Good Riddance To Steve Bannon—Apostle Of Rightwing Statism, Part 1
We don’t think Steve Bannon should go to jail just because he and his associates skimmed a little off the top from the freewill offerings of people who were stupid enough to send them money to build the Mexican Wall. The latter were going to get fleeced anyway—-so if you want to make a crime out of “go-fund-me” scams, you better build a lot of new jails.
Still, when it comes to the nasty, baleful influence of Steve Bannon on the Donald and today’s intellectually lobotomized GOP, we say double good riddance. For the fact is, the scourge of Bannonism provides an illuminating window on why it’s all going so wrong for the Trumpite-GOP.
The basic point is that Bannonism is 100% off base. The the last thing America needed after decades of misrule by the bipartisan duopoly was a
1. conservative/populist/statist/nativist alternative to the
2. Welfare State/Warfare State/Bailout State status quo.
Yet what Bannonism boiled down to was essentially acquiescence to the latter. In fact, as a result of the Donald’s foolish lurch into Lockdown Nation and the Everything Bailouts, the domestic welfare state has mushroomed to levels relative to GDP that FDR, LBJ and Hubert Humphrey never even dreamed about.
To wit, when the Gipper came to town in 1981, Federal transfer payments—-as good as proxy for the Welfare State as there is—weighed in at $322 billion, which amounted to 10.3% of GDP. By the time he left office in Q4 1988, a small dent had been made: Transfer payments at $493 billion amounted to 9.2% of GDP.
After that it was off to the races. By Q4 2000 as Bill Clinton was packing his bags to shuffle out of the Oval Office all of the Reagan era gains had been lost, and when Bush the Younger finished his term in Q4 2008, transfer payments had soared to $1.86 trillion per annum and 12.7% of GDP.
Some folks in the Obama White House and Capitol Hill kept the figure rising. By Q4 2016, Federal transfer payments had risen to $2.64 trillion per annum and 13.9% of GDP.
Needless to say, the Bannonized Trump agenda did not even recognize transfer payments as a problem. By the eve of the pandemic in Q4 2019, Federal transfer payments had soared to $3.04 trillion at annualized rates; and then, of course, all hell broke loose with the serial Everything Bailouts.
By the end of Q2, Federal transfer payment spending totaled $6.27 trillion and amounted to a staggering 32.2% of GDP.
As we said, the Donald may have come to town to drain-the-swamp, but once Bannonized the Trump White House did not even recognize that the Welfare State is part and parcel of the Swamp; or that using its capital to pump up the already bloated Warfare State by another $250 billion per annum only made the Swamp on both sides of the Potomac impossibly deeper.
Needless to say, instead of tackling the real problems—the Warfare State, the Welfare State and the Federal Reserve–the Bannonized Trump administration drove politics and statist intrusions ever deeper into the sphere of culture, communications and commerce. That is, under the tutelage of Bannon, the Donald whiffed on his real job and went off to tilt at windmills in the Culture Wars.
Stated differently, the heavy hand of the Imperial City in traditional domestic, foreign and financial matters was already bad enough. But Bannonism was no alternative: It just gave a thin veneer of nationalism and law and order authoritarianism to what was otherwise the Donald’s own dogs’ breakfast of
· protectionism,
· nativism,
· jingoism,
· strong-man bombast and
· right-wing Big Government.
By the latter, of course, we mean Trump’s (and Bannon’s) essentially content free notion that America was falling from greatness mainly due to stupidity, corruption and a penchant for bad deals among Washington pols; and that the undeniable economic malaise, if not decline, of Flyover America was due to some kind of global grand theft from America.
That is, what rightly belonged to America was being stolen by immigrants, imports and the nefarious doings of foreign governments and globalist elites. What was needed to make America Great Again (MAGA), therefore, was a powerful Washington counter-attack and series of state-erected moats to hold back the tide of bad people and unfair foreign economic assaults.
And, along with that, a new sheriff in the Oval Office with the “smarts” (with which the Donald believed himself amply endowed) to start “winning” again.
In truth, the Donald had it upside down from the beginning. The unfortunate arrival of Steve Bannon to his campaign back in August 2016 only served to give the Trump’s disheveled basket of bromides, braggadocio and bile a rightist political edge and proto-intellectual rationalization.
The real problem, in fact, was not the inward flow of evil into the American homeland from abroad — whether imports, illegals or terrorists. Rather, it was the outward flow of Washington’s monetary and military imperialism that was gutting capitalist prosperity domestically, off-shoring much of the middle class economy and generating terrorist blow-back from abroad.
Bannonism never identified the real culprits: To wit:
- the Wall Street-enriching
Bubble Finance policies of the Fed, which forced foreign central banks to
buy dollars and trash their own currencies to keep their exports
“competitive”;
- The Fed’s drastic falsification
of interest rates and financial asset prices, which caused Wall Street to
strip-mine main street business to fund financial engineering and the vast
inflation of stock prices owned by the top 1% and 10% of households;
- the
military-industrial-intelligence-foreign aid complex of the Empire, which
massively drained America’s fiscal and moral resources;
- the hugely insolvent
institutions of the Welfare State social insurance system (Social Security
and Medicare) that guarantees inter-generational warfare within a very few
years; and
- the prodigious level of Federal spending on means-tested
entitlements (Medicaid, food stamps EITC, etc.) that has resulted in 110
million American’s living in households on the dole.
Consequently, the GOP’s Bannonized agenda had no inkling, either, that fiscal catastrophe was imminent. And that the Trump administration had no real choice except the politically unpalatable path of cutting spending and/or raising taxes.
Or, in the alternative, eventually getting buried by the inherited fiscal tidal wave cresting at the end of a failing octogenarian recovery that reached its 128th month in February—a wave that has now been drastically aggravated by the folly of Lockdown Nation and the Everything Bailouts designed to make-whole its household and small business victims.
Nor did it grasp that the real cause of Flyover America’s distress is the Fed’s multi-decade regime of financial repression and Wall Street price-keeping policies that—
- deplete the real pay of workers
and send jobs abroad via the FOMC’s absurd 2% inflation target;
- savage the bank balances of
savers and retirees via ZIRP and near-ZIRP;
- gut jobs, investment and real
pay in the business sector via the C-suites’ strip-mining of corporate
balance sheets and cash flows to fund Wall Street-pleasing stock buybacks,
fatter dividends and M&A empire building; and
- impale the bottom 80% of
households on a treadmill of unrepayable (temporarily) cheap debt in order
to sustain a simulacrum of middle class living standards
.At the same time, these pernicious monetary central planning policies did fuel the greatest (unsustainable) financial asset inflation in recorded history, thereby showering the top 1% and 10% with upwards of $63 trillion of windfall wealth (on paper). That is, between Q2 1987 and Q1 2020, household financial assets soared from $13 trillion to $87 trillion—-with approximately 85% of the gain going to the top 10% of households.
At bottom, the Fed’s financial repression and wealth effects policies amounted to an egregious variation of the old “trickle-down” theory — sponsored and endorsed by the beltway bipartisan consensus and administered from the Eccles Building with mindless zeal.
It is no wonder, therefore, that in 2016 Trump’s flawed candidacy and pastiche of palliatives and pettifoggery appealed to the left-behind working classes of western Pennsylvania, Ohio, Michigan, Wisconsin and Iowa — as well as to the retirees of Florida and culturally-threatened main streeters domiciled in the small towns and countryside of Red State America.
In these precincts, the election was not especially won by Trump. Rather, the electoral college was essentially defaulted to him by a lifetime denizen of the Imperial City. Hillary Clinton had no clue that war, welfare and windfalls to the wealthy were no longer selling in Flyover America.
Then again, Bannon’s raw nationalism and the Donald’s walls and trademark xenophobic expostulations were not remotely up to the task of ameliorating America’s actual economic, fiscal and financial ailments. That’s because it was not bad trade deals and thieving foreigners that accounted for the post-2000 stagnation of median household incomes, huge loss of middle-income jobs and the actual decline of real net investment by the business sector.
To the contrary, the vast off-shoring of American production and breadwinner jobs was due to wage arbitrage — fueled and exacerbated by the Fed’s chronic and increasingly profligate easy money policies. The latter resulted in an explosion of household borrowing that sucked in cheaper foreign goods and the continuous inflation of domestic costs, wages and prices, thereby curtailing US exports and encouraging massive import substitution.
Two figures are worth thousands of words and nullify all the econometric equations they have been stuffed away in the Eccles Building computers. To wit, since June 1987 (right before America got Greenspaned), nominal wages (purple line) have risen from $9.11 to $23.84 per hour or 162% while real wages (brown line) are up by just 4%.
And that encompasses a span of 33 years, meaning that the average wage gain after inflation has been a paltry 0.12% per annum.
Growth of Nominal Wages Versus Real Wages, 1987-2020
The juxtaposition above is a screaming indictment of Keynesian central banking. The academic fools who man the printing presses at the Fed and its global counterparts pretend that domestic inflation is benign and symmetrical.
That is, [pretend that] the treadmill captured by the brown line is not harmful because purportedly wages, costs and prices all march in lock-step over any reasonable period of time to the beat of the 2.00% inflation drummer-boy at the central bank. Nobody looses as the price level steadily rises—even as the economic goodness allegedly bestowed by 2.00% inflation fuels the growth of the macro-economy.
That’s pure humbug. The impact of inflation domestically is anything but symmetrical. All workers face the same CPI on the cost of living side, but highly differentiated wage inflation, depending on whether their employer competes with
· China Price for [manufactured] goods, the
· India Price for services, the
· Mexico Price for assembly, the
· Pilates Instructor [US] Price for services [provided in the US] [You can expect to make about $25 per class in a gym and about $40-$50 per private lesson in a Pilates studio.Dec 2, 2019] or the
· Civil Service Price for government output.
For example, the cumulative hourly wage increase between June 1987 and June 2020 for all production and non-supervisory workers was 162%, as shown in the purple line in the chart above.
However, the increase for manufacturing workers during that period was only 127% per the black line in the chart below, while for health and education workers it was 197% (red line).
In annualized terms, therefore, manufacturing wages barely kept up with the inflation rate as measured by the 16% trimmed mean CPI (purple line), while health and education worker wages beat inflation by nearly a full percentage point per annum:
Average annual change, June 1987 to June 2020:
- 16% trimmed mean CPI: 2.51%;
- Manufacturing hourly
wage: 2.59%;
- Education and Health hourly
wage: 3.35%.
Obviously, manufacturing workers got hammered by the China Price in world trade whereas health and education workers were more or less shielded by domestic government monopolies and provider cartels.
As a consequence, the Fed’s pro-inflation policy hurt manufacturing workers a lot more than health and education workers. But the real economic crime of the 2.00% inflation target happens in the globally traded space, which is a lot larger than is often recognized.
In fact, the baleful impact on jobs, trade and prosperity in Flyover America was far worse than just the loss of middle class jobs, as we will document further in Part 2.