The Return of Voodoo Economics
Last week saw lots of insane news, from Trump’s ignorant and destructive decision to decertify the Iran nuclear deal, to the appalling threat to halt relief aid to Puerto Rico, to his openly fascist attack on NBC News and a free press, to revelations that the Pentagon had to patiently explain to him — as one would to a slow-witted child — that we can’t (and shouldn’t) make our nuclear arsenal ten times bigger, to his juvenile taunts about his alleged IQ, to the latest flood of leaks in what looks like his accelerating slide into unbridled madness, to the worst salvo yet in his ongoing effort to sabotage Obamacare (though along with the millions of poor Americans it hurts, it may prove more damaging to Republicans than Democrats), and finally to his unconscionable reaction to the deaths of four US soldiers in Niger, which just seemed to get worse by the day.
That’s a year’s worth of op-ed fodder right there.
But what I’d like to talk about this week is something more prosaic but even more central to the Republican sickness that afflicts our country, which is the proposed GOP tax cut.
DECLARE THE PENNIES ON YOUR EYES
“Tax reform” was supposed to be the centerpiece of the GOP’s legislative agenda, the Holy Grail that they had sought during the eight long years of — dare I speak his name? — Barack Obama! But nine years of demonizing Obamacare seemed to demand that it be dispensed with before anything else, “repealed on day one” as the battle cry had it. Against the advice of strategists who favored tackling taxes right out of the gate in January, the party seemed to think it could shitcan the ACA first and notch an early, easy, crowd-pleasing legislative victory that would delight the base, build momentum, and pave the way for the main event.
We all know how that played out.
Now, ironically, the triple Trumpcare fiasco figures to make changes to the tax code–never an easy job under any circumstances — even more daunting. Serves the bastards right.
It is by no means clear that tax reform would have avoided that same fate had it gone first, as the GOP’s intramural dysfunction proved even worse than progressives had dared dream, laying bare both the utter bankruptcy of its philosophy of governance (cough cough) and the unsustainability of its ideological coalition. It was one thing to get Romneyite one-percenters, Breitbart white supremacists, and gun-worshipping canned tuna-hoarding TEOTWAWKI preppers all ginned up to vote against Hillary; quite another to get them to agree on complex policy issues. In other words, when your entire party consists only of lies and snake oil and hatred and greed, it should be no surprise that you have trouble getting anything done except dismantling some of the essential armature of civilization.
In any case, with repeal of Obamacare now off the legislative table as a three-time loser, and Trump reduced to using executive orders (what?????) to sabotage it, apparently out of sheer spite, tax reform is now up to bat, and the same forces that doomed Trumpcare are very much in play.
First of all, let’s dispense with the canard that this is “reform” in any way, shape, or form, except in the same way that amputating a leg is physical therapy. It is nothing but a blunt-edged tax cut that doesn’t even try to address the broader and deeper systemic problems of the byzantine and grossly unfair US tax code. Ironically, Trump (and to a lesser extent the mainstream GOP) are happy to call it just that, as “tax cut” has a nice, voter-pleasing ring.
Every reasonable analysis of this half-assed plan is that it gives a massive tax break to the very rich (the Family Trump very much included) while exploding the deficit that the GOP once claimed to care so passionately about when Democrats were in power. It figures to help middle-class people very little if at all, and may actively hurt many of them. It does absolutely nothing for the poor and most unfortunate among us, whose tax burden is mostly in payroll and not income taxes, and by reducing federal revenue, actually shifts more of the overall tax burden onto them as well.
EJ Dionne reports in the Washington Post that the non-partisan Tax Policy Center analyzed the GOP plan using the available details and “concluded that nearly a third of taxpayers with incomes between $50,000 and $150,000 would see their taxes go up, as would a majority of those making between $150,000 and $300,000….the tax rate for the poorest (those earning less than $9,325 a year) actually would go up, from 10 percent to 12 percent.”
Also writing in the WaPo, Katrina vanden Heuvel offered a nice summary of the astonishing chutzpah in play here:
The top 1 percent will pocket more than half of the tax cuts next year and an obscene 80 percent by year 10. This bill will also reward multinationals for booking profits as earned abroad to avoid taxes. The legislation offers a retroactive tax cut for the $2.6 trillion that has evaded taxation and would expand that tax dodge by eliminating taxes altogether on profits that they report as earned abroad. At a time when hedge-fund operators pay a lower tax rate than schoolteachers, this bill would increase the outrage, with a massive tax break for real estate barons, hedge-fund managers and lawyers by taxing “pass-through” income at a reduced rate. Instead of closing loopholes, the bill adds to them.
So the Republican plan is clearly a brazen betrayal of the patently fake populism and alleged concern for working people that were a chief part of Trump’s demagogic presidential campaign. No surprise there.
It should likewise shock no one that Trump has presented this tax cut with (spoiler alert) a blizzard of lies impressive even by his standards. In that regard, given that all of Republican tax policy is founded on deceit in the first place, McConnell and Ryan are fortunate to have on their team the greatest pathological liar of all time. Trump is lying about the cut helping anyone but the rich, lying about what its impact will be on the economy and the deficit, and he is damn sure lying — above all — when he says that he and his family wouldn’t benefit. The New York Times estimates the Trump clan stands to save about a billion dollars over the next ten years thanks to this cut. Of course we can’t be entirely sure because — oh yeah — he won’t release his tax returns.
But as I wrote last week, what I have learned in my encounters with Trump fans is that they are fanatically resistant to facts like these. They are so in thrall to tribalism, and so convinced of the bias of the legitimate media, that none of these undeniable facts will penetrate their bubble. Therefore do not look for a large uprising of popular opposition to this almost unfathomably venal Republican plan. Much of our nation is comprised of marionettes who love their strings, and the plutocrat puppeteers who engineered it that way are about to reap the fruits of that long campaign.
THE DEVIL IN THE DETAILS
I won’t attempt a detailed critique of the tax cut here. There’s no need. I am not an economist, and smarter people than me have already eviscerated this plan far better than I ever could. Prominent among them is Nobel Prize winner Paul Krugman, who does a thorough job in a recent column, which I invite you to read:
Lies Lies Lies Lies Lies Lies Lies Lies Lies Lies
(New York Times, October 16, 2017
(Full disclosure: I will be heavily reliant on Krugman in this essay, as my own Nobel Prize in Economics has been unaccountably held up by Fedex.)
I will note, however, that the Right has a special hatred for Krugman that even goes beyond its hatred for most progressives, which is a sure sign that he is absolutely correct almost all the time. Whenever I cite him to conservatives, and note that they don’t give out them Nobels fer nuthin’, I usually get a sneering attack on how the Nobel Prizes are totally political — by which conservatives mean compromised by liberal bias. To be fair, the Nobel Peace Prize — which is administered and awarded by an entirely different arm of the Nobel organization than all the others — is by definition unavoidably political. But the Nobel Prize in Economics most certainly is not. This then is the same feet-stamping, breath-holding form of denial in which the Right engages regarding anything it doesn’t like: if a credible source contradicts your position, deny its credibility. The New York Times, the Nobel Prize, the Congressional Budget Office — no organization is above being slandered and dismissed as a bunch of lying commies.
Mike Lofgren, a long time GOP congressional staffer who turned apostate, has written bluntly that tax cuts for the rich are the only thing that the Republican Party cares about, and that all the rest of its platform is — in his words “rube bait.” Ouch. But history bears his claim out. Everything the GOP does serves this ultimate goal of further enriching the wealthiest Americans through whatever dishonest theorizing, policymaking, and Ponzi scheme marketing campaigns necessary. That fact alone explains the party’s willingness to make its Faustian bargain with Trump, although it’s not at all clear that it’s paying off. On the contrary, in fact. The tax cut will be the ultimate test, as it will have to weather both Trump’s human hand grenade style of governance, and the opposition of the insurrectionist Freedom Caucus (nee Tea Party), which for all its other myriad faults is not as beholden to the 1% as the party’s Big Money wing. Still, early indications are that they may actually come together and get this one through, which is also a testament to how important it is to the GOP: cutting rich people’s taxes is the one thing that is actually stronger than the dysfunction of Team Trump.
Per Lofgren, the Right has long been adept at using wedge issues — guns, abortion, gay rights, religion — to divide America and woo voters to its side. Above all it has exploited racism to pull of the miraculous trick of making white Americans in the working and middle classes identify with rich whites more than with people of color who share their economic circumstances. In America, race is far stronger than class, identity-wise. Hence the GOP’s Javert-like focus on repealing Obamacare over the past seven years, which had more to do with the “Obama” part than the “care” part.
The tax cut is part of a larger — albeit sketchy — GOP budget proposal that also includes $5.8 trillion in spending cuts over that same ten years. Vanden Heuvel continues:
At a time when baby boomers are retiring, it calls for cuts of $473 billion in Medicare, $1 trillion in Medicaid and another $300 billion in Obamacare subsidies to medium- and low-income workers. It cuts more than $650 billion in income security programs for low-income workers — primarily food stamps, the earned-income tax credit and child tax credit, and Supplemental Security Income (SSI) for disabled seniors and others in need. Another $200 billion is cut from Pell grants and student loans that help working families afford college. These decreases will leave millions without affordable health care and make millions of disabled and low-income Americans even more vulnerable. The budget also projects stunning reductions in what is called non-defense discretionary spending, essentially everything the government does outside of the military, entitlements and interest payments on the national debt. These include programs that contribute to our safety — such as law enforcement, the Coast Guard, the FBI and the Drug Enforcement Administration — as well as services vital to our health — such as environmental protection, water and sewage systems. It also includes public investment vital to our economy and our future — in science and technology, medical research, modern infrastructure, education, advanced training and research, modern infrastructure, education, advanced training and more.
These programs are already projected for deep cuts under the 2011 Budget Control Act, but the Senate bill decimates them. By 2019, it cuts this spending by 10 percent from 2017 levels, and by nearly 20 percent by 2027. As a share of the economy, spending on domestic services will be cut to levels not seen since Herbert Hoover.
In other words, the Republicans don’t just want to give more money to the rich; they want to rob from the poor as well — Robin Hood in reverse. And for some reason, millions of Americans buy the GOP line that this will be good for everyone.
TRICKLE ME DOWN
As part of this shameless snake oil sale, the stinking corpse of supply side economics — as discredited a theory as there could possibly be — has been exhumed and propped up, Weekend at Bernie’s-style, for another go-round.
For those born after Reagan, supply side economics — also known as “trickle down economics,” and based in part on research by the aptly named Arthur Laffer — is the theory that keeping more money in the hands of the wealthy will benefit everyone by stimulating the economy. If that sounds like a shameless scam, it is. Supply side has an obvious appeal to the rich, who for the past thirty-seven years have relentlessly tried to convince us that it’s true. I’d love to believe it is so. I can even imagine ways that it could be: it has some merit on first blush, and just because it’s counterintuitive doesn’t automatically mean it’s wrong. In fact, it might even suggest that it’s right, because a lot of life seems puzzlingly ass-backwards like that. If it were true I’d be delighted and would wholeheartedly support it. But it ain’t.
Every attempt at instituting supply side principles has bombed miserably, failing to stimulate the economy, and resulting only in the rich getting richer, the rest of society suffering, and the tax base shrinking. At best it’s wishful thinking by the wealthy; at worst, a deliberate, unconscionable deception. As Paul Waldman writes:
Most Republicans still publicly hold to the ludicrous fantasy that cutting taxes will create such a supernova of economic growth that it will pay for itself, not only not increasing but actually cutting the deficit. This isn’t true, has never been true and never will be true — as I’ve said before, it’s like arguing that eating more ice cream will help you lose weight. Harvard University economist Greg Mankiw, who was chairman of the Council of Economic Advisers for President George W. Bush, famously called the belief that cutting taxes raises revenue the hallmark of “charlatans and cranks.”
Supply siders often cite the aphorism, “A rising tide lifts all boats.” The yachting metaphor ought to be a dead giveaway to its patrician bias. When he was Reagan’s rival in the 1980 GOP presidential primaries, George H.W. Bush memorably derided it as “voodoo economics.” When Reagan won the nomination and picked him as his running mate, Bush was never heard from again on the topic. But when his son was in the Oval Office two decades later he sided with Reagan and twice cut taxes for the rich, with the disastrous results that his dad could have predicted.
While the appeal of supply side thinking to the rich is self-evident, what is far less clear is why anyone else would ever believe it, given its repeated track record of failure, exposing it for the brazen sham that it is. Again, Krugman says it well: “Insistence in the magical power of tax cuts is the ultimate zombie lie of US policy discussion; nothing can kill it. And we know why: there’s a lot of money behind the proposition that great things will happen if you cut the donors’ taxes.”
The faithful traveling companion to the avarice at the heart of the GOP tax cut is its utter hypocrisy.
As noted above, when Republicans were out of power for eight years, they were fanatics on the topic of the deficit. The usual term is “deficit hawks.” Vultures would be a better description. We don’t need to debate whether or not deficits are a concern. (Paul Krugman certainly doesn’t think so, and did I mention that he has a Nobel Prize in Economics?) Even if we were to concede that Republicans are right and deficits are a dire threat to the republic, the GOP has done an absolute, height-of-hypocrisy 180 on the topic now that they are in charge.
Those aforementioned deficit birdbrains used to demand that any tax cuts be “revenue neutral,” meaning offset by reductions in spending. (Never mind the idea of actually reducing the deficit.) While some still cling to the fantasy (or lie) that tax cuts for the rich will somehow accomplish one or both of those goals, others have abandoned any concern about the deficit completely — or at least abandoned talking about it. Now that the possibility of a huge giftwrapped giveaway to the 1% is on the table, that obsession has been summarily dispensed with. Look for it on a milk carton near you, because it has vanished like Scott Baio’s acting career.
The Trump administration and McConnell/Ryan Congress are not unique in this regard. Dick Cheney infamously said “Deficits don’t matter” when he pushed for a huge tax cut during the Bush 43 years. I guess that’s why that administration was also cool with turning the Clinton-era budget surplus into a six trillion dollar deficit by starting a pointless and criminally wrongheaded war in Iraq.
THE AMERICAN CON
In keeping with our fake president’s rumored predilection for golden showers, “trickle down” economics is an apt name for a theory that embodies the old Yiddish saying, “You can’t piss on my back and tell me it’s raining.” Except that, for loads of Republican true believers and Kool-Aid drinkers, apparently you can.
It is not news that for decades the American right has succeeded brilliantly in getting middle and working class Americans (and even some desperately poor ones) to vote against their own economic interest. The underlying psychology of that phenomenon, and the complexity, sophistication, and dishonesty of that propaganda campaign, are both far too vast to delve into here, but its crux is simply this:
Most Americans are sympathetic toward the rich because they imagine that someday they could join them. Needless to say, the rich have a vested interest in fostering that mindset.
If not uniquely American, this mentality is at the very least deeply entwined with the bootstraps ethos of the United States, the myth of Horatio Alger, the ideal of the classless society, and above all the celebrated “American Dream”: the idea that in America anyone can rise from even the humblest of origins to the loftiest of heights — to included untold riches — through hard work and hard work alone.
If this was ever true it undeniably no longer is. Contrary to popular American belief, the US lags behind numerous other Western democracies in social mobility, including some of the most famously hidebound, class-conscious countries Europe has to offer (like Britain). The gap between rich and poor has been growing at an alarming rate since Reagan took office in 1981. Of the wealth created in the United States since ’81, the vast majority has flowed to the richest 1%, which saw its average real income grow by 175% while the income of the bottom 90% of Americans remained flat.
Yet the myth of the American Dream persists, despite having turned into this cruel hoax. And the Republican stranglehold on its base depends on it.
Witness the estate tax, the subject of an upcoming documentary called Death and Taxes (working title) by acclaimed filmmaker Justin Schein (Left on Purpose). The GOP has spent untold reserves of advertising, energy, and time convincing the American people that this tax on inherited wealth — which they have successfully rechristened the “death tax” in the public vernacular — is an abomination before God. But why should Joe Sixpack care? The estate tax affects only about 0.002% of all Americans — which is to say, the very very richest. But to that tiny fraction it matters very very much, as it is worth billions to some of them. Yet if you ask the average middle or working class Republican voter, he or she is apt to repeat the same outraged GOP talking points in opposition to this tax, which affects them not in the slightest. But surely a significant part of the solidarity ordinary Republicans feel over the so-called “death tax” is a feeling that, “Hey, I could be rich someday myself and then I wouldn’t want to pay that either.”
In yet another irony, the best economics suggest that it’s not cutting taxes for the rich that will stimulate the economy, but putting cash in the hands of what are sometimes called “regular folks” — which is to say tens of millions of consumers — by giving middle and working class people decent wages that they can pump into the marketplace and drive up demand for goods. The remarkable emergence of the American middle class in the postwar period was the core of an age of prosperity that lasted all the way up to 1981 when it came to a screeching halt with the advent of Reagan and the dawn of a new Gilded Age of inequality that has yet to be arrested. Now those same working and middle class people — including most of us reading this, and me writing it for sure — are strapped with rent, mortgages, student loans, and other prohibitive costs of living. Per above, wages and other income remain flat; few of us make our money through investments (which are taxed at a lower rate, naturally). Most Americans don’t save because most Americans live hand to mouth.
Yet still the GOP is able to get ordinary, hardworking middle and working class Americans to lend their passionate support to programs and policies that benefit only the rich, sometimes at their own economic expense.
Why does the bulk of the American population not rise up in outrage? Why do so many of them cast their lot with the very people who exploit them?
I dunno. But that, my friends, is the dictionary definition of a “sucker.”
DEATH AND TAXES AND MORE DEATH
It is a bitter irony that — if only subconsciously — Trump’s ascent was driven in part by resentment over this very issue of the rising inequality in the US. Tired of being lied to and taken advantage of, many ordinary Americans were (and remain) eager for a radical change, even one that would burn the whole goddam system to the ground. (Sometimes preferably so.) In that sense, strange as it seems, Trump’s appeal and that of Bernie Sanders were twinned, while Hillary Clinton had the misfortune of being the eat-your-vegetables candidate of sober, diligent dedication to the slow improvement of the status quo.
The mystifying part is that those same people who were and are fed up with being exploited by the rich and powerful for some reason decided that the Republican Party was the ideal vehicle to fix the problem. It was even more improbable that a Richie Rich cartoon come to life / slash / billionaire Manhattan plutocrat shitbag born with a silver spoon in his ass could successfully cast himself as a populist hero to those people.
Part of Trump’s appeal was that he portrayed himself as a revolutionary alternative to the old school Rockefeller Republican leadership. That of course was another laughable con which should have been clear as soon as he got elected and filled his Cabinet (if not the moment Candidate Trump first opened his mouth). The man who fulminated against Goldman Sachs and promised to “drain the swamp” blithely assembled a team full of veterans from that very vampire squid, representing the richest Cabinet in terms of personal wealth in American history. (Even the self-styled insurrectionist Bannon had been a trader at Goldman Sachs.) Yet Trump’s fans somehow either overlooked or forgave that, one of many yogi-like contortions they engage in every day in order to continue supporting him.
Trump may be a loose cannon on the deck of the SS Ronald Reagan on many fronts, but when it comes to serving the GOP’s economic agenda he has been a reliable howitzer firmly set in a battlement. This appalling Christmas gift to the 1% disguised as a “tax plan” is proof positive. (There, Fox News: I said “Christmas.” Now get off my back.) Once again, is that any surprise, seeing as two of its chief architects are Trump’s Treasury Secretary (and man in desperate need of a vowel) Steve Mnuchin and his economic advisor Gary Cohn, both formerly top partners at Goldman Sachs?
The corollary to Trump’s loyalty here is the Republican Party’s culpability for this particular atrocity. Trump is unilaterally responsible for plenty of nightmares since he became — gak — president, but like the thrice failed repeal of Obamacare, the tax plan is one that the GOP at large not just abetted with its silence but for which it actively shares the blame. There’s been a lot of talk about the Republicans’ desperation to pass any kind of major legislation after a disastrous first nine months of unified control of the federal government. But a tax cut for the rich is not just any old legislation for the GOP. It’s their entire soul, to the extent that they have one. Even critics of Trump such as McCain have indicated that they will vote for the appalling GOP budget that is a prerequisite to this cut.
In his unprecedented public break with the President two weeks ago, Sen. Bob Corker of TN made it clear the entire US Senate knows Trump is unhinged and unfit and even an existential threat to the species….but its Republican members are so determined to deliver the monetary goods for their plutocratic masters that they are willing to risk nuclear war to get it.
WHAT, ME WORRY?
Echoing Lofgren, EJ Dionne calls cutting taxes for the rich “the only thing the (modern) Republican Party knows how to do.” But the fact that they try to tell us it’s for our own good is the ultimate insult:
And they have the nerve to pretend that they aren’t really trying to further enrich the moneyed classes. They claim that comforting the comfortable will someday, really and truly, help working people by creating jobs and economic growth.
And imagine this: Republicans want to use this deficit-bloating, inequality-enhancing, inflation-courting, social-justice-insulting monstrosity to prove they can actually govern.
For the last word, let’s go to Krugman again, one more time:
How can an administration that pretends to be populist, to stand up for ordinary (white) working people, sell such elitist policies? The answer is a strategy based entirely on lies. And I mean entirely: The Trump administration and its allies are lying about every aspect of their tax plan. I’m not talking about dubious interpretations of evidence or misleading presentation of the facts — the kind of thing the Bush administration used to specialize in. I’m talking about flat-out, easily refuted lies, like the claim that America has the world’s highest taxes (among rich countries, we have close to the lowest), or the claim that estate taxes are a huge burden on small business (almost no small businesses pay any estate tax)….
So, politically, can they really get away with this? A lot depends on how the news media handles it. If an administration spokesperson declares that up is down, will news reports simply say “so-and-so says up is down, but Democrats disagree,” or will they also report that up is not, in fact, down? I wish I were confident about the answer to that question. One thing we know for sure, however, is that a great majority of Republican politicians know perfectly well that their party is lying about its tax plan — and every even halfway competent economist aligned with the party definitely understands what’s going on. What this means is that everyone who goes along with this plan, or even remains silent in the face of the campaign of mass dissimulation, is complicit — is in effect an accomplice to the most dishonest political selling job in American history.
Did I mention Paul has a Nobel Prize in Economics?
Artwork: A. Saleem