Those who do not learn history, are bound to repeat it
Analysis by Reporting San Diego
Nov 30, 2017 (San Diego) The Senate version of the tax reform bill is on its way to a vote. There have been no hearings. There is not much of an analysis. What we have, we know it will be bad news for working and middle-class Americans.
The bill is targeting Californias in a direct way. It will prevent deducting state and local taxes, what is colloquially known as the SALT deduction. This will increase your taxes and mine. It is meant to force states to lower taxes and cut services.
It is also targeting graduate students, who will not be able to finish their degrees. This will directly affect our ability to compete in the world, as it will reduce our ability to educate a new generation of scientists.
This bill will also affect your ability to deduct medical costs, which many in the middle class and working class Americans use to defray the cost of medical care for loved ones. And incidentally, it will trigger automatic cuts in Medicare. 13 million Americans will lose access to medical insurance.
It will trigger a growth in income inequality, which is the highest since 1929. It will force austerity as money for a multitude of social programs is simply not there.
It will benefit the extremely wealthy. The President alone is expected to benefit to the tune of $1 billion dollars. It will increase the deficit by $1 trillion dollars over 10 years. And the snake oil of trickle-down economics promises economic growth of 3 percent per year.
This is a trickle-down program, not unlike that of 1929. This is a neoliberal program, meant to transfer vast amounts of wealth from the bottom to the top. In this, it will succeed. Growth, as in economic growth, don’t count on it. Every time we have had these kinds of tax policies enacted, we do not see that magic growth. Why? Corporations will not expand a business. Why? They need consumers, and those consumers will be very busy keeping their heads above water. In other words, and most economists have not said this, we may very well see an economic slowdown.
Kansans know of this and have begged Senator Jerry Moran not to take this experiment, failed and all, nationwide.
Every Kansan knows what happened after Gov. Sam Brownback’s 2012 cuts did away with the state income tax for some 330,000 business owners. The governor kept insisting — and in fact, still does — that robust growth and woohoo, jobs galore would result. When that didn’t happen, elected officials kept having to dip into funds set aside for highways and schools just to balance the budget. Finally, this year, lawmakers overrode a Brownback veto and at last repealed the LLC tax break and raised income tax rates.
That had to happen, as Andracsek reminded Moran, “because we decided we want schools and we want roads.” Knowing all that history, she asked him, “Why would you take this failed experiment nationwide? Our members of Congress should be the ones leading the way for tax reform that actually affects normal people, not just millionaires and billionaires.”
We know that this reality has also reached Oklahoma. Yes, another state where the creed of trickle down was used to lower taxes. Now, according to the Tulsa World:
But the boom ended and the money dried up. Now the once-unwavering confidence in the wisdom of lower taxes has given way to a growing panic over how to pay for basic services such as schools, health care and public safety. Revenue has fallen about 20 percent short of budgeted needs for the third year in a row.
The situation has deteriorated to the point where highway patrol troopers have been warned not to fill their fuel tanks, and drunken drivers have been able to keep their licenses because there are not enough administrative workers to revoke their driving privileges. Nearly 100 of the state’s 513 school districts have moved to four-day weeks.
We know this reality. This is the kind of economic policy that also led to the Greek crisis and what should be described as a depression. And we are about to take these policies nationwide.
Republicans have been trying to kill the New Deal since the New Deal was enacted. The New Deal is dead. Partly because Democrats forgot who they fought for over the last generation. But partly because trickle down is a religion for many Republicans. It does not matter how many times it has failed. For example, Ronald Reagan did drop taxes in his first year in office. as Senator Ted Cruz loves to remind us. However, he raised taxes 11 times afterward, because none could reconcile the books.
George W Bush lowered taxes, and that ultimately was partially responsible for ballooning the budget. The promised growth never materialized.
There is no other explanation. This belief in trickle down is akin to a religion. We predict that there will be no 3 percent growth. In fact, higher taxes for many middle-class Americans will lead to less consumption. It may very well lead to an economic slowdown. Of course, but then the levers of power will be in the hand of Democrats, who will get the blame. This is a well known political playbook as well.
As the New York Times aptly put it:
Economists and tax experts are overwhelmingly skeptical that the bills in the House and Senate can generate meaningful job growth and economic expansion. Many view the legislation not as a product of genuine deliberation, but as a transfer of wealth to corporations and affluent individuals — both generous purveyors of campaign contributions. By 2027, people making $40,000 to $50,000 would pay a combined $5.3 billion more in taxes, while the group earning $1 million or more would get a $5.8 billion cut, according to the Joint Committee on Taxation and the Congressional Budget Office.
“When you put all these pieces together, what you’re left with is we are squandering a giant sum of money,” said Edward D. Kleinbard, a former chief of staff at the Congressional Joint Committee on Taxation who teaches law at the University of Southern California. “It’s not aimed at growth. It is not aimed at the middle class. It is at every turn carefully engineered to deliver a kiss to the donor class.”
Many will rue the day they voted for a political elite that will bring in an economic disaster. We doubt the most ideological of Republican voters will ever admit to these issues. But the rest of the country is about to pay for their folly.
You want roads, schools and education, forget about it. The money will not be there. Nor the political will to spend money that is not there to generate demand to create the money to pay for it. This is the kind of loop that Greece currently finds itself in. This is the kind of economy we found this country in when the Great Depression hit. However, Americans are terrible about remembering history, or studying history.