I’ve been warning since the 2016 election that the presidency of Donald Trump would be bad for our nation, and even our world. My primary concern centered on the probability that President Trump would be faced with a disaster he just couldn’t solve, due to a combination of ignorance and a complete inability to lead.

Frankly I thought it would be a geopolitical problem and so far he appears to have dodged that.

But this week, I believe, was his reckoning.

Almost from his first day in office he bragged about success in the Dow Jones average. Necessary spoilers: the Dow Jones average isn’t the economy and there is reason to believe that the Standard and Poor’s 500 Index is a better gauge. But everyone looks at the DJIA so here we are.

And for the past 3 years I’ve heard from Trump supporters that they are willing to overlook his lack of a moral compass, his history of sexual assaults, and, well you get the message. The one thing they tell me is that he has been good for the economy. They tell me that Trump will make them rich and nothing else matters.

Until last week. You can read about this here: in five days the index lost 3,583 points or 12.4%

It’s the consensus that this downturn is a direct result of the recent Corona virus also know as COVID-19. These things happen when you’re president. The virus began in China but has now spread globally. The need to limit travel of people and goods badly impacts the world’s economies and global stock markets’ downturn results directly from this.

So what do you do if you’re President Trump? Well, that’s the problem. In 2018 he fired the Pandemic Team from the Center for Disease and Prevention. They were the scientists who would have been the front line of battling the Corona virus. But they’re gone.

Instead he went to his playbook: claim credit for everything that goes well and blame others for everything that goes wrong.

And that’s what he’s done. He’s blamed the Democrats and the media for the downturn. He’s also tried to downplay the seriousness of the pandemic.

Speaking as both a Democrat and blogger let me say this: despite what you’ve heard, we don’t want this to happen. An economic downturn not only hurts our retirement savings it also hurts the most vulnerable among us. Our taxes depend on three things: income (income tax), purchases (sales tax), and property values (property tax). A recession hurts all of these: rising unemployment lowers income tax. People who are out of work (or fear becoming out of work) don’t buy things. People who fear an economic downturn put off moving and this lowers property values and therefore taxes.

Simply put, our history tells us that when government has to cut or eliminate programs it doesn’t hurt the wealthy, it hurts the poor and vulnerable.

It looks like it’s going to be a tough ride.

A year and a half ago I argued against the Republican belief that cutting taxes will benefit the economy and pay for themselves. Granted, tax cuts can increase consumer spending in the short run and that’s good for the economy. But it also balloons the budget deficit and the national debt.

Now, in August of 2019, we see signs of an upcoming recession. This is nothing but bad news for President Trump as a recession would likely doom his reelection.

Hoping to stave this off, in the last few days he’s suggested another round of cuts to payroll taxes (in fairness, as I write this, he now claims he’s not considering it). Then again, since he reacts to the last thing he saw on Fox TV who can tell what will happen?

There are times when higher deficits make sense, and President Obama’s quick action to recover from the Great Recession added to both the deficit and the debt. Ironically, this led to a recovery that lasts to this day, and a recovery that President Trump claims credit for.

But our economy rises and lowers, booms and busts. Frankly we are overdue for a downturn. President Trump clearly hopes not so much to prevent the inevitable next recession as to delay it until after the election 15 months from now.

But here’s the problem: his proposed payroll tax cuts work like taking cash advances on your credit card. Responsible consumers sometimes use cash advances in a short term crisis. But responsible consumers know that they need to plan a path to their repayment. Maybe the need cash to relocate for a better job or make a necessary purchase. Irresponsible consumers, who don’t have a repayment plan, learn eventually that they’ve dug a hole they can never climb out of.

Unlike the United States, irresponsible consumers can declare bankruptcy. Our nation can’t.

And we are led by a President who has declared bankruptcy six times.

Can somebody tell him that the United States economy can’t?

From his earliest days on the campaign trail President Trump has promised tax reform. As with many Republicans he bought into the fiction of supply side economics, previously known as trickle down economics. This theory claims that if we cut taxes more people will have more money. They will spend that money and create more wealth that will more than make up for the loss in tax revenue. Many of us argue that this is popular not because it’s true but because makes us feel good, much like the Atkins Diet. It doesn’t help people lose weight in the long run but it’s popular because it tells overweight people that they can eat bacon and cheese omelettes and still lose weight.

Last week the President signed into law a tax reform bill that he claims will be good for America, particularly the middle class. Additionally he claims it will hurt him. Of course since we don’t have access to his tax returns we can’t say, but he has often bragged about his wealth and since this bill will lower the highest tax bracket from 39.6% to 37%. And while 2.6% may not sound like much, if you claim taxable income of $100 million (not unheard of among the wealthiest), that 2.6% pencils out to $260,000, or a little over a quarter of a million dollars. That may not be much for Mr. Trump, but it is for the rest of us.

Many of us looked at this tax bill with hope as Republicans have often claimed that they are the party of fiscal responsibility, as opposed to Democrats who they characterize as the party of “tax and spend.” They claim the Democrats want all our money only to figure out how to spend it on frivolous programs that cause more harm.

We counted on Republicans like Ron Johnson of Wisconsin and Jeff Flake of Arizona who promised not to vote for a tax package that would increase the federal deficit. By the way, I wrote an earlier article on the difference between the federal deficit and debt.

So how do they get around this? They lie. They claim the tax cuts will pay for themselves but that depends on unsustainable economic growth. You can read an this article but basically Presidents have little control over economic growth. Anything less than hopelessly optimistic economic growth will balloon both the deficit and the debt.

Don’t care about this? Fine. But if you have children, grandchildren, nephew, nieces, or young people you care about you need to explain to them how they will have to repay the debt you saddled them with. It’s a little like using cash advances to pay for frivolous purchases with the knowledge that if you do it for long enough you won’t have to clean up your own mess.

To quote our President, let’s see what happens.

It strikes me that we’ve been hearing a great deal about President Trump’s promise to cut taxes.  It’s not a new promise, nearly every politician claims this.  I have to confess some amusement that these promises also claim to improve the economy.  In my last post I spoke about the false promise to close loopholes.

Here I want to talk about the difference between the national debt and the budget deficit. Alas, most of the time these two things are talked about as if they were the same thing. They’re not.

By way of explanation let me start with debt and deficit in our own households. Many of us owe money to someone. If you’re making payments on your home, or car, or credit cards, you have debt. You’ve convinced someone to lend you money to pay for something you can’t pay cash for. Your lender (likely a bank) trusts you to pay both the money and interest over time, and if you can’t they can take whatever they financed. Or, if you borrow money on a credit card and can’t pay that back, they can report you to a credit bureau and make it harder to borrow money in the future. The government borrows a lot of money. As I write this the government debt is $20,453,245,142,792.62. If you’re keeping track it’s over $20 trillion.

In other words, our government owes $20 trillion dollars. Fortunately 68% is owned by Americans. Every time you give one of your grandchildren a savings bond you own part of the national debt. You lend the government money and the government pays you back with interest after a fixed time.

That’s the good news. The bad news? While we own 68% of our debt, the rest (32%) is owned by other nations. As I write this, China and Hong Kong own 6.9%. That may not sound like much but 6.9% of $20 trillion dollars translates to $141,127,391,485, or a shade over $141 billion (I hope I have the math right). If they want, they can demand immediate payment and cause a great deal of panic in our markets.

But that’s not what concerns me the most. I’m more concerned over the need to continue to borrow money. Every year the our government spends more money than it collects, we need to borrow money to close the deficit. If we translate this into our household budgets, it’s like going to your bank and telling them that you need a loan because last month you spent beyond your means. Not only that, but you expect to come back next month, and the month after that, and…well you get the point. At some point your bank (or for that matter, your loan shark) will simply refuse to lend you more money, believing eventually you’ll just give up and stop trying to repay your debt. But if you’re the United States you can continue to print savings bonds without limit. Unless something happens to change this trend there will be a limit: there will be a point where people (and nations) will begin to distrust our ability to pay back the loans and will stop lending money.

It doesn’t have to be like this. Many of us have seen our government run budget deficits for so long that it seems like a given. But it’s not. You can read the numbers here but the last few years of the presidency of President Bill Clinton we actually ran a surplus and had the opportunity to pay down the debt.

As I write this President Trump and Congress are rolling out a tax plan that will cut taxes (and revenue) but will likely dramatically increase the deficit and debt.

Since we are currently led by a President who promises America First it’s odd that his tax policy will make us increasingly debtors of other nations.

In my last post I spoke about President Trump’s promise to reform taxes by closing loopholes and make filing your taxes easier, perhaps even on a postcard.

But that part of tax reform matters only to those taxpayers who itemize. If you file a tax return you have the choice of taking the standard deduction or itemizing. Here’s my layman’s explanation: Your employer is required to send you a W2 form that shows how much money they paid you the previous year. That’s your gross income. You now have to choose whether to take the standard deduction or itemize your deductions.

Currently the standard deduction is $6,350 if you are married but filing separately from your spouse. It’s $12,700 if you and your spouse file jointly. If you’re single and head of your household it’s $9,350. You deduct this number from your gross income and it becomes a taxable income. According to the Tax Foundation, 68.5% of filers do this.

But if you’re in the early years of an expensive mortgage, if you donate lots of money to charities, or if you’re eligible for some of the countless other deductions, you may want to itemize. If these deductions total more than your standard deduction it makes sense to itemize. From the Tax Foundation 30.1% of taxpayers do this. OK, if you’re doing the math that leaves 1.6%. Those are taxpayers who don’t make enough money to pay anything in taxes.

This brings us to the end of part 1: determining your taxable income. Part 2 determines how much tax we pay on this income. But what percentage do we pay? When the government began collecting income taxes in 1913 it was determined that the wealthy would pay a higher percentage of their income than poor people: they created tax brackets. They specifically did not institute a flat tax (where everyone would pay the same percentage of income), arguing that those with higher incomes could afford to pay a higher percentage than those with lower incomes. From time to time politicians suggest a flat tax and I wrote about it in 2011.

Currently we have 7 tax brackets, and those in the highest bracket (39.6%) report a taxable income of $418,400 or higher. President Trump proposes only 3 brackets, and lowers the highest rate from 39.6% to 35%. And yet he claims this won’t benefit him or the rest of the 1%.

Simply put, it’s not true. In my last post I argued that his promise to close loopholes won’t happen and in this post I’m claiming that lowering the tax rate for the wealthiest will benefit only themselves.

More later.

While on the campaign trail President Trump spoke often about the need for tax reform. He promised lower our taxes.

From our earliest days we Americans have yearned for tax relief. Benjamin Franklin (1706-1790) is widely believed to claim that the only things we can’t avoid are death and taxes.

As a hospice chaplain I tell you how hard we try to avoid both. I’m not normally a fan of the “good old days” but there was a time when many Americans saw paying taxes as a form of patriotism. You can see a funny Donald Duck video from 1943 that tied taxes into support for World War II.

But the IRS 1040 form from 1943 was only 4 pages long. In fairness, the 1040 from 2016 is only 2 pages long, but the instruction book for the 1040 is 106 pages long. Clearly paying taxes has become much more complicated.

Republicans promise to reduce our tax returns to a postcard. But here’s the thing: it’s already easy if you don’t care how much you pay. Filing taxes requires to do two things: finding the difference between gross income and taxable income, and finding out how much we owe based on our taxable income.

Most of us (myself included) hire someone to do our taxes (and if you live in San Diego I strongly recommend Mark Young). But we need to hire someone to find the difference between gross income and taxable income. We can deduct from our gross income the money we spend on charitable donations, interest on home loans, and countless other things. Simply put, the government uses deductions to encourage certain behaviors. The government wants us to donate money, purchase homes, etc, and they encourage us to do these things by giving us a tax break.

But if you don’t care about this, all you need to do is declare your gross income as your taxable income. If you do this, all you need to do is look on a simple table to see how much you owe and pay it. This would take less than a minute.

And when politicians promise to “close loopholes” they are promising to eliminate deductions and make your gross income closer to your taxable income. But every loophole has a lobbyist whose salary depends on keeping that same deduction. Do you want to eliminate the home mortgage interest deduction? Good luck. You’ve declared war on the National Association of Realtors. Do you happily donate money to your local charity? Good luck. Expect pushback from your church, the Salvation Army, the Red Cross, the San Diego Blood Bank, and well, you get the point.

In fairness President Trump has promised to keep deductions for mortgage interest rates and charities. But look over your last tax return and see how many deductions you were able to take. If the only difference between your gross income and taxable income came from these two places, how much more is there? Are you willing to lose those deductions?

I don’t think so and I don’t think President Trump can pull this off.

There’s much more to this and I’ll be writing more. Stay tuned.