16 October 2018   Leave a comment

The global economy produces about $80 trillion worth of “stuff” every year.  That figure measures what the global market counts as economically valuable as determined by the prices at which goods and services are sold.  It is not necessarily what each one of us might regard as valuable (there are many things for sale in the market that many of us would never think of buying, and far more things that many of us would never consider selling).  But it is a measure of what people are willing to buy and sell, and that economic activity is broken down by states.

The fiscal year just ended for the Federal government and it ended with a 
$779 billion deficit.  That deficit is 17% more than it was last year and the increase is quite dramatic given that the country has a booming economy and is not fighting a major new war.   Government spending last year only grew by 3% so the deficit is largely the consequence of much lower tax receipts because of the tax cuts passed by Congress last year.  Most strikingly, corporate tax revenues declined by 31% despite large increases in the profitability of companies in the US because the corporate tax was reduced from 35 to 21%:  “Corporate profits jumped 15.4% year-over year in the first half of 2018, compared with a rise of just 6.1% in the first half of 2017, before the tax cuts went into effect. That’s the biggest semi-annual jump in profits since 2012.” The tax cuts were passed on the assumption that they would increase economic growth substantially and therefore tax revenues.  That assumption does not appear to be valid.  At some point, the deficit will become unsustainable, at which point taxes will have to be raised or government spending has to be cut.  How that pain will be distributed is a question of great political moment. 

It is very difficult to determine US policy in Syria.  President Trump made it very clear when he was a candidate that he favored a US pullout from the country.   But US commitments to Israel and Saudi Arabia to contain Iran in the region make keeping that promise.   President Trump’s National Security Adviser, John Bolton, has been quoted as saying: “We’re not going to leave as long as Iranian troops are outside Iranian borders and that includes Iranian proxies and militias.”  Colin P. Clarke and Ariane Tabatabai have written an essay for The Atlantic which outlines the long-term difficulties of the inability to define precisely US goals in Syria. 

Posted October 16, 2018 by vferraro1971 in World Politics

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