Trump’s ‘Populism’ – Huge Tax Cuts For the Wealthy
What a pathetic display of political theater perpetrated by the Republican majority of the US House of Representatives. They pass a cruel, unworkable and unpopular repeal of the Affordable Care Act, and then bus it down to the White House for beer and self-congratulatory hugs.
It was like rushing the mound after a first inning home run. Uh, fellows… The bill faces an uncertain future in the Senate, in Conference and another House vote, where (hopefully) a more moderate version will provoke the same divisions among House Republicans as before.
The bill that just passed the House was, in my opinion, not really about health care. Remember when right after the called-off March vote, both Trump and House Speaker Paul Ryan shrugged off the failed attempt and proclaimed, On to tax reform!
Not so fast. What made them pivot back?
Trump’s “Tax Reform”
Soon after the health care bill failed in the House, the White House distributed to the media a one-sheet bulleted tax reform proposal. Purposely vague, it contained all sorts of goodies for wealthy investors and businesspeople: A 15 percent corporate tax rate, elimination the estate tax (affecting an estimated 4,918 super-wealthy estates, Trump’s included) and erasing the alternative minimum tax (Trump’s primary tax burden, according to his partial 2005 return obtained by The Rachel Maddow Show) and lowering the capital gains tax to, in some cases, zero. Impact on the deficit: up to $5.5 trillion in the next decade.
It was such a craven sop to Republican wealthy donors that spinning it as “revenue neutral”…it would pay for itself by stimulating new investment and job creation…would be a heavy lift, to put it mildly (we’ll get to that). What the Republicans needed was a rollback to some kind of entitlement program to pay for all those giveaways and disguise it as “reform.” That was how the Affordable Care Act, always a convenient whipping boy, reentered the picture.
House Plan Would Savage Medicaid
Simply put, the House health care reform bill would cut federal spending on Medicaid by up to $880 billion in the next ten years, depending on how many states choose to nullify it. It would halt ACA’s Medicaid expansion in its tracks, potentially reducing enrollment for 14 million low-income Americans.
According to the Center for Budget and Policy Priorities, the House bill would affect “coverage and financial security for over 70 million low-income Americans–including children, seniors and people with disabilities–while also increasing uncompensated care for hospitals.”
One unheralded takeaway: Since the ACA was enacted, bankruptcies have decreased by 50 percent, according to Marketwatch.com. The House bill would increase the likelihood of medical bankruptcies and throw millions of low-income people into hospital emergency rooms. Do we really want to go back to those days?
Reagan and W.: Same Result
Donald Trump seems to be following in the footsteps as his Republican predecessors, Ronald Reagan and George W. Bush. Each enacted tax cuts soon after assuming the presidency and they shared similar results that didn’t meet expectations. Specifically:
- Ronald Reagan, the patron saint of conservatism. He had it good for a while, cutting the marginal rate from its steep 70 percent benchmark. But following Republican losses in the 1982 election and a recession, the deficit ballooned from $700 million to $3 trillion. Something just didn’t make sense about cutting taxes + increasing the military = a balanced budget. Reagan ended up raising taxes eleven times.
- George W. Bush. Remember, Bush inherited a budget surplus from Bill Clinton, but that didn’t last long. In 2001 and 2003, he enacted two massive tax cuts primarily benefiting the rich: People with incomes of over a million dollars stood to gain at least $18,000, which was more than 30 times larger than the cuts enjoyed by average Americans. The Clinton surplus sunk to a deficit of 3.6 percent of GDP in just four years. To be fair, anemic economic growth during the Bush years was not helped by the Fed’s policy of easy money which led to a subprime mortgage frenzy.
Tax Cuts Don’t Pay for Themselves
Since he has demonstrated little aptitude or appreciation of history, Donald Trump is not likely to learn from past missteps of Ronald Reagan or George W. Bush. Further, he can safely ignore non-partisan economic research from the likes of the Library of Congress’s Congressional Research Service, which was muzzled by Senate Majority Leader Mitch McConnell for rendering information not to the Republican’s liking. Here is their conclusion, by the way:
The results of the analysis suggest that changes over the past 65 years in the top marginal tax rate and the top capital gains tax rate do not appear correlated with economic growth. The reduction in the top tax rates appears to be uncorrelated with savings, investment and productivity growth. The top tax rates appear to have little or no relation to the size of the economic pie.
However the top tax rate deductions appear to be associated with the increasing concentration of income at the top of the income distribution.
My Saturday morning paper greeted me with a front-page, below-the-fold headline: “April bounce in hiring sends jobless rate to a 10-year low.” The unemployment rate stands at 4.4 percent. The article pointed out that the number of part-time workers who would prefer full-time jobs reached a nine-year low.
Meanwhile, Trump and the Republicans in Congress are spinning their wheels with rapid-fire proposals that would suggest that the US is in some kind of economic crisis…like the one President Obama inherited eight years ago and doused with aplomb.
See you at the next Townhall meeting.