If GOP Tax Bill Passes, here is how it will tank the economy
December 4, 2017
There are two famous quotes I keep returning to again & again:
“Those who do not learn from the past are doomed to repeat it.” – Edmund Burke, Irish Statesman (1729-1797)
and
“The definition of insanity is doing the same thing over & over, and expecting a different result each time.”
– Author Rita Mae Brown (not Einstein) as quoted by the AA/NA sobriety guides (1983)
Every tax policy analyst who has looked at the Republican tax plan agrees that (if passed) it will create a huge hole in the Deficit and “add as much as $1.4 Trillion to the National Debt” (I believe they mean “Deficit”, not “Debt”)… which I can assure you is WILDLY understating what this bill would do to the Deficit, National Debt, and the economy as a whole.
I find myself actually stunned (well, not really) Republicans… self-proclaimed “Deficit Hawks” when Obama was president… would so blatantly try to sell us “Voodoo Economics” again with a straight face. They aren’t even being coy about it. They talk about Trump’s massive tax cut for the wealthy “supercharging” our economy as though it’s never been tried before. It appears Republicans now meet the definition of “insane”… doing the same thing over & over again, expecting a different result. Ronald Reagan slashed the top tax rate on the rich to “just 50%”, about which you can check out this site… a rate we are wildly below today and Trump would have us more than slash in half (but assures us it wouldn’t benefit him personally)… and by the end of Reagan’s first budget (the end of his second year), unemployment had SOARED to 10.8%… despite November/December holiday shopping and seasonal hiring boosting the economy. The Federal budget for the coming year is passed every December. We are still coasting on Obama’s last budget (and Trump is taking credit for it.)
Senate Republicans passed their version of the next Federal Budget & Tax Reform last week by the skin of their teeth, just 51 to 49. Despite having a 52/48 majority in the Senate, every single Democrat and one Republican (Bob Corker R-TN) voted against the bill. Earlier in the year, Republicans in the House passed their own version of the budget and now Republicans have until Friday to pass a reconciled budget in time to avoid a government shutdown. We’ve already seen that this White House can’t organize a two-car parade, so if you believe House & Senate Republicans will come together to agree upon a budget & tax bill by Friday (Dec 8), you haven’t been paying attention the last 11 months. And they have no intention of trying to attract Democratic votes to help them pass their bill. During ABC’s ThisWeek yesterday, Mitch McConnell complained “There wasn’t a single Democrat who thought this tax bill was a good deal.” But Donald Trump thinks it is and if you’re a Republican, you trust the judgement of Donald J. Trump more than the entire Democratic Party (hell, they’d rather elect a suspected child-molester… Roy Moore… than a Democrat.) Let’s see how far that kind of judgement gets them.
Three separate Tax Policy institutes… Center, Left, and Right, have looked at the GOP Tax Bill and even the most Conservative estimate says it’ll blow a half-Trillion dollar hole in the annual Deficit…
…EVEN IF you factor in growth (that we’re unlikely to see), causing the National Debt… you know, that thing Republicans screamed about for eight years under Obama… to EXPLODE.
One of the things I most remember most about Mike Pence before he became VP was what a Teabagger tool he was as the self-appointed head of the Senate “Tea Party Caucus”. And in 2010, he declared that he’d rather shutdown the government and default on our Debt than raise the Debt Ceiling and accrue more debt:
Pence: “I say: Shut it down!”
And now they are trying to sell us “Voodoo Economics” once again (a term coined by then-presidential candidate George HW Bush in 1980 to describe his opponent, Ronald Reagan’s claim that massively cutting taxes on the rich will create so much economic growth the resulting tax revenue will offset the losses.) It didn’t of course. As I pointed out above, by the time Reagan’s first budget was over, unemployment nearly hit 11%, and before he left office, the National Debt had TRIPLED. Reagan tried to offset the losses by raising taxes TWELVE TIMES throughout the remainder of his presidency to stop the bleeding, but they never repealed that tax cut on the people who had all the money, so the Debt continued to grow.
In fact, the last time we balanced the budget and massively grew the economy was when Bill Clinton RAISED taxes on the wealthy to 39.5%, bringing in enough tax revenue to start paying off the debt and grow the economy. Bush-43 reversed that by cutting taxes again, turned that surplus into a $1.4 Trillion Deficit and triggering a Global economic collapse. Obama reversed course again with his own tax hike, cutting the Deficit by almost 2/3rds and spurred economic growth that we continue to enjoy to this day. Now, Trump is looking to repeat the mistakes of Reagan/Bush-41/Bush-43… except on steroids.
Reagan won reelection by massively increasing the size of government, rehiring hundreds of thousands of Federal employees nearly back to pre-Reagan levels, and spending like a drunken sailor, helping to bring the unemployment rate back down in time for the 1984 election:
Federal Hiring 1981-1982 (*in 1000’s)
That’s right, The Gipper was hailed as a hero for fixing a problem his own policies caused (by using a method he himself would have called “Communism” if a Democrat had done it.) And now Republicans want to do it again (because they’ve bought into the myth his policies were a huge success.)
Republicans have been all over the airwaves the past few weeks trying to sell us Voodoo Economics yet again. I don’t know if they themselves are in deep denial about what Reagan’s policies actually did, or perhaps they honestly don’t remember because they were either too young at the time or have simply bought into the myth after being spoon fed it by Conservatives for years. Right-Wing pundit Dan Castellanos argued yesterday that Trump’s tax plan would be like “rocket fuel for the economy”… a phrase Trump himself used. It is no longer clear if the pundits are quoting Trump or Trump is quoting the pundits. Either way, we have a vicious feedback loop not seen since Dick Cheney cited reporters who claimed Saddam had WMD’s… whose source for that claim was Dick Cheney himself. Conservative politicians/pundits are everywhere declaring with a perfectly straight face that “all the analysts are wrong”, that THEY know better than the experts and Trump’s massive tax cut for the rich will pay for itself in economic growth. “Voodoo Economics-101”.
So here is what’s going to happen if the GOP passes Trump’s massive tax cut for the rich:
First off, we won’t see any real effect on the economy until at least next May… after most Americans pay their taxes in April. The Poor & Middle Class typically file their taxes quickly… even early. And the increase in their taxes (mostly due to losing a number of exemptions/deductions) means less money going into the economy. Meanwhile, the wealthy (who pay most of the taxes because they have most of the money), typically have much more complicated taxes and will file extensions to give them longer to file and more time to pay. And in that gap between when “Regular People” pay their taxes and the wealthy do, the government must still operate with no money coming in. So they must borrow it, causing the Deficit to go up. But the only way to attract investment is to raise interest rates slowing the economy down even further. Vicious Feedback Loop part 2, the economy starts to sink like a stone. The Deficit & Debt explode, and the only way out of it is massive government hiring ala Reagan (maybe by building Trump’s Border Wall on the taxpayers dime.) All because they don’t want Rich people to pay their fair share in taxes.
Many years ago, I bought into the “Flat Tax” nonsense because the idea “everyone paying the same percentage” sounded fair to me. It wasn’t until years later that I realized the wealthy actually use FAR more “government” than the Poor & Middle Class do. Republicans would have you believe it’s the other way around, with all the poor people living on welfare and sucking up government resources. But the fact is, CORPORATE WELFARE dwarfs the amount of money spent on the poor. The wealthy also rely on the police more to protect their businesses/wealth, file complex lawsuits as part of doing business, need the government to make trade deals, and worst offenders of all, government contractors (particularly those in the Defense Industry.) The wealthy use FAR more government services than they pay for.
But the most obvious flaw with a “Flat Tax” is that you can’t make up BILLIONS in lost tax revenue from the Rich (via reducing the wealthy’s tax rate from 35% to just 15%) by raising taxes on the Poor (from 0% to 15%.)
And that is almost exactly what Republicans are trying to sell us now with this proposed massive tax cut on the rich. That somehow, we can cut HUNDREDS OF BILLIONS in tax revenue from the wealthy and make up for it in taxes paid by the Middle Class due to all the extra hiring corporations will do to meet the demand of all that economic growth.
Republicans argue that slashing the top tax rate will encourage all those wealthy tax cheats hiding their money overseas to finally bring that money home, resulting in a “three Trillion dollar boost to the economy.” I wonder if these people actually believe that. Do they ACTUALLY believe that millionaires/billionaires hiding “three trillion dollars” overseas are going to bring all that money home just to spend it??? Seriously?
So, what exactly would spur all this “economic growth” if we simply make the rich richer? “More money in people’s pocket” they say. Except the only people with “more money” in their pocket under Trump’s Tax Plan are people who ALREADY have a lot of money and yet aren’t spending it. If you give $10 to someone with no money, they’ll spend it right away. Give $10 to a wealthy person and they’ll just stick it in their pocket. If they needed anything, they would have bought it already.
No, what they’ll do with that savings is buy back their own stock to make themselves even richer (we are ALREADY seeing this in recent record Stock Market gains in anticipation of the cut.) They’ll continue to hide it in off-shore tax havens because ZERO percent is still better than 20%. And EVEN IF they spend it here, how many houses, cars & big screen TV’s can a person possibly buy to boost the economy? They think business owners will hire more people with all that extra money in their pocket. Why? Out of the goodness of their heart? DEMAND forces companies to hire more employees to meet that demand. If the demand isn’t there, why on Earth would anyone hire additional employees they don’t need? (I remember President George HW Bush pathetically begging corporations to “just hire one extra person and it’ll pull us out of the Recession (and save his presidency).” Of course, they didn’t. You can’t make corporations do something when they don’t need to. And if THAT is your plan to grow the economy… relying on the benevolence of corporations… we’re screwed.) The Unemployment Rate is ALREADY just 4.1% (a continued steady decline since President Obama passed his “Stimulus” in late 2009.) How much more growth do they think we can muster to offset those losses in tax revenue?
George HW Bush was right when he called it “Voodoo Economics”. You can’t make up for MASSIVE cuts in tax revenue through “growth”. The wealthy won’t spend more of their wealth just because we let them keep more of it. If they spent their money, they wouldn’t be wealthy in the first place, now would they?
Hang tight this week. Republicans are desperate to give Trump his one & only major legislative accomplishment of his first year in office. And huge tax cuts for rich people is the one thing they’ve always been able to agree upon.
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December 4, 2017
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Posted in: Economy, Greed, Jobs, Money, myth busting, Partisanship, Predictions, rewriting history, Right-Wing Insanity, Taxes
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