Dec 2, 2017 (San Diego). The United States Senate passed their version of the tax bill overnight. It was by a narrow passage (51-49). It is pure supply-side economics and will balloon the deficit by anywhere from $1T to $1.5T. In other words, this is hardly a bill passed by people concerned with the deficit. If anything, they don’t care
This is hardly the first time these gifts to the top 0.01 percent f earners are passed. Every time thy have the same exact disastrous effects.
In 1928 President Herbert Hoover signed a similar tax cut bill that lowered taxes for the all. The idea was to stimulate the economy, and it would pay itself. The worst economic disaster of the 20th century started in 1929. The president tried austerity and deepened the crisis. Most living Americans don’t remember the Great Depression directly. Nor do we have good economic data, just a historical record that tells us what happened.
However, Americans do remember the Reagan years. Ronald Reagan signed the greatest tax cut since the Great Depression in his first year in office. There were similar promises made. The economy would start to grow and all boats would rise.
We know poverty rates did rise:
Percentage of Americans Living Below the Poverty Line
- 1979: 11.7 percent.
- 1980: 13.0 percent.
- 1981: 14.0 percent.
- 1982: 15.0 percent.
- 1983: 15.2 percent
- 1984: 14.4 percent.
- 1985: 14.0 percent.
- 1986: 13.6 percent
- 1987: 13.4 percent
- 1988: 13.0 percent
We also know that the Reagan-Bush years ballooned the deficit out of sight. This is not something that trickle down acolytes like to discuss. They rather you ignore it.
Oh, and Reagan reversed most of the cuts passed in that bill within a year with the greatest increase in taxes in modern history. Again, this is conveniently ignored. To Reagan’s credit, he understood he was far from balancing the books. It could have been much worst.
The George W Bush tax cuts were predicated on the same failed economic logic. This will pay for itself with greater economic activity. Many acolytes of the free market do not want to discuss his economic policy because it failed to produce desired results. When they do, the excuse is 911. However, the following charts tell the story.
All indicators show an economy that did not doo well. We saw increased poverty rates, the deficit grew out of sight,, and the house of cards crashed in 2008.
Given these data points as well as the more recent experience such as Kansas and Oklahoma. I am willing to make a few bold predictions.
* The budget deficit will balloon, even perhaps the expected $1.5 T, which is the high number
* Income inequality will go up.
* A recession is now assured
* At least 13 million will lose access to medical care
* There will be an attempt to end the New Deal programs, and perhaps it will succeed this time. We will be told there is no money. So say goodbye to Social Security.
* Because of the attack on higher education, the US will slip in its leadership role in science and technology.
Incidentally, the Bill Clinton tax increase led to a decade-long economic expansion and the elimination of the deficit. There were other issues with the Clinton years, but a tax increase was not it.
There is one more thing. This will reduce deductions on House ownership. This will cripple that market, especially in places like California. With the elimination of the state and local tax deductions and the lack of real benefit to small businesses, this will deepen the coming crisis. It is also a direct attack on high-income states that have better social and state services. It is double taxation as well.
Incidentally, supply side and trickle down are modern terms for the “Horse and Sparrow” analogy of the 19th century. It went like this. Feed your horse oats, and some will pass through to feed the sparrow. Its fitting, since this religious creed by so-called fiscal conservatives, is akin to horse manure.
On a technical matter. This is now going to conference for reconciliation, with the equally toxic House Bill. Many bills have not come out of Conference and have died at that stage. We do not expect this fate and will see this president sign this.
As to political costs, unless Democrats find their inner FDR, they will be crippled by these deficits and blamed for it for years to come. Bruce Bartlett helped to design the Reagan tax cuts and has seen this movie a few times. He understands the dynamic well, and so do the researchers he quotes.
I think many Democrats and independent political observers are puzzled by the intensity with which Republicans are pursuing their tax cut. It’s not politically popular and may well lead to the party’s defeat in next year’s congressional elections. So why do it?
The answer is that Republicans are pushing the tax cut at breakneck speed precisely because they know they are probably going to lose next year and in 2020 as well. The tax cut, once enacted, however, will bind the hands of Democrats for years to come, forcing them to essentially follow a Republican agenda of deficit reduction and prevent any action on a positive Democratic program. The result will be a steady erosion of support for Democrats that will put Republicans back in power within a few election cycles.