Santa Claus, taxes and deficits
from Peter Radford
“Deficits don’t matter”, to borrow a phrase made famous by Dick Cheney. Hardly a left of center guy, Cheney was defending the sea of red ink Ronald Reagan created in the early 1980’s. Reagan, please recall, was the first president to plunge the US into deficits that were not related to war, economic downturn, or macro-economic management. They were simply an outcome of an ideologically driven set of policies. So Cheney was right: they didn’t matter.
According to the modern Republican party they especially don’t matter when the slashing of Federal revenues is done at the behest of business. That’s because the tax cuts involved are “pro-growth”, and, so we are assured, the increased growth presumed to be stimulated by the cuts will more than offset the red ink.
That’s never happened, but such is the allure of the magic of markets that otherwise sensible people can fall for fairy tales. The University of Chicago is thick with such folk.
Anyway, for those who aren’t obsessing over the rise of Trump and the imminent invasion of America by ISIS – both of which dominate our febrile media – I would like to draw your attention to Washington where a big government funding bill is in the process of wending its hapless way through Congress.
The good part of the bill is that it provides funding to keep government running. So we have no fiscal cliffhanger this year. Sorry, I know they are so much fun, but with the media’s attention elsewhere there’s no point in having a cliffhanger this year.
The bad part of the bill is pretty much everything else.
It includes an astonishing array of tax breaks for business, and its net effect is to add about $680 billion to the national deficit.
Now I think it’s slightly hypocritical for any of us to get too upset over this: we were all berating the Republicans for being stupid about the deficit back in the dark days of 2009/2010. That was when the deficit was rising quickly and looked to be out of control. It wasn’t, it was simply a function of the crisis we created by being so attached to rotten economics for the past few decades.
Still, it is rather quaint to watch was the Republicans, even the most trenchant “austerians” amongst them, rattle off dozens of well worn reasons why adding $680 billion to the deficit is no big deal.
Here’s one such comment, by Ways and Means Chairman Kevin Brady (R-Texas):
“We’re making permanent some very key pro-growth provisions that are going to grow the economy, these are tax provisions we’re extending one year at a time; making the pro-growth provisions permanent doesn’t add any level of funding to our deficit. It’s simply honest budgeting going forward.”
Honest budgeting. I like that.
Brady is a math whizz too, he also said that the cost of these tax cuts over a decade is about the same as one year multiplied by ten. Presumably the cost of interest and so on isn’t a factor in Texas.
Then there’s the old line about making it up in volume, or, in this case, getting the lost revenue back from all that magical growth down the line, Bill Flores, also from Texas tells us not to worry about figuring out the deficit impact – known as “scoring” in Washington speak:
“We don’t score them because economic growth helps them. … We’ll get that back multiple times over in economic growth,”
Just like we always have. Never.
Listen, I am in a radical mood for a change. This entire charade is simply a giveaway to business. Congress is pretty much run by business through its lobbying and election donations. So I have a plan. Call it my “holiday gift plan”.
Get rid of corporate taxes.
Yes. You read that correctly. Just do away with corporate tax.
No, I am not nuts. There are strings attached to this.
Getting rid of corporate taxes will reduce the stranglehold business has on our politics in terms of the stupidity and pretense that surrounds the budget process. But they would still lobby like crazy over social legislation: things like work and labor regulation, family leave, product safety, and so on. All the things businesses have tried to tell us make it hard to do business.
Well: the same bill that eliminates corporate tax will include provisions restoring all the rules and regulations done away with over the last forty years. It will also include rules making it easy for workers to set up unions and a return to collective bargaining for wages and work conditions. Let’s toss in family leave as well. Oh, and obligatory paid annual vacation time. Businesses will be able to afford all sorts of pro-worker goodies now that they can fire their tax departments and not pay all those fees to lawyers looking for loopholes. Not to mention the extra cash from the taxes they no longer pay.
I am sure we can come up with a good long list of things that business has taken away from us in the name of being “pro-growth”. Let’s be imaginative.
And, hey, It’s Christmas isn’t it? Well holidays are upon us. So we, aren’t done yet.
Let’s also throw in the abolition of the capital gains tax.
No: listen to me. We will simply tax capital gains as income. At income tax rates. Income is income, whatever its source. The privilege given to capital owners needs to go. And let’s get the estate tax rate back to a level where it inhibits the growth of a rentier class. That’s why we have an estate tax after all. Well I think so.
And why not reform the income tax for all of us? Get rid of all deductions, lower all the rates at the bottom, add a couple of new higher rates at the top – those top income earners have all the income anyway – and, just for good measure, replace all our hodgepodge of welfare and poverty programs by a simple annual check from the government for anyone earning under some ratio of the median wage.
We can pay for that by adding a little rule that extracts a penalty – not a tax – from any business paying its CEO and top executives a wage/pay package of more than 40 times the lowest wage the business pays. We could be generous to our poor CEO’s and make the ratio set to the average wage, but that’s a detail we can negotiate later.
None of this is controversial at all. Really. At least in a country that thinks Donald Trump is qualified to be president. So we ought to add a lot more.
After all it’s “pro-growth”. And that’s all that counts. At least that’s what everyone seems to think.