Long-term positive effects of fair and equal trade policies will push financial markets to new highs

 
Posted by Shyam Moondra

During the 2016 presidential campaign, President Donald J. Trump emphasized tax cuts and deregulation as a means to spur economic growth and he successfully achieved that. Since those policies were enacted, the GDP growth has gone up to as high as 4%, unemployment has gone down to the lowest levels in the last 50 years, and manufacturing base is growing again. These positive economic results also led the financial markets to set all-time records. 

During the 2016 campaign Trump also talked about doing something about the U.S. trade deficit with our international trading partners that has been steadily growing since the 1990s and currently stands at around $800 billion. China, Mexico, Japan, Germany, and Canada are the largest beneficiaries of trade deficit with the U.S. This enormous wealth transfer has decimated the U.S. manufacturing base with neighborhoods in many of our industrial hubs becoming no-man’s land, especially in Michigan, Ohio, Pennsylvania, New York, and Illinois. Trump aggressively used tariffs as a tool, based on national security concerns, to renegotiate trade deals with many countries. He successfully concluded revisions to NAFTA and struck a new trade agreement with Canada and Mexico (USMCA) which will stop the hemorrhage of manufacturing jobs to Mexico and Canada and also open up those markets for the American agricultural products and poultry. Trump also successfully renegotiated a new trade deal with South Korea. New trade deals with Japan and the U.K (in post-Brexit era) are almost done. 

Negotiating new trade deals with China and EU have proven to be more difficult than expected. These negotiations were also exasperated by the Federal Reserve Board that increased interest rates in rapid successions last year even though inflation was within their target range (FED kept rates near zero percent during the Obama presidency but they increased the rates to 2.5% during the Trump presidency); higher interest rates strengthened the USD which made U.S. trade negotiations even more difficult. In the case of EU, Trump is holding the card because if he imposes tariffs on EU automobiles, it would devastate the EU economy. At some not too distant point, the EU would have to reduce tariffs on American imports and also open up their markets for American agricultural and energy products. China, the biggest beneficiary of trade deficit with the U.S., has proven to be a tough negotiator. We have seen a few rounds of tariffs and retaliatory tariffs that have rattled the financial markets in both countries. In Trump’s calculations, since China is benefiting from the huge trade surplus with the U.S., they have more to lose from a trade war. The trade war with China has forced American companies to explore alternative non-Chinese supply-chain arrangements involving other low-cost countries such as Vietnam, Malaysia, Indonesia, Thailand, and India (some jobs are even returning to the U.S.). However, the trade war has created uncertainty and it has dampened capital investments by multinational companies, especially in China. These trends have slowed down global economic growth and they have rattled the financial markets around the world. Surprisingly, the U.S. economy has proven to be more resilient to the negative forces unleashed by the trade war and it continues to do relatively well albeit at a slower growth rate than before.

The stock market in the U.S. has not yet discounted the long-term implications of a new trade world order which will greatly benefit the U.S. in terms of higher growth rate, continuing decline in unemployment rate, and increasing wages as many high-paying manufacturing jobs return to the U.S. If and when Trump announces new trade deals with China, Japan, the U.K., and EU, we will see increased economic activity in the U.S. with reduced wealth transfer to other countries. Since inflation is muted, the Federal Reserve Board will likely reduce interest rates in the U.S. to complement growth-oriented fiscal policies that might include a new massive infrastructure spending plan. Recently, ECB announced a new QE program which will also give a new impetus to global growth. These positive trends will propel the U.S. stock market to new highs. In the near-term, we will see a much stronger U.S. economy with S&P 500 Index hitting a new record high of 3,400 as early as next year. In the long-term, as the new trade deals set in, S&P 500 Index could even hit 4,000 by 2022. Trump’s fiscal and trade policies are indeed transformative and these policies will produce good results for years to come.

Federal Reserve Board should focus on higher GDP growth to reduce income inequality and poverty

Posted by Shyam Moondra

During the administration of President Barack Obama, we have had a slow-growth economy and lower inflation. However, Obama left a record 40 million Americans under poverty level (defined as income of $30,750 for a family of four) in spite of his significant increase in welfare spending to the tune of $1 trillion (Obama was the first president to spend more on welfare than on defense). The current administration of President Donald J. Trump pushed for higher sustained economic growth via lower taxes, reduced regulations, and more favorable trade deals with global trading partners. In a short period of one-and-half years, the unemployment rate has gone down to 3.7%, the lowest in the last 49 years, and unemployment among African-Americans and Hispanic population has gone down to the lowest level ever. So the key to reducing income inequality and poverty is sustained 3-4% GDP growth and not limiting inflation to an arbitrary 2.5% as currently targeted by the Federal Reserve Board (FRB).

The FRB expeditiously wants to increase the funds rate to a "normalized" level which is somewhat arbitrary because what was "normal" yesterday may not be "normal" today, depending on a multitude of issues related to global trade, regulations, and tax policies. In anticipation of higher inflation caused by growing economy, the FRB has been increasing interest rates that are negating the positive results achieved by Trump’s fiscal and trade policies. Higher interest rates are already slowing down housing and auto industries that are the backbone of the U.S. economy. Also, higher interest rates are making dollar stronger relative to other major currencies, which is exacerbating the trade deficit problem and making it harder for Trump to achieve his goal of cutting trade deficit by half. Therefore, the FRB’s monetary policy designed to keep inflation under control is acting against Trump’s policy of high sustained growth designed to reduce income inequality and poverty in America. If Trump’s policies reinvigorate the manufacturing sector in the U.S. (new 700,000 high-paying manufacturing jobs have already been added since Trump was inaugurated), the average wage level will go up. Therefore, the FRB shouldn’t be exclusively concerned with inflation, so long as wages are increasing at a faster rate. If the FRB is overly aggressive with their interest rate increases, the corporate world would reduce capital investments in anticipation of economic slowdown which would hurt the economy in the long-term. Higher economic growth and capital expansion must go hand-in-hand to achieve higher employment levels while keeping inflation under control. In recent years, Germany has had near zero interest rates for many years and yet it became the most prosperous country in Europe.

Rather than be solely focused on anticipatory inflation and using the outdated Phillips Curve (inflation vs unemployment) as its guiding principle, the FRB needs to find a way to maintain high growth while at the same time keeping inflation in check by aligning monetary policies with fiscal policies to create an environment where businesses feel confident about making new capital investments. The FRB has been creating these artificially manufactured boom-and-bust cycles by adjusting interest rates lower or higher, but these cycles make it impossible to make a dent on poverty which can be reduced only by sustained high economic growth.

To get the optimum results for the country, we need the FRB to come up with a new model which has the funds rate fixed at a nominal rate, say between 1 and 2% (and it should be changed only in emergency situations), while using other tools at its disposal to focus on growing economy at 3-4% a year.  We need a collective monetary and fiscal policy approach to achieve the best possible results for the American people in terms of higher growth, higher wages, lower unemployment, lower trade imbalances, and increased wealth creation. If we can maintain the current GDP growth with low inflation while freezing funds rate at the current level, we should see a significant reduction in income inequality and poverty in the coming years.

Pitfalls of Trump’s “Cut Cut Cut Act"

Posted by Shyam Moondra

During the presidential campaign, then candidate
Donald J. Trump often talked about unprecedented tax cuts for the middle class and tax reform, as one of his goals for the first 100 days of his presidency. However, the bruising infighting among the Congressional Republicans on repealing and replacing Obamacare wasted a lot of time and ultimately their attempt failed in the Senate. The Congress then started the process of passing a legislation on tax cuts and tax reform. The House passed the “Tax Cuts and Jobs Act” and the Senate is only days away from passing their own version of the law which widely differs from the House version in many aspects. Of course, President Trump coined his own name for the eventual bill as “Cut Cut Cut Act” to emphasize his claim that his tax cuts would be even bigger than the record tax cuts enacted by President Ronald Reagan. The Congress, however, is unlikely to adopt Trump’s suggested name. After the failed attempt to repeal and replace Obamacare, the Congressional Republicans are under tremendous pressure to pass a tax cut legislation to show to the Trump supporters that they can govern. After the Senate passes its own tax cut bill, the House and Senate conferees will then try to sort out the differences between the two versions and have a bill ready for President Trump’s signature before the end of the year.

Currently, economy is operating at “full employment” level and GDP is growing at 3% per year with modest inflation. The tax bill passed by the House will will undoubtedly add to the inflationary expectations. Tax cuts are usually used as a fiscal policy tool at the bottom of economic cycle to stimulate economy, but this time around tax cuts are being proposed at a time when economy is operating at the peak level. If tax cuts lead to higher inflation, the Federal Reserve Board (FED) will be forced to increase interest rates at a higher rate than originally planned and if FED is not able to fine tune rate increases, they could even trigger recession. Besides, Trump has ambitious plans for infrastructure improvements and military upgrades that will add additional trillions of dollars to the budget deficit over 10 years. The timing and magnitude of the proposed tax cuts are thus very risky.

The Trump administration is relying on increased economic activity to generate enough additional tax revenues which will offset the anticipated budget deficit caused by tax cuts. However, most economists believe Trump’s claim of growth are overstated and they estimate that there would be a net increase in national debt by at least $1.5 trillion. Higher budget deficit and national debt will put additional pressure on FED to increase interest rates. Higher interest rates will slow down housing market and demand for durable goods such as automobiles, possibly triggering crash of financial markets which could lead to recession.

During the campaign, Trump emphasized tax cuts for the middle class and tax simplification, but the proposed legislation does neither. By most estimates, the bulk of the tax cuts will go to the corporations and rich people and the proposed tax plan wouldn’t really do much in terms of simplification. The tax code is riddled with special interest provisions that make the tax return more complicated for most people than is necessary.

Given the political necessity to pass something on taxes, after having failed to repeal and replace Obamacare, Republicans have no choice but to do something, anything, on taxes. Hopefully, the conferees from House and Senate would iron out the differences and make tax cuts targeted more at the middle class and scale back corporate tax cuts to reduce budget deficit. Politically, it’s hard to justify big tax cuts for the rich at a time when rich individuals have done so well since the financial crisis and income inequality among the population is at a record level. Congressional Republicans need to go back to Trump’s original twin objectives: create high-paying jobs and give a boost to wage growth for the middle class that accounts for two-third of economy.

Trump found a winning formula - partner with Congressional Democrats

Posted by Shyam Moondra

When President Donald J. Trump was inaugurated last January, the business community was full of confidence that the federal tax code would finally be reformed. Optimism about higher economic and jobs growth propelled the stock market to record levels. However, in the last eight months, Republicans couldn’t even deliver on their long standing promise to repeal and replace Obamacare which was utterly shocking. The sharply divided Republicans in the House and Senate made it almost impossible to move on the Trump campaign promises. While Trump issued a series of Executive Orders to undo President Barack Obama’s legacy, legislative victories were nowhere to be found. Most Trump supporters are in total disbelief that Republicans can’t seem to get anything done in spite of the fact that Republicans control the White House, House of Representatives, and Senate.

With the possible government shutdown and default on federal debt looming large, Trump had no choice but to negotiate directly with the Congressional Democrats on the extension of federal debt ceiling and to provide funds for the victims of hurricane Harvey. There are twenty five or so House Republicans and five or so Republican senators that were proving to be obstructionists and Trump badly needed the support of Democrats to avoid fiscal catastrophe on debt ceiling and to immediately provide badly needed funds for the hurricane victims.

Trump should have sought help of Democrats right from the beginning; if he did that, these first few months of his presidency would have been more productive. The Republican Party is badly divided and it doesn't look like it will get any better. Republican leaders are the "swamp" in its truest sense of the word because they are controlled by the lobbyists. It’s important for Trump to demonstrate that he can get things done, so it was a good strategic move on his part to make a deal with House Leader Nancy Pelosi (D-California) and Senate Minority Leader Chuck Schumer (D-New York).

Trump can work with Pelosi and Schumer to accomplish the following that involve common interests:

1. Make debt ceiling extension automatic as needed. In the corporate world, we don't have a ceiling on debt, so there is no reason for the government to have it either. Let the free market and voters decide what should be the government debt ceiling; if debt is too high, government would have to pay higher interest to raise new funds which by itself will induce the government to live within its means. Also, whoever pile up debt excessively will be thrown out of office by the voters. So let these built-in mechanisms decide what level of debt is appropriate. Trump has used debt as a primary instrument for growing his businesses in the private sector (which at times worked against him and he had to seek bankruptcy protection more than once). Trump’s agenda includes massive increase in military expenditures and $1 trillion worth of investments in his ambitious infrastructure plan. Therefore, Trump wouldn’t want debt ceiling getting in the way to fulfill his campaign promises. In general, Democrats like to spend beyond government means (e.g., Obama doubled the national debt to $20 trillion during his presidency). So there is a collusion of interest between Trump and Democrats to get rid of the whole concept of debt ceiling for good. This, of course, would be opposed vehemently by conservative Republicans, especially the “Freedom Caucus” in the House, but Trump could put together a coalition of Democrats and moderate Republicans to sideline conservative Republicans and neutralize the issue of debt ceiling.

2. Fix the health care system. Obamacare didn't last because it was passed by only Democrats. We need a bi-partisan effort to come up with something that would endure. Trump could work with Democrats to come up with a new health care plan, which is better than Obamacare but at a higher cost to the government (in terms of subsidies via Medicaid for the poor) than what conservative Republicans would want. But the passage of a new health care plan would afford Trump to put a check mark against one of his prominent campaign promises.

3. Get going with the $1 trillion infrastructure investment to fix our roads, highways, bridges, tunnels, schools, airports, etc. Democrats tried unsuccessfully for years to get concurrence of Republicans on a huge infrastructure improvement plan. During the presidential campaign, Trump proposed a massive $1 trillion investment (much of which could be financed by the private sector), which he considers essential for the U.S. to be competitive in the global marketplace. Again, Trump could easily forge a bi-partisan infrastructure plan with the help of Democrats.

4. Reform the tax code to make it simpler and fairer. Reduce taxes for the middle class, but keep the taxes on the rich the same (may even increase a little for super rich as advocated by billionaires such as Warren Buffett and others). Corporate taxes should be reduced only to the extent loopholes are eliminated, so as to make it revenue-neutral. Again, Trump could easily make a deal with Democrats to get this done.

Trump and Democrats have a real opportunity to do away with the Washington, DC gridlock that has paralyzed the Congress for almost a decade with its approval rating plunging to single digits. In the last presidential election, the voters made it abundantly clear by electing a non-politician outsider that they want the gridlock to end. If Trump’s coalition with Democrats and moderate Republicans is able to get the above things done, the people would begin to have more faith in the government and businesses would have more confidence which is needed if we ever going to achieve 3-4% GDP growth and create millions of new high-paying jobs. Trump should move quickly to replicate his success in dealing with a short-term fix of debt ceiling issue and achieve bigger things that will guarantee him an easy win for the second-term.

Trump’s war on liberal media, “Do Nothing” Congressional Republicans, and Alt-Left’s dead-end are all inter-connected

Posted by Shyam Moondra


Soon after Donald J. Trump was inaugurated as the 45^th president of the United States, he moved swiftly to fulfill his campaign promises through a series of executive orders that didn’t require Congressional approval. Even though he stumbled on the legal front on limiting immigration from seven predominately Muslim countries, infested with Al-Qaeda, ISIS and other terrorists, it did look like that the government was finally working, compared with the Obama days of gridlock in Washington, DC when nothing would ever get done. Then came the firing of Gen. Michael Flynn as National Security Advisor and withdrawal of Andrew Puzder as the nominee for Secretary of Labor that gave the perception that Trump Administration was in chaos. These twin mishaps seem to have lifted the spirits of demoralized Democrats and given them a feeling of relevance in political discourse. And, the liberal anti-Trump media finally got an upper hand in their fight against Trump with their non-stop attacks and going as far as predicting his imminent downfall, just as they erroneously did about his presidential candidacy not long ago. While all this was going on, Republicans seemed to be in hiding; they are quiet on Democrats’ accusations of Russian links to Trump’s aides and they have not produced any significant legislation to implement Trump’s promises.

While Trump’s team could have handled the debacles better, given that most of his aides have had no prior government experience it seemed inevitable that Trump’s desire to fulfill his campaign promises quickly would lead to hiccups along the way. However, media’s prediction of imminent fall of Trump is more of a wishful thinking than reality. Judging from the lopsided number of negative stories about Trump by Washington Post, New York Times, CNN, and MSNBC, it does appear that the media is engaged in unfair reporting which is supported by a recent poll that shows media's approval rating at 16%. In this age of instant social media, fake news has become a real problem and often mainstream media look more and more like sensational tabloids. There was a time when journalists would find at least two independent sources corroborating a story before printing it, but now they go with a story even without a single corroboration and that’s fake news. Trump has a point when he says that the media has become enemy of the people. Freedom of press is an integral part of our democratic principles, but with the inception of fake news phenomenon during the 2016 election cycle, the media seems to be abusing that right. It seems inevitable that the Republican controlled House of Representatives and Senate would impose some sort of checks-and-balances against the abusive media by passing a law that allows lawsuits against the media that  disseminate fake news.

Trump’s stumbles got amplified because the Congressional Republicans have failed to produce a single bill on tax reform, infrastructure spending, repealing and replacing Affordable Care Act (Obamacare), securing the border, reforming immigration laws, and strengthening the military. Trump won based on promises he made on campaign trail on those scores and yet Republican majorities in both houses have failed to act since November 8, 2016. If Republicans had shredded their decade-long “Do Nothing” attitude and worked hard through their various committees, by now they would have passed a series of bills to be signed by Trump. Had Congressional Republicans done that, the media would have been busy talking about those bills rather than engaging in an all-out war with Trump. Republican led Congress has created a vacuum because of their slow pace in achieving their goals and the media is filling that vacuum by going after Trump at full speed. Lackluster performance of Republicans points to either sharp divisions within the Republican caucus or weak leadership skills on the part of House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell. If Trump presidency fails, it would be a no-brainer to blame the Congressional Republicans for the lost opportunity. It’s amazing that House Republicans tried to repeal Obamacare dozens of times when they knew that Obama would never sign it, but now that they know that Trump would sign it, they still have not passed the repeal bill.

That brings us to the last piece of the puzzle – the Congressional Democrats. Democrats lost because their welfare approach to governing proved to be a dead-end and it couldn’t possibly be sustained at a rate of $1 trillion a year. The Democratic Party did much better nationally and locally, when its political philosophy was centered. But then came Obama who moved the party so much to the left that it’s hard to believe that this party was once led by such people as John F. Kennedy and William J. Clinton. The focus of the Democrats is to give away things “free” to the masses at the low end of society. Free or subsidized health care, housing, education, child care, and food via a variety of welfare programs are funded by the rich and the middle-class that can barely make it. The system is based on disincentive to work rather than giving people a reason to work hard for better life. That kind of society can never prosper and it only increases the number of people falling below the poverty level. The brand of progressive leaders such as Sen. Elizabeth Warren or Sen. Bernie Sanders think of hard working successful people as criminals and the people who don’t want to work as victims. As more and more people lose ground, progressive leaders double-down on their welfare approach which sets in a downward spiral to ruins rather than prosperity. Europe is decaying because of socialistic attitudes and more and more countries there are now close to being bankrupt (Greece, Portugal, Spain, Italy,…). Unless Democratic Party has a strong centrist leader, the Democratic Party is finished. Democrats need to move back to the center where Bill Clinton was, if they want prosperity for all. Warren and Sanders are not the answers - they will put the final nail in Democrats' coffin....moreSee More

If Republicans in the Congress can get their act together and get on with their agenda of rapid economic growth and faster job creation, Trump’s stumbles would soon be forgotten and Trump's and Congress' approval ratings would zoom up nicely (Congress has had approval rating of 7-15% over the last ten years). Trump should lead and meet with Republicans and Democrats to hammer out compromises on health care and tax reforms. The voters elected Trump as the president because they were tired of gridlock in Congress, Obama’s welfare state, slow-growth economy, and stagnated wages. Obama made a mistake of passing Obamacare without Republican votes; Trump would be foolish to repeat that mistake and rely only on Republicans to implement his agenda. Trump is not viewed as a hard-core ideologue, which makes it feasible for him to use his renowned negotiations skills in moving country forward on tax reforms, infrastructure repairs, securing our borders, defeating ISIS, and reducing health care cost in a bi-partisan way.

 

 

 

Trump did it, his own way!

Posted by Shyam Moondra

The 2016 presidential campaign has been like none in the history of the United States. Donald J. Trump, a non-politician, talking politically incorrect (uttering words that no politician would dare to speak in public), spending a fraction of what his opponent spent on the campaign (in fact, a lot of his own money), being at the receiving end of mockery of a majority of dishonest media, being ridiculed by foreign leaders and stand-up comedians alike, deserted by his own party leaders, and mocked by the sitting president, showed to the world that he could still prevail in the historic election. Trump’s deft handling of his campaign and holding rallies at just the right places and at right times show that he is indeed smarter than the current breed of stupid politicians in Washington, DC. The media pundits, who universally predicted that Trump had no chance against the seasoned and well financed politician, former Secretary of State, Hillary Rodham Clinton, will now earn their paychecks by trolling their theories about how Trump did it and writing books about it. The dishonest media would now have another chore to undertake – criticizing everything that President Trump does – and, again, against all odds, Trump will deliver on his promises. That’s the kind of man he is – he is strong willed, determined, energized (how many politicians can hold six rallies in six different cities in a single day crisscrossing the country?), and very focused on what he wants to do. Trump is like a swimmer who dives right into the wave to get past it rather than tries to duck it. The media is underestimating Trump’s potential as one of the strongest leaders of the free world in recent memory.

 

Brexit started the wave of nationalism in Europe, which quickly hit the shores of the U.S.; Trump seized the moment and adopted the core principle of America First (“Brexit paves the way for Trump to win the presidency,” The Moondra Post, June 24, 2016) in propelling his candidacy through the Republican primaries, in which he knocked out sixteen other candidates many of whom were accomplished career politicians with tons of campaign money.

 

President Trump is unlikely to waste any time. Given that Trump’s party controls both House of Representatives and Senate, he is expected to move quickly on several fronts:

·         Trump will appoint a conservative to fill the vacant seat on the U.S. Supreme Court and solidify the slate of conservatives on the bench.

·         Trump will repeal Affordable Care Act (Obamacare) and replace it with a better plan which will bring down health care premiums by fostering competition across state borders.

·         Trump will cancel many of President Barack Obama’s Executive Orders, especially those related to climate change that put an extraordinary burden on American companies.

·         Trump may appoint a cabinet-level person to weed through countless new regulations created during the Obama presidency and drop many of them to make it easier for businesses to operate, especially in the energy area. Reduced regulations will enormously help small businesses.

·         With the help of Democrats, Trump is expected to move quickly on ambitious infrastructure projects to repair roads, bridges, etc.

·         Trump will waste no time in making the necessary investments to modernize the military.

·         Trump will finally get tax reforms done that have been languishing for years, even though both Obama and Congressmen expressed interest in them.

·         Trump is likely to appoint someone as an Inner City Czar and charge him or her to come up with a plan to revitalize crumbling metro areas and create job opportunities for minority youths that are involved in destructive gangs and violent crime.

·         Trump will immediately deport illegal immigrants who have criminal record. While he may not actually build a wall on the southern border, he may use that as a threat to get more cooperation from Mexico to stop illegal immigration and drug trafficking across the border. Trump will certainly increase border patrol and surveillance.

Given so much to do at home, Trump may be slow in moving on foreign policy issues. The following actions are likely:

·         Trump may work with the Congress to cancel the Iran nuclear deal and strengthen sanctions on Iran.

·         Trump will take a tough stance on terrorism and suspend financial and military aid to countries that breed terrorism such as Pakistan.

·         Trump will open dialogue with President Vladimir Putin of Russia, but will move cautiously. Trump is likely to demand that Russia give back Crimea to Ukraine and guarantee non-interference in neighboring countries in exchange for accommodation on the deployment of defensive missile shield in Europe. Trump will convince Putin to focus more on mutually beneficial trade and commercial interests. They might also agree to act together against ISIS.

·         Trump is unlikely to engage in regime changes in the Middle-East, but rather focus on incentives for economic development as a way to induce Israel and Palestinians to resolve their territorial  disagreements and bring about the long overdue two-state solution.

·         Trump will put the issue of NATO relevance on the back burner, but will insist that NATO partners pay their fair share of costs.

·          Trump will renegotiate NAFTA and pull out of TPP. He will focus more on bi-lateral trade deals rather than seek global deals (one size doesn't fit all). He will find ways to encourage corporations to keep manufacturing in the U.S. rather than move abroad.

Given that Trump is an impatient man and someone who thrives on resolving issues, he will be relentless in solving nation’s problems. If Congress works with him and together they begin to solve problems, the approval rating of Congress will finally break out of decade-old single digit range. Trump has a tremendous opportunity to work on multiple issues and get them done very efficiently, just as he has done during the presidential campaign. The media could also play a constructive role and help Trump achieve the full potential of his presidency which is to Make America Great Again.

A tug of war between Trump’s capitalist approach and Clinton’s socialist agenda

Posted by Shyam Moondra

In the post-WW II era, the industrial revolution led the western world to a period of high economic growth and prosperity. But then came the period of complacency in which the governments encouraged shorter work weeks, longer paid vacations, liberal benefits, and increased freebies from the governments in the form of subsidized food, education, health care, housing, and child care that made the population increasingly dependent on the government and less self-reliant. The wave of socialism, coupled with higher taxes and higher government expenditures, has contributed to the decline of capitalist system which is making it harder for free-market economies to grow. The slow or negative growth has led to higher budget deficits and record national debts. These trends have been more prevalent and more pronounced in Europe where many countries are now in dire financial situation. In the United States, it has been estimated that during the presidency of Barrack Obama, the welfare programs have increased government expenditures by $1 trillion that could not possibly be sustained in the future. Obama’s legacy is doubling up the national debt to almost $20 trillion.

The global financial crisis of 2008 and subsequent bailouts of banks around the world have created another destabilizing situation in the form of income inequality. The top 10% of the people around the world handsomely benefited from bank bailouts and they became even more rich, while the rest of the people lost ground. Even today, almost a decade later, a majority of people are still struggling. In the United States, stagnant incomes of the middle-class has become an explosive issue in the current election cycle. Globalization of trade has also contributed to stagnant incomes of common people because high-paying manufacturing jobs are being outsourced to emerging economies where the labor cost is much lower than in the western world. In many industrialized cities such as Cleveland, Detroit, and Buffalo, we now see a frighteningly ghostly sight of deserted plants with broken windows and falling roofs, and deteriorating homes and streets.

During the current presidential election, Democratic Party nominee, former Secretary of State Hillary Clinton, has sharply moved to the left to attract the supporters of her primary opponent Senator Bernie Sanders (D-VT), a self-proclaimed socialist. She now promises a minimum wage of $15 an hour, free college education, free health care for all children, and no more trade deals (such as TPP) that have the potential to move high paying jobs from the U.S. to other emerging countries. To pay for all new programs, she proposes to increase the taxes on the rich and corporations that are comparatively already too high. If Clinton wins in the general election, we will see a third Obama term with continuing budget deficits and crushing national debt. The Republican nominee, Donald J. Trump, on the other hand, proposes to increase infrastructure spending and reduce taxes for the middle class and corporations to give economy a big boost. Trump’s overriding focus is on growing economy faster to create more high-paying jobs (Trump also disfavors unfair trade deals such as NAFTA and TPP) and only that will move the recipients of government freebies from welfare rolls to employment rolls. High growth rates will also reduce chronically high unemployment rates among the minorities in the inner cities. The polls consistently show that almost two-third of the electorate thinks that presently the country is moving in the wrong direction which seems to favor Trump’s approach.

If Clinton wins in November, she might keep most of Obama’s policies in place with an emphasis on “tax and spend” philosophy. If Trump wins, his focus would be to cut taxes and spend on infrastructure to stimulate economy, reduce regulations to make it easier for small businesses to thrive, and modify trade deals to discourage migration of high-paying manufacturing jobs to other countries. Only the election will tell where the electorate stands in terms of Republican capitalist approach with reduced government regulations vs Democratic socialist approach to solve the twin problems of stagnated wages and income inequality.

Brexit paves the way for Trump to win the presidency

Posted by Shyam Moondra


Yesterday, the people of the U.K. decided in a close referendum to exit the EU. Supporters of so-called Brexit were jubilant and called the day as Independence Day. The people were basically voting against globalization, influx of uncontrolled immigration of refugees from Syria and elsewhere, and increased terrorism risk posed by open borders within the EU. The same issues are driving the candidacy of Donald J. Trump, the Republican presumptive nominee, here in the U.S.

Trump has been hammering at the issue of unfair global trade deals that are encouraging American multi-national companies to move jobs to less industrialized countries with cheap labor, causing stagnated job market domestically and huge loss of manufacturing base in the U.S. This globalization has amounted to an unprecedented transfer of jobs and wealth from rich countries to developing countries such as China, India, Brazil, Vietnam, Mexico, and others. The workers here in the U.S. have experienced stagnated incomes and increased income inequality that are fueling resentment among the masses. The rise of Trump is no accident; given the global trends, it was inevitable that extreme dissatisfaction among the population will turn into popular movements.

The U.S., like in the E.U, has also had this growing problem of illegal immigrants, numbering in tens of millions from Mexico and other impoverished countries in the region aided by the U.S. open borders. These undocumented immigrants are taxing the government services system and creating a shadow economy that is hurting the country’s economic well being. The U.K., along with other E.U. countries, has had similar economic migration because of passport-less borders within the E.U. In the U.S., the current presidential election cycle has afforded the people a timely opportunity to voice their opposition to illegal immigration. Trump, who has advocated to build a wall along our southern border with Mexico and to deport millions of illegal immigrants, easily managed to capture the support of many Americans who urgently want the immigration reforms. Hillary Clinton, the Democratic presumptive nominee, has in fact opposed Trump’s proposal to build the wall on the southern border with Mexico and she has also spoken against deporting millions of illegal immigrants who are already here in the U.S.

In the wake of growing violence in the Middle-East caused by the rise of ISIS, millions of refugees from Syria, Iraq, Libya, and elsewhere are trying to migrate to the EU and the U.S. This huge influx of migrant asylum seekers in the West has created an opening for ISIS jihadists to enter the EU and the U.S. as refugees and engage in Islamic terrorism. In recent months, we have had a marked increase in terrorist acts in France, Belgium, Germany, and the U.S. that has been attributed to ISIS. Many local residents resent their governments agreeing to let thousands of refugees with possibly fake Syrian passports enter their countries and increase the risk of terrorist acts in their own homeland. President Barack Obama, in spite of reservations expressed by many security experts, has continued to let thousands of migrant refugees come to the U.S. In fact, Clinton has said that she will increase the number of these refugees who are allowed to settle in the U.S. over and above proposed by Obama.

The nationalist feeling has been on the rise in the West and the Brexit referendum is the first concrete proof that the people want less globalization, better control of their country’s borders, and more strict standards for allowing migrant refugees to enter their countries on asylum. Trump’s “America First” is not just a slogan; it is a heartfelt expression of millions of people around the world and they want their governments to put them first. The Brexit referendum has strengthened the basic premise of Trump's political campaign and he may very well win the presidency in November, albeit by a small margin.