The latest
entry in the apparently bottomless pit of
Trump administration "don't
piss on my shoes and tell me it's just raining" absurdities will be
unveiled soon, we're told. Supposedly it'll be "really huge, really great,
large and bigger than anything any president has ever done!" Of course
this is just one man's opinion. So what could this colossal revelation be? Why,
tax cuts for business and the wealthy,
of course.
It is tragic
that a man who actually has zero understanding of economics (don't give me that
"He's a financial genius" bullshit, show me his taxes and recall his
6 bankruptcies along the way) has any shred of control of the nation's
financial welfare. There was another man, also Republican who entered office
with claims of economic guru status. He knew all about how tax cuts on the
wealthy would make us all happy and financially well off. That man doubled the
national debt.
Nationally
known economist and advisor to both Kennedy and Johnson, Pierre Renfret was
asked by Reagan's handlers to counsel
Reagan, as in talk some sense into the man regarding Supply side economics,
which even his eventual VP, Bush 41 called "voo-doo economics." He gave up, stating that Reagan staked the
entire economy on his "feeling" that "I just know that it
works." Taking office during an
economic period when growth was stagnant,
but by no means in recession such as Bush 43 left, he doubled the national
debt, because he continued to spend ("Star Wars?") as if supply side
economics worked, when it clearly didn't.
In high school,
those of us who stayed awake during the mandatory semester of economics learned this as
"The Trickle Down theory." It is based on the following supposition:
That every dollar cut in taxes will be "multiplied" through the
economy and stimulate growth, ergo everybody's happy. A corollary to this canard is the insistence that deregulation
of business is in everyone's best interest, when in fact, while that would
probably hold true for the immediate fortunes of the top 1% of the body
politic, it is blatantly phony when applied to the rest of us, for reasons I'll
explain directly.
Supply siders
begin their justification for their position with a palpable lie. They insist
that there is a greater than one to one correlation between tax reduction and
increased revenues. In plainspeak: If
taxes are cut on top earners including corporations, the money not spent on
taxes will be plowed back into the
economy in terms of expansion, increased salaries and infrastructure. The only
actual statistical analysis study done to test this theory (by the National Bureau
of Economic Research) reveals that, counter to the promises of the supply
siders, the promised results simply never
materialize. The analysis shows that for every dollar reduction in income tax, a
mere 17 cents per dollar in revenue materializes. For corporate tax reductions,
a better, but still woefully short of the pie in the sky promise, 50 cents per
dollar revenue results. This has been shown to be valid through both the Reagan
and Bush 43 administrations. In fact both were leading "cutters" of
tax on the top earners and in both cases lead the league in percentage debt
increases. "What?" more than Obama?
In terms of percentage increases in the national debt, absolutely. During
the Reagan years, the national debt increased by 186%! Bush 43 oversaw a more modest 101% debt
increase. In a semi-catastrophic recession, second only to the Great Depression,
triggered in large part by failure to regulate/oversee financial markets, Obama
increased the debt by just 35%.
Analyzing the
probable immediate results of reducing personal income taxes paints a stark
picture. Since we know from actual analysis during two major Republican initiated
personal tax cuts that only 17 cents in federal revenue comes back for every dollar
spent, it is possible to project the results of such tax cuts. This year, of a
projected total Federal revenue of $7 trillion, a fairly consistent 45% will (again)
come directly from you and me in income tax. So under what we can discern re:
Trump's proposal (it isn't really his, he is incapable of such
formulation) the lower 60% of Americans would see essentially no change, but
the top .01% would see a monumental reduction in tax obligation. In fact,
Current budget reconciliation rules dictate that no law shall increase the deficit
after 10 years by a single dollar. This proposal would increase the
deficit after 10 years by $10 trillion in the following decade. This amounts to
50% of the present national debt! Even
the most watered-down version of this bill—no individual tax changes, just a
short-term corporate rate cut—would still raise the deficit after the 10-year
window, according to the Joint Committee on Taxation.
So what did Reagan
and his Republican Congress actually do? The Economic Recovery Tax Act of 1981 also
known as the ERTA or "Kemp-Roth Tax Cut", was signed on August 13,
1981, by President Ronald Reagan at Rancho del Cielo, his California ranch. (You know, like Mar a Lago West?) Its stated goal was "to
amend the Internal Revenue Code of 1954 to encourage economic growth through
reductions in individual income tax rates, the expensing of depreciable
property, incentives for small businesses, and incentives for savings, and for
other purposes". Included in the
act was an across-the-board decrease in the marginal personal income tax rates in the United States by 23% over
three years, with the top rate reduced from 70% to 50% and the bottom rate from 14% to 11%.
In the following
year after enactment of ERTA, the deficit ballooned, which in turn, drove
interest rates from around 12% to over 20%, which, in turn, drove the economy
into the second dip of the 1978-82 "double dip recession". The Dow
Jones average, which had been over 1000 before enactment of ERTA, fell to 770
by September 1982.
Without the decency of so much as a simple acknowledgement that they had been grossly
incorrect in their belief in supply side theory, much of the 1981 ERTA was reversed
out in September 1982 by the Tax Equity
and Fiscal Responsibility Act of 1982 (TEFRA), sometimes called the largest
tax increase of the post-war period. Sadly, the only way to make supply side theory
work is to spend less. In truth, it still doesn't work, but as in our daily lives,
spending less saves money. Of course, we all know who the targets of these cuts
would be, and it isn't the fat cats of
Exxon, Morgan Stanley et al, is it?
Obviously there
is recent precedent for anyone willing to dispassionately evaluate it. Even so, Trump who is far more a dullard than Reagan, Kemp/Roth and their ilk, has been
lured to trickle down by, what one must assume, are several issues. First, it
helps his own business interests, by reducing his tax obligations, and let's be
candid enough to admit that he is not distanced to any real extent from his
business interests. Additionally it curries favor with those of his social stratum
(I originally typed "class" for "stratum", but my computer
almost crashed when I used the word "class" in a monograph on Trump.
Finally, and saddest to consider, he's simply too ignorant to learn from recent history
and too lazy to educate himself.
In the final analysis, as tax cuts on the top
induce suffering at the bottom, Trump and his rubber stamp Congress will
probably, in private, echo the line from Mel Brooks' "History of the World, Part I",
where, when a Roman Senator asks "What about the poor?" the rest of
the senators respond as one, "Fuck the poor!"
