Taking the Argument Too Far

Michele Bachmann was a rising star in the Republican Party once, a long time ago – that year when the Republicans were deciding which of them had the best chance of making Obama a one-term president – the year of fifteen or so candidates in twenty or so primary debates. She even led in the polls for a bit, because she was so severely conservative. She didn’t make nuanced arguments. She was all in, and in the Republican debate on November 9, 2011, when asked what percentage of their income Americans should pay in taxes, she went all in:

I think you earned every dollar. You should get to keep every dollar that you earn. That’s your money; that’s not the government’s money. That’s the whole point. Barack Obama seems to think that when we earn money, it belongs to him and we’re lucky just to keep a little bit of it. I don’t think that at all. I think when people make money, it’s their money. Obviously, we have to give money back to the government so that we can run the government, but we have to have a completely different mindset.

She continued to ramble on a bit, but she had uttered the ultimate expression of the Republican mindset – Americans should get to keep every dollar that they earn. That’s their money, not the government’s money.

Everyone had heard that before. Taxation is theft, sometimes necessary, unfortunately, to keep the government running, but theft none the less. No one knew the completely different mindset that Michele Bachmann had in mind – perhaps a government funded by voluntary contributions and bingo nights and bake sales, and an occasional car wash – but it didn’t matter. She was gone soon enough. She took the argument too far. She did that a lot – it was one conspiracy theory after another – and the Republicans finally settled on Mitt Romney, for all the good it did them. But at least he knew the government runs on tax money. His gripe was with the loathsome forty-seven percent, the poor and working poor who paid no federal income tax – the morally reprehensible takers. It wasn’t fair. The people who had made something of their lives had to pay for everything, and it was time for the “takers” to pay up. The people who had made something of their lives were getting ripped off.

This was a variation of the “taxation is theft” argument. This was theft from the job creators, the makers, the doers – the morally responsible folks who had been rewarded for their moral responsibility with the hard-earned comforts of life. Here, the government wasn’t the thief. It was the poor and working poor – the morally reprehensible takers – but really, someone had to be taxed to keep the nation running. It was time for the freeloaders to pay up.

Romney tried to walk that back. He wasn’t heartless. He understood that “those people” were in trouble. He’d make sure they got jobs, or something, but the damage was done. He was a self-righteous rich man. He was gifted at generating resentment. That sunk him. His studied broad grins were worse than outright sneers. Obama won easily.

Republicans have been trying to strike the right balance ever since. How far can they advance the “taxation is theft” argument before it blows up in their faces? They now have a Michele Bachmann as president, with one conspiracy theory after another – Obama tapped his phones and so on. He also takes arguments too far – we WILL build a big wall and Mexico WILL pay for it. But he hasn’t made Romney’s forty-seven percent mistake. He swore he would never cut Social Security or Medicare or Medicaid, and everybody would have health insurance – the best there ever was, and it would cost next to nothing. He says the opposite now. Those cuts will be necessary and twenty-four million people will lose their health insurance (nobody knew health care was so complicated) – but he once said those things. He’s no dummy. He saw what happened to Mitt Romney. He too may be rich, but he’d be a champion of that forty-seven percent. Coal miners would be back at work, even if coal has become a cumbersome and expensive and rather useless energy source. He’d work something out, and of course everyone’s taxes will be lower. There’d be no more talk about makers and takers. All Americans want their goodies – roads and bridges and schools and whatnot – and no Americans want to pay for any of that. He’d work something out there too.

Okay, this is what he worked out:

President Trump on Wednesday proposed sharp reductions in individual and business income tax rates and a radical reordering of the tax code that would significantly benefit the wealthy, but he offered no explanation of how the plan would be financed as he rushed to show progress before the 100-day mark of his presidency.

Mr. Trump’s skeletal outline of a tax package, unveiled at the White House in a single-page statement filled with bullet points, was less a plan than a wish-list. Treasury Secretary Steven Mnuchin and Gary D. Cohn, the director of Mr. Trump’s National Economic Council, laid out the bare bones to reporters, part of a mad dash toward the administration’s 100th day on Saturday that has included the resurrection of a health care bill and near-daily signings of executive orders.

But they offered none of the standard accouterments of such rollouts, such as detailed charts showing the cost of each provision, phase-in periods, the impacts of the proposals on people and testimonials on the program’s potential benefits.

This was nothing much at all, but these guys have enthusiasm:

“We have a once-in-a-generation opportunity to do something really big,” Mr. Cohn said. “President Trump has made tax reform a priority, and we have a Republican Congress that wants to get it done.”

No one is sure what the “it” is of course, but it seems to be this:

The proposal envisions slashing the tax rate paid by businesses large and small to 15 percent. The number of individual income tax brackets would shrink from seven to three – 10, 25 and 35 percent – easing the tax burden on most Americans, including the president, although aides did not offer the income ranges for each bracket….

The president would eliminate the estate tax and alternative minimum tax, a parallel system that primarily hits wealthier people by effectively limiting the deductions and other benefits available to them – both moves that would richly benefit Mr. Trump. Little is known of Mr. Trump’s tax burden, but one of the small nuggets revealed in the partial release of a 2005 tax return this year was that he paid $31 million under the alternative minimum tax that year.

So he gets to save himself thirty-one million big ones. Some might object to that, or to this:

Corporations would not have to pay taxes on their foreign profits, an unusual proposal for a president who has championed an “America first” approach and railed against companies that move jobs and resources overseas. They would also enjoy a special, one-time opportunity to bring home cash that they are parking overseas, though administration officials would not say how low that rate would be or how they would ensure that the money would be invested productively.

And he sticks it to the blue states, but not everyone:

Mr. Trump wants to double the standard deduction for individuals, essentially eliminating taxes on around $24,000 of a couple’s earnings. That proposal was met with alarm by home builders and real estate agents, who fear it would disincentivize the purchase of homes. The proposal would scrap most itemized deductions, such as those for state and local tax payments, a valuable break for taxpayers in Democratic states like California and New York.

But the president would leave in place popular breaks for mortgage interest, charitable contributions and retirement savings.

Now add this:

In a brief session with reporters, Mr. Cohn and Mr. Mnuchin said they had been toiling for weeks on the proposal, much of which closely resembles the plan Mr. Trump championed as a presidential candidate. They argued that it would spur robust economic growth that would – along with the elimination of deductions – cover the potentially multitrillion-dollar proposal entirely, a prospect that even many Republicans privately concede is virtually impossible.

“This will pay for itself with growth and with reduction of different deductions and closing loopholes,” Mr. Mnuchin said, repeating his optimistic estimate that the plan would spur the economy to grow at a rate of 3 percent annually. “The economic plan under Trump will grow the economy and will create massive amounts of revenues, trillions of dollars in additional revenues.”

That’s the same old Art Laffer thing – cut taxes, reducing revenue, and the economy soars, increasing revenue. Ronald Reagan found out that this just doesn’t work. It hasn’t ever worked, but no matter:

Democrats rejected what they described as magical thinking behind the plan and condemned it as a giveaway to the rich masquerading as a tax overhaul.

“This is an unprincipled tax plan that will result in cuts for the One Percent, conflicts for the president, crippling debt for America and crumbs for the working people,” Senator Ron Wyden of Oregon, the ranking Democrat on the Finance Committee, said in a statement. “Instead of providing a real tax reform plan as promised, this administration is offering cakes to the fortunate few.”

That’s Mitt Romney stuff, but there’s this:

As expected, the White House did not include in its plan the border adjustment tax on imports that was a centerpiece of a plan developed by House Speaker Paul D. Ryan of Wisconsin and Representative Kevin Brady, Republican of Texas and chairman of the Ways and Means Committee. Earlier on Wednesday, Mr. Mnuchin said the White House could not support that proposal “in its current form,” setting up an intraparty struggle over the elements of a tax plan and how to offset the deep reductions envisioned.

Paul Ryan wants those tariffs – increase the cost of foreign goods. People will then “buy American” – even if everything is now much more expensive. FDR tried that in 1934 and it was a disaster, and of course this had to happen:

Democrats are ready to battle Mr. Trump over the tax cuts, which they are determined to tie to his refusal to release his tax returns.

“Trump’s latest proposal is another gift to corporations and billionaires like himself,” said Thomas E. Perez, the Democratic Party chairman. “Trump must release his tax returns, as millions of Americans are demanding, before Congress can consider any Trump tax plan. We must know how much Trump would personally financially benefit from his own proposal.”

Forget that:

Questioned about that repeatedly on Wednesday, Mr. Mnuchin said that Mr. Trump, the first president in four decades not to disclose at least a portion of his tax returns, had “no intention” of releasing them now.

Mnuchin was channeling W. C. Fields – “Go away, kid, you bother me” – but it wasn’t funny, and Kevin Drum adds this:

This is the United States of America, the biggest, richest country on the planet. The leader of the free world. And this is what we get from our president these days. He wants to cut taxes by $4 trillion or more – $4 trillion! – and he can’t be bothered to produce more than a single page of bullet points about it. No details. No legislation. No analysis from the OMB. Nothing. Just a comic book version of a tax overhaul.

The contempt and incompetence this displays is breathtaking.

And there’s that other problem that Alan Rappeport discusses here:

As President Trump’s top economic advisers faced a barrage of questions on Wednesday about the tax plan they had just unfurled, there was one that they struggled most to answer: how to keep the “massive tax cuts” they proposed from ballooning the federal deficit.

The White House insists that economic growth will cover the cost, which could be as high as $7 trillion over a decade. But the question will dog Republicans and could fracture their party as they face the prospect of endorsing a plan that many economists and budget analysts warn will increase the deficit. After years of fiscal hawkishness, conservatives now face a moment of truth about whether they truly believe America’s economy is drowning in debt.

Yeah, there’s that:

Some skeptics are already ringing alarm bells, fearing that Republicans will sign on to what critics see as a dangerous plan composed by a president who called himself the King of Debt.

“It seems the administration is using economic growth like magic beans: the cheap solution to all our problems,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a nonpartisan group that advocates fiscal restraint. “But there is no golden goose at the top of the tax-cut beanstalk, just mountains of debt.”

Ms. MacGuineas’ group estimates that Mr. Trump’s plan could reduce federal tax revenue by $3 trillion to $7 trillion over a decade. The economy would need to grow at a rate of 4.5 percent – more than double its projected rate, an unlikely prospect – to make the plan self-financing.

This is magical thinking, and there’s history:

“This is fool’s gold that you’ll cut taxes, everybody will work harder, more money will come and you’ll erase the fiscal impact,” said Steve Bell, who was a Republican staff director of the Senate Budget Committee from 1981 to 1986. “It never happens.”

Joseph J. Thorndike, director of the Tax History Project at Tax Analysts, said the Trump plan appeared to have strong parallels with Reagan’s 1981 cuts. Mr. Thorndike recalled that the Reagan administration soon realized the problem of the red ink it was facing and started looking for new sources of revenue.

“This looks like ’81, where they said, ‘Deficit be damned, we want to do a tax cut,'” Mr. Thorndike said. “It’s a cautionary tale.”

And this plan is less coherent than anything Art Laffer convinced Reagan to do:

The White House’s outline was too thin on details to allow for a concrete analysis of how much deficits would grow. There were no specifics about what income would fall into the three, instead of seven, individual tax brackets. The explanation of how the mammoth switch to a territorial corporate tax system would work was vague. There was no word on how low the tax on repatriated foreign corporate earnings would be. And Gary D. Cohn, the director of the president’s National Economic Council, could not say how much of a tax cut a middle-income American would get.

Other than that, it’s a solid plan, and a joke:

For Democrats, now out of power, the reversal is bitterly ironic, and several lawmakers assailed the president for, they said, preparing to cripple the country with debt.

“I’m not the first to observe that a Republican Congress only cares about the deficit when a Democrat is in the White House,” said Alan B. Krueger, the Princeton economist who was chairman of President Barack Obama’s Council of Economic Advisers. “It may be that Dick Cheney is right and that deficits don’t matter to the public, but they do matter to the economy.”

But for Republicans who have been craving big tax cuts for years, confidence was high that the worries about deficits were overwrought.

“This is a thing of beauty, a thing of wonder,” Grover Norquist, the president of Americans for Tax Reform, said of Mr. Trump’s one-page plan.

That’s the Norquist Kiss of Death, and Justin Miller adds this:

Donald Trump has been in office nearly 100 days with little to show for it, save for signing a bunch of fancy parchment that orders the roll back of several environmental and worker protections.

His fragile ego is driving his need to do something big. And so he’s doing what Republicans generally do when all else fails: propose steep tax cuts for the wealthy and corporations.

And rightly, everyone is onto this:

Experts on the left and right agree there’s no way the White House can cover the cost of those cuts – about $2.4 trillion in lost revenue over 10 years – just by limiting deductions, closing loopholes, or even including dubious revenue raisers like House Speaker Paul Ryan’s border-adjustment tax, which Trump has now ditched. Alas, Trump and his aides are turning to the only argument that politicians can make to justify trickle-down economics: that when the wealthy and corporations pay less in taxes, economic growth surges and make up for the lost revenue.

“The plan will pay for itself with growth,” Trump’s Treasury Secretary Steven Mnuchin pronounced last week. Factoring in economic growth with tax cuts is a dubious practice known as “dynamic scoring.” It’s the special sauce of voodoo economics that trickle-downers use to provide political cover for the otherwise humongous holes that their tax cuts leave in federal budgets.

George H. W. Bush coined the term “voodoo economics” for this sort of thing when he was running against Reagan in the primaries. Bush became Reagan’s running mate and then his vice president – and he had to stop saying that. That’s a shame:

Trump is making an unfunded, unsustainable, deficit-ballooning tax cut for the rich the cornerstone of his first 100 days, with the fingers-crossed promise that it will drive unprecedented economic growth. It was a lie the last time Republicans pushed through a similar tax cut, and it’s still a lie today.

Nicholas Kristof puts that this way:

What do you do if you’re a historically unpopular new president, with a record low approval rating by 14 points, facing investigations into the way Russia helped you get elected, with the media judging your first 100 days in office as the weakest of any modern president?

Why, you announce a tax cut!

And in your self-absorbed way, you announce a tax cut that will hugely benefit yourself. Imagine those millions saved! You feel better already!

I’m deeply skeptical that President Trump will manage to get a tax reform package passed into law, and that’s just as well. Trump’s new tax “plan” (more like an extremely vague plan for a plan) is an irresponsible, shameless, budget-busting gift to zillionaires like himself.

And it’s bad politics:

This isn’t about “jobs,” as the White House claims. If it were, it might cut employment taxes, which genuinely do discourage hiring. Rather, it’s about huge payouts to the wealthiest Americans – and deficits be damned! If Republicans embrace this “plan” after all their hand-wringing about deficits and debt, we should build a Grand Monument to Hypocrisy in their honor.

Trump’s tax “plan” is a betrayal of his voters. He talks of helping ordinary Americans even as he enriches tycoons like himself.

In fact, this is theft:

Where the tax plan would have a big impact is in empowering some very wealthy people, because of another bit of chicanery in the proposal: Trump apparently would allow some business owners to dodge personal income tax by paying at the much lower corporate rate. In other words, tycoons would try to structure their incomes to pay not at a 39.6 percent top personal rate but at a 15 percent corporate rate.

This isn’t tax policy; it’s a heist.

Now add this:

The Tax Policy Center examined Trump’s campaign tax plan and found it would cause the federal debt to rise by at least $7 trillion in the first decade, and more than $20 trillion by 2036 – slowing growth, not raising it. To put the latter number in perspective, that’s additional borrowing of about $160,000 per American household.

Effectively, we’d borrow from China or other countries to finance huge tax breaks for Trump and his minions. And this is populism?

No, it’s not. Ever since the Romney disaster, Republicans have been trying to strike the right balance, to see how far they can advance the “taxation is theft” argument before it blows up in their faces. It may have just done that. They now have Michele Bachmann as president, with one conspiracy theory after another, and a shallow thinker who always takes arguments too far. Perhaps she feels vindicated. The rest of us feel something else.

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About Alan

The editor is a former systems manager for a large California-based HMO, and a former senior systems manager for Northrop, Hughes-Raytheon, Computer Sciences Corporation, Perot Systems and other such organizations. One position was managing the financial and payroll systems for a large hospital chain. And somewhere in there was a two-year stint in Canada running the systems shop at a General Motors locomotive factory - in London, Ontario. That explains Canadian matters scattered through these pages. Otherwise, think large-scale HR, payroll, financial and manufacturing systems. A résumé is available if you wish. The editor has a graduate degree in Eighteenth-Century British Literature from Duke University where he was a National Woodrow Wilson Fellow, and taught English and music in upstate New York in the seventies, and then in the early eighties moved to California and left teaching. The editor currently resides in Hollywood California, a block north of the Sunset Strip.
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