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:
“When the Trump tax cut was on the verge of being enacted, I called it “the biggest tax scam in history,” and made a prediction: deficits would soar, and when they did, Republicans would once again pretend to care about debt and demand cuts in Medicare, Medicaid and Social Security.”
As Krugman points out, he predicted exactly what happened. Because was all highly predictable. Both the way the tax cuts would explode the deficit and how the GOP would respond with calls for entitlement cuts. It was all highly predictable in a highly Orwellian manner:
As Krugman also points out, it’s not like the GOP actually believes its own arguments. We’re simply dealing with a party that has a strategy of knowingly lying about the fiscal impact of its tax cuts and using the resulting deficits to call for entitlement cuts. It’s that horribly simple:
But as Krugman grimly observes, despite the GOP’s long embrace of up-is-down deception, it does indeed seem like GOP’s lying is somehow getting worse. Which hardly seems possible and yet it’s happening. Whether is a barrage of lies about tax cuts, entitlements, or health care, like the absurdist claims that the GOPers are making about health care and claims of trying to protect coverage for people with pre-existing conditions, the GOP is lying like it’s rarely lied before this election. It’s an amazing feat:
As Krugman also observes, the embrace of theses kinds of in-your-face up-is-down lies is presumably predicated on a genuine contempt for voters including the GOP’s own voters who are lied to the most aggressively by right-wing media. And this wall of lies is the real GOP final stretch campaign strategy. Just say anything:
And it’s that ‘just say anything’ context that we have to place Trump’s mysterious made up middle-class tax plan. He’s just doing what the rest of the GOP is doing in this period of unparalleled lying by the entire party which has truly embraced Orwell. Trump is just often out of sync with the rest of the GOP because he an undisciplined liar who just makes things up on the fly.
How will Trump making up a fake middle-class tax cut plan weeks before the election play out? We’ll see. But in Trump’s defense, this the most benign GOP tax lie ever. After all, he lied about the existence of a non-existent GOP tax bill. That’s arguably the most positive GOP tax lie ever. Although he lied about a middle-class-only tax cut, which would be the best GOP tax cut ever, so in that sense it was an extra nasty lie because he lied about the best GOP tax cut ever. It’s a complicated lie.
And when it comes to Mitch McConnell’s warnings about the GOP’s plans on pushing for entitlement cuts next should the Democrats take control of the House, one nice thing about McConnell’s decision to tie together deficit and entitlements together in such a blatantly cynical way is it helps to make it clear that the best way to deal with the cost of entitlement spending is to raise taxes on the super-rich and big corporations. So that’s positive. Maybe fixing the US’s fiscal situation to protect entitlements involves repealing the GOP’s 2017 tax cuts, or maybe it involves just new targeted tax hikes on the wealthy on big corporations. But the farcical nature of the GOP’s stance on taxes and entitlement is making it abundantly clear that tax cuts for the wealth of corporations will blow up the deficit and that’s going to translate into entitlement cuts. It’s a given under the GOP’s plans. So reversing those tax cuts for the rich and big corporations is the obvious solution to saving entitlements, as Mitch McConnell ironically, cynically, and blatantly made clear weeks before the mid-terms. And that requires voting out the GOP. When the GOP ‘drops the mask’, it often comes in the form of lying very obviously. Which is what just happened and is kind of helpful.
So both Trump and McConnell sort of helped out by being to blatantly dishonest and cynical in such strategically bad ways in the midst of unprecedented levels of overall GOP dishonesty during a campaign season. Days after Mitch McConnell talks about entitlement cuts to deal with rising deficits and deflects blame away from the GOP’s unpopular tax cuts, Trump appears to flagrantly just make up a middle-class-only tax cut plan. As Krugman asks, can a campaign this dishonest actually succeed? Perhaps even with the GOP picking up senate seats? Even after Trump and McConnell just ‘dropped the mask’ with blatant lies and calls for entitlement cuts? We’ll see. Don’t forget that the GOP’s Orwellian powers include Orwellian vote-counting abilities too. It’s a different kind of systemic GOP lying that blatantly imperils American democracy.
By the time it became clear that the GOP wasn’t going to be touting its tax cut scam as a selling point in the 2018 mid-terms, the reason for that strategic decision was already pretty clear too: the tax cuts are simply unpopular and seen as largely a massive giveaway to the wealthy and corporation. It’s so obvious unpopular that President Trump even proclaimed a couple weeks ago that he was working on a special tax cut for the middle-class only that would be rolled out before election day. That turned out to be a complete lie, of course. But it was a lie that belied an unpleasant truth for the GOP. Those tax cuts were supposed to be the party’s reelection strategy and instead they became a liability. As a consequence, the GOP decided to make fearmongering about immigrants and ‘the caravan’ their central rallying cry.
And as part of that anti-immigrant rallying, Trump himself has assumed a center stage role and explicitly framed the mid-terms as a referendum on his presidency. So given the fact that Trump is going out of his way to make sure these mid-terms are seen as a referendum on himself, and given the unpopularity of his tax cuts, it’s somewhat surprising that one of the biggest and most scandalous reports on the Trump family history was published just a month ago but hasn’t also played a more significant role in these mid-terms. It’s especially surprising because when you look at that story, it’s almost like the Trump family is the living personification of what it is that the public hates about the tax cuts. A family fortune built on scamming the public so the already rich can get much, much richer and build an enduring dynasty:
“As it turns out, both of Clinton’s jabs—that the so-called self-made billionaire received a tad bit more than $1 million from his father, and that he knows a thing or two about tax-dodging—turned out to be more or less correct. Only Clinton was unwittingly downplaying things. According to a bonkers, years-long investigation by The New York Times, published on Tuesday, not only did Donald Trump receive hundreds of millions of dollars from his father—a man who thought it was hugely unfair for the government to tax his fortune, despite building that fortune largely through the help of federal housing subsidies—but most of that money “came to Mr. Trump through dubious tax schemes he participated in during the 1990s, including instances of outright fraud.” (Emphasis added to note that “fraud” is an actual crime.) In total, Fred Trump and his wife, Mary, transferred more than $1 billion to their children, a gift that should have produced a tax bill of at least $550 million based on tax rates at the time. Instead, the Trumps ended up paying a mere $52.2 million, tax returns show.”
Yep, Trump fortune wasn’t just started with hundreds of millions of dollars from his dad. Those hundreds of millions of dollars were funneled to Trump via outright fraudulent schemes designed to minimize Trump Sr.‘s taxes, thus maximizing the Trump family’s overall fortune. Trump’s financial gifts started as a small child and by the time he was in his 40s and 50s he was receiving more than $5 million a year from his dad. That’s a pretty sweet allowance:
And when Trump Sr. was getting close to death, Donald Trump was at the center of the fraudulent tax avoidance schemes used to shield Fred Trump’s fortune from the inheritance tax:
And how did the president respond to this report? Well, his attorney assured us that there was no fraud, but if there was fraud it was fraud done by other Trump family members and/or employees:
And that highly topical Trump family scandal was just revealed a month ago. A highly scandalous Trump story that largely came and went from the public’s attention like almost all highly scandalous Trump-related stories. It’s one of the defining features of the age of Trump. The scandals all get buried in a flood of more scandals.
So who knows if this scandal will end up haunting Trump in the future or if it’s already fallen down the American memory hole like most Trump scandals, but given that particular Trump scandal really gets to the heart of why the GOP tax scam was so unpopular, it seems like the kind of scandal that the American public is going to be reminded of over and over. Why? Because in addition to endless Trump scandals being a feature of contemporary America, stories like the following are also an unsettling new feature of contemporary America. Stories about the wealth gap continuing to explode and the consolidation of an American plutocracy thanks to the active efforts of Americans wealthiest families to make themselves wealthier at the expense of everyone else:
“In the face of weakened tax laws and aggressive wealth hiding, we’re facing the emergence of widespread wealth dynasties. The French economist Thomas Piketty has warned that if we don’t intervene to reverse these dynamics, we’re moving toward a “patrimonial capitalism”, where the heirs of today’s billionaires will dominate our politics, culture, philanthropy and economy.”
That’s right, the top three wealthiest individuals in America now have as much wealth as the bottom half of the US population combined:
““We’re developing into a plutocracy,” said the former Federal Reserve.”
When Ronald Reagan’s former head of the Federal Reserve warns about a rising plutocracy that’s a warning worth heeding.
And it’s not just a warning about a rising plutocracy. It’s a warning about a rising multi-generational plutocracy. The three wealthiest families in American have seen their net wealth increase %6,000 percent (60-fold) since 1982, which is not coincidentally the year after Ronald Reagan’s massive 1981 supply-side tax cuts for the wealthy. And during this same period, median US household wealth dropped by 3 percent. You almost couldn’t ask for more compelling real-world evidence that the rise of the American plutocracy is coming at the expense of everyone else:
So how long will it be before it’s a 100-fold increase? Or 500-fold? We’ll find out, sooner than you probably expect because it’s not like this trend is showing any sign of slowing down. Especially after the GOP’s 2017 tax cuts, which is only going to accelerate it.
And, of course, much of the rise of the American plutocracy can be seen as a direct consequence of the aggressive use of tax tricks designed to protect dynastic wealth. In other words, cheating the public out of taxes so the children of the super-rich can get super-richer:
And if it wasn’t clear that tax dodging has played a key role in the rise of this modern day plutocracy, let’s take a quick look at more of what Reagan’s former Federal Reserve chairman, Paul Volcker, had to say about this phenomena: “The central issue is we’re developing into a plutocracy...We’ve got an enormous number of enormously rich people that have convinced themselves that they’re rich because they’re smart and constructive. And they don’t like government, and they don’t like to pay taxes”:
““The central issue is we’re developing into a plutocracy,” he told me. “We’ve got an enormous number of enormously rich people that have convinced themselves that they’re rich because they’re smart and constructive. And they don’t like government, and they don’t like to pay taxes.””
And that, right there, is why the story of the Trump family’s tax fraud is the kind of story that could capture the imaginations, and ire, of the American public, even if it seems like that explosive report has already been forgotten. We’ll see if that happens. But every single time there’s a new report about the super-rich getting richer, it’s going to be worth keeping in mind that both the GOP’s tax cut scam and Trump family’s history of tax fraud are part of that larger story of the rise of the American plutocracy. A story that isn’t going away and rapidly getting worse thanks to Trump and the GOP.
The fact that US stocks have more or less erased their gains for the year over the last few days has received quite a few headlines. Tech stock like Google and Facebook have been getting particularly hammered.
A story that’s received far less attention is the story of the impact of the GOP tax cuts of 2017 that have had nearly a year to start taking effect. As the following article points out, it’s not looking good. Not because the tax cuts haven’t had a stimulative impact. In the short run they have had a positive impact as they inevitably would. But the kinds of private sector investments that will lead to the greater longs-term growth, which is one of the arguments the advocates of supply side economics always use for why we should accept higher deficits in the short run from tax cuts. In the long run they’ll pay for themselves through higher private investment. 10 months into the new GOP tax regime, which lowered the corporate tax from 35 to 21 percent, and the promised capital investments by the private sector hasn’t materialized. In other words, the seeds of that that promised long-term growth aren’t being sowed.
Plus, Alphabet, Facebook, Intel, Exxon Mobil and Goldman Sachs make up about third of the entire rise capital spending. That’s awfully concentrated and not exactly signs of business sowing the seeds of a greater economy.
The article also mentions the nonprofit research of Just Capital, which is tracking 1,000 large public companies’ reports of how they are spending their tax cuts. Just Capital finds that, since the tax cuts were passed, those 1,000 largest public companies have actually reduced employment, announcing the elimination of nearly 140,000 jobs — almost double the 73,000 jobs they say they have created in that time. Wages, for the most part, have grown but not at the pace of inflation, according to Just Capital.
And about half of the $270 billion in repatriated overseas corporate profits were spent on $124 billion in stock buybacks. So instead of restructuring US business incentives and encouraging the kinds of long-term investments that the GOP promised would pay for the tax cuts by growing the economy, one of the only ‘benefits’ of the tax cut was to inflate the stock values of the largest US companies and now those inflated values have been effectively wiped out in the market rout:
“Ten months after the law took effect, that promised “supply-side” bump is harder to find than the sugar-high stimulus. It’s still early, but here’s what the numbers tell us so far:”
The supply-side bump isn’t even a bump. Wages haven’t even kept up with inflation and wage growth is actually slowing. But the backers of supply-side economic policies always warn that it will take time for the long-term growth positive impacts of the tax cuts to take effect. First companies need to invest in more capital which will raise worker productivity, and only after those capital investments raise worker productivity will American workers see the promised wage gains. That’s the supply-side narrative. A narrative that conveniently excuses away the lack of meaningful benefits for average Americans and excuses away the immediate damage to the national debt and deficits cause by these policies:
“By Republicans’ own economic theories, it should take a while for corporate tax cuts to translate into higher worker pay. First, the cuts need to stimulate increased capital investments, which in turn raise worker productivity. More productive workers would then see their wages rise accordingly.”
It’s a convenient narrative for the advocates of supply-side economic theories: patience is all that is required. Patience and faith in the supply-side economic theories. Theories that have yet to be proven to work despite being repeatedly employed in the United States since Ronald Reagan introduced them in the 80’s, although they have proven to explode the wealth gap quite effectively while wages stagnated.
The narrative is particularly convenient in the face of evidence that the top 1000 largest US companies have actually reduced employment since the tax cut was passed:
And while capital investments have indeed risen in 2018, the rise has been highly concentrated, with Alphabet, and Facebook, Intel, Exxon Mobil and Goldman Sachs alone accounting for a third of the rise and the vast majority of companies indicating the tax cuts have made no change of investment plans:
But there has been one big change in corporate behavior as a result of the tax code: $270 billion in overseas corporate profits have been repatriated as a result. Unfortunately, almost half of that repatriated money has been spent on stock buybacks, which helps no one but existing shareholders and the executives:
Then there’s the exploding national debt and deficits. Supply-side proponents assure us that this is just temporary as we wait for the magic of the tax cuts to take effect, magic that would be a lot easier to believe in if businesses actually appeared to be increasing their investments as a result of this tax cut. But they aren’t, so the only thing we should really believe at this point is that US debts and deficits are going to be going a lot higher for the foreseeable future:
So it’s looking like the GOP tax cuts are turning out to be a failure in pretty much every possible dimension of policy performance. It’s a notable failure because one of the fears of passing this tax cut at the height of an economic recovery was the fear that it would overstimulate the economy so much that wages would rise rapidly and the Federal Reserve would respond with rapid interest rate hikes and trigger the next recession. And yet we haven’t even seen that wage growth. That’s how wildly unhelpful this tax cut was for average Americans.
And as the following piece by Paul Krugman reminds us, the reason for this spectacular policy failure is clear and has been clear for quite some time: supply-side economics is a fraud:
“Meanwhile, there’s no sign of the vast investment boom the law’s backers promised. Corporations have used the tax cut’s proceeds largely to buy back their own stock rather than to add jobs and expand capacity.”
The big predicted investment boom turned out to be a another Republican myth. A now familiar myth we’ve been hearing for decades. And that’s part of why the failure of the GOP tax cuts is such a significant story: it’s a big piece of empirical evidence that the Republican Party’s economic doctrine as a whole is a giant pile of destructive garbage. As Krugman argues, it’s a dirty secret in macroeconomics that business decisions aren’t actually very responsive to interest rate changes, other than the impact interest rate have on the value of the dollar and the housing market. And the same logic applies to tax rates. Businesses simply aren’t more likely to make a spending decision due to lower taxes on that spending. And if it’s the case that business spending decisions aren’t nearly as responsive to things like interest rates as supply-side theory suggests, that makes supply-side theories fundamentally garbage because they are theories that emerge only when you assume that business decisions actually are very responsive to things like tax rates:
So what about the observation that countries with very low corporate tax rates can attract additional foreign investment? Well, as Krugman points out, when you look at a country like Ireland, those foreign investments are largely accounting fictions. And that’s part of why there’s been no substantial impact felt from the decision of US corporations to transfer assets from overseas subsidiaries in low-tax places like Ireland back to the parent companies in the US: those investments in low-tax countries like Ireland were never real investments. They were investments on paper alone:
And as Krugman also points out, it’s objectively the case that supply-side theories just keep failing and the failure of the GOP tax cuts is simply the latest example of this failure. America keeps giving supply-siders the benefit of the doubt despite this horrible track record:
So that’s all one big reason average Americans probably didn’t end up giving too much tanks for the GOP tax cuts during Thanksgiving this year. But it’s also all one big reason why Americans shouldn’t forget to be not thankful for the latest GOP tax cut next Thanksgiving and each one after that for the foreseeable future, not just this year. Because the promised positive impact of these tax cuts is supposed to emerge in the long-run, and that means the failure of these tax cuts is actually going to grow year after year as that long-term growth fails to materialize.
And perhaps most importantly, the failure of supply-side economic theories due to a lack of corporate sensitivity to tax rates also means that we shouldn’t fear some sort of big wave of economic damage should the US actually try to correct the supply-side disaster and raise taxes on corporations and the wealthy. In other words, the empirical failure of the repeated experiments with supply-side policies doubles as empirical evidence that we shouldn’t really fear raising taxes on the wealthy and corporations. Americans can address the growing wealth gap and wild power imbalance in American society by simply reversing these disastrous GOP tax cuts without worrying about the threats of economic damage. America can actually wake up from its multi-decade supply-side nightmare and that’s definitely something average Americans should be thankful for this year and every year.
The Daily Beast has a new piece with a behind-the-scenes peek at Trump that’s typically shockingly unshocking: It turns out Trump doesn’t care about the the fact that the GOP tax cuts are exploding the national debt because “I won’t be here” when it blows up.
It’s an unshocking revelation because it’s completely obvious that Trump and the rest of the Republican Party hasn’t actually care about the national debt since Ronald Reagan and the party’s embrace of supply-side ‘voodoo’ economics.
But it’s still kind of shocking that Trump apparently straight up tells people behind closed doors that he doesn’t care because he doesn’t expect to still be in office when there’s some sort of national debt crisis. You’d think he’d be concerned about articles like this coming out, but apparently not. After all, you almost couldn’t come up with a better example of the “time inconsistency” scam that the Republican Party has been running for decades now — the scam described by former Reagan advisor Bruce Bartlett where the GOP cuts taxes to get immediate political benefits knowing that voters won’t know who to blame when the long-term negative consequences of those tax cuts play out years later at which point the debt crisis can be used to justify cuts to entitlements and other public programs — than to learn that the Republican president doesn’t care about the long-term consequences of a giant tax cut for the rich because it’s going to happen after they are out of office. That’s all part of why this was shockingly unshocking. Perhaps unshockingly shocking is a better way to put it.
Plus, when stories like this inevitably come out if he talks like this behind closed doors, that’s probably not going to do great things to the financial markets.
The article’s behind-the-scenes peek is based on anonymous “sources close the president”. You have to wonder who they might be. But there are some non-anonymous sources who come to Trump’s defense in the article and their arguments are highly illustrative of the deceptive/lunatic nature of Republican Party’s justifications for supply-side policies.
One of the people coming to Trump’s defense is Marc Short, Trump’s former legislative affairs director. Short claimed that, yes, Trump is actually very concerned about the debt. Short goes on to say that he believes “this administration” and “this congress” need to deal with “out-of-control entitlement programs”. It’s an ominous recommendation because “this congress” is a lame duck congress that’s going to end in January. Might we be seeing the hints of a lame duck GOP attack on entitlements?
Hogan Gidley, a spokesman for the president, also defended Trump by pointed to his 2017 budget proposal noted which the administration claimed would balance the budget in 10 years. That proposal, of course, was notoriously draconian and called for massive cuts to almost all non-military federal spending, the privatization of public assets, and massive cuts to spending for rural America.
An anonymous “current senior Trump administration official” complains that Trump “doesn’t really care” about actually attacking the debt “crisis,” and prefers simply “jobs and growth, whatever that means.” This anonymous official laughably gripes that “He understands the messaging of it, but he isn’t a doctrinaire conservative who deeply cares about the national debt, especially not on his watch… It’s not actually a top priority for him… He understands the political nature of the debt but it’s clearly not, frankly, something he sees as crucial to his legacy.”
Given that the idea that a modern Republican genuinely cares about the national debt is beyond farcical given the historic reality of the profound failure of American’s decades-long experiment with supply-side economics, this anonymous current official was really merely complaining that Trump doesn’t spend much time pretending to care about the debt. Trump doesn’t incorporate talk about the urgent need to cut spending into his normal rhetoric like pre-Trump Republicans almost always used to do. That’s what this anonymous official was concerned about when he talked about how Trump “understands the messaging of it”.
And this anonymous official does have a point: Trump really has dropped the “we must cut spending now or it’s doom!” part of classic GOP propaganda and swapped it for a “economic growth is the solution!” branding, which is a branding that is implicitly much more open towards recognizing the stimulative value of government spending. To some extent it’s an acknowledgment of the failure of the right-wing billionaires to sell even the Republican base on the need for massive spending cuts, especially to entitlements. The Trumpified Republican base wants red meat nativist politics, not supply-side economics. And doesn’t want entitlement cuts. That’s what sells. So Trump’s “growth is the solution” approach really is a better sales pitch even if the public is getting the same ol’ GOP behavior of spending like blackout drunk sailors when they’re in power while they plan for massive spending cuts after their policies cause a fiscal crisis.
Interestingly, one of the big defenders of Trump’s new “growth is the key!” branding for the Republican policy agenda is Stephen Moore of the Heritage Foundation. Moore was one of Trump’s economic advisers during the campaign. And not only does he defend Trump’s approach to the debt and deficit, he actually takes credit for Trump going down this path. As Moore puts it, he personally assured then-candidate Trump that the way to deal with the US’s long-term debt issues is to focus increasing economic growth. Moore describes a belief by Trump that strong economic growth would solve all problems and allow him to slash taxes and spend big on infrastructure without big entitlement cuts. Moore calls it “Trumponomics” and co-authored a book advocating it.
Don’t forget that Stephen Moore is one of the most lunatic supply-side economists out there. So to have him guide Trump’s “growth alone is the key” rebranding of the GOP’s economic agenda is a notable event. It also highlights how it’s merely a rebranding. Again, don’t forget that Trump’s first budget proposal included draconian cuts to public spending including to entitlement programs and wanted to use the privatization of public assets to fuel the infrastructure plan. His administration has never accepted Keynesian-style stimulus. They merely used a “growth is the key!” slogan to avoid using the traditional Republican unpopular rhetoric about deficit cutting and entitlement cuts. It’s still clearly the same Republican old policy. A policy of creating fiscal crises that can be used to force the Democrats into bipartisan austerity programs so the political burden for cutting beloved public programs can be shared. The big spending cuts only happen if Democrats agree to share the blame, hence the need for a fiscal crisis.
And that’s a reminder of another reason why we shouldn’t be shocked that Trump doesn’t actually care about his policies creating a debt crisis: causing a debt crisis is literally the key part of the GOP’s strategy for forcing its plan cuts to entitlements while sharing the blame with Democrats. A giant debt crisis is the plan. So this is about as shocking as learning that Trump is fine with things going as planned:
“Sources close to the president say he has repeatedly shrugged it off, implying that he doesn’t have to worry about the money owed to America’s creditors—currently about $21 trillion—because he won’t be around to shoulder the blame when it becomes even more untenable.”
The consequences of the Grand Slow Motion GOP Smash and Grab policy agenda doesn’t concern Trump because he’s pretty sure someone else will take the blame, just like the rest of the Republicans in congress. Imagine that:
And this lack of exhibiting a personal concern about the debt is very concerning to the anonymous sources in this article. One senior current official complains that Trump prefers simply “jobs and growth, whatever that means”:
But Trumps former director of legislative affairs, Marc Short, assures us that Trump cares about debt. Short then goes on to call for “this administration and this Congress” to “address spending because we have out-of-control entitlement programs”. It’s an ominous hint at a lame duck session attack on public programs and entitlements coming from someone like Short, who should know something about the GOP’s planned upcoming moves in congress:
Then Trump’s spokesman points to his draconian first budget proposal as evidence of his commitment to tackling the debt. So his budget proposal that never stood a chance of becoming law because it was so draconian is what we should look to when determining if Trump cares about the national debt, not the giant tax cut Trump fought for that’s already exploding the debt:
And then Stephen Moore informs us that he personally sold Trump on the idea that focusing on economic growth alone will solve the debt problems, which is another was a saying he gave his blessing to Trump’s strategy of dropping the traditional GOP rhetoric about the need for spending cuts. Spending cuts will still be pursued in areas like the safety-net and entitlements when the opportunity is there, but they won’t talk about it. That’s what the ‘focus on growth’ strategy is all about and it is a genuinely new thing for the GOP. The same wolf in newer, shinier sheep’s clothing:
But as we’ve seen, the promised supply-side seeds of new business investment hasn’t shown up yet. And as the current swooning US bond and equity markets hint at, the prospects for future growth on the global stage appears to be waning. The ‘growth is the key!’ strategy is already failing and set to fail bigger going forward:
So it’s going to be interesting to see how a possibly slowly economy alters the Trump administration’s lack of rhetorical focus on spending cuts.
Also keep in mind that the political dynamic that is keeping Trump from needing to talk about spending/entitlement cuts. The fact that the GOP held complete control of congress and the White House gave the Republicans the option of unilaterally imposing cuts but that’s not how the GOP operates because then they would solely take the blame. The party waits for the inevitable fiscal crises that will come for their budget-busting tax cuts to force the Democrats to go in on a bipartisan austerity agenda. And having the Democrats take control of the House is exactly the kind of situation where the GOP is going to start trying to coax/force the Democrats to sign on to a bipartisan austerity agenda with big cuts.
In other words, now that the Democrats are in control of the House, the GOP could suddenly really use a fiscal crisis. Soon. More accurately, the billionaires behind the GOP who desperately want to slash entitlements and public spending as much as possible could really use a fiscal crisis very soon.
Trump himself probably doesn’t want a fiscal crisis. Not on his watch. As we are told, dealing with a fiscal crisis is supposed to be for some future president according to Trump. But his billionaire buddies could sure use a fiscal crisis on Trump’s watch.
So that’s all one big source of financial uncertainty investors should keep in mind. If the US or global economy goes south fast, just how bad is the US’s fiscal situation going to get after this tax cut disaster? What if there’s almost no growth and actually economic shrinkage? What happens to the US deficit the Trump/Moore ‘Trumponomics’ model under those conditions? That seems like a big question investors must be asking themselves these days?
And what about the perverse incentive of the GOP’s billionaire backers to see a fiscal crisis unfold now that the GOP is in control of the White House and Senate but Democrats in control of the House. The stars are once again aligned for a big push at the key long-term goals on the right-wing billionaire agenda like big entitlement cuts. And a fiscal crisis is a key part of that plan. So just how interested is that network of billionaires seeing a fiscal crisis happen? And how much more likely is a fiscal crisis to to happen if that network of right-wing billionaires is interesting in seeing it happen? That’s something investors should also be asking themselves too. And Trump. He should definitely be asking himself that question too.
With President Trump continuing to threaten to declare a national emergency at the US border with Mexico as part of a strategy for getting funding for ‘the Wall’ without going through Congress, even some congressional Republicans in are warning that using a national emergency to get around Congress sets a bad precedent. Which is especially true when illegal border crossings are at a multi-decade low that ‘national emergency’ is a manufactured crisis largely driven by right-wing media outlets.
So given that the US appears to be in the midst of fake crisis manufactured to allow Trump to get basically remove Congress from the law-making process, it’s worth noting one of the interesting parallels this whole situation has to lone significant legislative ‘victory’ Trump actually achieved during his two years of Republican control of congress: the GOP tax cut, which was based on fake economic doctrines and designed to create future fiscal crises in order to justify cuts to social programs. A crisis-making machine built to create large deficits so Republicans can pretend that the only solution is to cut entitlements and the safety-net. That’s pretty much only significant legislative accomplishment of the first two years of the Trump administration. A tax law that designed to create crises that a simultaneously fake and real. Which is kind of impressive.
So when might those inevitable fake/real fiscal crises arise as a consequence of this tax law? That’s unclear at this point, but if a fiscal crisis emerges soon than expected we should probably expect that at this point. Because as the following column by Paul Krugman reminds us, the GOP tax scam is worse than you think:
“Yet coverage actually hasn’t been negative enough. The story you mostly read runs something like this: The tax cut has caused corporations to bring some money home, but they’ve used it for stock buybacks rather than to raise wages, and the boost to growth has been modest. That doesn’t sound great, but it’s still better than the reality: No money has, in fact, been brought home, and the tax cut has probably reduced national income. Indeed, at least 90 percent of Americans will end up poorer thanks to that cut.”
At least 90 percent of Americans will end up poorer thanks to the GOP tax cut. That’s how big of a scam it was.
But the tax scam isn’t just net harmful. It’s also unhelpful, in the sense that it doesn’t even provide the positive benefits it was supposed to provide. Like greater investment in the US. It’s simply not happening:
This isn’t to say the tax bill didn’t help anyone. It’s been a big help to the shareholders of large corporations. Shareholders that happen to be foreign shareholders for about a third of the corporate ownership of American businesses. So foreign wealthy people got a big boost from the GOP tax bill. At least someone benefited:
And, of course, there’s the price that’s going to eventually be paid by the American public when the inevitable deficit explosion leads to declarations of a ‘national emergency’ and calls for cutting programs (or raising taxes on the poor and middle-class):
And that’s the only meaningful legislative accomplishment Trump and the GOP managed to get done during two years of unified Republican rule.
So while the prospect of Trump creating a fake national emergency at the border does indeed threatened to establish a harmful embrace of ‘national emergencies’ as a means of forcing through policies in order to get around opposition in Congress, it’s going to be worth keeping in mind that the strategic creation of national emergencies is a central part of the GOP’s approach to advancing their policy agenda when Congress is involved too.
Well that’s refreshingly and disturbingly candid: An anonymous “senior White House official” wrote an op-ed published in the Daily Caller where this individual basically expresses their desire that the ongoing partial federal government shutdown goes on indefinitely. Why? Because, according to this anonymous official, almost all federal workers do nothing useful anyway so this person is hoping that the government shutdown can be used to effectively shrink the federal government down to the “free market night watchman” state “our founders envisioned.” In other words, this anonymous senior White House official is gleeful that Grover Norquist’s infamous declaration that “I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub” is coming to fruition as long as they keep the government closed:
“Federal employees are starting to feel the strain of the shutdown. I am one of them. But for the sake of our nation, I hope it lasts a very long time, till the government is changed and can never return to its previous form.”
Yep, this anonymous senior White House official is hoping this government shutdown lasts so long that it permanently shrinks the federal government. Of course, this is portrayed is a desirable outcome because, according to this anonymous official, the federal government is filled with lazy, evil bureaucrats standing in the way of the Trump administration’s bold agenda. And perhaps an extended shutdown will prove to the American people that the only government they need is the “free market night watchman” state “our founders envisioned” (another meme routinely pushed in right-wing media). So an extended government shutdown isn’t just perceived as being awesome to this anonymous official. This official appears to also believe that the American public itself will think an extended shutdown is awesome too. It’s the Trump-era version of ‘starve the beast’: ‘furlough the beast’. Instead of cutting taxes in order to force rising deficits to encourage public approval for spending cuts (the traditional ‘starve the beast’ GOP strategy), this time they’re just shutting down the government first and hoping the public approves after the fact:
So will the American public actually agree with this anonymous White House official that the US should return to an era where the federal government is shrunk down to “free market night watchman” state and things like food safety inspections and the federal safety-net programs should just suddenly and permanently be shutdown? That seems pretty unlikely based on polls.
But who knows, maybe the right-wing media disinfotainment complex will succeed in shifting public opinion and convince the public that all of the shutdown functions of the federal government were never necessarily in the first place. We’ll see. But for the public to be convinced that it only needs a “free market night watchman” state and nothing else, there better not be too many more stories like this: the chairman of the FCC, Ajit Pai, just told Congress that he can’t meet with them to discuss the growing scandal about US cellphone providers selling detailed location information to third-parties because the government shutdown effectively shutdown the FCC’s investigation:
““The Commission has been investigating wireless carriers’ handling of location information,” a spokesperson wrote. “Unfortunately, we were required to suspend that investigation earlier this month because of the lapse in funding, and pursuant to guidance from our expert attorneys, the career staff that is working on this issue are currently on furlough.””
Yep, the FCC can’t investigate the scandalous recent revelations that cellphone providers have been selling massive amounts of detailed location information on hundreds of millions of Americans. Because the shutdown furloughed the investigators.
Although it sounds like there’s nothing stopping Pai himself from meeting with congress because he’s not actually furloughed, but he’s still sticking with the shutdown as an excuse to put that meeting off:
It’s a reminder of how the shutdown isn’t just literally directly shutting down a variety of federal functions. It’s also providing a great excuse for cronies like Pai to shutdown investigations into their corporate benefactors.
Are Americans going to want to keep this FCC investigation, and any other federal investigations that might pop up, shutdown for good? The anonymous senior White House official had better hope so. Pai is presumably also hoping to see this shutdown continue for as long as possible. You almost have to wonder if Pai is the mysterious “anonymous senior official”, although the position of FCC chairman doesn’t quite fit the description of a White House official. Who might the anonymous official be? Well, as the following article makes clear, their identity is kind of beside the point because that Daily Caller article merely expressed the views that numerous senior White House officials have been voicing for years:
“Those encouraging a hard line include acting White House chief of staff Mick Mulvaney and acting White House budget director Russell T. Vought, as well as leaders of the House Freedom Caucus, whose members have taken on an influential role with the White House.”
Is Mick Mulvaney the anonymous senior White House official? White House budget director Russell Vought? How about Mike Pence? Or Maybe Larry Kudlow? It’s very unclear, because they are all prime suspects based on their past rhetoric:
“Trump’s inner circle is stocked with officials and senior advisers who have long shrugged off shutdowns as painful but needed lapses.”
And that’s all why it’s actually pretty appropriate that identity of the senior White House official who wrote that twisted far right fantasy screed in the Daily Caller was left anonymous: they were just saying what Trump’s entire inner circle, the broader Republican Party, and right-wing media has been telling itself for decades. Any one of Trump’s inner circle could have plausibly written that piece.
In related news, the FDA just announced that it’s going to be bringing 150 furlough employees back to work to inspect foods deemed “high-risk” that weren’t getting inspected: seafood; dairy products; custard-filled bakery products; unpasteurized juices; fresh fruits and vegetables; spices; shell eggs; sandwiches; prepared salads; and infant formula. These 150 workers will unpaid.
In other related news, it turns out the GOP’s corporate tax cuts are bringing in about $600 billion less over the next decade than was projected. That will presumably be blamed on evil lazy federal workers and used to justify more cuts to federal programs.
The Trump Shutdown had another dramatic day that doesn’t bode well. Drama both staged and real. President Trump’s effectively doubled down on the government shutdown with his Saturday afternoon public address we he demanded Democrats accept his ‘compromise’ offer. It’s the kind of offer the Democrats immediately shot down, largely because it was barely a compromise: Trump offered to give the ‘Dreamer’ kids a three year reprieve from his threats to deport them in exchange for the Democrats giving him the $5.7 billion he wants for the wall. A compromise set up to be broken in three years. It’s not exactly an enticing offer.
The crappiness of Trump’s offer creates a seemingly hopeless situation because it puts the Democrats in a moral vice. There’s the moral hazard of validating Trumps shutdown tactics and the moral urgency of preventing the hazard that this shutdown is inflicting on the lives of federal workers and millions of Americans in need of disrupted services. Trump has created such a bad situation with the shutdown that the Democrats are in a ‘damned if you do [accept Trump’s bad faith ‘compromise’], damned if you don’t [accept Trump’s bad faith ‘compromise’]’ situation. It’s not the greatest negotiating tactic.
So we have to hope that Trump’s plan was to make an offer the Democrats had to refuse so he could declare them unwilling to negotiate and use that as an excuse to huff and puff and end the shutdown.
But as the following article makes clear, it’s becoming increasingly clear to economists that this shutdown is having real economic consequences. Those economist include the Chicago Fed president Charles Evans, who warned of self-reinforcing forces that could be unleashed if dropping consumer sentiment leads to a drop in investments. Consumer spending is two-thirds of the US economy. So when consumer sentiment starts heading south, that’s the kind of thing that could reverberate across the economy in self-reinforcing ways and be substantial if it leads to things like postponed business investments.
Adding to Evans’s warning is the observation from former Fed chair Janet Yellen, who reported a general cooling of business sentiment at a retail trade show in New York.
So we now have Fed officials voicing warnings of the economic impact of this shutdown and there’s no end to it in sight. It’s a reminder that we can add holding the economy hostage as part of Trump’s shutdown blackmail as part of the ‘damned if you do [accept Trump’s bad faith ‘compromise’], damned if you don’t [accept Trump’s bad faith ‘compromise’]’ moral vice situation the Democrats find themselves in. They certainly don’t want to validate Trump’s shutdown tactics, but don’t want this economic damage to continue either.
The article also reminds of of one area of the economy that appears to be getting hit extra hard from the shutdown that’s going to add to that moral vice Trump has placed the Democrats in: anything food related is going to get hurt. Restaurants are losing that business from the furloughed federal workers that they’ll never earn back. That’s a lot of tips.
And grocery stores in need of getting their licensing processed to legally accept SNAP food stamps aren’t current able to get a license due to the shutdown. According to the National Grocers Association more than 2,500 retailers have experienced a lapse or inability to reauthorize their license. That’s a lot of places that suddenly can’t process food stamps and a lot of avoidable hunger. It’s not like poor people on food stamps can necessarily easily travel to the next closest place with a license. And this kind of avoidable hunger and damage to the food sectors of the economy just adds to the reasons Democrats don’t want to award this kind of blackmail shutdown negotiating tactic and also adds to the reasons Democrats urgently want to find a way out of this.
So we’ll see how consumer sentiment responds to the fact that the president is acting like a mad king, but it’s presumably not going to get more positive response as this shutdown showdown economic slowdown grinds on:
“Federal Reserve officials and many economists have long counted on continued robust consumer spending to keep the economy chugging along, despite headwinds from recent financial markets turbulence, trade conflicts and weakening global growth.”
Continuous robust consumer spending. It’s sort of an American specialty. And the assumption of robust consumer spending has been a big part of the economic forecast that assume the US economy keeps humming along. If consumers get spooked it becomes a self-fulfilling prophecy as business retrench in response. That’s the warning from the Chicago Fed chair Charles Evans. And Janet Yellen is warning we’re already seeing signs of the retail sector retrenching:
And with consumer spending comprising two thirds of the US economy, hits to consumer confidence get magnified and reverberate. The Trump Shutdown economically echos. But it’s a bad echo:
But not all sectors of the economy will get hit equally. Restaurants, and their workers, are already seeing permanently lost income from the furloughed federal workers. So underpaid restaurant workers are getting hit extra hard:
And then there’s the hit grocery stores and retailers are taking from the inability to get SNAP licensed to accept food stamps. That’s already happening to 2,500 stores according to the National Grocers Association. And it’s going to disproportionately impact poor neighborhoods. That’s definitely not going to help consumer sentiment:
It’s also worth keeping in mind that this shutdown experience and the warnings of of drops in consumer sentiment can reverberate across the economy with substantial impacts are are all big reminder of the interconnectedness of government, business, and society. And the basic recognition of that interconnectedness is actually quite important given the right-wing mantras like ‘government doesn’t do anything useful’ and ‘we would be fine if we just shut almost all government services down’. That’s the kind of nonsense that obscures all the ways the government can make life better and generates real social good. Wiping out that recognition of the value government provides has been one of the chief ideologically goals of the right-wing decades and now we have Trump and the GOP careening the government into one shutdown after at every available opportunity. Sometimes it’s for ideological reasons and sometimes it’s for blackmail negotiation purposes. But the GOP has become the shutdown party and the propagation of this myth of the uselessness of government has been both the ends and means in this pattern of behavior. And now we have Trump, who politically backed himself into a corner with his ‘Wall’ pledge, who appears to be willing to keep the federal government shut down indefinitely.
So we’ll see how much damage this shutdown ends up doing to consumer sentiment. That presumably will depend heavily on how long this goes on. But it’s going to be worth keeping in mind one of things with the proven track record of helping an economy suffering from flagging consumer sentiment: government spending, which doesn’t depend on consumer sentiment. There’s nothing like government spending for an economy as a reliable economic stimulus and a source of Keynesian stimulus boosts when needed. It’s the ironically appropriate lesson to take from this whole nightmare situation: Erasing from the public consciousness the knowledge about the economic value of government spending and services by promoting a ‘government doesn’t matter’ myth that’s driving this shutdown is part of what this shutdown is all about. Promoting that myth to promote the idea that a permanent shutdown will be fine. In other words, while ‘the Wall’ is part of what this shutdown is all about, the shutdown is also about the long-term right-wing project of shutting down the government. So it’s going to be ironically important to keep in mind that government spending and services is literally one of the best proven tools for dealing with the kind of economic damage the GOP’s shutdown philosophy is doing and is going to keep doing for the foreseeable future.
With the federal government shutdown now in its second month and federal workers getting increasingly desperate as a result, the Trump administration’s Commerce Secretary, billionaire Wilbur Ross — who earned the nickname “The King of Bankruptcy” for making his fortune buying distressed companies for cheap — responded to reports of furloughed federal workers being forced to go to food banks to get by with what he presumably thought was good advice to those federal worker: Ross claimed to be baffled that federal workers had to go to food banks at all because some banks and credit unions are offering zero interest or low interest loans to federal workers who will (eventually) receive back pay for their missed paychecks.
It was one of those chilling snapshots inside the mind of an out of touch billionaire that’s becoming a signature feature of our contemporary Gilded Age. Not only was it wildly tone deaf, but Ross’s advice ignores all of the federal workers who either don’t use the banks or credit unions offering these loans or won’t be receiving back pay (not all federal employees receive back pay). Or maybe they have bad credit and won’t qualify for their banks’ special deal. And, of course, it ignores federal workers who are contractors who often won’t be receiving back pay.
So was Ross unaware that his ‘solution’ for desperate furloughed federal workers doesn’t actually apply to a lot of those workers? Or does he just not care? Both? Who knows, but the fact that the Commerce Secretary casually dismissed the plight of thousands of federal workers by recommending they just get a loan is an example of why having a government run by and for billionaire is a really bad idea
“A food pantry opened by chef Jose Andres in central Washington has been swamped with workers seeking hot meals, while furloughed employees across the country have been visiting food banks and seeking other assistance.”
Food pantries for federal workers. It’s clearly a sorry state of affairs. Unless you’re Wilbur Ross, who can’t see why this “liquidity crisis” is a problem at all because, “the banks and the credit unions should be making credit available to them.” Why can’t all of these furloughed federal workers just get a loan? It’s a complete mystery to the Commerce Secretary:
Then, later in the day, Ross attempted to walk back his comments by claiming that he was merely trying to let federal workers know that some banks and credit unions are making low interest loans available to federal workers that, in Ross’s words, “could help somewhat mitigate their problems.” So we went from Ross expressing puzzlement that missing paychecks is an issue at all for furloughed federal workers to Ross asserting that he merely wanted to let these workers know that there’s something that “could somewhat mitigate their problems.” It’s quite a walk back:
But in Ross’s defense, at least he wasn’t acting like this was all a fun vacation for furloughed workers, like one of Trump’s senior economic advisors, Kevin Hassett, did a couple of weeks ago:
President Trump even attempted some damage control by suggesting that “local people”, like people at groceries, will somehow know who the furloughed federal workers are and “they will work along.” In other words, Trump appears to be suggesting that local business will all spontaneously start extending credit to federal workers or something :
Well, let’s hope Trump is correct and local businesses will just start working out arrangements for these hundreds of thousands of federal workers spread across the US.
But since that’s a fantasy solution, and since lots of federal workers, especially federal contractors, aren’t going to have these cheap loans or special arrangements available to them, it seems reasonable to conclude that as this shutdown drags on a number of these workers are going to be forced to take out the kind of short-term loans that millions of low-income Americans are already very familiar with: payday lender loans. The kinds of high-interest loans that demonstrate the need for usury laws.
So, since payday lenders are probably going to experience a surge in demand in coming weeks, it’s worth recalling that the CFPB is basically on the side of the payday lenders now after Trump made Mick Mulvaney the head of the Consumer Financial Protection Bureau (CFPB):
“Last November, Cordray resigned to run for governor of Ohio (his directorship was slated to end in July 2018). Trump’s pick to replace him was former House member Mick Mulvaney (R‑SC), who also heads the Office of Management and Budget. Mulvaney immediately brought the bureau under the president’s direct political control, assigning appointees to shadow career staffers in each CFPB division, moving critical supervisory and enforcement functions into the director’s office, and requesting no money for bureau operations at all. In June, he fired his entire advisory board after several members criticized his leadership. He also changed the agency’s name to the Bureau of Consumer Financial Protection.”
Yep, the impact of placing Mick Mulvaney at the head of the CFPB was immediate, in that he immediately began defanging the agency and turning it into a plaything of special interests. And perhaps no interest is more special in the eyes of the CFPB these day than the payday lenders. It’s an example of how the payday lending industry is getting paid back for all the money its given to Mulvaney over the years:
Still, it’s worth keeping in mind that the CFPB isn’t yet permanently broken. The underlying stuatory authority of the bureau is still in place. Mulvaney is just choose to not use that authority. And that points towards one of the possible consequence of the pain this shutdown is inflicting on federal workers: if there ends up being a wave of furloughed workers being forced to use payday lenders, and getting fleeced in the process, this could end up being the kind of crisis that creates public attention and awareness of the numerous ways the Trump administration has neutered the CFPB and made the public vulnerable to predatory lenders:
All that’s required for the CFPB to return to the mission of the agency is for it to be lead by someone who actually cares about protecting borrowers. Might the fleecing of furloughed federal workers by predatory lenders end up being the kind of crisis that forces Trump to replace Mulvaney with someone who isn’t a payed minion of predatory lenders? Probably not, at least not as long as there’s a Republican president. But a short-term loan crisis could at least highlight the importance of the CFPB protections to the American public. And highlight the fact that the Trump administration took those protections away.
So let’s hope there isn’t a federal worker predatory loan crisis in the near future. But if there is such a crisis, let’s hope this results in a public recognition that the Trump administration already effectively ‘shut down’ the CFPB months ago when Mulvaney took over and the only thing that’s going to re-open it and bring a return of those consumer borrowing protections is a different administration.
And, of course, if there does end up being a predatory loan crisis for these workers, let’s hope that results in a growing public awareness that the only place where pain-free government shutdowns exist is in the minds of out of touch billionaires like Wilbur Ross.
And in other news...
Here’s a pair of stories about the aftermath of the now-ended federal government shutdown that don’t really tell us anything we didn’t already know about the impact of shutdown on federal contractors — who often don’t qualify for back pay — but do provide some more real world examples of the impact that bring into focus how much pointless damage was done:
First, here’s an article that includes an interview of Yvette Hicks, a federal contractor who was working as a security guard at the Smithsonian National Air and Space Museum. Hicks explains how her excitement over the ending of the shutdown quickly reverted back to worry. Why? Because all of those bill collectors over her unpaid bills started calling right after the announcement of the end of the shutdown wondering how soon they were going to get paid and Hicks — one of the thousands of low-wage federal contractors still doesn’t know how she’s going to pay those unpaid bills without back pay for those missed 5 weeks of work — simply cannot pay those bills without that back pay. Also, she’s forced to ration her children’s asthma medication and is worried about becoming homeless again.
And while Hicks’s situation might sound like an exceptionally bad non-representative situation for federal contractors, keep in mind that 40% of Americans can’t cover a $400 emergency and almost 80% are living month-to-month. Decades of Republican neo-liberal philosophy have made Republican shutdowns a lot more painful for furloughed federal workers than would have been the case in the past. So the fact that Hicks simply doesn’t have enough savings to make up for 5 weeks of missed work is sadly typical.
Hicks is in an unusually bad situation compared to her peers in one big way: she just started her employment and so didn’t have any earned vacation time built up. Her employer, Allied Universal, has announced that it’s allowing employees to use vacation buyback for accrued vacation time, which obviously won’t help new hires like Hicks. So when politicians try to dismiss the disruption the shutdown has on the lives of federal workers by describing it as a vacation, keep in mind that federal contractors may have been effectively forced to use their vacation time to pay for this missed work. A vacation that involves sitting at home worrying and maybe hold a yard sale. That’s the ‘vacation’ thousands of federal contractors were just forced to take this year instead of their regular vacation, assuming they had this buyback as an option at all.
And as the president of the SEIU union, which represents hicks and other federal contractors in jobs like security guard and janitorial work, points out in the article, when someone in Hicks’s situation missed debt payments that could mean permanent damage to their credit rating. So Hicks is being forced into a situation that’s going to increase the odds of being forced to borrow money to get by at the same time her credit rating is poised to get damaged.
So while the shutdown has hopefully ended permanently, Hicks’s personal story is a powerful reminder that the damage caused by the shutdown is still being accrued as the unpaid bills of the thousands of low wage federal workers who won’t be receiving back pay remain unpaid:
““I had bill collectors calling me back-to-back-to-back wondering when I could start making a payment arrangement,” she said, recalling how her mood quickly changed from excitement back to worry.”
That was how Yvette Hicks experienced the end of the shutdown: from relief back to concern when the debt collectors all suddenly started calling about those unpaid bills. Unpaid bills that are going to remain unpaid without back pay for those 5 weeks of missed work. Because for thousands of of the lowest paid federal contractors like Hicks, like most Americans, don’t have the savings to cover a lost month of work. That’s the New Normal in America. The kind of New Normal that makes government shutdowns a lot more damaging for federal contractors than it was in the past. Including the possibility of permanent damage to their credit scores if they can’t pay those bills:
Permanent credit score damage for the lowest paid federal workers. That could still happen despite the end the of the shutdown thanks to lack of backpay for contractors.
And while Hicks’s employer is offering “vacation buyback for accrued time” which will help some of these contractors deal with the lack of backpay, that won’t help employees that don’t have the accrued vacation time for whatever reason:
Hicks was basically forced to take month long vacation where she got the joy of rationing medicine and worrying about whether or not she might become homeless again. We can only hope that Hicks’s story was an exceptionally bad example of the lingering impact of the shutdown, but there’s no denying that the month-to-month living situation with little to no savings makes it a certainty that 5 weeks of lost pay is financially perilous to a large portion of America’s workforce, including its federal workforce. It’s one of the key features of our contemporary gilded age.
Next, here’s an article with a couple more examples of federal contractor experiences now that the shutdown has tentatively ended. These workers are higher up on the pay scale than Hicks is. Michelle Oler of St. Louis works as a contractor processing rural development claims for the Agriculture Department. She might be receiving backpay but doesn’t know if that happens. So far she estimates the shutdown cost her $3,500. There’s also Kevin Doyle, a parent working as an encryption specialist at Laughlin Air Force Base. He’s lost around $5,000. In direct financial terms, that’s the kind of money this shutdown cost thousands of contractors like Doyle an Oler. And while federal employees are back to work, their contractor counterparts may not be back to work right away. That depends on how soon the federal employees get everything back up and running. So thousands of federal contractors remain wondering when exactly they’re going to be going back to work and whether Trump will shut it all down again in a few weeks. And while they both make much more than Hicks, neither describes having the kind of financial cushion that makes losing thousands of dollars a stress free experience. Instead, both Doyle and Oler describe experiencing anxiety and sleeplessness during the shutdown and both are so spooked by the experience that they’re planning on getting different jobs:
“For the hundreds of thousands of people who work for private companies that support government, the future will be decided in part by how quickly federal agencies get running after the record 35-day shutdown, the fine print of contracts and the kindness of strangers.”
Thousands of federal contractors like Michelle Oler are are still effectively furloughed. Oler doesn’t know if she’ll get backpay or when she actually returns to work. She’s looking for a new job:
Kevin Doyle found himself out $5,000 pay and two months behind of the mortgage and power bills. He doesn’t expect to receive his next paycheck for another month. He’s starting a new job Friday that he hopes is more stable:
It’s also all a reminder of one of the lingering costs of this shutdown that doesn’t go away even after the shutdown ends: the psychic cost of never knowing when the next shutdown will happen that grows with each Republican shutdown. So now it’s a little bigger. And eventually that psychic cost grows enough to drive people out of government work and shrink the available pool.
So as we can see, even a temporary shutdown feeds into the GOP’s long-standing ‘starve the beast’ strategy of shrinking the federal government. Instead of starving the government of money though tax cuts for the rich and corporations, the Republican shutdown strategy is starving the federal government of potential employees by making fears of getting furloughed something to be increasingly expected each time the GOP forces another shutdown as a negotiating tactic. It’s another Republican contribution to the American New Normal.
Here’s a pair of articles that, taken together, highlight some remarkable political opportunities for the US heading into the 2020 election cycle:
The first article is about the totally unsurprising 77 percent spike in the US federal budget deficit as a consequence of the GOP tax cut. Despite this surge in the deficit, the article indicates that the White House is planning on making economic policy one of the areas of focus for the Trump 2020 reelection capaign. The Trump team will presumably argue that the US economy is better than ever (because they say that regardless of the reality) while simultaneously asserting that the spike in the deficit is just temporary as we wait for the ‘supply-side’ magic of the tax cuts to take effect and at the same time blaming the rising deficits on too much government spending.
The second article is about the Republican Party’s new focus on demonizing the “Green New Deal” (GND) — the vague slew of policy proposals put forward by Alexandria Ocasio-Cortez that combines an overhaul of the US economy towards an environmentally sustainable model with an expansion of the safety-net into areas like universal basic incomes and job guarantees — by making up a completely fabricated $93 trillion price tag for the GND in the first ten years. That’s the number that American Action Forum (AAF), a right-wing think tank, came up with. Except that $93 trillion over a decade number doesn’t actually show up anywhere in the AAF’s report on the Green New Deal and it turns out the AFF can’t really explain how it arrived at the number. But that $93 trillion number has been used over and over by the GOP in recent weeks.
Now here’s where that made-up $93 trillion GND price tag creates an interesting political opportunity in relation to the GOP’s already-disastrous tax cut: the second article notes that, of the $93 trillion price tag that AAF concocted as a GND cost estimate, about $80.6 trillion of that was the (fake) estimation of the cost of all of the jobs guarantee and universal healthcare that were part of the GND proposal. That leaves a $12–13 trillion estimated cost for the actual environmental overhaul for the GND over the first decade.
The AAF study actually gives a range of $51 trillion to $93 trillion for the Green New Deal. The GOP just focuses on the $93 trillion number. But if we look at that range, it implies a $43–80 trillion estimated cost of the social programs and $7–13 trillion in estimated costs of the ‘green’ parts of the Green New Deal over 10 years. And that starts putting the GOP’s fake exaggerated cost of the environmental part of Green New Deal in a similar price range to the costs of the GOP tax cuts. Recall that the official 10 year cost of the GOP tax cuts was $1.5 trillion but those were always joke estimates based on unrealistic assumptions about +3 percent economic growth over the next decade and powerful supply-side effects. As the 77 spike in the deficit and the lack of any significant boost in business investments makes clear, the real cost of the GOP tax cut over the next 10 years is going to be much higher than $1.5 trillion. How much higher? $2.5 trillion? $3 trillion? $3.5 perhaps if there’s a nasty recession?
So let’s say we are looking at a $2–3 trillion real 10 year cost for the Trump/GOP tax cuts. Now let’s compare that to the $7–13 trillion estimate 10 price tag for the ‘green’ part of the Green New Deal and factor in that the cost estimates are wildly inflated numbers generated by a right-wing think-tank that can’t even back up its numbers. In other words, that $7–13 trillion range should probably be cut in half at minimum just to account for the fact that the AAF numbers of made up propaganda garbage numbers, giving a much more reasonable range for the ‘green’ part of the Green New Deal over 10 years at somewhere around $3.5–6.5 trillion. In other words, when you account for the deceptive underestimation of the costs of the Trump/GOP tax cut with the deceptive overestimation of the cost of the Green New Deal, the cost estimates of the two policies start overlapping, creating the political choice for US voters: do they want the Green New Deal or the Trump/GOP tax cut. The price tags are comparable.
And, again, we’re talking about cost estimates for the GND that have been wildly inflated by AAF in the first place. The president of AAF, Douglas Holtz-Eakin, actually confesses that he has no idea how much the GND would actually cost, saying, “Is it billions or trillions?...Any precision past that is illusory.” Yes, the head of the think-tank that came up with the $93 trillion estimate admitted that it was impossible to get more precise in the estimate than asking the question of whether it would cost billions or trillions. In other words, the real AAF cost estimate of the GND is somewhere between less than $1 trillion and $93 trillion.
Now, in fairness, Holtz-Eakin is correct that it is extremely difficult to estimate the actual cost of the GND because it’s simply a vague collection of concepts and not an actual solid policy proposal. Still, if it’s so vague that the most precise you can get is to ask whether or not it will cost billions or trillions of dollars it’s clearly pretty absurd to arrive at a $93 trillion price tag. And it’s even more absurd for the GOP to latch onto that number. But selling absurdities with a straight face is a GOP specialty so this is also exactly what we should have expected. And why we shouldn’t be surprised to learn that the White House is planning on treating 2020 as a referendum on Trump’s economic policies despite a 77 percent surge in the deficit:
“The deficit grew 77 percent in the first four months of fiscal 2019 compared with the same period one year before, Treasury said.”
Behold! That magic of supply-side economics. You simply slash taxes on the wealthy and big corporations and the deficit magically spikes. That wasn’t exactly part of the GOP’s sales pitch but it’s what US voters got: A giant tax cut directed at the wealthiest segments of American society (and foreign corporations) that’s acted as a short-term mini-stimulus at best but done nothing demonstrable in terms of sowing the seeds of future economic growth and undermined the long-term finances of the US. And at just one year into this new tax regime we’re already at the point where the short-term benefits have peaked while the long-term costs are surging.
And note how, despite the short-term economic stimulus that tax cuts of this magnitude would inevitably provide, there’s still been a 25 percent drop off in corporate tax receipts. Which is not at all surprising given that corporate tax rates were slashed from 35 percent to 21 percent:
It’s also both noteworthy and utterly unsurprising that the White House is coming out with this year’s budget proposal. The White House budget proposals are always interesting political documents given that they are purely suggested budgets (Congress writes the budget) that the public doesn’t pay close attention to, so they tend to be extra insane even by GOP standards. Typically, GOP White House budget proposals are farcical call for massive across the board spending cuts for everything but Social Security, Medicare, and the military, which the promise that it would balance the budget if it was followed for a decade. And this year’s White House budget proposal is no exception, except that it doesn’t promise to balance the budget for 15 years instead of 10 years. That’s how bad the budget situation is as a result of the GOP tax cut: even the farcical GOP budget proposals that are always filled with wild-eyed optimism about the magic of supply-side economics had to to become a little optimistic as the disastrous consequences of the GOP’s 2017 tax cut rapidly unfolds:
And yet the White House is signaling that it’s planning on making 2020 a referendum on economic policy. This is surprising in the sense that the you would think economic policy is something the GOP wouldn’t want to talk about given that the outrageous policy malpractice of the GOP tax cuts are already becoming undeniable. But denying the undeniable is a GOP specialty so it’s still no surprise that the White House is signaling that it wants to run on the legacy of these tax cuts. Of course it does:
Ok, so that’s a look at how the GOP’s 2017 tax cut disaster is already openly disastrous. In a way it’s refreshingly transparent given the GOP’s long-standing tactic of tax cuts that result in budget disaster years down the line. This time it resulted in an immediate budget disaster. Which is another reason why it’s still a little surprising the White House is planning on making 2020 a referendum on economic policy. Even if the economy is still doing ok in the short-run in 2020 there’s still a clear and present danger to the long-term economic health given the immediate disastrous impact this tax cut has had on the budget.
And that bring us to the next GOP agenda item that poses a massive long-term threat to the health of the US economy: the collapse of the environment. It’s a topic that should be at the center of the 2020 election, and pretty much every election. The collapse of the biosphere is a pretty vital issue whether we treat it as one or not.
So, of course, the GOP is completely fixated on demonizing the ‘Green New Deal’ and casting the cost of transitioning to a sustainable economy as wildly unnaffordable. And as the following Politico article describes, a big part of the GOP’s strategy for casting the Green New Deal as wildly unaffordable is by relying on a $51-$93 trillion 10 year cost estimate arrived at by the right-wing think tank American Action Forum (AFF). Of the $93 trillion, $80 trillion was the estimated costs for social programs like universal basic income and Medicare for All, leaving about $13 trillion as the estimated high end of the costs for the ‘green’ part of the Green New Deal according to this farcical right-wing study that’s becomes central to the GOP’s attack on the environment:
“The number originated with a report by a conservative think tank, American Action Forum, that made huge assumptions about how exactly Democrats would go about implementing their plan. But the $93 trillion figure does not appear anywhere in the think tank’s report — and AAF President Douglas Holtz-Eakin confessed he has no idea how much exactly the Green New Deal would cost.”
Is it billions or trillions? That’s what AAF President Douglas Holtz-Eakin asked almost rhetorically when asked to justify the AAF’s $93 trillion high end cost estimate of the Green New Deal. But of that $93 trillion cost estimate, $80.6 trillion of the costs in AAF’s study come from the jobs guarantee and universal healthcare cost estimates, leaving less than a $13 trillion estimated price tag for the ‘green’ parts of the Green New Deal like upgrading the power grid or transitioning to electric cars:
And despite that extreme uncertainty, the GOP has turned the $93 trillion into a central talking point during its recent fixation on all things related to Alexandria Ocasio-Cortez and the Green New Deal:
So as we can see, the GOP’s intensifying attacks on the Green New Deal are reliant on a set of garbage estimates as part of a broader strategy to paint the Democrats as extremists and ‘socialism’ as somehow impossibly unaffordable. But it’s not outrageous to imagine the ‘green’ part of a the Green New Deal costing trillions of dollars over the first 10 years if it’s appropriately ambitious. And that’s what creates such a fascinating political opportunity given the unfolding political boondoggle of the Trump/GOP tax cuts: what’s a better way to spent a few trillion dollars over 10 years? A Green New Deal that invests in a sustainable economy that doesn’t collapse the environment? Or more tax cuts for the rich and big corporations? With the cost of the Trump/GOP tax cut and the cost of not doing anything about the environment both continually surging, the answer seems obvious, hence the GOP’s Green New Disinformation campaign.
When President Trump decided to decry the “invasion” of illegal immigrants “rushing our border” during the very same Oval Office conference Friday where he once again refused to acknowledge the growing threat of white nationalism in the wake of the neo-Nazi attack on a mosque in New Zealand we were all reminded of the grim reality that stoking white nationalist sentiments is almost certainly going to be central to the Trump 2020 reelection campaign. There’s never really been a question of whether or not nativism was going to be a big element of Trump’s 2020 campaign, but when the President chose that moment to double down on ‘invasion’ rhetoric the growing likelihood of white nationalism taking a central role in his reelection strategy becomes clear. “We’ll Finally Get to Building that Wall!” is basically going to be the 2020 campaign.
So with that grim 2020 campaign dynamic of Trump leading a strategic anti-immigrant fear-mongering campaign in mind, it’s worth another story from Friday that has a strong tangential tie to the role white nationalism and nativism is going to place in the Trump/GOP 2020 campaign: Friday also gave us a report on a Reuters/Ipsos poll that found that only 1 in 5 (21 percent) Americans expect their taxes to go down as a result of the Trump/GOP tax cut. And 29 percent of respondees actually expect their taxes to rise.
Of course, this isn’t the first time we’ve seen signs of a lack of public enthusiasm for tax cuts. Don’t forget that the 2018 mid-terms just happened and tax cuts were barely mentioned by the entire GOP. It was all ‘caravans’ and ‘illegals’ all the time in the closing months of the campaign. But this new polls was taken on March 6–11, just five weeks before the tax filing deadline which implies that a number of these respondents already filed and know whether or not their taxes went down. So if only 1 in 5 actually expect to see any drop in their taxes and almost 1 in 3 expect their taxes to rise this close to the tax filing deadline that implies that the vast majority of Americans really aren’t going to see any perceivable drop in their taxes as a result of the Trump/GOP tax cut.
Granted, as the following article notes, the US Treasury is estimating that 80 percent of Americans will actually see a tax cut, with another 17 percent seeing their taxes stay roughly the same. So it’s possible that the vast majority of Americans really will see some sort of tax cut. But it’s also possible those cuts will be so miniscule that most Americans won’t even perceive them when they get them. We’ll see soon. But if the American public is this unenthusiastic about the only significant legislative accomplishment that Trump can point to going into the 2020 election season that effectively means he has no legislative accomplishments and a giant legislative albatross instead.
And this isn’t the kind of polls with a sharp partisan divide with a majority of Democrats giving one response and a majority of Republicans giving another response. An overwhelming majority of Democrats and Republicans aren’t expecting to pay less in taxes. Only 33 percent of Republicans and 8 percent of Democrats expect to pay less. The fact that the tax bill capped the ability to deduct state and local taxes (to pay for bigger cuts for the Kochs and billionaires and big corporations), which disproportionately impacts the higher-tax Democratic ‘blue’ states, partially explains the fact that only 8 percent of Democrats expect a real cut. But a lot of Republicans live in those ‘blue’ states so that might partially explain why so few Republicans are expecting a cut.
And the saddest part for Trump and the GOP is that if they invest the media time and energy into ensuring the public know they got a cut in order to counter the public perceptions of the tax cut revealed in this poll that’s only going to encourage the American public to find out what their cut was and discover it was actually quite small. So the GOP is kind of stuck. The more the public thinks about the tax cut the worse public perception gets.
Now, in fairness, some of the tax cut was already dispensed throughout the year in lower amounts taken out from monthly paychecks. So a low tax return won’t reflect the whole tax impact that individuals get. But, again, if the GOP invests the time to explain this to the public they risk reminding people of the fact that the tax cut exists. Because it’s always been unpopular. It just appears to be getting more unpopular as time goes by.
That’s all part of why white nationalism and ‘invasion’ rhetoric are almost certainly going to be central to the Trump 2020 campaign: Trump and the GOP need to ensure no one is talking about how disastrous the tax cut turned out to be and that’s going to require a massive distraction. Like nativist fearmongering.
It’s also why it’s going to be important for the Democrats to make it clear to the public how the tax cut and the inevitable GOP campaign of immigrant ‘othering’ and fear-mongering are deeply and tragically intertwined issues. Intertwined in part because fear-mongering of ‘illegals’ is a great distraction from the tax cut that is absolutely necessarily for Trump and the GOP right now. But also intertwined because this is a major example of that age old technique of the powerful of exploiting everyone else by pitting us against each other and quietly robbing everyone blind. Fear-mongering about immigration and echoing white nationalist memes is just fine for right-wing billionaires and big corporation who would rather not have you talking about how they just robbed the US treasury blind for a useless tax cut. Get working class whites pissed at the poorer immigrants while the powerful loot the place. Hysterics about ‘the Caravan’ are a great distraction from all the other GOP policy disasters.
But while pretty much every GOP law in the 2017–2018 period when they complete control was a policy a disaster, the tax cut was a particularly prominent GOP policy disaster. It was a historic looting sold on a bed of lies that’s going to play out for decades to come. And it was a looting that happened to throw a few tax cut crumbs to the public so Trump and the GOP could declare that almost everyone got a cut. And now 33 percent of Republicans and 8 percent of Democrats think they’ll actually get a cut. Which is quite a GOP political emergency. Which will require even more hysterics about immigrants so the GOP and Trump can win in 2020 so they can loot the place one more time. Because Trump and the GOP definitely aren’t going to want to be talking about the tax cuts:
“The poll suggested that the tax overhaul, mostly geared to helping businesses, may not be as strong a 2020 campaign talking point as Republicans and President Donald Trump had hoped. The U.S. Treasury Department insisted that most Americans were paying lower taxes under the new law.”
Yep, tax cuts may not be what the public hoped for. Although they were never particularly popular. Don’t forget that polls were showing large majorities of the public being opposed to the tax bill when the GOP was pushing it through Congress in December 2017. The public has always hated the tax cuts. Looting isn’t popular. Neither are crumbs:
And higher-tax states and localities got extra screwed and many upper middle-class households might see and effective tax hike. And, again, this effective upper middle-class ‘blue state’ tax hike was done to pay for the cuts for the billionaires and big corporations. Recall how the cost projections for the tax bill had to be about a $1.5 trillion cost over the first decade for the GOP to pass the bill through the Senate without facing he threat of a Democratic filibuster. The cap of the state and local tax deductions was added to get the funds to keep the project cost at $1.5 trillion to allow the GOP to use that loophole. Also, recall how the tax cuts for the vast majority of Americans are temporary and start expiring in 2025. But not the tax cuts targeting the wealthy and corporations which were generally permanent. That’s why a whole bunch of households are paying more. Especially in ‘blue’ states. Which makes these polls both unsurprising and a political emergency for the GOP that requires a big distraction:
And even the American partisan divide is united in this case with a bipartisan general expectation of no personal help by the tax cuts. Only 33 percent of Republicans and 8 percent of Democrats expect a cut. Many expect to pay more. The US Treasury has determined that 80 percent of Americans got a cut. And that might be true. But it doesn’t feel like a to cut most Americans across the board based on this poll:
It’s a remarkable political development for the GOP. Everyone still hates the tax cut. And as we get closer to 2020 this is going to require a remarkable response by the GOP in anticipation of the inevitable Democratic attacks. Which will probably involve Trump leading a remarkably horrible GOP/right-wing media fear-mongering campaign about illegal immigrants.
Pretty much everyone that isn’t insane recognizes the dire need for humanity to address the growing climate catastrophe. So when freshman representative Alexandria Ocasio-Cortez’s (AOC) congressional office released a fact sheet outlining the broad vision of the ‘Green New Deal’ it was hard to criticize the overarching goal of creating a green American economy of the future. It’s good politics and vital policy.
The fact that AOC’s office retracted the initial fact sheet and claimed that it was an earlier draft not intended for the public, however, underscores the fact that while the goals Green New Deal are both admirable and, frankly, vital, the politics of the Green New Deal are potentially quite precarious. But as we’re going to see, it actually turns out that the 6 page FAQ document that AOC’s staff wrote over the course of a weekend that became known as the ‘Green New Deal’ actually did a disservice to the full ‘Green New Deal’ proposal that’s been developed by a number of relatively mainstream economists. These economists, who include pretty mainstream voices like Brad Delong and Mariana Mazzucato, recently put together the New Consensus think tank, and pretty much the only thing New Consensus has been working on since its inception has been to put together the Green New Deal.
It’s also the case that the 6 page fact sheet initially put out by AOC’s office was created with the input of some members of New Consensus (it was a weekend collaboration of AOC’s staff, New Consensus, and the Sunrise Movement). So New Consensus did play a direct role in the creation of that fact sheet but that fact sheet was more of a hybrid between the version of the Green New Deal that AOC’s office came up with in collaboration with New Consensus. And as we’re going to see, while AOC’s office framed the Green New Deal in the language of social and racial justice and emphasized programs like “economic security” for those “unwilling to work” that got predictably lambasted in the media, the actual full Green New Deal proposal crafted by these mainstream economists was largely focused on a large-scale retooling of US industrial policy to promote the industries that create the green energy and infrastructure of the future. And that’s something that’s going to be really popular. Because it’s practical and creates jobs. And does something about the impending climate doom. Doing things about climate doom is potentially quite popular.
Critically, the Green New Deal created by the New Consensus team is largely a call by mainstream economists to return the United States to the kind of industrial policies that the US government has often held from its very beginning until the ‘Reagan Revolution’ of the 1980’s led to the ideological embrace of neoliberalism. A return to industrial policies where the federal government sets out ambitious goals and encourages industries to develop to meet those goals. In other words, the real Green New Deal put forward by these mainstream economists is certainly ambitious but it’s hardly radical by historical US standards and actually a return to the historic norm.
And as the following article also points out, when you strip away all of the emphasis on social programs, universal health care, and racial and social justice that were a big part of the Green New Deal outline put forward by AOC’s office, the economic overhaul agenda of the New Consensus version of the Green New Deal is actually a remarkably compelling counterpoint to the kinds of protectionist industrial rhetoric routinely championed by President Trump. So while it remains to be seen whether or not that Green New Deal will end up being good politics, it’s going to be important to keep in mind that the New Consensus think tank’s version of the Green New Deal has to potential to be great politics. On top of being vital policy that might actually prevent future catastrophes:
“Above all, the Green New Deal is a leftist resurrection of federal industrial policy. It is not an attempt to control the private sector, according to its authors; it is a bid to collaborate with it. And it draws on a set of ideas with a rich American history, extending long before the great World War II mobilization to which the Green New Deal is regularly compared.”
That’s right, in contrast to its portrayal as a far left fever dream government take over the US economy, the actual Green New Deal that was conceived by the New Consensus think tank is essentially just a call for much more government collaboration with the private sector for the purpose of achieving the public good. That’s the grand overhaul envisioned in the economy. There’s so a large private sector, but it’s a private sector that’s accomplishing the public good (of a green, sustainable economy) achieved under the guidance of federal industrial policy. As Rhiana Gunn-Wright, one of the policy researchers who developed it, described it, the core of the Green New Deal, if you just look at the projects, “is just like industrial policy, industrial policy, industrial policy.” And that’s exactly why the Green New Deal has the potential to be such a compelling counter-point to Trump’s rhetoric of bringing back manufacturing jobs to America:
Adding to the political potential of the Green New Deal is the fact that its authors are relatively mainstream economists. You can’t call Brad DeLong and Mariana Mazzucato wild eyed socialists. And as these mainstream economists see it, the US’s history of industrial policies designed to facilitate new sectors of the economy was basically abandoned with Reagan in 1980 and US workers and industry has been feeling the impact ever since:
But despite that mainstream grounding, the Green New Deal has been cast as a radical proposal. Part of that obviously has to do with decision of AOC’s office to emphasize social programs when they were concocting their 6 page summary sheet that became the public face of the Green New Deal. But another reason for the widespread misrepresentation of the nature of the Green New Deal is the fact that when AOC submitted a version of the Green New Deal to congress as a resolution, it was largely just a set of goals without any policies. The industrial policies at the heart of it were basically de-emphasized in favor goals like universal health care. So pundits could just make up whatever policy regime they could imagine that might achieve those goals:
And that’s part of why the public rollout for the Green New Deal and the inclusion of items like providing income for those unwilling to work was so unfortunate while the industrial policies were largely left out was such a massive missed political opportunity. This really is a compelling rebuttal to Trump’s rhetoric about protecting US manufacturing with immense potential political appeal:
Tragically, is almost sounds like left-wing activists have concluded that Trump has literally tainted talk of manufacturing policy with white nationalism and that’s part of why there was so much emphasis on social justice. So instead of reclaiming that rhetorical territory about policies to support US manufacturing they emphasized social policies which had the result of fundamentally obscuring the industrial policy overhaul that’s at the heart of the Green New Deal and almost poison-pilling it with politically unpopular policies that are only indirectly related to green industrial policies. It was an unfortunate missed opportunity:
“Gunn-Wright told me that her team doesn’t talk about the Green New Deal as industrial policy first, because people misunderstand it. Trump’s economic message is linked to his racist rhetoric, perhaps irretrievably so. Say the word manufacturing, and people hear a paean to the white working class. “We haven’t talked about the decline of manufacturing outside of cultural terms,” she said. “It’s really weaponized in terms of race. That also makes people back away from it.””
That was how Rhiana Gunn-Wright, one of the members of New Consensus who helped AOC’s team craft their version of the proposal, described the decision to de-emphasize the manufacturing component of the Green New Deal when pitching it to the public: they were concerned that an emphasis on manufacturing policy might come across as talking to working class whites only. The word “manufacturing” has become tainting with Trump’s racist politics. That’s what they determined, which seems like a highly questionable conclusion to arrive at.
And that is perhaps one of the most important observations the left can take from the rollout of the Green New Deal: the public discussion over the decline in US manufacturing over the decades has been so inadequate and muted for so long that it just took a few years of Trump’s blatant racism and puffery about trade and promises of a return of US manufacturing jobs to somehow brand talk of manufacturing policy as a racially charged topic catering to working-class whites. Or at least that’s how the people crafting AOC’s version of the Green New Deal appeared to view the situation which is profoundly unfortunate. It’s unfortunate not just because it reflects the reality of the largely bipartisan abandonment of large-scale industrial policies in the US designed to achieve the public good ever since the disaster of the ‘Reagan Revolution’ but also because it appears to represent a preemptive capitulation on the part of the activists in AOC’s office to rightfully reclaim that political territory and these are particularly influential activists in the US at this moment. It seems like an opportunity is being lost here.
So as we can see, when pitched as a revival of US industrial policy focused on creating the manufacturing sector that will build a sustainable economy and energy sector and rebuild America’s decaying out-of-date infrastructure, the Green New Deal represents an enormous political opportunity for the Democrats. But that isn’t how the Green New Deal has been presented so far. And that mean there remains an enormous political opportunity Democrats have yet to really embrace. An opportunity that is particularly strong heading into the 2020 election cycle because the Green New Deal represents such a compelling alternative to Trump’s manufacturing agenda. A Trump agenda that appears to exclusively revolve around useless tax cuts for corporations, self-serving threats of trade wars, and doing everything possible to maximize the growing climate super-emergency.
Of course, it’s important to acknowledge that part of the reason the AOC version of the Green New Deal was so broad in scope and included tangentially related policies like universal basic income is become it’s true that everything is connected and broad based policy changes are required for paradigm shifts. And while that’s true it’s also important to keep in mind that it’s still kind of politically crazy to expect the electorate that isn’t thinking about the issue in those terms fully appreciate the interconnectedness of it all.
It’s also important to acknowledge that another big justification for including all sorts of social programs in a climate emergency policy response package is because a climate emergency is precisely the kind of long-term emergency that will require big safety-net just to deal with all the stresses of a climate emergency. Like people being dislocated from flooding. And local economies being destroyed as local natural resources change or are phased out for being too polluting. The robust safety-net that AOC’s team emphasized in her version of the Green New Deal is indeed going to be necessary. Climate change is going to require a massive safety-net. And lots of boats. So that’s an additional reason to include all of those programs like a jobs guarantee to the Green New Deal. But it doesn’t change the fact that making all of that a big part of the public rollout made it a much tougher sell for today’s electorate. Industrial policy is popular. Industrial policy with a massive safety-net attached is going to be a lot less popular. At least today in America. In the future, when the climate has ravaged things, Americans will probably be generally much more in favor of the broad safety-net called for in the AOC Green New Deal. Climate change will ensure safety-nets are super popular in the future.
And that’s all why the following Paul Krugman column from December 31st, over a month before the February release of the 6 page FAQ by AOC’s office, where Krugman gives his initial impressions about the early talk of Green New Deal, carries such an important lesson for Democrats and the Green New Deal: the Obamacare experience is going to hold a lot of useful lessons for dealing with climate change. And that includes the lesson of going with the next best solution when the optimal solution isn’t presently politically viable. Obamacare fell far short of the hopes for a single-payer ‘Medicare for All’ system that has now become a pretty standard Democratic policy goal. And it was never seen as the end goal but merely a big step in the right direction. But Obamacare still did a lot of good and proved to be politically popular in the end despite Republican disinformation and support for ‘Medicare for All’ has only grown as a result. So one way to sell the public on the Green New Deal is to start implement it with more specific and politically doable initiatives — like greening the US electrical grid and phasing out coal or green mass transit- that fall far short of the full Green New Deal but are still massive accomplishments that demonstrate to the public the benefits of these kinds of investments. Part of what makes the issue of climate change so difficult to deal with as a political issue is that it’s such an all encompassing issue that’s going to require massive efforts to combat so even massive initiatives meant to deal with climate change won’t feel like enough. Many massive initiatives will be needed for addressing climate change in coming decades. And that calls for recognizing one of the key lessons of Obamacare: bite-size policy accomplishments will increase the public’s appetite for bigger, bolder initiatives next. And addressing climate change is going to need A LOT of separate big bold initiatives that are going to have to find the political support to become law. So figuring out how to balance the need for all encompassing change with the urgency of now and the political expediency of passing the next best solution is going to be a critical political skill set for the champions of Green New Deal:
“So what does the Green New Deal mean? It’s not entirely clear, which is what makes it a good slogan: It could mean a number of good things. But the main thrust, as I understand it, is that we should make a big move to tackle climate change, and that this move should accentuate the positive, not the negative. In particular, it should emphasize investments and subsidies, not carbon taxes.
The Green New Deal. As a slogan it’s actually good politics from a generic political standpoint. Again, keep in mind that this column was written before the release of that FAQ sheet that included all of the references to things like programs for those “unwilling to work”. So when Krugman wrote this column, the Green New Deal was largely seen as as what is it: industrial policy to generate a green economy. And as Krugman notes, the economic part of the Green New Deal appears to ‘accentuate the positive’ with a focus on government investments in a green economy vs punitive approaches like a carbon tax that are more a harder sell to the public. So while the Green New Deal might seem like it included all of the policies that are possibly needed to deal with climate change, there are actually all sorts of useful, but less politically palatable, policies that were left out. Like a carbon tax. A carbon tax would actually be very useful for cutting down on emissions according to economists but it would be a tough political sell because it’s a broad-based tax. And pretty much everything — from major investments to carbon taxes — is going to be required to realistically address the climate change and transitioning to a green economy. The Green New Deal is just a step in the right direction if it doesn’t include stuff like carbon taxes. It’s massive step in the right direction, but also not all the way there because that’s the scale of the challenge.
And as Krugman notes, it’s going to be important for backers of the Green New Deal to keep in mind a lesson from Obamacare: highly imperfect partial steps are still huge improvements that can wet the public’s appetite for bigger improvements. That was Obamacare. Highly imperfect. A huge improvement. And something that could pass at the moment and has helped fuel public acceptance for more ambitious policies like single-payer ‘Medicare for All’. And for something as big the Green New Deal, doing it in pieces that sell the public on bolder initiatives might be the way to go. A series of eco-Obamacares. Big steps in the right direction that can pass a the moment that make bigger steps politically possible. It’s a stepping stone approach of multiple eco-Obamacares to a Green New Deal long-term vision based on dealing with the political urgency of now:
And that raises the question of could be packages as a politically palatable eco-Obamacare? How about greening the electricity grid. It Like getting rid of coal and transitioning as much as possible to renewables. And building the manufacturing sector to create that new green power grid. It would be a massive accomplishment and still just part of the way there:
And that’s one way the rollout of the Green New Deal that made it seem like an all encompassing agenda will help in the future: something like making the US electrical grid green is just a subset of the Green New Deal. It’s like an eco-Obamacare-level goal relatively speaking. A big practical step, but just part of the way there. And probably a politically popular step. That’s going to be another thing to keep in mind with the Green New Deal. When you look at the separate big agenda items in its green manufacturing/energy agenda they could all be wildly popular separate political initiatives. The greening of the electrical grid could be one popular program and the greening of the transportation sector could be another separate program. Both are highly intertwined topics and could and should be addressed at the same time. But politically speaking it might make sense to break a lot of this up and start showing the public all the benefits of a big federal push into supporting a green economy.
Might the Green New Deal, pitched as industrial policy, be part of the 2020 debate? Well, given that almost all of the Democratic presidential candidates have already endorsed the Green New Deal and given that the AOC version was vague enough in nature leave a lot of room for candidates to make their own more detailed versions, it seems likely that we’re going to see a variety of Green New Deals emerge over the next year. So let’s hope the Democrats can figure out how to turn the Green New Deal into the political asset it deserves to be. A political asset that could be a powerful counter to a Trumpian 2020 campaign that’s going to heavily feature Trump’s claims of protecting US manufacturing jobs. Do voters prefer to basically beg business for more manufacturing jobs while nothing is done about the climate crisis (the Trump approach)? Or do they want the government to take an active role in stimulating all sorts of new manufacturing jobs by stimulating and guiding the creation of whole new manufacturing sectors that will be required to build the economy of the future? An economy of the future that has a future because it’s sustainable. That’s poised to be part of the 2020 debate.
And let’s not forget that we’re talking about the potential collapse of the biosphere when we’re talking about dealing with, or not dealing with, climate change. That’s the political choice that could, and should, be a big part of the 2020 race. Are Americans going to build an economy of the future that actually has a future or economy of the future with no future because the biosphere was destroyed? That’s the choice at hand because the economy of the future is being built either way. So the fact that the Green New Deal is all about building an economy of the future with a future and Trump is all about building a doomed economy of future seems like the kind of political contrast that could be very beneficial for the Democrats heading into 2020.
It’s that time again. Because it’s always that time. Time for more warnings about how the US economy is totally doomed if there aren’t massive cuts to entitlements. Social Security, Medicare, and and Medicaid are simply unaffordable for Americans and the only way to save the programs is to slash them.
It’s a familiar refrain in American politics and this time it’s former Fed Chairman Alan Greenspan turn to issue this warning to Americans. Recall that Greenspan is a former acolyte of Ayn Rand, so getting advice from Greenspan or things like entitlements is kind of a giant fool’s errand. And no one really asked him for this advice. But he’s giving it anyway.
And as we’re going to see, Greenspan recently gave quite a bit of advice to Americans in a new book he published back in September. It turns out Greenspan is concerned that Americans aren’t embracing “creative destruction” enough (the idea that mass layoffs and industries dying is a good thing that should be embraced) and that people are weak and lazy due to entitlements. Instead, Greenspan finds inspiration in the Robber Barons of the Gilded Age and wants to see a return to a better era. And era with scaled back entitlements, mass deregulation, and lots of ‘creative destruction’ that will bring about a renewal of the American economy. That’s seriously the vision he laid out in his new book. So when you’re reading reports of Greenspand’s warnings to Americans about the unsustainability of entitlements, keep in mind that this advice is coming from someone who sees the Gilded Age as the sustainable period Americans need to return to
““I think the real problem is over the long run, we’ve got this significant continued drain coming from entitlements, which are basically draining capital investment dollar for dollar,” he told CNBC’s Sara Eisen during a “Squawk on the Street ” interview.”
The real problem facing the American economy is too many entitlements and an aging population. No mention of plummeting tax rates on the wealthy, the complete failure of decades of supply-side economic, and an ever increasing concentrations of wealth. The fundamental problem is overly generous social security checks according to ‘the Maestro’.
Now let’s take a look at a review of Greenspan’s new book, “Capitalism in America”, on what ails the American economy. Surprise! It’s too many “sugar candy people” who lack the pioneer spirit. A spirit best exemplified by the Robber Barons like JP Morgan, John D. Rockefeller, and Andrew Carnegie. These men are “heroes of creative destruction” because they “helped to produce a massive improvement in living standards for all,” and America needs to return to a time that encourage the rise of such men. And Greenspan’s recipe for returning to that time is cutting entitlements, cutting federal spending, deregulating business, and above all ‘fostering a fierceness in the face of creative destruction’ (i.e., doing nothing about mass layoffs in the face of massive economic crises):
“Less a conventional history than an extended polemic, “Capitalism in America: A History,” by Greenspan and Adrian Wooldridge, a columnist and editor for The Economist, explores and ultimately celebrates the Austrian economist Joseph Schumpeter’s concept of “creative destruction,” which the authors describe as a “perennial gale” that “uproots businesses — and lives — but that, in the process, creates a more productive economy.” While this approach risks oversimplifying centuries of American economic history, it provides a useful lens for analyzing America’s current polarization and for understanding the centrifugal forces that have given rise to a President Trump, on the right, or a Bernie Sanders on the left.”
Less a conventional history than an extended polemic. That’s the gist of the book according to this review. An extended polemic on the virtues of the Robber Barons and a plea for Americans to return to that hyper-capitalist spirit. Yes, the methods of the Robber Barons may have led to mass layoffs and social dislocation as a consequence of their ruthless tactics, but it was a small price to pay because, according to Greenspan, “People seldom achieve great things without being willing to ride roughshod over the opposition”:
Yep, according to Greenspan and his coauthor, while the public might understandably want to avoid and address the consequences of hyper-capitalism like mass layoffs and the destruction of small businesses, this is all a big mistake that thwarts the power of “creative destruction” that makes life better for everyone (except for the people who have their livelihoods destroyed which is a small price to pay). And because America no longer lives by a Gilded Age embrace of hyper-capitalism, the American economy is already on the path to stagnation. Not stagnation due to ever increasing concentrations of wealth. Stagnation due to an inadequate concentration of wealth and not enough Robber Barons:
Because as the review notes, Greenspan still appears to be an Ayn Randian nut job. And its in that context that his recipe for national renewal — cutting entitlements, cutting spending, ‘limited government’, deregulating, and above all fostering a fierceness in the face of creative destruction — is to be completely expected:
So that’s all something to keep in mind when reading articles about Alan Greenspan’s warnings of impending economic doom if the US doesn’t slash entitlement spending.
And in case it’s not obvious that Greenspan is an economic crank prone to garbage theories and bad advice, here’s a quick reminder that back in 2011 Greenspan’s big complaint over the Obama administration’s stimulus programs following the financial crisis were preventing the economic recovery. In other words, Greenspan wanted to the see more ‘creative destruction’. That was what Greenspan wrote paper where he concluded that too much regulation and ‘government activism’ was the source of the relatively tepid economic recovery. And as Paul Krugman points out, the problem with Greenspan’s piece isn’t simply that the arguments were weak. The more blatant problem, as Krugman sees it, is that Greenspan’s underlying arguments against government activism in the economy appeared to rely on his reputation from the 90’s as an economic oracle, a reputation that was in tatters given that Greenspan is the the man “who presided over an economy careening to the worst economic crisis since the Great Depression — and who saw no evil, heard no evil, refused to do anything about subprime, insisted that derivatives made the financial system more stable, denied not only that there was a national housing bubble but that such a bubble was even possible”:
“He’s no longer the Man Who Knows; he’s the man who presided over an economy careening to the worst economic crisis since the Great Depression — and who saw no evil, heard no evil, refused to do anything about subprime, insisted that derivatives made the financial system more stable, denied not only that there was a national housing bubble but that such a bubble was even possible.”
By 2011 is was already pretty clear for anyone who can see: ‘the Maestro’ is no oracle, even if he plays one sometimes. Flash forward to 2015, and we find Krugman pointing out an even more blatant descent into crank-dom: Greenspan was scheduled to show up at Jackson Hole, Wyoming, during the Fed’s annual gathering there. But Greenspan wasn’t attending the Fed’s conference. No, he was attending a counter-conference organized by the anti-Federal Reserve group called the American Principles Project. The group advocates for a return to the gold standard. That’s the conference ‘the Maestro’ was scheduled to attend: an anti-Fed pro-gold standard conference:
“Now I have in my inbox a notice that as the Fed holds its annual meeting in Jackson Hole, Greenspan will address a counter-conference organized by a group called the American Principles Project. The group combines social conservatism — it’s anti-gay-marriage, anti-abortion rights, and pro-“religious liberty” — with goldbug economic doctrine.”
A goldbug conference. This is where ‘the Maestro’ was going to talk in 2015. But he didn’t actually end up going. It turns out Krugman’s post calling him “the Worst Ex-Chairman Ever” hit a nerve:
“Seth Lipsky at The Wall Street Journal reports that Alan Greenspan, the former chairman of the Federal Reserve, has backed out of a conference on monetary policy this summer because of a scathing blog post written by Paul Krugman in The New York Times.”
So was Greenspan unaware of the goldbug nature of this conference he almost attended or did he just not want the public attention? Who knows, but it would have made for some interesting headlines if someone with Greenspan’s reputation gave an address at a goldbug counter-conference taking place next to the Fed’s annual retreat. So it’s kind of amazing Greenspan was open to attending in the first place. You can see the internet archive of Jackson Hole Summit’s initial webpage saved here, where it has scenic pictures and the title of the conference and the featured speaker: it featured an afternoon with Greenspan:
Yes, Robert Mercer’s crank anti-Fed/pro-gold standard counter-conference featured an afternoon with Alan Greenspan. He was the main event. Until Paul Krugman pointed it out.
Oh, and guess who was the man who financed this counter-conference in Jackson Hole that Greenspan almost attended:
Far right billionaire Robert Mercer:
” Four people who’ve discussed the matter with him say Mercer is preoccupied with the country’s monetary and banking systems, which he sees as hopelessly compromised by government meddling. He was the main financial backer of the Jackson Hole Summit, a conference that took place in Wyoming last August to advocate for the gold standard, two of these people said. His name wasn’t anywhere on the agenda. According to video shot at the event, he sat with Rebekah toward the back of the audience, an unobtrusive, silver-haired gentleman with dark brows, wire-rimmed glasses, a navy suit, and a red tie. At dinner that night, he sat at a table while other guests chattered around him, softly whistling to himself.”
Yes, the main financial backer of the pro-gold standard counter-conference was Robert Mercer, the far right billionaire behind Cambridge Analytica, and Alan Greenspan was going to be one of their speakers until Paul Krugman called him the worst ex-Fed chairman ever. And note how the purpose of the counter-conference wasn’t just a call for a return to a gold standard. The conference called into question the very purpose of the Fed. That was really the fundamental purpose of the conference. Returning the gold standard is a default response to getting rid of the Fed and in keeping with the Murray Rothbard anarcho-capitalist school of economics that Mercer appears to follow. So Greenspan was going to speak at a Fed counter-conference financed by a Murray Rothbard follower. Until Krugman called him out. It’s rather important context for interpreting Greenspan’s advice on entitlements. He cavorts with cranks because he is a crank. A crank with an ideological aversion to entitlements and a deep faith in the power of creative destruction by powerful businessmen for the greater good:
And note how even John Allison, the former president of the Cato institute, came away embarrassed by the presentation made by Steve Lonegan, the American Principles Project activist who arranged a meeting with Janet Yellen in 2015 for Fed critics. Allison came away embarrassed by Lonegan’s presentation which he saw as amateurish. This is the former president of the libertarian Cato Institute making these comments. So Lonegan’s presentation must have been pretty bad. And it probably was a really bad presentation given that the American Principles Project is financed by Robert Mercer and he’s a Rothbardian. Lonegan’s presentation to Yellen was probably bonkers. But he still got her audience. That’s the kind of influence this group has:
All in all, it’s remarkable how much high level access Mercer’s group has to current and former Fed officials. Meeting with Yellen and a counter-conference featuring Greenspan.
And given Greenspan’s love of the Robber Baron’s and the immense power they wielded and dirty tactics they employed, it’s important to keep in mind that Mercer’s rise as a political powerhouse in recent years is, in part, a direct consequence of the Citizen’s United Supreme Court ruling, a ruling that allows the billionaire class to secretly channel their surplus wealth into political propaganda and influence peddling and has been dominated by right-wing billionaires like the Koch brothers and Mercer. And this 2015 conference was the first of it’s kind. Mercer just started it that year. So we should really view his financing of this 2015 Jackson Hole Summit counter-conference as an extension of the political influence peddling operation he was dramatically expanding since Citizens United in 2010. A Mercer propaganda empire that included his investments in Cambridge Analytica too. It’s all part of one very big and very secretive effort and Citizens United makes that secretiveness a lot easier:
Citizens United didn’t lead to corporations taking over politics. It led to a small group of billionaires taking over instead. Like Robert Mercer. It was worse than expected.
But as we can surmise from that Alan Greenspan book review above, from Greenspan’s perspective the takeover of US politics by billionaires like Robert Mercer can presumably be celebrated as an Ayn Randian heroic industrialist shaping his destiny and preserving ‘freedom’ (unregulated markets) while maybe heroically riding roughshod over the opposition. As Greenspan’s book put it, “People seldom achieve great things without being willing to ride roughshod over the opposition.” That sounds like Mercer, where the opposition is the public will.
So given that Alan Greenspan is using his public prestige to irresponsibly fearmonger about the urgent need to cut entitlements, as part of a larger package of deregulations and cutting spending and returning to more of a Gilded Age-style government, it’s worth noting that wealth is apparently getting so concentrated in the US that the estate planners for the explosion of US billionaires are finding that the fortune of modern-day billionaires is “so large that it’s anticipated to last for not just children or grandchildren or even great-grandchildren, but great-great-grandchildren who these patriarchs will never know”:
“These days, the fortune of modern-day billionaires is “so large that it’s anticipated to last for not just children or grandchildren or even great-grandchildren, but great-great-grandchildren who these patriarchs will never know,” said Elizabeth Glasgow, a partner at Venable LLP who specializes in succession and wealth planning. And with that expectation comes the increased threat of litigation.”
Estate planning for hte great great grandchildren. It’s a luxury for billionaires that’s led to a growing estate planning advisory industry. Because there’s a lot more billionaires of late:
And note the one year jump in the percent of wealth management firms offering estate and succession planning as primary services from 37 to 45 percent, according to Cerulli Associates. It’s the Trump/GOP tax cut in action:
And note how demand for these services is going to continue to snowball, with $68 trillion in wealth expected to be transferred in the US alone over next 25 years. And a rapidly growing percent of that $68 trillion will be controlled by the billionaires. It’s a fun fact worth keeping in mind as folks like Greenspan warn of long-term threats to the finances of entitlements.
So as we can see, Alan Greenspan has decided to once again warn the American public that society simply must cut entitlements. But now he has a book where he’s goes beyond those recommendations and encourages Americans to return to something closer to Gilded Age America, where the safety-net is replaced with personal ruggedness and heroic Robber Barons allowed to ride roughshod for the greater good. That’s Greenspan’s version of ‘making America great again’. Which is kind of standard Republican policy at this point. And that’s perhaps the most important lesson in all this: Alan Greenspan was just delivering the same package of ‘we can’t afford this’ garbage rhetoric about US entitlements that the right-wing has been employing since the creation of social security. He’s the same crank he always was and in line with modern Republican Party establishment orthodoxy even if he’s not always in line with Trump’s policies on areas like trade. It’s classic GOP.
So now that Greenspan is using his public reputation to push the idea that entitlement cuts are required to save entitlements, let’s hope the fact that he’s a former Ayn Rand acolyte who has an ideological hatred of entitlements becomes more widely recognized, along with a recognition that he shares this ideological hatred of entitlements with the rest of the Republican Party.
It’s clear President Trump treasures the love he receives from Europe’s far right politicians. But it’s going to be interesting to see how Trump responds to the praise he just received from Italy’s far right deputy primer minister Matteo Salvini:
With the EU parliamentary elections fast approaching, the issue of government spending limits and Italy’s debt levels has become a key issue with Italian projected to break EU spending limits and Italy’s Deputy Prime Minister Luigi Di Maio of the Five Start party calling for changes to the EU fiscal rules to allow for more public spending on health, research, and education.
It was in that context that Italy’s other deputy prime minister (and also interior minister), Matteo Salvini, found a rather amusing way to sing the praises of Donald Trump. Salvini, who is trying to distinguish his far right agenda to Italian voters by championing opposition to EU spending limits, pledged to voters that he will be ‘Italy’s Trump’. Specifically, Matteo pledged to slash taxes while embracing a Trumpian disregard for deficits and spending limits.
Keep in mind the unusual nature of the political situation in Italy in the EU right now, where, because Brussels has strict (and economically stupid) rules restraining the debt and deficits of member states, some far right politicians have come to embrace higher spending levels and deficits as a means of defying Brussels. It’s in this political environment that we see the far right, normally keen to play the role of deficit scold in order to justify cuts to public spending, railing against spending limits and promoting fiscal stimulus.
Although, true to form, Salvini is still primarily interested in tax cuts as the means of fiscal stimulus. As Salvini put it, Italy should copy what the Trump did on tax cuts, have his courage “without giving a damn about the no’s, limits, constraints, doubts”:
“Back came Salvini with praise for Trump. Italy should copy what the U.S. president did on tax cuts, have his courage “without giving a damn about the no’s, limits, constraints, doubts,” Salvini told reporters on the campaign trail in southern Potenza, according to newswire Ansa.”
Yes, the same disregard for limits, constraints, and doubts over much higher deficits that Trump and GOP displayed when pushing for the GOP’s 2017 tax cut is what Italy’s far right deputy prime minister is promising to voters. For some reason Trump hasn’t yet tweeted about this unusual form of praise.
Now, it’s important to keep in mind that in the case of Italy, Salvini is largely correct that a fiscal stimulus is appropriate policy, although tax cuts probably aren’t the best way to achieve that. One of the core problems ailing the EU, and in particular the eurozone, is that fiscal stimulus in the form of a pan-EU-wide fiscal transfers — where tax funds from the surplus countries like Germany are used for public spending in places like Italy (like what the federal government effectively does in the US) — is the kind of solution that should actually be employed for the short-term and long-term stability of the continent. But that’s an idea that’s a non-starter in Europe. And that leaves countries like Italy with few options outside of higher deficit spending and tax cuts as sources of fiscal stimulus.
It’s also important to recognize just how wildly different the economic situations are between Italy today and the US in 2018, when the GOP tax cuts took effect. It’s part of what it make hilarious that Salvini literally cited Trump’s disregard for limits, constraints, doubts as his model for selling his own deficit-hiking tax cut proposal. Because in Salvini’s case, he’s encouraging the breaking of the EU’s ill-advised spending and deficit caps in the face of Italy’s persistently weak economy. That’s decent policy. But when Trump and the GOP passed their budget-busting tax cut in December of 2017 the US was years into one of the longest economic expansions in the country’s history. And in that economic context the decision to focus a giant tax cut on the super-rich and big corporations is basically just throwing money away. Italy will at least get some ‘bang for their buck’ with higher deficit spending. The US mostly just got a blown up deficit.
It’s also important to keep in mind that a big part of the fiscal stimulus for the US economy right now is coming in the form of higher federal spending levels on top of the tax cut. This higher spending is a major driver of higher deficits. So if Salvini wanted to he could also o call for a Trumpian-like splurge in higher spending. Which, again, would make a lot more sense for Italy now than the US.
So while Salvini was trying to entice voters by suggesting that he would embrace a Trumpian-level of disregard for caution and prudence in pursuing tax cuts, it’s not really possible for him to embrace Trumpian-levels of disregard for fiscal prudence because that would require Italy to already have a good economy first. For example, the Congressional Budget Office announced at the begging of this month that the US deficit in 2019 is already higher than all than all but five full-year deficits in U.S. history. These are the kinds of deficits the US is creating for itself in the middle of a relatively robust economy which highlights how the GOP has been far more fiscally irresponsible than anything Savini is proposing:
“If President Donald Trump’s spending and tax policies continue apace, a report by the Congressional Budget Office out Thursday found, the U.S. national debt will rise from 78 percent of the economy to 105 percent of the economy over the next decade.”
A rise in the U.S. national debt from 78 percent of the economy to 105 percent of the economy over the next decade. That’s the projected impact of Trumps tax cuts and spending spree, which is why the deficit for just the first part of 2019 is already higher than all but the top five highest full-year deficits in US history. And 60 percent of the current deficit is attributable to the GOP tax cuts and spending hikes:
So thanks to Trump’s “courage”, as Matteo Salvini was put it, the US is on an increasingly risky fiscal path that’s projected to get worse and worse. Don’t forget that part of the justification for deficit spending when the economy is weak is that the boost to the economy helps pay for that those deficits down the line. But when you engage in that kind of deficit spending when the economy is already going strong and direct the tax cuts at the rich and corporations experiencing record profits the ability of higher economic growth to pay for that deficit spending down the line is going to be substantially reduced because you just don’t get the same ‘bang for your buck’, dollar for dollar, in terms of the actual stimulus.
At the same time, keep in mind that when we hear from deficit scolds like the ones cited in the above article from the Committee for a Responsible Federal Budget (which is associated with the pro-austerity Pete Peterson Institute) warning against the prospect of the US making additional big investments in infrastructure, those kinds of investments in infrastructure is exactly the kind of deficit spending that the US could benefit right now from even with a relatively strong economy. In other words, it’s not deficit spending is inherently bad. It’s the particular type of deficit spending the GOP has chosen that’s bad along with the blanket condemnation of deficit spending that comes from think-thanks like the Committee for a Responsible Federal Budget:
Also keep in mind that Trump’s previous infrastructure proposals were designed in the worst way possible: a plan that ‘pays for itself’ by replacing the US’s public infrastructure with privatized infrastructure paid for with tolls, all financed by massive tax incentives for the new owners of that privatized infrastructure. So it wouldn’t have been much of a stimulus and would have largely just been a massive giveaway to private developers at the long-term cost of eroding the quality of the US’s infrastructure.
And while it’s possible Trump could have reached some sort of agreement with the Democrats this time around that was a real stimulus program and not a mass privatization scheme, we’ll never really know because the Republicans in Congress already killed the idea of a big $2 trillion infrastructure scheme. Because, as Paul Krugman recently reminded us, the Republican Party is actually very open to exploding deficits. But only if the deficits are exploding under a Republican president and only if the deficits aren’t being used to help average people:
“The strength of the economy doesn’t reflect a turnaround of the U.S. trade deficit, which remains high. Nor does it reflect a giant boom in business investment, which proponents of the 2017 tax cut promised, but didn’t happen. What’s driving the economy now is, instead, deficit spending.”
Do you like the strong US economy? Thank deficit spending. Because everyone is a Keynesian when a Republican is president. As Krugman points out, the combined GOP spending spree and tax cut is so dramatic right now that federal government is pumping as much money into the economy right now that it was injecting sever years ago in 2012. It’s a fun fact that encapsulates the juxtaposition of the GOP’s partisan hypocrisy on deficit spending. As long as a Republican is president, and as long as the deficit spending isn’t targeted at helping poor people, the GOP is going to be fine with it:
But there’s no denying that this massive stimulus spending is making a difference in the US economy, at least in the short-run. And as Krugman reminds us, if the GOP and the “Very Serious People” deficit scolds in the US establishment had allowed the US to engage in this kind of stimulus spending following the 2008 financial crisis the long period of high unemployment that followed could have easily been avoided. That’s part of why Matteo Salvini’s calls for breaking EU spending caps are valid. It’s particularly good policy for a country in Italy’s position. Trump and the GOP don’t have the same excuse Salvini has of a bad economy that would respond well to well-targeted stimulus spending. They just decided to turbocharge an already hot economy with little to no thought about actually investing in anything:
That’s one of the key lessons of all of this: deficits aren’t nearly as harmful or dangerous as the deficit scolds in the EU or at the Committee for a Responsible Federal Budget would have us believe. But the way the deficits are spiking in the US is harmful because it’s wasteful and largely useless supply-side stimulus that’s actually harmful in the long-run. Tax cuts for the rich that merely deliver a short-term fiscal stimulus but don’t actually invest in anything are merely going to concentrate wealth further. And further concentrating wealth in a country that’s already as concentrated as the US isn’t just just harmful to the economy. It’s cancer for democracy. But those wealth-concentrating stimulus measures are just fine with the GOP as long as a Republican is in the White House. Just as long as it doesn’t help the poor or get spent on things like health care or education or infrastructure:
It’s also worth keeping in mind that while it’s a shame Matteo Salvini’s stimulus appears to focus heavily on tax cuts instead of public investments, it’s also the case that Italy’s taxes are still much higher than the US’s so Salvini’s calls for tax cuts still aren’t as irresponsible as the Trump/GOP tax cuts.
So we’ll see if Matteo Salvini’s pledges to being Italy’s Trump resonates with Italian voters. But given that Italy is in the unfortunate situation where the far right leader gets to score easy political points because official EU policy on budget rules is so fundamentally right-wing and restrictive, let’s hope Italian voters keep in mind that one of the big rules of successfully implementing Keynesian-style economic fiscal stimulus is that it’s not Trump-style Keynesianism, which is Keynesianism combined with a right-wing agendas of cutting public services and giveaways to the wealthy. That’s an especially important lesson for Italians because Salvini’s stimulus plans don’t appear to include the poor and are largely limited to tax cuts and some pension hikes. And while pension hikes are good way to channel a stimulus, the rest of that limited agenda is a great way to blow the fiscal space. The Keynesian stimulus pays for itself when you’re correcting imbalances and making investments in the future like education and addressing environmental collapse. That’s when it works. Trump-style Keynesianism with ever-exploding deficit to pay for tax cuts for the already well off really is the harmful spending the deficit scolds are warning about.
Here’s a quick update on the impact of the GOP’s 2017 tax cut and the extent to which it has live up to its promise of paying for itself by encouraging greater economic growth. Morgan Stanley’s index of intended capital expenditure by US companies dropped to its lower level in two year last month. Yep, capital expenditures by US corporations are below pre-tax cut levels. It was the sharpest monthly drop for the index on record. Blame is partly being attributed to corporate concerns over Trump’s trade wars. And the fact that the timing of the tax cut late into an economic expansion no doubt plays a role. Regardless of the reasons, the fact is that the tax cut hasn’t just fizzled in the short-run. It’s also fizzling in creating the promised long-run growth that relies on corporate investments that aren’t happening. But there is one metric of corporate spending that remains high: stock buybacks, which is on track to break a record this year:
“Morgan Stanley’s index of intended capital expenditure by US companies dropped to its lowest level in two years last month, while S&P Global estimates that capex growth will weaken to 3 per cent this year from 11 per cent in 2018.”
Capital expenditures in Trump’s first year in office — in an economy he inherited from Obama — were higher than they are now.
But it wasn’t all a bust. Stock buybacks were at record levels last year and on track to breaking that record this year:
So let’s hope inflated stock bonuses for corporate executives somehow sows the seeds of future growth. It’s the magic of supply-side economics in action!
Here’s a pair of articles that serve as a reminder that, while Kansas may be successfully pulling itself out of the fiscal black hole by repealing Sam Brownback’s radical tax cuts that turned Kansas into a spectacular failed experiment in supply-side economics, Kansas still isn’t out of the Republican Party’s destructive clutches.
First, here’s a good news/bad news article Kansas. The good news is that the repeal of the tax cuts has been so successful that Kansas is actually running a budget surplus this year and jumped more than any other state in the annual CNBC ‘Top States for Business’ rankings. Yep, massive supply-side tax cuts caused Kansas’s business-friendliness to plummet after the state found itself forced to slash spending and repealing those tax cuts went a long way toward ending the crisis. That’s the good news. The bad news is that the Republican state legislator appear to want to cut taxes again, arguing that the problem was simply that Kansas didn’t cut spending enough:
“This year the full force of the repeal has taken effect: The state is running a budget surplus. In addition to the 16-point improvement in its overall ranking, Kansas rises 16 points in the Economy category.”
The first full year of the tax cut repeal and the state is running a budget surplus and jumped 16 rankings. It may not have been the result Brownback was hoping for with his grand experiment but now we know. Granted, we already basically knew Brownback’s experiment would almost certainly end in disaster which is exactly what happened, but now this experiment is also showing how reversing those tax cuts can go a long way towards fixing the problem which certainly a better way to end this experiment than the alternatives.
But it’s also possible the supply-side experiment isn’t actually over for Kansas. The Republicans still have tax cut fever. Because of course they do:
So that was a good news/bad news story for Kansas. How here’s simply a horrible story for Kansas. A horrible horror story: So in addition to gutting the tax base back in 2011, Sam Brownback and the Kansas Republicans went ahead and gutted the safety-net too. In 2011, Brownback started restricting access to the federal “temporary assistance for needy families” (TANF) program for poor families. The recipients of TANF are almost all single mothers with children under 5 years old.
The federal time limit for TANF benefits is five years but states have the option to set up their own more strict criteria. Kansas decided to limit it to two years. Brownback and the Republicans relied on one of the right-wing’s favorite justifications for cutting programs for the poor: the theory that if they removed access to the programs all the poor people would simply find jobs and that would be the solution. Tax cuts for the rich and assistance cuts for the poor. That’s the Republican theoretical paradigm. And, of course, that theory completely failed. For starters, most of the TANF beneficiaries already had jobs, so the idea that they would simply go out and find jobs and climb out of poverty was an obvious fantasy. Instead, during the first year and a half after exiting TANF, nearly two-thirds of the parents had no earnings or earnings 50 percent below the poverty line. Four years after exiting TANF over half the families had earnings below 50 percent of the poverty line. So cutting TANF benefits did nothing more than deepen poverty in Kansas for families with young children.
But it gets worse. It turns out cutting poverty assistance for young parents and throwing them even deeper into poverty means its much more likely that children will end up in foster care. Predictably. According to researchers, over 10,000 Kansas children have entered or eventually will enter foster care due to these TANF restrictions alone. Beyond the clear human costs to this policy, it turns out cutting TANF benefits ends up costing the state more. That’s because the federal government, not the state, pays for TANF benefits. But the state does pay for 69 percent of the foster care costs. As a result, researchers estimate the Republicans cuts to TANF will end up costing Kansas $264 million in extra foster care costs. So the Republicans basically forced Kansans to pay extra to force poor kids into foster care:
“Blocking available TANF benefits did not open a path out of poverty, as Republicans imagined. Most beneficiaries worked before, during, and after exiting TANF, but, after losing TANF benefits, work was irregular. According to research on TANF in Kansas conducted by the national Center for Budget and Policy Priorities, during the first year after exiting TANF, “nearly two-thirds of the parents had no earnings or earnings 50 percent below the poverty line.” Four years after exiting TANF over half the families had earnings below 50 percent of the poverty line.”
Cutting aid to the poor doesn’t magically fix poverty. Surprise! And not only will cutting aid to the poor not fix poverty, it might actually throw people into such deep poverty they have to send their kids into foster care. It’s the kind of consequence we should have expected before Kansas Republicans decided to cut benefits for poor parents of young children but thanks to the GOP’s heartlessness we have Kansas’s experience as evidence:
And keep in mind that, unlike the tax cuts, these TANF cuts haven’t been reversed. This is ongoing state policy. Paying extra to unnecesarily send poor kids into foster care.
So that was the good, bad, and horrific news coming out of Kansas’s experiment in far right policy-making. An experiment that’s still very much ongoing when it comes to sending poor kids into foster care.
And in tangentially-related idiotic news, President Trump awarded Art Laffer the Presidential Medal of Freedom for developing and promoting supply-side economics.
The 50th anniversary of the Apollo Moon Landing is one of those anniversaries that’s inevitably going to trigger both a sense of refined awe in what was humans were capable of 50 years but also a sense of reflection of what has, or hasn’t, been accomplished by humanity since that amazing accomplishment. The Apollo program was the kind of accomplishment that seemed to almost make inevitable a future for everyone lived in peace and harmony sustained by a technologically-fueled abundance for all. There’s no need for war in the Jetsons future because what is there to fight over? The Apollo program also demonstrated what could be accomplished when you had massive teams of highly skilled and trained people working together to achieve amazing goals. It was the power of science and ever increasing technological wizardry on display.
Flash forward 50 years and we have President Trump and Vice President Mike Pence.
Back in March, Pence did announce a plan for returning US astronauts to the moon within 5 years by 2024. NASA has already quietly pushed that back to 2028. NASA invited companies to bid on the project so the development of the next generation moon lander will be a largely private affair. So it’s not like there’s no US space program 50 years later. But it’s the broader context of that US space program that’s so disappointing. Mike Pence leads the White House’s space policy. American society obviously took a few steps back over the years in a lot of key areas.
And while technology in general has certainly exploded over the last 50 years, it hasn’t progressed in the ways society was expecting after a feat like putting a man on the moon. For starters, there’s no moon colony. That would probably be unexpected to a lot of people in 1969 watching the moon landing. There haven’t even been any other manned trips to the moon after NASA ended the program.
There’s no Jetsons-style flying personal vehicle. That’s something that people probably expected within 50 years of putting people on the moon. But that’s not really a thing outside of prototypes. As fascist Silicon Valley billionaire Peter Thiel opined in 2011, “We wanted flying cars, instead we got 140 characters.”
Thiel’s comment was made in the context of his general critiques of modern society with largely revolved around the idea that there’s too much government and socialism holding society back. Around that same time, Thiel said of the iPhone, “I don’t consider this to be a technological breakthrough, Compare this with the Apollo space program.” This was, of course, two years after Thiel’s infamous 2009 Cato Unbound essay where he lamented women getting the right to vote and declared “I no longer believe that freedom and democracy are compatible”, in favor of a libertarian future run by corporations and billionaires.
And it’s in that disappointed look at humanity’s progress since the Apollo program made by Peter Thiel — one of the most wealthy and powerful people in the US and who is also an open anti-democratic far right libertarian and close to the current fascist clown president — where we find a tragically succinct summation of one of the key changes in America over the last 50 years impacting the country’s ability to successfully execute other grand projects like the Apollo program: Almost all of the real political power held by the general public in 1969 that allowed for something like an Apollo program has been recaptured by oligarchs like Peter Thiel as part of a multi-decade long assault on the federal government successfully waged by the right-wing establishment. The Empire Struck Back and won.
As a result of that recapturing of economic and political power, America is today a country where a Green New Deal that could save the future from runaway climate change and global eco-collapse is portrayed as ‘government overreach’ and a fantasy by the ‘conventional wisdom’. The vision of a bold, ambitious public goal like putting a man on the moon in a decade is now seen as unthinkable. That’s the big accomplishment over the last 50 years but it’s been an accomplishment of the right-wing oligarchy/corporatocracy that has successfully slashed taxes on the wealthy, crushed the power of Labor, and dismantled much of the New Deal. Thanks to the recapture of DC public policy-making by right-wing orthodoxy over the past 50 years, a large, sophisticated public bureaucracy accomplishing amazing goals with large teams of highly trained expert public employees has been deemed inefficient and too expensive. The wild success of the Reagan Revolution was the death of the hope for future Apollo programs. Any future Apollo programs are going to be private Apollo programs. Probably with government subsidies. Today, big bold visions for the future of civilization are privatized.
And that’s all part of the context of one of the other bits of recent news we should acknowledge on the 50th anniversary of the moon landing: that there was a recent announcement of plans to the moon with tests that could start this year. In keeping, the call was from Jeff Bezos. It was part of the unveiling of the moon lander project that his Blue Origin space company is working on. Ominously, as the following article describes, Bezos has much grander ambitions than simply returning to the moon: Bezos has a vision of the future where almost off of humanity lives in space colonies and the earth is left as a pristine vacation spot or place to go to college. He imagines a trillion people living in space in colonies which he describes as allowing for thousands of Mozarts and Einsteins. The colonies he envision will house million people that produce artificial gravity by rotating. There will be perfect weather all year around and people will love living there. That’s the vision Bezos presented back in March when he spoke at his Blue Origin moon lander.
A trillion people living in space colonies. It’s a seemingly hyper-optimistic vision of the future but it’s also remarkably bleak one. Because Bezos sees moving almost everyone to space as the way only humanity can realistically avoiding destroying the Earth’s environment and ourselves. Earth has limited resources. And instead of learning to live within those constraints, we’re going to explode humanity’s population in space where there’s a lot more resources. And that points towards perhaps the biggest disappointment over what the humanity hasn’t managed to achieve over the last 50 years: an ability to not collectively destroy ourselves by avoiding preventable catastrophes. We’re still working on that:
“The lander revealed on Thursday, a mock-up, is called Blue Moon. It’s sleek, hulking, and insect-like, with spindly legs to cushion the landing. Here’s the plan, or at least part of it: Before touching down on the lunar surface, Blue Moon will dispatch a bunch of tiny satellites, depositing them into an orbit around the moon, where they can collect scientific data. Then it will fire its engines and begin its approach. Less than a mile from the surface, it will rotate itself to land upright. The underbelly is equipped with lasers to guide the spacecraft to its target landing zone. Once it’s on the ground, robotic arms will lower a rover, perhaps as many as four, onto the dusty, slate-colored ground.”
So that’s a fun announcement for the 50th Anniversary of the moon landing. A private company’s moon lander. The sad part is that this isn’t alongside a robust public space program. It’s the replacement:
Who’s going to launch US astronauts back to the moon? The richest people on the planet who do rocketry as a billionaire hobby after the shrunken 21st century US government got out of the business. And in Bezos’s case, it’s a hobby that involves building the foundations of a vision of the future where almost everyone lives on orbital space colonies. And because Earth’s resources are finite, going offworld is humanity’s only hope. Offworld, where there will be enough resources for a trillion people:
A Super-Apollo program that relocates humanity into space and explodes humanity’s population is required to avoid blowing through Earth’s resources. That was the vision pushed by the wealthiest man on the planet at an event for his hobby-horse rocket company’s moon lander that’s the leading candidate to send a US astronaut back to moon.
So given that the US space program is basically in the hands of a billionaire who is convinced the only way we can avoid destroying ourselves is by heading into space, it’s worth keeping in mind that if we really wanted to honor the legacy of the Apollo program, we would be building a society that prioritizes universal access to high quality education and big bold public investments in research and development. A big supply of high trained people and a big supply of vision for the kinds of amazing things those people could build for the common good. Preferably as part of a Green New Deal so we don’t destroy ourselves. And if we are truly serious about increasing the supply of Mozarts and Einsteins to fuel these future Apollo-like grand public investments, we’ll build a society that prioritizes giving everyone the time a resources to think and learn, which might be incompatible with a world run by billionaires:
“Earth is the best planet, Bezos assured his audience, but building space colonies is the only way to ensure “growth and dynamism” in our future, instead of the “stasis and rationing” that would accompany remaining an Earth-based species. His colonies would allow the human population to expand to a trillion people — it’s currently expected to peak between eight to eleven billion — which he promises would allow us to produce “a thousand Mozarts and a thousand Einsteins.””
Behold, the worst talent-hunting scheme ever. Let’s fill the solar system with a trillin people, which will produce a thousand Einsteins and Mozarts. And who knows, perhaps this would produce far more than that. It obviously depends on the living conditions of that trillion people. If they’re toiling in space mines and left overwhelmed by the burdens of living in a dysfunctional space capitalist society that treats the space inhabitants as expendable resources or ‘useless breathers’, there may not be so many Einsteins and Mozarts. But if the space colonies really are Star Trek-like worlds where everyone has the resources and time required to really fulfill their potential, well, there might be a lot more than a thousand Einsteins and Mozart. We don’t know. We what do know is that the better you treat people the better the outcomes and we live under a capitalist system where almost all of the power is held by the wealthiest and the poor are treated like a burdensome disposable resource. So if the space people of the future don’t figure out a better modality for sharing power and resources, there may not be very many space Mozarts:
The rise of the world where billionaire hobbyist took over the US space program was the rise of a world where workers and unions lost power and poverty exploded. The rise of the billionaire over the last 50 years was in many ways the anti-Apollo program.
So there’s obvious a need for an ‘Apollo program for the 21st Century’ of a Green New Deal R&D program that makes the kind of short-term and long-term public investments in green technology research and development that can fight eco-collapse. But we shouldn’t forget that building a world that prioritizes tackling poverty and making investments in everyone would be the ultimate Apollo program. An Apollo program that fills the world with trained and talented people who were allowed to reach their fullest potential. A world that values everyone is a world a lot less likely to destroy itself.
There’s another significant change over the last 50 years that’s worth noting: during the decade when America won the race to put a man on the moon and had one of its strongest overall economies in history the top federal income tax rate was 70 percent. Because progressive taxes are how we pay for bold visions of the future.
Bloomberg just released its annual assessment of the top 25 wealthiest families in the world. The Walton family alone has been accumulating wealth at around $100 million per day. Note that many of the oldest and wealthiest dynasties, like the Rockefellers, have so successfully obscured their wealth that they are left off this list. But among the super-rich who haven’t yet reached the status of incalculably super-rich, those top 25 wealthiest families have gotten about 24% wealthier. In the last year alone. Surprise!:
““It can be very challenging to preserve wealth over the long-term,” said Rebecca Gooch, research director at Campden Wealth, a network and education business for generational-wealth holders. “Family-owned operating businesses can shift from booming to declining, a family’s investment portfolio might not be well diversified or there can be issues with generational transitions.””
“It can be very challenging to preserve wealth over the long-term”...that sound you hear is Thomas Piketty guffawing. The top wealthiest familes had their net worth increase by 24% in a single year and we get to hear from the wealth preservation business about the challenges of wealth preservation over the long-term.
And it’s not just America’s billionaires who got a lot wealthier for the obvious reason of the GOP’s massive tax cut for the rich and big corporations. The super-rich around the world have seen their wealth swell in just the last year:
Given the global nature of the surge in wealth for the wealthiest families, it’s worth recalling one of the key features of the GOP’s tax cut: almost 1/3 of the tax cuts went to foreign investors. So it wasn’t just America’s wealthiest families who saw their wealth surge as a result of the tax cuts. The GOP also gave the wealthiest foreign families around the planet a massive tax cut. As Paul Krugman describes it, the 2017 tax cut slashed taxes on foreign investors by around $40 billion annually, which is probably the biggest US giveaway to other nations since the Marshall Plan. It’s an appropriate way to think about the GOP tax cut: a Marshall Plan for the world’s wealthiest dynasties:
“Donald Trump often complains that the media don’t give him credit for his achievements. And I can think of at least one case where that’s true. As far I can tell, almost nobody is reporting that he has presided over a huge — but hidden — increase in foreign aid, the money America gives to foreigners. In fact, the hidden Trump program, currently running at around $40 billion a year, is probably the biggest giveaway to other nations since the Marshall Plan.”
A $40 billion annual giveaway to wealthy foreign investors. It’s one of the many features of the GOP’s tax cut thanks to the globalized nature of economy:
So while we can’t say that the 24% annual surge in the net worth of the 25 wealthiest families around the globe was entirely due to the GOP’s tax cuts, it’s pretty clear that the primary beneficiaries of that tax cut were indeed the wealthiest families across the world. And every year they’ll effectively be getting another $40 billion. Thanks to the GOP’s Marshall Plan for the wealthiest people on the planet otherwise known as the Trump tax cut.
Has it almost been four decades already? Boy how time flies. Yes, it’s nearly the forty year anniversary of one of the darkest turns in American history: The Reagan Revolution. Or, rather, the ongoing Reagan Revolution of supply-side “trickle down” economics, privatizations, the assault on public services, unions, and regulations and that started in 1980 and never really stopped. Reaganomics became Bushomonics became Trumponomics. Without ever changing. Just more tax cuts for the rich and other policies that help the rich get richer. For forty years. If America is going to stick with the Reagan Revolution’s fundamental pro-oligarchy framework it should probably reflect on that every once in a while. Ronald Reagan famously closed his 1980 campaign by asking the American electorate “Are you better off than you were four years ago?” So with the US 2020 election fast approaching on the forty year anniversary of the Reagan Revolution, it’s probably worth asking, “Are you better off than you were forty years ago?”
Although that question can obviously only meaningfully be answered by people who were already adults in 1980. But there are plenty of metrics younger US voters can use to compare the US of today to 1980 so a better question is probably, “Is America better off then it was forty years ago?” For example, there’s the metrics of the national debt, which was at around $900 billion in 1980. It’s now about $22 trillion, a 24-fold increase. Is that ‘better’ for America? There are some metrics, like Gross Domestic Product, that are clearly much better over the last forty years. GDP was around $2.8 trillion in 1980, but up to over $19 trillion today, a near seven-fold increase. So a 24-fold spike in the national debt with a 7‑fold GDP growth. Is that a ‘better’ debt/GDP growth ratio for America thanks to Reaganomics? 2020 is a great year for the US to ask that question.
Or how about the growth in incomes (or lack thereof)? How have average US wages done since 1980? Well, it turns out wages haven’t grown at all since the 80’s when you factor in inflation. Stagnant wages for four decades. Is that ‘better’ for American workers?
But, of course, there are the metrics that some Americans will ostensibly love that the rest may not be so happy about. Like the increase in wealth for the top 1 percent. It’s a metric conveniently provided by the Federal Reserve a few weeks ago, sort of. The Fed recently released a new data set of historical wealth measurements. And Matt Bruenig of the People’s Policy Project used it to calculate how much net wealth the top 1 percent gained since Reagan and how much the bottom 50 percent gained since 1989, so just the post-Reagan years. Bruenig found that the top one percent’s increase in wealth was $21 trillion, which just happens to be the same as the increase in debt since just 1989 and nearly today’s national debt. Isn’t that a fun metric. And it doesn’t even include the the wealth transferred to the top during the Reagan years. The Reagan years, while revolutionary, were also merely the foundation upon which the GOP would dig the giant debt hole in the ensuing three decades, although better described as a counter-revolutionary three decade reversal of the New Deal by America’s aristocracy. A forty year counter-revolutionary project most recently capped off with the 2017 GOP tax scam.
What did Bruenig find about the bottom 50 percent since 1989? They grew poorer. $900 billion poorer, which is coincidentally roughly America’s federal debt in 1980 before Reaganomics blew it up. Has that made America ‘better’? It’s a question at least half of America should be very keen on asking before they vote in 2020.
So while the right-wing media machine and Trump administration has already signaled that they are going to be painting the eventual Democratic nominee as a socialist hell bent on ‘income redistribution’ that will destroy America, it’s going to be important for the US electorate to be aware of the reality that massive income redistribution has been taking place for forty years thanks to the forty year Reagan Revolution of tax cuts for rich that never paid for themselves. And Trump’s only significant legislative ‘accomplishment’ so far is the 2017 GOP tax bill that was just more tax cuts for the rich and big corporations. And then voters needs to ask themselves if this forty year experiment in more tax cuts for the rich is what they want for four more years:
“He found that America’s superrich have grown about $21 trillion richer since Taylor Swift was born, while those in the bottom half of the wealth distribution have grown $900 billion poorer.”
The rich got richer. $21 trillion to be precise. And that’s just the post-Reagan years. It’s pretty amazing. More amazing is that few Americans are aware this historic forty year wealth transfer has even taken place and therefore wildly underestimate the current levels of inequality. Beyond that, average Americans would prefer to see levels of inequality that make even Western European countries look grossly unequal. In other words, average Americans hate Reagonomics they just don’t know it. At least not most of them. It’s been a stealth counter-Revolution by the rich done out in the open:
And as Levitz points out, any realistic plan to create the kind of America most Americans want really would require some sort of nationalization of wealth from the richest on a significant scale. A huge wealth tax, for example. Elizabeth Warren has proposed a wealth tax of 2% on fortunes over $50 million, which is no where near what is required to create an American remotely close to the wealth distribution most Americans think is fair. So while her wealth tax would doubt lead to immense howling and threats of economic apocalypse and by the people who have to pay that wealth tax, it’s actually a tame proposal relative to what’s realistically necessary to fix the situation. Thanks to forty years of Reagonomics/Bushonomics/Trumponomics:
“The fundamental challenge in combating inequality is that wealth begets more wealth.” Wealth begets more wealth. “r > g”, as Thomas Piketty would put it. Resisting any meaningful recognition of this is a big part of what the Reagan Revolution was all about. Forty years of the upward transfer of wealth required forty years of denial it was happening. Republicanomics: It’s literally worse than you think because it relies on lies.
Has forty years of pretending the massive upward transfer of wealth isn’t happening made Americans better off than they were forty years ago? The answer is an unambiguous yes, for some Americans. About 1 percent or so.
Oh hey, look at that: private equity groups are threatening mass layoffs unless they get a piece of the federal rescue package for small business. Millions of workers will have to be cut to protect they’re investors. Yep. The industry best known for hostile leveraged buyouts followed by gutting the debt-laden company and firing everyone wants in on the small business emergency loans set up to prevent mass layoffs.
Specifically, it’s the $350 billion in rescue loans for companies with fewer than 500 workers affected by the COVID-19 pandemic. The rescue package explicitly banned small business from participating if they are back by a private equity firm that collectively employs more than 500 people across their business holdings. In other words, a small business backed by a small private equity firm could potentially apply for those loans but not if it’s backed by a giant like the Carlyle Group or Bain Capital.
And that’s made those private equity giants unhappy so they’re going to the White House to argue for access to those loans and that if they don’t get the loans they’ll have to lay off people because “We need to act in the best interest of our own investors, which include pension funds,” as one top fund manager put it. Pointing out that private equity investors include pension funds appears to be one of the key arguments they’re relying on. Is it in the best interest of the pension fund holders for these economic giants to engage in spiteful mass layoffs that tank the economy? Apparently. It’s worth recalling the various reports about private equity funds basically fleecing public pension investors in hidden fees an unusual profit-sharing arrangements. That’s who this industry group is using as their public face: the pension funds they’re screwing.
As the article notes, the private equity industry is sitting on $2 trillion in unspent cash right now. Yep. It’s a reminder that the group making these mass layoff blackmail threats are shameless in addition to ruthless. And shameless ruthlessness is a pretty potent combo for getting your way, at least in contemporary America, especially when combined with disingenuous grievances. Shameless ruthlessness and disingenuous grievances is kind of Trump’s brand, after all. It seems to ‘work’, politically. Will it work for the private equity giants as they engage in this public relations push? We’ll see, but it looks like we’re in store for a big coordinated campaign by the greatest concentrations of corporate wealth on the planet that if they don’t get to participate in the small business rescue loans they’re going to be forced to engage in mass layoffs to protect grandma’s and grandpa’s pensions:
“The Wall Street groups are taking aim at the so-called affiliation rule, under which small businesses can be barred from accessing the rescue funds if they are backed by a private equity firm whose portfolio companies collectively have a workforce that exceeds the 500-person limit.”
It’s like discrimination against really, really, really big big companies that own lots of other companies. That’s how the private equity giants are reacting to the small business rescue package that they can’t tap. As one letter sent to Steve Mnuchin put it, “We see no reason why being owned in a fund structure should result in these businesses having less access to the capital needed to keep their employees on the payroll.” This is, again, a group that is sitting on $2 trillion in unspent cash. Fighting for a chunk of the $350 billion small business rescue loans by repeatedly pointing out that their investors include pension funds:
And then there’s the threat to layoff millions of workers to protect their investments. As one large fund advisor put it privately, “We need to act in the best interest of our own investors, which include pension funds.” The threat to layoff millions couched in an effort to protect small pensioners:
As the industry group is making it very clear, it’s planning on only acting in the best interests of its investors. Not in the best interest of the public...well, except for those pensioners...assuming its in the best interest of pensions to have the largest private equity funds collectively engage in mass layoff so they can protect their $2 trillion cash treasure trove.
So what are the odds that the private equity industry prevails and gets to scoop up those small business loans? Well, while Democrats are the ones opposing allowing private equity to get those loans in the first place, there’s one particular Democrat who appears to be on board with changing the eligibility rule: House Speaker Nancy Pelosi, whose district includes Silicon Valley, a city filled with private equity-backed start-up companies:
It’s an indication that it’s going to be the big Silicon Valley investors that will probably be the biggest beneficiaries of this demanded rule change.
And don’t forget what these private equity firms are going to do with all those cheap loans: buy up more small businesses. They not be allowed to directly do that with the loans but money is fungible. Those loans that are a lifeline for real small businesses will just free up capital at the parent private equity fund for more acquisitions. It’s what they do. In the middle of a small business fire sale at the moment. And then maybe liquidate the businesses because that’s also what they do. A lot.
And if the private equity industry ends up taking loans meant for small business and that dries up the available pool and sends those small business into even deeper distress...well, that just makes them cheaper for private equity buyers. It’s an example of how mass economic crises can end up by win-win situations for concentrations of wealth: as long as you’re big enough to likely survive the crisis you’re going to be around to buy everything up for a pittance and own an even bigger share of the economy after it recovers. So who cares if it all burns. The giants will survive and only get bigger. And that’s all part of why the industry that has thrived on a ‘who cares if it all burns, we win either way’ philosophy wants those ultra-cheap government-subsidized loans and is willing to threaten to further tank the economy to get them. All those ultra-cheap government-subsidized loans could buy up a lot of small businesses. Especially small businesses starved for credit.
Welp, the GOP took control of the House and went full throttle insane right out of the gates. As expected. But as we’re going to see in the following article excerpts, the situation unfolding in DC isn’t as insane as it looks. It’s much worse. And much more insane. As we also probably should have expected.
And with the last week’s hitting of the US debt ceiling coming as the House GOP appears to intent on using its leverage to repeat the ‘government shutdown showdowns’ of the past and extract massive spending cuts, that full throttle insanity is in the driver’s seat. After all, with the GOP holding onto a narrow majority and House Speaker Kevin McCarthy forced to effectively hand his power over to the House Freedom Caucus, how the showdown is ultimately resolved is effectively up to the Freedom Caucus. Except, of course, not really. There’s nothing stopping the rest of the GOP House caucus from siding with the House Democrats to get past this debt ceiling. But that happy ending sure doesn’t look likely. At least we got a hint in that direction following one of the first votes in the new House. A vote that that ultimately fell along party lines, with 221 Republicans voting for the bill and 210 Democrats voting against it. A bill to strip $80 billion from the IRS intended to be used to find tax cheats. The next day, Kevin McCarthy agreed to hold a vote on bill that promises to ‘reform’ federal taxes by eliminating the federal income tax, estate tax, and corporate taxes entirely and replace them with a 30% national retail sales tax. It turns out bringing that “FairTax” bill to the House floor for a vote was one of the House Freedom Caucus’s conditions for their support for McCarthy and he delivered. Rep. Earl L. “Buddy” Carter, R‑Georgia, introduced H.R. 25, The Fair Tax Act, a couple of weeks ago and it’s slated for a vote.
And that was basically the House GOP’s opening move. A vote to strip the IRS of money to find tax cheats followed by pledge by McCarthy to hold a vote on a bill ‘tax reform’ bill that’s insane even by the GOP’s standards. It’s a big part of the upcoming debt ceiling shutdown showdown. The GOP isn’t just demanding massive spending cuts to, ostensibly to deal with rising federal debts and deficits, largely driven from prior GOP tax cuts. It’s also calling for what is arguably the most regressive ‘tax reform’ the party has ever proposed. Eliminating the federal income taxes, estate tax, and corporate taxes and replacing them with a 30% sales tax is like a cartoonish version of what the GOP would do.
Beyond that, let’s not forget that this whole budget showdown is right on schedule. The ultra cynical schedule that observers reasonably predicted back when Trump and the GOP were trying to justify their absurd tax cut back in 2017: the GOP is going to act in bad faith on taxes and spending as soon as possible. That’s the schedule. It was completely obvious the deficits would explode from the tax cuts and the GOP would respond by crying about excessive spending and demand spending cuts. But only when Democrats are in the White House. It wasn’t really a question of if but when. It was just a matter of time. So of course that’s exactly what happened. It couldn’t have happened any other way. As former Reagan/Bush economic advisor Bruce Bartlett noted at the time, the GOP had long cynically relied on what economists called “time inconsistency”: the lag time between when policies are implemented and the effects of those policies and the tendency of voters to attribute their current experiences on the current people in power. It was that “time inconsistency” that allowed the GOP to successfully follow the Grover Norquist-blessed path for decades of ‘shrinking the government down to the size where you can drown it in the bathtub’. Cut taxes, scream about deficits, and demand spending cuts. And when deficits spike from the tax cuts, just cut them again and rinse and repeat. Just keep cutting taxes on that wealthy, keep demanding spending cuts, and deploy whatever theatrics are necessary to keep the public confused and unaware of this deeply cynical game. Grover’s game.
But while the FairTax bill might seem extreme even by the GOP’s standards, it’s important to recall that this is far from the first time we’ve seen the GOP put forward this bill. Or at least something very similar to the bill. The GOP has been trying to pass something like this since the George W. Bush administration. And so it might come as a bit of a surprise to learn that one of the biggest critics of the recently passed FairTax bill was none other than Grover Norquist. Not that he had a problem with the contents of the bill. It was the politics. Norquist called it “a political gift to Biden and the Democrats” and “one of the stupider ideas that have been put forward.”
But it shouldn’t have been a surprise to hear Norquist’s condemnation of the FairTax. He said the same thing back in 2011 about the FairTax idea. And as Norquist noted at the time, it was particularly bad politics for the GOP with the elderly:
Yep, that 30% national retail sales tax (NRST) would apply to thing like pensions too. It’s just awful politics. That’s what Kevin McCarthy just agreed to hold a full floor vote on as part of his deal with the Freedom Caucus.
But more generally, the problem Norquist is pointing out isn’t that the policies hurt an important constituency like seniors. Norquist wants to hurt senior citizens. Seniors are arguably the prime targets of his ‘starve the beast’ strategy for shrinking the government. The problem obviously Norquist has with the Fair Tax is that it hurts seniors in a manner that doesn’t invoke the “time inconsistency” rule that results in voters systematically misattributing blame. The Fair Tax is too blunt. Grover wants a long game. His cranky billionaire bosses appear to want to speed things up.
But, of course, the Fair Tax is also not going to become law. At least not under the Biden administration. The passage of the bill is all politics and part of the debt ceiling hostage-taking theatrics. Theatrics designed to make that hostage-taking look like some sort of principled stand against rising debts. The kind of theatrics that require the audience to suspend not just their disbelief but also their memories. Like the recent memories of the budget-busting Trump tax cuts were the GOP’s lone signature legislative accomplishment during its two years with a lock on the federal government. Or the longer-term budget-busting effects of the Bush tax cuts. Or Reagan’s nightmarish fiscal legacy. We have to ignore all of that for the kind of theatrics to resonate.
But as we’re also going to see, there’s another aspect of the Fair Tax that Grover might be that thinking about when he gripes about the Fair Tax’s bad politics: It was originally a Church of Scientology idea. Yeah, it turns out the CoS — at one point locked in a bitter legal battle with the IRS over its tax exempt status — came up with a ‘tax reform’ plan that would pave the way for the elimination of one of the church’s most hated government agencies. And it was none other than Bruce Bartlett who appears to have witness the CoS’s early outreach efforts to the GOP pushing the bill.
As Bartlett told the story back in 2007 — when a slew of GOP presidential primary candidates were all proposing some version of the Fair Tax — it was 1993 when he was fresh out of the Bush administration at serving a stint at the CATO Institute. He was the temporary replacement for Stephen Moore, then the head and fiscal studies at CATO, as Moore left to advise House Republican Dick Armey. It was while standing in for Moore that Bartlett was approach by a Stephen L. Hayes, the founder of a group called Citizens for an Alternative Tax System (CATS) that was pushing the national retail sales tax idea. Moore informed Bartlett that Hayes was a prominent Scientologist, so this wasn’t a secret.
CATS reportedly wooed the Texas political elite, including Robert A. Mosbacher Jr., the son of George H.W. Bush’s secretary of Commerce. Mosbacher urged Hayes to reach out to Jack T. Trotter, an attorney close to Texas Representative Bill Archer, the ranking Republican on the tax-writing House Ways and Means Committee. This resulted in several meetings between Trotter and Hayes but nothing became of it. Trotter loved the idea but feared the Scientology association. So, instead, Trotter himself started Americans for Fair Taxation (AFT) in 1995 which proceeded to promote the CATS plan without the direct Scientology connection. So it wasn’t that nothing came out of those meetings between Trotter and Hayes. The Fair Tax came of it. But just without a direct Scientologist front group promoting it.
So what happened to CATS? Well, here’s where we get to a genuinely kind of surprising twist: CATS appears to have largely dissolved by 2006, with its final 2005 tax return showing $1,750 in total donations. But as Bartlett noted, he spotted none other than Stephen “Steve” Moore’s name listed as one of the group’s directors in its 2003 filing. So while the GOP went through the efforts of setting up the AFT to pushing the CATS plan without the Scientology taint, Stephen Moore was apparently still willing to serve on the CATS board in 2003.
It’s a good time to recall how Moore is a member of the Council of National Policy (CNP), the powerful network that more or less coached the Freedom Caucus into its big standoff with Kevin McCarthy. Also recall how Moore publicly came to then-President Donald Trump’s defense following reports describing how Trump didn’t personally care at all that his tax cut was triggering exploding deficits because “I won’t be here” when it blows up. And as we saw, while anonymous sources inside the White House were leaking to reporters their concerns that Trump had abandoned the traditional Republican stance of fretting about exploding deficits as an excuse for cutting spending, there was one notable defender in the White House of Trump’s approach of allowing deficits to explode without fear: Stephen Moore, who countered Trump’s critics at the time by arguing high economic growth would alleviate the deficit problems over time. As we also saw, Moore later bragged that it was he and Larry Kudlow who convinced Trump to implement the massive tax cuts in the first place. Moore has long been one of the loudest advocates for something like the Fair Tax. But what explains working with the Scientologists on this given the obvious public relations problems? What is under that rock?
So that’s all part of the insanity already underway with the latest debt ceiling shutdown showdown debacle. The House Freedom Caucus — which holds the whip hand in the House right now — wants to take another swing at making the Church of Scientology’s Fair Tax a reality. Again. And this time they seem extra unhinged. It’s one of the key differences between this latest round of the GOP’s Fair Tax antics. The GOP really is, somehow, even crazier than its Tea Party or Bush-era iterations. With the CNP apparently fully on board with this showdown. The Fair Tax may not have a chance of becoming law now, but dangerous games are afoot and the Fair Tax is very much a part of it. That’s why the House Freedom Caucus demanded a vote on it as part of their deal with McCarthy. Dangerous games are at work here and the Fair Tax is going to be one the of rhetorical cudgels used to play those games, with ominous implications during the next power GOP trifecta. The GOP is positioning itself to take very unpopular positions on matters related to the debt and taxes, starting with a party-line vote to protect tax cheats:
Stripping the IRS of money to find tax cheats. That just passed, with 100% GOP support.
Followed the next day by the Freedom Caucus’s introduction of HR 25. Eliminating the IRS and federal income entirely and replace it all with a “fair” sax tax. A bill that, true to form, wouldn’t just eliminate the income tax but estate and corporate taxes too, passing that tax burden onto the poor, middle-class, and especially the elderly. Demanding that bill be allowed to be brought to the floor for a vote was one of the Freedom Caucus’s demands and introducing it was one of the very first moves by new House Republican majority: It’s like a preemptive embrace of budget insanity in preparation for the more insane showdowns ahead:
How many Republicans will ultimately vote for the Fair Tax? We’ll see but the party-line vote to protect tax cheats is a clue about the GOP caucus’s sentiments. Which is what makes it all the more remarkable to note one of the critics of the bill: Grover Norquist.
Yes, even Grover Norquist calls the Fair Tax an awful bill. Not because Norquist opposes the actual bill itself, mind you. It’s the awful politics of it all that he opposes. Awful politics like the fact that it would impose a giant tax spike on one of the GOP’s core constituencies: retirees. Yes, in one of their first moves, the House Freedom Caucus just put a bullseye on the savings of America’s retirees:
“Under the Fair Tax bill sponsored by Representative Buddy Carter, a Georgia Republican, all income, capital gains, estate, gift, corporate, and payroll taxes would be eliminated. They would be replaced by a flat 30 percent national sales tax on everything you buy. Even Grover Norquist, the hard-right president of Americans for Tax Reform and flat-tax advocate who famously said he wanted to shrink government “to the size where I can drag it into the bathroom and drown it in the bathtub,” told Joseph Zeballos-Roig of Semafor this week that the Fair Tax bill was “a political gift to Biden and the Democrats.” Elsewhere Norquist has called it “one of the stupider ideas that have been put forward.” If the “fair tax” passed in the House it would still have no chance of becoming law, of course, because the Senate and the White House would stop it. That makes a purely symbolic House vote all upside for the Democrats.”
Even Grover Norquist calls this plan to eliminate the IRS — his life mission — a stupid idea. You almost couldn’t come up with a more damning condemnation for a tax cut. But as Norquist points out, it’s not just bad policy. It’s bad politics. It’s ‘tax reform’ that would effectively skyrocket taxes for not just the poor — a constituency the GOP obviously cares nothing about — but also the elderly, a core GOP constituency. It’s simply not a serious policy proposal. Obviously unserious by virtue of the fact that there’s no chance of it becoming law. And yet that’s the political angle the GOP has chosen at this moment:
So why are the House Republicans choosing to make such a politically awful piece of legislation part of the party branding? It’s a question that looms large in this story, but it’s not a new question. And that perhaps points us towards the answer: the GOP is proposing this politically awful legislation because that’s what it’s been doing for almost two decades now. This is a George W. Bush-era “fair tax” rerun, including the elimination of the income tax, estate tax and also the capital gains, gift, and corporate taxes. But with the addition of the elimination of the IRS entirely. So when trying to answer the question of why the GOP is putting forward such politically atrocious legislation, the answer is in part that it hasn’t hurt them in the past. There’s simply no consequence for their preposterous behavior, which is a pretty big incentive to keep it up:
Collective amnesia strikes again. And again. And again. It’s one of the defining features and modern America. We just can’t remember what actually happened or develop coherent narratives about our own contemporary history.
Or as Bruce Bartlett, an economist from the Reagan and H.W. Bush administrations, might put it, we’re all simply suffering from what economists call “time inconsistency”. As we saw back in 2017 during the GOP’s passage of the Trump tax cuts, Bartlett described the psychological phenomena and time inconsistency as a process where “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 was a process that, as Bartlett pointed out at the time, was central to Grover Norquist’s decades-long crusade of cutting taxes to force cuts in government spending. It’s an important part of Norquist’s condemnation of the current tax proposal to keep in mind: his objections weren’t over the consequences of the proposed policy. He was objecting primarily over how bad it would look politically for the Republicans because the negative impacts would be so powerful and immediate that it would be too obvious for voters to know who to blame. Norquist is an advocate of playing the long game. What the GOP just proposed in eliminating the IRS is more akin to ending the game altogether and flipping the table. That’s also part of this story: the GOP’s ‘tax cuts now/spending cuts later’ long game appears to have been swapped for a ‘burn it all down now’ short game with no obvious political upside for the GOP. What’s going on here?
But, again, with no chance on becoming law, it’s all just theatrics. The same theatrics we’ve seen for decades now from the GOP. What may not be theatrics is the GOP’s willingness to use its leverage in the debt ceiling negotiations to force a default on the US debt unless Democrats submit to the demands. And with, again, the entire House Freedom Caucus — with the backing of the CNP — backing this politically insane bill at the same time the party is ramping up for another government shutdown showdown, it’s hard to view this as entirely theatrics. Is the GOP abandoning its long-standing “time inconsistency” strategy on taxing and spending that it has used so effectively over the decades? We’ll see. But as Bruce Bartlett reminds us in the following piece, there’s another politically dicey detail in this bill: It was originally devised by the Church of Scientology back in the 90s as part of the church’s battle with the IRS:
“Bruce Bartlett, a tax expert who worked in Ronald Reagan’s White House and worked for other Republicans, explained years ago how the proposal marketed today as the “Fair Tax” was initially pitched by an organization created by the Church of Scientology during its dispute with the IRS over whether it constituted a church and was thus tax-exempt. (The tax exemption for churches created by Congress puts the IRS, an agency focused on revenue collection, in the unenviable position of determining what is a church and what is, well, a cult.)”
It’s long seemed like the GOP operates as a deranged cult divorced from reality. Well before its ‘MAGA cult’ years of the Trump era. The GOP has long been a cultish entity. And here we are, with the GOP having just introduce a bill rooted in a Scientology-devised joke tax scheme as one of its first acts of the new congress. The more things change, the more they stay the same. It’s the cult way:
Also note the sleazy math at work in the branding for this bill: instead of acknowledging that it would impose a 30% tax, the GOP is touting it as merely a 23% tax on your “gross payment”. As if the public wouldn’t figure this out if it ever became law:
And as we can see in the following piece Bruce Bartlett published back in 2007, that “30% tax is actually a 23% tax” shtick is the exact same stunt the GOP was pushing back then. As Bartlett also points out, it’s not simply the case that the GOP tax bill was inspired by a Church of Scientology proposal made back in the 90s. The actual history is far more intertwined.
As Bartlett describes it, back in 1993, he spent a few months at the CATO Institute, filling in for Steven Moore who had taken a brief leave from his position as the director of CATO’s fiscal studies program to advise former House Republican Dick Armey, then the House Minority Whip. It was while serving in that position the Bartlett was visited by Steven L. Hayes, the founder of group called Citizens for an Alternative Tax System (CATS) which was promoting what was effectively the “Fair Tax” proposal the House GOP just passed centered around a new national retail sales tax (NRST). As Bartlett pointed out, it wasn’t hard to see the CoS’s motivation for the proposal given the church’s longstanding battles with the IRS. If passed, it would have made the agency ripe for abolition.
As Moore pointed out to Barlett at the time, Hayes was a prominent Scientology. And yet, as Bartlett describes, CATS proceeded to woo Texas’s political elite, including Robert A. Mosbacher Jr., the son of George H.W. Bush’s secretary of Commerce. Mosbacher, in turn, urged Hayes to reach out to Jack T. Trotter, an attorney close to Bill Archer, then the ranking Republican on the tax-writing House Ways and Means Committee. Despite several meetings between Trotter and Hayes, the GOP didn’t move ahead with the specific NRST proposal put forward by CATS, apparently over Trotter’s fears of the Scientology connection to the plan. But Trotter was still enamored with the idea and wanted to expand it to include the payroll tax as well. Trotter then went on to form Americans for Fair Taxation (AFT) in 1995 to promote the CATS proposal without the Scientology taint.
And there’s one more important detail in all this: According to Bartlett, the 2003 tax filings for CATS listed Steven Moore as a director. Yep, Steve Moore was working directly with the Church of Scientology front group in 2003, eight years after Jack Trotter set up the AFT specifically to push the plan without the Scientology taint.
Keep in mind Moore’s enormous influence within the conservative movement. Recall how Moore, a member of the powerful Council for National Policy (CNP), publicly came to then-President Donald Trump’s defense following reports describing how Trump didn’t personally care at all that his tax cut was triggering exploding deficits because “I won’t be here” when it blows up. And as we saw, while anonymous sources inside the White House were leaking to reporters their concerns that Trump had abandoned the traditional Republican stance of fretting about exploding deficits as an excuse for cutting spending, there was one notable defender in the White House of Trump’s approach of allowing deficits to explode without fear: Stephen Moore, who countered Trump’s critics at the time by arguing high economic growth would alleviate the deficit problems over time. As we also saw, Moore later bragged that it was he and Larry Kudlow who convinced Trump to implement the massive tax cuts in the first place. Moore has played a profoundly influential role in shaping GOP tax policy in recent decades. So it’s pretty fascinating to learn that he was serving as a director for a group that was so closely tight to the Church of Scientology that the GOP set up a whole separate front group the AFT), just to avoid that taint. What was Moore’s angle? Who knows. It’s an ongoing mystery. An ongoing mystery that suddenly became a lot more topical after the House Republicans just introduced what amounts to the Church of Scientology’s IRS revenge bill:
“In a strange confluence, the Scientologist proposal happens to be nearly identical to one of the trendiest conservative tax proposals of the year, the so-called FairTax, which has been endorsed by John McCain and Fred Thompson, as well as second-tier presidential candidates Mike Huckabee, Tom Tancredo, Duncan Hunter, and Democrat Mike Gravel. Georgians John Lindner and Saxby Chambliss have introduced FairTax legislation in the House and Senate that would establish a 23 percent national sales tax.”
A ’23%’ national retail sales tax (NRST) that’s actually 30%. That was the FairTax bill the GOP was introducing in both the House and Senate back in 2007. Sound familiar?
And as Barlett describes, this now-familiar FairTax law didn’t have its origins in some right-wing think-tank like the CATO institute. It came from Citizens for an Alternative Tax System (CATS), founded by prominent Scientologist Steven L. Hayes. It was an image problem for the law. But the GOP found a solution: in 1995, jack T. Trotter formed Americans for Fair Taxation (AFT). A plan vehicle to promote the NRST without the the CoS. That’s the plan playing out again, 30 years after Bruce Bartlett was first approached by Hayes while Bartlett was filling in for Stephen Moore at the CATO institute:
And that we get to this fascinating nugget: despite forming the AFT in 1995 specifically to avoid the CoS taint, Bartlett found Stephen “Steve” Moore listed as a CATS director in 2003, just a few years before the group effectively went defunct:
Again, what is under this rock? How much of the rest of the GOP’s platform originated with the church? It would be nice to see it turned over finally. And thanks to the GOP’s love affair with the Scientologists’ IRS revenge plan, we once again have a reason to ask why it is that at Stephen Moore decided to become a director for a Scientology front group.
It’s just one of the many questions once again raised by the GOP’s ultra-cynical hostage-taking opportunism. The exact ultra-cynical hostage-taking opportunism Bruce Bartlett and so many others easily predicted back in 2017. The opportunity arose and the GOP is taking it. With the blessing of the CNP.
It’s all been highly predictable. The yet how this shutdown showdown ultimately ends remains very unclear, in large part because the GOP has never been this palpably crazy before. Which is really saying something. Will they ultimately blow up the economy if they don’t get their way? We’ll find out. But let’s keep in mind that blowing up the economy and society is increasingly becoming a theme in conservative politics. Blowing everything up through the debt ceiling is just one of many avenues for blowing things up. The CNP-backed January 6 insurrection, for example, very well could have blown this society up. You can’t say they didn’t try. Whether or not they blow it up this time remains a mystery for now. But a county can only have a major party operate at these levels of extremist brinksmanship and attacks on basic systemic stability for so long before something managed blow it all up, economically or otherwise. And don’t forget that at these debt brinksmanship games are going to presumably be very different after it’s all blown up. So at least now we have a very good idea of what kind of tax plan the GOP will be demanding after they finally succeed in blowing it all up and we have to pay for the rebuilding efforts. Get ready for some substantial tax hikes. Unless you’re a billionaire. Or a corporation. Or a church. One very litigious ‘church’ in particular.
It’s all about combating waste, fraud, and abuse, you see. That’s the narrative we’re continuing to get from the Trump administration regarding the Department of Government Efficiency (DOGE) and the apparent ransacking of federal agencies by a crew of young hackers whose primary qualifications about to be loyalty to Elon Musk. It’s all just about rooting out waste, fraud, and abuse.
Of course, the reality is that DOGE’s agenda is, so far, really just the execution of Project 2025 and the long-planned far right ransacking and capture of the federal government. The notion that DOGE is just about combating ‘waste, fraud, and abuse’ is the ethos guiding Musk’s teams of hackers is just cheap propaganda. But that’s the propaganda they are going with. Which brings us to the latest target of DOGE’s ire: the Internal Revenue Service (IRS).
As we’re going to see, the story we’re going getting out of the IRS is already sounding awfully similar to the story that emerged from DOGE’s purge of the Treasury Department: teams of young DOGE employees are suddenly showing up at IRS offices and demanding full access to some of the most sensitives databases in the federal government, including the Integrated Data Retrieval System (IDRS), a system with personal tax information that is potentially so sensitive even the improper inspection of the data can result in monetary damages. The IDRS also potentially allows IRS employees — or DOGE employees apparently — to adjust transaction data and automatically generate notices, collection documents and other records.
Beyond combating waste, fraud, and abuse, we’re told that ‘Return on Investment’ (ROI) is another top goal of the DOGE agenda. And while a search for ‘ROI’ at the IRS sounds like it could be a call for a renewed hunt for tax cheats, it looks like the preferred method for increasing ‘ROI’ at the IRS is the mass firing of IRS employees.
Which, taken together with ‘waste, fraud, and abuse’, raises the question as to whether or not DOGE is going to somehow be involved with the auditing of individual taxpayers. Because, at this point, it sounds like mass layoffs of roughly 9,000 IRS employees is already on the DOGE agenda following the initial meetings with DOGE staff. Staff that presumably had jobs that involved looking for tax cheats.
So with the DOGE team leading mass IRS layoffs under the pretense of combating waste, fraud, and abuse and increasing ROI, we also have to ask if the DOGE team is planning on conducting audits of its own on US tax payers. Because it sounds like they could conduct those audits with the powers they’ve been granted. Are we going to see the power of the IRS directed against Trump’s and Musk’s political enemies?
And that question about whether or not we’re going to see the IRS weaponized against Trump’s political opponents brings us to another disturbing detail about this DOGE operation: it sounds like the DOGE employee tasked with leading the DOGE operation at the IRS was not just using a non-government-issued laptop during their meetings at the IRS’s facilities but they were also walking around with five iPhones. Why five separate iPhones? We have no idea. But they apparently felt the need to have them on hand during that visit.
The many-phoned DOGE employee, Gavin Kliger, has another now-familiar detail in his background that we should probably have expected: it turns out Kliger is a big fan of the far right. Yep. Now, as we’ve seen, Kliger maintains a Substack account that includes posts like “The Curious Case of Matt Gaetz: How the Deep State Destroys Its Enemies,” and “Pete Hegseth as Secretary of Defense: The Warrior Washington Fears.” But it appears Kliger’s online boosting of the far right includes a number of social media posts promoting figures like Andrew Tate and neo-Nazi Nick Fuentes. Keep in mind that Fuentes isn’t just a Nazi who infamously dined with Donald Trump at Mar-a-Lago. He’s also a self-described radical Catholic, which makes this a good time to recall how Hegseth is associated with Domioninist Christian sects planning the authoritarian takeover of US society. Kliger seems to be a fan of theocracy. Or at least a fan of theocrats. And much like the racist posts made by DOGE staffer Marko Elez, the posts promoting Fuentes and Tate made by Kliger weren’t ancient. They were made between October 2024 and January 2025. There’s no indication at this point that DOGE is planning on firing Kliger over these posts. Not that it would matter, as we saw with Marko Elez’s rehiring following his resignation.
There’s also some question over who exactly Kliger is formally working for at this point. IRS officials were reportedly told to treat Kliger and other DOGE officials as contractors. But the Trump White House is insisting that DOGE personnel at the IRS were full agency employees and not contractors. So Kliger is apparently a full IRS employee at this point. And that’s on top of his status as “Special Advisor to the Director” at the Office of Personnel Management (OPM). We’ll see how many more roles Kliger gets before the DOGE purge is over. Assuming it ever ends.
But as we’re going to see in the last article excerpt below, part of what makes this DOGE capture of the IRS so darkly intriguing is the reality that, while taxes for most Americans are pretty boring and largely just involve the simple taxing of their wages, the taxes for America’s billionaire class can get very interesting. That’s because the US tax code has, for decades, been written by billionaires for billionaires and designed to allow for the legal avoidance of nearly all their taxes. Those were the findings of June 2021 ProPublica piece that publicly exposed some of the tax secrets of five of the US’s wealthiest individuals: Jeff Bezos, Mark Zuckerberg, Warren Buffet, Michael Bloomberg, and Elon Musk. As the ProPublica piece describes, these billionaires paid effective tax rates on their wealth that equates to roughly a 1% total tax rate. This is at the same time that most Americans ended up paying more in taxes in recent decades than their increases in net-worth. And, again, all of this was done legally?
How did ProPublica get these tax returns? That’s unclear although it sounds like someone inside the IRS specifically leaked it to the publication. Which makes that piece a kind of snapshot into the incredibly sensitive nature of the information this DOGE team can now access. Because while all the tax avoidance done by these billionaires may have been legal, it’s still an awful look. It’s not like they wanted the public to realize they were paying so little in taxes. How much leverage does the DOGE team now have over America’s billionaire class just through the implied threat of leaking their tax returns and showing the public how little they pay? It points to one of the absurd realities underpinning the DOGE theatrics: the US tax code is so scandalously skewed in the favor of the billionaires, simply disclosing the legal tax returns of billionaires could pose a risk to their reputations. And that’s all, of course, before the next round of Trump tax cuts targeted for the super-rich.
That’s all part of the gross context of the DOGE purge at the IRS: the IRS purge isn’t just another chapter in the capture and ransacking of federal agencies by teams of Alt Right hackers working for the wealthiest man on the planet. It’s also a remarkable lesson in the grand deception that underlies DOGE’s entire reason for existence. Because when you have a tax system written by and for billionaires and designed to enable the wealthiest people in the country to legally dodge nearly all of their taxes and pay rates far below that of average Americans, it’s kind of a moral and intellectual absurdity to go on a mass cost-cutting bonanza in the name of combating waste, fraud, and abuse. The biggest form of waste, fraud, and abuse in the US government is obviously the tax code built by and for billionaires that systematically abuses average Americans with a wildly unfair tax system. Legal abuse enshrined in law, through one Republican tax cut after another over decades. And all of the cuts DOGE is carrying out is merely being done in order to justify even bigger tax cuts designed just for the America’s billionaire class.
Ok, first, here’s a report from last week about Gavin Kliger’s new role as the “Special Advisor to the Director” at the Office of Personnel Management. A role he got despite his very recent history of social media post promoting figures like Andrew Tate and Nick Fuentes. And, of course, a role that was soon eclipsed by his new role as the guy in charge of the IRS’s most sensitive secrets:
“In social media posts between October 2024 and January, Kliger has voiced controversial views and reposted content from white supremacist Nick Fuentes and self-described misogynist Andrew Tate.”
Posts promoting Nick Fuentes and Andrew Tate made between October 2024 and January. These weren’t ancient social media posts made by the current “Special Advisor to the Director” at the Office of Personnel Management (OPM):
And as we can see, the Trump White House has been insisting that Kliger and the rest of the DOGE team are all operating with the appropriate security clearances and as employees to the relevant agencies. Not outsider advisors:
And as we can see in the following pair of articles, Kliger’s DOGE role isn’t limited to the OMB. Instead, he appears to be the individual tasked with leading up DOGE purge of the IRS. And much like the reports we got about DOGE’s purge of the Treasury Department, it sounds like Kliger has been demanding deep access to the IRS’s most sensitive systems. Systems with information on individual tax payers including the Integrated Data Retrieval System, or IDRS, that is potentially so sensitive that the illegal inspection of the IDRS can result in monetary damages getting paid out. The IDRS even enter allows for the adjustment of transaction data and automatic generation of notices, collection documents and other records. That’s the system Gavin Kilger just got seemingly unrestricted access to, for the vague mission of working to “eliminate waste, fraud, and abuse, and improve government performance to better serve the people”:
“Under pressure from the White House, the IRS is considering a memorandum of understanding that would give DOGE officials broad access to tax-agency systems, property and datasets. Among them is the Integrated Data Retrieval System, or IDRS, which enables tax agency employees to access IRS accounts — including personal identification numbers — and bank information. It also lets them enter and adjust transaction data and automatically generate notices, collection documents and other records.”
Complete IRS access. Personal identification numbers, bank information, and even access to the Integrated Data Retrieval System (IDRS), a system so sensitive that wrongful inspection of your data held there can result in monetary damages. But it’s not just access to this information. Access to the IDRS also grants the power to adjust transaction data and automatically generate things like collection documents. Which sounds like the power to unleash the IRS’s collections department on individuals. Power apparently held by these random DOGE employees with little to now oversight:
Also note how “combatting waste, fraud, and abuse” is the generic excuse for this entire power grab. A power grab that doubles as the unofficial implementation of Project 2025 and the oligarchy’s decades-long desire to evicerate federal programs. So keep in mind that, in the context of the IRS, the banner of ‘combatting waste, fraud, and abuse’ essentially calls for the auditing of individual tax payers who have been dodging taxes in a manner that hadn’t been previously detected by the IRS. Is DOGE going to be effectively conducting audits of MAGA’s political enemies?
And then we get to the very interesting confusion surrounding Gavin Kliger, the DOGE employee who appears to be tasked with leading this IRS purge effort. And as we can see, the official status of Kliger’s employment as this all-powerful DOGE employee doesn’t appear to be formally established. IRS officials were told to treat him as a contractor while the White House claims the DOGE personnel at the IRS were full agency employees. That’s a remarkable degree of ambiguity for the people granted access to some of the most sensitive databases in the US government:
So is Kliger official an employee of both the OMB and the IRS, as the White House suggests? Who knows, but Kliger is being given access whether the public is allowed to understand the nature of that access or not. Which brings us to a disturbing detail about Kligers handling of the IRS purge: when Kliger showed up to conduct meetings at the IRS, he was using a non-government-issued laptop and carrying around five different iPhones:
““Their interest was … really across the board, so it included the operation of enforcements, it included taxpayer service in terms of function and the personnel footprint, and they wanted extensive system access,” the Hill source said.”
Across the board interest with extensive system access to a database that contains highly sensitive information all virtually all US taxpayers. That’s what DOGE demanded, and apparently received. And this is, again, despite law protecting not just the improper disclosure of this information but even their inspection. How can extensive access possibly be granted without a violation of those rules?
And then we get to this detail about the ostensible purpose of DOGE’s activities at the IRS: Return on Investment, or ROI. Which, again, raises the question as to whether or not this DOGE team is actually going to be reviewing past tax returns of individuals, looking for additional taxes that could be demanded or fraudulent deductions. Or will the ‘ROI’ analysis be more focused on how much can be ‘saved’ through the mass firings of IRS employees? That’s unclear, although it’s already clear that mass firings are very much on the agenda. The mass firing of employees that, in many cases, are the real people professionally tasked with searching for real waste, fraud, and abuse hidden in tax returns:
But it’s not just that Kliger has this ambiguous employment status paired with awesome powers. And also happens to be a fan of Nazis. We also get this bizarre detail about Kliger’s DOGE activities: not only was he working off of a non-government-issued laptop, but he apparently had five iPhones with him during a meeting with IRS employees. What are the odds those five iPhones are all government issued? And if they aren’t, who exactly is he talking to? Is Kliger ‘taking requests’ for special deep dives into targeted individuals?
Who is Kilger taking order from? Musk? Trump? Who else? We’ll probably never find out. But as the following ProPublica piece from June of 2021 makes clear, one of the demented rules of the US tax code — a tax code written by and for billionaires — is that he kind of information the DOGE team now has access is probably going to be pretty boring when it comes to average Americans but VERY interesting when it comes to the billionaires. Because as the ProPublica report also describes, while the egregious tax sheltering routinely done by America’s billionaires might be legal, it’s still grossly and clearly a moral crime against society at large. And also just a personal embarrassment for any billionaire who finds their tax records suddenly publicly exposed. Especially if that information includes the results of past audits. In other words, when it comes to the blackmail and extortion potential the DOGE now has access to, keep in mind it’s Musk’s fellow billionaires who should perhaps be the most concerned right now:
“ProPublica has obtained a vast trove of Internal Revenue Service data on the tax returns of thousands of the nation’s wealthiest people, covering more than 15 years. The data provides an unprecedented look inside the financial lives of America’s titans, including Warren Buffett, Bill Gates, Rupert Murdoch and Mark Zuckerberg. It shows not just their income and taxes, but also their investments, stock trades, gambling winnings and even the results of audits.”
It’s not just income and taxes paid. The kind of data possessed by the IRS is A LOT more interesting. Data like investments, stock trades, gambling winnings and audit results. The kind of data people might pay a lot of money to avoid seeing publicly disclosed. And blackmail payments is just one way information like this could be leveraged. Especially when it comes to influential and powerful people. The extortion potential is immense. Now, for this 2021 ProPublica piece, someone leaked the tax returns of Warren Buffett, Bill Gates, Rupert Murdoch and Mark Zuckerberg to ProPublica for the purpose of public exposure. ProPublica obviously wasn’t going to blackmail or extort any of these billionaires. But now, Musk’s DOGE team has access to this kind of tax information on every US taxpayer. Which, again, raises the question: why did Kliger have all those iPhones? Who is he talking to? Why isn’t one government-issued phone adequate?
But then we get to the heart of the ProPublica article’s findings, which demonstrates now only how absurd this ‘ROI hunt’ is at the IRS — like the mass firings for the employees who actually look for tax cheats — but how absurd the whole pretense is ‘DOGE’ in its entirety. Because the idea that slashing government programs is the optimal approach to budget deficits is as little hard to take seriously in light of the absurd extent to which the billionaire class has gamed the US’s income tax system. Legally gamed for decades. How many trillions of dollars in ‘waste, fraud, and abuse’ could the IRS ‘find’ if the US’s absurd tax laws were changed and the super-rich weren’t allowed to pay almost nothing in taxes? And what are the odds Elon Musk is interested in answering that question? Also keep in mind that another part of the ostensible rationale behind the creation of ‘DOGE’ is to help pay for the upcoming second round of massive tax cuts for the super-rich. Tax cuts that will extend far beyond income taxes and include all sorts of other taxes that primarily apply to the super-rich like estate taxes or capital gains. It’s going to be looting on a historic scale, but legal looting, on top of the legal looting of the income tax system that’s also been going on for decades:
Adding insult to injury is the reality that during the same period that America’s billionaires have been legally gaming the US tax system average Americans have paid more in taxes than they’ve net-accumulated. And that was all before DOGE came along to add more insults and injury:
Also note how Biden’s relatively meager tax hikes 2021 — raising the top rate to 39% — barely matter to the taxes of billionaires. Hardly any of their wealth comes from income anyway. Meaningfully and substantially raising taxes on the super-rich, on the other hand, could make a huge difference when it comes to public investments and services like roads, bridges, and the financing lf Social Security and Medicare. The more you look at how wildly rigged the US already is and has been for decades, the more absurd the whole DOGE premise gets:
It’s also important to keep in mind that the core of the income tax avoidance schemes — minimizing direct incomes while accruing mass fortunes in shares and borrowing against those shares to finance a lavish lifestyle — has been exacerbated by the decades-long defanging of US antitrust enforcement. Corporate behemoths owned by tech billionaires dominate the stock market:
Also note what preceded the income tax in America: tariffs, which systematically hit regular Americans more than the wealthy. It’s one of the many lessons of history Americans get to learn again in the new age of Trumpian tariffs:
Finally, note this detail about one of the other routine methods of reducing income taxes: undervaluing commercial real estate. Which, is kind of the flip side of the systematic overvaluation of properties that landed Donald Trump with his $355 million civil penalty last year. You have to wonder if identifying mis-valued properties that could result in similar penalties is one of the tasks of this DOGE operation:
Just imagine how much Donald Trump would relish the opportunity to get his political opponents charged with basically the same crimes he was convicted for last year. Can he possible pass up the opportunity? Either way, the IRS Sword of Damocles is now dangling over the US public like never before. And dangling particularly perilously over the heads of America’s billionaires.
And sure, there was little reason to believe the US’s billionaire class was really going to oppose the Trump administration’s agenda in any meaningful way. The Trump agenda is their agenda. That’s what Project 2025 is, after all: a joint agenda of the billionaires’ economic policies with and theocrats’ social ambitions. The billionaire resistance to the Trump agenda was always going to be tepid at best. We can just expect it to be that much more tepid now that DOGE has all their tax returns with all of those scandalously legal secrets.