“Republicans Are Plotting Economic Disaster For 2016: The American People Will Be The Collateral Damage
Since George W. Bush’s presidency, Republican economic ideas have become drastically more conservative. Instead of massive tax cuts for the rich coupled with a general tolerance of the rest of government (or even new welfare programs), the party is now committed to much larger tax cuts coupled with eye-watering cuts to government.
Every Republican presidential candidate proposes staggering tax cuts heavily weighted toward the rich. Donald Trump would give the top one-thousandth of taxpayers $1.3 million apiece per year, while Ted Cruz would give them an even $2 million. Trump does favor preserving the welfare state, but he is a marked outsider in this respect. The entire rest of the party is committed to gigantic cuts to welfare, as shown by the budget formulated by House Republicans. Their most recent plan would slash $5.3 trillion in spending over a decade, 69 percent of which would come from programs for the needy.
The party’s intellectual apparatus (distinct from the Trumpist insurgency) has more-or-less fully regressed to an economic libertarianism straight out of the 1920s. They view basically all government programs outside of the military and the courts as illegitimate, to be slashed or eliminated wherever possible. The only problem with this is that when you try it, the results are immediate disaster.
Republicans haven’t been able to fully implement their plan of tax and service cuts on the federal level, but they have tried it in a few places on the state level. Louisiana under Gov. Bobby Jindal has had it the worst. Jindal’s massive cuts to education and services were not nearly enough to cover his gigantic tax cuts, and draining every rainy day fund in the state only delayed the day of reckoning. Eventually the results were so disastrous that the unthinkable happened — a Democrat replaced Jindal. Now Gov. John Bel Edwards is scrambling to deal with the most extreme budgetary emergency of any state government in decades, working feverishly just to keep the state from literal financial collapse.
Kansas is also suffering from Republican quack economics. Gov. Sam Brownback (who barely scraped through re-election in 2014 and now sits at a 21-percent approval rating) tried the same tricks as Jindal, though to a somewhat lesser degree, and the results were similar: a huge budget deficit with none of the promised explosive growth or job gains. Now Kansas conservatives are running into problems with the state’s Supreme Court, which found legal problems with the distribution of education cuts. Their solution: Attack the justices politically, by drawing up a new impeachment law and trying to get them thrown out in an upcoming confirmation election.
It’s the same story in Wisconsin with both deficits and lousy economic performance. Gov. Scott Walker’s major innovation has been an effort to basically destroy the Wisconsin state university system with drastic cuts and the abolishment of tenure, which is already leading to serious problems at the flagship school in Madison.
However, it could have been worse for all these states. The federal government, with its grants, its spending on social programs, and its employment of in-state government workers and contractors, provides a buffer of spending state governments cannot cut. For example, Louisiana gets over 40 percent of its state budget from the feds, as well as $5,917 per person in social spending, $3.5 billion in federal contracts, and $5.3 billion in compensation paid to almost 68,000 federal workers (as of the most recent data). That’s $48 billion in income against $39 billion paid in federal taxes (other states don’t make out so well).
This means that the results would be far more disastrous should Republicans get to implement their ideas on a federal level. Great chunks of the federal programs — food stamps, federal health programs, the Earned Income Tax Credit, and so on — that have provided inadequate but vital economic stabilization would be cut or eliminated altogether.
The results would be just as what happened on the state level, only worse.
It took many years for Republicans to talk themselves out of the fact that Herbert Hoover’s presidency was a disastrous failure, but with the exception of Trump, Hooverism is where they stand. It’s an ideology that can gain wide popularity only insofar as it is not actually tried on a wide scale. It turns out that a vision of government that was already outdated a century ago (when farmers were over a quarter of the workforce) is not very well-suited to a modern economy. It’s just too bad the American people might have to be the collateral damage in re-learning that lesson.
By: Ryan Cooper, The Week, April 4, 2016
“At The Top Of The To-Do List For 2017”: Here’s What Will Happen On Taxes If A Republican Is Elected President
The Tax Policy Center has released an analysis of Marco Rubio’s tax plan, which, like their analyses of Jeb Bush’s plan and Donald Trump’s plan, shows that it would result in a staggering increase in the deficit if it were implemented — $6.8 trillion in Rubio’s case, compared to an identical $6.8 trillion for Bush and $9.5 trillion for Trump.
The problem is that it’s awfully hard to wade through all these details and numbers, grasp the distinctions between them, and determine which one you find preferable.
The good news is, you don’t have to.
That’s in part because the differences between the various Republican candidates’ plans are overwhelmed by what they have in common. But more importantly, it’s because if one of them becomes president, the tax reform that results will reflect not so much his specific ideas as the party’s consensus on what should be done about taxes.
So to simplify things, here’s what you can expect if a Republican is elected president in November:
- Income tax rates will be cut
- Investment tax rates will be cut
- The inheritance tax will be eliminated
- Corporate income tax rates will be cut
- Corporations will be given some kind of tax holiday to “repatriate” money they’re holding overseas
And that’s basically it. Yes, there will be hundreds of provisions, many of which could be consequential, but those are the important things, and the things almost all Republicans agree on.
Let’s keep in mind that this is the policy area Republicans care more about than any other. There are pockets of conservatives for whom the details of defense policy are important, and others who care a lot about education, and even a few who care a lot about health care. But all of them want to cut taxes. They may get passionate talking about how much they want to repeal the Affordable Care Act, or how tough they’ll be on border security, or how they’ll totally destroy the Islamic State. But if a Republican is elected in 2016, it is a stone-cold guarantee that changes to the tax code will be at the top of the to-do list for 2017.
That doesn’t mean, however, that the tax reform we get will be exactly what that president promised during the campaign. For instance, Ted Cruz is proposing what’s essentially a Value Added Tax (VAT). But he won’t get that passed even with a Republican Congress, because it’s controversial within the party.
That’s critical to understand. It isn’t as though congressional Republicans, who have been waiting to do this for years, will just take the new president’s plan and hold a vote on it. Instead, they’re going to hammer out a complex bill that reflects their common priorities. It will be a product of the party’s consensus on what should be done about taxes, a consensus that has been forming since the last time they cut taxes, during the George W. Bush administration.
You can make an analogy with the ACA. By the time 2008 came around, Democrats had arrived on a basic agreement on what health care reform would look like. That isn’t to say there was no disagreement within the party. But the outlines had been agreed to by the most powerful people and the wonks within the party: expand Medicaid for those at the bottom, create exchanges for people to buy private insurance, offer subsidies to those in the middle. That’s why the plans offered by Barack Obama, Hillary Clinton, and John Edwards in that election all followed that outline, and that’s what the Democratic Congress eventually produced.
The things that I listed above are the essential tax consensus of the GOP at the moment. Some people would add or modify some elements — Rubio, for instance, would completely eliminate investment taxes while others would merely reduce them, but he would also expand the child tax credit. But the outline is the same, particularly in its effects. Here’s how we can summarize those:
- Poor and middle-class people will pay a little less in taxes
- Wealthy people will pay a lot less in taxes
- Corporations will pay a lot less in taxes
- The deficit will explode
Republicans, who profess to care deeply about deficits, will claim that their tax plan won’t actually cost anything (or will cost very little), because when you cut taxes, you create such a supernova of economic growth that the cost of the cuts is offset by all the new revenue coming in. This is sometimes referred to as a belief in the “Tax Fairy” because it has as much evidence to support it as a belief in the Tooth Fairy. It is a fantasy, but their continued insistence that it’s true requires us to address it.
You don’t need a Ph.D. in economics to remember the history of the last quarter-century. Bill Clinton raised taxes, and Republicans said the country would plunge into recession and the deficit would balloon; instead we had one of the best periods of growth in American history and we actually got to federal budget surplus. Then George W. Bush cut taxes, and Republicans said we’d enter economic nirvana; instead there was incredibly weak job growth culminating in the Great Recession. Barack Obama raised taxes, and Republicans said it would produce economic disaster; instead the deficit was slashed and millions of jobs were created.
So we don’t actually have to argue about whether the Republican tax plan will increase the deficit, because the theory behind it has been tested again and again, and the results are obvious. If they cut taxes as they’d like, maybe the deficit will go up by a trillion dollars, or five trillion, or eight trillion. We don’t know exactly how much it will go up, but we know it will go up.
As far as Republicans are concerned, dramatic increases in the deficit are a reasonable price to pay to obtain the moral good of tax cuts. If you think I’m being unfair, ask them whether they believe Bush’s tax cuts were a mistake. They don’t.
You can agree or disagree. But you don’t have to wonder what will happen if a Republican is elected. There may be other plans that president will be unable or unwilling to follow through on, but I promise you, cutting taxes is one thing he absolutely, positively will do. And we don’t have to wonder what it will look like. We already know.
By: Paul Waldman, Senior Writer, The American Prospect; Contributor, The Plum Line Blog, The Washington Post, February 12, 2016
“Crying About The Deficit Is A GOP Tool”: Can We Stop Pretending That Republicans Care About The Deficit Now?
Congress is about to pass a package that will keep the government operating through next September. And in order to sweeten the deal for conservative Republicans who would rather not spend money to have the government operate, they’ll also be voting on a $680 billion package of tax cuts. These bills contain both things Republicans want (like allowing oil exports, extending a research and development tax break for businesses, and delaying the “Cadillac Tax” in the Affordable Care Act) and things Democrats want (like extending the child tax credit and the Earned Income Tax Credit).
But whether you’re happy with the overall balance of line items in the bill, one thing’s for sure: it will increase the deficit rather substantially.
While there are some Republicans complaining about that, what they’re really mad about is the things they didn’t get, like banning Planned Parenthood from getting Medicaid reimbursements. In short, what mattered for both sides was the substantive details, and to some degree the politics (i.e. Republicans not wanting to suffer the fallout from another shutdown crisis).
Let’s be honest: despite all their talk about what we’re handing to the next generation and how government should balance its books just like a family does, when it comes down to actually making choices, Republicans are no more concerned about deficits than Democrats are. Crying about the deficit is a tool they use to constrain policies they don’t like. When it comes to the policies they do like, how much the government will have to borrow to fund them is barely an afterthought. So can we stop pretending they actually care about deficits?
There’s no denying that Republicans have wielded the fear of deficits and debt with extraordinary effect. They often convince the public that deficits are a serious problem that needs addressing, because most voters have only the vaguest understanding of how the government operates, and words like “debt” become a stand-in for “the economy.” And they have allies among those sometimes referred to as the Very Serious People in Washington, who gravely intone that government can’t do things like mitigate the effects of a recession if doing so will add to the debt. But when Republicans actually have to make choices, there’s a simple calculus at work: the programs they don’t support anyway, like food stamps or Medicaid, should be cut because we just can’t afford them. But the programs they do support, like military spending, not to mention tax cuts that will increase the deficit? Well, we just have to do those things, because they’re necessary.
Consider that the biggest Democratic policy initiative in recent years was the Affordable Care Act, which was completely paid for through taxes and budget cuts within Medicare. The ACA not only didn’t increase the deficit, it decreased it. The biggest Republican policy initiatives in recent years, on the other hand, were the Bush tax cuts and the Iraq War. The former cost somewhere between $2 trillion and $3 trillion (see here and here), while the latter cost around $2 trillion. There was no attempt to pay for either one, meaning the cost was just added to the deficit.
And why wasn’t there an attempt to pay for them? The simple answer is that when Republicans have something they want to do, they do it. Trying to pay for what you want to do just complicates things (as the authors of the ACA could testify). When George W. Bush took office, they wanted to cut taxes, particularly on the wealthy, so they did. They wanted to invade Iraq, so they did. If any Republican said, “It would be nice to do this, but it’s going to increase the deficit, so we shouldn’t,” they would have been laughed out of the room. And all those Republicans who today say that they don’t think Bush was a real conservative because he didn’t curtail spending? If you don’t remember them loudly objecting at the time, that’s because they didn’t.
The main reason Republicans are free to set aside concerns about the deficit right now is that it has dropped so dramatically over Barack Obama’s presidency, so it’s much harder to argue that it’s an urgent problem. The deficit peaked at $1.4 trillion in 2009, Obama’s first year in office, when the country was still in the depths of the Great Recession. By 2014 it had fallen to $484 billion, a decline of two-thirds. It went from 9.8 percent of GDP in 2009 down to 2.8 percent of GDP in 2014.
There are multiple reasons why, including sequestration, the improving economy, and the tax increases Obama negotiated. But if you want to grant presidents credit or blame for what happens with the deficit on their watch, in the last forty years, Presidents Obama and Clinton reduced the deficit as a proportion of GDP, President Carter kept it almost exactly where it was, and Presidents Bush the Younger, Bush the Elder, and Reagan increased the deficit. Notice a pattern?
And all the Republicans running for president have tax plans that would send the deficit into the stratosphere. They wave away the consequences by saying that they’ll come up with some package of (yet unspecified) budget cuts, or even better, that despite all historical evidence, this time cutting taxes will lead to such an explosion of economic growth that the deficit will actually fall (this is known as a belief in the “Tax Fairy”). But the truth is that they just want to cut taxes, and if one of them becomes president, that’s what he’ll do. And nobody on the Republican side will care what it does to the deficit.
By: Paul Waldman, Senior Writer, The American Prospect; Contributor, The Plum Line Blog, The Washington Post, December 17, 2015
“Voodoo Never Dies”: Never Forget That What It’s Really About Is Top-Down Class Warfare
So Donald Trump has unveiled his tax plan. It would, it turns out, lavish huge cuts on the wealthy while blowing up the deficit.
This is in contrast to Jeb Bush’s plan, which would lavish huge cuts on the wealthy while blowing up the deficit, and Marco Rubio’s plan, which would lavish huge cuts on the wealthy while blowing up the deficit.
For what it’s worth, it looks as if Trump’s plan would make an even bigger hole in the budget than Jeb’s. Jeb justifies his plan by claiming that it would double America’s rate of growth; The Donald, ahem, trumps this by claiming that he would triple the rate of growth. But really, why sweat the details? It’s all voodoo. The interesting question is why every Republican candidate feels compelled to go down this path.
You might think that there was a defensible economic case for the obsession with cutting taxes on the rich. That is, you might think that if you’d spent the past 20 years in a cave (or a conservative think tank). Otherwise, you’d be aware that tax-cut enthusiasts have a remarkable track record: They’ve been wrong about everything, year after year.
Some readers may remember the forecasts of economic doom back in 1993, when Bill Clinton raised the top tax rate. What happened instead was a sustained boom, surpassing the Reagan years by every measure.
Undaunted, the same people predicted great things as a result of George W. Bush’s tax cuts. What happened instead was a sluggish recovery followed by a catastrophic economic crash.
Most recently, the usual suspects once again predicted doom in 2013, when taxes on the 1 percent rose sharply due to the expiration of some of the Bush tax cuts and new taxes that help pay for health reform. What happened instead was job growth at rates not seen since the 1990s.
Then there’s the recent state-level evidence. Kansas slashed taxes, in what its right-wing governor described as a “real live experiment” in economic policy; the state’s growth has lagged ever since. California moved in the opposite direction, raising taxes; it has recently led the nation in job growth.
True, you can find self-proclaimed economic experts claiming to find overall evidence that low tax rates spur economic growth, but such experts invariably turn out to be on the payroll of right-wing pressure groups (and have an interesting habit of getting their numbers wrong). Independent studies of the correlation between tax rates and economic growth, for example by the Congressional Research Service, consistently find no relationship at all. There is no serious economic case for the tax-cut obsession.
Still, tax cuts are politically popular, right? Actually, no, at least when it comes to tax cuts for the wealthy. According to Gallup, only 13 percent of Americans believe that upper-income individuals pay too much in taxes, while 61 percent believe that they pay too little. Even among self-identified Republicans, those who say that the rich should pay more outnumber those who say they should pay less by two to one.
Well, consider the trajectory of Marco Rubio, who may at this point be the most likely Republican nominee. Last year he supported a tax-cut plan devised by Senator Mike Lee that purported to be aimed at the poor and the middle class. In reality, its benefits were strongly tilted toward high incomes — but it still drew harsh criticism from the right for giving too much to ordinary families while not cutting taxes on top incomes enough.
So Mr. Rubio came back with a plan that eliminated taxes on dividends, capital gains, and inherited wealth, providing a huge windfall to the very wealthy. And suddenly he was gaining a lot of buzz among Republican donors. The new plan would add trillions to the deficit, which conservatives claim to care about, but never mind.
In other words, it’s straightforward and quite stark: Republicans support big tax cuts for the wealthy because that’s what wealthy donors want. No doubt most of those donors have managed to convince themselves that what’s good for them is good for America. But at root it’s about rich people supporting politicians who will make them richer. Everything else is just rationalization.
Of course, once the Republicans settle on a nominee, an army of hired guns will be mobilized to obscure this stark truth. We’ll see claims that it’s really a middle-class tax cut, that it will too do great things for economic growth, and look over there — emails! And given the conventions of he-said-she-said journalism, this campaign of obfuscation may work.
But never forget that what it’s really about is top-down class warfare. That may sound simplistic, but it’s the way the world works.
By: Paul Krugman, Op-Ed Columnist, The New York Times, October 2, 2015
“Openly Contemplating Possibility He Could Win”: Republicans Come To Terms With Their Worst Trump Nightmare
The tenor of Republican Party rhetoric has darkened. Until recently, most Republican candidates and strategists regarded Donald Trump’s presidential campaign as something ephemeral—a flash in the pan; a storm to be waited out. Now they are openly contemplating the possibility that he could win, or at least ride his steady support all the way to the Republican nominating convention next summer, leaving havoc in his wake.
Consider:
- On Tuesday, Republican presidential candidate Lindsey Graham said, “If Donald Trump is the nominee, that’s the end of the Republican Party.”
- Also on Tuesday, Graham’s home state of South Carolina—the first southern state to hold a primary—announced that it would require candidates to sign a pledge promising to support the Republican presidential nominee in the general election, and not launch an independent candidacy. Trump has thus far refused to make such a promise.
- After a Monday focus group brought Trump’s appeal to the Republican grassroots into sharp relief, GOP pollster Frank Luntz had a mini anxiety attack. “You guys understand how significant this is?” Luntz asked reporters. “This is real. I’m having trouble processing it. Like, my legs are shaking.”
As much as Trump himself is an outgrowth of the reckless way conservatives have stoked the resentment of the Republican Party base, his durability is also an outgrowth of an electoral process conservatives have shaped aggressively. Even if Trump’s ceiling of support is around 30 percent, it’s enough to ride out the primary process—and retain the lead—in a fractured field where almost every candidate has a wealthy patron or two.
In a better-controlled environment, Trump would be a less potent force. As the frontrunner, though, he’s steering the policy debate in ways that have Republican donors and strategists deeply spooked. As Greg Sargent writes at the Washington Post, “his willingness to say what other Republicans won’t has forced out into the open genuine policy debates among Republicans that had previously been shrouded in vagueness or imprisoned within party orthodoxy.”
Right now, Trump has his hand on the third rail of Republican politics. He’s arguing that wealthy people shouldn’t get a pass on paying regular federal income taxes. “The middle class is getting clobbered in this country. You know the middle class built this country, not the hedge fund guys, but I know people in hedge funds that pay almost nothing, and it’s ridiculous, okay?”
For almost any candidate, promising to reduce taxes on rich people is the price of admission into the Republican primary. Trump, by contrast, is poised not only to survive this apostasy, but to singe any of the more orthodox rivals who challenge him.
Senator Marco Rubio’s tax plan represents the most pointed contrast to Trump’s middle-class populism. Rubio proposes not just to lower the top marginal income tax rate, but to completely zero out capital gains taxes. To escape scrutiny for offering such a huge sop to the wealthy, Rubio plans to fall back on his origin story—as the son of a bartender who worked at a hotel financed by investors, Rubio can elide the typical criticisms of trickle-down economics, by claiming to be a direct beneficiary of it. This might be an effective diversion against a Democratic politician promising to increase people’s taxes, but against a rapacious developer like Trump, it falls completely flat. Trump would love nothing more than for a career elected official like Rubio to lecture him about the impact tax rates have on investment and growth. Trump has managed to survive in the business world at a number of different capital gains tax rates, whereas Rubio has struggled to stay afloat, and racked up high levels of credit card debt, in the working world.
If Trump were running an insurgent candidacy against Rubio and one other viable Republican, a supply-side platform would fare pretty well. Republican base voters aren’t as doctrinaire about taxes as Republican elites are, but they still support cutting taxes by a significant margin. In a smaller field, Rubio might be the standard bearer. Instead, the standard bearer claims to want to raise taxes on the rich. And much to the dismay of just about everyone else in the Republican Party, he isn’t going anywhere.
By: Brian Beutler, Senior Editor, The New Republic, August 28, 2015
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