Trump And GOP Triple Down On Trickle Down Economics
Photo Credit: Ed Hall
Most of us have heard the old adage that the definition of insanity is repeating the same behavior time and again and expecting a different result each time. If that is the case, then the GOP and Trump are clearly insane because their tax plan is trickle down economics in its most extreme version since its inception during the so called “Reaganomics” of the Reagan presidency that culminated in tripling of the national debt (from $900 billion to $2.7 trillion) and an economic recession that doomed the presidency of George H.W. Bush. Despite this epic failure of economic policy, trickle down economic theory got a second chance with the infamous Bush tax cuts that cost the country $3 trillion and led to zero net job creation and wage increases in George W. Bush’s 8 year presidency. Why in the world would the GOP think that trying trickle down for a third time in its most extreme version yet would yield a different result?
To be fair on some level to the GOP, even President Obama favored a significant reduction in the corporate tax rate to help our companies compete internationally, as well as a simplification of the tax code that closed loopholes and provided middle class tax relief, leaving a higher tax burden on the wealthiest Americans (while cutting unnecessary or antiquated programs including a leaner and more efficient military budget and preserving Medicare and Social Security). He favored tax reform that would also pay for itself and toeing the line of spurring growth but remaining deficit neutral.
The current House and Senate plans that are at this time very similar strip the corporate tax rate from 35% to 20% permanently, while offering the average the middle class family a $1200 tax savings that will expire in 2025. Compounding the problem, they are helping to fund this by cutting the Obamacare individual mandate that is an integral component to drawing young, healthy people into the health insurance exchanges to offset the cost of older, sicker Americans that cannot be denied coverage due to pre-existing health conditions or age. The CBO has determined that not only will the savings hardly be enough to offset resulting deficits which will add $1.7 trillion to the national debt, the bill would cause a hike in insurance premiums of 10% a year over 10 years. CBO also projects 13 million less insured with 4 million less insured in the first year alone.
GOP law makers argue (as they have twice before) that the growth that this will spur will raise wages, create jobs, and overcome budgetary shortfalls from increased revenues stated growth will generate. The chief flaw in this argument is that corporations do not use tax relief and increased profits to increase wages. Those profits go toward paying share holders and disproportionately jacking up the salaries of CEO’s and board of directors. It never trickles down to the average worker whose wages will remain stagnant while as many jobs as possible will still be shipped overseas.
If one does not believe this, all one needs to do is examine history. From 1947 – 1979, the pre-trickle down age, the income of the bottom 1/5 of Americans rose by 122%. Enter Reagan and his economic policies and from 1980 to present (the post-trickle down age), the income of the top 1% wealthiest American has risen by 270% while the rest of the 99% has remained virtually stagnant. Now the GOP wants to triple down on trickle down in its most extreme version to date dangling a lame tax cut of $1200 to the middle class that will be negated by soaring health care premium costs and are set to expire in 2025 anyway.
The GOP assure us that all of this will be solved by robust economic growth while history tells us otherwise – repeatedly! Sorry GOP, it is a well known tenant among responsible business leaders that hope is not a strategy. When it comes to a plan that affects hundred and millions of citizens of the world’s greatest country, this tax plan is nothing short of insane.