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    The Guardian view on Starmer’s aid cuts: they won’t buy security, but they will undermine it | Editorial

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    Politics is about choices. Some are forced on governments by circumstance. Others are self‑imposed. Labour’s decision to cut the aid budget to “pay” for increased defence spending is firmly in the latter category. It is also wrong – forcing the world’s poor to pay for Britain’s safety. This is a false economy. Cutting aid will make the world more unstable, not less. The very crises that fuel conflict – poverty, failed states, climate disasters and mass displacement – will only worsen with less development funding. Labour’s logic is self‑defeating: diverting money from aid to defence does not buy security; it undermines it.The numbers tell the story. Despite government attempts to inflate the amounts involved, the extra £5bn‑£6bn for defence is tiny relative to Britain’s GDP. The UK could easily absorb this through borrowing – especially in a global financial system where sterling is heavily traded – or, if the government prefers, through a modest wealth tax. Yet Sir Keir Starmer has chosen to frame this as a zero-sum game, where aid must give way to security. Why? Because this is not about economic necessity – it’s about political positioning. Labour wants to prove that it can be fiscally disciplined even when the numbers don’t demand it. It wants to neutralise Tory attacks, even when the real battle is over priorities, not affordability.It is also a move that aligns with Donald Trump’s worldview. The US president wants to close down the US government’s main overseas aid agency, treating it as an expensive indulgence rather than a pillar of foreign policy. Sir Keir is set to go to Washington this week. A UK prime minister that echoes Mr Trump’s “America first” instincts on defence and aid may find the meeting more congenial. If so, Sir Keir may be taking the idea that “the meek shall inherit the earth” a little too literally.Labour doesn’t just believe in fiscal discipline, it believes that it must believe in fiscal discipline and it constructs a justification for that belief. The problem is this: by accepting Conservative trade‑offs, Labour locks itself into an orthodoxy that it may later need to break. In a volatile world, Britain – outside the EU – must boost high-value exports and cut reliance on fragile supply chains. Even under Joe Biden, the UK was kept out of the US-EU Trade and Technology Council, which strengthened transatlantic industrial policy. Yet when does Downing Street admit Britain’s real limit is productive capacity – not budget deficits?Britain’s fiscal constraint is artificial, but its resource constraints are real. Energy, food and manufacturing are matters of national security, not just market functions. Without investment, dependence on key imports makes Britain vulnerable to supply-chain shocks and price inflation. That should make the announcements by Labour’s Ed Miliband and Steve Reed matter. If every pound spent requires a cut elsewhere, neither would have had much to say.Sir Keir often presents himself as a pragmatist rather than an ideologue – claiming to be adapting to circumstances rather than adhering to dogma. But such pragmatism is itself a belief system, one that treats capitalism’s rules as unchangeable, markets as beyond politics, and history as a one‑way street where past mistakes justify permanent, crippling caution. In doing so, he isn’t just rejecting alternatives – he’s rewriting history to suggest they were never an option to begin with.Do you have an opinion on the issues raised in this article? If you would like to submit a response of up to 300 words by email to be considered for publication in our letters section, please click here. More

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      Modi heads to US in mission to dodge a tit-for-tat tariff battle

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      The Indian prime minister, Narendra Modi, is heading to Washington for high-stakes talks in an attempt to avoid a trade war with Donald Trump.India is considering tariff cuts in at least a dozen sectors in the hope of dodging US tariffs that would pile more pressure on its already slowing economy.Wednesday’s meeting will test the much-hyped “bromance” between Trump and Modi, in which they exchanged bear hugs and effusive compliments during the president’s first term. Trump has called Modi “the nicest human being”, while the Indian prime minister has referred to the president as his “dear friend.” Both are populists who rose to power on waves of anti-establishment ardour and nationalism.The Indian foreign secretary, Vikram Misri, told reporters that the fact the prime minister had been invited to visit the US “within barely three weeks of the new administration taking office, shows the importance of the India-US partnership”.Trump has not held back his frustration over India’s high tariffs, labelling the country a “very big abuser” and accusing it of blocking US imports.Modi’s two-day visit comes shortly after Trump announced a 25% tariff on global steel and aluminium imports into the US. Calling the tariffs “the first of many”, the president indicated there could be levies on cars, chemicals, pharmaceuticals and other goods. He is planning a system of “reciprocal tariffs”, saying: “If they charge us, we charge them.”The metal tariffs have rattled India’s steel and aluminium industries, which export good worth billions of dollars to the US each year. The Indian Steel Association said on Tuesday the steel tariff was “expected to slash exports to the US by 85%”.In an effort to pre-empt punitive trade action, in its budget last week the Indian government cut duties on a range of goods, including high-end motorcycles such as Harley-Davidsons. It is also considering tariff cuts on other products, including electronics, medical and surgical equipment, chemicals, dish antennae and wood pulp, many of which originate in the US.Bilateral trade has been growing steadily, surpassing $118bn (£95bn) in the last financial year, with India running a $32bn trade surplus. Trump says he wants a relationship that is more “fair” while India says it is open to discussing a limited trade deal to address US concerns about market access.Trump has urged Modi to buy more US defence and energy products, with India presenting a lucrative market as the world’s largest arms importer. Nuclear energy, including small and modular reactors, is also on the agenda, as India seeks to expand its clean energy sources to meet decarbonisation targets. Reports suggest India is already in talks to buy combat vehicles and finalise a fighter jet engine deal.Another significant issue is Trump’s crackdown on illegal migration. The president says Modi has assured him India “will do what’s right” on the matter.The US last week deported 104 Indian migrants and plans to return many more. Images of deportees in shackles during a 42-hour military flight prompted public anger in India, with a senior Indian government official responding that “this kind of treatment can perhaps be avoided”. Discussions are expected to focus on managing the return of hundreds of other Indian nationals to be deported.Modi will also push for expanding H-1B visas, which are vital for the Indian IT workforce in the US. Importantly for Modi, Trump has expressed support for the H-1B visa programme, which brings skilled foreign workers to the tech sector. Elon Musk has backed the H-1B visa scheme, saying it drives innovation but, highlighting the ideological divide among key figures in Trump’s orbit, Steve Bannon and other Maga voices argue that H-1B visas siphon jobs and undermine American workers.Modi has framed his visit as an opportunity to build on the successes of the US-India partnership, in particular in technology, defence, energy, and supply chains. But his immediate mission is to keep trade relations from spiralling into a damaging tit-for-tat tariff battle. More

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      Trump’s tariff threat sets stage for bitter global trade war

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      Donald Trump’s threat to impose steep tariffs on goods imported into the US has set the stage for a bitter global trade war, according to trade experts and economists, with consumers and companies warned to brace for steep costs.The president-elect announced on Monday night that he intended to hit Canada, Mexico and China with tariffs on all their exports to the US – until they reduce migration and the flow of drugs into the country.As officials in the three countries scrambled to respond, Keith Rockwell, a former director at the World Trade Organization, predicted that Trump’s move could spark a trade war. “The United States exports hundreds of billions of dollars worth of goods to these countries,” he said. “Anyone who expects that they will stand pat and not retaliate has not been paying attention.”China promptly suggested that both sides would lose from an escalation in economic tensions. “No one will win a trade war or a tariff war,” Liu Pengyu, a spokesperson at the Chinese embassy in Washington, wrote on X, formerly Twitter. Chrystia Freeland, Canada’s deputy prime minister, and Dominic LeBlanc, its public safety minister, touted the country’s “balanced and mutually beneficial” economic ties with the US.Hours after Trump issued the announcements on Truth Social, his social media platform, economists at ING released research that estimated his broader campaign proposals on trade – including a universal tariff of between 10% and 20% on all goods imported from overseas, and a 60% tariff on all goods from China – could cost each US consumer up to $2,400 each year.“This potential increase in consumer costs and inflation could have widespread economic implications, particularly in an economy where consumer spending accounts for 70% of all activity,” James Knightley of ING said.It is unclear whether Trump, who has described “tariff” as “the most beautiful word in the dictionary”, will follow through on this plan. Tariffs – levies paid for by the company importing foreign goods – are not popular with voters, even Trump’s voters. A Harris poll conducted for the Guardian found 69% of people believe they will increase the prices they pay.And while he threatened universal tariffs while campaigning for the White House, this proposal – a 25% duty on all goods from Mexico and Canada, and a 10% duty on China, on top of existing duties – is more targeted.“Trump’s statements clearly herald the dawn of a new era of US trade protectionism that will sweep many US trading partners into its ambit,” said Eswar Prasad, former head of the IMF’s China division. “Such tariffs will have a disruptive effect on US as well as international trade, as countries around the world jockey to soften the blow of US tariffs on their own economies and try to find ways to evade the tariffs.”On the campaign trail, Trump and his allies claimed such measures would help strengthen the US economy and “make America wealthy again”. Many economists took a different view, warning that sweeping tariffs would increase the price of goods for US consumers, and risk prompting other nations to retaliate, hitting US businesses exporting goods to the world.But in his announcements on Tuesday, Trump did not focus on the economic benefits has claimed tariffs would bring. Instead, he blamed Mexico and Canada for “ridiculous Open Borders” he alleged were prompting an immigration crisis, and China for “the massive amounts of drugs, in particular Fentanyl” arriving in the US – and pledged to impose tariffs on these countries until they addressed his concerns.“Trump apparently sees tariffs as a tool with broad uses in tackling a variety of malign external factors that have adverse effects on the US economy, society and national security,” noted Prasad, now a professor of trade policy at Cornell University.skip past newsletter promotionafter newsletter promotionThe billionaire hedge fund manager Bill Ackman, who endorsed Trump, wrote on X that the president-elect “is going to use tariffs as a weapon to achieve economic and political outcomes which are in the best interest of America”, in a bid to deliver on his “America First” policy strategy.Making such announcements on social media “is a great way for Trump to effect foreign policy changes even before he takes office”, Ackman claimed.As Trump builds out his broader trade strategy, Rockwell, formerly of the WTO, said a 10% universal tariff would me “more manageable” than 20%. “But if you raise it 20%, that creates a different dynamic,” he said. “You’re going to see much, much less demand for these products coming in.“There will also be, without any doubt, retaliation,” he added. European officials “have got their list drawn up”, he said. “It’s the most closely guarded secret in Brussels, but it’s drawn up.”Countries will hit back with tariffs on “political pinch points”, Rockwell predicted. Under the last Trump administration, the European Union targeted US exports including Harley-Davidson bikes, Levi’s jeans and Kentucky bourbon. More

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      Trump scapegoats migrants again at Georgia event meant to discuss economy

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      At an event intended to tout economic policies that would usher in what his campaign calls a “new age of American industrialism”, Donald Trump spent as much time discussing personal grievances and blaming immigrants for everything from fentanyl overdoses to crime and taking Americans’ jobs as he did discussing the economy.“This is a speech on economic development but this is a big part of economic development,” the former president said of immigration at a speech in Savannah, Georgia, on Tuesday.After about 30 minutes of sticking to prepared remarks about the economy, Trump’s speech veered into other topics like immigration, much to the crowd’s delight.“Close the border!” a man in the crowd yelled as Trump said that undocumented immigrants were responsible for myriad ills.Some of the loudest cheers from a crowd of about 2,500 came when the Republican presidential nominee claimed that the United States already has much of what it needs to become an “economic powerhouse”, as he put it, including natural resources, skilled workers and leading companies.“The only thing we don’t have is smart people leading our country,” Trump said.Among other promises – including reducing Americans’ energy bills by half and claiming he would “prevent world war three” – Trump said he would revive American manufacturing and restore it to “how it was 50 years ago”. Trump also said he would block the sale of US Steel to the Japanese company Nippon – a plan that Joe Biden has said he plans to block.The former president bashed electric cars – with the exception of those made by his supporter Elon Musk – a perhaps odd tactic considering the ongoing construction of a $5.4bn Hyundai electric car plant that will employ 8,500 workers and has been lauded by Georgia governor Brian Kemp. Trump didn’t mention the plant or Kemp in his remarks.Trump then became sidetracked with immigration, questioning Kamala Harris’s intelligence and patriotism, and reliving an assassination attempt in July in Pennsylvania and another scare in Florida earlier this month.Trump claimed it had been more than luck that saved his life the day he was grazed by an assassin’s bullet.“People say: ‘It was God, and God came down and saved you because he wants you to bring America back,’” Trump said as the crowd began to chant “USA!”Eventually returning to the economy, Trump said a plan to give away federal land to companies willing to build manufacturing facilities there would prompt “entire industries” to relocate to the United States.skip past newsletter promotionafter newsletter promotionHe also said he would cap the tax rate for corporations at 15% – but only for companies whose products are made in the United States. Trump and Republicans already reduced the highest possible corporate tax rate from 35% to 21% when Congress passed the Tax Cuts and Jobs Act in 2017. The top-end corporate tax rate was made permanent under the law, but individual tax reductions included in the legislation are set to expire in 2025. Both candidates have said they want to see those tax cuts extended, but Harris says she would raise the highest rate to 28%.It was Trump’s first visit to Georgia since 3 August, when he held a rally in Atlanta. Last month, Harris visited Savannah and held a rally that drew nearly 9,000 supporters.Much of Trump’s economic policies can’t be separated from his views on immigration. That line of attack – that a weak economy and even inflation and the availability of goods is the fault of immigrants – resonated with a pair of the Republican candidate’s voters waiting to get into his event on Tuesday.“We don’t have enough groceries in our stores because of all the immigrants here,” said Christy Donley, who drove from nearby Pembroke to hear Trump speak. “We’ve got Americans here who can’t get the American dream but we’re giving the American dream to illegal immigrants.”Donley’s friend, Kassie Williams, chimed in.“Loans, healthcare, drivers’ licenses – we’re giving all this stuff to immigrants whether they deserve it or not,” said Williams, who believes that the corporate tax cuts Trump has proposed will help out individual workers. “I want to hear him be more detailed when he says he’s going to give corporations tax breaks. I understand how it benefits everybody – they’ll lower the unemployment rate, which will make for more tax revenue from people – but not everybody might understand that.” More

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      Why is Trump cozying up to America’s most powerful business leaders? | Robert Reich

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      The Business Roundtable is an association of more than 200 CEOs of America’s biggest corporations. It likes to think of itself as socially responsible.Last Wednesday, its chair, Joshua Bolten, told reporters that his group planned to drop “eight figures” while “putting its full weight behind protecting and strengthening tax reform”.Translated: it’s going to pour money into making sure that Donald Trump’s 2017 tax cuts – most of which benefit big corporations and the rich – don’t expire in 2025, as scheduled.On Thursday, Trump met at the Business Roundtable’s Washington headquarters with over 80 CEOs, including Apple’s Tim Cook, JP Morgan Chase’s Jamie Dimon and Walmart’s Doug McMillon.Trump reportedly promised the CEOs he would cut corporate taxes even further and curtail business regulations if elected president.Trump’s 2017 tax cuts reduced the rate of corporate income taxes from 35% to 21%. That has cost America $1.3tn.Those tax cuts, along with the tax cuts put in place by George W Bush, are the primary reason that the national debt is rising as a percentage of the economy.What have corporations done with the money they have saved? They haven’t invested it or used it to raise wages. Nothing has trickled down to average workers.A large portion has gone into stock buybacks. The year after the tax cut went into effect, corporations bought back a record $1tn of their shares. Buybacks do nothing for the economy but raise stock prices – and, not incidentally, CEO compensation, which is largely in shares of stock.Making Trump’s 2017 tax cuts permanent – as the Business Roundtable seeks – will cost $4tn over the next 10 years, $400bn per year – and cause the debt to soar.Yet every one of the CEOs that Trump met with last week has been thriving under Biden. Corporate profits are way up. Stocks are at near record levels. Inflation has plummeted.So why are they attracted to Trump, whose antics are likely to destabilize the economy? Is it mere ideology?Kathryn Wylde, the president and CEO of the Partnership for New York City (a non-profit that represents the city’s top business leaders), relates that Republican billionaires have told her “the threat to capitalism from the Democrats is more concerning than the threat to democracy from Trump.”In my experience, CEOs of large corporations are more practical than ideological. They’re coming around to Trump because they want even more tax cuts and regulatory rollbacks – which means even more money in their own pockets.The Business Roundtable’s motto – “More than Leaders. Leadership” – suggests a purpose higher than making its CEOs and corporations richer.Indeed, in August 2019 the Roundtable issued a highly publicized statement expressing “a fundamental commitment to all of our stakeholders”, including a commitment to compensating all workers “fairly and providing important benefits”, as well as “supporting the communities in which we work”, and protecting the environment “by embracing sustainable practices across our businesses”.Signed by 181 CEOs of major American corporations, the statement concluded that “each of our stakeholders is essential,” and committed “to deliver value to all of them”.The statement got a lot of favorable press. But it was rubbish. At the time, Bernie Sanders and Elizabeth Warren were gaining traction in the 2020 Democratic presidential primaries with their criticisms of corporate America, and the CEOs of the Roundtable were worried. They needed cover.Then, after the January 6 attack on the Capitol, many of these CEOs announced they would not provide campaign funds to Republican members of Congress who refused to certify the 2020 election.Now, they’re lining up to fund Trump, because they and their corporations want another giant tax cut and rollbacks of regulations.If the Business Roundtable’s CEOs were honestly committed to all their stakeholders, they wouldn’t seek massive tax cuts.If they cared about preserving American democracy, they wouldn’t support Trump or any Republican.The greedy cynicism of America’s corporate elite is now on full display.
      Robert Reich, a former US secretary of labor, is a professor of public policy at the University of California, Berkeley, and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His newest book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com More

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      ‘Bidenomics’ is working – which means Biden and the Democrats may win too | Robert Reich

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      Until recently, I assumed that Joe Biden would get a second term despite worries about his age because most Americans find Trump so loathsome.But I’ve underestimated Bidenomics. It’s turning out to be the most successful set of economic policies the United States has witnessed in a half-century.It may not only give Joe another term but also give Democrats control over both houses of Congress. It may even put the nation on the path to widely shared prosperity for a generation.New economic data last week showed that inflation cooled to 3% in June, down from over 9% last year, and close to the Fed’s goal of 2%.And as inflation has subsided, real wages – that is, what paychecks will buy – have finally risen.Meanwhile, economic growth has accelerated. Consumer spending is solid. Consumers expect the economy to continue to do well.Inflation is coming down without a crash landing, in large part because the Fed’s rate increases – designed to slow the economy, stop wage growth and cause higher unemployment – are being offset by Bidenomics’ massive public investments in infrastructure, semiconductors, wind and solar energy, and manufacturing.This isn’t all. The Biden administration has added three other critical ingredients: the threat (and, in some cases, reality) of tough antitrust enforcement, a pro-labor National Labor Relations Board, and strict limits on Chinese imports.Taken together, these policies are beginning to alter the structure of the American economy in favor of the bottom 90%.In recent decades, the Fed has been in charge of evening out the business cycle, but no one has taken charge of altering the structure of the economy so that the poor and working middle class get a larger share of the gains.This restructuring has been difficult to achieve for the simple reason that the monied interests don’t want it.In Republican circles, the monied interests have preached the snake oil of supply-side economics, which legitimized giant tax cuts going mostly to the rich and large corporations.Those tax cuts – under Reagan, George W Bush and Trump – exploded the federal debt, fueled giant profits in the biggest firms and financial institutions, and stoked a surge in billionaire wealth but did literally nothing for average working people. Nothing trickled down.In Democratic circles, the monied interests have used neoliberalism – which has called for deregulation, privatization, free trade and the domination of finance over the economy.This orthodoxy pervaded the Clinton and Obama administrations. (I won’t bore you with my war stories, but trust me.)The result was similar to that of supply-side economics: wealth surged to the top, but average working people remained stuck in the mud.In contrast to both supply-side economics and neoliberalism, the Biden administration is focused on altering the structure of the economy.Over the past year, manufacturing construction in hi-tech electronics, which the administration has subsidized through Chips and the Inflation Reduction Act, has quadrupled.Tens of billions in infrastructure spending has been funneled to the states for road, water system and internet upgrades.More clean-energy manufacturing facilities have been announced in the last year than in the previous seven combined.Biden understands that these investments must translate into high-paying jobs, which often require unions.“When I think climate, I think jobs … union workers are the best workers in the world,” he said in a recent speech on what he has called Bidenomics.The monied interests don’t want unions, of course. The narrow congressional majority that got these bills passed rolled back some of the labor conditions that originally accompanied the tax credits and grants.Moreover, much of the funding is pouring into so-called “right-to-work” states that make it exceedingly difficult to unionize.But a buoyant economy strengthens the hand of workers, making it easier to unionize – which helps explain the ubiquitous labor action this summer.Voters may not yet understand Bidenomics, but it’s probably not necessary that they do in order for Biden and the Democrats to benefit.If Bidenomics continues to alter the structure of the economy in ways that help the vast majority, voters will give Biden another term and reward Democrats with both houses of Congress.And if Bidenomics is successful, it will make the American economy both stronger and fairer in years to come.I’m betting on it.
      Robert Reich, a former US secretary of labor, is professor of public policy at the University of California, Berkeley, and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com More

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      Pacific trade deal is more useful to Joe Biden than it is to the UK’s economy

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      Tory MPs hailed the UK’s entry last week into the Indo-Pacific trading bloc as a major step on the road to re-establishing Britain as a pioneer of free trade.It was a coup for Rishi Sunak, said David Jones, the deputy chairman of the European Research Group of Tory Eurosceptics, who was excited to be aligned with “some of the most dynamic economies in the world”.Trade secretary Kemi Badenoch also used the word “dynamic” to describe the 11 members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). She pushed back against criticism that signing a trade deal with a loose collection of countries on the other side of the world would only add 0.08% to the UK’s gross national product, and then only after 10 years of membership. That figure was an estimate by civil servants 10 years ago, she said in an interview with the Daily Mail. The CPTPP is more important these days.And it might be, but not for the trade it facilitates. The significance lies in the geopolitical realignment it promotes and how such pacts could harm future Labour governments.The CPTPP was signed on 8 March 2018. Australia, Brunei, Canada, Japan, Mexico, New Zealand and Singapore were the first to form a bloc before being joined in the five years that followed by Vietnam, Peru, Malaysia and Chile.Former president Barack Obama hoped the US would also be a founder member before coming up against a Republican Congress that disagreed. Later, Donald Trump abandoned the deal altogether.Obama wanted to throw a friendly arm around Pacific countries threatened by China’s increasingly aggressive attitude to its neighbours – or, looked at another way, maintain open markets for US goods and services across south-east Asia in opposition to Xi Jinping’s Belt and Road investment initiative. Joe Biden, despite having control of Congress, refused to consider reopening talks about US membership, paving the way for China to apply in 2021.Thankfully for Biden, Britain’s application preceeded Beijing’s by six months, putting the UK ahead in the queue; quickly it became apparent that Britain’s role could be to help block China’s entry to the CPTPP without the US ever needing to join. For the Americans, the potential loss of trade was a side issue.Brexit was never considered by Washington to be a positive development, but there was a silver lining once it became clear the UK could be deployed more flexibly in a fight with China – a confrontation that Brussels has so far backed away from.The Aukus defence pact between Australia, the UK and US is another example of this anti-China coalition – and of Sunak’s efforts to win back Washington’s approval.The move also plays to a domestic agenda. In the same way that Margaret Thatcher’s sale of state assets – from council housing to essential utilities – denied Labour the means to directly influence the economy without spending hundreds of billions of pounds renationalising those assets, so global trade deals undermine Labour’s promise to use the state to uphold workers’ rights and environmental protections.Secret courts form the foundation stone of most trade deals and allow big corporations to sue governments when laws and regulations change and deny them profits.Badenoch’s civil servants say they are comfortable with the investor-state dispute settlement (ISDS) tribunal system because the UK government has never lost a case.However, a government that wanted to push ahead at a faster pace with environmental protections, carbon taxes, or enhanced worker’s rights might find themselves on the wrong end of a court judgment.The TUC’s general secretary, Paul Nowak, was quickly out of the blocks to voice these fears when the deal was announced on Friday. That is why the EU parliament has forced Brussels to ban ISDS clauses from future trade deals.Sunak, on the other hand, appears comfortable with the prospect of CPTPP countries beginning to dictate how the UK considers basic rights – and how this could become the price of easier trade, and more importantly, foreign policy. More

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      US banks want socialism for themselves – and capitalism for everyone else | Robert Reich

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      Greg Becker, the former CEO of Silicon Valley Bank, sold $3.6m of SBV shares on 27 February, just days before the bank disclosed a large loss that triggered its stock slide and collapse. Over the previous two years, Becker sold nearly $30m of stock.But Becker won’t rake in the most from this mess. Jamie Dimon, chair and CEO of JPMorgan Chase, the biggest Wall Street bank, will probably make much more.That’s because depositors in small- and medium-sized banks are now fleeing to the safety of JPMorgan and other giant banks that have been deemed “too big to fail” because the government bailed them out in 2008.Last Friday afternoon, the deputy treasury secretary, Wally Adeyemo, met with Dimon in New York and asked whether the failure of Silicon Valley Bank could spread to other banks. “There’s a potential,” Dimon responded.Presumably, Dimon knew such contagion would mean vastly more business for JPMorgan. In a note to clients on Monday, bank analyst Mike Mayo wrote that JPMorgan is “battle-tested” in volatile markets and “epitomizes” how the largest US banks have shed risk since the 2008 financial crisis.Recall that the 2008 financial crisis generated a gigantic shift of assets to the biggest Wall Street banks, with the result that JPMorgan and the other giants became far bigger. In the early 1990s, the five largest banks had accounted for only 12% of US bank deposits. After the crisis, they accounted for nearly half.After this week, they’ll be even bigger.Their giant size has already given them a huge but hidden effective federal subsidy estimated to be $83bn annually – a premium that investors and depositors willingly pay to these enormous banks, in the form of higher fees and lower returns, precisely because they’re considered too big to fail.Some of this hidden federal subsidy goes into the pockets of bank executives. Last year alone, Dimon earned $34.5m.Dimon was at the helm in 2008 when JPMorgan received $25bn from the federal government to help stem the financial crisis which had been brought on largely by the careless and fraudulent lending practices of JPMorgan and other big banks. Dimon earned $20m that year.In March 2009 Barack Obama summoned Dimon and other top bank executives to the White House and warned them that “my administration is the only thing between you and the pitchforks”.But the former president never publicly rebuked Dimon or the other big bankers. When asked about the generous pay Dimon and other Wall Street CEOs continued to rake in, Obama defended them as “very savvy businessmen” and said he didn’t “begrudge peoples’ success or wealth. That’s part of the free market system.”What free market system? Taxpayers had just bailed out the banks, and the bank CEOs were still raking in fat paychecks. Yet 8.7 million Americans lost their jobs, causing the unemployment rate to soar to 10%. Total US household net worth dropped by $11.1tn. Housing prices dropped by a third nationwide from their 2006 peak, causing some 10 million people to lose their homes.Rather than defend CEO paychecks, Obama might have demanded, as a condition of getting bailed out, that the banks help underwater homeowners on Main Street.Another sensible proposal would have been to let bankruptcy judges restructure shaky home mortgages so that borrowers didn’t owe as much and could remain in their homes.Yet the big banks, led by Dimon, opposed this. They thought they’d do better by squeezing as much possible out of distressed homeowners, and then collecting as much as they could on foreclosed homes.In April 2008, Dimon and the banks succeeded: the Senate voted down a bill that would have allowed bankruptcy judges to modify mortgages to help distressed homeowners.In the run-up to the 2020 election, Dimon warned against policies that Bernie Sanders and Alexandria Ocasio-Cortez were then advocating, including Medicare for All, paid sick leave and free public higher education. Dimon said they amounted to “socialism”.“Socialism,” he wrote, “inevitably produces stagnation, corruption and often worse – such as authoritarian government officials who often have an increasing ability to interfere with both the economy and individual lives – which they frequently do to maintain power,” adding that socialism would be “a disaster for our country”.Dimon also warned against “over-regulation” of banking, cautioning that in the next financial crisis, big institutions like JPMorgan won’t be able to provide the lending they did during the last crisis.“When the next real downturn begins,” he wrote, “banks will be constrained – both psychologically and by new regulations – from lending freely into the marketplace, as many of us did in 2008 and 2009. New regulations mean that banks will have to maintain more liquidity going into a downturn, be prepared for the impacts of even tougher stress tests and hold more capital.”But, as demonstrated again this past week, American capitalism needs strict guardrails. Otherwise, it is subject to periodic crises that summon bailouts.The result is socialism for the rich while everyone else is subject to harsh penalties: bankers get bailed out and the biggest banks and bankers do even better. Yet average people who cannot pay their mortgages lose their homes.Meanwhile, almost 30 million Americans still lack health insurance, most workers who lose their job aren’t eligible for unemployment insurance, most have no paid sick leave, child labor is on the rise and nearly 51m households can’t afford basic monthly expenses such as housing, food, childcare and transportation.Is it any wonder that many Americans see the system as rigged against them? Is it surprising that some become susceptible to dangerous snake-oil peddled by power-hungry demagogues?
      Robert Reich, a former US secretary of labor, is professor of public policy at the University of California, Berkeley, and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com More

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      Republicans are threatening to default on the US national debt. Don’t believe them | Robert Reich

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      Republicans are threatening to default on the US national debt. Don’t believe themRobert ReichHere’s a dirty secret: both Republicans’ debt hysteria and Biden’s proposed tax hikes are pure theater. Neither will happenPresident Biden is proposing to trim the federal budget deficit by close to $3tn over the next 10 years. He was an FDR-like spender in the first two years of his presidency. Has he now turned into a Calvin Coolidge skinflint?Neither. He’s a cunning political operator.The US central bank is poised to cause untold hardship to millions of Americans | Robert ReichRead moreBiden knows that he – along with his three immediate predecessors (Trump, Obama and George W Bush) – have spent gobs of money. In addition, Bush and Trump cut taxes on the rich and on corporations.Not surprisingly, the national debt has soared. It’s not so much an economic problem as a political one. The huge debt is giving Republicans a big, fat target.House Republicans are planning to stage theater-of-the-absurd pyrotechnics – refusing to raise the debt ceiling. Which means that at some point this summer, Biden’s treasury department will say that the nation is within days (or hours) of defaulting on its bills. A default would be catastrophic.To counter this, Biden is planning his own pyrotechnics.In the budget released this week, he’s proposing a “billionaire minimum tax” that would require wealthy American households worth more than $100m to pay at least 20% of their incomes in taxes (most middle-class Americans pay about 30%). Plus, they’d have to pay 20% a year on unrealized gains in the value of their liquid assets, such as stocks, which can accumulate value for years but are taxed only when they are sold (and not even then, if left to their heirs).Here’s the important thing: the tax would apply only to the top one-100th of 1% of American households. Over half of the revenue would come from those worth more than $1bn.Biden is proposing additional tax hikes on the wealthy: reversing the Trump tax cut by raising the top tax rate to 39.6% from 37%, increasing the corporate tax to 28% from 21%, and raising the tax on stock buybacks from 1% to 4%.All told, Biden’s new tax proposals would amount to an almost $3tn tax increase over a decade – on the richest of the rich. Oh, and did I say? Taxing the rich is enormously popular.Biden also wants to let Medicare officials negotiate with pharmaceutical companies for lower drug prices and cap the costs of drugs for seniors – a proposal that is also hugely popular.But here’s the dirty little secret. Neither of these two theatrical productions – neither the Republicans’ refusal to raise the debt ceiling nor Biden’s big tax hike on the super-rich – will ever happen. They’re both fantasies.A default on the nation’s obligations would bring on an economic calamity that Republicans don’t want to be responsible for. And a giant tax increase on the super-rich would be a miracle, given their political clout.These two productions are being staged for the public – two competing performances, each intended to score political points against the other.Biden’s performance is rational, and the Republicans’ is irrational and unserious, but that doesn’t really matter.They will both end in a dramatic flurry of last-minute negotiations, seemingly death-defying moves and countermoves, and breathtaking cliffhangers.Exciting? Of course. Important? Meh.The denouement? The debt ceiling will be raised. The national debt will be lowered a bit. Social Security and Medicare will be left alone. And Biden and the Democrats will have leeway to do one or two more things before the gravitational pull of the 2024 election pulls them in – perhaps expand childcare or pre-K or enable more students to attend community college.
      Robert Reich, a former US secretary of labor, is professor of public policy at the University of California, Berkeley, and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com
      This article was amended on 9 March 2023 to correct an editor’s error in the standfirst. Biden has proposed tax hikes for wealthy Americans, not tax cuts.
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