By Tom Cushing
Some thoughts on the Shiny New Tax BillUploaded: Dec 20, 2017
o This bill carries a whiff of desperation. It's the dog's breakfast, simplifying nothing, passed with no hearings or opportunity for debate or any outreach across the aisle, drafted in secret or handwritten marginalia, rushed through against an artificial deadline to get Something/ANYthing out of their majorities this year – it’s as if the GOPers recognize the high likelihood of their impending electoral comeuppance. That reckoning would be even worse, they seem to think, if they have nothing this Holiday Season to lay at the feet of their patrons, the campaign-contributing billionaire base. It is mostly a Dark Money pay-off: The Donor Relief Act of 2017.
o How on earth do you craft and sell a tax-cut bill so poorly that it may lower fees on 75% of taxpayers, yet only 25-30% of taxpayers support it? Granted, that’s double the Americans who favored that health care stinker, but this is like handing-out candy to schoolkids that's so, uh, pungent that they refuse to gobble it up. To hear Speaker Ryan predict, in his most earnest undergraduate tone, that surely folks will like it better when their paychecks are swollen by the bill’s nickels and dimes trickled onto the working class, boggles the mind. You can’t fool ‘em all, All the time, as a famous earlier Republican once intoned.
o Supply-side economics is always and forever voodoo, as another former GOP President famously noted. It is a deeply flawed, rationalized free lunch for the rich that didn’t spur growth for Hoover, JFK, or Reagan, nor in the recent, doomed Kansas Experiment. It never will.
If you decide to encourage growth, sound policy experience demonstrates that you convey the major savings directly to the middle and working classes - those who will spend it, stimulating demand that justifies expansion. The 1% primary beneficiaries here are already spending money as fast as humanly possible, and their investments can/do go anywhere in the world. This will Not encourage US growth to offset its significant deficit impact – never has/never will.
Item: 43/44 economists from across the political spectrum agree with the above – the 44th later admitted that he’d miss-read the question. Voodoo.
o This is exactly the Wrong Time to even try to stimulate the economy to encourage growth (which was opposed by the GOP at the Right Time - when it was needed to pull the country out of the slack demand doldrums of the Great Recession – but then again: #Obama). You stimulate directly, and when unemployment > 10%, not when it’s under 4%. To deficit-spend in relatively good times is at best a foolish waste. It also beggars the country’s ability to deficit-spend when it should - in hard times.
o The other purported justification – a dramatic corporate tax rate cut – is similarly ridiculous. It is touted to spur investment (Jobs! Jobs! Jobs!) and repatriate earnings, but will do neither. Several problems – corporations are already sitting-on record earnings that could be invested if they wanted to invest, borrowing money is already practically free if they wanted to invest, and a large portion of any new investment will involve AI/robotics, not jobs. McKinsey reports that 1/3 of American jobs will disappear by 2030; if it does anything, this will only speed that day. Finally, if I’m Apple, the world is my tax home - I can borrow or spend anywhere, and I will. With my army of accountants and lawyers, I already pay next to no federal income taxes, so the formal rate is irrelevant.
The lowered corporate rate will, if anything, encourage more dividends to the shareholders. And who are they? These days it’s not widows and orphans – 89% of stocks are owned by Americans in the top 10% of earners, with incomes > $100K; only 4-in-10 of our countrymen own any stocks, at all.
o The GOP has forever prided itself on fiscal responsibility uber alles. Are we to believe suddenly, that caution has been flung to the wind? Of course not - this is only a temporary inane-ity. See next.
o This bill is only Act One, of course. When this cut starves the government of needed revenue and so balloons the deficit, suddenly the GOP will remember it roots. They will leap-in to cut programs – slashing away at the safety net they will piously point-out we can no longer ‘afford.’ Except we could, if we didn’t now give away a cool $Trillion to the donor class.
o Instead of cutting taxes, the US should be investing in the future - e.g., via student loans that don't consign our young to the avaricious mercies of the banksters, and 21st century digital infrastructure to ensure 21st century competitiveness. Competitor countries are doing both - they will win the 21st century, as the US won the 20th with the help of education and highway investments.
o I hope (without expecting it) that this will be the end of GOP blathering about “wealth redistribution.” That redistribution has been upward - feathering the nests of the wealthiest among us – for the past forty years. This is only the most blatant recent example of how that works.
o For well-heeled CA Republicans, this must feel like a pyrrhic victory. The very rich are benefitted handsomely, wherever they reside. The merely rich, however, not so much – especially in blue states. Caps on mortgage interest and state/local tax deductions are gonna hurt. Congratulations, as we Californians shoulder still more of the national fisc – we already subsidize the red states - sending much more tax money to the feds than we receive in services – this new travesty will only make it worse. Interesting to note that Orange County Republican Darryl Issa voted no - it will hurt his constituents, he said.
o One upshot of this War on Blue States is that it will be more difficult for the dozen-or-so GOP congressfolk to keep their positions. Will 2018 be the year California sends a completely unified delegation to Washington? Stay tuned, and let the "butwhatabout x" comments commence.