over half (51.6%) of all individual income taxes, though they accounted for only 2.7% of all returns filed. By contrast, people with incomes of less than $50,000 accounted for 62.3% of all individual returns filed, but they paid just 5.7% of total taxes.

This post was published at Charles Hugh Smith on THURSDAY, NOVEMBER 09, 2017.

The United States Is Melting Down Under Extreme Corruption

I have fond affection for my sense of right and wrong – morally, spiritually and legally. But it’s becoming increasingly difficult to behave responsibly as a citizen given the thorough corruption which has engulfed nearly the entire population of elected officials and business leaders. Fraud, corruption, grand-scale theft and remarkable dishonesty is endemic to Wall Street, DC and across corporate America.
Every single elected official at the Federal level, and at most State levels, is a paid servant of big banks, corporations and wealthy families/individuals. Obtaining a House or Senate seat is worth $10’s of millions. Getting into the Oval Office is worth $100’s of millions. For those you who still harbor disillusions of Obama’s integrity, recall that he campaigned aggressively on a platform in 2008 that promoted ‘cleaning up Wall Street’ as a high priority. Not only did he not clean anything up, he enabled the same fraudulent business activities that sunk the financial system in 2008 to become even more grand in scale and stealth. Now he’s greedily pocketing $1 million speaking engagement with the banks he bailed out in 2008 with $800 billion in taxpayer funds.
Anyone who believes their vote matters has their head buried in sand. Even though he must believe his vote still matters, James Kunstler has written must-read commentary on the current plight of the U. S. political system:

This post was published at Investment Research Dynamics on November 5, 2017.

Trick Or Treat: One Year Later, Is Trump A Blessing Or A Curse To The Deep State?

Authored by John Whitehead via The Rutherford Institute,
Has Donald Trump been a blessing or a curse to the architects of the American police state?
One thing is for sure: a year into his presidency, Trump hasn’t done much to improve the lot of the American people.
The predators of the police state are still wreaking havoc on our freedoms, our communities, and our lives.
The government still doesn’t listen to the citizenry, it still refuses to abide by the Constitution, which is our rule of law, and it still treats the citizenry as a source of funding and little else. Police officers are still shooting unarmed citizens and their household pets. Government agents – including local police – are still being armed to the teeth and encouraged to act like soldiers on a battlefield. Bloated government agencies are still fleecing taxpayers. Government technicians are still spying on our emails and phone calls. Government contractors are still making a killing by waging endless wars abroad.
In other words, the American police state is still alive and well and flourishing.
Nothing has changed.
Rather than draining the corrupt swamps of Washington, as he repeatedly promised, Trump and his brand of reality TV politics have merely redirected our attention.
Trust me, the swamps are still stagnant with corruption.
Indeed, we are still the unwitting victims of a system so corrupt that it spans all branches of government.
We are still ruled by an elite class of individuals who are completely out of touch with the travails of the average American.
We are still viewed as relatively expendable in the eyes of government: faceless numbers of individuals who serve one purpose, which is to keep the government machine running through our labor and our tax dollars.
We are still being made to suffer countless abuses at the government’s hands.

This post was published at Zero Hedge on Oct 31, 2017.

An Army Of Lobbyists Is Coming To Kill Tax Reform

Having sworn themselves to secrecy, Republicans on the House Ways and Means committee are scrambling to put together a tax bill by next week. But not knowing anything about the details of the plan, as it stands right now, hasn’t stopped an army of lobbyists from mobbing Capitol Hill with one overweening mission: To threaten, cajole or otherwise coax lawmakers into preserving loopholes that benefit their clients.
Here’s Bloomberg:
The stage was set with the House’s adoption Thursday of a budget resolution designed to speed the course of tax legislation and kick off a three-week sprint toward a House bill. Now, lobbyists representing every corner of the economy are poised to first devour, then attack what may be hundreds of pages of legislation that Brady says he’ll release Nov. 1. Special interests from realtors to dairy farmers will be trying to save their industry-specific tax breaks, said Tim Phillips, president of Americans for Prosperity. His group, which is backed by billionaire industrialists Charles and David Koch, supports ending such breaks.
‘It’s pretty fierce,’ Phillips said. ‘We met with Brady on Tuesday and he was saying their offices are swamped with all the special interest groups swarming in asking to be protected.’
The immense pressure to find a source of revenue to compensate for the sweeping cuts to corporate and individual rates has already nearly derailed the tax reform process. Yesterday, House Republicans narrowly approved the Senate version of a $4 trillion federal budget over the objections of 20 blue-state Republicans who oppose the elimination of the state and local tax deduction, which they say would disproportionately raise taxes on middle-class taxpayers in blue states, which tend to have higher taxes. Yet, Ways and Means Chairman Kevin Brady has said the elimination of the SALT deduction will stay in the bill – for now, at least.

This post was published at Zero Hedge on Oct 27, 2017.

Seeking More QE for Japan – Abe Calls Snap Election

Opponents of Abe-economics – a policy whose defining characteristic these days is ever more radical monetary experimentation and a creeping but serious deterioration in the public finances – are in despair. Yet again, as in March 2015, the Japanese PM Abe has called a snap election (one year short of a full term with a campaign limited to 3 weeks), this time with the intention of crushing a potential leadership challenge within his party (the LDP) which incidentally could have brought a change in economic policy direction.
PM Abe took a gamble. The established opposition party to the LDP, the DPJ, is weak and indeed in meltdown. But the Party of Hope formed just in the last few weeks by popular governor Koike (the nationalist ex LDP defense minister, previously a television news anchor) could galvanize a protest vote. Opinion polls suggest now that the Abe’s LDP will obtain indeed a large majority in the Diet following the October 22 election.
Governor Koike has gained from the corruption scandals beleaguering the PM but she articulates no alternative to Abe-economics. In fact her party’s program supports continuation of the mega-money printing program
This time, like the last, the ostensible justification which PM Abe has advanced for a snap election is to win voter approval for his decision to over-ride already legislated fiscal discipline. In 2015 the election was called to postpone a looming increase in the consumption tax; this time it is to match that delayed tax increase (scheduled now for 2019) with a boost to social spending.
The fact that such a rolling back of fiscal tightening is indeed saleable to a doubting public fully aware of the weak public finances is due to long-term interest rate markets having ceased to exert any constraint. They have become dysfunctional in consequence of monetary radicalism – now extending to the Bank of Japan (since September 2016) pegging long term interest rates at zero.

This post was published at Ludwig von Mises Institute on October 17, 2017.