Like a carnival barker selling a circus sideshow, Donald Trump is off to Missouri to sell snake oil to the White Working Poor. Before heading to The Show-Me State, the President is headed to Texas to view the flooding. As if getting hit by a hurricane wasn’t bad enough, now the poor folks in Texas must endure the Ego-In-Chief.
The flooding should be a reminder that Congress only has 6 weeks to reauthorize the Flood Insurance Program. Think they will? Odds are they are more interested in taking care of their wealthiest supporters with a whopping tax cut.
I used to be part of the trickle-down gang. I sat with my supply and demand curves and smiled with great satisfaction drawing charts of how when I cut taxes investment went up and employment went up. It was a great sideshow. Too bad there was not an element of reality in the theories.
Like most things in Economics, these theories are based on the notion of “everything else being equal.” Only one problem with that. Not all things are equal. People with money don’t always behave like “economic man.” Some behave like a bunch of greedy jerks.
The evidence is that Tax Cuts are not guaranteed economic stimulus.
My statement above is GOP Blasphemy. If I ever lost my mind and decided I wanted to go back to the GOP I would have to go to a Gulag for political re-education. Maybe a little-forced labor on Wall Street would reorient me to “the truth.” I despise that phrase “the truth” when applied to politics. Those who use that term are often telling a big lie.
Instead of dealing with “truth,” I’m going to deal in facts. In politics, dealing in facts is a bit like being a snake charmer. The bite of facts can be lethal.
Republican “truth” is that massive tax cuts lead to massive investments which lead to higher employment and a more robust economy. They bolster their claims by citing the Ronald Reagan tax cuts of the early 1980s without mentioning the 9 times Reagan raised taxes. Ronald Reagan was not afraid to cut taxes and he was not afraid to raise them either.
The first George Bush made the pledge of “No-New-Taxes” and then was forced to raise taxes. For Conservatives, that was the end of the line for sitting still while taxes were raised. The anger over the broken promise had much to do with the conservative backlash that brought H. Ross Perot to the national ticket and led to Bill Clinton being elected President.
From that day to this, the GOP has only been in favor of tax cuts and never tax increases. They don’t hold back on spending though. They have become the party of spend like wild and don’t tax. That leads to the grotesque deficits we have today. Those deficits land squarely on the doorstep of Conservative Republicans.
Here’s the real deal with tax cuts
In 2012, the nonpartisan Congressional Research Service did a study of the effects of the tax cuts and tax hikes on the US Economy over a 65-year period. They conclude that cutting taxes has little evidence of economic stimulation. If you love charts and data, you can read the CRS study by clicking here.
The screenshot of the Chart above was prepared by the New York Times which illustrates the effects of tax cuts and increases from 1990 through 2012. As is clear from the chart, the GHW Bush tax hike of 1990, and the Bill Clinton tax increase of 1993 led to the eradication of the Reagan deficits of the previous decade.
Bill Clinton handed George W. Bush an economy with a surplus which GW Bush mismanaged. America became entangled in two costly wars and to pay for them, the GOP cut taxes. The effects have been devastating on our deficits.
Donald Trump stands poised to repeat the GW Bush mistake. He is not only content t cut taxes but proposes dramatic increases in infrastructure spending in addition to his childish wall with Mexico.
Tax policy is not what drives The Economy forward. Innovation is what drives the economy to new heights. If we examine the spike in the economy in the 1990s, we see that new technology and revolutionary new ideas are what led to the economic boom. The invention of the internet and High-Tech turning its attention to nearly every facet of our lives is what spurred on our Economic growth.
It wasn’t tax policy.
Not all tax breaks are bad
There are some tax breaks that serve a very useful purpose. During the economic meltdown of 2008-2009, the General Aviation industry was in deep trouble. Aviation has always been a business that America has dominated in the past. Our economic turn down threatened 1 million jobs in the industry. Most of those jobs are high paying union jobs within America’s borders.
Congress enacted legislation that provided bonus depreciation to those who purchased a General Aviation Aircraft for business purposes. It kept the industry afloat and people employed in a key segment of the economy. After the economy recovered, the program came to an end. That is an example of a directed tax cut for doing a specific thing that is in the best interests of the economy in the long run.
Blanket tax cuts do little to help the economy. The data proves it. Yet for some odd reason, the White Poor, those who suffer the most by big tax cuts are thrilled when the GOP Carnival Barkers start selling their tax cut snake-oil. I’ve always said Macro and Micro Economics should be required in schools. Politicians don’t like that idea because then the public is much more difficult to fleece.
The Carnival is in Missouri tonight. I wish for once those who live in Missouri would live up to their slogan as “The Show Me State.”
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