When is a tax cut more than just a tax cut? When it’s a GOP tax cut. Because when the GOP cuts taxes, it’s never just an attempt to cut taxes because tax cuts are just one element of the GOP’s much larger agenda of creating a society run by and for the super-rich. And because few people, even Republican voters, actually want a society that’s run by and for the super-rich, massive amounts of propaganda and deception are part of the tax cut package too. It’s why GOP tax cuts tend to be so much more than just tax cuts for the rich. They’re Big Lies designed to fool society into dismantling itself.
So it should come as a surprise to no one that the current tax cut barreling its way through the GOP controlled congress is an abomination being sold to the public by a web of lies that represent an inversion of the truth. But what is genuinely surprising about the current GOP tax push is just how shoddy that web of lies is turning out to be this time. Perhaps it shouldn’t be surprising given the political disaster that the GOP’s multiple failed attempts to overturn Obamacare turned out to be, where less than 1 in 5 voters actually approved of ‘Trumpcare’ once they learned about Trumpcare’s details and this was the case for both the House and Senate versions of Trumpcare. The GOP clearly has problems crafting legislation that it can at least try and pretend is ‘for the people’ these days so troubles crafting the tax cuts aren’t particularly surprising. But as we’re going to see, the Trump tax cut are turning out to be so politically toxic that it’s very possible that the GOP’s tax bill will end up being even more politically poisonous than ‘Trumpcare’. And that is genuinely surprising. It’s almost as if the failure to pass Trumpcare only increased the resolve of America’s right-wing oligarchs to vindictively pass legislation that’s even more awful:
Associated Press
Ultra-Rich Win Big Under GOP Tax Bill; Taxes Rise For Everyone Else
By MARCY GORDON
Published November 18, 2017 9:28 amWASHINGTON (AP) — The ultra-wealthy, especially those with dynastic businesses — like President Donald Trump and his family — do very well under a major Republican tax bill moving in the Senate, as they do under legislation passed this week by the House.
Want to toast the anticipated tax win with champagne or a beer — or maybe you’re feeling Shakespearean and prefer to quaff mead from a pewter mug? That would cheer producers of beer, wine, liquor — and mead, the ancient beverage fermented from honey. Tax rates on their sales would be reduced under the Senate bill.
On the other hand, people living in high-tax states, who deduct their local property, income and sales taxes from what they owe Uncle Sam, could lose out from the complete or partial repeal of the deductions. And an estimated 13 million Americans could lose health insurance coverage over 10 years under the Senate bill.
Some winners and losers:
__WINNERS
— Wealthy individuals and their heirs win big. The hottest class-warfare debate around the tax overhaul legislation involves the inheritance tax on multimillion-dollar estates. Democrats wave the legislation’s targeting of the tax as a red flag in the face of Republicans, as proof that they’re out to benefit wealthy donors. The House bill initially doubles the limits — to $11 million for individuals and $22 million for couples — on how much money in the estate can be exempted from the inheritance tax, then repeals it entirely after 2023. The Senate version also doubles the limits but doesn’t repeal the tax.
Then there’s the alternative minimum tax, a levy aimed at ensuring that higher-earning people pay at least some tax. It disappears in both bills.
And the House measure cuts tax rates for many of the millions of “pass-through” businesses big and small — including partnerships and specially organized corporations — whose profits are taxed at the owners’ personal income rate. That’s potential cha-ching for Trump’s far-flung property empire and the holdings of his daughter Ivanka and her husband, Jared Kushner. The Senate bill lets pass-through owners deduct some of the earnings and then pay at their personal income rate on the remainder.
— Corporations win all around, with a tax rate slashed from 35 percent to 20 percent in both bills — though they’d have to wait a year for it under the Senate measure. Trump and the administration view it as an untouchable centerpiece of the legislation.
— U.S. oil companies with foreign operations would pay reduced taxes under the Senate bill on their income from sales of oil and natural gas abroad.
— Beer, wine and liquor producers would reap tax reductions under the Senate measure.
— Companies that provide management services like maintenance for aircraft get an updated win. The Senate bill clarifies that under current law, the management companies would be exempt from paying taxes on payments they receive from owners of private jets as well as from commercial airlines. That was a request from Ohio Sens. Rob Portman, a Republican, and Sherrod Brown, a Democrat, whose state is home to NetJets, a big aircraft management company.
Portman voted for the overall bill. Brown opposed it.
__LOSERS
— An estimated 13 million Americans could lose health insurance coverage under the Senate bill, which would repeal the “Obamacare” requirement that everyone in the U.S. have health insurance. The projection comes from the nonpartisan Congressional Budget Office. Eliminating the fines is expected to mean fewer people would obtain federally subsidized health policies.
— People living in high-tax states would be hit by repeal of federal deductions for state and local taxes under the Senate bill, and partial repeal under the House measure. That result of a compromise allows the deduction for up to $10,000 in property taxes.
— Many families making less than $30,000 a year would face tax increases starting in 2021 under the Senate bill, according to Congress’ nonpartisan Joint Committee on Taxation. By 2027, families earning less than $75,000 would see their tax bills rise while those making more would enjoy reductions, the analysts find. The individual income-tax reductions in the Senate bill would end in 2026.
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“Wealthy individuals and their heirs win big. The hottest class-warfare debate around the tax overhaul legislation involves the inheritance tax on multimillion-dollar estates. Democrats wave the legislation’s targeting of the tax as a red flag in the face of Republicans, as proof that they’re out to benefit wealthy donors. The House bill initially doubles the limits — to $11 million for individuals and $22 million for couples — on how much money in the estate can be exempted from the inheritance tax, then repeals it entirely after 2023. The Senate version also doubles the limits but doesn’t repeal the tax.”
As we can see, the wealthy and their heirs are the big winners in both the House and Senate versions of the bills. Surprise!
But don’t forget that it’s not just things like the elimination of the estate tax or cuts to the individual rates for the wealthy that are going to make this tax cut a giant gift to the wealthy. The massive cut to the corporate tax, from 35 to 20 percent, also counts as a massive tax cut for the rich given the reality that 80 percent of the stock market wealth in the US is owned by the wealthiest 10 percent and the top 1% of Americans own 38 percent the US’s wealth overall. When the rich own almost everything you can’t cut corporate taxes without cutting taxes disproportionately for the rich and that permanent corporate tax cut down to 20 percent is part of both the House and Senate bills.
But while it’s clear that both the House and Senate versions of the bill represent a massive redistribution of wealth towards the already-wealthy, there are still a number of differences between the House and Senate versions and at some point those differences are going to have to be resolved. And as we’re going to see, the resolution of those differences isn’t going to be easy for two key interrelated reasons:
1. The Senate’s “Byrd rule” needs to be followed to in order to pass legislation in the Senate with a simple majority vote of 51 Senators, avoiding the 60-vote threshold to overcome a filibuster. And the Byrd rule stipulates that new spending legislation must be budget-neutral over the next 10 years. That’s a pretty big ‘catch’ to the Byrd rule when you’re planning a massive tax giveaway for corporations and the wealthy.
and
2. The GOP’s tax cuts are not remotely budget-neutral...unless you decide to drink the ‘trickle-down’ supply-side economics Kool-Aid and choose to believe the fantasy that massive tax cuts for the wealthy will permanently turbo-charge the US economy. The vast majority of economists believe no such fantasy, and with good reason given that historical evidence doesn’t support it (it’s not like this will be the first time the US has given the rich a massive tax cut). But unless the GOP can successfully sell the US on the notion that massive tax cuts for the rich and corporations will result in a large and permanent increase in the growth of the US economy it’s going to be very difficult for the GOP to construct a tax plan that cuts taxes on the wealthy and corporations that’s budget neutral. The math just won’t work without the ‘trickle-down’ Kool-Aid.
And that Byrd rule requirement that the Senate alone faces is key driver for the differences we’re going to see between the House and Senate versions of the tax cuts: the House doesn’t need to adhere to the Byrd rule, so its version of the bill involves a lot more cuts with a higher explosion of public debt. The Senate version, on the other hand, has to somehow find a way to balance out the tax cuts for the wealthy with new revenues that somehow all balance out within a decade. And in order find that balance the Senate bill actually ends up raising taxes on the poor and middle-class and Democratic-leaning states. And also encourages poor-people to drop their subsidized health insurance. Yep, that’s how the Senate version of the bill passes the Byrd rule. By passing the cost of the tax cuts for the wealthy on to the middle-class, the poor, and ‘Blue states’.
So with that critical distinction between the House and Senate bills in mind — the Senate needs to follow the Byrd rule and avoid exploding the deficit, the House doesn’t — it’s worth taking a closer look at the various similarities and differences between the House and Senate versions of the bill. They are both extremely generous to the wealthy and corporations, but the House version tends to be somewhat more generous without trying to cover the cost of that generosity: Both versions also eliminate the the alternative minimum tax (meaning a lot of wealthy people will be allowed to pay almost nothing in taxes) and both versions double the the inheritance tax exemption from estates worth $11 million up to $22 million right away, but only in the House version has the entire estate tax expire in 2023. Also, both versions cuts in the tax rate for “pass-through” businesses — where profits are taxed at the personal income tax rate (which tends to be higher than the corporate tax rate for wealth individuals) — but the House version is particularly nice to the wealthy who own pass-through corporations:
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Then there’s the alternative minimum tax, a levy aimed at ensuring that higher-earning people pay at least some tax. It disappears in both bills.And the House measure cuts tax rates for many of the millions of “pass-through” businesses big and small — including partnerships and specially organized corporations — whose profits are taxed at the owners’ personal income rate. That’s potential cha-ching for Trump’s far-flung property empire and the holdings of his daughter Ivanka and her husband, Jared Kushner. The Senate bill lets pass-through owners deduct some of the earnings and then pay at their personal income rate on the remainder.
...
An elimination of the estate tax and and a with a 25 percent tax rate for “pass-through” corporations. Yeah, the House version of the bill is going to be mighty nice for people like Ivanka Trump and Jared Kushner. And it’s not like the Senate version isn’t still wildly generous to Jared and Ivanka. It’s not quite as generous.
And look one of the major ways the Senate version helps pay for cost all these goodies for the wealthy: by repealing the “Obamacare” mandate, the requirement that US adults purchase health insurance or face a small annual fine. The Senate version complies with the Byrd rule by assuming that repealing the Obamacare mandate will result in an estimate 13 million Americans dropping their health insurance coverage. Coverage that is typically government subsidized. The tax cuts for the rich are paid for with less health care for the poor. That’s how the Senate bill is literally designed. And that’s on top of the Senate’s plan to have taxes on people making less than $75,000 actually rise at the end of 10 years:
...
— An estimated 13 million Americans could lose health insurance coverage under the Senate bill, which would repeal the “Obamacare” requirement that everyone in the U.S. have health insurance. The projection comes from the nonpartisan Congressional Budget Office. Eliminating the fines is expected to mean fewer people would obtain federally subsidized health policies.— People living in high-tax states would be hit by repeal of federal deductions for state and local taxes under the Senate bill, and partial repeal under the House measure. That result of a compromise allows the deduction for up to $10,000 in property taxes.
— Many families making less than $30,000 a year would face tax increases starting in 2021 under the Senate bill, according to Congress’ nonpartisan Joint Committee on Taxation. By 2027, families earning less than $75,000 would see their tax bills rise while those making more would enjoy reductions, the analysts find. The individual income-tax reductions in the Senate bill would end in 2026.
...
The Senate GOP’s giant tax cut is set to raise taxes on the poor to pay for tax cuts for the rich and corporations. It’s that bad and that blatant. With the House version we don’t find as many tax hikes on the poor and middle-class, but it just ends up blowing up the national debt more instead. But the the middle-class and poor don’t fair much better with the House bill, where middle-class tax cuts expire and only 40 percent of Americans will still see lower taxes by 2023, along with popular deductions like the mortgage deduction in the House version.
House Leadership to GOPers: Don’t Trash the Senate Bill (Because it’s Probably Closer to the Final Bill)
But despite all the similarities between the two versions of the bill — they both shower corporations and the wealthy with tax treats and make the poor and middle-class pay for them — there are still significant differences. So which version should we expect to win out? Well, since the Byrd rule still applies to the final version of the bill that the Senate has to vote on — the version the House and the Senate create in conference after the different versions of the bill are passed by each chamber — it’s hard to see how the Senate’s version isn’t going to be a lot closer to the final version of the bill because that’s the only way the final version can still comply with the Byrd rule. And that’s why it’s no surprise that we have reports that the House leadership told lawmakers not to bash the Senate tax bill which is making some House members feel like the eventual plan for the House is to make their version of the tax cut look a lot more like the Senate version:
Vox
The House just passed its tax reform plan. It’s drastically different from the Senate’s.
by Tara Golshan Nov 16, 2017, 1:51pm EST Updated
House Republicans passed their tax reform plan Thursday afternoon 227–205 — on a day marked by a visit from President Donald Trump — with only 13 Republicans voting against it.
It was a big day for House Speaker Paul Ryan. On the surface, the proposal, which dramatically cuts taxes for corporations, doubles the standard deduction, and consolidates the individual tax rates, among other changes, has moved swiftly through the House without much drama. “This is Ryan’s bill,” Rep. Pete Sessions (R‑TX) told reporters.
But behind the cheers and celebration, there’s a clear sense that this vote doesn’t say much about the state of tax reform as a whole — a debate that, despite the insistence of Republican leadership and their allies, is still unresolved.
As the House passed its bill, on the other side of the Capitol Building the Senate continues to mark up its own tax reform proposal — one that looks very different from the House’s.
“It is interesting to me that the ‘Big Six’ worked for nine months on getting on the same sheet of music on tax reform, and [to] have it be this dynamically different as it is rolled out — it’s a bit of a surprise,” Rep. Mark Meadows (R‑NC) told Vox of the group of top senators, House members, and Trump administration officials who brainstormed a framework for tax reform.
Going into the vote, House leadership told lawmakers not to bash the Senate tax bill — a move that has made some feel like the plan is to adopt a lot more of the Senate bill. Already, some of the differences are making House Republicans grumble. The Senate fully repeals the state and local income and property tax deduction, cuts health care, and sunsets tax relief for individual Americans in order to pay for corporate tax cuts.
“You’re rewriting a tax code for a generation, and you are doing it in 10 days, and then to be dismantling health care without any debate at all could have unintended consequences,” Rep. Peter King (R‑NY), who voted against the House bill, said. “In [1986] it took two years to put together a tax reform bill; they’re doing it in 10 days.”
We still don’t know exactly what tax reform will look like — but Republicans are moving fast
“It seems to be pretty significant differences,” King told Vox Wednesday of the House and Senate tax reform proposals.
“Especially because you have to get it done in such a short amount of time. Any changes to the tax bill has significant consequences,” he continued.
The day before the House vote, some members cast last-minute doubts on the math, HuffPost reported, questioning whether the typical family of four would actually get an average cut of $1,182, as Republican leadership keeps touting.
There’s no question that Republicans have been grappling with a major math problem with their tax bill, searching for budget gimmicks and rosy analyses to make the proposal add up and comply with the Senate budget rules. The House’s bill fails to hew to crucial Senate budget rules — making the proposal untenable in the upper chamber. Members seem to be aware of this dilemma.
“My must-changes are I just want the math to work,” Rep. David Schweikert (R‑AZ) said of bringing the House and Senate bills together.
The math solutions in the Senate have proved politically difficult.
The Senate bill leaves many of the deductions the House repeals untouched, and instead repeals Obamacare’s individual mandate, phases in the corporate tax cut, increases the child tax credit, fully repeals the state and local tax deduction, keeps the seven tax brackets — instead of the House’s four — and sunsets almost all of the tax relief for individual Americans by 2025.
By Wednesday, one senator, Ron Johnson (R‑WI), had already come out against the Senate’s bill, saying it helped corporations more than small businesses and families. Several more crucial senators have been tight-lipped about their feelings. A recent distributional analysis from the Joint Committee on Taxation found that the Senate’s proposal, which sunsets the individual tax reforms to pay for a corporate tax cut, would raise taxes on the poor by 2021 and across the board in 2027.
Are corporate tax cuts enough to keep Republicans together? It’s starting to look like it.
There is one policy that is unifying the Republican ranks: They really want to cut the corporate tax rate. It’s the centerpiece of every plan they have released in both the House and the Senate, and they’ve spent weeks floating wildly unpopular ways to pay for it.
“It’s in all of our best interest to have these tax cuts for corporations so that they will have more money to invest in their business and pay their workers,” Rep. Mike Conaway (R‑TX) told Vox.
Lowering the corporate tax from its current 35 percent to 20 percent, as Republicans are proposing, is costly — in the context of the current bill, the Joint Committee on Taxation estimates it would cost $1.33 trillion over 10 years. Republicans argue that this cost will be partially offset through incredible economic growth — pushing corporations to invest more in their workers and bring more jobs back to the United States. And most economists believe that temporary corporate cuts do little or nothing to boost economic growth, because corporations can’t count on the cuts in the future.
So even the most vulnerable Republican lawmakers from states like New York, New Jersey, and California that are adversely impacted by both the House and Senate proposals to pay for the permanent corporate tax cut are prioritizing doing so.
“Overall there is much more substantive tax policy that is in agreement,” Rep. Tom Reed (R‑NY) said of the ideology behind the Senate and House bills, making a case for a permanent corporate tax cut. “From a growth perspective on the business side, the less you can rely on having a long-term planning capability and making those investments long term, I would say that has a little more negative impact.”
Still, corporate rate cuts also have a lot of potential to be politically expensive.
Sixty percent of registered voters think corporations pay “too little” in taxes, according to a September poll from Morning Consult and Politico surveying a little under 2,000 Americans. A more recent Morning Consult/Politico survey from October found only 39 percent of Americans think lowering the corporate tax rate should be part of the tax plan — with 59 percent of Republican voters supporting it. Another poll from Pew Research Center showed that 53 percent of Republicans think corporate tax rates should either be raised or stay the same.
...
———-
“Going into the vote, House leadership told lawmakers not to bash the Senate tax bill — a move that has made some feel like the plan is to adopt a lot more of the Senate bill. Already, some of the differences are making House Republicans grumble. The Senate fully repeals the state and local income and property tax deduction, cuts health care, and sunsets tax relief for individual Americans in order to pay for corporate tax cuts.”
‘Don’t bash the bill we might have to vote for!’ That was the implied message from House GOP leaders following the passage of the House’s own bill. And that means a lot of the highly unpopular features of the Senate’s version — like the full repeal of state and local taxes deductions and property tax deductions — are probably going to be things the House GOPers eventually have to vote for. Best not to bash the ideas you’re going to have to vote for:
...
There’s no question that Republicans have been grappling with a major math problem with their tax bill, searching for budget gimmicks and rosy analyses to make the proposal add up and comply with the Senate budget rules. The House’s bill fails to hew to crucial Senate budget rules — making the proposal untenable in the upper chamber. Members seem to be aware of this dilemma.“My must-changes are I just want the math to work,” Rep. David Schweikert (R‑AZ) said of bringing the House and Senate bills together.
The math solutions in the Senate have proved politically difficult.
The Senate bill leaves many of the deductions the House repeals untouched, and instead repeals Obamacare’s individual mandate, phases in the corporate tax cut, increases the child tax credit, fully repeals the state and local tax deduction, keeps the seven tax brackets — instead of the House’s four — and sunsets almost all of the tax relief for individual Americans by 2025.
...
Fully repealing state and local tax deductions and property tax deductions — something that will hammer people living higher-tax ‘Blue’ states where property values also tend to be higher — is something that all GOPers in the House and Senate are probably going to end up having to vote for in order to pay for permanent cuts to the taxes for the wealthy and corporations. Including the GOPers from those Blue states that are about to get hammered. It’s not exactly great politics.
And yet it appears that ‘Blue state’ and ‘Red state’ Republicans are largely united behind this tax cut push. United by a desire to slash corporate taxes, the centerpiece of both bills:
...
Are corporate tax cuts enough to keep Republicans together? It’s starting to look like it.There is one policy that is unifying the Republican ranks: They really want to cut the corporate tax rate. It’s the centerpiece of every plan they have released in both the House and the Senate, and they’ve spent weeks floating wildly unpopular ways to pay for it.
“It’s in all of our best interest to have these tax cuts for corporations so that they will have more money to invest in their business and pay their workers,” Rep. Mike Conaway (R‑TX) told Vox.
Lowering the corporate tax from its current 35 percent to 20 percent, as Republicans are proposing, is costly — in the context of the current bill, the Joint Committee on Taxation estimates it would cost $1.33 trillion over 10 years. Republicans argue that this cost will be partially offset through incredible economic growth — pushing corporations to invest more in their workers and bring more jobs back to the United States. And most economists believe that temporary corporate cuts do little or nothing to boost economic growth, because corporations can’t count on the cuts in the future.
So even the most vulnerable Republican lawmakers from states like New York, New Jersey, and California that are adversely impacted by both the House and Senate proposals to pay for the permanent corporate tax cut are prioritizing doing so.
...
“There is one policy that is unifying the Republican ranks: They really want to cut the corporate tax rate. It’s the centerpiece of every plan they have released in both the House and the Senate, and they’ve spent weeks floating wildly unpopular ways to pay for it.”
Permanently slashing corporate tax rates from 35 to 20 percent: It’s the one element that both the House and Senate GOPers insist upon for any final version of the bill. The tax cuts for the wealthy or tax hikes on everyone else are up for the debate but those corporate tax rates of 20 percent must be there in in the final version. And it’s that unified desire to delivery corporations this massive tax goodie that is guaranteeing so much pain elsewhere. Because as the following article notes, there is simply no way to make this corporate tax cut pay for itself, even if you eliminate every corporate tax loophole:
Vox
The Republican tax plan’s original sin
A giant, unpopular, unworkable business tax cut.Updated by Matthew Yglesias
Nov 6, 2017, 9:00am ESTPaul Ryan, speaking to CNN about the tax overhaul bill the passed earlier this month, says “the whole purpose of this is a middle-class tax cut.” That’s in line with the rhetoric Donald Trump deployed on the campaign trail, in line with public opinion polling about what voters want, and reflects a kind of common sense conservatism on economic policy that says what typical Americans could most use from the government is to keep more of their hard-earned cash rather than some big new government programs.
Ryan and his team have even cooked up a model family — a mom, dad, and two kids getting by on the national median household income — who stand to reap a windfall of $1,182 per year from the plan.
I don’t envy the partisans tasked with messaging against giving middle income families (family of four making $59K) $1,182 back. #1182more
— AshLee Strong (@AshLeeStrong) November 2, 2017
Unfortunately for the American middle class, Ryan is lying. The hypothetical family his top spokesperson AshLee Strong described would get a tax cut of almost $1,200 — for one year. It gets smaller in year two, smaller still in year three, smaller still in year four, and smaller still in year five. It nearly vanishes in the sixth year of the Ryan tax plan, and in years seven, eight, nine, and 10 the family would be paying higher taxes than under current law. That tax hike is not only permanent, it actually grows over time because of a change to the inflation indexing of tax brackets.
On average, over the entire 10-year scoring window, the family would get a total tax cut of $3,550. Yet over the same time period, the national debt would grow by $4,644 per person — or about $18,500 for a family of four.
There’s nothing wrong with running a budget deficit if you’re accomplishing something worthwhile. But to go $18,500 in debt in order to secure a $3,550 tax cut is preposterous. And yet something like that is an inevitable consequence of the Republican tax plan’s original decision — an unpopular and unworkable scheme to reduce the corporate income tax rate from 35 percent to 20 percent.
Real corporate tax reform is a reasonable idea
The basic story with the corporate income tax in the United States is that the statutory rate of 35 percent is one of the highest of any rich country, but there are so many corporate tax loopholes that companies on average only actually pay in the mid-to-high 20s.
Under the circumstances, there’s a strong case for corporate income tax reform. By eliminating a bunch of deductions you should able to significantly reduce corporate tax rates without increasing the budget deficit. That would make the conduct of business in the United States both fairer and more efficient by treating all forms of business activity more equally. That, in turn, should provide a modest boost to economic growth as well as eliminating some hassles and wasted time in terms of tax compliance.
The Obama administration looked at this and concluded that there was a reasonable reform path to cutting from 35 percent to 28 percent while raising some revenue.
Mitt Romney’s presidential campaign in 2012 looked at it and concluded more aggressively that there was a reform path to cutting from 35 percent to 25 percent while probably losing some revenue.
Republicans copied a number from another plan
But House Republicans looked at Romney’s plan and decided to cut 5 percentage points lower — all the way down to 20 percent — even though there’s no way to make that work. Remember, the effective corporate income tax rate paid in the United States is somewhere in the high 20s, varying a bit from year to year. Even if you closed every single deduction you couldn’t get down to 20. And nobody really wants to close every single deduction anyway. So in the long run, the 20 percent target simply isn’t workable without raising taxes on individuals — which is why Strong’s favorite family’s tax cut eventually goes away and becomes a tax hike.
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A year ago, the people involved in drafting the plan were completely aware of the mathematical realities. That’s why they weren’t proposing a 20 percent corporate income tax rate. Instead, they proposed eliminating the corporate income tax as we know it altogether and replacing it instead with a destination-based cash flow tax (DBCFT).
This was basically a broad 20 percent national consumption tax — similar to a retail sales tax except levied on services as well as goods — partially offset by a big payroll tax cut. The result, on net, would be a tax on consumption that was financed out of past savings. This was an idea with some merit that ended up being derailed by public and congressional confusion about its border adjustment provisions, though I think it would have died anyway once members of Congress understood its implications for non-poor retirees. The key point, however, is that the 20 percent DBCFT was not the same thing as a 20 percent corporate income tax.
Indeed, I assume that if Republicans had thought they were the same thing, they wouldn’t have gone through the trouble of inventing a whole new kind of tax! But having dropped the DBCFT idea, Republicans didn’t rethink the rest of their plan. They just copied the number “20” over from one tax plan to another and tried to make the math work based on a 20 percent corporate income tax rate.
But the math doesn’t work. The business tax cuts in the GOP plan add $1 trillion to the deficit over 10 years, accounting for two-thirds of the total net tax cutting. And with plenty of tax cuts for rich people also in the plan, that leaves Republicans raising taxes on many families and increasing the deficit.
Now they’re stuck with an unpopular, unworkable nightmare
There are at least two big problems with the approach House Republicans ended up taking. One is that it’s ridiculously unpopular. Only 24 percent of the public says we should have a corporate tax cut, and that’s without considering any tradeoffs.
A lot of the individual contentious measures in the GOP plan are defensible in at least some contexts. But to eliminate a tax credit for adopting a child while raising taxes on PhD programs and curtailing the homebuilding industry is a tough sell if the purpose of it all is to pass a big unpopular corporate tax cut.
But it gets worse. Even with a bunch of popular tax breaks going away, and even with Strong’s sample family eventually facing a future of endlessly escalating tax increases, the corporate tax cut is so huge that it blows a hole in the long-term budget deficit in a way that violates Senate rules. So the House bill not only has a profoundly unpopular trade-off at its heart — it literally cannot pass the Senate without substantial changes. Which means if they’re smart, House Republicans will stop and make some serious changes of their own rather than just plowing ahead.
If.
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“The Republican tax plan’s original sin” by Matthew Yglesias; Vox; 11/06/2017
“Unfortunately for the American middle class, Ryan is lying. The hypothetical family his top spokesperson AshLee Strong described would get a tax cut of almost $1,200 — for one year. It gets smaller in year two, smaller still in year three, smaller still in year four, and smaller still in year five. It nearly vanishes in the sixth year of the Ryan tax plan, and in years seven, eight, nine, and 10 the family would be paying higher taxes than under current law. That tax hike is not only permanent, it actually grows over time because of a change to the inflation indexing of tax brackets.”
Yep, House Speaker Paul Ryan is blatantly lying when he claims that this tax cut bill is all about tax cuts for the American middle-class. The way the House version works, the tax cuts start eroding after the first year, are nearly completely gone by year six, and taxes rise for middle-class families after year seven. And just keep on rising. So that hypothetical middle-class family of four will get a total tax cut of $3,550 (which expires), while the national debt rises $4,644 per person (including the two kids in this family of four). It’s a giant scam. And it’s the kind of scam that is utterly unavoidable given the corporate tax cut:
...
On average, over the entire 10-year scoring window, the family would get a total tax cut of $3,550. Yet over the same time period, the national debt would grow by $4,644 per person — or about $18,500 for a family of four.There’s nothing wrong with running a budget deficit if you’re accomplishing something worthwhile. But to go $18,500 in debt in order to secure a $3,550 tax cut is preposterous. And yet something like that is an inevitable consequence of the Republican tax plan’s original decision — an unpopular and unworkable scheme to reduce the corporate income tax rate from 35 percent to 20 percent.
...
“There’s nothing wrong with running a budget deficit if you’re accomplishing something worthwhile. But to go $18,500 in debt in order to secure a $3,550 tax cut is preposterous. And yet something like that is an inevitable consequence of the Republican tax plan’s original decision — an unpopular and unworkable scheme to reduce the corporate income tax rate from 35 percent to 20 percent.”
And notice how it would have been possible for the GOP to cut corporate taxes pretty significantly without requiring these stealth middle-class tax hikes simply by closing corporate tax loopholes. Mitt Romney only proposed a cut to 25 percent during his 2012 election and even the Obama administration concluded that corporate taxes could have dropped from 35 to 28 percent without any drop of tax revenues simply by closing loopholes. But the GOP now feels compelled to drop it all the to 20 percent instead, hence the need for those middle-class tax hikes:
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Under the circumstances, there’s a strong case for corporate income tax reform. By eliminating a bunch of deductions you should able to significantly reduce corporate tax rates without increasing the budget deficit. That would make the conduct of business in the United States both fairer and more efficient by treating all forms of business activity more equally. That, in turn, should provide a modest boost to economic growth as well as eliminating some hassles and wasted time in terms of tax compliance.The Obama administration looked at this and concluded that there was a reasonable reform path to cutting from 35 percent to 28 percent while raising some revenue.
Mitt Romney’s presidential campaign in 2012 looked at it and concluded more aggressively that there was a reform path to cutting from 35 percent to 25 percent while probably losing some revenue.
Republicans copied a number from another plan
But House Republicans looked at Romney’s plan and decided to cut 5 percentage points lower — all the way down to 20 percent — even though there’s no way to make that work. Remember, the effective corporate income tax rate paid in the United States is somewhere in the high 20s, varying a bit from year to year. Even if you closed every single deduction you couldn’t get down to 20. And nobody really wants to close every single deduction anyway. So in the long run, the 20 percent target simply isn’t workable without raising taxes on individuals — which is why Strong’s favorite family’s tax cut eventually goes away and becomes a tax hike.
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“But House Republicans looked at Romney’s plan and decided to cut 5 percentage points lower — all the way down to 20 percent — even though there’s no way to make that work. Remember, the effective corporate income tax rate paid in the United States is somewhere in the high 20s, varying a bit from year to year. Even if you closed every single deduction you couldn’t get down to 20. And nobody really wants to close every single deduction anyway. So in the long run, the 20 percent target simply isn’t workable without raising taxes on individuals — which is why Strong’s favorite family’s tax cut eventually goes away and becomes a tax hike.”
And even with those middle-class tax cuts, the cost of the corporate tax cuts still aren’t covered. Hence the House version’s deficit explosion, a violation of the Senate Byrd rule:
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But it gets worse. Even with a bunch of popular tax breaks going away, and even with Strong’s sample family eventually facing a future of endlessly escalating tax increases, the corporate tax cut is so huge that it blows a hole in the long-term budget deficit in a way that violates Senate rules. So the House bill not only has a profoundly unpopular trade-off at its heart — it literally cannot pass the Senate without substantial changes. Which means if they’re smart, House Republicans will stop and make some serious changes of their own rather than just plowing ahead.
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And that gives a better idea of just how politically awful the Senate version of the tax bill is: the deficit explodes even with the House version’s tax hike in the middle-class, violating the Byrd rule. The Senate addresses fiscal hole this by extracting even more money from the poor and middle-class.
The Sequester Cuts. Including Medicare Cuts
And there’s the Medicare cuts. Yep, even though Medicare cuts aren’t mentioned anyone in the House or Senate versions of the tax bill, Medicare will still face a $25 billion cut. Why? Because of special “sequester” rules the Tea Party conservatives mandated during the 2010 budget showdown that forces across-the-board cuts to federal programs whenever Congress passes a bill that increases the deficit. And while Medicaid, Social Security, and food stamps are protected from the sequester, Medicare isn’t. So of the ~$136 billion in sequester cuts that the House tax bill will force on federal government programs in 2018 alone, $25 billion of that will come from cuts in Medicare:
Talking Points Memo
House GOP’s Tax Bill Would Trigger A $25 Billion Cut To Medicare
By Alice Ollstein
Published November 17, 2017 6:00 amTwo weeks after its introduction and following zero hearings, the House of Representatives passed an approximately $1.5 trillion dollar tax cut on Thursday. Most of the focus has been on the bill’s tax benefits for the wealthy and corporations, but some lawmakers are sounding the alarm that passage of the bill will also trigger an estimated $25 billion cut to Medicare.
With the Senate expected to take up its own bill after the Thanksgiving recess, Democrats struggling to mount an opposition to the bill see an opening in its controversial health care impacts—including the Medicare cuts, the repeal of Obamacare’s individual mandate, and the elimination of the medical expenses deduction in the House bill.
The Medicare cut—announced by the non-partisan Congressional Budget Office on Tuesday—can only be waived by a majority of the House and a 60-vote supermajority of the Senate.
Thanks to laws created by the Tea Party’s infamous 2010 sequester showdown over government spending, automatic cuts spring into action anytime Congress passes a bill that balloons the federal deficit, as the tax bill would. The approximately $136 billion in cuts spurred by the GOP tax bill would hit a number of government programs—including farm subsidies and the Border Patrol—but would cut most deeply into Medicare. Medicaid, Social Security, and food stamps are protected.
These cuts would violate President Trump’s repeated campaign promises not to touch Medicare and other social safety net programs. But for House Speaker Paul Ryan (R‑WI) and other lawmakers who have for decades longed for an opportunity to cut to Medicare and other federal benefits, the cuts would be a feature rather than a bug.
The CBO’s announcement this week has also raised the hackles of the influential AARP, who wrote to Congress on behalf of their 38 million members in opposition to the bill.
“The large increase in the deficit will inevitably lead to calls for greater spending cuts, which are likely to include dramatic cuts to Medicare, Medicaid and other critical programs serving older Americans,” they warned. “The Congressional Budget Office has now published a letter stating that unless Congress takes action, H.R. 1 will result in automatic federal funding cuts of $136 billion in fiscal year 2018, $25 billion of which must come from Medicare.”
Congress could avoid these cuts by waiving the so-called “pay-as-you-go” rules, but it’s unclear whether Republicans or Democrats would see that as being in their political interest. Senators from both parties would have to support the waiver to see it pass the upper chamber. Republicans who regularly rail against runaway government spending may not want to vote against the cuts, and Democrats have suggested they have little interest in bailing out Republicans’ deficit-busting tax bill.
Yet some, including Sen. Chris Van Hollen (D‑MD), are already sounding the alarm. In a letter to the House Freedom Caucus on Thursday, he demanded to know if they would vote to waive the budget rules if the tax bill became law.
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“Thanks to laws created by the Tea Party’s infamous 2010 sequester showdown over government spending, automatic cuts spring into action anytime Congress passes a bill that balloons the federal deficit, as the tax bill would. The approximately $136 billion in cuts spurred by the GOP tax bill would hit a number of government programs—including farm subsidies and the Border Patrol—but would cut most deeply into Medicare. Medicaid, Social Security, and food stamps are protected.”
In case it wasn’t completely obvious that this tax cut would lead directly to cuts in federal programs, the sequester is a good reminder of this because it’s literally a rule that mandates cuts to federal programs when Congress increases the deficit. Federal cuts aren’t an option unless the sequester is ended.
And let’s not forget that, while President Trump pledged to leave Medicare untouched during his campaign, gutting Medicare is a long-term dream for the GOP at large:
...
These cuts would violate President Trump’s repeated campaign promises not to touch Medicare and other social safety net programs. But for House Speaker Paul Ryan (R‑WI) and other lawmakers who have for decades longed for an opportunity to cut to Medicare and other federal benefits, the cuts would be a feature rather than a bug
...
So it’s looking very possible that Paul Ryan’s dream of cutting Medicare is about to happen. Soon. Because that $25 billion cut will be mandated to happen in 2018:
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The CBO’s announcement this week has also raised the hackles of the influential AARP, who wrote to Congress on behalf of their 38 million members in opposition to the bill.“The large increase in the deficit will inevitably lead to calls for greater spending cuts, which are likely to include dramatic cuts to Medicare, Medicaid and other critical programs serving older Americans,” they warned. “The Congressional Budget Office has now published a letter stating that unless Congress takes action, H.R. 1 will result in automatic federal funding cuts of $136 billion in fiscal year 2018, $25 billion of which must come from Medicare.”
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Also note that the cuts to Medicare are capped at 4 percent per year, which comes out to $25 billion. So if the sequester mandates that Medicare should be cut even more than $25 billion, those additional cuts are going to have to come from elsewhere in the federal budget. In other words, these tax cuts for corporations and the rich aren’t just being paid for with higher taxes on the poor and middle-class. All beneficiaries of federal spending are also going to experience a cut.
And the only way to avoid these cuts will be for the GOP to repeal the sequester, which would be pretty remarkable if it happened when you consider that the sequester was demanded by the GOP over fears of rising national debt.
Is it a Tax Hike on the Poor, or a Premium Hike for the Poor’s Health Insurance? How About Both
Of course, since the the $25 billion annual cut to Medicare and the rest of the sequestration cuts triggered by the House’s version of the tax cut are triggered due to the explosion in the federal deficit, the sequester cuts might not be quite as large for the Senate version simply because the Senate version has to follow the Byrd rule and isn’t allowed to blow up the deficit quite as much. But as we already saw, it’s not like health care will go untouched under the Senate’s version thanks to the repeal of the Obamacare mandate.
And as we’ll see below, that Obamacare mandate repeal result in a pretty remarkable estimate for the impact of the Senate’s tax bill on the poorest Americans: the Joint Committee on Taxation (JTC) — the congressional committee consisting of House and Senate members tasked with estimating the costs of proposed legislation — estimated the tax bill for the poorest Americans would rise over 25 percent by 2027! And this spike in taxes for the poor was largely due to the repeal of the Obamacare mandate.
Now, as we’ll also see, that 25 percent rise in the tax burden for the poor is based on the fact that the government won’t be paying health insurance subsidies to 13 million Americans who assumed to drop their health insurance coverage if the mandate is repealed. So it’s the loss of health insurance subsidies that’s driving the 25 percent spike in the tax burden for the poor, a fact that the GOP is angrily latching onto to in this debate to make it look like this tax bill isn’t predicated on the poor paying the bill for the wealthy’s tax cuts. And yet it’s hard to ignore the reality that the Senate’s tax bill is paying for itself by assuming that the federal government spends a lot less money on health care for the poor, which sure looks a lot like the poor paying for tax cuts for the rich:
The Hill
Tax cuts in Senate bill would evaporate in a decade: JCT
By Niv Elis and Peter Sullivan — 11/16/17 10:40 AM EST
Tax cuts for individuals in the Senate’s latest tax plan would disappear by 2027, according to an analysis by the Joint Committee on Taxation (JCT), with some even seeing a tax increase.
While taxpayers would see their tax bills drop by 7.4 percent on average in 2019 under the bill, by 2027, their taxes would rise by an average of 0.2 percent.
The poor would be hardest hit, with those making between $20,000 and $30,000 seeing their tax bills rise starting in 2021. By 2027, they would see a 25.4 percent increase in their tax bill.
Those making over $75,000 would still see their taxes go down, albeit by less than 1 percent by the final year, while everyone making under $75,000 would see some level of tax increase.
The drop-off is likely attributable to a series of expiring tax cuts introduced in Finance Committee Chairman Orrin Hatch’s (R‑Utah) latest update to the bill. The legislation would also eliminate the individual mandate for ObamaCare and lower some individual tax rates.
The JCT analysis looked at averages for each income group and did not break out how many people at each level would see their taxes go up or down.
Hatch said that the sharp tax increase on low-income families found by the analysis was the result of the individual mandate being repealed. Without the mandate, millions of people are expected to go without health insurance.
“JCT began with an assumption that some people in the lower income brackets will opt to not purchase health insurance and thus not take advantage of available tax credit subsidies. Without those credits, they see an overall uptick in their tax liability,” Hatch said at the opening of Thursday’s finance committee markup of the tax bill.
Low-income people would retain the option of accessing those subsidies if they chose to buy health insurance, he added. The JCT simply reflected the assumption that many would choose not to.
“Obviously, we have no intention of raising taxes on these families,” he added.
Republican senators at Thursday’s markup generally agreed that the numbers reflected fewer people receiving ObamaCare subsidies, which take the form of tax credits, when the individual mandate is removed.
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“The poor would be hardest hit, with those making between $20,000 and $30,000 seeing their tax bills rise starting in 2021. By 2027, they would see a 25.4 percent increase in their tax bill.”
A 25 percent increase in taxes for the poor in the GOP’s big tax cut bill. It’s not a great look.
But as the GOP tries to explain, this 25 percent increase is more or less voluntary because the poor can still access subsidized health insurance (thanks to the GOP’s repeated failures to repeal Obamacare this year):
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Hatch said that the sharp tax increase on low-income families found by the analysis was the result of the individual mandate being repealed. Without the mandate, millions of people are expected to go without health insurance.“JCT began with an assumption that some people in the lower income brackets will opt to not purchase health insurance and thus not take advantage of available tax credit subsidies. Without those credits, they see an overall uptick in their tax liability,” Hatch said at the opening of Thursday’s finance committee markup of the tax bill.
Low-income people would retain the option of accessing those subsidies if they chose to buy health insurance, he added. The JCT simply reflected the assumption that many would choose not to.
“Obviously, we have no intention of raising taxes on these families,” he added.
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And while it’s true that the people who decide to forgo health insurance once the mandate is repealed would be doing this voluntarily, that ignores one of the more significant indirect effects of the mandate repeal: the 13 million people expected to go without health insurance if the mandate is repealed are also expected to be relatively young and healthy people. And when you encourage 13 million young and healthy people to drop out of the individual insurance markets, you’re inevitably going to see a spike in premiums.
And that’s the Congressional Budget Office (CBO) projected if that Obamacare mandate is repealed: a 10 percent hike in premiums for the individual health insurance market most years:
Bloomberg Politics
The Senate Tax Bill’s Chances Just Got Better
By Steven T. Dennis and Sahil Kapur
November 22, 2017, 7:47 AM CST Updated on November 22, 2017, 10:03 AM CST* Murkowski agrees to kill Obamacare’s individual mandate
* Hurdles remain, including concerns about deficit effectsAlaska Senator Lisa Murkowski’s decision to agree to smash Obamacare’s individual mandate may remove one obstacle to passing the Senate Republican tax bill next week.
“I believe that the federal government should not force anyone to buy something they do not wish to buy in order to avoid being taxed,” she wrote in an op-ed in Alaska’s Daily News-Miner newspaper posted online Tuesday.
Murkowski didn’t mention the tax bill in the article. But she previously said she preferred not to mix it with health care, and she was one of three mavericks who killed the GOP’s Obamacare repeal efforts earlier this year.
Her announcement came after she said last week that Congress should act to stabilize health-insurance markets in conjunction with eliminating the individual mandate — a requirement that individuals get health insurance or pay a federal penalty — in the tax legislation. In the op-ed, Murkowski reiterated her support for proposed legislation to do just that but didn’t indicate it was a precondition for her to support the tax bill.
The mandate repeal now appears much more likely to stay in the tax bill, where it helps offset more than $300 billion in other tax cuts — revenue needed to bring the bill into compliance with Senate budget rules. It’s also crucial to President Donald Trump’s goal of making corporate tax cuts permanent under those rules.
There are still other hurdles for the tax bill to get to 50 votes. Republican Senators John McCain of Arizona and Susan Collins of Maine — who joined Murkowski in torpedoing efforts to repeal the Affordable Care Act earlier this year — have yet to sign on. And Wisconsin Senator Ron Johnson also threatened to vote against the bill without more tax relief for partnerships, limited liability companies and other so-called pass-through businesses. Senate leaders have said they’re trying to address Johnson’s concerns.
Deficit Questions
Three Republican senators, Bob Corker of Tennessee, Jeff Flake of Arizona and James Lankford of Oklahoma, have raised specific concerns about the bill’s effect on the deficit. On Wednesday, a new independent analysis of the bill found that it would continue to reduce federal revenue each year after 2027 — a potential complication for Senate tax writers.
Murkowski’s vote has long been wooed by the Senate Majority Leader Mitch McConnell. The bill notably includes a provision opening up Alaska’s Arctic National Wildlife Refuge to oil drilling — a priority for Alaska lawmakers for decades.
In recent weeks, Murkowski has been openly conflicted on how to vote on the mandate, saying she was concerned that higher premiums from repealing it could cancel out the tax cuts for some in the middle class. But in her op-ed, she drops those concerns, saying repealing the mandate would simply restore people’s freedom to choose and noting the sky-high insurance costs under the ACA in her state.
“A silver plan for a family of four, with a $9,000 deductible, will cost about $2,160 per month in 2018,” she wrote. For families who make too much for subsidies, that amounts to nearly $35,000 out of pocket before insurance kicks in, she added.
Insurance-Market Effect
She said in the op-ed that she still wants Congress to pass bipartisan legislation that aims to fix Obamacare “as fast as possible to stabilize our markets.”
Legislative staff members for Senator Patty Murray, a Washington Democrat who joined Tennessee Republican Lamar Alexander to sponsor a stabilization bill, said in a memo Tuesday that the legislation wouldn’t be enough to protect the system if the individual mandate is repealed.
“Republicans are seriously mistaken if they think passing Alexander-Murray will lessen the blow of repealing the coverage requirement included in the Affordable Care Act,” the memo said.
The Congressional Budget Office has estimated that the $300 billion in savings from repealing the mandate would come from about 13 million Americans dropping their coverage by 2027 — eliminating the need for federal subsidies that help them afford it. Because many of them would be younger, healthier people, insurance premiums would rise 10 percent in most years, the nonpartisan fiscal scorekeeper found.
On Tuesday, a national actuaries’ group said in a letter to Senate leaders that repealing the individual mandate would raise costs for consumers and harm insurance markets.
Fiscal Study
Apart from health-care concerns, senators will have to grapple with the bill’s long-term effects on federal deficits. A new study released Wednesday may spell potential trouble on that score.
A report from the Penn Wharton Budget Model at the University of Pennsylvania found that the bill would reduce federal revenue in each year between 2027 and 2033. That finding would mean the bill doesn’t comply with a key budget rule that Senate Republican leaders want to use to pass the legislation with a simple majority over Democrats’ objections.
The rule holds that any bills approved via the fast-track process that GOP leaders intend cannot add to the deficit outside a 10-year budget window.
The official scorekeeper, Congress’s Joint Committee on Taxation, has already found that the bill would generate a surplus in its 10th year due to expiring tax breaks for businesses and individuals. But JCT hasn’t publicly weighed in on the revenue effects in subsequent years.
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“The Congressional Budget Office has estimated that the $300 billion in savings from repealing the mandate would come from about 13 million Americans dropping their coverage by 2027 — eliminating the need for federal subsidies that help them afford it. Because many of them would be younger, healthier people, insurance premiums would rise 10 percent in most years, the nonpartisan fiscal scorekeeper found.”
So the Senate’s tax plan doesn’t just involve raising $300 billion — to be spent on tax cuts for corporations and the wealthy — by dropping 13 million mostly young and healthy Americans off of federally subsidized health insurance. It’s also a plan to destabilize the individual health insurance markets because that’s what happens when you do something that’s expected to suck the young and healthy out of the insurance markets:
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In recent weeks, Murkowski has been openly conflicted on how to vote on the mandate, saying she was concerned that higher premiums from repealing it could cancel out the tax cuts for some in the middle class. But in her op-ed, she drops those concerns, saying repealing the mandate would simply restore people’s freedom to choose and noting the sky-high insurance costs under the ACA in her state.
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It’s a remind that the subsidies for the young and healthy to buy insurance weren’t simply subsidies for those individuals who choose to buy subsidized insurance. They were subsidies for everyone in the individual insurance markets because having the young and healthy in those markets help bring down rates for everyone.
It’s that dynamic of lower coverage leading to higher premiums that’s led Lisa Murkowski, Alaska’s moderate GOP senator, to openly fret about the impact of repealing the mandate. And yet it sounds like she’s suddenly decided that repealing the Obamacare mandate is a great idea. Because it will enhance freedom (apparently the light fine for not getting health insurance harmed Americans’ freedom). And given that Murkowski is one of a handful of GOP Senator’s to express concerns about the Senate version of the tax bill, so hear her suddenly come around to repealing the mandate is a very ominous sign:
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Alaska Senator Lisa Murkowski’s decision to agree to smash Obamacare’s individual mandate may remove one obstacle to passing the Senate Republican tax bill next week.“I believe that the federal government should not force anyone to buy something they do not wish to buy in order to avoid being taxed,” she wrote in an op-ed in Alaska’s Daily News-Miner newspaper posted online Tuesday.
Murkowski didn’t mention the tax bill in the article. But she previously said she preferred not to mix it with health care, and she was one of three mavericks who killed the GOP’s Obamacare repeal efforts earlier this year.
...
Murkowski’s vote has long been wooed by the Senate Majority Leader Mitch McConnell. The bill notably includes a provision opening up Alaska’s Arctic National Wildlife Refuge to oil drilling — a priority for Alaska lawmakers for decades.
In recent weeks, Murkowski has been openly conflicted on how to vote on the mandate, saying she was concerned that higher premiums from repealing it could cancel out the tax cuts for some in the middle class. But in her op-ed, she drops those concerns, saying repealing the mandate would simply restore people’s freedom to choose and noting the sky-high insurance costs under the ACA in her state.
...
“In recent weeks, Murkowski has been openly conflicted on how to vote on the mandate, saying she was concerned that higher premiums from repealing it could cancel out the tax cuts for some in the middle class. But in her op-ed, she drops those concerns, saying repealing the mandate would simply restore people’s freedom to choose and noting the sky-high insurance costs under the ACA in her state.”
And there we have it: Senator Murkowski notes the high insurance costs for Obamacare in her state in her statement supporting the repeal of the mandate, a move that she has previously been concerned with lead to higher insurance costs.
So now the chances of the tax cut bill actually passing in the Senate are A LOT higher than they would have been without Murkowski’s support. But there was one rather significant recent set back for the bill: According to a study by the Wharton school at the University of Pennsylvania, despite all the tax hikes on the middle-class and poor, the Senate tax bill still violates the Byrd rule:
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Apart from health-care concerns, senators will have to grapple with the bill’s long-term effects on federal deficits. A new study released Wednesday may spell potential trouble on that score.A report from the Penn Wharton Budget Model at the University of Pennsylvania found that the bill would reduce federal revenue in each year between 2027 and 2033. That finding would mean the bill doesn’t comply with a key budget rule that Senate Republican leaders want to use to pass the legislation with a simple majority over Democrats’ objections.
The rule holds that any bills approved via the fast-track process that GOP leaders intend cannot add to the deficit outside a 10-year budget window.
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But that’s still just an independent report. It’s going to be up to the congresses’ official scorekeeper, the Joint Committee on Taxation (JTC), to make the determination as to whether or not the Senate bill really does pass the Byrd rule. And the JTC has yet to weigh in on that:
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The official scorekeeper, Congress’s Joint Committee on Taxation, has already found that the bill would generate a surplus in its 10th year due to expiring tax breaks for businesses and individuals. But JCT hasn’t publicly weighed in on the revenue effects in subsequent years.
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So while we don’t yet know what the JCT will decide, we do know that outside analysts don’t see the Senate’s version of the bill fulfilling the Byrd rule.
GOP Scheme to Trickle Its Way Into Byrd Rule Compliance
And that skepticism over the Senate bill’s compliance with the Byrd rule isn’t limited to University of Pennsylvania analysis. The Tax Policy Center recently put out its own analysis on the Senate bill. And that analysis assumed the tax cuts would indeed boost the overall economic growth. In other words, the analysis assumed the tax cuts for the rich and corporations would pay for themselves by boosting economic growth, a central tenet to the GOP’s tax-cutting orthodoxy. But even with that enhanced growth, the analysis found that the still didn’t pass the Byrd rule:
Talking Points Memo
DCStudy: Even With Dynamic Scoring, GOP Tax Bill Still Blows Up The Deficit
By Alice Ollstein Published November 20, 2017 2:52 pm
On Monday, the Tax Policy Center released a new analysis of the House tax bill that disproves claims from GOP leadership and the Trump administration that the deep tax cuts for corporations and the wealthy will create so much economic growth that the bill will pay for itself.
Treasury Secretary Steve Mnuchin recently insisted that “not only will this tax plan pay for itself, but it will pay down debt.” White House economic adviser Gary Cohn agreed, saying that “we can pay for the entire tax cut through growth over the cycle.”
Yet the new study by the Tax Policy Center finds that while the bill would somewhat boost the nation’s economic output, leading to more revenue for the government, it would not be enough to offset the revenue lost by the tax cuts. The net effect of the bill would be to increase the deficit by $1.27 trillion over 10 years.
The estimated growth would be lower than promised and the impact would diminish over time. The Tax Policy Center estimates that the tax cuts would increase the U.S. GDP by 0.6 percent in 2018, 0.3 percent in 2027, and 0.2 percent in 2037.
The revenue generated by the growth would be about $169 billion over 10 years—a drop in the bucket to the revenue the government would lose over that same period.
This study echoes the findings of other analyses—including one conducted by President Trump’s alma mater, the Wharton School of Business—showing that even when taking growth into account through so-called dynamic scoring, the tax bill would still balloon the deficit.
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“Yet the new study by the Tax Policy Center finds that while the bill would somewhat boost the nation’s economic output, leading to more revenue for the government, it would not be enough to offset the revenue lost by the tax cuts. The net effect of the bill would be to increase the deficit by $1.27 trillion over 10 years”
Even with assumed increases in economic growth as a result of these tax cuts, the Tax Policy Center study found the net effect on the deficit would be an increase of $1.27 trillion over 10 years.
So if the Joint Committee on Taxation is going to conclude that the Senate bill does actually follow the Byrd rule, it’s going to have to assume that these tax cuts result in far greater enhanced economic growth than what the Tax Policy Center was assuming. Spectular growth. The kind of growth that the GOP has been promising from its various tax cuts for the rich for decades that never seem to material. That kind of growth.
Which is perhaps why it’s not surprising to see statements like this coming from the Trump administration:
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Treasury Secretary Steve Mnuchin recently insisted that “not only will this tax plan pay for itself, but it will pay down debt.” White House economic adviser Gary Cohn agreed, saying that “we can pay for the entire tax cut through growth over the cycle.”
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That’s right, Trump’s Treasury Secretary actually argued that the tax cuts will not only pay for itself but actually bring in more revenue than it costs. Super trick-down! And the White House economic advisor Gary Cohn agreed! All those projections that the Senate tax cut bill will result in over a trillion dollars in new deficits over the next decade are completely wrong because the tax cuts will completely pay for themselves through economic growth according to the Trump White House:
CNBC
Trump advisor Gary Cohn says we can pay for the entire tax cut through economic growth
* Tax cuts Republicans proposed this week will be paid for through economic growth, chief White House economic advisor Gary Cohn tells CNBC.
* Cohn says the cuts will drive growth that will exceed 3 percent.Jeff Cox
Published 8:05 AM ET Thu, 28 Sept 2017 Updated 9:11 AM ET Thu, 28 Sept 2017Tax cuts Republicans proposed this week will be paid for entirely through economic growth, chief White House economic advisor Gary Cohn said Thursday.
Republicans issued the tax overhaul plan Wednesday that simplifies the tax code, breaking rates down into three categories and cutting corporate rates. The plan also seeks to give companies a break for profits stashed overseas while doubling the standard deduction for most filers.
The tax cuts are projected to cost at least $1.5 trillion and up to $2.2 trillion, according to one analysis. Tax reform, along with reduced regulation and infrastructure spending, was the cornerstone of President Donald Trump’s 2016 election campaign.
Cohn said the cuts won’t increase the budget deficit.
“We think we can drive a lot of business back to America, we can drive jobs back to America, we can make ourselves very competitive,” Cohn told CNBC in a live interview. “We think we can pay for the entire tax cut through growth over the cycle.”
Cohn predicted that economic growth would be “substantially over 3 percent” due to tax reform and deregulation.
The GOP plan proposes lowering the corporate tax rate from the current 35 percent, the highest in the world, to 20 percent. The administration originally had wanted 15 percent, and Cohn said the White House will not budge on the 20 percent level.
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““We think we can drive a lot of business back to America, we can drive jobs back to America, we can make ourselves very competitive,” Cohn told CNBC in a live interview. “We think we can pay for the entire tax cut through growth over the cycle.”
This is seriously the White House’s line on this debate: there is no problem with the Senate’s compliance with the Byrd rule because the massive tax cut for the rich and corporations will completely pay for itself.
America’s CEO’s Didn’t Get the Trickle Down Memo
So given that the White House is making some sort of Super Tricke-Down argument to the public, it raises the question as to whether or not that’s the same argument the GOP is planning on making to the JCT. Is Super Trickle-Down going to be official justification for this tax bill? Well, if so, someone needs to inform America’s CEOs. Because if American companies expected to go on an investment and hiring binge after this tax cut goes into effect, America’s CEOs don’t appear to be aware of this plan:
Business Insider
Gary Cohn had an awkward moment when CEOs appeared to shoot down one of the biggest arguments for the GOP tax plan
Bob Bryan
Nov. 14, 2017, 1:58 PM* The Trump administration has argued that the proposed GOP tax cuts will lead to a boom in private investment.
* During an event with the top White House economic adviser, Gary Cohn, CEOs were asked whether they would increase investment if the GOP’s tax overhaul passed.
* Few did, prompting Cohn to ask, “Why aren’t the other hands up?”A group of CEOs on Tuesday appeared to cast doubt on one of the White House’s biggest arguments for overhauling the tax code — right in front of the economic adviser Gary Cohn.
At a meeting of The Wall Street Journal’s CEO Council, an interview with Cohn — the National Economic Council director who previously worked as an executive at Goldman Sachs — prompted discussion about the amount of investment the GOP tax bill, the Tax Cuts and Jobs Act, would generate.
Republicans and the Trump administration have argued that tax cuts for businesses would lead companies to investment more and raise wages for workers.
The moderator then asked those in attendance whether they were planning to increase their business investment if the tax bill became law. The CEOs in attendance did not seem to be on the same wavelength as Cohn.
While there was a smattering of raised hands in the auditorium, it was clearly not as many as Cohn would have liked.
“Why aren’t the other hands up?” Cohn asked before moving on to another question.
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“The moderator then asked those in attendance whether they were planning to increase their business investment if the tax bill became law. The CEOs in attendance did not seem to be on the same wavelength as Cohn.”
A smattering of raised hands. That was the response from an auditorium filled with CEOs at the Wall Street Journal’s CEO Council when asked who was planning on using this tax cut to hire more people:
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While there was a smattering of raised hands in the auditorium, it was clearly not as many as Cohn would have liked.“Why aren’t the other hands up?” Cohn asked before moving on to another question.
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“Why aren’t the other hands up?” It’s a question America is probably going to ask itself for years to come if that tax plan becomes reality. While deficits explode and wealth inequality skyrockets.
The Byrd Rule is Really Just a Suggestion in the Long Run
But another question America is probably going to be asking itself is, “how on Earth did we believe the deficits would only spike by $1 to 2 trillion?” Because in addition to the Super Trickle-Down arguments that we’re hearing from the White House, the GOP is trotting out another set of arguments to answer critics who point out the temporary tax cuts are for the poor and middle-class while all the permanent tax cuts are for corporations and the wealthy: don’t worry, those temporary tax cuts for the poor and middle-class aren’t actually temporary, because Congress will almost surely extend them in the future. In other words, all this talk about making the Senate tax plan comply with the Byrd rule and remain deficit-neutral is purely for expediency, and the real plan is to actually blow up the deficit much, much more than even more than currently projected:
The New York Times
The Conscience of a LiberalSchroedinger’s Tax Hike
Paul Krugman
November 24, 2017 12:26 pm November 24, 2017 12:26 pmYes, I know that’s supposed to be an umlaut in the title. I just can’t persuade WordPress to do it.
So: There are many amazing things about the Republican tax pitch, where by “amazing” I mean terrible. But possible the most amazing of all is the attempt to have it both ways on the question of middle-class taxes.
The Senate bill, as written, tries to be long-run deficit-neutral — allowing use of the Byrd rule to bypass a filibuster — by offsetting huge corporate tax cuts with higher taxes on individuals, so that by 2027 half the population, and most of the middle-class, would see taxes go up. But those tax hikes are initially offset by a variety of temporary tax breaks.
Now, Republicans are arguing that those tax breaks won’t actually be temporary, that future Congresses will extend them. But they also need to assume that those tax breaks really will expire in order to meet their budget numbers. So the temporary tax breaks need, for political purposes, to be both alive and dead.
If they succeed in this exercise in quantum budgeting, we’ll eventually open the box, collapsing the wave function, and discover whether the budget promise or the tax claim was a lie. But for now, they want to hold it all in suspension. Once upon a time you wouldn’t have imagined they could get away with it. Now …
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“Schroedinger’s Tax Hike” by Paul Krugman; The New York Times; 11/24/2017
“Now, Republicans are arguing that those tax breaks won’t actually be temporary, that future Congresses will extend them. But they also need to assume that those tax breaks really will expire in order to meet their budget numbers. So the temporary tax breaks need, for political purposes, to be both alive and dead.”
Don’t worry about the deficit because enough of tax cuts are temporary. And don’t worry about the unfairness of the temporary tax cuts because they aren’t actually going to be temporary. This is the messaging coming from the GOP right now, which is why even some conservatives are getting anxious. You might be tempted to assume that lots of GOPers would be getting nervous about this since focusing on the deficit is a cudgel the GOP has been using for years to keep government spending down. But it turns out there aren’t actually very many Republicans in Congress who care about higher deficits if those deficits are a consequence of a tax cut. But for that handful of genuine GOP deficit hawks, all this talk about extending the temporary tax cuts is making them nervous:
Politico
GOP deficit hawks fear tax plan is secret budget-buster
Key Senate Republicans worry tax cuts slated to expire will eventually be extended — boosting the true cost of the bill.
By SEUNG MIN KIM
11/24/2017 07:42 AM EST
The GOP has yet to resolve an internal clash over whether expiring tax cuts will really expire, potentially threatening the party’s push for a desperately-needed legislative achievement.
On one side are the White House and top congressional Republicans, who argue that ultimately all the tax cuts in their plan will be extended, even the ones slated to lapse. But that’s exactly what the party’s small, but mighty, bloc of deficit hawks is afraid of.
And as the Senate steams toward a vote next week on its massive tax overhaul, the fight over the bill’s true sticker price may be the deciding factor for the bill.
It was bad enough, in the deficit hawks’ view, that key provisions in the House bill expire in five years and that lawmakers already assume they’ll get extended. But their concerns multiplied after the revised Senate GOP tax plan proposed winding down a host of popular tax cuts for individuals after 2025. The tax cuts were made temporary to trim the official cost of the bill, but deficit hawks fear Congress will simply extend them — further adding to the government’s red ink.
“The savings, the score, it just isn’t valid because you know that they’re not going to follow through,” Sen. Jeff Flake (R‑Ariz.), an avowed fiscal conservative, said in a recent interview. “You can’t assume that we’ll grow a backbone later. If we can’t do it now, then it’s tough to do it later.”
The collision between what most Republicans see as simple political reality — keeping popular tax cuts for voters — and deep deficit worries from influential GOP senators could derail the tax reform efforts, particularly if and when the chambers try to meld their tax proposals in the coming weeks.
The deficit hawks decry what they see as gimmicks in the plan, particularly writing in an expiration date for tax breaks with no intention of letting them die. While the official price tag for the Senate tax plan may be $1.4 trillion, extending all the expiring provisions would bump up that cost by another half a trillion dollars, according to the fiscal watchdog group Committee for a Responsible Federal Budget.
Republicans leading the tax charge have said that the tax cuts expire merely to fit within the parameters set up by complicated Senate rules. And they brush off attacks from Democrats who note that the cuts are permanent for corporations but temporary for regular people. Republicans say Democrats should help them make those cuts permanent, which would require 60 votes on the floor — something Democrats are unlikely to do.
Speaker Paul Ryan (R‑Wis.) has publicly blamed the Senate rules as the reason some provisions in the House bill, like a family tax credit, expire after five years. He recently told reporters he thinks future Congresses will extend them.
That’s the White House line, too.
“Of course, the hope for everybody is that when the time comes for these things to expire, that they get extended,” Kevin Hassett, chairman of the White House Council of Economic Advisers, said last week.
Flake and Tennessee Sen. Bob Corker, another independent-minded Republican not running for reelection next year, have been among the most outspoken with their deficit concerns. So too, has Sen. John McCain of Arizona, a major wildcard for GOP leadership in the tax fight.
But other Republicans have gradually become more vocal about their own deficit worries, with Sens. Todd Young of Indiana and James Lankford of Oklahoma among them. GOP leaders can only lose two votes before the tax bill tanks.
...
Other GOP senators have raised different objections to the tax bill; Sen. Ron Johnson of Wisconsin doesn’t like the way the plan treats small businesses and Sen. Susan Collins of Maine takes issue with repealing Obamacare’s individual mandate in the plan, among other concerns.
Democrats have seized on the bill’s contradictions, and Senate Minority Leader Chuck Schumer of New York has been particularly eager to exploit the Republican divide.
“I say to my colleagues, particularly the deficit hawks, you can’t have it both ways,” Schumer said in a recent floor speech. “You cannot say we’re going to protect the middle class after 2025 and we’re going to reduce the deficit. This bill is a deficit budget buster. We all know what will happen.”
Indeed, Congress has a good track record of keeping expiring tax cuts around.
Lawmakers faced a “fiscal cliff” at the end of 2012 composed mainly of the expiring Bush tax cuts. Congress, backed by the Obama administration, ultimately voted to make the vast majority of tax cuts permanent. Capitol Hill also routinely voted to maintain temporary tax “extenders” year after year, before passing legislation in December 2015 that made most of them permanent.
The Senate tax measure includes dozens of provisions that are set to expire yet would likely be politically untenable to actually kill; chief among them are their plans to boost the child tax credit, cut individual tax rates and increase the standard deduction.
Corker has been one of the loudest critics of ballooning the deficit. But he’s been careful not to openly disparage the tax plans moving through Congress, and Senate tax-writers, as well as leadership, are aware of his concerns. The Tennessee Republican said he has been discussing ways to resolve deficit worries with other senators — Flake among them — but declined to elaborate further.
Whether Senate Republicans can ultimately win over the GOP skeptics is unclear.
When asked about the cost of extending expiring provisions, McCain stressed: “I’m always worried about the deficit.”
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“GOP deficit hawks fear tax plan is secret budget-buste” by SEUNG MIN KIM; Politico; 11/24/2017
“The deficit hawks decry what they see as gimmicks in the plan, particularly writing in an expiration date for tax breaks with no intention of letting them die. While the official price tag for the Senate tax plan may be $1.4 trillion, extending all the expiring provisions would bump up that cost by another half a trillion dollars, according to the fiscal watchdog group Committee for a Responsible Federal Budget.”
Extending the tax expiring tax cuts for the poor and middle-class is expected to raise the cost of the Senate’s plan from $1.4 trillion to close to $2 trillion, spiking the cost by over a third. And that $1.4 trillion is just the costs for the first 10 years. The long term costs of extending the expiring tax cuts for the middle-class will of course be substantially higher if these tax cuts get the same treatment the corporate tax cuts are given and are extended permanently.
So will the GOP’s ‘deficit hawks’ balk at the prospect of massively exploding the deficit for decades to come, something that would guarantee the forced cuts in entitlement programs? We’ll see, but it’s worth noting that the three deficit hawks interviewed for the above article are three GOPers set to retire from the Senate: Bob Corker, Jeff Flake, and John McCain:
...
Corker has been one of the loudest critics of ballooning the deficit. But he’s been careful not to openly disparage the tax plans moving through Congress, and Senate tax-writers, as well as leadership, are aware of his concerns. The Tennessee Republican said he has been discussing ways to resolve deficit worries with other senators — Flake among them — but declined to elaborate further.Whether Senate Republicans can ultimately win over the GOP skeptics is unclear.
When asked about the cost of extending expiring provisions, McCain stressed: “I’m always worried about the deficit.”
So will retiring from the Senate make these three GOPers more likely to vote down the GOP’s prized tax cut out of sense of fiscal responsibility, or will retiring just make it easier for these Senators to vote for a bill that will likely cause havoc on the budget after they’ve retired? We’ll see.
GOP Mega-Donors, the Ultimate Constituency
But one aspect of being a retiring Senator should make life much easier for people like Bob Corker, Jeff Flake, and John McCain: they don’t have to answer to the GOP mega-donors:
Talking Points Memo
LivewireGOPer On Tax Cuts: Donors Are Saying ‘Get It Done Or Don’t Ever Call Me Again’
By Matt Shuham
Published November 7, 2017 1:53 pmRep. Chris Collins (R‑NY) got points for honesty Tuesday while advocating for Republicans’ tax bill to slash the corporate tax rate and eliminate the estate tax, among other things.
“My donors are basically saying, ‘Get it done or don’t ever call me again,’” Collins said.
According to the Hill, Collins made the comment while speaking to reporters after a House GOP conference meeting.
...
Collins, a millionaire and one of the wealthiest members of Congress, repeated the GOP claim in a radio interview Tuesday that a middle-income American family would get a roughly $1,200 tax break as a result of the party’s tax proposal.
Vox’s Matthew Iglesias reported Monday that claim is only true for the first year following the plan’s passage. The advertised tax break would decrease to next-to-nothing within six years, and the exemplar family would pay more under Republicans’ tax bill from year seven onward.
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““My donors are basically saying, ‘Get it done or don’t ever call me again,’” Collins said.”
Sure, that’s just an anecdote from a single congressman. But it’s hard to imagine that this isn’t the same message all GOPers are getting from their mega-donors across the country. After all, it’s not like a tax cut that’s almost entirely for the rich and corporation is going to be politically popular. Yet the GOP is clearly desperate to make this political poison pill a reality.
And yes, Trump and the GOP still clearly need at least one big legislative ‘win’. But it’s hard to see how a tax cut that starts eroding away for the poor and middle-class in a year is going to be politically helpful. Mega-donors wouldn’t need to issue ‘pass this, or else’ threats if it was a political winner. If Congress simply passed a resolution to be better people next year that would be a far, far bigger legislative accomplishment for the GOP than a super-villain-ish tax monstrosity.
Misinformed Future Voters Who Won’t Realize the Damage the GOP Has Already Done is Also an Important GOP Constituency
So given how politically poisonous this horrible tax plan is, it raises the question of what the GOP’s long-term plans are, especially given the already declared plans to extend all the tax cuts and blow up the deficit even more. After all, if this bill passes and ends up being as politically poisonous it appears to be, it’s entirely possible that the GOP will lose control of the House in 2018 and the Senate and White House in 2020.
Does the GOP and its mega-donor class actually believe in their Super Tricke-Down rhetoric? Do they actually think there’s going to be an economic mega-boom that makes results in the tax cut paying for itself? That seems highly unlikely. So what’s the plan?
Well, as the following article from Bruce Bartlett — a domestic policy advisor for Ronald Reagan who helped popularize the Trickle-Down myth but who is now a harsh critic of GOP economic policy — makes clear, the GOP plan is likely as follows: pass a massive tax cut now, lose control of power and the Democrats temporarily take control while deficits explode from the tax cuts, then campaign against the Democrats as out-of-control spenders who need to be thrown out of office for their fiscal irresponsibility, and finally regain political power and demand massive spending cuts. In other words, ‘the plan’ the same plan the GOP has been successfully exploiting for decades:
The Guardian
Republican tax cuts will hurt Americans. And Democrats will pay the price
The consequences of the tax program will shelve support for the Republicans, but once in power the Democrats’ hands will be financially bound for years
Bruce Bartlett
Monday 20 November 2017 09.10 EST
Last modified on Monday 20 November 2017 10.35 ESTI think many Democrats and independent political observers are puzzled by the intensity with which Republicans are pursuing their tax cut. It’s not politically popular and may well lead to the party’s defeat in next year’s congressional elections. So why do it?
The answer is that Republicans are pushing the tax cut at breakneck speed precisely because they know they are probably going to lose next year and in 2020 as well. The tax cut, once enacted, however, will bind the hands of Democrats for years to come, forcing them to essentially follow a Republican agenda of deficit reduction and prevent any action on a positive Democratic program. The result will be a steady erosion of support for Democrats that will put Republicans back in power within a few election cycles.
The theory was laid out almost 30 years ago by two Swedish economists, Torsten Persson and Lars EO Svensson. In a densely written article for the Quarterly Journal of Economics in 1989, they explained why a stubborn conservative legislator would intentionally run a big budget deficit.
It has to do with what economists call time inconsistency – the consequences of actions taken today may not appear until the future, when a different political party will be in power. Thus the credit or blame will accrue to that party rather than the one that implemented the policy, because voters tend to attribute whatever is happening today to the party in power today even if that party had nothing to do with it.
Thus Barack Obama got blamed for a recession and resulting budget deficits he had nothing to do with originating. No matter how many times the Congressional Budget Office showed that the vast bulk of the budget deficits in his administration were baked in the cake the day he took office, Republicans nevertheless blamed him and his policies exclusively for those deficits.
Of course, another reason for those deficits is that Republicans systematically decimated the federal government’s revenue-raising capacity during the George W Bush administration with one huge tax cut after another. All of these were sold as necessary to get the economy growing again. The failure of the economy to respond positively was never taken as evidence of the failure of those tax cuts, but rather as showing the need for even more and bigger tax cuts.
The payoff for this orgy of tax-cutting came when Obama took office. All of a sudden, Republicans noticed that there were large deficits and insisted that Obama do something about them right this minute! They even made the nonsensical argument that spending cuts would stimulate growth by reducing the burden of government.
Democrats did a poor job of explaining how Franklin Roosevelt tried exactly that in 1937, slashing government spending because his treasury secretary told him it would restore business confidence. The result was a sharp downturn that raised unemployment, which had been trending down.
Obama’s hands were tied by the deficit hawks in his own party as well and prevented from offering an economic stimulus adequate to offset the loss of aggregate demand resulting from the great recession that began in December 2007 on Bush’s watch. Obama even joined with Republicans to slash spending in the 2011 budget deal and put in place budget controls that made it virtually impossible to pursue any positive Democratic initiatives for the balance of his presidency. No wonder Trump won.
I think Republicans remember better than Democrats the lesson of 1993 as well. Bill Clinton was elected in 1992 on an activist agenda. But once in office, he was persuaded to reverse course and put all his efforts into deficit reduction. This transformation was spelled out in detail in Bob Woodward’s 1994 book, The Agenda. Its key element was a significant tax increase that every Republican in Congress voted against. They said it would crash the economy, but was instead followed by an economic boom. Unfortunately, the boom didn’t become apparent until after the 1994 election in which Democrats took heavy losses – in large part because of the tax increase. Republicans got control of both houses of Congress for the first time in 40 years.
Clinton remained beholden to the deficit hawks for his entire presidency, doing nothing with the vast budget surpluses that emerged and hoarding them like a modern day Midas, despite pressing economic needs and growing financial problems withsocial security and Medicare that those surpluses could have fixed. Clinton simply bequeathed them to Bush, who promptly dissipated them with tax cuts and a huge new spending program, Medicare Part D, not to mention wars in the Middle East that continue to this day.
I believe that the same cycle will rerun over the next few years. Should Democrats get control of the House and/or Senate next year, Trump and his party will insist that deficit reduction be the only order of business. Automatic spending cuts resulting directly from the tax cut will start to bite, hurting the poor and middle class primarily, according to the Congressional Budget Office, and making them forget that they resulted from a huge tax give-away to the wealthy that increased the deficit by $1.5tn. Democrats will get much of the blame due to time-inconsistency.
It’s possible that Trump’s appointees to the Federal Reserve may be so alarmed by the inflationary potential of the growing deficits that they will raise interest rates in response. This could trigger a recession that will be blamed on a Democratic president taking office in 2021, just as happened with Obama. But that president may not be able to enact any stimulus at all because deficits crowd out any fiscal space. By 2022, Republicans will be back in control of Congress and in the White House by 2024. In 2025, they will demand still more tax cuts.
Keep in mind that no matter how big the deficit gets from the tax cut Republicans are rushing to enact, none of them will ever vote to undo those cuts or raise taxes except, perhaps, in ways that further burden the poor, such as raising the gasoline tax. That is because they all signed a tax pledge promising never to raise taxes. Therefore, any deficit reduction will either consist solely of spending cuts or pass with only Democratic votes, as was the case in 1993.
The originator of the pledge, Grover Norquist, planned it this way. I doubt he has ever read Persson and Svensson, but understood intuitively that the tax pledge was guaranteed to ratchet down the size of government forever. It wouldn’t happen all at once, but over a period of decades. The history of fiscal policy since the pledge was originated in 1988 is, sadly, proof that it has worked exactly as he hoped.
...
———-
“I think many Democrats and independent political observers are puzzled by the intensity with which Republicans are pursuing their tax cut. It’s not politically popular and may well lead to the party’s defeat in next year’s congressional elections. So why do it?”
That’s the big question: why do it? Why is the GOP pushing so hard to do something that appears to be political suicide? And Bruce Bartlett has a very compelling answer: The GOP is intentionally committing the political equivalent of a suicide-bombing. It’s a strategy rooted in the assumption that the public will have no memory any of this ever happened:
...
The answer is that Republicans are pushing the tax cut at breakneck speed precisely because they know they are probably going to lose next year and in 2020 as well. The tax cut, once enacted, however, will bind the hands of Democrats for years to come, forcing them to essentially follow a Republican agenda of deficit reduction and prevent any action on a positive Democratic program. The result will be a steady erosion of support for Democrats that will put Republicans back in power within a few election cycles.The theory was laid out almost 30 years ago by two Swedish economists, Torsten Persson and Lars EO Svensson. In a densely written article for the Quarterly Journal of Economics in 1989, they explained why a stubborn conservative legislator would intentionally run a big budget deficit.
It has to do with what economists call time inconsistency – the consequences of actions taken today may not appear until the future, when a different political party will be in power. Thus the credit or blame will accrue to that party rather than the one that implemented the policy, because voters tend to attribute whatever is happening today to the party in power today even if that party had nothing to do with it.
...
“It has to do with what economists call time inconsistency – the consequences of actions taken today may not appear until the future, when a different political party will be in power. Thus the credit or blame will accrue to that party rather than the one that implemented the policy, because voters tend to attribute whatever is happening today to the party in power today even if that party had nothing to do with it.”
Blowing the party up in order to create fiscal conditions that force the party’s long-term goals and relying on the theory of “time inconsistency” to ensure that voters have no idea what happened. That’s the plan.
And it’s plan with precedents. Very recent precedents:
...
Thus Barack Obama got blamed for a recession and resulting budget deficits he had nothing to do with originating. No matter how many times the Congressional Budget Office showed that the vast bulk of the budget deficits in his administration were baked in the cake the day he took office, Republicans nevertheless blamed him and his policies exclusively for those deficits.Of course, another reason for those deficits is that Republicans systematically decimated the federal government’s revenue-raising capacity during the George W Bush administration with one huge tax cut after another. All of these were sold as necessary to get the economy growing again. The failure of the economy to respond positively was never taken as evidence of the failure of those tax cuts, but rather as showing the need for even more and bigger tax cuts.
The payoff for this orgy of tax-cutting came when Obama took office. All of a sudden, Republicans noticed that there were large deficits and insisted that Obama do something about them right this minute! They even made the nonsensical argument that spending cuts would stimulate growth by reducing the burden of government.
Democrats did a poor job of explaining how Franklin Roosevelt tried exactly that in 1937, slashing government spending because his treasury secretary told him it would restore business confidence. The result was a sharp downturn that raised unemployment, which had been trending down.
...
The Obama presidency was an example of the successful implementation of “time-inconsistency”. The George W. Bush administration pass all sorts of tax cuts for the rich that don’t magically result in a booming economy, deregulates the financial sector, and by the time Obama enters the White House the economy has tanked, deficits spiked, and the Democrats are unable to adequately respond in fiscal stimulus. It’s an important lesson, not just because it was recent, but also because you almost couldn’t come up with a more appropriate situation for deficit spending than government stimulus following something like the 2008 financial crisis. But that option was significantly comprised thanks to the Bush tax cuts.
And then, following the GOP re-taking control of the House in 2010, the GOP immediately declares the budget is out of control and eventually blackmailing the Democrats into accepting the sequester because the alternative would have been the GOP forcing a default on the national debt. And that same sequester is still in place today. This is why the $25 billion in Medicare cuts might happen as result of the propose tax cuts: Republicans used the rising deficits in Obama’s early years following the 2008 financial crisis — years when the deficit should have risen due to the situation — to regain political power and then take the nation’s finances hostage to force the Democrats into accepting the sequester. And the public largely has no idea this happened. Time-inconsistency in action:
...
Obama’s hands were tied by the deficit hawks in his own party as well and prevented from offering an economic stimulus adequate to offset the loss of aggregate demand resulting from the great recession that began in December 2007 on Bush’s watch. Obama even joined with Republicans to slash spending in the 2011 budget deal and put in place budget controls that made it virtually impossible to pursue any positive Democratic initiatives for the balance of his presidency. No wonder Trump won.
...
And that’s just the precedent from the Obama years. Then there’s the case of the Clinton administration: Bill Clinton gets elected on an activist agenda in 1992 but then submits to a deficits reduction strategy that involves raising taxes. That tax hike helps sweep the GOP into congressional power in 1994, but it’s also great policy and precedes an economic boom that results in a surge in government revenues. Clinton sticks with the budget-reduction agenda and eventually hands a budget surplus to George W. Bush, who promptly proceeds to convert it into a budget-busting tax cut for the rich and Medicare Part D (which is basically a corporate giveaway that fosters high drug prices):
...
I think Republicans remember better than Democrats the lesson of 1993 as well. Bill Clinton was elected in 1992 on an activist agenda. But once in office, he was persuaded to reverse course and put all his efforts into deficit reduction. This transformation was spelled out in detail in Bob Woodward’s 1994 book, The Agenda. Its key element was a significant tax increase that every Republican in Congress voted against. They said it would crash the economy, but was instead followed by an economic boom. Unfortunately, the boom didn’t become apparent until after the 1994 election in which Democrats took heavy losses – in large part because of the tax increase. Republicans got control of both houses of Congress for the first time in 40 years.Clinton remained beholden to the deficit hawks for his entire presidency, doing nothing with the vast budget surpluses that emerged and hoarding them like a modern day Midas, despite pressing economic needs and growing financial problems withsocial security and Medicare that those surpluses could have fixed. Clinton simply bequeathed them to Bush, who promptly dissipated them with tax cuts and a huge new spending program, Medicare Part D, not to mention wars in the Middle East that continue to this day.
...
Clinton raises taxes, gets politically punished for it, oversees an economic boom, and hands a budget surplus to George W. Bush who blows it all on tax cuts, wars, and a Big Pharma giveaway. Time-inconsistency strikes again.
And as Bruce Barlett warns us, this cycle is likely to play out again:
...
I believe that the same cycle will rerun over the next few years. Should Democrats get control of the House and/or Senate next year, Trump and his party will insist that deficit reduction be the only order of business. Automatic spending cuts resulting directly from the tax cut will start to bite, hurting the poor and middle class primarily, according to the Congressional Budget Office, and making them forget that they resulted from a huge tax give-away to the wealthy that increased the deficit by $1.5tn. Democrats will get much of the blame due to time-inconsistency.
...
“I believe that the same cycle will rerun over the next few years. Should Democrats get control of the House and/or Senate next year, Trump and his party will insist that deficit reduction be the only order of business. Automatic spending cuts resulting directly from the tax cut will start to bite, hurting the poor and middle class primarily, according to the Congressional Budget Office, and making them forget that they resulted from a huge tax give-away to the wealthy that increased the deficit by $1.5tn. Democrats will get much of the blame due to time-inconsistency”
And that cycle that Bruce Bartlett warns us about is the cycle Grover Norquist has been promoting for decades. In particular, promoting by getting GOPers to sign a ‘no tax’ pledge that means the GOP has pledged to not undo the damage it does even if its tax cut is super damaging:
...
Keep in mind that no matter how big the deficit gets from the tax cut Republicans are rushing to enact, none of them will ever vote to undo those cuts or raise taxes except, perhaps, in ways that further burden the poor, such as raising the gasoline tax. That is because they all signed a tax pledge promising never to raise taxes. Therefore, any deficit reduction will either consist solely of spending cuts or pass with only Democratic votes, as was the case in 1993.The originator of the pledge, Grover Norquist, planned it this way. I doubt he has ever read Persson and Svensson, but understood intuitively that the tax pledge was guaranteed to ratchet down the size of government forever. It wouldn’t happen all at once, but over a period of decades. The history of fiscal policy since the pledge was originated in 1988 is, sadly, proof that it has worked exactly as he hoped.
“Therefore, any deficit reduction will either consist solely of spending cuts or pass with only Democratic votes, as was the case in 1993.”
Yep, the Norquist cycle continues:
1. The GOP engages in a fiscally egregious agenda
2. The Democrats eventually regain control after the GOP’s politicies create a financial disaster and the GOP immediately starts using rising deficits to argue for cutting entitlements and public programs
3. Democrats try to undo the GOP’s fiscal damage, including with tax hikes, and get politically punished
4. The GOP regains control and immediately forgets about deficits and pursues its fiscally egregious agenda. And Grover Norquist gets really happy.
That’s been the political cycle playing out in the US ever since the GOP embraced ‘Reaganomics’ and the Myth of the Magical Trickle-Down Tax Cut. And this is Bruce Bartlett — one of the architects of that myth — who is reminding us of this cycle.
But as important as Bruce Bartlett’s lesson about the impending trap that the GOP and its mega-donor puppetmasters are laying is for the American public at this moment, perhaps the most important lesson is that Bruce Bartlett needed to explain this lesson in the first place. Because this is just basic history at this point. It was super helpful that Bruce Bartlett wrote that article but it shouldn’t be super helpful because we should already all know this. But Americans don’t know this and it’s that mass collective amnesia about significant issues — issues like how the GOP exploits mass amnesia to wage a class war on behalf of fascist mega-donors — that allows this cycle to continue without end. We’re so collectively bad at learning from history that we haven’t even learned that we’re collectively bad at learning from history. It’s hard to think of a more important lesson than the fact that the American public is largely incapable of learning important lessons from contemporary history because that’s why this same scam keeps happening over and over.
Mass amnesia over contemporary history is so predictable in the US that the GOP and its mega-donors can plot a strategy predicated on the above cycle predictably playing out one more time. That’s the conclusion Bruce Bartlett has arrived at and it seems like a very reasonable conclusion. A plan predicated on the assumpion of mass amnesia is a very GOP-ish plan to execute. No matter how Big the Lie gets with the GOP, the people forget that it happened. Or never learn in the first place. And it just keeps happening over and over. Because if the time-inconsistency strategy works once it’s probably going to keep working over and over because it only works when the public doesn’t know its own history. A political strategy of rooted in the time-inconsistency theory is a political strategy rooted in an awareness of a public mass lack of awareness of happened. And that awareness that the GOP clearly possesses means GOP can reuse the time-inconsistency strategy over and over. Which the GOP appears to be doing. Again.
So, because the current tax madness is just the latest iteration of an ongoing scam cycle rooted in the exploitation of a poor national memory, it’s going to be important to keep in mind that rebuilding the capacity for a meaningful national memory should probably be part of the national response to the tax monstrosity that’s about to be unleashed. Making a point of actively remembering for years to come that the GOP unleashed a fiscal time-bomb (for the benefit of the super-rich) is probably one of the most valuable things the Democrats and public at large can do if this tax bill becomes law.
Imagine a big political fight in a decade (or more likeliy 2024, or even 2020), over whether or not to make the temporary tax cuts for the poor and middle-class permanent. Being able to remember contemporary history — history that includes the economic boom that followed the Clinton tax hikes — will be invaluable in that kind of political situation. Because thanks to these tax cuts and the damage they’re most assuredly going to do to the federal budget, the US public is soon going to be facing a stark choice over whether or not to raise taxes or massively cut federal programs like Medicare that the public loves. Don’t forget, forcing stark choices like that and betting that the Democrats and public won’t choose to raise taxes and cut spending instead is part of the GOP/Norquist long-term time-inconsistency plan too. And that’s why it’s going to be so important to develop a national memory capable of recalling things like the fact that Democratic tax hikes are done to fix GOP fiscal damage and they’ve been largely successful.
The GOP is planning on creating a giant fiscal mess that it knows Democrats are going to be forced to clean up and the GOP is planning on using that as an opportunity to regain power by bashing the Democrats for cleaning up the mess. We know that’s likely the plan because it’s the same plan we’ve watched play out for decades to the GOP’s enormous success. And it’s going to remain the GOP’s plan as long as we keep collectively forgetting that it remains the GOP’s plan.
While Bruce Bartlett is absolutely correct that the best outcome is for the public to prevent this tax bill from becoming law in the first place, it’s also pretty clear that it really could easily become law at this point even if it’s going to damage the GOP to do so. Passing fiscally disastrous tax cuts for the wealthy and corporations is one of the GOP’s core reasons for existing. It’s what it does even when that’s not the best move politically because keeping mega-donors happy is the GOP’s long-term best political move. As Barlett pointed out, the GOP is probably planning on losing in the House and Senate in upcoming elections and maybe even the White House too. Handing control back to the Democrats after creating a fiscal crisis is part of the cycle. Unless of handful of GOP Senators save the day it’s hard to see what’s going to stop it’s passage.
And if it passes, the US is going to be facing a general set of choices
1. Trickle-down economics magically start working and the projected deficits never materialize. Hooray.
2. The projected deficits materialize and public spending is cut to deal with them.
3. The projected deficits materialize and taxes are raised to deal with them.
4. Some combination of 2. and 3.
Unless ill-advised trickle-down economics suddenly works, the US is going to have to raise taxes or cut spending. And the GOP is betting that even if the Democrats take control in coming years they’ll still be pressured into cutting spending instead of raising taxes.
So it’s probably not too early to start laying the groundwork for a political movement dedicated to building the national collective awareness about the time-inconsistency theory of politics and the fact the GOP has been employing this theory for a long time. There is no logical reason the Democrats should be politically punished for cleaning up the GOP’s fiscal messes rewarded for raising taxes on the rich. Especially when polls show the American public would much rather see taxes raised on corporations and the wealthy, not lowered dramatically. Which is a finding polls have shown for years. When the Democrats are forced to raise taxes to clean up the GOP’s giant fiscal mess, there’s not reason that can’t be a positive political move for Democrats too. But for that to happen the American public needs to have a working memory of this same old scam cycle that this the GOP is trying to do right now and has done in the past.
So what better time than the present for a public education campaign to teach the American public about the contemporary history of the GOP creating fiscal messes with tax cuts for the rich and the Democrats cleaning up that mess and getting politically punished for doing so. The history of GOP tax scams is coming alive once again as it repeats itself, so the American public should probably learn that history this time around.
One of the interesting twists to the current GOP tax cut push that contrasts it somewhat with previous tax cuts relates to the “time-inconsistency” theory of voter behavior and GOP sophistry Bruce Bartlett recently wrote about — the idea that the consequences of political actions taken today may not appear until the future, when a different political party will be in power to share the blame or accolades of a policy they didn’t put in place and that explains why the GOP is willing to be so openly reckless on topics like tax cuts. The twist involves the fact that the time-inconsistency scheme is best executed when the initial destructive policy is liked by voters when it initially passes. Because if voters hate a policy they’re going to probably be a lot more likely to remember that hated policy years later when the policy disaster strikes while a different party is in power.
Imagine two scenarios:
1. The GOP passes a budget-busting tax cut that voters initially like. In 7 years there’s a giant budget crisis when the Democrats are in power.
or
2. The GOP passes a budget-busting tax cut that voters initially think is a complete scam and they feel insulted the GOP tried to sell this scam as a “middle-class tax cut”. In 7 years there’s a giant budget crisis when the Democrats are in power.
Isn’t the GOP far more likely to take the blame when that budget crisis hits in scenario two? It seems like it’s just human psychology that voters will remember the policies they view as a scams for the rich a lot better than they remember a random ‘middle-class tax cut’ that gives the average family a small windfall that does little to change their financial situation.
And that’s the fascinating twist the current GOP tax bill: It’s very similar to past GOP tax bills, in the sense that it’s primarily a tax cut for the rich and corporations and sold as tax cut for the middle-class, but it’s very different from past GOP tax bills in the sense that the tax cuts for the poor and middle-class this time around are almost like an insult. There’s almost no ‘feel good’ element to them because they quickly evaporate in order to pay for things like the corporate tax cut and eliminating the estate tax. It’s an outrageous scam that feels like an outrageous scam. And outrageous scams aren’t supposed to feel outrageously scammy. It’s poor con artistry technique.
And that relates to another fascinating twist to the GOP’s current tax bill sales pitch: in order to make the evaporating poor and middle-class tax cuts seem less like a scam to average voters, we have the GOP now predicting that the expiring tax cuts for the poor and middle-class will be extended and made permanent. And these predictions of extending those tax cuts are being made at the same time the GOP keeps assuring voters that they aren’t about to explode the deficits and force massive spending cuts. And making both of these contradicting arguments simultaneously is, of course, very scammy. It’s a scammy argument being used to placate middle-class voters feeling scammed about the disappearing middle-class tax cut scam.
Another things that makes the above scammy duel argument so fascinating is that both arguments are meant to be heard and believed simultaneously. It’s not unusual for politicians to adopt multiple stances on an issue, but they usually take those multiple stances in front of separate audiences. But in this case it really is important to the GOP that the poor and middle-class simultaneously believes that the tax cuts won’t explode the deficit and the tax cuts for the poor and middle-class will be extended. The GOP can’t avoid looking two-faced because it has to sell the public on two contradictory messages in order to avoid leaving voting feeling scammed. Looking two-faced is the GOP’s best messaging option. The tax bill is that bad.
This is also why an open embrace of trickle-down economics is now vital to the GOP’s tax schemes: the only way to somehow resolve the twin messages of ‘don’t worry about the deficit’ and ‘don’t worry, those temporary tax cuts will be made permanent’ is to pretend that there won’t be any large deficits after the temporary tax cuts are made permanent because trickle-down economics will cause a huge economic boom that covers the lost tax revenue.
So it’s really a triple-layered messaging: Don’t worry about deficits because it’s deficit neutral. Don’t worry about expiring tax cuts. And when you decide to start worrying about deficits after the expiring tax cuts are made permanent, don’t worry because trickle-down economics will save the day.
And for this scam to work, all of these arguments need to be made simultaneously. Not made simultaneously by the same GOP messenger, because that would be too weird. But by simultaneously sending messengers out to make each of those arguments separately, the net messaging effect is all of those arguments simultaneously.
And as the follow column by Paul Krugman points out, that’s exactly what the GOP is doing with its deceptive messaging on the tax bill. And that’s incoherent in part because GOP figures are saying wildly different things. But taken together, they’re more or less making the three above arguments. Separately but simultaneously.
So is this part of a conscious fog of confusion messaging strategy or is the GOP’s propensity for lying and intellectual incoherence inadvertently executing that strategy? It’s very unclear, since it’s pretty hard to distinguish between intentional and unintentional maelstroms’s of lies and incoherence (and even rage when the lie and incoherence is pointed out) and both scenarios seem plausible for the contemporary GOP:
“Not long ago, leading Republicans claimed to be deeply concerned about budget deficits. Only fools and centrists took the Republicans seriously. Still, the abrupt shift to nonchalance about adding trillions to the debt in order to cut taxes on corporations and the wealthy is causing a bit of whiplash even among cynics. How do they justify the shift?”
Yes, it wasn’t too long ago that the GOP pretended to care about deficits. But suddenly all that changed. For reasons even the GOP can settle upon, hence the messaging fog of confusion:
“Well, they don’t seem to have settled on a story. Mnuchin keeps asserting that tax cuts will pay for themselves, going so far as to claim (falsely) that Treasury has released a study showing this. Mick Mulvaney, the budget director, cheerfully acknowledges that they’re using gimmicks to pass a bill that permanently cuts taxes on corporations, and not to worry. Whatever works, it seems.”
Whatever works. That’s the strategy. And it’s a strategy that’s particularly useful for communication the GOP’s triple-layered nonsense message: Don’t worry about deficits because it’s deficit neutral. Don’t worry about expiring tax cuts. And when you decide to start worrying about deficits after the expiring tax cuts are made permanent, don’t worry because trickle-down economics will save the day.
It’s also worth pointing out another message that White House economic advisor Gary Cohn communicated during an interview a couple weeks ago with CNBC’s John Harwood: During the interview, Cohn repeatedly argues that the tax cut is actually focused on the middle-class and there was no plans for cutting taxes on the wealthy and then appears to argue that the tax cuts for the wealthy and corporations are actually targeting the middle-class. Because of all the benefits that will ‘trickle-down’ on them. Tax cuts for the wealthy and the corporations will increase economic growth so much that not only will we see increased tax revenues but workers will also see significant wage inflation. Want a raise? Cut taxes on the wealthy and corporations. That was Cohn’s core message. It’s impressive spin.
But there was an additional message Cohn had that he perhaps didn’t intend to express, and it’s the kind of message that directly relates to the expiring poor and middle-class tax cuts: When Harwood confronts Cohn with the fact that 80 percent of the tax cuts are for corporations and the wealthy, Cohn responds that federal income taxes for the middle-class are already so low that after the planned middle-class cuts they can’t really go any lower because a family of four making $60k will only be paying around $500 in federal income taxes. In other words, Cohn was making the case that this would effectively be the last middle-class tax cut. He didn’t say that, but it’s certainly implied in his answer.
And when you think about how important “middle-class tax cuts” are to the GOP’s long-term strategy of cutting taxes for the rich, the fact that there might not be much room left to cut federal income taxes on the middle-class and poor spells disaster for that long-term strategy. Unless the tax cuts for the poor and middle-class expire, in which case there’s once again room to craft a giant tax bill that mostly cuts taxes on the wealthy that also includes a few tax cuts for the poor and middle-class as a selling point.
Also keep in mind that federal income taxes aren’t the only federal taxes the poor and middle-class pay. Payroll taxes that finance Social Security and Medicare are far more significant for these incomes. That hypothetical family of four making $60k and paying $500 in federal income taxes would still be paying more than $4,000 in payroll taxes to help fund programs like Social Security and Medicare.
So there are still significant federal taxes the poor and middle-class will be paying even without an income tax. But cutting income taxes for the poor and middle-class is still crucial for selling the public on tax bills that slash income taxes on the wealthy. Well, at least that used to be the case. Now that Gary Cohn is peddling ‘trickle-down’ tax cuts for the wealthy as a policy targeting the middle-class, who knows what kind of sales pitches the GOP will be using for future tax cuts. But it’s still pretty notable that Cohn implicitly admitted that if those poor and middle-class tax cuts didn’t expire, there wouldn’t be any room left to cut them again:
“Cohn: We have not had wage growth in this country. So, we’ve got a lot of Americans finding work, but they’re finding work at stagnant wages. Really to continue going on with this recovery, this long recovery, is we have to find a way to really drive wage growth. What our tax plan is really aimed at doing is creating wage growth.”
It’s all about the middle-class: that’s the laughable meta-spin the GOP uses with every tax cut, even when the middle-class tax cuts are set to expire. And how does Gary Cohn spin this tax bill as focused on the middle-class? By spinning corporate tax cuts as the path to higher wages:
“We create wage inflation, which means the workers get paid more; the workers have more disposable income, the workers spend more. And we see the whole trickle-down through the economy, and that’s good for the economy.”
Want a raise? Cut corporate taxes. That’s the fantasy Gary Cohn in peddling. The reality is that corporate tax cuts will likely be used for stock buybacks, dividends, and executive compensation. But in Gary Cohn’s fantasy version of reality, corporate tax cuts are going to lead to broad-based wage inflation and that was the primary focus of the tax cut all along.
And check out Cohn’s answers to questions about how much the wealthy are receiving in this tax bill: Cohn appears to claim that as almost accidental. The GOP didn’t set out to cut taxes for the rich. It’s just sort of happened, but Cohn isn’t upset about it:
“I don’t believe that we’ve set out to create a tax cut for the wealthy. If someone’s getting a tax cut, I’m not upset that they’re getting a tax cut. I’m really not upset.”
That wasn’t intended to be sarcasm. It’s pretty amazing.
And when pressed about the fact that the corporate and estate tax cuts were four times larger than the individual rate cuts, Cohn makes his startling admission: if the middle-class tax cuts didn’t evaporate, there wouldn’t be room to cut them again:
“The median-income family in the United States, the family that earns about $60,000 in the United States, the Speaker [Paul Ryan] talked about them getting a $1,182 tax cut. That family is now paying a marginal tax rate of less than 1 percent. They’re paying less than $500 of total taxes in the system. So a $60,000 earner, family of four, is paying less than $500. We have cut their taxes significantly. You can’t go much further in the tax system.”
For the hypothetical middle-class family of four — politicians’ favorite demographic fetish — the effective federal income taxes would be approaching zero when you factor in the various deductions if they got cut again after the GOP gets done with its ‘middle-class tax cut’. And that means no more opportunities for the GOP to use middle-class income tax cuts as a political prop to sell the public on wealthy income tax cuts. Or it would mean that if the tax cut for this hypothetical family of four didn’t starts climbing after the first year and expiring in less than a decade.
Still, don’t forget that even if this hypothetical family of four that Cohn claims would only be “paying less than $500 of total taxes in the system,” that same family would also be paying more than $4,000 in payroll taxes to help fund programs like Social Security and Medicare. So even if income taxes on the middle-class are some day permanently cut to effectively zero (after deductions) in the future, it’s not like there aren’t other federal taxes that GOP can use as a policy prop to sell future big tax cuts for the rich.
Although as we saw from Gary Cohn’s rhetoric, the future sales pitches for tax cuts for the rich are probably going to be something “wow, these tax cuts exclusively for the rich are going to be really great for the middle-class!” It’s almost the argument they’re making right now.
The future is now. It’s apparently going to be scammy future.
The non-partisan Congressional Budget Office (CBO) just came out with a new analysis on the Senate GOP’s tax bill and, like the other various analyses of the bill, the CBO found that the bill is wildly beneficial for the wealthy at the expense of the poor. Surprise!
And while that set of findings isn’t actually remotely surprising, the analysis makes an important point that highlights one of the more interesting political dynamics that could emerge in coming years if this tax bill becomes reality: The CBO report notes that 13 million people are expected to lose their health insurance coverage as a consequence of the tax bill’s repeal of the “individual mandate” in Obamacare that imposes a small fine on adults who don’t have health insurance. GOPers have defended this by asserting that those 13 million people who lose health insurance coverage want to lose that coverage and are only getting coverage because of the individual mandate. But the CBO points out that while some of the people — typically young and healthy people ‑who are going to lose their coverage will do so voluntarily, there’s also another set of people who are going to involuntarily lose their coverage thanks to the rising insurance premiums that are an inevitable result of all those young and healthy people dropping their insurance. The voluntary loss of coverage will drive the an involuntary loss of coverage.
Now, the fact that this tax bill might result in rising health insurance premiums that will predictably price health coverage out of the markets should be a big enough political obstacle for a tax cut. But let’s not forget that spiking insurance premiums has been one of the GOP’s key tactics for indirectly forcing the death of Obamacare and a key element of that Obamacare-killing strategy is to spike premiums without taking the blame. So the Senate GOP version of the tax bill doesn’t just raise health insurance premiums by destabilizing the markets. It merely one of many different destabilization tactics the GOP is employing to raise Obamacare premiums. But it will be a pretty high-profile Obamacare destabilization tactic that is very directly tied to financing bigger tax cuts for corporations and the wealthy. The GOP clearly wants to catalyze a health care crisis in order to create a public clamor for the repeal of Obamacare. But they presumably didn’t want to tie that whole scheme directly to their other schemes to get massive tax cuts for the rich. The optics aren’t great for the GOP:
“As Republicans scramble to shore up the votes needed to pass the tax bill, this latest reports adds fuel to criticisms from Democrats and independent economists that the bill privileges the wealthy and corporations at the expense of the middle class and the poor.”
Yes indeed, this latest report adds quite a bit of fuel to criticisms from Democrats and independent economists that the bill privileges the wealthy and corporations at the expense of the middle class and the poor. But it should add quite a bit of fuel to criticisms about the GOP’s tactics on health care because let’s not forget that spiking insurance premiums was something Trump and the GOP were openly talking about just last month. Destabilizing the insurance markets to increase dissatisfaction with Obamacare is an openly discussed GOP policy. This is just what the GOP does these days.
So learning that the Senate tax bill is going to destabilize health insurance markets in order to pay for tax cuts for corporations and the rich isn’t just an unpleasant surprise to find in a tax bill. It’s also an unsurprising extension of an GOP plan already in operation:
“Republican lawmakers have argued the drop in health coverage would be a choice, but the CBO emphasizes that many would also be pushed out of the market against their will by rising premiums.”
Rising premiums pushing people out of the individual markets Obamacare set up. That’s a predictable consequence of the Senate GOP’s tax bill. But it’s also the predictable consequence of the various other GOP attempts to destabilize the Obamacare markets, many of which the GOP did long before Trump became president like Marco Rubio’s successful destabilization of premiums in 2015.
Destabilizing Obamacare is more than just a strategy of the GOP’s at this point. It’s a passionate hobby. A passionate hobby that’s always has the end goal of maximizing tax cuts for billionaires, which is something the GOP Senate bill now makes unambiguously clear.
So that’s all part of the fascinating new political dynamic this GOP tax bill could create: if this tax bill passes and it includes repealing the Obamacare mandate, the GOP’s ongoing and seemingly endless attempts to destabilize Obamacare insurance markets by doing things that cause premiums to rise are going to be inextricably intertwined with the current giant GOP tax scam which, in turn, helps highlight that this is all being done for the super-rich and also helps highlight that the GOP has been actively destabilizing Obamacare for years. It’s like a convergence of bad ideas that synergistically accentuates the badness of each idea by demonstrating how intertwined they all are with other bad ideas. Which seems like a politically bad idea.
Well that’s certainly ominous: The Senate just pushed the tax scam monstrosity out of the Senate Budget Committee, which will allow it to move forward to a full vote in the Senate and into “conference” with the House, which already passed its own monstrous version of the tax bill. But that’s not the ominous part. What’s ominous is that we’re now getting word from GOP Senators and the White House that the plan is to rapidly have a vote on the tax plan this week, without adequate time for public debate or hearings or expert testimony or any or the normal proceedings for passing a bill in the Senate. And White House sources are saying they want to avoid a formal House/Senate conference and would prefer that process be worked out behind closed doors. That’s what’s ominous.
But what’s extra ominous is the fact that most of the GOP Senators who have been expressing misgivings of the tax bill thus far suddenly ‘found (supply-side) Jesus’ after lunch with Trump on Tuesday and are sounding like they’re almost ready to support it. That includes Senators Susan Collins, Bob Corker, and Ron Johnson.
Johnson’s sudden shift isn’t surprising since his primary complaint is that the ‘pass-through’ tax cut that primarily benefits the wealthy isn’t big enough. This was his deal-breaker issue. So he’s almost entirely behind this incredibly irresponsible bill already. He just doesn’t think its irresponsible enough.
Corker and Collins suddenly supporting the bill, on the other hand, is much more ominous than Johnson’s sudden support because their political brands make a ‘no’ vote on this bill potentially politically beneficial, especially given the politically toxicity of the tax bill. It’s just a politically crappy bill, so it wasn’t inconceivable that three of the GOP Senators who might conceivably vote against the bill — Collins, Corker, Flake, and McCain — actually end up doing that. Because it makes political sense now that they’re wedded to the “I told you so” wing of the GOP. The GOP ‘anti-Trump’ faction is inevitably going to experience a renewal of some sort in the GOP if the current Trump/GOP Era of Errors leads to disaster and these senators are already basically in that “I told you so” faction. So the emergence of a block of three or more GOP senators who block a politically disastrous tax cut bill and save the GOP from itself wasn’t inconceivable.
But now we’re hearing that Susan Collins — who was primarily expressing concern about the part of the tax bill that repeals the Obamacare individual mandate which would destabilize the individual insurance markets — has been assured during the Tuesday lunch with Trump that the Senate is going to pass a pair of bill design to shore up the Obamacare insurance markets (which is basically temporarily undoing some of the damage from the GOP’s endless sabotage successes) and she’s saying she was assured those laws supporting Obamacare markets would be passed by the Senate and signed into law before the conference report. And that sure sounds like Susan Collin is suggesting that she’s fine with the tax bill passing out of the Senate and into conference with the House because the conference report doesn’t happen until the bill passes out of the Senate and goes to the conference committee.
Senator Corker also emerged from lunch with Trump indicating that he was assured that his concerns over the impact of tax bill on the deficit would be limited by some sort of “trigger” is the trickle-down magic didn’t happen and the deficit exploded. We don’t know what the trigger is going to be and which taxes are going to be hiked in response (because it will probably be middle-class tax hikes) but we are told Corker has been assured some sort of trigger system will be in place.
And Senator Johnson has been assured that the “pass-through” tax cut will be increased, which is guaranteed to increase the deficit unless the trickle-down magic happens. So we better hope Senator Corkers’ tax hike “triggers” are well thought out because they’re probably going to be triggered.
But before we look at the sudden Tuesday collapse of the tiny GOP tax scam hold out faction, here’s an article from Monday when we first got word that the White House wants to avoid a conference committee entirely after the bill passes the Senate so there will be almost public debate on the tax bill at all:
“White House officials privately said that they hoped the two chambers could resolve their differences privately and informally to avoid a potentially lengthy and divisive formal conference that typically is needed to complete major legislation.”
The White House wants Congress to “resolves their differences privately and informally.” And they’re talking about a massive tax overhaul. It’s a sign that the GOP’s plan for addressing the outrageous scamminess of their tax bill is to hide it from the public as much as possible.
And, of course, Senator Johnson was pledging to not even allow the bill out of the Budget Committee unless his complaints about the pass-through cuts weren’t address:
And some other Senators, in particular Corker and Flake, were calling for a “trigger” that was raise taxes automatically if the tax cuts didn’t generate enough in new revenues. And Corker, like Johnson, also sits on the Budget Committee and was threatening to not even let it out of the Committee unless his deficit concerns were address:
So we have Senator Johnson threatening to block the bill in the Budget Committee if it doesn’t expand the tax cuts and blow up the deficit even more while at the same time Senator Corker was threatening to also block the bill in the Budget Committee if it doesn’t do something about the exploding deficit.
That was the situation Monday. And now here’s a report from Tuesday following lunch with Trump. As we’ll see, Corker, Collins, and Johnson are all placated as the bill makes its way out of the Budget Committee (with Corker’s and Johnson’s support) and on its way to a full Senate vote.
Now, it’s important to note that Johnson and Corker could have both single-handedly stopped the tax bill simply by not voting to let it out of the Budget Committee, and they probably weren’t going to do that on their own even if they’re still planning on voting against the bill in the end. So, while Johnson appears to be a safe eventual vote (since he’s trying to make it even more of a deficit-buster), we still don’t really know where Corker stands on the bill. That’s presumably going to depend on the details of the “triggers” that have yet to be worked out.
But there was a particular ominous comment from Susan Collins regarding her concerns with the bill’s destabilization of the Obamacare insurance markets: Collins came out of that lunch meeting with Trump expressing her confidence that her concerns will be addressed before the conference report. And the conference report is presumably going to happen after the bill passes full vote in the Senate. So that sure sounds like Susan Collins was hinting at a deal to vote it through the Senate and take it to conference, the step the White House wants to be worked out informally and in private. And that means we could be looking a situation where this tax bill is passed by the Senate, and then moved through the House/Senate conference, and back to the House and Senate for a final vote with virtually no public hearings and this could happen very soon:
“For many members on the fence, the fruits of weeks-long negotiations panned out just moments before the Budget Committee vote. Corker — whose key concerns centered around how the tax bill would affect the country’s deficit — told reporters as he left the weekly Senate lunch that he had just struck a deal on a plan to ensure some kind of backup if the GOP’s tax proposal didn’t generate the kind of economic growth the party anticipated.”
Yep, as of Tuesday morning it was still looking like the tax bill might actually die in the Senate budget committee. But after that lunch session with Trump we find Corker, Collins, and Johnson all sounding like they’ve arrived as some sort of agreeable compromise, although they continued to hedge somewhat and weren’t saying they would definitely vote for the bill:
But when it comes to Collins’s statements, that hedge started sounding like a commitment to vote for it in the Senate and move it to conference:
“So, I believe I have secured an agreement that the Alexander-Murray bill — which reinstates the cost savings reductions and gives more flexibility to states, plus a bill that I have introduced with Bill Nelson, which would authorize and provide some seed money for high risks pools which would ensure that people with preexisting conditions are protected and would also help to lower premiums — would be considered and signed into law before the conference report on the tax bill comes back”.
Keep in mind, if there’s conference committee and the House and Senate leaders informally resolve the differences between the two bills — the plan the White House says it wants to see happen — that almost certainly means the House will just agree to vote on the Senate’s bill unchanged because the Senate has the constraints of the filibuster that the House doesn’t have. So whatever gets passed in the Senate could easily become the final law. And that means the agreement Collins says she got from the GOP leadership that these two Senate bills design to shore up the destabilized insurance markets before the conference report is potentially a completely useless agreement because there might not be a conference report.
When confronted about this Collins expressed confidence that there would actually be a conference committee and conference report, saying, “Everything I’m hearing is that there is going to be a conference committee”. So is what she’s hearing from her colleagues accurate? We’ll find out:
“When reporters pointed out the possibility that there will be no conference committee, that the House just passes the bill as-is, Collins waved away that fear. “Everything I’m hearing is that there is going to be a conference committee,” she said.”
And note how, even if the Senate does pass these two bills designed to undo some of the damage the GOP has already done to the insurance markets by systematically destabilizing them, those bills still won’t do enough to prevent a further destabilization and there’s not guarantee the House will pass those bills too:
So that’s the status of the tax bill. The major GOP holdouts are suddenly holding out a little less after they all received a variety of reassurances. Reassurance that are both contradictory and not actually reassuring even if taken at face value: Senator Johnson wants to make the tax cuts even bigger, while Corker wants controls on the deficits. That’s not going to be an easy needle to thread. And Collins got a pledge that the Senate will pass two bill to restabilize the insurance markets before the conference report and yet those two bills wouldn’t actually do much to undo the damage and there’s no guarantee the House would pass them and no guarantee there’s going to be a conference committee at all.
All in all, it’s rather ominous. But it gets worse: we’re now getting leaked reports on the negotiations over the “trigger” Corker and Flake are calling for. There are a couple different versions being negotiated, including a 1 percent hike in the corporate tax rate if the GDP doesn’t grow an average of 0.4 percent over the next five years. But, not surprisingly, there’s already four GOP Senators who are openly opposed to the idea of any trigger. And the Koch brothers’ front group, Club for Growth, has a different, highly predictable alternative trigger: triggering spending cuts if the tax cuts don’t lead to the promise growth (surprise!):
“Uncertainty about exactly what tax cuts would fall under the trigger and the length of time before it goes into effect, along with staunch opposition to the idea from fellow Republicans and outside conservative groups, could kill the idea before it ever makes it into the bill. With a vote just a day away and the details of the proposal still shrouded in secrecy, senators are agonizing over siding with the deficit hawks demanding the trigger or the growing band of lawmakers insisting no trigger is necessary because the tax cuts will create wild economic growth to fill the trillion-plus dollar deficit.”
The planned Thursday vote in the Senate is just a day away and the details of the “trigger” negotiations are still largely a secret. But we do have some leaks about some of the negotiations:
The problem is that we also have leaks about four Senators who are already saying they’re opposed to the idea of any tax hiking trigger at all:
And there’s no way the GOP can pass this bill while losing those four Senators. So we’re in a situation that would appear to be stalemate: if the triggers are put in place to get Corker’s and Flake’s vote it could lose four other GOP votes.
What’s the GOP going to do with the big vote just a day away? The Koch brothers have an idea: make the triggers spending cut triggers instead:
Don’t forget that that if these automatic spending cuts are triggered in the middle of a recession, that’s a recipe for a eurozone-style austerity death spiral: the economy is weak, so the triggers force more spending cuts, which makes the economy weaker, etc.
So will the GOP compromise with its warring factions by putting in place mandatory spending cuts if its magical trickle-down tax scam doesn’t result in the economic boom they’re promising? On the one hand, that does seem like a very GOP-ish thing to do. But on the other hand, it’s hard to imagine a last minute change that could make this bill even more unpopular than to slip in an automatic spending-cut provision inside a bill that’s largely tax cuts for corporations and the super-rich. Passing this bill just becomes more and more politically risky the more we learn about it and the more modifications are made.
And yet, we can’t forget that all this secrecy and plans to avoid any extended public hearings is specifically being done in anticipation of passing a highly unpopular bill. The GOP is clearly gambling on the prospects the public will eventually forget that this whole tax monstrosity happened and just move on to the next shiny object.
Which might happen. We’ll see. The Senate just voted to move the tax bill to a floor debate on Thursday. It will 20 hours of debate, followed by “vota-a-rama” when Senators can propose any amendments they want, and then the final vote for the Senate bill. That’s what the Senate just approved and the 20 hour debate is happening tomorrow. And if the Senate votes to pass the final version of the bill it then moves on to the conference with the House. But as we already saw, the GOP’s plans are apparently to rush this bill through the Senate and then skip the conference committee and just have the House vote on whatever the Senate passes. And yet was also saw Senator Collins indicating that she was promised her concerns would be resolved in conference. So it’s very possible that GOPer holdouts like Collins are being told that there’s going to be another round of debate and amendments in the conference committee that never actually happens, which means these upcoming 20 hours of debate and amendments are going to effectively be the ONLY hours of debate and amendments for this bill and the people debate and amending it won’t necessarily realize they’re basically creating the final version:
“The vote to begin debate starts the clock on 20 hours of additional debate on the tax legislation before a free-wheeling “vote-a-rama.””
And notice how Alaska Senator Lisa Murkowski, a potential hold out, was already said she’s supporting the bill:
With Collins already hinting that she’s been promised her concerns would be address (which sounds like a soft ‘yes’), that pretty much just leaves Corker, Flake, and McCain as the possible ‘no’ votes.
Will these three retiring Senators save the GOP from itself? It would be rather ironic if the retiring GOP Senators are the ones to save the GOP from a politically disastrous self-inflicted wound. At least it would be ironic if the US wasn’t clearly already living in Bizarro world. But here we are.
The GOP’s giant tax scam isn’t failing to disappoint in the department of suspense: With the GOP Senator leadership hoping to pass the bill tomorrow but still unable to secure the 50 votes it needs to actually pass the bill, a massive last-minute rewrite is underway. And it’s still totally unclear what sort of amendments could possibly placate the remaining GOP holdouts given their conflicted demands.
While Senator McCain appears to have moved into the ‘yes’ column, Senator Collins — who was sounding like a likely ‘yes’ vote in recent days — is sounding a lot less like a ‘yes’ vote now that it’s becoming increasingly clear that the demands she made to get to ‘yes’ probably can’t be kept. And the Joint Tax Committee — the official Congressional scorekeeper for assessing the likely impact of the tax cut on the debt and deficit — just released an estimate that predicts over $1 trillion in new debt over the next decade, a potentially significant obstacle for getting Senators Corker and Flake — two of the remaining members of the GOP’s ever-dwindling ‘deficit hawk’ faction — to ‘yes’. Beyond that, the solution the GOP had come up with for easing those deficit concerns — tax hikes, or spending cuts, that would get “triggered” if tax revenues didn’t meet expectations -
has already been shot down as unworkable. There’s talk of an alternative plan of automatic tax hikes that will kick in down the road, but it’s very unclear how much support there is for that with the rest of the GOP caucus.
In addition, Senators Johnson and Daines — who were both threatening ‘no’ votes unless the ‘pass-through’ tax cuts targeting the wealthy are expanded — are maintaining that ‘no’ vote threat. And don’t forget, meeting their demands works in the opposition direction of meeting the deficit hawks’ demands.
So, basically, all of the intra-GOP tensions that existed in the lead up to the point remain. What doesn’t remain are the potential solutions they GOP cooked up. Hence the frenzy of last minute changes:
“Multiple GOP senators leaving the chamber after a dramatic late afternoon vote said a key proposal for deficit hawks — a trigger to raise tax rates if sufficient economic growth did not materialize — would not pass procedural muster and would need to find something else to satisfy the bloc of deficit hawk holdouts, led by Sen. Bob Corker (R‑Tenn.).”
Something other than “the trigger” is going to be required to alleviate the deficit hawks’ concerns. And according to Senator Corker, a key deficit hawk, the replacement for the trigger is going to be automatic tax increases:
So how is the rest of the GOP caucus going to feel about the automatic tax increases Corker was hinting at? Well, since we don’t have any information about that proposal it’s hard to know exactly how the rest of the GOP will respond, but it’s not hard to imagine that the response isn’t going to be welcoming.
And while it’s possible the deficit hawks — basically just Corker and Flake at this point — will suddenly cave, it’s going to be a lot harder for them to do that now that the Joint Committee on Taxation just came out with its official score for the tax bill and projected over a $1 trillion will be added to the debt:
That said, one of the Senators who was recently expressing deficit hawk concerns, Senator McCain, appears to have come around to supporting the bill. McCain’s vote isn’t enough to give the GOP the 50 votes it needs, but it’s getting closer:
And the loss of the “trigger” isn’t the only modification to the bill that appears to be a non-starter. Senator Collins has been predicating her support for the bill on the assumption that her concerns over the repeal of the Obamacare mandate will be address with the passage of two different bills designed to shore up the insurance market. But there’s no way Senate leaders can promise that will happen because the House would need to pass those bills too, and the House’s far-right “Freedom Caucus” is already saying that’s a non-starter:
“I’m going to know whether or not those provisions made it [before final passage of a tax bill]...That matters hugely to me.”
Those were Collins’s words about the health care provisions she is demanding for a ‘yes’ vote. And yet it’s already pretty clear that those provisions aren’t going to make it into the final version of the bill. That’s according to the chair of the House ‘Freedom Caucus’:
So Susan Collins is increasingly basing her ‘yes’ vote on assurance that something that increasingly looks unlikely to happen will happen. And the tiny deficit hawk faction won’t get the “trigger” it wants and might have to settle for automatic tax hikes that the rest of the GOP caucus probably won’t accept.
But it gets worse in terms of securing those 50 votes. Because don’t forget that she’s already expressed concerns over the $25 billion in Medicare cuts that will be mandated if the deficit rises thanks to the “pay-as-you-go” rules Congress has to follow. And as the following article lays out, that $25 billion in Medicare cuts will be just one part of $150 billion in federal spending cuts that will likely happen year after year, potentially forcing the slashing and potential elimination of a number of federal programs. In other words, there is actually a “trigger” that’s going to be pulled by this tax bill. It’s the pay-as-you-go trigger that mandates spending cuts and it’s a trigger that’s already law and it can’t be overturned without 60 votes in the Senate which means Democrats would need to cooperate.
So what’s the GOP’s plans for dealing with $150 billion in forced federal spending cuts that guaranteed to be highly unpopular? Demand the Democrats vote with the GOP to waive the pay-as-you-go rules. So the GOP’s tax bill creates a situation where Democrats are going to decide between allowing massive federal spending cuts happen or allow the deficits to spike in order to finance massive tax cuts for corporations and the super-rich. In other words, the GOP’s plan is to hold virtually all federal programs hostage in order to extract from the Democrats a concession to waive the deficit-control rules and allow the deficits to go much, much higher to pay for a massive tax cut for corporations and the super-rich:
“Unless Congress acts swiftly to stop it, as much as $150 billion per year would be cut from initiatives ranging from farm subsidies to student loans to support services for crime victims. Medicare alone could see cuts of $25 billion a year. And the specter of those cuts has thrust Congress into a high-stakes game of political chicken.”
A high-stakes game of political chicken. But it’s a game of chicken that won’t be played until after the tax bill becomes law. As a result, the GOP leadership is basically promising Senator Collins that this game of chicken will be won and the Democrats will ultimate agree to waive the pay-as-you-go rules in order to avoid those mandatory cuts:
“GOP leaders are asking moderates like Susan Collins (R‑Maine) to back the tax package with the mere promise that lawmakers can find a bipartisan solution during an already divisive year-end crunch that could lead to a government shutdown.”
Yep, this pay-as-you-go debate could happen as part of the looming government shutdown showdown. And it sounds like the GOP’s mere promise to “find a bipartisan solution” might be correct. Democrats probably are going to agree to waive the pay-as-you-go rules. Because as tempting as it might be to allow the GOP’s tax bill to force wave after wave of politically disastrous cuts to programs like Medicare, the Democrats still probably aren’t going to allow that to happen:
“But privately, longtime Capitol Hill veterans say Democrats would never allow spending cuts, even if they could avoid the blame.”
And while it might seem like the GOP is dodging a bullet on this pay-as-you-go debate because the Democrats will probably agree to waive the rules, keep in mind that there’s probably going to be a big fight before that ultimately happens and this fight is going to probably happen during the upcoming government shutdown showdown. And that’s going to give the Democrats a very high-profile platform to make the case to the US public that the GOP’s tax cut is creating a national choice between much higher deficits or massive spending cuts to almost all federal programs.
Also don’t forget, any scenario of the passage of this tax bill that’s based on the assumption that the pay-as-you-go rules are going to waived is a scenario that’s probably not going to go down well with the deficit hawks.
That’s all part of why this GOP tax cut bill is suddenly looking a lot shakier than it was just a day ago: The GOP leadership keeps making contradictory promises it can’t keep, and the more this process chugs along the more obvious this reality becomes. Additionally, the more this process chugs along, the more the public slowly learns about the bill and, in turn, the more the public hates it, giving political cover to any potential GOP ‘no’ votes.
We’ll see how this all plays out, but it’s worth noting that the GOP wouldn’t be in this politically perilous position if its fascist mega-donor puppet masters weren’t demanding a massive tax cut regardless of the political and economic fallout. And that’s something the GOP in particular should keep in mind. Because if this tax bill fails to pass there’s going to be no shortage of intra-GOP finger-pointing. So why shouldn’t the GOPers point those fingers at the mega-donors who are demanding political suicide for a tax cut the US clearly can’t afford? Sure, the GOPers tend to be corrupt sellouts, but the demand that they pass a ‘tax cut’ that raises taxes on the middle-class to pay for cuts for the super-rich is mega-donor malpractice. Even for fascist mega-donors. This whole thing is so politically toxic and short-sighted that there’s no reason the GOPers shouldn’t be utterly enraged with the Koch brothers and the GOP mega-donor network for demanding that they piss away their political careers. Yes, the tax cut is a deeply immoral proposal. But it’s also deeply stupid. It’s excessively greedy even by the GOP’s ‘greed is great’ standards.
And it’s not like there’s any reason to assume this stupid excessive greed demands from the mega-donors are going to end once this tax cut passes. If anything, they’re get even worse because that’s when their demands for politically toxic spending cuts kick in. In other words, one of the lessons the GOP should probably take from all this is that it’s not going to be as much fun being an elected GOP official as it might have been in the past because the mega-donors are now demanding the kind of stuff that’s going to make elected officials look like super-villains in the eyes of the public. And it’s only going to get worse.
So if this tax scam does go down in flames and the GOP is forced to regroup, hopefully some of them will recognize that their primary political opponents at this point are the guys giving them all that money in exchange for doing stupidly awful things the public is guaranteed to hate.
Welp, they did it. After a flurry of last minute changes, the Senate GOP passed the tax bill and sent it to the conference committee on a 51 — 49 vote. The sole GOPer to vote against it was retiring Tennessee Senator Bob Corker over deficit concerns. So now the fate of the tax bill is going to be up to the final votes in the House and Senate after the conference committee creates a joint version.
So now finding a way to create a GOP ‘No’ coalition in the House or Senate is a top priority for the American public. Given that dire imperative, it’s worth keeping in mind that the many dire consequences of this tax bill represent many opportunities to shame a large enough coalition of House or Senate GOPers to kill the bill in one of the chambers in the final vote after the conference committee. But even more importantly at this point, it’s worth keeping in mind that this bill is so politically toxic that a GOP ‘No’ faction can probably come out ahead by opposing their own party’s signature legislation. And that’s because of the provision in the Senate’s version of the tax bill that eliminates the state and local tax (SALT) deductions in order to help finance tax cuts for the super-rich and corporations is going to be so unpopular in higher-tax Democratic-leaning ‘Blue’ states that tend to have better public services. Including with GOP voters. At least if a recent Harvard Harris poll is correct, the Senate tax bill’s elimination of the SALT deduction is even more unpopular with Republicans than Democrats (28 vs 35 percent approval).
Recall that 13 House GOPers — 12 from New York, California, and New Jersey — voted against the House bill when the house passed its version a couple of weeks ago 227–205. So GOP can only afford to lose 22 more House votes and it’s entirely possible the House “Freedom Caucus” of uber-far-right members will find reasons to vote against the final version too. And it would probably be good politics for those ‘No’ vote Blue state GOPers because it really is an assault on their states.
But there’s another reason a GOP ‘No’ faction could come out politically ahead by helping to kill the bill: A key desired side-effect of of eliminating the SALT deduction is to basically force Blue states into a massive crisis of either cutting taxes or and cutting state services. That’s the and it’s a plan that obviously shifts more demand for public services to federal programs. And while it’s true that the elimination of the Federal programs that the GOP is also planning on slashing. And when those federal programs are slashed, they’re going to get slashed on every state in the US. In other words, the elimination of the SALT deductions is probably going to exacerbate the strain on federal programs and that impacts every state as Blue state public services are starved.
Also don’t forget that these SALT deduction eliminations are basically being dont to increase the sze of the cuts targeting corporations and the super-rich. Yes, it will be argued that they reduce the deficit and finance public spending. But in reality the SALT deduction elimination was done to increase the size of the tax cuts that are almost entirely for the rich and corporations.
And yes, these same Blue state GOPers routinely plot the demise of the same government programs that will be destroyed by the state and federal cuts that will be prompted by the tax cut and exacerbated in the Blue states. But there’s a big reason Blue state GOPers should be especially concerned about keeping the SALT deductions in place: the GOP’s whole long-term plan for federal services is to block grant them to states and then steadily shrink the block grants. That’s not a great time get rid of state and local tax deductions because state and local taxes are going to be the new financial base of most government programs once the GOP is done “deconstructing the administrative state” as Steve Bannon would put it. So the higher-tax Blue state GOPers can frame opposition to the bill over opposition to the SALT deduction eliminations even from a GOP perspective: Getting rid of the SALT deductions makes block granting a lot more painful for everyone. And, of course, the rest of the tax cut also makes block granting a more difficult for states by also encouraging significant federal cuts which translates into faster shrinking block grants.
Yes, the fact that obstacle the tax cut and SALT deduction eliminations creates an obstacle for the GOP’s long-term block granting agenda isn’t actually a good reason for keeping the SALT deductions. But if we can get the GOP to do the right thing for the wrong reasons that’s pretty much as good as it gets these days. Beggars can’t be choosers.
It’s also worth keeping in mind that lower taxes in the Blue states will inevitably cut into the competitive advantage Red states get by generally having lower, more regressive taxes that offer fewer public services and charge the poor and middle-class for much of it. Eliminating the SALT deduction is clearly intended to make higher-tax/higher-service Blue states more like lower-tax/lower-service Red states. Why exactly are Red states that rely on that competitive advantage happy about this?
As we can see, there’s an array of reason for a faction of the GOP to emerge that opposing this bill and sinks it while gaining politically. But here’s perhaps the reason Blue state GOPers will find the most persuasive: wealthy GOP donors in Blue states are super pissed about the SALT deduction elimination:
“They foresee higher personal taxes under a plan that axes deductions for state and local taxes without offering what they consider compensatory reductions in marginal income rates, even with the repeal of the Alternative Minimum Tax that hits many upper-middle-class Americans. They resent that the bill excludes their white-collar service professions — think law, finance, and consulting — from the bill’s lower small-business rate, even as it shrinks the corporate levy to 20 percent from 35 percent.”
It’s not just an attack on Blue states. The GOP donors in Blue states appear to view this as an attack on them too. It’s a fascinating political development.
And note the amusing back and forth between the GOP factions on this issue, with Rep. Lee Zeldin of New York noting how his wealthy constituents simply ran the numbers and realized that they would see their taxes rise, while the GOP defenders of the bill dismissed that as liberal news propaganda:
Trust me, not your lying eyes and accountants and the liberal media. That was the message from New Jersey Rep. Tom MacArthur, one of the few Northeastern GOPers to support the House bill. But not surprising, it doesn’t sound like his Sith Lord mind tricks are working on his wealthy constituents, which is why most Northeastern GOPers voted against the billl. So is MacArther going to continue supporting the bill as more and more of his donor base learns about how they’re getting scammed too. This was suppose to be a rich vs everyone else smash and grab but now it turns out the Blue state rich Republicans are getting smashed and grabbed a bit too. It’s like the point in a movie when the bad guys all start turning on each other while consumed with greed.
But the Blue state wealthy GOP donors aren’t the only ones to get a nasty surprise in this tax bill. Even the mega donor kingpins like the Kochs might be setting themselves up for a nasty surprise. Because if they succeed in their quest to shift burdens onto states while encouraging a nation-wide competitive tax cutting race to the bottom, we’re going to see an entire nation of states in a fiscal crisis. And the most effective solution will be to raise taxes at the federal level and those taxes will most likely primarily be raised on the wealthy and corporations because all states will be broke and public services will be in permanent crisis mode after the massive GOP cuts in federal spending shift costs to the states. The GOP mega-donors are creating a disaster that may hit Blue states harder but it still hits all states enough to be disastrous to the whole nation and eventually to the GOP mega-donors. Taxing the hell out of mega-donors and big profit centers in the economy and a national focus on wrestling control of the levers of political power away from the Koch/Mercer-led cabal of billionaires that inflicted this disaster for their benefit will be a widely seen national imperative.
This is all why a GOP ‘No’ faction really would save the GOP from dramatically escalating its war on government programs Americans love and doing it in an open egregiously blatant way. It’s political malpractice and it’s being done at the behest of mega-donors that appear to be mad with power. In response to that kind of elite madness, raising federal taxes specifically on the wealthy and big business is almost a national security issue just to avoid such mad men grabbing even more wealth and power.
Heck, if this tax scam becomes reality, maybe a national movement to overturn Citizens United and end unlimited political spending and get big money out of politics could seriously emerge. Which can only happen with a broad-based Democratic take over at the federal level so the Supreme Court can be moved to the left. It’s both an urgent and long-term project and this gigantic tax scam makes it all the more urgent now and all the more important to follow through on in the long-run. Getting big money out of politics is a national security issue. If that wasn’t completely obvious before hopefully it’s obvious now. After all, we’re now witnessing big money that’s so big and so bold that it’s not just shaking down the poor and middle-class. It’s also shaking down other wealthy people. It’s a remarkable development in the evolution of the American oligarchy. Oligarch bum fights. It’s a thing now apparently. When big money is shaking down less big money in addition to everyone else as part of a giant smash-and-grab designed to create future fiscal crises that can be used for future smash-and-grabs that seems like a good time to focus on getting big money out of politics. Let’s hope that’s part of the backlash.
Senate majority leader Mitch McConnell had some very apt comments on the giant scammy tax bill that the Senate just passed early Saturday morning. Apt in the sense that it succinctly encapsulate one of the key elements underpinning the GOP’s Big Lie approach to policy: the American people have the memory of a gold fish and the That GOP can do whatever it wants because it can explain it away without fail no matter how outlandish the explanation. That may not have been what Mitch McConnell said, but he clearly communicated it:
“Back home in Kentucky just hours after the Senate narrowly pushed through the nearly $1.5 trillion tax bill, McConnell predicted that the boldest rewrite of the nation’s tax system in decades would generate more than enough economic growth to prevent the burgeoning deficits being forecast.”
Yes, Majority Leader McConnell confidently predicted that, despite all the economic models predicting the tax cut would add over a trillion dollars over 10 years to the national debt, the tax cut would more than pay for itself from the economic growth it will create. And then he says he’s “not one of the total supplier siders who just believes that if you cut taxes, no matter what amount, you turn out ahead,” and it apparently wasn’t intended to be sarcastic:
Does Mitch McConnell assume everyone has dementia? It seems like it.
But in McConnell’s defense, it’s possible he was actually just doing a poor job of executing a standard lie. How so? Well, note the other blatant fabrication he delivered moments later:
Yes, the tax bill that clearly predominantly benefits the wealthy doesn’t actually benefit the wealthy according to the Senate Majority Leader. We’ll just give Mitch the benefit of the doubt and assume he was intentionally trying to deceive his home state audience and doesn’t, himself, have dementia. So it’s possible when he hilariously asserted that the tax cut would pay for itself and then called himself a non-believer in tickle-down economics he was actually intending to make that laughable statement within the context of his deception about the tax cut not primarily benefiting the wealthy.
In other words, maybe he was trying to assert that the tax cut was actually targeting the poor and middle-class and that’s why he was confident it would more than pay for itself. He came out and said he’s not a “total supply-sider” and that sure sounds like he was refuting a basic tenet of the contemporary GOP. Is the GOP’s leader in the Senate saying that supply-side economics doesn’t work and the party’s confidence that the tax cut will pay for itself is rooted in a conviction that tax cuts targeting the middle-class and not the rich is the proper tax cut design for this moment? Shouldn’t we get some clarification on that?
It’s a reminder that if the GOP is going to laughably assert that its tax cut is targeting middle-class, it raises a question about whether or not the GOP still officially believes in supply-side economics. They can’t have it both ways. Well, they can have it both ways, but only if they aren’t called on it.
It’s also a reminder that if the money spent on tax cuts for the wealthy and big corporations reaping record profits during a time of relatively low unemployment was instead spent on government programs targeting the poor and middle-class for and addressing things like student debt and inadequate retirement savings that plague American society, that would probably be a far more beneficial use of that money for the wealthy and big corporations. Taxing the rich to pay for things for everyone else stabilizes capitalism. Of course, since the Kochs and Mercers and like-minded oligarchs would like to see a mass far-right revolution that makes it easier for them to grab even bigger slices of the pie and trap the masses in powerless penury, unstable capitalism is a feature, not a bug.
It’s also of reminder of the important fact that one the far-right’s constant and most effective propaganda techniques is for its public figures to play dumb in a manner that enables them to say preposterous things without smirking in order to dumb down the national discourse in order to make their lies easier to believe. So was Mitch McConnell playing dumb or lying? It’s the unfortunately never-ending question when it comes to the contemporary GOP. Although In fairness, it’s not always a ‘playing dumb or outright lying’ binary question. Sometimes we can’t rule out dementia.
Oh look at that: At the same time the GOP’s giant tax cuts for the rich and corporations is moving its way through Congress, GOP leaders are already talking about cuts to entitlements and other federal programs. Surprise!:
“Speaker Paul D. Ryan and other Republicans are beginning to express their big dreams publicly, vowing that next year they will move on to changes in Medicare and Social Security. President Trump told a Missouri rally last week, “We’re going to go into welfare reform.””
Cutting entitlements and other public services. That’s the plan. A plan with rather obvious political risks. And those risks are only made worse by the fact that the GOP is about to do a big trickle-down tax cut for the rich and corporations during a time of yawning wealth inequality, low unemployment, and stocks at all time highs and record profits for big corporations. It’s like throwing a big party where everyone is invited, giving the wealthiest guests fabulous door prizes, and then handing a giant bill to all the other attendees that they’ll have to pay out of their retirement savings. That would be a crappy party. A crappy, very memorable party that no one in their right mind would want to attend again. And it’s exactly the kind of party the Republican party appears to be planning for the American electorate. Which seems risky:
And this spending cut chatter is happening before the tax cut is even made law. It just adds to the bitter taste of it all. But bitter pills is what the GOP’s agenda is generally all about these days so a bitter taste is sort of unavoidable:
Couldn’t Paul Ryan and Marco Rubio at least wait until after the scammy tax bill to talk about this? Perhaps, but perhaps not because it’s very possible they feel the need to talk about spending cuts right now in order to appease the handful of genuine ‘deficit hawks’ left in the party and just can’t avoid it.
And notice how Rubio made his comments on Wednesday, right in the middle of the Senate’s scramble to find the votes to appease a handful of deficit hawks. It’s conspicuous timing for talk of upcoming spending cuts that raises a massively important question heading into the conference committee workup of the bill: are promises of upcoming entitlement cuts going to be part of deal to win over any ‘Freedom Caucus’ hold outs? Specifically, secret promises? It’s an obviously important question that the GOP obviously won’t answer, but we should probably still be asking it. Loudly.
But regardless of the motivations of whether or not secret agreement to move ahead on big spending cuts soon really are happening right now as part of the tax bill negotiations, don’t forget that existing pay-as-you-go rules are going to implement quite a few cuts without anything being done. Unless Democrats join Republicans in waiving the pay-as-syou-go rules. But as the AARP representative warns people, even if the Democrats agree to waiving the pay-as-you go rules, the Republicans are still going to ask for more spending cuts in the future, likely citing rising deficits and framing that as out-of-control spending instead of out-of-control tax-cutting:
“Regardless of whether Republicans can waive these cuts, David Certner, legislative counsel for AARP, said, “You know they’re going to come back and say, ‘We need to make more cuts to deal with the growing debts and deficit.’””
And that accurate observation from the AARP’s legislative counsel is part of what makes this current talk of upcoming spending cut plans is that it hands the Democrats an obvious easy retort to the upcoming show-down over the pay-as-you-go waivers: Why should Democrats give the GOP political cover over the deficits the GOP’s tax cut is creating — because pay-as-you-go cuts are in direct response to the deficits created by new legislation — when the GOP is planning more cuts anyway. In other words, the upcoming negotiations over waiving these pay-as-you-go cuts double as a great opportunity for Democrats to highlight the GOP’s stated plans of upcoming spending cuts including entitlement cuts to programs like Social Security and Medicare.
And note the observation by the executive director of the Concord Coalition — “nonpartisan organization that encourages fiscal responsibility” that’s actually a pro-austerity group dedicated to cutting entitlements and government spending in general — that if the tax cuts don’t generate the promised growth the Republicans will demand more tax cuts in response:
“If the tax cuts do not generate the revenue Republicans are expecting, he predicted, “people will say, ‘No, we’re not getting the growth because we should have cut taxes even more.’””
Yep, it’s hard to imagine that isn’t exactly what will happen. Calls for more tax cuts, likely followed immediately by more spending cuts. Just like right now. And before. Over and over. And let’s not forget that this is exactly what the “time-inconsistency” strategy the GOP uses over and over that former Reagan economic advisor Bruce Bartlett recently warned us all about. It’s actually remarkable. This whole situation is almost exactly the way Bruce Bartlett warned us it would play out. Except it’s even more blatant than what Bartlett predicted.
So with the eerily predictive power of that Bartlett article in mind, let’s take another look at the piece and Bartlett’s description of the time-inconsistency strategy and the GOP’s history of using it. And let’s and marvel at how it’s already playing out the way Bartlett want us. Marvel and shudder. Because it’s happening again. It’s one of the quirks about applying the “time-inconsistency” strategy: if the strategy works once it will probably work more than once because it only works in an environment when the target audience (the American public, in this case) isn’t paying attention and accumulating a memory of what happened. In that kind of an environment, the strategy can work over and over because when it works the audience can’t adapt to it because, by definition of the strategy working, the target audience never realized the strategy was used in the first place. In other words, the “time-inconsistency” strategy can be a remarkably consistent strategy and has been for the GOP.
And there’s a particular element of the strategy that Bartlett describes that gives us an idea of whether or not the GOP is actually planning something as electorally insane as pushing big spending and entitlement cuts shortly after its big tax cut for the rich. Because it really is an incredibly politically risky move for the GOP to do a big spending/entitlement cut push next year or even in 2019. If the tax cut has a short-term economic boost and does better than expect, people will be like “why then need for all the cuts?” But if the tax cut doesn’t have that effect and the economy disappoints, people will be like “these cuts are to pay for the tax cuts for the rich you guys did.” What Paul Ryan and Marco Rubio have been talking about is political poison after a tax bill like what they crafted. One that raises taxes on the middle-class by the time it expires. It’s politically insane..unless the plan involves the assumption that the GOP loses power in 2018 in Congress and 2020 in the White House.
And losing upcoming elections is precisely part of the “time-inconsistency” plan Bruce Bartlett warns us the GOP has now and has had many times before. But there’s one big inconsistency between the “time-inconsistency” strategy Bartlett describes an the one the GOP would be playing out of it unilaterally pushed for big spending cuts and entitlement reform next year or in 2019 after the mid-terms: The strategy Barlett describes assumes the spending cuts happen after the Democrats regain control of Congress or the White House and the Democrats and GOP are sharing power. So the cynical “time-inconsistency” strategy Bartlett’s is describing assumes the GOP isn’t shameless enough to do this tax cut and then immediately push for big spending and entitlement cuts. Deflecting the long-term blame for the spending cuts is the whole point of the plan. And yet we have GOPers talking about spending and entitlement cuts now. So is the GOP actually planning on unliteral spending and entitlement cuts or going to wait for the Democrats to share control? It’s hard to say given how politically insane the GOP is in general these days. It’s reminder that one of the consistent things about the GOP is that its behavior can always get worse:
“The answer is that Republicans are pushing the tax cut at breakneck speed precisely because they know they are probably going to lose next year and in 2020 as well. The tax cut, once enacted, however, will bind the hands of Democrats for years to come, forcing them to essentially follow a Republican agenda of deficit reduction and prevent any action on a positive Democratic program. The result will be a steady erosion of support for Democrats that will put Republicans back in power within a few election cycles.”
An act of strategic political suicide. That’s how Bruce Bartlett interprets the GOP’s behavior. The tax cut creates a fiscal time-bomb designed to force massive government cuts and this bomb is planted by a political-suicide-bombing party carrying out a strategy of winning in the long-term now by losing in the short-term. Winning by losing. It’s a potent strategy if carried out competently. And it’s a strategy that would be severely undermined by a unilateral GOP big entitlement ‘reform’ push that didn’t include Democrats.
So what’s the GOP’s plan on pushing for big spending cuts? It’s a super relevant question right now, especially if there are any secret promises of future cuts in the ongoing tax bill negotiations. Is the GOP going to push for big cuts in a unilateral manner before the mid-terms in 2018? Or will the GOP wait to lose either a house of Congress or the White House in 2020 before it tries to force a bipartisan giant spending/entitlement cut bill that Democrats have to sign on to as a result of all the deficits caused by the tax cuts? We’ll see, but regarding the possibility that the GOP could push ahead with cuts unilaterally, let’s not rule out the possibility that the GOP like it assumes the electorate has no memory and will believe pretty much anything at any given point in time. And who could blame them if they assumed this was true. The GOP has complete control of the federal government. It’s clear the American public really does have some sort of severe collective learning disability. Otherwise a party with the contemporary GOP’s track record wouldn’t be remotely near any levers of power. Even dog catcher (especially dog catcher).
So perhaps the GOP really might be pushing for a GOP-only spending cut push following these tax cuts and make use of this window of complete federal control, damn the political consequences. The GOP will pass all the cuts (tax and spending cuts) on its own, plan on losing power in a voter backlash, wait a few election cycles for the Democrats to get power and wrestle with the consequences while the GOP brays about deficits and obstructs everything, and eventually the public will forget what the GOP did in 2017 in 2018 and they’ll be rewarded with power again some time in the 2020’s. Could that be the plan? It’s sort of a variant on the “time-inconsistency” scenario, but a more extreme scenario that assumes a more forgetful public than the one Bruce Bartlett describes.
But let’s also not forget that gerrymandering, voter-suppression, vote-machine-rigging, billionaire mega-donors and the GOP’s anything-goes dirty-tricks machine threatens to give the party a near unbreakable lock on power even if it pisses a majority voters off. The Democrats are going to need large margins of victory spread out across gerrymandered districts to really take back control, and the GOP knows this. So maybe the GOP isn’t planning on losing power because it can’t assume it will lose control of Congress even if it passes horrible laws the vast majority of voters hate. Is the system too rigged to execute a “time-inconsistency” strategy that assumes the GOP loses control so the GOP is just going to go ahead with its agenda and try to hold on to power by any means necessary? We can’t rule it out.
It’s a fascinating, if grim, question: what will the GOP do with this rare window of unified power? The party’s biggest agenda goals are all political poison that’s basically a fascist Koch brothers-style pro-oligarch nightmare agenda so it can’t overreach casually. Unless its long-term game plan of building up an advantage in gerrymandering, voter-suppression, vote-machine-rigging, billionaire mega-donors and political dirty-tricks (dirty-tricks that includes hacking it appears) has resulted in such a massive systemic advantage that the GOP can pass unpopular policies without necessarily losing control of power and it knows it.
And while gerrymandering only helps the GOP in the House, don’t forget that the Democrats have three times as many Senators up for reelection in 2018, so the GOP’s calculus in terms of doing horrible policies that the public will hate heading into 2018 are probably pretty unusual. The GOP can potentially get away with being more irresponsible than normal given that numerical advantage that just happens to have hit this year by chance. Could the GOP’s grip on power be strong enough to withstand a significant voter backlash? Or is the GOP planning on a voter backlash in order to pass a political hot potato to the Democrats. The answer isn’t obvious. But it’s hard to imagine the GOP is placing major bets on the GOP winning the White House in 2020 even if they expect to hold on to Congress. We can’t rule it out a GOP White House win in 2020 but it’s hard to rule it in either for obvious reasons. The most stable aspect of President Trump is his consistent instability. And that has to weigh heavily on the GOP strategists’ decision-making...the GOP knows it might have full control of the House, Senate, and the White House up through 2020 even even if the party gets routed somewhat in the 2018 midterms thanks to all the systemic advantages the GOP built for itself. Will the GOP use the power it has now to pass politically unpopular policies or will it defer and wait for shared control. It’s not obvious what the GOP is going to do but the range of possible GOP behaviors is immense.
What is obvious is that someone should probably tell Donald Trump that the the GOP’s time-inconsistency strategy just might mean the legislative agenda his GOP colleagues in Congress are handing him might be made by people planning on him losing in 2020 as part of the time-inconsistency strategy Bruce Bartlett warned us about.
As the GOP scrambles to find a compromise version of the party’s tax scam monstrosity that can satisfy all the factions of the party and pass both the House and Senate, it’s not surprising that the elimination of the state and local tax (SALT) deductions remains a sticking point in the negotiations. It’s obviously flirting with political suicide for Republicans in Congress from the higher-tax ‘Blue’ states like New York, New Jersey, and California to vote for a tax bill that suddenly triggers a big tax shock from the loss of those SALT deductions.
What is surprising is that the elimination of the SALT deductions is being viewed as something exclusively impacting ‘Blue’ states. Lower-tax ‘Red’ states are going to be impacted too. How so? Well, there’s the obvious problem with the loss of relative tax competitiveness if ‘Blue’ states do actually end up lowering their taxes in response to the loss of the SALT deductions.
But a far more direct reason this tax plan is going to harm ‘Red’ states is that the whole GOP vision for the ‘deconstruction of the Administrative State’, as Steve Bannon would put it, is to first transfer federal programs to states and then encourage states cut those programs in response to state-level pressure to cut taxes. Under this GOP vision every state is slated to have much higher costs for all sorts of things pushed on them and that’s inevitably going to involve a choice between higher-taxes or reduced public services. Costs slated to grow year after year for decades to come relating to everything from Medicare and Medicaid to virtually all federal safety-net programs under that GOP vision. And the state and local taxes paid to finance those costs aren’t going to be tax deductible anymore. All so the GOP can cut taxes for corporations and the super-rich.
It’s an obvious consequence of the GOP’s SALT deduction elimination, but it’s only obvious when viewed in the context of the GOP’s larger plan to block-grant federal programs to the states with steadily shrinking block grants. And that’s one reason why it’s so important to keep in mind the GOP’s long-term agenda of transferring responsibilities and costs from the federal government to states for as many programs as possible as the GOP continues to try to sell its tax bill. Because one of the sales pitches its perversely using to get ‘Red’ state voters behind the bill is the pleasure of a tax bill that screws over ‘Blue’ states the right-wing media loves to get its audience to hate.
And as the following article makes clear, the GOP and right-wing pundit aren’t just using the pleasure of screwing over Democrat-leaning states with the SALT deduction elimination as a selling point for their tax bill. They’re also using screwing over Democrats as an bonus effect for an array of other provisions in the bill, like making it more expensive to go to graduate school and eliminating the ability of school teachers to deduct the personal money they spend on classroom supplies.
Oh, and the elimination of the individual mandate in Obamacare that’s expected to cause a premium-spike death-spiral in the individual health insurance markets is also being sold as a bonus because it hurts Obamacare which is portrayed by the tax bill backers as exclusively hurting Democrats for some bizarre reason.
That’s all being sold as an attack on Democrats. Instead of an attack on everyone who wants to live in an educated society with functioning health insurance markets:
““It’s death to Democrats,” said conservative economist Stephen Moore, who advised Trump’s campaign on tax policy.”
“It’s death to Democrats.” That’s become a key part of the the GOP’s sales pitch for the tax bill, which is rather chilling in and of itself. But it’s the things that are celebrated as “death to Democrats” that make it extra chilling: state-level spending, graduate education, university endowments, teacher who spend their own money on classroom supplies, and the individual health insurance markets. GOP voters are supposed to celebrate a systematic attack on education and health care because doing so hurts Democrats. That’s seriously part of the GOP’s sales pitch. And such attacks on health care and education do indeed harm Democrats. It just also hurts everyone else, except apparently Stephen Moore and his billionaire bosses:
And, of course, it’s not just education and health care that the GOP is casting as falling int the ‘Demoncrat’ domain and worthy of attack. It’s also state spending. State-level services are also framed as Democratic in this ‘death to Democrats’ sales pitch. Which is pretty remarkable when you recall that one of the GOP’s mantras for decades has been the virtue of transferring federal spending to states. But that state-level spending is now also tainted with the Democratic party and needs to be pared back, according to Stephen Moore and his fellow GOPers:
“Conservatives say they hope the change will mean lower state taxes and smaller governments. “One hopefully positive result of this legislation will be that state and local officials will be less eager to jack up the taxes on hard working Americans,” Ted Cruz of Texas said after the bill passed. He mentioned California, New Jersey and New York explicitly.”
Lower state-level spending — as a consequence of lower state-level taxes as a consequence of the loss of the SALT deductions — is the stated goal of GOP Senators like Ted Cruz. In part because the GOP has long hoped to destroy public employee unions by generating public support for turning state-level public sector jobs into low-wage, low-benefit highly undesirable positions. But pressuring cuts to state spending is also a key GOP goal now that the GOP is putting into place its larger agenda of transferring federal spending to states and then encouraging states to do all the cuts to those programs. Indefinitely. It’s an agenda that’s obviously going to include indefinite state-level cuts to ‘Red’ states too.
And as the following article from back in November when the House passed its version of the bill, it’s not just the elimination of SALT deductions that’s going to hit states unequally at first but eventually all states as growing levels: The House bill (and Senate bill) also includes the elimination of personal loss deductions for thing like wild fires, hurricanes, earthquakes, and other natural disasters. Or non-natural disasters. Like if your home burns down. Or losses from theft or vandalism. That’s all currently deductible for your federal taxes. But it won’t be once this tax bill passes.
Hurricanes Harvey, Maria, and Irma are going will be grand-fathered in and losses from those will be allowed to be deducted, along with losses from the recent Northern California wildfires (not the currently raging fires). But going forward, when anyone in the US experiences a disastrous loss, they’re going to have to hope that it happens in the context of a major event that causes mass losses in their area. Because special Congressional laws that address the victims of specific disasters are going to be the only way the public gets to write off the losses from a disaster.
Remember when all those GOP Congressmen refused to vote for federal disaster relief for Hurricane Sandy, which hit the ‘Blue’ Northeast states, but then all voted for federal relief for Hurricanes Harvey after it hit Texas? Yeah, that’s going to be the politics behind all federal disaster relief going forward if this tax bill passes. GOPers in Congress are even defending the elimination of the disaster loss deductions by assuring the public that Congress can still pass special bills for individual disasters. How assuring.
And that loss of disaster losses deductions is obviously going to hit states unequally. Because some states are just more prone to disasters than others. Although natural disasters and personal disasters like theft, vandalism, or your home burning down obviously can hit everywhere and there’s little chance Congress will pass special federal relief for those events. But for the big natural disaster those are obviously going to hit some states more than others. And it won’t be a ‘Red’ vs ‘Blue’ divide. It will be a ‘more disaster-prone’ vs ‘less disaster prone’ divide:
“The legislation specifically repeals the deduction for personal casualty losses. The Internal Revenue Service describes casualty losses as including those from “natural disasters like hurricanes, tornadoes, floods and earthquakes. It can also include losses from fires, accidents, thefts or vandalism.””
The tax bill passed by the House repeals the federal deduction for personal casualty losses. And this includes fires, accidents, thefts or vandalism. To pay for more tax cuts for the rich and corporations. How nice:
But at least the victims of Harvey, Irma, and Maria will be spared. Future disaster victims will just have to hope Congress is feeling generous:
So that’s all something to look forward to...and wince at in anticipation: routinely politicized congressional disaster relief responses. Again, don’t forget Hurricane Sandy relief and the viciously cynical GOP response. That’s what the GOP wants to be able to do much, much more in the future. Apparently. It’s the GOP’s tax bill so the party is presumably interested in a lot more congressional control over federal disaster responses knowing full well that the party’s toxic politics is going to recreate the Hurricane Sandy/Harvey ‘approve Red state disaster relief but vote down Blue state disaster relief’ dynamic over and over in the future. It’s grimly cynical.
Given all this, it’s probably worth keeping in mind that climate changes is almost certainly going to be a driving factor behind much of the state-level disaster costs in coming decades. And according to a new study that factors in state-specific risk models for climate change’s economic costs to each US state, climate change is going to result in an increasingly unequal distribution of costs. And it also roughly breaks down on ‘Red’ state vs ‘Blue’ state lines, because it largely breaks down on latitude and the fact that warmers states are going to be hurt a lot more by a warming climate:
“Past models had only looked at the United States as a single region,” said Robert E. Kopp, a climate scientist at Rutgers and a lead author of the study. “They missed this entire story of how climate change would create this large transfer of wealth between states.”
A large relative transfer of wealth from southern warmer states to northern colder states. That’s one of the general trends we should expect from a warming planet, and the warmer it gets, the greater that transfer gets. And it’s an increasing number of disasters like heat waves in already hot climates that’s going to going to be a key driver:
“The greatest economic impact would come from a projected increase in heat wave deaths as temperatures soared, which is why states like Alabama and Georgia would face higher risks while the cooler Northeast would not.”
Climate change isn’t going to be felt equally and it’s the ‘Red’ states in the South and parts of the Midwest US that are going to be on the short end of that inequality. And thanks to the GOP’s tax bill, the losses from those coming climate change-related disasters aren’t going to be federally deductible. Unless Congress makes an exception.
But even if Congress does make lots of tax deduction exceptions to for future climate change-related disasters, that’s only going to be the case for big disasters that get congressional attention. Not the individual cases of things like theft, vandalism, nasty storms, and a home burning down. And yet it’s hard to imagine that the heat waves and other natural disasters that will disproportionately hit ‘Red’ states in the Southern parts of the US harder won’t lead to increases in things like theft, vandalism, nasty storms and homes burning down. Part of what makes the giant disaster of climate change so disastrous is that it stresses out things — ecosystems, human societies and economies — and makes mini-disasters much more likely to happen. Mini-disasters that are no longer going to be deductible from federal taxes thanks to the GOP’s big tax bill.
And the costs of those future climate change disasters aren’t just going to be felt by individuals. The states are obviously going to have their own disaster responses. Which will probably involve raising taxes at the state and local level. And the worse climate change gets, the more likely we could see a scenario for today’s southern ‘Red’ states are effectively forced to be higher-tax states than their northern neighbors simply because the cost of dealing with the high cost of climate change damage will just keep growing and growing. Those SALT deductions sure will be nice for disaster-prone states. But away they go. To pay for the tax cuts.
It’s all a reminder that the GOP’s tax bill doesn’t just punish Democratic states. The tax bill punishes all states. It’s just more obvious when it comes to the ‘Blue’ states and the SALT deduction elimination because the GOP is trying to make that a sadistic selling point to distract from the fact that this bill is more of an S&M thing.
Remember when the Trump administration released its 2018 budget blueprint back in March that was almost comically draconian due to the fact that it gutted almost all federal spending, especially for safety-net programs? And remember how Trump’s big $1 trillion dollar infrastructure plan rapidly morphed into a mass infrastructure privatization plan? Well, it sounds like those budget and infrastructure plans are going to more or less have to be adopted if the GOP’s giant tax scam becomes law. Yep.
And why is are joke monstrosities going to be required? Because as the GOP scrambles to come up with a joint bill that can pass both the House and Senate, the need to fulfill the Senate’s “Byrd rule” — the rule that a spending bill can pass the Senate with a bare majority (no filibuster) as long as it’s expected to be budget neutral in a decade — is one of the key constraints on the final shape of the bill. And according to a new one-page report from the Treasury Department, the Treasury has officially concluded that the only way the GOP’s tax bill can be budget neutral over the next decade is if the Trump administration also carries out the ‘welfare reform’ (gutting safety-net programs), ‘infrastructure development’ (mass privatization and toll roads everywhere) and mass deregulation, only then will the US economy grow fast enough over the next decade for the tax scam to pay for itself. Because gutting the safety-net, mass privatization of infrastructure, and mass deregulation is apparently good for the economy.
And note that it doesn’t look like this is a report the Treasury Department actually wanted to release. It only came to light after the department’s inspector general went hunting for it after people kept asking why the Treasury wasn’t issuing a report on the matter after it promised to do so. And it’s not surprising the Treasury wasn’t enthusiastic about releasing this report because it basically admits that the GOP’s pledge that the tax bill will pay for itself over the next decade is a fraud. Demanding ‘welfare reform’ and ‘infrastructure development’ is basically code for cutting spending so making those two major legislative initiatives assumptions in the Treasury argument that the tax bill will be budget neutral is basically an acknowledgment by the Treasury that the tax bill isn’t actually budget neutral.
So, to summarize:
1. We have the Treasury Department first promising to issue a report on the budget impact of the tax bill.
2. Then it apparently forgets to actually issue the report.
3. Then, after people start asking about the missing report, the department’s inspector general goes looking for it.
4. Then the department suddenly issues the report. It’s one page.
5. The report says the tax bill will pay for itself...if the government also proceeds to ‘reform welfare’ (gut the safety-net). And ‘develop infrastructure’ (privatize everything public assets). And pursue mass deregulation. If all that happens, the magic of trickle-down economics will allow the tax cut for corporations and the rich to pay for itself in 10 years.
That was what the Treasury Department just told the American public. Grudgingly and belatedly. And also deceptively since the surface argument the Treasury is making is that slashing the safety-net and privatizing infrastructure will synergistically work with the tax bill to create a sustained elevated economic boom that will make the tax cuts budget neutral. Which ignores how the mass cuts in spending and the temporary one-time revenue boost from the mass infrastructure privatization probably won’t do much to help the economy but would be very useful for covering the costs of the tax cut.
But at least the Treasury Department finally admits that the tax bill won’t pay for itself. Indirectly, belatedly, and grudgingly:
“The Treasury Department promised to release an analysis ahead of last week’s Senate vote, but it was nowhere to be seen, and whistleblowers at the Department told the New York Times they were never even instructed to crunch the numbers. On Monday, after the department’s inspector general opened an investigation into the whereabouts of the promised report and whether Secretary Steve Mnuchin was attempting to mislead the public about the impact of the tax plan, the Treasury Department quietly released a one-page document.”
“We promise a report. What report? Oh look, an inspector general coming after the report we promised. Here it is.” That’s what just happened to the Treasury Department. At least we have the report. As chilling as that report may be when you consider what it actually recommends:
“So, essentially, Treasury is saying that corporate tax cuts, plus a budget Congress will never pass that defunds Meals on Wheels etc., will save the government money in the long run.”
Yep, as long as Congress passes the insanely draconian Trump budget — a budget that shocked the public back in March because it even cut things like Meals on Wheels (meals/check ups for old people) — the tax bill will eventually pay for itself. That was the message at the core of the Treasury’s report. It’s one-page report that it only released after the inspector general came after it.
And lets not forget that a key element of the GOP’s ‘welfare reform’ plans is blockgranting those programs and sending them to the states where the cutting and work-requirements will become the norm. Work-requirements that will be in place whether or not that makes sense for people’s individual circumstances. While a subset of people using welfare programs don’t work by choice, the rest that don’t work don’t have a real choice due to circumstance. And yet they’ll all be expected to find any minimum wage job available, likely dragging down wages for working class Americans everywhere.
Don’t forget that ‘welfare reform’ in the US already happened. Two decades ago. And there’s still lots of poverty. It’s just a much, much meaner welfare system to deal with all that poverty than existed before and now it’s about get A LOT meaner. Imagine people who don’t work and utilize welfare services because they can’t work because they need to stay at home taking care of relatives with medical needs. Those people are going to have to find jobs and if it leads to disaster for that family, oh well. That’s what the GOP’s ‘welfare reform’ has long entailed and the Treasury Department just basically declared that the only way the GOP’s tax bill would pass the Senate’s “Byrd rule” is if that long-held GOP goal of ‘welfare reform’ is made a reality soon. Along with the privatization of public infrastructure and mass deregulation. That’s all going to have to happen in order to pay for the tax cuts for the super-rich and corporations.
Although there is one notable alternative area of government spending cuts that the GOP might pursue instead: Entitlement cuts. Large cuts to Medicare, Medicaid, and Social Security is like GOP fever dream and 2018 is the party’s big historic chance to do it with control of Congress and the White House. Might that happen? If House Speaker Paul Ryan’s recent declaration that entitlement ‘reform’ (cuts) is the GOP’s plan for next year is accurate then, yes, the GOP might actually try to do entitlement reform next year (which shouldn’t be surprising after this tax scam nightmare):
“Next year we’re going to have to get back at entitlement reform,” Ryan said on a Wisconsin radio talk show, calling Medicare the “biggest entitlement that’s got to have reform.”
It doesn’t happen very often, but every once in a while you should take Paul Ryan at his word. And this is one of those times. Ominously.
And how is the GOP planning on pulling this off? By doing the ol’ GOP three-step: cut taxes to drive up the deficits and then rail about deficits, demand spending cuts, and make those spending cuts a reality. Spending cuts that are going to be entitlement cuts this time. It’s the “time-inconsistency” strategy but applied over a compressed time-frame of just a couple of years:
And that’s all part of the stated GOP agenda for next year according to the House Speaker.
So if the GOP guts Medicare and Social Security like Paul Ryan is predicting, hopefully the government won’t need to gut the safety-net for poor quite as much to pay for the tax cuts for the rich and corporations. Although the GOP wants to cuts all of these programs regardless of whether or not its ostensibly to pay for a trickle-down tax cut so we should probably expect maximum cuts for the poor regardless of circumstance.
Well that turned out to be an exciting special election: Roy Moore just lost the Alabama Senate race to replace Attorney General Jeff Sessions’s old seat to Doug Jones. A Democrat. Which is unusual for Alabama. For the first time since 1992, Alabama elected a Democratic Senator. It’s a positive kind of exciting outcome. And as we’ll see below, it’s an especially exciting positive outcome because it might
But there’s a potentially negative exciting outcome that’s also developing: Roy Moore hasn’t conceded yet, announcing “It’s not over yet.” Maybe it’s just a temporary stalling while he waits to see if a miracle develops. But as we’ll also see below, the GOP is currently navigating very tricky timeline with its push to get the tax bill giant scam passed through the House and Senate and that timeline at this moment strongly incentivizes the GOP to prevent Doug Jones from getting certified as the final winner of this race for as long as possible. So if if Roy Moore doesn’t concede soon, the American public had better watch out for a stalling tactic intended to get the GOP’s horrible tax bill passed.
Will Moore make a tactical non-concession effort or is a Moore concession coming soon after options like counting contested ballots get exhausted? That will be something to watch. But the loss of a GOP vote in the Senate makes the passage of an the tax bill down to a question of whether or not Maine’s Senator Susan Collins can be convinced to vote for it. And it’s very unclear they’ll be able to do so since there’s no real indication the final version will meet her key demands.
Even worse, as the article below notes, the only ‘safe’ move for the GOP is to ram the tax bill through Congress before Doug Jones can get seated and they’re planning on doing exactly that next week.
So the longer Roy Moore refuses to concede, the more time it gives the GOP to hastily and egregiously ram through the tax bill. And that’s all part of what it’s quite an exciting night for US politics in Alabama. It’s that latest reminder that, even in defeat, the GOP will do whatever it can to cut taxes for rich people. And probably more hastily in defeat:
“Senate Republicans are passing their tax bill through the budget reconciliation process, which requires only 50 votes to advance instead of the usual 60. So Republicans can afford two defections from their 52 members. If Jones were to be sworn in before the tax bill is passed, suddenly Republicans would have only one vote to spare. With Sen. Bob Corker (R‑TN) seeming implacable — he was the only Republican to oppose the Senate bill the first time — they could not survive any more desertions.”
A one vote margin. That’s all the GOP will have with its tax bill for the final vote in the Senate if Doug Jones gets seated before they make the final. Because otherwise it’s all down to Susan Collins, and she’s looking rather shaky since her major demands aren’t being remotely met:
“So Congress is now in a race against the clock on the tax bill, trying to pass their biggest bill of the year before Doug Jones is sworn in and Susan Collins changes her mind.”
It’s pretty remarkable. The GOP mega-donor class’s giant dream tax cut is at risk thanks to a GOP loss in Alabama. Baby Jeebus works in mysterious ways.
But the GOP also works in mysterious ways since it’s always conniving for more tax cuts for the rich through any means necessary. And that’s why we can’t rule out a stalled concession from the Moore campaign that’s specifically designed to buy the GOP enough time to pass its reprehensible tax bill. It just seems like a very GOP-ish thing to do.
And don’t forget, if Roy Moore concedes tomorrow, that just means the GOP is going to be even more pressed to hastily pass its historically awful tax bill before Jones is seated.
That’s all why there’s a distinct negative excitement attached to the positive excitement of Doug Jones’s historic victory in Alabama: the GOP’s precious tax bill scam is even more at risk after Moore’s defeat and that alone might drive the party even more insane. Because when it comes to the GOP and tax cuts and insanity, where there’s a will there’s a way.
As the GOP continues to scramble to come up with a version of the GOP’s tax bill that can pass both the House and Senate, House Speaker Paul Ryan decided to troll the American public regarding his long-held dream of slashing entitlements like Social Security and Medicare that’s he’s already declared is a legislative goal of his in 2018: Paul Ryan laid out a 3 point GOP plan to get the US economy “humming to reach its potential”. The first two points are just the standard GOP agenda items of mass deregulation and tax cuts for the rich and corporations. It’s Ryan’s third point that’s extra-trollish: Americans need to have more babies in order to save programs like Social Security. Yep, in the middle of a GOP drive to slash immigration, do nothing about college expenses, and gut almost all government programs designed to help working parents afford the cost of raising kids, the GOP’s third big agenda item is to pretend that it’s encouraging Americans to have more kids:
““People,” Ryan said bluntly. “This is going to be the new economic challenge for America. People. Baby boomers are retiring. I did my part, but, you know, we need to have higher birth rates in this country, meaning, baby boomers are retiring and we have fewer people following them in the work force.””
And notice how Ryan isn’t just lamenting a lack of American babies (presumably American white babies given the GOP’s existential angst over non-caucasians). He’s also pointing to the “tens of millions of people right here in this country falling short of their potential, not working, not looking for a job, or not in school getting a skill to get a job”:
And keep in mind that the GOP’s long-standing goal — a goal Paul Ryan already pledged to make happen in 2018 — is to set up work-requirements for almost all government programs, state and federal, at the same time those programs are slashed. Also keep in mind that those “tens of millions people” includes the disabled, students, and other people who have very good reasons for not finding a job, like taking care of disabled family members.
We already knew that the GOP’s agenda for “getting the economy humming” was to push those tens of millions of people who don’t have a job for whatever reason (including many very valid reasons) into the labor force for whatever minimum wage job they can find. But now it appears that the GOP is going to try to sell that work-requirement agenda as one that addressing a perceived baby-shortage.
So with in mind, here’s a fun look at the demands Paul Ryan was making back in 2015 when the GOP was asking him to because the new House Speaker: Ryan demanded more time to spend with his wife and children. Which would be an admirable demand if it wasn’t for the fact that he was proposing cuts to child care subsidies:
“Ryan has put forth a number of budgets and policy proposals that call for deep spending cuts. Some of those cuts take aim at an important tool for poor parents: child care subsidies. The sky-high cost of child care in the U.S. can dwarf a parent’s income, particularly a low-income parent. Child care subsidies help defray that cost, allowing a parent to find a place to leave their children while going to work and knowing that they don’t have to rely on family members or unsafe, unstable arrangements. Without them, however, poor parents can face a tough choice between continuing to work and simply staying home because the cost is too high.”
Yep, at the same time Paul Ryan was demanding more time to spend with his family, he was calling for cuts in child care subsidies for poor parents, a move that would force those parents to choose between working or staying home to raise their kids. And this is at the same time he’s calling for work-requirements for poor people to actually access those poverty assistance programs he wants to cut:
And don’t forget that child care subsidies is merely one of the programs for poor parents Ryan would like to cut. There’s also the Medicaid cuts, the school lunch program cuts, and his general plans for block-granting and transferring to states virtually all federal poverty programs so they can be cut at the state-level.
It’s all party what made Paul Ryan’s “America needs more babies” rant such epic trolling. Because if there’s one massive reason not to have kids in America today, it’s people like Paul Ryan with immense power doing everything they can to turn the US into dystopian nightmare a mass poverty and despair.
At the same time, one of the biggest callings in America today is raising a generation of kids that don’t suffer from the sickness infecting Paul Ryan’s heart and soul.
So, in a way, Paul Ryan was correct. Americans do need to have more children. Specifically, more children who are raised in such a manner that they’re very unlikely to end up like Paul Ryan. More kids who recognize the peril of Paul Ryan’s worldview would probably be really helpful for the future of the US. And if these kids are raised with a desire to create a nation that sensibly and compassionately shares the wealth and a sensible understanding of economics, future challenges like a large aging population would be relatively easy to deal with without having to resort to baby-boom stimuluses. Let’s not forget that automation will go a long ways towards addressing future workforce shortages. We don’t actually need a big baby boom to deal with a large chunk of retirees. It just seems like we need that to people like Ryan who can’t imagine anything other than a Dickensian template for society.
So let the baby-making commence, followed up with the kind of child rearing that produces a generation of adults capable of recognizing the peril someone like Paul Ryan represents to the future. Try not to go overboard with the baby-making.
It grows closer. *shudder* The GOP’s highly unpopular tax scam bill is out of the conference committee and set to go back to the House and Senate for the final vote and it’s heading for a final vote before Christmas. So of course this massive reverse-Robin Hood Grinch attack by the GOP on behalf of its billionaire mega-donors is being branded as some sort of giant Christmas present to the American public.
Ominously, the Joint Tax Committee already gave the conference committee version of the bill an official projected 10 year cost of ~$1.5 trillion, allowing it to pass the Senate with just a simply majority vote. More ominously, it appears the GOP has completely unified around the final version, with Tennessee GOP Senator Bob Corker — the sole ‘no’ vote in the initial Senate vote on the bill over its projected $1.5 trillion cost over the first decade and could easily be much, much more expensive — flipping to a ‘Yes’ despite none of his debt concerns being addressed. And the same is true for all of the rest of the Senate GOPers who previously expressed concerns about the bill despite none of their concerns being addressed in the final version. In other words, the GOP isn’t going to allow those few remaining shreds of integrity it possessed from stopping it from passing this tax bill.
And while Bob Corker’s sudden flip might seem somewhat baffling given how unpopular the bill is with the public as a whole — with American voters opposing the bill by a 2–1 margin according to a recent poll — it’s worth noting that there are still a number of factors that may have led to Corker’s flip-flop: The first being that Corker is a possible replacement for Rex Tillerson as Trump’s Secretary of State. The Democrats in the Senate have already indicated they would support him in that role and Corker clearly wants to the job. And he must really want that job because Trump is like a political Monkey’s Paw: if you achieve your political dream via him you will regret it. So it’s very possible that Corker, really, really, really wants that Secretary of State job and, as such, has already come to terms with a future of political shamelessness working under Trump, in which case he might as well just vote for the bill.
Another obvious reason why Corker might have felt compelled to flip and vote for the bill despite having none if his concerns addressed is that it’s not clear the GOP voter based shares those concerns. Because while this bill may not be popular with the public at large, it is popular with Republican voters. It’s an example of what a political conundrum this tax bill represents for the GOP officials: GOP voters support it, but that’s largely it and most other voters hate it. It’s a polarizing issue that GOPers will feel compelled to vote for despite more of the electorate hating it.
Of course, that’s how most of the GOP’s pro-super-rich agenda works politically and the GOP is in complete control of the government. Winning elections with an agenda most people hate is a GOP specialty. But that’s also what makes this tax bill extra-risky for the GOP: if the GOP ever crosses a line and becomes so blatantly corrupt that even its expert use of political dark arts — weaponized disinformation and propaganda, voter suppression/rigging, Roger Stone/James O’Keefe-style dirty tricks, and now political document hacks — can’t prevent GOP voters from realizing they’re getting totally scammed by professional con artists, the whole GOP facade risks crumbling down. Not crossing that line of overly blatant looting and corruption is a constant risk for the GOP and its allied right-wing disinfortainment media complex because the ‘Big Lie’ strategy of mass deception and confusion is the movement’s primary strategy at this point.
So while there is a certain political logic behind the GOP’s near-unified support for this bill — namely that the GOP based overwhelmingly supports it thanks to that Big Lie disinfotainment-complex — it’s logic that can’t logically be followed too aggressively without running the risk of overwhelming the power of that Big Lie disinfotainment complex by being too blatantly corrupt. In other words, Bob Corker’s political conundrum over this tax bill is really just the microcosm of the GOP macrocosm of constantly having to walk that line of placating the demands created by the GOP Big Lie disinfotainment complex without looking too irresponsible. And it’s not an easy line to walk because it keeps moving. The right-wing Big Lie disinfotainment complex is constantly pushing that line more towards requiring blatantly corrupt or irresponsible behavior while the larger public backlash to that increasingly blatant corruption pushes the line back towards not acting too blatantly corrupt. It’s a difficult tightrope act even by tightrope act standards.
And that tension brings us to the third reason Bob Corker may have been tempted to vote ‘Yes’: a provision was added to the bill at the last minute that will directly benefit Corker’s personal investments. While with this reason probably isn’t the primary reason he flipped to ‘Yes’ — being Secretary of State and not angering the GOP base in order to get that job seems like the most likely reasons — the last minute provision that will directly benefit Corker’s investments probably don’t hurt in terms of sweetening the deal. At least, it probably wouldn’t hurt as a deal sweetener if Corker didn’t have to be worried about voting for a tax bill that crosses the line of being too blatantly corrupt and irresponsible. But he clearly does have to be worried about crossing that line with this tax bill, as does the rest of the GOP because this same provision that will help Corker’s personal business interests also appear to be tailor made to benefit President Trump’s and Jared Kushner’s real estate empires. Yep, the GOP added a provision to the final version of the bill at the last minute that specifics benefits companies with a few number of employees and large investments in real estate.
Now, it’s true, the GOP does have a long track-record of successfully employing the “time-consistency” strategy, the tactic of passing irresponsible tax cuts targeting the rich and avoiding blame for the negative consequences and lack of “trickle-down” benefits that play out years later. But that long track-record is what makes this overly blatantly tax scam such a big risk. Passing a tax bill with temporarily tiny benefits for the middle-class and permanent massive cuts for the wealth and corporations is bad enough, but adding a last minute provision specifically benefiting real estate moguls when the president and his son-in-law are both real estate moguls is just rubbing everyone’s face in it and people are a lot more likely to remember something negative when they’ve had their faces rubbed in it which is exactly what could undermine the “time-consistency” strategy.
But despite that risk, the Christmas present the GOP is preparing to give to American household really is coal for almost everyone to pay for the giant Christmas gift for Trump and Jared Kushner and their billionaire brethren, which seems like crossing the line in a memorable manner:
“The new bill still has the same income provision but adds a loophole: depreciable property. So instead of being being able to get a large tax cut only if you pay a lot of wages, now you can get the tax cut if you own a lot of property.”
A giant last minute gift to wealthy real estate entities that don’t employ very many people. And Senator Corker was the only GOP lawmaker who will benefit:
And, of course, there’s two of the prime beneficiaries: the president and his son-in-law:
So does a last minute provision that specifically helps wealthy entities with few employees — and significantly helps Trump and Kushner — cross a line with a American electorate? We’ll find out.
But let’s also not forget that this last minute real estate mogul provision is just the one piece of coal the GOP’s Christmas gift to America. There’s lots of coal in this bill and much if it is the kind of memorable coal that could leave a bad memories about this Christmas gift lingering in the minds of American voters for years to come. For instance, check out the giant piece of coal the GOP is giving to Americans in jobs at risk of offshoring...
“What happened to the workers in Clinton, tax experts say, will probably happen to more Americans if the Republican tax overhaul becomes law. The legislation fails to eliminate long-standing incentives for companies to move overseas and, in some cases, may even increase them, they say”
That’s a lot of coal. And it’s offshoring coal coming from Trump, which case it an extra-memorable coal gift for Christmas.
And while it remains to be seen just how much offshoring this bill encourages, it’s undeniable that it encourages offshoring:
“In the future, corporations would be required to pay about a 10 percent minimum tax on overseas income above a certain level. The provision is billed as a way to discourage the movement of jobs and profit overseas. But the fine print of the new global minimum tax would make the problem worse, several tax specialists said.”
That’s right, the provision the GOP sold as way to prevent offshoring actually encourages it by using a single minimum corporate tax rate on overseas income that still makes it quite profitable to offshore US jobs in tax havens. And it doesn’t just encourage the offshoring of intellectual property to places like Ireland. It also encourages the offshoring of manufacturing plants. It That’s quite a lump of coal right there.
As one tax expert, the only real way to use a minimum corporate tax rate on overseas profits to disincentivize offshoring is to have separate minimum corporate tax rates for each nation, with tax shelters getting extra high minimum rates to make them comparable to the US rats:
It’s worth noting that this has some parallels to the vision laid out in the “America First” speech Trump gave in Asia last month when he proclaimed that, “I am always going to put America first the same way that I expect all of you in this room to put your countries first,” and called for the US to pursue bilateral trade-agreements instead of giant one-size-fits-all trade agreements. In other words, the GOP tax bill’s uniform treatment of corporate overseas profits is in direct contradiction to the principles of “America First” bilateral trade agreements Trump campaigned on, making it an extra large lump of coal for all those Trump voters who supported Trump primarily for his promises to bring back manufacturing jobs to the US.
Will that cross a line for the Trump voters waiting to see their lost jobs return? Or will those voters remain captive to a right-wing Big Lie disinfotainment media complex and never learn about these parts of the GOP’s Christmas gift to America? Only time will tell, but if they do end up learning about this remember that Trump’s big tax bill ended up encouraging the offshoring of jobs that’s going to make it a lot harder for the GOP’s “time-inconsistency” strategy to work this time around.
And it’s not like the first impression this tax bill gives to voters is necessarily going to be the final impression. It’s the gift that keeps on giving. Coal. For years. Which is what the “time-inconsistency” strategy is predicated on exploiting...all the years required for something like a tax bill to finish giving all its gifts of coal to the rabble. Maybe the public will forget about the tax bill Christmas gift of 2017 when government programs are getting gutted over deficit concerns coming years? Or maybe not? It’s the core gamble the GOP is making as it finalizes the gift that keeps on giving coal for years to come.
So with that in mind, check out one of the ‘gifts’ the GOP is going to be giving in coming years: a reduced incentive to donate to charities. Merry Christmas:
“The final legislation roughly doubles the standard tax deduction, to $12,000 for individuals and $24,000 for couples. A higher standard deduction means fewer taxpayers will itemize their deductions on their tax returns, reducing the incentive to give to charities. Currently, only taxpayers who itemize — meaning, they detail gifts to charity and other spending on their returns — may deduct contributions.”
That’s right, thanks to the doubling of the standard deduction from $12,000 to $24,000, the number of tax filers expected to itemize their tax returns is expected to fall from 46 million to 20 million. And while the GOP sells this as a major benefit in the bill because it’s easier to take the standard deduction than itemize (they sell that feature as if that’s an awesome benefit), that simplification has the perverse side effect if disincentivizing charitable giving.
It’s kind of amazing. One of the few provisions in the bill that actually benefits the middle-class, double the standard deduction, simultaneously discourages people from donating to charity. It’s classic GOP badness distilled:
“For charities who serve families in need, the projected declines in giving will devastate our ability to provide food assistance”
And keep in mind that this expected devastation of things like food assistance is happening at the same time the GOP is planning on gutting federal safety-net programs. So when there’s a future wave of desperately poor people cut off from government programs and unable to find a job (perhaps after their job gets offshored), that’s going to be another lump of coal from this tax bill.
Of course, there’s no guarantee that doubling the standard deduction will reduce charitable giving. But if we assume that tax incentives are relevant to human behavior, which is GOP mantra, then it’s hard to see which reduced charitable giving won’t happen:
Of course, the GOP will no doubt argue that the massive “trickle-down” effect of their tax bill will include extra large charitable contributions as society grows wealthy from all the extra economic growth from the low taxes they’re predicting.
And if that ends up happening that will be wonderful. It’s just not what the philanthropic sector is expecting. Although it is expecting a boost in giving this year. But only due to front-loading of next-year’s donations in order to take advantage of the additional savings that won’t be available next year. So a one-year boost in donations followed by a permanent reduction is what we should expect, which makes the GOP’s Christmas gift to charities a real gift this year followed by lumps of coal:
It’s one of those microcosm in the macrocosm moments: The charities get a short-term boost from an act that threatens to undermine them in the long-term, much like the GOP tax bill does to the broader society. Don’t forget the tax bill undermines a lot more than just the economy, especially when it’s part of a giant scheme to gut entitlements and government programs.
The disincentivization of charitable giving that comes from cutting taxes is also a reminder that if you really want the wealth to “trickle down”, you should raise marginal tax rates on the wealthy. Make it more expensive for the rich to get richer and that wealth is inevitable going to trickle down, whether through taxation or more charitable giving or employee raises. Because why not give a raise to your employees or donate to charity if the dollars you’re trying to save for yourself by not giving those raises are going to be heavily taxed?
The arguments the GOP uses to justify lower taxes on the wealthy — that it will shift incentives and stimulate investments which will strengthen the economy and “trickle-down” to all — are arguments rooted in the assumption that we can look at how taxes incentivize behavior and cause bring about big macro-effects. So why can’t we get big macro-effects like more charitable giving, wage growth, and a more equally distributed sharing of the overall wealth from higher marginal taxes? And why aren’t those highly desirable goals and a compelling argument for higher marginal taxes in an era of record inequality and a dangerously extra-bloated oligarchy?
And there are the other obvious “trickle-down” benefits to taxing the wealthy more like generating revenues that can be spent on things like education, infrastructure, and programs like social security and Medicare that generate consumer demand and keep the population healthy. This whole tax bill disaster is a great reminder of all the useful things the government could do instead of giving Trump and Jared Kushner a big new tax cut.
Don’t forget the creation of “middle-class America” in the post-WWII era happened with a 91 percent top marginal tax rate. And also don’t forget that the wildly disproportionate capture of overall wealth by the super-wealthy over the past four-ish decades (kicked off by Reagan in a big way), coincided with steady falls in tax rates. The egregious concentration of wealth is one of the great challenges of this era so this tax bill is a pretty good excuse to remind the public of the direct and obvious benefits of higher tax rates on the wealthiest as a highly effective means of dealing with that egregious concentration of wealth. And the US, as the leading global economy, is best positioned to lead in that area. Much higher taxes on people like the Koch brothers — and their Koch donor network of mega-donors who are demanding this bill — isn’t just great policy for dealing with the US’s own problem of the egregious concentration of wealth, it’s also an opportunity for the US to lead globally. Higher taxes on the wealthy as part of a broader push towards making a more balanced and self-sustaining society could be a competitive advantage in a ‘race to the bottom’ world and the US is the only country that could realistically lead in this area with the hope of getting other countries to follow. And if the US succeeded in such a drive, we could finally see a global economic boom that doesn’t involve the richest getting disproportionately richer relative to everyone else.
A tax system designed to systematically disincentivize the concentration of wealth should be seen as a goal strongly in the public interest. Why wouldn’t we want to avoid a concentration of massive wealth? That’s clearly a massive threat.
And that dangerous concentration of wealth about to get a lot worse thanks to this tax bill. Which is why this tax bill is a great reason to point out the numerous very positive systematic benefits from progressive tax rates on the very rich. More charitable giving. More raises. More tax revenues for public investment. And a less egregious divide between the wealthiest and everyone else. Higher progressive tax rates during a period like now, with record corporate profits and long inadequate public investment, is great policy and that’s important to point out as the GOP gets ready to delivery its big lump of coal to the American people for Christmas.
It’s also worth keeping in mind that, while addressing the offshoring of jobs is indeed an important issue for the US to deal with, it’s also vital to point out that it’s insane for the US and every other country to be locked into a global ‘race to the bottom’ in an economy that systematically creates “winners and losers”. That’s just dangerous. It’s the kind of system that breeds poverty, grievances and terrorism. The planet needs a global system of trade that creates “winners and extra big winners” where economic conditions and human welfare everywhere are considered a global issue everyone cares about. Yes, everyone does actually have to care about everyone for this highly interconnected “global economy” thing to work well for everyone. A global economy that worked for everyone would be humanity’s ultimate gift to itself, which is also worth keeping in mind on Christmas. That’s kind of what Christmas is supposed to be about anyone, but it’s especially poignant amidst this year’s giant lump of GOP coal.
And in the US we shouldn’t forget that Christmas is going to have to become a day of giving extra to charity going forward.
Oh look at that: thanks to the flurry of the last minute changes to the GOP tax bill — soon to be tax law — the top one percent of wealthiest Americans no longer get 62 percent of the total benefits of the tax cuts. Now the top 1 percent get 83 percent of the benefits. And let’s not forget that this is just the distribution of the benefits that will be seen in the first decade. It’s going to get a lot more lopsided after that because the tax cuts for the middle-class were made to expire by 2025 in order to pay for the permanent tax cuts for the rich.
Of course, the GOP would respond that, no, the top 1 percent won’t really receive 83 percent of the benefits because the tax cuts for the middle-class that are scheduled to expire within a decade (in order to pay for the permanent tax cuts for the wealthiest and corporations) won’t actually be allowed to expire because future Congresses will make those tax cuts permanent. It would just be political unimaginable not to extend those expiring middle-class tax cuts and make them permanent. That’s the spin.
But as the following article reminds us, given that these tax cuts are going to be “paid for” with future cuts to spending — on things like Medicare, Social Security, and safety-net programs — extending those middle-class tax cuts in the future will simply mean even more future cuts to things like Medicare and Social Security under the GOP’s plans:
“If you believe the GOP’s rhetoric, then its tax plan is a blueprint for redistributing resources away from ordinary people and to the Über-rich, by cutting services for the former and taxes on the latter. If you believe the GOP’s legislative text, then its tax plan is a blueprint for redistributing resources away from ordinary people and to the Über-rich, by raising taxes on the former and cutting taxes on the latter.”
Want to make those middle-class tax cuts permanent? Then get ready for more spending cuts! That’s the hidden message the GOP has for voters when they predict a future extension of those expiring middle-class tax cuts. The message isn’t actually very hidden. That message is loud and clear when we find GOPers openly planning an attack on entitlement programs in the middle of this tax bill push. But it’s a message the GOP obviously does not want the public to hear, which is why they don’t say it out loud. But they are definitely saying it:
“Republicans can say that they don’t intend for the 2027 version of their bill to ever take effect. But if we are going to evaluate the tax plan on the basis of the GOP’s stated intentions then we need to assume that the 2018 version of the plan will be maintained indefinitely — with the cost offset by multitrillion-dollar cuts to Medicaid, Medicare, Social Security, food stamps, public schools, the Environmental Protection Agency, and virtually every other public institution that the middle class relies on more than the GOP donor class does”
Read between the lines, and you find Paul Ryan and the Koch network of mega-donors scheming multi-trillion dollar cuts to Medicaid, Medicare, Social Security, food stamps, public schools, the Environmental Protection Agency, and virtually every other public institution that the middle class relies on more than the GOP donor class does. It’s the loud and clear message the GOP dareth not speak, and they are shouting it from the rooftops every time they predict those expiring middle-class tax cuts will be extended.
It’s also important to keep in mind when we read that the last-minute changes to the tax bill shifted the top 1 percent’s share of the overall benefits from 62 percent to 83 percent, that the ‘poor rich’ are also getting soaked to pay for extra large benefits for the ‘rich rich’. So that 62 to 83 percent shift towards the top 1 percent was actually a much bigger shift to the top 0.01 percent:
The GOP’s dream bill just kept getting dreamier. Especially near the end. And then it became reality. But as the following article notes, that tax cutting dream didn’t quite become reality for a lot of wealthy Americans. Because their money was required to make the tax cut for the wealthiest Americans even bigger. The ‘poor rich’ getting soaked for the ‘rich rich’. Welcome to GOP unified rule:
“Here’s the nuance: The tax bill soaks some of rich Americans — but it does not soak the richest.”
Yep, some of the ‘pretty rich’ will indeed get soaked. In particular if they live in Blue states. But for the billionaires this tax bill is a godsend:
And the only reason it’s able to be such a godsend for billionaires — especially billionaire real estate developers and private equity executives — is because of all the areas the GOP found to raise taxes on the rabble. And that includes the ‘pretty rich’ rabble:
And note how one of the other areas where taxes are going up to raise the funds to pay for the billionaire tax cuts is eliminating business expense deductions. Which is probably going to make business a lot less fun. No more tax writeoffs for that lunch with a client:
Let’s hope America’s businessmen remember that this lost deduction is pretty much exclusively getting funneled into the wallets of the super-rich. Compliments of the GOP mega-donors.
And keep in mind that if the ‘pretty rich’ who are still smarting over their selective tax hike want to get their taxes back down to where they were before this bill, that also implies more spending cuts on entitlements and other federal programs. At least that’s the case if the GOP is in charge because those are the rules the GOP has made very clear: as long as the GOP has power, the only option for raising more money is tax hikes on the rabble — including the ‘pretty rich’ rabble — and spending cuts.
And this GOP rule points us towards a critical fact that is also loud and clear but never gets spoken: if US politicians wanted a big federal tax cut for the middle-class and the poor, cutting something like the payroll tax, which funds Medicare and Social Security, is the tax you want to cut. Currently, its at 6.2 percent of income for the first $118,500. Barrack Obama cut it temporarilyand the public noticed when it rose again and wasn’t happy about that. Nearly half of American households don’t pay federal income taxes because they don’t make enough. But the most of those poor and middle-class households do pay that payroll tax. It’s a tax ripe for the cutting.
At the same time, a payroll tax is a tricky thing to cut because that’s money intended for funding entitlements that are getting rerouted into a tax cut. Yes, it would be a far more effective tax to cut from a stimulus standpoint than tax cuts for bloated billionaires, but it’s still a tax cut that starves entitlements from funding. So, since the GOP is planning on cutting entitlements soon, they probably couldn’t include a payroll tax cut. It would be a bad look. And the GOP doesn’t need a worse look.
But there’s another reason a payroll tax cut is tricky and it’s related to the difficulties of raising the cap on the income that faces the payroll tax (current $118,500 cap). Eliminating that cap and charging, say, Charles Koch the 6.2 percent payroll tax on the billions he might earn annually, instead of just his first $118,500, would be a great way to ‘Make America Great Again’ by financially shoring up Medicare and Social Security. Better yet, make it progressive, so the poorest have a very low payroll tax while it gets higher for millionaires and billionaires.
So why can’t something like a progressive payroll tax and lifting of the cap happen? Well, because entitlement programs like Social Security and Medicare are designed to be self-funded by the recipients, which is perceived as “not welfare.” American culture suffers from a psychosis related to “welfare” and if Social Security and Medicare shifted into a program heavily financed by the wealthiest Americans, that would indeed change the nature of those programs into something more like a ‘welfare’ program. And all the Americans fed a diet of ‘rugged individualism’ mythology over the course of their lifetimes might have an identity crisis and support for programs like Medical and Social Security might erode.
But if American culture adopted a more mature attitude towards welfare and safety-net programs and recognized their necessity in an era of extreme and growing wealth inequality, adopting a progressive payroll tax model would be a political winner. Especially when the only alternative the GOP is offering is entitlement cuts. And that really is the only alternative the GOP is offering so the future of entitlements in the US will either involve entitlement cuts — the GOP’s only option — or whatever the Democrats come up with.
So what better time than right now for the Democrats to make the point that the massive shift of wealth towards the rich is going to make things like a progressive payroll tax without a cap is both fair and necessary to keep these programs afloat without massive cuts. If the rich want to get richer, they should pay much higher taxes to keep society afloat and that includes things like Medicare and Social Security. And there’s no shame in the public demanding this. There should, however, be some shame in the public not demanding this because that would make the public a bunch of suckers.
And what better time than now to point out that the endless attempts by the super-rich to slash public spending on things like entitlements and the safety-net actually call for things like a payroll tax without a cap. A special tax that nails billionaires to finance the safety-net is clearly needed. Just look at the behavior of the mega-donors. That’s the evidence of the need.
So given that the GOP’s mega-donors just looted the country and are getting ready to liquidate and slash what’s left over, and given that these mega-donors are basically giving the US middle-class the choice of extending the expiring middle-class tax cuts or cutting entitlement spending more, perhaps the American public should make the super-rich GOP mega-donors a counter set of choices: support or oppose a push to drops the payroll cap and imposes a substantial progressive payroll tax that applies to ALL income and becomes particularly onerous for billionaires. The choice won’t be over whether or not it happens because that should happen regardless of the wishes of the mega-donors. The mega-donors get to choose whether they agree and want to help shape that policy or oppose it every step of the way which is what the will likely do. That seems like the kind of choice the American public should be giving these mega-donors.
Check out what Attorney General Jeff Sessions just did right on the heals of Congress passing the giant GOP tax cut for the super-rich: Sessions has been rescinding numerous Obama-era “letters” — Justice Department legal guidance letters — with all sorts of horrible consequences. But in light of the new tax law, there’s one particular letter Sessions just rescinded that just jaw-droppingly egregious. And cruel and twisted too, of course. It was a letter written in 2016 directing local prosecutors to review their policies and keep in mind that they should be factoring in whether or not someone is very poor or indigent when deciding whether or not to imprison someone for not paying their debts incurred by law enforcement action done primarily to raise revenues. The letter cited the pattern of people getting repeatedly thrown in prison for not paying debts they can’t pay because they were very poor. In other words, the Justice Department reminded local prosecutors that they shouldn’t be sending the very poor and homeless to prison for not being able to pay fines put in place to raise public revenues. And that’s the “letter” Jeff Sessions just rescinded. A “please no debtors prison” letter.
It’s an egregious act for a number of reasons. There’s the obvious juxtaposition with the giant tax cut for the rich that did almost nothing for the poor and is setting up massive cuts to programs for the poor.
There’s also the fact that the big infrastructure plan Trump and the GOP have in mind is largely going to involve privatization and a wave of new fees and tolls. So charging everyone, including the very poor, regular fees just to use public services and infrastructure is about to get A LOT more expensive.
And let’s not forget that the GOP’s grand schemes involve transferring as much of the cost of government onto states as possible, and when states raise revenues, it tends to be fees. It’s exactly the kind of plan that could lead to a surge in people with debts to the state they can’t afford to pay.
And then there’s the fact that Sessions has already directed prosecutors to pursue the most severe penalties possible in cases, even when it could trigger a mandatory minimum prison sentence. And he’s restored the use of private prisons for federal prisoners.
So we are poised to see big cuts to the safety-net that will make the poor poorer right before the big “tolls everywhere” infrastructure privatization plan, and Jeff Sessions orders prosecutors to pursue the harshest penalties possible, including prison. Oh, and he brought back private prisons for federal prisoners. And states are going to have to raise more revenues in general in coming years and that means more state and local feeds. So after all that, Jeff Sessions decides to rescind the letter that told local prosecutors to avoid throwing poor people in prison for not paying fees:
“It’s the latest move in Sessions’s effort to dramatically reshape the Justice Department by undoing many of the reforms imposed by his predecessors and giving the institution a harder edge. Sessions is revoking 25 previous guidance documents dating back decades and covering topics as diverse as ATF procedures and the Americans With Disabilities Act.”
Yep, the rescinding of this letter, while egregious, is merely one of 25 previous guidance “letters” Sessions is rescinding. Including rescinding previous guidance against automatically pursuing the harshest penalties and private prisons:
And after doing all this, Sessions rescinds the ‘no debtors prison please’ letter. Because apparently sending poor people to prison is now a Trump administration priority:
“Individuals may confront escalating debt; face repeated, unnecessary incarceration for nonpayment despite posing no danger to the community; lose their jobs; and become trapped in cycles of poverty that can be nearly impossible to escape,” the letter said. “Furthermore, in addition to being unlawful, to the extent that these practices are geared not toward addressing public safety, but rather toward raising revenue, they can cast doubt on the impartiality of the tribunal and erode trust between local governments and their constituents.”
A real life debt trap that destroys lives and families. That’s what the letter stated local prosecutors should avoid. Both because that’s the law, but also because it’s inevitably going to destroy relations between local governments and the public. And that’s one of the 25 letters Jeff Sessions just repealed.
In other news...
Senate Majority Leader Mitch McConnell made a potentially significant statement a couple days ago when talking about is expectations of what he’s going to be working on in 2018: McConnell said he didn’t think the GOP’s 2018 agenda would include welfare reform. This is in contrast to House Speaker Paul Ryan’s prediction that welfare reform and other spending cuts would indeed be next on the agenda.
Given the incredibly bad look of ‘reforming’ (slashing) welfare programs right after a massive tax cut for the super-rich and big corporations, it’s entirely possible that McConnell is correct and the GOP is deciding to strategically put that off until 2019 or so. But, of course, it’s possible McConnell was lying and just said that because he realized how bad it looked when Paul Ryan said he wanted to cut welfare next just a few weeks ago. Why give the rabble more reason to resent the tax scam? Pretending he’s not planning on welfare ‘reform’ in 2018 could easily just be a ploy.
So we’ll see what the GOP does with welfare ‘reform’ next year. 2018 is an election year so, on the one hand, cutting welfare is a potentially risky move because it could motivate Democratic-leaning voters to vote. But on the other hand, those voters are already motivated to vote by Donald Trump’s bombastic insanity and the GOP’s general treachery. So it’s possible the GOP views cutting welfare is as something they might as well do because they have nothing to lose. Cutting welfare — likely by block-granting it all and starting a race to the bottom between states — might even motivate the GOP base and win over some independent voters. Americans love to hate the poor hating the poor is part of the GOP’s ‘secret sauce’. It’s one of the few things the party delivers to the common man since the rest of the party’s agenda is about fleecing and manipulating that common man. We can’t discount the possibility that the GOP sees welfare ‘reform’ as a politically winning issue. It’s a polarizing ingredient in the GOP ‘secret sauce’ that wins over average voters so it can only be deployed strategically because it might backfire.
Given how much Trump already motivates Democrats to vote, we can’t forget that the GOP might just decide that it has nothing to lose by going full steam ahead on as much of its agenda as it can pass. The party might end up extra unpopular, but Trump more or less ensures the party of going to be extra unpopular anyway. In other words, Trump’s horrible behavior might actually be enabling the GOP to behave as badly as it can get away with because the mass backlash the party has always feared if it went through with its agenda is already guaranteed by Trump.
Thanks to Trump the party has little to gain by pretending to be good and little to lose by being extra bad. Trump has already strongly energized Democratic base. That’s part of the reason we shouldn’t assume welfare reform won’t be on next year’s agenda. They have nothing to lose so why not be extra bad and unilaterally pass as much of the GOP agenda as they can during this window of unified power across the federal government.
So with that look at the GOP’s Trumpian bad-behavior incentive structure in mind, here’s an article in Harpers that makes some critical points the American public needs to think long and hard about when the GOP makes its welfare reform pitch: the automation of welfare eligibility using Big Data is creating a kind of welfare surveillance state. A Big Data Big Brother. And if this Big Brother system targeting the poor keep growing, it’s going to be targeting a lot more than the poor. But America’s tradition of hating on the poor and kicking the poor makes this a political ‘oldie but goodie’ and hard to stop. An oldie but goodie that is morphing into a Big Data panopticon. And the GOP’s welfare ‘reform’ agenda is going to go make the government’s appetite for Big Data to find which poors to punish is going to get a lot bigger:
“Today, we have ceded much of that decision-making power to machines. Automated eligibility systems, ranking algorithms, and predictive risk models control which neighborhoods get policed, which families attain needed resources, who is short-listed for employment, and who is investigated for fraud. Our world is crisscrossed by information sentinels, some obvious and visible: closed-circuit cameras, GPS on our cell phones, police drones. But much of our information is collected by inscrutable, invisible pieces of code embedded in social media interactions, applications for government services, and every product we buy. They are so deeply woven into the fabric of social life that, most of the time, we don’t even notice that we are being watched and analyzed”
Who is eligible for public services and who is deemed an unworthy soul? Those decisions that used to be done by biased humans are increasingly being done by automated systems. Automated systems that still carry human biases, but now confer a degree of ethical distance allowing society to more casually make decisions about things like who gets food and who is allowed to starve:
And, sure, it’s possible that this Big Data surveillance state for the poor system will be more likely to find people in need and eventually self-correct if it makes a mistake, like discovering someone is undernourished after denying them food stamps. But that could only happen if such needs are actually being measured, which is a big ‘if’. Don’t forget that it’s inherently a lot easier for a surveillance system to identify an infraction that could be used to deny service — like buying cigarettes or alcohol with public assistance funds — than it is for a Big Data surveillance system to identify something like general need. In other words, Big Brother is inherently a lot better at discovering who’s been naughty than who’s been nice. It’s like a deeply cynical AI Santa Claus that only delivers coal. And that AI Santa Claus is going to be designed by people that carry all the prejudices against the poor and various minority groups that has been going on throughout history. So while the automation of this poverty-based surveillance state is probably going to be sold as being more ‘objective’, it’s going to be important to keep in mind that these automated Big Data surveillance systems set up ostensibly to ‘combat waste, fraud, and abuse’ of public programs can easily be turned into systemic amplifiers of existing systemic biases:
“When my family was erroneously red-flagged for a health care fraud investigation in 2015, we had to wrestle only one strand. We weren’t also tangled in threads emerging from the criminal justice system, Medicaid, and child protective services. We weren’t knotted up in the histories of our parents or the patterns of our neighbors. We challenged a single strand of the digital poorhouse and we prevailed.”
That’s another critical feature of the growing “digital poorhouse”: It’s not like only the poor live in it. EVERY lives in it to some extent. It’s just the poor who are tracked more closely and actually punished by it because the digital poorhouse only ends up mattering for people trying to qualify for public services like food stamps.
But as the article notes, two-thirds of people between the age of 20 and 65 will at some point rely on a means-test program, so the digital poorhouse is something the vast majority Americans are likely going to have to deal with at some point. Especially after the GOP gets done with its ‘welfare reform’ schemes and government assistance programs are heavily means-tested to deal with steadily shrinking budgets. Those are the kinds of trends that make the explosion of the digital poorhouse and the use of Big Data to punish the poor the kind of trend that’s inevitably going to creep more and more into the middle-class American lives. Especially as those middle-class lives slip into poverty. So that punitive welfare system Americans built to ‘kick the poor’ is going to be the system more and more Americans find themselves living in:
“The programs we encounter will be shaped by the contempt we held for their initial targets: the chronically poor. We will endure invasive and complicated procedures meant to divert us from public resources. Our worthiness, behavior, and social relations will be investigated, our missteps criminalized.”
That’s what’s going to be automated using the Big Data collected in the ‘digital poorhouse’: a system that investigates our worthiness, behavior, and social relations to assess our worthiness as human beings and operates from the assumptions of contempt for people in need that society feels towards the chronically poor. That’s what’s going to be automated.
It’s one of the more disturbing aspects of the Republican party’s overarching agenda, an agenda to unravel almost all government support for the poor and middle-class and create a giant pool of working poor who are too stressed out to effect resist the oligarchs. And it’s all something that’s going to be critical to keep in mind as the GOP refocuses on ‘welfare reform’ in 2018. Because Americans are literally going to be building their own future digital poorhouse. The poorhouse that more and more Americans will find themselves living in as the Republican agenda — an agenda of austerity for the poor and weakening labor combined with tax cuts for the super-rich and big corporations — extends the decades-long trend of a shrinking middle-class. A trend that’s only going to gain momentum with this new GOP tax law.
Also recall that creepy story about the experiment “smart city” run by Google that’s going to be set up outside of Toronto and is seen as a model for delivering public services with “behavioral health coaches” and Big Data. That’s the future of the digital poorhouse. ‘Smart’ cities wired up for pervasive data collection. And the corporate sector is going to make a fortune building those cities and gorging on the data.
Will Americans stand for this? Well, as the article notes, one very unfortunate difference between the brick-and-mortal poverty-management paradigms of the past (like poor houses) and the digital Big Data poverty-management approach today is that the brick-and-mortal approach at least had the benefit for encourage solidarity among the poor that could transcend racial and sectarian differences. People of very different backgrounds all ended up in the poorhouse together. That’s not the case with the digital poorhouse, which can have the effect of exacerbating existing divides because new surveillance methods can be targeted at particular ‘most hated’ groups of people with ever growing precision. And that means, as more and more Americans fall into poverty and the systems designed to address that poverty get weaker and more cash strapped, it’s entirely possible America will become increasingly self-loathing and self-punishing. A nation of mostly poor people pissed off at all the other poor people and calling for more and more systems design to make sure ‘those people’ aren’t ‘mooching’ the system. Could that scenario play out? Well, it’s been playing out for decades so, yes, that scenario seems very possible in the ‘smart city’ future.
Also keep in mind that, as more and more data points gets collected and fed into the algorithms used to assess our worthiness, eventually that’s probably going to involve some sort of super-AI to do the assessing. Like a human worthiness-judging super-AI. A super-AI designed to assess the general goodness of people and then make judgements on whether or not someone qualifies for a public service. As absurd as that sounds, a system incorporating a super-AI is the logical end-point of current trends. Trends that include growing automation of services using Big Data coupled with widespread anti-poor attitudes and a widespread misunderstanding of economics and social science and history that feed those anti-poor attitudes. Hating the poor is popular, along with junk economic theories blind to systemic biases and view economics as a morality play. That’s why we can’t rule out future government super-AIs designed to incorporate the full spectrum of data collected in the digital poorhouse to assess people’s ‘worthiness’ and is biased to assume people in financial need are probably unworthy.
And note that this super-AI scenario presents a new avenue for the emergence of Skynet. A super-AI built to read in the Big Data on all of us and then assess our worthiness and built with our anti-poor biases seems like a bad idea. And as programs becoming more underfunded and more people need to be cut off from services, the super-AI would have to get better and better at assessing the ‘worthiness’ of people by finding more and more reasons to be critical of someone using the giant pool of Big Data at its disposal. That’s the kind of super-AI that’s probably not going to have a high opinion of humanity. So that’s another reason not to support the GOP’s welfare ‘reform’ agenda. The GOP agenda is bad for humanity for all sorts of reasons. Including Skynet-related reasons.
Here’s a reminder that all those threats the Koch network of GOP mega-donors were making last year about cutting off funds to the GOP unless the they passed the giant tax cuts for the super-rich came with the implicit promise of showering the GOP with cash if the party did indeed pass that tax bill. Because, heads up, that promised cash shower is about to commence: The Kochs just announced plans to shower the GOP with $400 million this year for the mid-terms, including $20 million to be spent on ads convincing the American public that the tax bill wasn’t a giant scam designed by and for the Koch network of GOP mega-donors:
“There is a healthy skepticism among a majority of Americans about politics in this country,” Phillips said. “We do think the bar is a bit higher.”
LOL, yes, there is indeed “a healthy skepticism among a majority of Americans about politics in this country,” as Tim Phillips of the Koch-financed Americans for Prosperity poignantly notes. And what Phillips no doubt realizes, even if he won’t admit in public, is that the public’s “healthy skepticism” is heavily driven by a sense that billionaires like the Koch brothers are effectively running the government for their own private benefit by buying off most of the politicians. And it’s hard to find something more emblematic of this reality than the announcement of the Koch brothers that they will shower the GOP with $400 million for the mid-terms, including $20 million for ads convincing the public the giant tax cut wasn’t a giant Koch-demanded scam for big corporations and the super-rich:
So what type of overall message is this $400 million war chest going to try to shove down the public’s throat? Well, that appears to be somewhat of an open question given the various areas of disagreement withing the GOP about what to pursue next. But note agenda item House Speaker Paul Ryan appears to want the GOP to pursue next: entitlement reform e.g. gutting Social Security, Medicare, and Medicaid:
Now, it seems unlikely that the GOP is seriously going to listen to Paul Ryan and try to push through ‘entitlement reform’ in 2018 given the impact that could have on the mid-terms. You almost couldn’t come up with worse political timing for something that politically poisonous.
But from a ‘transparency in politics’ standpoint, a GOP ‘entitlement reform’ push coming on the heels of this giant tax scam would be perfect. Because let’s not forget what Bruce Bartlett warned us about the GOP’s decades-long strategy of employing the tactic of “time-inconsistency”, the observation that the electorate is unlikely to see cause and effect relationships between past policy decisions, like massive tax cuts, to future policy decisions, like gutting entitlements due to a lack of revenues, and therefore unlikely to blame the GOP when its tax cuts force future entitlement cuts. And future entitlement cuts forced by the future fiscal crises created by this tax cut is unambiguously one of the goals of the Koch network of GOP mega-donors. That’s why Paul Ryan is pushing it right now. So the ‘tax cut’ really was a ‘tax and entitlement cut’. They just haven’t worked out the exact cuts to entitlements yet.
So while the Koch network is no doubt going to be showering the US airwaves with ads touting the temporary bump in take-home pay and one-time bonuses that Americans are going to see as a result of this tax bill, the reality is that this extra take-home pay is effectively be drawn from future entitlement spending. And that entitlement spending is a huge portion of America’s retirement savings and safety-net spending. It’s like the GOP just forced American public to raid their own retirement and ‘rainy day’ savings. So from a ‘truth in advertising’ perspective, ‘entitlement reform’ really would be the perfect major agenda item to follow the tax bill. Hence the $20 million in planned spending to convince the public that the tax bill is actually in their best interests and wasn’t a giant Koch network scam.
Also keep in mind that the GOP’s internal division over what agenda item to pursue next doesn’t necessarily reveal any particular deep schism within the GOP or its mega-donor base. These disagreements are perfectly reasonable because the entire GOP policy agenda is a giant scam and there’s no major agenda item that’s isn’t politically poisonous on some level. Hence the rest of the $400 million in planned Koch network spending to convince the public that the rest of the GOP’s agenda is actually in their best interests and isn’t part of a giant Koch network scam.
To shut down the government or not shut down the government? That is the question. Again. In a week. When the three-day federal government shutdown ended a week and a half ago with a stopgap compromise to fund the US government for another two and a half weeks and revisit the issue on February 8th, the question of what’s going to be different didn’t have an obvious answer. The Democrats would obviously try to rally public support in favor a deal that would protect the ‘Dreamers’ without allowing them to become ransom for a far-right anti-immigration overhaul. And the Republicans would obviously try to make the case that a far-right immigration overhaul must happen in exchange for protecting the ‘Dreamers’. And, who knows, the public sentiment might shift enough in one direction or another on the immigration issues that one side would feel forced to concede and just accept the terms the other party is demanding.
But what if we don’t see that dramatic shift within the next week and neither side feels like they need to cave? What then? Well, the obvious answer is another short-term funding compromise (a “continuing resolution”) that pushes the issue of the fate of the ‘Dreamers’ and the final vote on the federal budget back a few more weeks. And, Surprise!, that’s exactly what Congressional appears to be trying to negotiate, with both sides acknowledging that a resolution to these issues is highly unlikely to be achieved within the next week.
But there’s a problem with this scenario. And, Surprise!, it’s a far-right problem. Yep, the House ‘Freedom Caucus’ of far-right GOPers is threatening to oppose any more continuing resolutions. They want the budget resolved NOW and they are demanding that this includes a far-right immigration ‘reform’ package that includes massive cuts to legal immigration, an end to family-based immigration (so called “chain migration”), and a complete elimination of the diversity lottery that ensures that immigration to the US is truly global in nature.
On top of these immigration demands, the Freedom Caucus is also demanding an end to the military spending caps the GOP forced on all federal spending back in 2011 (the “sequester). But they’re only demanding the military spending caps be lifted. The rest of the sequester will stay in place.
So what are the Democrats saying about this? Well, the Democrats appear to largely have come to an agreement with the GOP for a significant increase in military spending. But, in return, House Democrats are demanding increasing in domestic spending, like dealing with the opioid crisis or more funding for veterans’ benefits, and promising that they too won’t support any new stopgap bill that doesn’t include a fix for the ‘Dreamers’ and an increase in federal spend for domestic programs. But, of course, being in the minority, the House Democrats’ threats to oppose a future stopgap bill are largely just inconsequential theatrics, unlike the Freedom Caucus’s threats which are very real.
And, again, the Freedom Caucus is taking the position that they will not vote for any more stopgap continuing resolutions at all unless their demands are met. So it looks like the ‘Freedom Caucus’ could be leading the way to another government shutdown next week:
“House Freedom Caucus Chairman Mark Meadows is threatening to withhold votes for another funding bill without more concessions on immigration. The North Carolina Republican told reporters this week that members of his hard-line caucus couldn’t vote for the bill until Speaker Paul Ryan makes good on his promise to push a more conservative immigration plan.”
No hard line immigration bill, no Freedom Caucus votes to fund the government. That’s the ‘line in the sand’ being laid down by the Freedom Caucus Chairman Mark Meadows. But even if the immigration issue is somehow resolved, there still the GOP demands to raise the spending caps on military spending. And while both parties appear to be ready to agree to that requested hefty increase in military spending, there’s no sign of an agreement for lifting the spending cap on anything else:
“House Democrats say they’ll remain unified in opposition to all stopgap bills until both sets of negotiations — spending caps and immigration — are resolved. That tactic has drawn fire from Republicans, who blame the spending deal holdup on immigration.”
Don’t forget, House Democrats have almost no real power in this situation as the minority party so their “unified in opposition to all stopgap bills until both sets of negotiations — spending caps and immigration — are resolved” isn’t a real obstacle to resolving this impasse.
So should we expect another shutdown when that February 8th deadline comes and goes? We’ll see. But as of now, the talk on both sides is that there is no realistic possibility that this budget/immigration showdown will be resolved in a week and House GOP leaders are eyeing a spending bill through March 22nd. Keep in mind that the deadline for coming up with a solution for the ‘Dreamers’ is March 5th, so pushing the next shutdown fight to March 22nd could shift the immigration debate dynamic quite a bit since we could see the Dreamers losing their jobs and getting deported by then.
But as the following article notes, in addition to that March 5th Dreamer deadline, there’s another rather critical deadline between February 8th and March 22nd: Raising the debt ceiling. Yep! Thanks to the GOP’s giant tax cuts, the date when the government hits its debt-ceiling has been pushed up and is now expected to hit that debt-ceiling some time in mid-March.
So, given that added element of risk added to the negotiations, is some sort of compromise going to happen? Well, as the following article also note, the GOP ion the Senate is offering a compromise of sorts, but, true to GOP-form, it’s more trolling than any sort of compromise: the GOP is offering to lift the cap on domestic spending in exchange for lifting the cap on military spending, but only if all of that extra domestic spending is spent on infrastructure. And while it’s unclear what the exact nature of the GOP’s infrastructure is going to be, recall that earlier descriptions of the GOP’s infrastructure plans appear to actually be hundreds of billions of dollars in tax incentives for private interests to buy up public infrastructure and run it as a for-profit enterprise (tolls everywhere). In other words, the Senate GOP’s big compromise on these spending caps appears to be an offer to fund the mass privatization of US infrastructure in exchange for more military spending. And there’s no reason the Freedom Caucus is going to be interested in that proposal even if the Democrats agreed to it. So the government isn’t just at risk of shutting down. It’s at risk of defaulting too:
“House GOP leaders are eyeing a spending bill through March 22, aides said, though that date could change. It would have to pass early next week, as government funding is set to expire at the end of next Thursday. Without a new funding agreement, the government would shut down, as it did for three days in January”
Meet the new plan, same as the old plan: another continuing resolution to buy more time.
But while the plan might be the same as before, the actual demands keep growing. The GOP demands a lift of the spending caps on the military, so the Democrats demand a lift on the spending caps for other federal programs. And the GOP counters with an offer to spend more, but only on an undefined infrastructure package:
And now, thanks to the tax cuts (for big corporations and the super-rich), the federal debt limit is set to be hit by mid-March. If that isn’t resolved, the US government defaults on its debt. And in the face of this budget crunch due to the tax cuts, the Freedom Caucus is talking about ‘reigning in spending’. It doesn’t bode well:
“Republicans have typically found it hard, if not impossible, to cobble together enough House votes from their own party to increase the debt limit. That gives Democrats further leverage to bargain for spending concessions.”
And that’s where we are: If Congress manages to pass a short-term funding bill and avoid a government shutdown on February 8th, that’s probably going to create situation where this shutdown showdown overlaps with a debt-ceiling default showdown. And the closer we get to all these deadlines, the more extreme the Freedom Caucus’s demands get. What are those demands? We don’t get to know. But based on past experience, we know that the Freedom Caucus loves to make demands that even the rest of the GOP won’t agree to. So, given that this isn’t just a ‘normal’ debt ceiling showdown, but instead a showdown tied into a government shutdown and the fate of the ‘Dreamers’, will that make the Freedom Caucus even more extreme than usual? America will find out. Possibly via a government shutdown and default.
While there is no shortage of significant questions about the future direction of the GOP these days, perhaps the most surprising question is whether or not Paul Ryan, the Speaker of the House, is going to retire. It’s surprising even in the context of the larger wave of announcements of GOP congressional retirements. You wouldn’t normally expect a relatively young Speaker of the House. True, Ryan did refute the rumors back in December. But it’s also true that Ryan declined to say whether or not he would run for another term when directly asked a couple of weeks ago and hasn’t since made that announcement.
So we’ll see whether or not Paul Ryan finally announces a reelection bid or his retirement. Either way, it’s hard to imagine that the remarkably tin-eared tweet that he sent out, and quickly deleted, over the weekend isn’t going to factor in to his decision-making. It’s the tweet that’s almost surely going to be featured in one Democratic campaign ad after another. Because with the GOP planning on running in the mid-terms touting the benefits of the Trump tax cuts for middle-class voters by confusing people about the extremely skewed nature of the tax bill that gives almost all the benefits to the wealthy and big corporations, it’s hard to imagine a more politically damaging admission than what Paul Ryan just tweeted out: It was a tweet celebrating a secretary who would get an extra $1.50 per week from the tax cut:
“Should we keep giving Ryan grief over that tweet? Yes, we should – and not just because it shows how out of touch he is. By highlighting the tiny tax cut some workers will get as if that were the point and main result of a bill that blows up the deficit by more than $1 trillion, he helps illustrate the bait-and-switch at the core of the whole G.O.P. agenda.”
Bait-and-switch. Selling rotten lemons as delicious lemonaid and hoping the public doesn’t notice. It’s the meta-GOP tactic. The “time-inconsistency” tactic Bruce Bartlett warned us about that the GOP repeatedly used to force big cuts in federal spending — by first passing big tax cuts and then waiting a few years for the deficit to explode and demand spending cuts — is just one example of that bait-and-switch tactic in action. As Paul Ryan accidentally made clear in his now notorious tweet, the bait-and-switch tactic was also used to sell the public on the tax cut by selling it as a tax cut for middle-class Americans when almost all the benefits actually go to the wealthy and big corporations.
And as Krugman points out, it’s not like there isn’t ever an appropriate time for a spike in deficits. But that appropriate time is during a depressed economy, like in 2009 when the GOP and the deficit scolds prevented Barack Obama from implementing a much larger stimulus. Instead, we have the GOP spiking the deficits when the US is near full employment, which means the benefits of all this deficit spending are going to be much more muted and the future spending cuts mandated by the deficits much more likely. It’s the kind of ass-backward economic policy we should expect from the GOP:
“And those special circumstances – basically a depressed economy that needs a fiscal boost – don’t apply now, with the U.S. close to full employment.”
But it’s not even like the GOP is waiting for much larger deficits in the future to call for those spending cuts. The call for the cuts have already started and were even going on in the middle of the debate over the passage of the tax cut:
It’s really quite remarkable. The GOP isn’t simply serious about implementing the “time-inconsistency” bait-and-switch tactic of using deficits from tax cuts to demand spending cuts in the future. They are in a hurry to implement that tactic. In other words, it’s not a bait-and-wait-and-switch-later tactic. It’s a bait-and-switch-NOW tactic. A bait-and-switch-NOW strategy is also the strategy Paul Ryan reportedly advocated recently when he suggested the GOP should implement ‘entitlement reform’ (i.e. gutting Social Security, Medicare, and Medicaid) this year as part of the GOP’s main agenda.
And as the following article points out, it’s not just GOPers like Paul Ryan calling for big cuts in federal spending right after the GOP’s giant tax cuts for the rich. The ‘usual suspects’ who are always calling for massive cuts in entitlements over debt and deficit concerns — like the Committee for a Responsible Federal Budget thank-tank which is part of the Peter. G. Peterson Foundation dedicated to cutting entitlements under the guise of deficit concerns — are also now calling for big cuts in federal spending. But unlike the GOP, these think-tanks are very clear about why they think those bug spending cuts need to happen soon: the massive new deficits caused by the GOP tax cuts that have already nearly doubled the deficit:
“Here are the exact figures: The U.S. Treasury expects to borrow $955 billion this fiscal year, according to a documents released Wednesday. It’s the highest amount of borrowing in six years, and a big jump from the $519 billion the federal government borrowed last year.”
From $519 billion to $955 billion. That’s the one year jump in the deficit. Largely thanks to the tax cut that the GOP is pitching as beneficial to average Americans:
But despite the fact that the GOP and its decades of bait-and-switch tactics designed to cut taxes on the rich and cut federal programs for everyone else, we have think-tanks like Committee for a Responsible Federal Budget claiming that this is really a ‘both sides’. And why does the Committee for a Responsible Federal Budget feel that the the Democrats are also at fault here? Because they aren’t in favor of the massive entitlement cuts that are now needed to control the deficit as a result of all these tax cuts. The tax cuts and the spending that becomes less affordable as a consequence of those cuts are both treated as the same “addiction”:
““Every time you feed your addiction, you grow your addiction,” says Goldwein.”
Yes, for the deficit scolds at the Committee for a Responsible Federal Budget, delays in Medicare reimbursement cuts are viewed and tax cuts for the rich aren’t viewed as a cause and effect situation. Both are viewed as two sides of the same “addiction”.
But those deficit scolds do have a point when it comes to the possibility that spiking deficits really can have real-world consequences that defy the GOP’s reality-denialism media-machine: if bond investors get spooked by these sudden sustained deficit spikes, that’s that kind of thing that can cause a sell-off in the bond markets. And when you factor in that the stimulative effects of the tax cut are happening when the US is near full-employment, that’s the kind of situation that might also lead to higher levels of inflation, meaning the deficit concerns from this tax cut could coincide with inflation concerns from this tax cut. Plus, the Federal Reserve has already started selling off its substantial QE-related bond portfolio, which is another reason this tax cut was ill-advised. This tax cut was just incredibly ill-timed:
Timing matters with tax cuts. Especially really bad timing for really irresponsible cuts
But as Paul Krugman recently noted, there’s another consequence of the timing of the tax cut that contributed to last week’s treasury and stock market sell-offs that’s actually a very good reason: expectations that recent wage-growth signals that the US economy really is near full employment, meaning demand for workers really could lead to a period of broad-based wage growth. And that wage growth would be great news if it was within the context of an overall economic environment and policy framework that was moving the economy into a period of high productivity growth and sustained elevated economic growth. Like the 3 percent target of growth that Trump has repeatedly touted as a likely consequence of his tax bill. If the US economy was looking like it was actually heading towards sustained 3 percent growth and higher productivity growth, that would make the sustained wage gains something we could actually believe would be sustained. But if that elevated economic growth isn’t looking likely and something closer to 1.5 percent economic growth the US is closer to what we should expect, turbo-charging the economy right now creates the kind of situation where that wage growth is going to be followed by inflation, recession and a return to wage stagnation because the larger policy framework that created that wage growth is destabilizing.
It’s all a reminder that relying solely on ‘the market’ for wage growth is actually kind of stupid because it requires very tight employment conditions to get the kind of broad based wage growth societies need in order to avoid an ever-widening wealth gap. The US’s war on unions left turbo-charged economies as the only real wage growth option. Which is a policy almost designed to hold back the human potential of a society. But that’s our dumb system, so now we have to be concerned about wage growth feeding into the current concerns over spiking deficits (due to a massive tax cut for the rich) and helping to tank the stock markets. Again, that shouldn’t be how society works, but that’s how society does actually work thanks to our current paradigm, hence market concerns over wage growth despite decades of stagnant US wages and an ever-widening wealth gap between the ‘haves’ and ‘have nots’ that threatens to destabilize US society.
So we’re in a situation where the prospects of a tight labor market leading to wage growth as viewed as an economic drag and reason for a sell-off. But not the only reason. As Paul Krugman points out in the following recent piece from Friday, when the Dow Jones suffered an omionous 666 drop, the recent stock market sell off is probably due to a combination of market expectations of short-to-medium-term wage growth and sustained large future deficits from the tax cut and higher inflation and interest rates and low medium-to-long-term economic growth with low productivity growth. And it’s that expectation of low future productivity growth translating into low economic growth that, combined with the expections of higher wages, that could be a big driver for stocks stocks. And then the Dow Jones drops more than 1,100 points on Monday, the largest one day drop in history. So if Krugman’s suspicions are correct, it suggests ‘the market’ is expecting low productivity and economic growth at this point, which means ‘the market’ isn’t buying into the fraudulent ‘supply-side’ argument that massive tax cuts for the wealthy and big corporations and the GOP’s massive deregulation agenda will somehow create a super-efficient economy with high productivity. ‘The markets’ are instead assuming the tax cuts are actually going to make things worse for profits in the long-run because ‘the markets’ don’t buy into the GOP’s supply-side nonsense about tax cuts for the rich leading to a permanently wealthier society and recognize that they will make the situation worse by destabilizing it in a number of ways:
“And stocks plunged. What?”
What? That was natural question to ask when stocks plunged on Friday after the pretty good jobs report.
But as Paul Krugman laid out, the drop in the markets may have made sense given the conflicting signals in recent economic numbers. Because stock and bond markets are making guesses about the prospect for future profits in our profit-oriented economic system and looking closely at two key economic metrics that: inflation (eats away at profits) and productivity growth (strengthens profits):
And right now, those two economic signals are pointing towards higher inflation coupled with low productivity growth which points towards lower overall economic growth. And that higher inflation is being driven by higher wage growth stemming for the lack of slack in the job market:
“Again, you don’t want to make too much of one month’s number. But the wage gain strengthens the case that we really are near full employment; interest rates rose because the odds of Fed rate hikes to limit inflation have risen. And that hit stocks.”
That’s the key point in Krugman’s piece regarding how the tax cuts are creating a self-sabotaging situation: good jobs numbers caused the stock markets to drop because they increase the expectations for a rate hike. And when rates are this historically low levels, the expectation of a string of future rate hikes can have significant repercussions in financial markets. So, to a large extent, the drop in the stock market following the positive jobs report is exactly what we should expect because falling stocks is generally expected whenever signs point towards higher inflation and higher Fed rates. But in the case of Donald Trump’s presidency, this normal market response to the expectations of rate hike creates a fascinating dynamic because Trump has made a higher stock market central to his list of ‘accomplishments’, and higher stocks just might be mutually incompatible with a policy of higher wages and higher inflation during a period of low productivity growth. And those productivity numbers are indeed looking low:
“So what the data are suggesting, although not with a lot of confidence, is that America is about to settle into a low-growth rut, maybe 1.5% a year. And yes, that’s only half what Trump is promising.”
So the productivity numbers are pointing towards the US settling into around a 1.5 percent growth rate, half the 3 percent Trump is promising. And that low productivity, combined with signs of future wage growth due to tight labor market is going to reduce expectations of future corporate profits adding downward pressure on stocks that are already relatively expensive. But these expectations of higher wages and lower profits is also happening in the context of a tax cut that is so irresponsible that is spikes the deficit and destabilizes the government’s fiscal situation and treasury markets. So while this may not be a ‘perfect storm’ of conditions for a big market drop, it’s still a ‘pretty good storm’.
But concerns of higher rates, higher wages, low productivity, and spiking deficits aren’t the only storm cloud on the horizon that markets are going to be looking at. As Paul Krugman also recently pointed out, the current economic expansion is looking ‘unhealthy’ in another key aspect: It’s happening at the expense of personal savings:
“Second, as Jason also notes, that cyclical expansion doesn’t look too healthy when you look at it closely. It is not being driven mainly by rising business investment. Here’s biz investment as a share of GDP in recent years: it bounces around some, largely because of the rise, fall, and partial recovery of fracking, but is not especially high”
An economic expansion not driven by business investment but instead driven by a draw down in consumer savings. That’s what the numbers are indicating is happening. And when that’s the source of your economic momentum, markets are going to notice and not in a good way:
So let’s pull back and note the interrelatedness of the various factors contributing to this market decline:
1. When wages are rising without a proportional rise in productivity, markets are going to view that as a threat to corporate profits.
2. The current economic expansion is being driven by a drop in consumer savings, which is also a reason for markets to fear for the sustainability of the current economic expansion.
3. The drop in consumer savings is clearly exacerbated by the decades of stagnant wages for the vast majority of Americans.
So markets view have reason to view both rising wages and stagnant wages as a threat to corporate profits and a reason to sell stocks. That’s our crazy profit-oriented system. For all the talk about the US government being “addicted to debt” as the Committee for a Responsible Federal Budget might put it, it sure seems like a systemic addiction to profit is the real profit here. After all, profit is just an arbitrary accounting metric if you think about it. And it’s an accounting metric that doesn’t take into account the entire system from which that profit is being derived and issues like stagnant wages, a lack of government investment in people and capital, and growing inequality. Or take into account things like the collapse of the environment. It’s a very poor metric to focus on if you think about it. And we don’t have to build a society focused on profit-maximization. That was a choice. An increasingly disastrous choice.
But that’s why wage growth in the context of low productivity growth can become a problem despite the fact that stock markets are near all-time highs, in keeping with the record profits corporate America has been enjoying in recent years, and despite the fact that US wages have been stagnant for decades as more and more of the national wealth got funneled up to the billionaires. And, once again, let’s not forget that the current wage growth the markets are fearing is largely a side effect of a tax bill that was primarily a giant new transfer of wealth up to the wealthiest Americans, with ‘$1.50 a week’ for that large swathe of American that’s been falling behind for decades and now have depleted savings.
So, really, the big problem with the big falls in the stock market isn’t that stock markets are falling. The big problem is that fall stock markets are a big problem. It’s an inevitable side-effect of a mindlessly-profit-oriented society. Stock markets are set up to track future profits, and if profits are expected to fall you would want stocks to fall. That’s a feature of markets. It’s only a problem when the economic foundations of a society is based on keeping those stocks up and running massive profits regardless of circumstance. Especially if the circumstance is that corporate profits and stocks are at record levels in large part because corporate America and the GOP have been so wildly successful over the past few decades slashing employee compensation and directing an ever growing share of the national wealth to big corporations and the GOP donor class.
If we had a system that assumes profit-maximization at a personal level, that makes unfortunate sense given the role human greed plays in day to day decision-making. But structuring an entire society (and global community) around profit-maximization is pretty much a recipe for a Thomas Piketty-style self-reinforcing oligarchy. The contemporary global system is just wildly skewed towards making the rich richer, so much so that long-overdue wage gains are harm the economy that eroding away at record profits. It’s a pretty insane system but it’s a the prevailing one.
And in our insane contemporary American economy context, we now find President Trump facing a situation where his GOP tax scam was such a massive giveaway to the GOP billionaire donors that it’s freaking out ‘the market’. And now his his campaign promises of higher wages and an ever higher stock market are at risk because those two metrics are mutually opposed in a relatively low 1.5 percent growth future and markets are expecting that future and not the relatively high 3 percent growth future Trump was promising as a result of the GOP tax scam. And now the markets are tanking and it’s laying bare one of the fundamentals problems with a society where an ever growing stock market is considered important and necessarily for a necessary for the US population to realistically save for its retirement. That mandate for an ever-growing stock market as a foundation of American private savings rooted in profit-maximization is in systemic conflict with wages and personal savings. The American system is strongly biased to only care about profits. Not savings. It’s destabilizing and we’re getting a taste of that in the current stock market meltdown.
So now Trump might have to watch his promises of higher markets and wages immolate each other as the broader damage to the economy done by the new tax law’s fiscal damage to the federal government reverberate through financial markets. It’s not just a disaster in the making. It’s a symbolic disaster in the making. Because it’s totally insane that everyone’s fate is tied to ever growing corporate profits no matter what.
It’s also worth noting that this built-in socioeconomic systemic tension between profit-maximization, social equality, and wage growth is analogous to the impossible expectations inherent in the global trading system. Think about how global trade works in the modern worlds: with the exception of the US — which has the unusual circumstance of being the global reserve currency and an economic/military hegemon that can run large trade surpluses for years on end — virtually all other countries are focused on a strategy of obtaining a high per-capita trade-surplus to grow wealthier as a nation. On one level, that makes a lot of sense given how the world works. On another level, it’s insane and a systemic recipe for poverty and global economic instability. Germany is the most prominent example of this strategy of wealth-via-chronic-per-capita-trade-surpluses , but it’s far from alone. And that tension between what’s good for the individual (individual nation, in this case) and the larger system (the global trade system that can’t run a net trade surplus) is very analogous to the tension between the drive for ever higher corporate profits and the need to pay labor and taxes and reasonably finance the government for the public good. The world is run by destabilizing human systems that share a lot of the same underlying problems.
And let’s not forget that the insanity of global economic paradigm is taking place in the context of the insanity of humanity laying waste to the ecosystem and causing the Sixth Great Extinction. And a central element of preventing global eco-catastrophe is getting to a stable global population ASAP while switching to a clean green economy. There’s no good reason societies around the world couldn’t reorient their economies away from the mandate of profit-maximization and towards mandates like ending global poverty, create an ecologically sustainable global economy, and build sustainable peace and prosperity with lots of sustainable broad-based wage gains. But that’s definitely not how the worlds works today and a growing population is seen as a driver for economic growth and economically incentivized. And large sustained trade surpluses are deemed as critical for aging economies like Germany and Japan to remain economically healthy and wealthy. So every economy needs to stabilize its population ASAP if we’re going to avoid calamity for life on Earth, and our system punishes economies with aging populations and mandates that they run giant trade surpluses to maintain their standards of living. And if countries can’t achieve that high net trade-surplus they’re incentivized to have a large and growing population to achieve economic growth that way instead. In other words, the global economic paradigm systematically discourages countries from stabilizing their populations in the midst of a giant global resource collapse. It’s like a riddle wrapped up in an enigma wrapped up in a tragically realistic horror movie wrapped up in the fate of life on Earth. Which is a horrible riddle.
So that’s all one reason why House Speaker Paul Ryan might actually be thinking about retiring in 2018: on some level, Ryan has to realize that the mindless devotion to profit-maximization and ever-growing wealth accumulation for the wealthiest individuals at all costs that is at the core of the political movement he represents is an ideology that is designed to fail for most Americans when put into action. And he is putting that ideology into action in a big way and things are already starting to fail. Because that fabulous wealth accumulation that Paul Ryan’s political patrons (the Koch network and their style of post-Citizen’s United bought-and-paid-for fascism) have been accumulating over the last generation, thanks to things like the GOP tax bill and wage stagnation, can’t possibly work out well for average Americans. For starters, it’s a bad faith agenda built by and for billionaires and designed to take from the poor and give to the rich. But beyond that, it’s an agenda operating in a our profit-centric system where long-overdue wage gains are treated by markets as economic poison. A morally broken agenda operating in a systemically broken global economic paradigm. Making that system even more profit-oriented is the agenda Paul Ryan has to offer and the only way that agenda to succeed is if its hidden and masked as a ‘populist’ agenda that’s going to help average. And now that he made it clear that $1.50/week in tax cuts is seen as something to celebrate it’s a lot harder for Paul Ryan to hide his agenda which, again, is a very good reason for Paul Ryan to retire this year.
Is that a light at the end of the shutdown showdown tunnel or is the train still coming? That’s the meta-question now that the US Senate has arrived at a bipartisan agreement that House leadership appears to be open to in the big February 8th deadline for the shutdown showdown fight. If the House and Senate don’t somehow find a compromise budget that can pass both chambers by midnight Thursday, the government shuts down again. And sure enough, that compromise appears to be just around the corner. It’s a compromise with bipartisan support in the Senate that funds both military and domestic spending for the next year (so both parties get what they want, but it’s expensive) and the compromise raises the debt ceiling for a year. And what about DACA and the ‘Dreamers’ that the Democrats are demanding and the extremely right-wing immigration ‘reform’ demands the ‘Freedom Caucus’ is demanding? Well, the compromise does nothing about that front, which is actually quite significant because it disentangles those issues immigration and the Dreamers from both the budget showdown and upcoming debt ceiling showdown. It was a pretty remarkable compromise.
Even more remarkable is that the House GOP leadership appears to be on board with it too. But, of course, the House ‘Freedom Caucus’ is freaking out due to all the new spending and over the debt ceiling extension. And that would all have to be put on hold for a year while the deficit skyrockets from the combination of tax cuts and big increases in military and domestic spending. And those concerns about the spiking deficits is why it’s looking like the ‘Freedom Caucus’ of ~40 far-right GOPers in the House are probably going to vote ‘no’ on this compromise. But as the following article notes, the opposition in the GOP goes far beyond the ‘Freedom Caucus’.
So while it looks like this compromise is going to pass the Senate, it’s still an open question in the House because the House GOP is going to have to find enough Democrats to accept the deal and it’s unclear if that’s going to happen due to the unresolved status of DACA and the Dreamers in the compromise. House Minority Leader Nancy Pelosi just broke the House record for longest speech after holding the floor for eight and a half hours to talk about the urgency of fixing the DACA issue, so she’s presumably not going to be super enthusiastic about the compromise. Will enough House Democrats sign onto it in order to cover for all the lost ‘Freedom Caucus’ members? We’ll find out. Very soon.
And what about President Trump? He was openly saying two days ago that he would “love” to see a government government shutdown over his immigration package deal (a path to citizenship for the Dreamers and a far-right immigration overhaul). What’s his response to a compromise that doesn’t deal with the Dreamers and his immigration plan at all? He’s all for it!
So it’s up to the House to either resolve or extend the current shutdown showdown situation. If House does accept the deal, the budget and debt ceiling showdowns are dealt with for the next year which is something that should help GOP in the upcoming midterms. But the deficit is also going to spike and rapidly reveal the true costs of the tax cuts.
What’s the House going to do? Given that this compromise has a real shot of getting significant support from both parties it seems like the odds are that it’s going to pass. But, again, as the following article notes, this deal has pissed off A LOT of GOPers beyond the predictable ‘Freedom Caucus’ members, so it’s still unclear if that the light at the end of the tunnel is train or not:
“Senators and House members on the right immediately came out against the agreement, while a large number of leadership-aligned Republicans were also noncommittal. It’s unclear whether the opposition to the deal, which calls for $300 billion in new spending, will put it in jeopardy. But it has certainly put the Republican Party’s reputation for fiscal discipline on the rocks, coming on the heels of a tax law projected to increase the deficit by $1.5 trillion.”
Even the leadership-aligned GOPers were expressing serious misgivings about the proposed deal during a close-door GOP meeting on Wednesday. And you can understand why they would be squeamish. But you can’t ignore how much worse it could be for the GOP, politically speaking, if this deal isn’t passed and the next year is filled with more showdowns over the budget and debt ceiling and it’s hard to imagine the GOP doesn’t realize this too. So the GOP knows it created a debt and deficit time-bomb with this giant tax cut and also knows that the only solution that fits into the GOP’s narrative is for massive spending cuts to offset to the deficits which would also be politically disastrous. It’s like a suicide time-bomb attack accidentally carried out against oneself.
So what’s the GOP going do? Well, keep in mind that the political pain associated with accepting the deal isn’t really going to be directly felt for a year, when this fight begins anew and with higher levels of debt and deficit. And that would be much more consistent with the “time-inconsistency” tactic Bruce Bartlett wrote about of passing a giant tax cut, waiting a while, and only later demanding massive spending cuts. In other words, if the GOP accepts this compromise, lets the debt and deficit spike for a year, and only then demands massive spending cuts and tries to blame the deficits it all Democrats and overspending that would be exactly what we should expect from the GOP according to its long history of employing the “time-inconsistency” tactic. It’s like a time-bomb hot-potato attack.
So that’s a big reason to expect this to pass the House: blowing up the deficit with tax cuts and big military spending increases is a time-honored GOP tradition. As is all the theatrics about how upset they are about these deficits:
“I just never thought that Speaker Ryan — with his history and his background in budget issues, and his concern with the debt and deficit issue — I just never thought that this would be something that the Congress would put forward”
Bwah! Yeah, who could imagine the GOP running up massive deficits. But those crocodile tears are an integral part of the GOP’s brand-saving theatrics so we should probably expect a lot more of that. The GOP may not actually care of deficits, but they surely care about the political cost of getting associated with deficits.
The Koch network of GOP mega-donors are also getting in on the crocodile tear act via their think-tanks who came out against the deal:
This is extra humorous set of crocodile tears given that the Kochs are the primary financial puppet-masters for the entire GOP and therefore all sides of this debate. And it’s harder to find a creature more beholden to the Kochs than House Speaker Paul Ryan. But according to the Kochs’ ‘FreedomWorks’, this plan is “a fiscal abomination” that it just can’t stomach (but it was super cool with the tax cut).
And adding to the required level of crocodile tear theatrics is the one year extension of the debt ceiling:
Keep in mind that this debt ceiling fight was looking like it would be hit by mid-March, much earlier than previously expected, and that’s all thanks to the fiscal impact of the tax cuts. So dodging that fight really should be a GOP priority, politically speaking. But maintaining those ‘fiscal conservative’ theatrics is also critical for the GOP so, at a minimum, we should expect a flood of crocodile tears over the debt ceiling because this issue really is critical for maintaining the GOP’s fraudulent ‘fiscal conservative’ branding with the voters.
So, all in all, it’s looking like we should probably expect this compromise deal to pass right at the last minute, but not without a serious GOP crocodile tear tantrum. Because if there’s one thing we should expect from the GOP, it’s blowing up the deficit with massive tax cuts, demanding massive spending cuts, and then either getting those spending cuts or just accepting higher deficits and complaining very loudly about it.
Isn’t this cute: Rebekah Mercer, daughter of billionaire investor Robert Mercer and major investor in Breitbart, just wrote an op-ed piece in the Wall Street Journal intended to respond to the “sensational fantasies” and “absurd smears” against her. It’s more or less what one might expect. There are laughable passages like the following that only leave out a professed love for puppies and rainbows:
And much of the rest of piece talks goes into slightly more detail about the kinds of issues she advocates for, but only slightly more detail. It’s still all very generic slogans. Including generic slogans about “smaller government” and “federalism” and and Rebekah Mercer’s belief that “power should be decentralized, with those wielding it closely accountable to the people they serve,” etc...:
Part of what makes the above passage so nauseating is laughable pretense that Mrs. Mercer cares at all about the quality of government policies and addressing “society’s problems.” But what is perhaps even more laughable is the notion that the Mercers feel power should be decentralized. After all, the overt goal of the Mercers and the rest of the GOP network of billionaire mega-donors is to concentrate as much wealth, and therefore power, as possible in the hands of these mega-donors. That’s been “the goal” of the GOP’s agenda for decades. Finding reasons to cut taxes on the super-rich. It’s the unacknowledged objective of virtually all the GOP’s “small government” policies: concentrating wealth and power.
And thanks to the Mercer’s success in getting President Trump elected, that agenda has culminated in a massive push to shift federal spending onto the states for almost all non-military federal spending. Medicaid, Medicare, housing aid, food assistance, and just about any other federal safety-net program is in the process of getting pushed onto the states, with the direct consequence of shrinking those programs and pushing their financing away from federal income taxes (which more heavily impact billionaires) and onto state and local taxes (which barely hit billionaires at all). So while Rebekah Mercer’s column was nauseating for a number of reasons, the absurdist statement about want to decentralize power is perhaps the most nauseating. After all, what’s a more effective form of decentralized power than a functional democracy, something the Mercers and their party have been assaulting for years.
And, of course, this op-ed piece was written just a couple months after the GOP’s giant tax cuts for the super-rich that are guaranteed to slash government programs and concentrate power to ever greater levels. Which is also pretty nauseating:
“This Wednesday, in a Valentine’s Day gift to campaign finance nerds the world over, Rebekah Mercer, the mysterious daughter of mysterious billionaire Robert Mercer, wrote a short essay for the Wall Street Journal responding to unspecified “sensational fantasies” and “absurd smears.” It is, essentially, a press release from an inconceivably wealthy and powerful person who has almost entirely avoided direct scrutiny from the press, and as you would expect of a press release, it is bullshit where it isn’t nonsense, and nonsense where it isn’t bullshit.”
A press release that gives us an idea of how Rebekah Mercer would prefer to be seen. Not as the Machiavellian financier of the Alt-Right’s primary media mouthpiece, but instead as someone who believes in “a kind and generous United States, where the hungry are fed, the sick are cared for, and the homeless are sheltered.” It would just be a sick joke if the GOP wasn’t in the process of making America a much less kind and generous country where growing numbers of people will go hungry and without medical care. But that is actually happening, thanks to folks like the Mercers.
And central to that goal of concentrating ever more wealth and power in the hands of the super-rich is the GOP’s war on federal spending. Under the banner of “decentralizing power”:
“It is, at bottom, just a fancy way of invoking “states’ rights,” which is itself just a fancy way of saying that the profit motive and its attendant bigotries should be allowed to run rampant across humanity.”
The profit-motive above all. It’s a reminder of another key element of the faux drive to “decentralize power”: the endless push for the privatization of government services as a means of ‘tackling waste and ineffeciencies’. It’s a central of the Koch/Mercer political agenda and that agenda and is getting a big boost with the GOP in full control of the federal government.
So given that it’s another “Infrastructure Week” — a week when the Trump administration unveils and promotes its new ‘infrastructure plan’ — just came and went, it’s worth noting just how much the proposed infrastructure plan achieves that Mercer agenda of concentrating wealth and power in the hands of billionaires under the guise of “decentralizing power” by putting the profit-motive first:
“With his infrastructure framework, the president is rethinking Washington’s role.”
A “rethinking” of Washington’s role. That’s one way to frame the Trump infrastructure plan...a plan that is completely consistent with the GOP’s long-held agenda of slashing federal taxes (and raising state and local taxes in the process). And completely consistent with Rebekah Mercer’s expressed desire to “decentralize power” by moving more responsibilities from the federal government (which taxes folks like the Mercers to pay for national needs) to state governments (which basically act as tax shelters for folks like the Mercers). That’s the kind of “rethinking” at work here: the fulfillment of the GOP’s decades-long goal of gutting federal spending so billionaires can lower their taxes.
And that rethinking is going to make the federal government a minority stakeholder in the US’s infrastructure. Of the $200 billion in federal spending, half of it will be used to incentivize state, local, and private infrastructure spending. So the federal spending Trump is proposing is spending designed to lower federal spending in infrastructure. And that includes selling off federal assets where a sale would “optimize taxpayer value”:
So what constitutes “optimizing taxpayer value”? On one level, it’s a pretty profound question because you need to answer the question of what society should actually value and that’s a core question at the heart of a functional democracy. But on another level, a GOPish-level money-oriented level, it’s the kind of question that will be answered by whether or not it maximizing profits. Financial profits. That’s it. And not just public profits. The maximization of private profits, even if that’s not to the benefit of the public, will be at the heart of this new “rethinking” of the American federal government:
“Proposals intended to serve more impoverished communities that require more state and local money, including improving drinking water in a place like Flint, Mich., could be given short shrift. Financial investors may not see a big profit in such a project.”
Sorry places like Flint, MI, where infrastructure might be poisoning people. Upon rethinking, your health and well-being isn’t profitable enough. Dangerous infrastructure is no longer going to be a significant federal priority. Exactly like how the public safety-net is no longer a federal priority. Because more wealth and power needs to be concentrated in the hands of folks like the Kochs and the Mercers. It’s GOP ‘rethinking’ in action:
Note how the above the above criticisms of the infrastructure plan was from a RAND corporation report. In other words, even the military industrial complex thinks this is a stupid idea. Also keep in mind that the military industrial complex is pretty much going to be the only thing the federal government finances under the GOP mega-donors’ vision of government. Yes, much lower federal taxes on billionaires will shrink the military industrial complex somewhat in the long run. But the planned collapses of federal spending in all other areas will cushion the blow.
But after the GOP’s new tax law went into effect there’s going to be very little to cushion the blow for states and localities who will now be responsible for much, much more infrastructure spending. Because don’t forget that the new tax law largely got rid of the federal deduction for state and local taxes (SALT), so all the planned state and local tax hikes under this infrastructure package will be extra expensive. Because keeping the SALT deductions would require higher federal taxes. And that means more taxes for billionaires like the Mercers. So those SALT deductions definitely had to go under the GOP’s vision of government:
On top of that, the tax bill doesn’t just starve the federal government of funding. Apparently many states are going to see a revenue hit too. That’s how irresponsible the GOP tax bill is and that’s how irresponsible the GOP’s massive drive to shift government responsibilities onto states:
And the fact that substantial hike in state and local taxes that is going to be required for public infrastructure investments going forward means there’s going to be a lot of pressure for private infrastructure investments instead. Private for-profit infrastructure investments. So how’s that going to work out? Well, such public-private partnerships aren’t new. And as Davis Damschen, Utah’s Republican treasurer, points out, those public private partnerships haven’t worked out so well for his state:
“But Mr. Damschen also noted that public-private partnerships do not tend to work well in his state.”
For-profit government hasn’t worked out well for Utah. Imagine that.
And as the following article grimly illustrates, Utah is far from alone in its mixed experience with for-profit public services. And as the article also grimly illustrates, that problem is about to get much, much worse. For every state. Why? Because the Trump infrastructure plan instructs states to prefer private financing for projects. And that’s making projects a lot more expensive. How much more expensive? Well, as the following story about the proposed overhaul of a Rhode Island viaduct that carries Route 95 traffic over an area of highway that’s been declared dilapitated and one of the worst traffic chokepoints in New England amploy illustrates, the costs for the project under Obama’s rules jumped 59 percent under Trump’s rules. Due to the need for a 15-percent private investor return along with higher interest on private loans. And that cost jump is after they removed a proposed pedestrian bridge from the project:
“A big chunk of that cost increase is connected to financing and the private part of the project. This year’s grant application says the “estimated design-build cost” is $264 million. The new plan then adds interest on a $45-million private loan and a “15-percent return to the private partner.””
A 15-percent private return. That’s the GOP’s idea of government efficiency. And that 15-percent return appears to be separate from the interest paid on the $45-million private loan which is presumably seen as even more efficient. And that’s why this same project is 59 more expensive than it was under Obama-era rules, even when you remove the pedestrian bridge:
And why is the state of Rhode Island suddenly choosing this for-profit model that costs 59 percent more? Because those are the new rules. Again, it’s the GOP’s idea of profit-driven government efficiency:
“This delivery method created additional costs, particularly due to the costs associated with private sector equity funding the project...We are seeking the new grant to offset those costs.”
It’s all a reminder that the GOP agenda isn’t just about cutting billionaire taxes. It’s also about turning the public sector into a billionaire profit-center. A billionaire profit-center with very low taxes. And very concentrated power. Nauseatingly concentrated.
When President Trump tapped Mick Mulvaney, the former GOP congressman chosen by Trump to become the director of the Office of Management and Budget, to become the acting director of the Consumer Financial Protection Bureau (CFPB) it was immediately clear that Mulvaney’s goal was undermine the agency as much as possible. After all, Mulvaney previously said it should be abolished.
So it’s worth noting that Mulvaney may have found an innovative new approach to accomplishing that goal of undermining the CFPB: giving a speech in front of a bunch of bankers where he explains to them that, as a congressman, he only listened to lobbyists who made donations, thus confirming the worst assumptions people have about politicians and making the head of the CFPB sound like a bankster puppet.
Yep, he actually said that. In front of a room full of bankers at the American Bankers Association conference, which, from a political symbolism standpoint, is about as bad as it gets. And it certainly doesn’t help the image of the CFPB. It’s as if Mulvaney is trying a new approach to the GOP’s long-standing strategy of sabotaging government and then running against bad government: Just openly talk about how corrupt you are, thus ensuring people don’t trust ‘the government’ even more:
“Mulvaney, a former South Carolina representative, said he would only meet with lobbyists who had donated to his campaign while speaking at the American Bankers Association conference on Tuesday, the New York Times reported. “We had a hierarchy in my office in Congress,” Mulvaney said. “If you’re a lobbyist who never gave us money, I didn’t talk to you. If you’re a lobbyist who gave us money, I might talk to you.””
Someone forgot to not be obviously corrupt in public. Unless being this obviously corrupt is intentional. Who knows with today’s GOP, maybe they can spin it as ‘owning the libs’.
Still, if Mulvaney had to choose a group people he shouldn’t have given his ‘donate or else’ pep talk to, it’s the financial industry. Political donations from the industry whose business is money is an exceptionally bad look. Especially since Mulvaney received extensive donations from the industry and done plenty of favors. Including favors as acting director for the CFPB like favors for hyper-predatory payday lending industry:
And if this all seems like a sick joke, keep in mind that “sick joke” is exactly how Mulvaney described the CFPB before he became its acting director. And since becoming its director he’s more or less systematically worked to ensure consumer financial protection is the last thing the CFPB is going to be doing under his tenure. So, yeah, it’s a pretty sick joke:
But perhaps the sickest part of this joke is that it’s hard to think of a sector of the US economy that’s more familiar with the benefits of donating to politicians than the financial sector. Case in point:
“The nation’s six big Wall Street banks posted record, or near record, profits in the first quarter, and they can thank one person in particular: President Donald Trump.”
Oh look at that, record profits for the six biggest Wall Street banks. Thanks to Donald Trump’s giant tax cut. Although the banks can’t just thank Trump. The tax bill really was largely a GOP group effort. A group effort to slash corporate tax rates, resulting in a combined tax savings of $3.59 billion for the six biggest banks in just the last quarter:
So that’s all one reason why Mulvaney’s audience at the American Bankers Association conference probably didn’t learn very much from his little ‘pay to play’ speech.
And there’s another, perhaps even more egregious, example of why Mulvaney said what everyone already knows: The chairman of the House Financial Services Committee, Jeb Hensarling, is openly asking the financial industry to lobby his Senate colleagues and push for a slew of additional deregulations that Hensarling wants to see added to the big new bank bill working its way through Congress.
Yep. The Senate recently passed its version of the bank bill congress is working on. It’s largely a deregulation push, of course. The key planks in the bill is as follows: 1. Banks with less than $10 billion in assets would be exempted from the Volcker rule, which put the brakes on certain kinds of risky trading in the wake of the 2008 financial crisis.
2. The list of banks deemed “too big to fail,” and thus faced with tighter restrictions, would be thinned by raising the threshold from $50 billion in assets to $250 billion.
3. One size fits all regulations, even for the mega-banks would be vulnerable to new pressures, with the Federal Reserve now required to work alongside those institutions to customize certain rules. This is described as a move to create a regulatory race to the bottom.
And this bill passed the Senate with full support of the GOP. Plus 17 Democratic Senators, mostly from states with large financial sectors or from Red States where they’re facing reelection this year. And that Democratic support that was required to get a filibuster-proof bill through the Senate is what’s causing Jeb Hensarling so much consternation in House. Because Hensarling want to add quite a few more financial sector deregulations to the House version of the bill and he’s going to need the support of those Senate Democrats if those additions are going to make it into the final version of the bill. That’s why he’s openly asking the financial lobby to lobby Senate Democrats.
Specifically, there’s 30 new deregulatory items that Hensarling demanded be added back in March, and that means he needs the support of some Senate Democrats. And to get that Democratic support he’s calling in reinforcements: financial lobbyists:
“The Texas Republican is trying to rally an army of lobbyists in his long-shot attempt to expand a bipartisan bank bill the Senate passed last month, posing a potential new threat to the landmark legislation.”
Rallying an army of financial industry lobbyists. That’s what Jeb Hensarling, chairman of the House Financial Services Committee.
And part of the motivation of Hensarling is he’s retiring and is trying to put his stamp on the last major financial services legislation of his career. The kind of stamp an army of financial industry groups will rally around:
But Senate Democrats are standing firm on not opening up the Pandora’s Box of amendments:
And that’s why a lot of the finance lobbyists, those who already got what they want in the Senate bill, are advocating just passing the Senate version now:
But even the lobbyists who are working with Hensarling to pressure the Senate Democrats appear to feel that this is really about Hensarling making a ‘last stand’ to secure his legacy. A legacy of leading the GOP’s fight to do the finance industry’s bidding:
But it’s important to keep in mind that Hensarling isn’t actually just doing a ‘last stand’ alone. He’s merely leading the collective GOP fight in the House for this amendments. House Speaker Paul Ryan joined Hensarling and froze passage of the bill through the House unless Senate Democrats agreed to negotiate Hensarling’s amendment wish list. But even industry insiders, who are supposed to man Hensarling’s army of lobbyists, reportedly view what Hensarling wants as unrealistic. In other words, whether or not Hensarling relents on his ‘last stand’ probably isn’t up to Hensarling alone because he’s just acting as the front man for the House GOP leadership.
And those skeptical lobbyists would be correct, because Hensarling has only barely eased his demands several days ago and the bank bill is at risk of running out of time. The bill really could collapse if a a compromise isn’t reached.
The fact that some of what Hensarling is demanding has received universal support in the House is also quite important to recognize because it means the House GOP has plenty of ‘bait’ to use in its bait and switch scenario: the House GOP and its lobbyist army sell the Hensarling package as merely a bunch of stuff with almost universal support (ignoring all the additional industry giveaways):
So as this congressional standoff continues, we’re probably going to hear a lot about all the stuff with near universal support and little about the rest of the amendments that are just more giveaways to the finance industry. Like a significant easing of regulations on “super-regional” banks with over $250 billion in assets:
And some of the industry groups that already got what they were lobbying for in the Senate bill are waging new lobbying campaigns in the House:
But there’s still those lobbyists who are lobbying the House to just pass the Senate bill. And it sounds like the banks and credit unions are largely in the category:
So we have this rather remarkable standoff going on in Congress: a bipartisan bill that makes it out of the Senate and the House GOP complains that it doesn’t go far enough. Oh wait, that’s not remarkable at all.
Still, the split in the finance lobby is somewhat remarkable, which is why Hensarling’s call for the “army” of lobbyists was probably a plea to those finance lobbyist to create a unified finance lobby.
But with both sides show no signs of yielding it’s still unclear how it’s going to pan out. It’s not like the GOP wants to die on this particular hill during an election year. It would require a pretty impressive public relations lobbying campaign to generate public interest in a bank bill that mostly deregulates the banks more. But that doesn’t mean they won’t try.
It’s also worth note that one of the main reason Jeb Hensarling is so interesting in making a ‘last stand’ for the finance sector is so he can leave congress and become a lobbyist.
So is there any news on what’s next for Rep. Hensarling after he retires at the ends of this term? Well, this is indeed some talk of what’s likely next for Hensarling. And it’s not being a lobbyist. It’s taking over a financial regulatory agency, like the Federal Housing Finance Agency. Or Mick Mulvaney’s position as the head of the Consumer Financial Protection. That’s what’s probably what’s next for Jeb Hensarling:
“But likely moves include replacing Federal Housing Finance Agency director Mel Watt, as his term expires in January 2019, or becoming the next director of the Consumer Financial Protection Bureau.”
Jeb Hensarling as director of the Consumer Financial Protection Bureau. That’s seen as one of the likely next moves for Hensarling. The guy who told a room full of bankers that he only listened to lobbyists who paid him is going to be replaced by the guy rallying an army of finance lobbyists.
So if you were hoping Mick Mulvaney’s replacement would be a little less openly beholden to Wall Street, don’t get your hopes up.
If you’re a financial lobbyist, on the other hand, you should probably keep your hopes up. And your checkbooks out. ‘Tis the season of record profits, after all.
There’s was no shortage of high expectations for the US 2nd quarter GDP report coming out Friday, with many economists expecting over 4 percent growth. And sure enough, the 2nd quarter GDP growth came in at reasonably robust 4.1 percent (somewhat below expectations). It was the kind of number we should have expected given the economic momentum President Trump inherited from Obama’s economy followed up with the GOP’s massive tax cut. Some sort of short-term stimulative effect was inevitable with a tax cut of that scale.
Unfortunately, despite the assurances from the Trump administration and GOP, that +4 percent GDP growth is largely expected to be transitory. Even more unfortunately, there’s another important economic number that also grew in the 2nd quarter that is expected to remain historically high for years to come due to another important number hitting historic lows: the US deficit, which is already spiking and expected to remain historically high due to suddenly historically low government revenues from corporate taxes:
“The amount of corporate taxes collected by the federal government has plunged to historically low levels in the first six months of the year, pushing up the federal budget deficit much faster than economists had predicted.”
Yep, even the pessimistic federal deficit projections of the Joint Committee on Taxation about the impact of the GOP tax scam — which the GOP tried to argue was overly pessimistic — wasn’t pessimistic enough. So just this week the Office of Budget and Management had to increase its official pessimism, adding an additional $100 billion in projected deficits every year for the next decade. So we just had the first major revision of the cost of the GOP tax scam: $1 trillion:
And to put this drop in corporate tax collections into perspective, it’s almost as large as the drop experienced right after the financial collapse of 2008, which at the time was the largest drop since such records started being kept in the 1940’s. So the GOP’s tax bill, which cut corporate tax receipts by a third, basically created a fiscal depression:
And this unsurprising revelation of worse than expected tax receipts is coming just months before the annual congressional showdown over the budget that comes up in September. So just months before the mid-terms we’re going to see how Congress responds to this artificially created fiscal crisis the GOP lied the country into. That should be interesting:
And note that, while a higher-than-average quarterly GDP report was expected on Friday — it came in at 4.1 percent, which is to be expected given the health of the economy Trump inherited and short-term stimulus impact of the tax cut — the quarterly GDP growth is also expected to drop in the second half of 2018. So if it turns out the official projections continue to be too unpessimistic, we could see the deficits continue to spike:
And, of course, the Trump administration and GOP continue to dismiss such concerns and assure everyone that historically high growth rates will continue. Keep in mind that one of the underlying assumptions that the GOP used to pass its tax cut without violating congressional rules requiring it to be budget neutral was to argue that historically high growth rates would continue for the next decade. Not just the rest of the year. It was always an appallingly dishonest argument and it remains the primary arguing the GOP is using to rely on:
To highlight how perilous the fiscal situation is, this historic drop in corporate tax revenues is happening during a period of record corporate profits. And yes, those record profits are due, in part, to the massive cut in corporate taxes that kicked in this year. But don’t forget that corporate profits were at record levels last year, before the tax cut was passed. So while the drop of corporate tax receipts parallels what we saw following the 2008 financial crisis, it’s happening during a period of unprecedented corporate profits. Highlighting how unprecedented the folly of this tax cut really is:
And while the White House is pointing to the large amounts of repatriated overseas profits that corporations brought back to the US as an example of the tax bill ‘working’, the tax bill also taxes those repatriated profits at extra low rates: 8 percent for profits invested in real estate and other hard assets abroad (which is very nice for Trump’s investments), and 15.5 percent for profits in cash and stock and other liquid assets. So pointing to higher levels of repatriated profits also points out how the strategy of multinational corporations to refuse to bring back overseas profits unless they were given special extra-low tax rates totally worked. It’s not exactly something anyone other than the shareholders of those large multinational corporations should celebrate. Also, most of the repatriated profits have just gone to pay dividends and not get used for new investments:
So that’s out first look at the real impact of the GOP tax scam: it’s worse than officially expected. Specifically, the federal deficit is $1 trillion worse than expected over the coming decade according to the Office of Management and Budget. And it was already expected to add an additional $1.5 trillion over the decade, so this is an additional $1 trillion on top of that $1.5 trillion. And it’s only July.
But who knows, maybe the GOP and right-wing economists will be correct for the first time ever about the self-financing nature of supply-side tax cuts and maybe we really will see sustained higher-than-average economic growth for the next decade that helps cushion the blow of this fiscal debacle. Let’s hope that happens, because it really would be nice if supply-side economics magically worked and societies could finance themselves with tax cuts. Especially since the latest information on wages in the US indicate that wages are falling. Yep, despite some early positive signs this year for US wages, US companies cut wages on average for the first quarter in the face of this historic tax cut:
“First, the tax reform hasn’t yet resulted in appreciably higher wages for American workers. Real average hourly compensation actually fell in the first quarter after the tax reform was passed”
We have a situation where corporate taxes were cut by ~40 percent during a period of already record corporate profits, leading to even higher record corporate profits, along with a big surge in repatriated overseas profits, and the end result six months into this grand experiment on wages is lower wages. It’s kind of amazing, isn’t it?
One metric of US corporate investments, private nonresidential fixed investment (expenditures by firms on capital such as commercial real estate, tools, machinery, and factories), is indeed up for the first two quarters of 2018. But still not as high as it was in 2015. And that lack of wage gains and tepid increase in investments points towards a possibility that doubles as a reminder of how bad the timing was for a tax cut of this nature: maybe US corporations just don’t have great investment opportunities at this point in the business cycle:
Beyond that, real per capita GDP growth is actually down from 2017 and below 2014 and 2015 levels:
This lackluster response to supply-side corporate tax policies doesn’t just point towards all points towards an early end to any stimulative effects from this current tax cut. It also suggests the US is literally at the point where supply-side tax policies can barely even generate short-term stimulative effects. Because, while it’s long been accepted by non-conservative economists that income tax cuts have a reduced capacity to stimulate the economy due to all the cutting to income taxes that’s already taken place, there was hope that corporate tax cuts might still have some sort of supply-side effect. And that doesn’t appear to be the case. And if income and corporate taxes are already low enough that there’s hardly even a stimulus when they get cut, that’s strong evidence that the potential utility of tax cuts in general in the US is more or less over:
“In the postwar period, with top marginal income tax rates at more than 90 percent, it made sense to cut taxes as a way of improving the economy’s long-term health.”
Another way to look at it is if US policy makers want to enact potentially stimulative tax cuts they’re going to have to raise taxes first. They’re too low now thanks to America’s decades of supply-side mania.
And if American really has reached a natural end point for the potential utility of supply-side tax cuts after cutting taxes on the wealthy for decades, it’s worth noting that the end result of that is record corporate profits, decades of stagnant wages, record inequality and a fiscal situation growing more dangerous with each passing quarter. In other words, this grand supply-side experiment has been consistently worse than you expect. It’s one of the meta-themes of the GOP: it’s somehow consistently worse than expected.
It was always obvious that the massive deficits triggered by the GOP tax cut scam would be used as a political cudgel to push through big spending cuts. It was merely a question of when the GOP would bust out the “we can’t afford all this spending” argument.
More specifically, it was really a question of how shamelessly soon after the December 2017 passage of the GOP tax cut this bait-and-switch routine, which particular cuts they would call for to get this phased of the tax scam underway, and how absurd the justification would be. And it looks like we may have our answer: President Trump just announced a pay freeze for all federal workers citing...wait for it...rising deficits! Yep, and he’s using the cited his statutory authority to adjust pay because of “national emergency or serious economic conditions affecting the general welfare.” He’s literally canceling cost-of-living increases in federal workers by declaring that there’s a national fiscal emergency 8 months after his budget-busting tax cuts for the super-rich.
So that gives us a sense of how the GOP is planning on transitioning to the “we have to cut [insert everything useful here] because we just can’t afford it” phase of their tax scam. They’re going to start off targeting with the federal workers, presumably hoping that their ‘ol “federal employees are all lazy and overpaid!” meme will deflect from the fact that Trump’s fiscal emergency is a direct result of his tax cuts. And by targeting the federal workers who are hated by so many Trump voters, Trump and the GOP can get the GOP base to enthusiastically accept the “we can’t afford this!” arguments that will soon by expanded to other programs like Social Security and Medicare. It’s like a karmic popular-program-cutting rhetorical appetizer in anticipation of the massive cuts yet to come:
“We must maintain efforts to put our Nation on a fiscally sustainable course, and Federal agency budgets cannot sustain such increases,” the President wrote.
Few people can pull off deadpan irony like President Trump. For him, is so deadpan it’s actual policy.
Note how this pay freeze was actually first proposed by Trump in February of this year as part of his budget proposal. So, true to form, this current “we can’t afford this!” declaration is merely an excuse to do something he’s was already planning on doing, much like how all the future programs (like Medicare) that will be cut under the auspices “we can’t afford this because of the deficits!” will be programs the GOP has wanted to cut anyway for years:
And in order to use his executive powers to cancel the pay raises Trump had to declared a “national emergency or serious economic conditions affecting the general welfare.” This is at the same time he’s been endlessly praising himself about the strength of the economy:
Intriguingly, by canceling these pay raises, Trump appears to have created a political issue for Congress to deal with in the weeks leading up to the midterms. Because Congress can overrule Trump’s edict in the upcoming spending bill. And the final version of that bill is getting negotiated a coming weeks. So pretty much every Democrat in the country can now run ads connecting the GOP tax cut to Trump’s declared “national emergency or serious economic conditions affecting the general welfare”. From a political standpoint this was a remarkable move:
Also keep in mind that the budget proposed by the GOP leadership in House back in June included massive cuts to Medicare and Medicaid for the explicit purpose of reigning in the deficit. So Trump may have given Democrats a convenient way to remind voters of what it means to leave the GOP in control of congress too.
It was always obvious that whatever gimmick the GOP used to start the “we can’t afford this!” phase of the tax scam was going to be a political gamble. The audacity of it all is inherently politically risky. Don’t forget that the GOP was long planning on passing the tax cuts and then running for reelection by touting them but that strategy has been largely abandoned because those cuts proved to be politically toxic. And now Trump just injected the issue back into the fray two months ahead of the midterms by declaring a tax-cut-induced national fiscal emergency. For an opening shot in the ‘switch’ phase of this ‘bait-and-switch’ tax scam this was quite a doozy.
Paul Krugman has a recent column exploring the stunningly shameless timing of President Trump’s recent decision to freeze the scheduled pay raises for federal workers after citing a fiscal emergency months before the midterms and a mere eight months after passing a massive tax cut for the super-rich. Krugman’s conclusion? The timing of Trump’s wasn’t strategic. It was pique. Specifically, Krugman speculates that anger at the Mueller probe might have Trump viewing virtually all federal employees as members of the ‘deep state’ and enemies in need of punishment.
Is Krugman’s suspicions correct? Who knows, but as we’re going to see, it raises a rather ominous question that needs to be kept in mind now that Trump has made it clear that he’s viewing federal workers with disdain: given that the GOP drive to cut federal employee compensation and shift to a ‘pay-for-performance’ model involves making it easier to fire ‘low performing’ employees, and given Trump’s obvious stance that employees who don’t politically support him are ‘disloyal’ enemies, should we expect a mass partisan purge of federal employees once Trump is given the green light to do so?
Krugman’s piece also makes two more important points to keep in mind: first, during every census year there’s a surge in federal hiring and the last time this happened, in 2010, the GOP started disingenuously complaining about the growth in federal employment. A repeat of that is more or less guaranteed in 2020, except this time there will be a Republican president who can use that census hiring as an excuse to further attack the federal workforce.
Second, Krugman notes that that widespread embrace of the ‘pay-for-performance’ model in the private sector has been a big part of what has led to the ever-growing wage gaps and the explosion of poverty wages across the American economy. So when Trump and the GOP talk about bringing the private sector efficiency of pay-for-performance and easy firings to the government, it’s actually a call to introduce McDonalds/Walmart-style wages for most federal jobs. And as Krugman points out, about two-thirds of the amount the federal government spends on employee compensation goes to the Department of Defense, the Department of Veterans Affairs, or the Department of Homeland Security. And the way federal compensation works now, less educated federal employees make more than their private sector counterparts while the most educated federal employees get substantially less than they could in the private sector. So any plan to make the federal workforce mimic the private sector is in reality a McHomeland Security plan designed to cut the pay of the least educated employees while likely transferring more money to the most educated, just like what’s happened across the US economy over the last several decades. Only after the federal government is as poor an employer as your standard retail giant and fast-food chain will it be deemed ‘competitive’ and ‘productive’ enough.
So whether or not the timing of Trump’s attack on federal workers is driven by an impulse to punish the ‘Deep State’, beating the federal workforce into submission and turning it into McGovernment for all but the highest-paid employees is a permanent GOP goal and under Trump the achievement of that kind of goal could easily double as cover for the creation of a spoils system. Spoils is kind of his presidential strength at this point.
But it’s that Trumpian declared war with the ‘deep state’ that makes the potential creation of a spoils system extra-ominous because Trump’s ‘deep state’ allegations effectively politicizes all federal employees and it’s hard to imagine any federal workers will be spared from that politicization. And that’s all why an overhaul of the federal workforce rules could be such a mega-disaster when it’s Trump’s doing the overhauling. If it suddenly becomes much easier to hire and fire federal workers it’s hard to imagine that won’t result in a mass ‘Alt Right’ federal hiring spree following a purge of the Democrats. So it’s important to keep in that Trump’s decision to freeze the scheduled federal pay hikes wasn’t necessarily just Trump lashing out at a federal work force he views as an enemy and wasn’t just part of the GOP’s long-standing efforts to make federal employees as powerless as their private sector counterparts. It may have also been a first big step in disempowering federal employees for the purpose of remaking the federal workforce in a Trumpian image where they are paid to ‘perform’ by showing loyalty to Trump. And it’s that larger context of the GOP’s long-standing plan to disempower federal workers under a ‘pay-for-performance’ scheme coupled with Trump’s general paranoia about the ‘deep state’ that suggests federal workers are in store for much more than just a pay freeze in coming years:
“So there’s a sense in which Donald Trump’s decision to use executive authority to deny all federal workers a cost-of-living adjustment is squarely in the Republican mainstream. But the timing is odd.”
The timing is indeed odd. Granted, there’s never a great time to declare a fiscal emergency months after your big tax cut, but the timing does seem exceptionally bad. Especially given that Trump floated the idea of also using his executive powers to implement a new tax cut on the same:
So perhaps the timing of it it really was driven primarily by anger as the ‘deep state’ and growing sense by Trump that all federal workers are enemies who need to be dealt with. It would be insane if that’s actually what was driving Trump, but it’s a plausible form of insanity:
Regardless, it’s pretty clear that an attack on federal workers is very much on Trump’s agenda at this point. So it’s going to be important to keep in mind that the 2020 census, and the temporary surge in hiring of federal workers, is going to give Trump an excuse to keep waging this attack as the census period gets closer:
And as Krugman points out, that attack on federal workers is mostly going to be an attack on the lowest paid workers at the the Departments of Defense, Veterans Affairs, and Homeland Security since that’s where two thirds of employment federal compensation goes. And as the private sector has amply demonstrated over the past few decades, when you impose the ‘pay for performance’ model on a workforce, the lowest paid workers inevitably get paid less and the highest paid get paid more. It’s just what happens, and that’s going to translate into people running public services on fast-food wages:
So how far should we expect wages to fall for the lowest paid federal employees after Trump’s pay-for-performance system gets put in pace? Well, as the following article from back in February — when the White House released its initial plans to overhaul the federal work force and implement a pay-for-performance system that makes firing easier — the average pay for federal workers without a college degree if 53 percent higher than their private-sector counterparts, 21 percent higher for federal workers with college degrees, but 18 percent lower for federal employees with advanced degrees than their private sector counterparts. That’s the situation Trump’s pay-for-performance proposal is trying to reverse, with lower pay for the lowest paid and more for those with the most, exactly like the rest of the US economy.
The article also notes that the Trump administration’s proposal also include moving federal workers away from pensions and into 401k-style defined-contribution plans for their retirements, which is also just like what happened to private-sector pension across the rest of the US economy. So that trend that’s currently ensuring mass old-age poverty for coming generations will be extended to federal employees too.
No pensions and lower pay: that’s what Trump and GOP have planned for the federal workforce and and the way Trump and the GOP spin it, this would be a good thing:
“The shift to performance-based pay could dramatically change structure and compensation in a federal workforce that has been something of a bulwark against the increase in economic inequality.”
Let’s make everyone economically insecure out of fairness. That’s the underlying sales pitch, even if that’s not how it’s always sold to voters. The GOP is betting that, like crabs in a bucket, general resentment against federal workers over the fact that they haven’t yet had their wages and retirement plans gutted will lead to public support for this drive. And who knows, they might be correct. But it’s worth marveling at just how far federal wages are going to have to fall to get in line with private-sector counterparts:
Then there’s the talk of switching from pensions to defined-contribution retirement plans, one of the other major changes in the US economy over the last generation that’s been to the benefit of Wall Street and corporate boardrooms and pretty much no one else:
And as part of that transition to a McGovernment-style employment regime there’s going to be an enhanced threat of firings. Employees with the poorest reviews with be much easier to fire under the Trump/GOP proposal:
And while firing the poorest performing employees might sound like something most voters should want support, there’s no getting around the fact that making it easier to firing federal employees simultaneously makes it easier to set up a spoils system where non-‘loyal’ employees get fired when new administration assume power.
That’s the situation described in the following 2009 article which covers the collapse of the last time the federal workforce experimented with a tenure-based system with a ‘pay-for-performance’ system. That was the Defense Department’s National Security Personnel System (NSPS), a three-year-old project that would have put more than 700,000 federal employees under a pay-for-performance system. And as the DOD discovered, assessing employee performance is actually highly a subjective task for a lot of government jobs. And that highly subjective nature of rating employees made the system perfect for creating a good-ol’-boy network-style where favored employees got the best reviews (much like in the private sector).
And as the article also reminds us, part of the whole reason the federal government put in place its current tenure-based pay system now instead of a ‘pay-for-performance’ system in the first place is to avoid a spoils system where new administrations have the latitude to mass-fire federal employees based on their politics. So when Trump and the GOP sell a vision of a highly efficient federal workforce comprised of only the best employees the labor market has to offer, in reality they are peddling a political patronage system that will ensure the highest paid federal employees are paid for their political loyalty and little else. In other words, the what Trump and the GOP are selling is most likely going to be the worst case scenario, of course:
“The demise of NSPS has left federal officials and reform advocates grappling with a fundamental question: Did NSPS fail because of poor planning and execution? Or, more worrisome, did it fail because the concept of linking pay to performance — however sensible it sounds — is simply not possible in the federal government?”
Can pay-for-performance even work for the kinds of jobs the federal government pays people to do? That was one of the big questions surrounding the Department of Defense’s experiment with such a system, but it’s been a meta-question for the government ever since the Federal Civil Service was created in 1872 with a goal of avoiding a spoils system. The current system for federal pay, the General Schedule, has avoided that spoils system, but it did it by paying pay on tenure (time employed by the government) and not based on some sort of ‘performance’ metric, leaving the neoliberal dream of a non-spoils-based pay-for-performance federal pay system unrealized:
And as the DoD’s experiment made clear, measuring ‘performance’ is actually really hard for a lot of jobs. So hard that the mandate for measuring performance basically becomes subjected and turns the pay system into the perfect environment for a good ol’ boy network or spoils systems. And that subjectivity results in unhappy employees, which is objectively bad, especially when they are government employees:
“Such systems depend on having clear and measurable job objectives. The problem is that the nature of government work often defies simple metrics.”
That’s kind of meta-problem here: the ‘pay-for-performance’ dream requires clear and measurable job objectives. Which doesn’t exists for a large number of government jobs. Or non-government jobs, for that matter, which makes this a meta-problem for more than just government. It’s a problem with human civilization in general: our market-oriented socioeconomic systems are often rooted in the assumption that we can make virtually everyone’s life better by relying on a ‘market’ that is accurately measuring things we can’t actually realistically measure. Moral clarity from blind faith in bad science is a pretty big meta-problem, and that’s one of the big problems laid bare by the ‘free-market’ ideology that demands that performance-based metrics determine everyone’s employment and life in general. It’s just a bad fit in many cases.
Let’s also not forget that pay-for-performance in the private-sector over the last few decades has generally involved paying executives big bonuses for their ‘performance’ of outsourcing workers, gutting worker pensions, and keeping wages stagnant. Paying the executive-class to gut the middle-class: That’s been one of the big areas of productivity growth in the US economy for the past generation. The yawning income gap has been justified by a pay-for-performance ideology that assumes life will improve for almost everyone if we simply let ‘the market’ perform its magic and allocate greater pay to those who ‘perform’ more. And yet one of the easiest way for an executive to ‘perform’ well was to create massive corporate profits by turning the US workforce into a contemporary peasant-class of virtually helpless workers trapped in a lifetime of poverty with almost no economic security. And those forces that make inevitably the rich richer and poor poorer are the same forces that Trump and the GOP want to unleash on the last employee safe havens in America. With obvious impacts on everyone because McGovernment probably isn’t going to be great government.
Is Mitch McConnell drunk with power? Who knows, but something appears to have caused a significant lapse in political judgement. Because for some strange reason this week, McConnell decided to let the public know that, should the Democrats win control of the House in the upcoming mid term elections a few weeks from now, McConnell is hoping to use the resulting divided government as an opportunity for big bipartisan cut to entitlements. That’s how Mitch McConnell is hoping to ‘make lemonade out of lemons’ if the ‘Blue wave’ does indeed material and the Democrats win the House and he spelled it all out in an interview.
In the same interview, McConnell asserted that the massive GOP tax cut scam — which was passed exclusively by the GOP with no Democratic support and is already leading to spiking deficits — is not in fact the cause of the spiking deficits. Too much entitlement spending is the cause according to McConnell. The tax cuts pay for themselves. That’s what he said in the same interview where he called for entitlement cuts due to rising deficits. Rising deficits that are rising rapidly less than a year after the massive tax cuts for the super-rich. Again, we have to ask if he’s so drunk on power and/or just assumes the electorate is idiotic.
Granted, it’s a standard GOP talking point these days to assure the American people that the large reported rise in the deficit this year has nothing to do with the tax cuts. But it’s particularly brazen to make that absurd argument during the same interview where you charge that entitlement spending is leading to out of control deficit problems and need to be cut soon. That seems like a politically insane thing for the Senate Majority Leader to say weeks before an election given how wildly unpopular cuts to Social Security and Medicare are with the US electorate. But he did it.
And don’t forget that it’s still possible the Democrats could take control of the Senate this year. That’s looking unlikely based on the polls in key Senate races, but a lot can change in the last few weeks of an election. For instance, the Senate Majority Leader could do something like call for entitlement cuts over deficit concerns in the same breath he defends the GOP tax cuts as being deficit-neutral. Because don’t forget that it’s not like Mitch McConnell’s desire to cut entitlements isn’t held by the entire GOP. They just don’t like to talk about it during elections. And that includes all those GOPers in tight Senate races.
So Mitch McConnell may have handed Democrats an incredible political gift by turning the GOP’s barely-hidden desires to cut entitlements into a national issue in the closing weeks of the mid-terms. Because when the Senate Majority Leader demonstrates the kind crass political cynicism and deception on display in the following interview, that’s a national issue. And a national crisis of crass cynicism predicated on the assumption that the masses will believe anything:
“Senate Majority Leader Mitch McConnell blamed rising federal deficits and debt on a bipartisan unwillingness to contain spending on Medicare, Medicaid and Social Security, and said he sees little chance of a major deficit reduction deal while Republicans control Congress and the White House.”
Blame entitlements, not the giant tax cuts. That was Mitch’s message. And then he tried to frame it as a bipartisan problem, which ignores the fact that the tax cuts just passed last year and are the direct cause of US deficits were passed exclusively by Republicans. So the can unilaterally create a bipartisan deficit crisis according to Mitch:
““It’s a bipartisan problem: unwillingness to address the real drivers of the debt by doing anything to adjust those programs to the demographics of America in the future.””
It’s that kind of in-your-face cynicism that drives home one of the central lessons of American politics today: The real drivers of the US deficit is Republican tax cuts for the rich. The tax cuts don’t exclusively drive higher deficits. They also drive the yawning wealth gap and corporate power and drive the breakdown in things like public investments in infrastructure and education. But they are unambiguously major drivers of US deficits and Mitch McConnell is doing a wonderful job of making that ironically clear:
And, again, we can’t forget that McConnell’s stance on this is identical to the rest of the GOP. Even Donald Trump, who notably campaigned promising to protect entitlements, included massive cuts to those programs in his budget proposals:
So as we can see, Mitch McConnell decided to be shockingly dishonest in such a jarring manner that it almost qualifies as accidental honesty by being to blatant. Ironically honest dishonesty. It’s kind of refreshing.
So what are the odds of Mitch McConnell’s last-minute shockingly honest dishonesty will actually impact his fellow Republican senators in tight races? That presumably depends on whether or not the Democrats can successfully translate McConnell’s comments into a greater public recognition that virtually all Republican candidates share his views. Along with the Trump White House, which made pretty much the same arguments McConnell made just last month:
“A top economic adviser to President Donald Trump said on Monday he expects U.S. budget deficits of about 4 percent to 5 percent of the country’s economic output for the next one to two years, adding that there would likely be an effort in 2019 to cut spending on entitlement programs.”
Those were the words of Trump’s economic adviser Larry Kudlow just last month: the drive to cut entitlements in order to curb rising deficits will probably happen in 2019.
And then he went on to repeat the laughable claim that the giant tax cut that slashed federal revenues has nothing to do with the rising deficits:
Then Kudlow brought up the idea of making the temporary parts of the GOP tax cuts permanent. Recall how the corporate tax cuts were made permanent but all the individual tax cuts — the only part that sort of helped the middle-class — is set to expire in 2025. It was all part of holding the projected costs of the tax cut below the technical threshold needed for the GOP to pass the law without the threat of a Democratic filibuster in the Senate. Republicans have been pledging to make those individual cuts permanent ever since, which is what Kudlow was echo, along with the claim that doing so wouldn’t impact that deficit at all:
So the Trump White House is planning on more ‘deficit-neutral’ tax cuts while it simultaneously plans on entitlement cuts next year to deal with rising deficits. And while the passage of new tax cuts before the mid-terms isn’t possible, the Trump White House is still looking at some sort of symbolic declared tax cut. That’s not just based on Larry Kudlow’s words. Trump himself just declared there’s going to be some sort of new tax cut proposal before the mid-terms. New tax cuts that will presumably have to be paid for with more entitlement cuts:
“In Nevada on Saturday, Mr. Trump said he and Republican lawmakers had been working on “a very major tax cut” for middle-income people that would be rolled out in the coming weeks.”
A “very major tax cut” for middle-income people. That appears to be a big part of Trump’s planned closing arguments in this election cycle. A promise of more tax cuts (without mentioning the corresponding entitlement cuts). And this time the tax cuts will actually help the middle-class apparently. Treasury Secretary Mnuchin then points out that administration is planning on paying for these additional tax cuts with more spending cuts:
Then the Treasury Secretary reiterated his claim that the GOP tax cuts are actually paying for themselves and not in any way causing the sudden sharp deficit spike:
Then Mnuchin claims that the new tax cuts the White House is thinking about are different from the tax bill quietly passed by the House GOP in September that would have made the individual tax cuts permanent:
Think about that: the House GOP quietly passed a bill that would make permanent the individual tax cuts. It’s as clear evidence as you can find that the GOP tax cuts are a political liability. Perhaps that’s why Steve Mnuchin insists that he’s been working diligently with Representative Kevin Brady of Texas, the Republican chairman of the House Ways and Means Committee, on this new tax plan that would be “specifically focused on the middle class and not beyond that”:
So we know that the GOP is planning on two big new tax cut packages: making the individual tax cuts permanent (which helped the middle-class a little and the super-rich significantly) and then some vague additional new tax cuts targeting only the middle-class that Trump suddenly promised during a rally. And as Mitch McConnell dishonestly made clear in his recent interview, all those new tax cuts are going to inevitably result in more demanded entitlement cuts to pay for them. It’s an interesting pitch to voters, because it’s basically a pledge to do more of what the public generally doesn’t like about Republicans. The tax cuts aren’t actually popular with non-GOP voters as polls show, and the GOP passed a bill to make the individual rates permanent and didn’t tell anyone. It appears the American public may have figured out that even the individual tax cuts in the GOP’s tax bill, almost the only part that kind of helped the middle-class a bit, still net help the rich much more. Most Americans simply do not make enough money to pay much in federal income taxes so making them permanent isn’t exactly a high voter priority.
And might the unpopularity of making the individual tax cuts permanent be the reason Trump is proposing some sort of new middle-class targeted tax cut? Perhaps, but it’s worth noting that the GOP leadership is acting like it has no idea what Trump and Steve Mnuchin are talking about with their new proposed middle-class tax cut. In other words, it looks like Trump completely pulled this new ‘middle-class tax cut’ idea out of his ass on the campaign trail:
“President Donald Trump has promised a new middle-income tax cut plan to land days before the midterm election, a move aimed at boosting his party’s chances of holding its Congressional majorities — yet Republican tax policy-makers know nothing about it.”
It sounds like the rest of the GOP didn’t get the memo about the new middle-class tax cut. Presumably because it was just a lie Trump made up on the spot. After all, what are the odds the GOP would pass a tax cut just for the middle-class. That’s almost as anti-GOP a policy as you can find:
Adding to the evidence suggesting that Trump just made it all up is the anonymous GOP tax lobbyist who apparently met with the White House recently and heard nothing about this:
And yet Trump claimed that Paul Ryan and Kevin Brady are working away on this mystery plan for just the middle-class. Something Steve Mnuchin backed up the next day. Without providing any details at all about this mystery plan:
All in all, it seems like kind of risky move on Trump’s part. Making up a fake middle-class tax cut is kind of bad politics after passing a tax cut that the public thinks mostly just helped the rich. But this is how Trump operates. And the way Trump operates sometimes helps the rest of the GOP and sometimes hurt them, so we’ll see how Trump’s mystery fake tax plan pans out. But as Senator Thom Tillis demonstrated during his own interviews on the Sunday talk shows, the rest of the GOP probably doesn’t want to talk about more tax cuts because it leads to conversations like the one Tillis just had, where he called for “tough choices so that we can balance our books,” at the same time he repeated the GOP lie that the tax cuts are paying for themselves and not contributing the deficit that’s forcing the “tough choices”:
Adding to bad tax cut politics for the GOP at this moment is the fact that Trump ordered his cabinet to cut each federal agency’s budget by 5 percent to deal with these rising deficits:
And that’s all the kind of backdrop that inevitably going to lead to proposals like the one Democratic Senator Kamala Harris made, to repeal the GOP tax cuts and replace them with actual tax cuts targeting the middle-class and don’t blow up the deficit and threaten entitlements:
In all, between Mitch McConnell’s mysteriously candid yet dishonest interview combined with Trump’s apparent middle-class-only tax cut lie, the GOP is managing to make a compelling argument for giving Democrats control of the House, Senate and White House as soon as possible. Because that’s what’s going to be required to fix this fiscal nightmare threatening entitlements.
OF course, as Paul Krugman points out, at this point the GOP is lying about almost almost everything in terms of the parties goals and the impact of its policies. This latest tax scam is just one facet of the Republican Party’s long-standing Orwellian crisis: