Erik Paulsen's Hypocrisy on the Deficit and Taxes

If you want to witness how hypocrisy is at the core of our Representative’s messaging ever since he got elected to Congress, go to Erik Paulsen’s website and search for “Deficits”. That search turns up dozens of Paulsen’s blog posts and press releases before Trump was elected in which Paulsen is critical of virtually anything that increases the deficit. Or you can watch the video of a Paulsen town hall meeting in 2010 where he led off with a lecture about the evil of deficits, saying it was one of his biggest concerns.  But now that Republicans are in power, he voted for massive tax cuts for corporations and the wealthy that will blow up the deficit because of his belief in the discredited theory of trickle-down economics. Perhaps we shouldn’t be surprised.  Right-wing Republicans have been playing this game since Reagan. They like to call Democrats the “tax and spend party,” but we now know they’re the “cut taxes and spend party.”
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Republican strategists believe that putting their best spin on the tax plan is key to avoiding a bloodbath in the 2018 mid-term elections. They are hoping they can fool voters who aren’t paying attention by doling out short term and very modest tax cuts for the middle class that obscure the fact that the trickle-down “Tax Cuts & Jobs Act” is bad public policy. The GOP tax bill, which was championed by Paulsen, overwhelmingly favors the wealthy and corporations and in the long run will likely do great harm to our economy and further increase economic inequality. Recent polling indicates that the Republican defensive public relations strategy on their tax plan is working because support for the tax bill now stands at 51%, up from 37% in December. 
 
Republicans claim that the tax cuts mean more money for middle-class voters and some of them of those voters are already seeing modest withholding adjustments that, for now, boost their take-home pay. For middle-income households earning $49,000 to $86,000, the average tax cut will be about $900 this year.  Republicans are counting on middle class voters not recognizing that: a) their average tax cut is less than 2% of the $51,000 average tax cut for those earning more than $733,000; b) the tax cut is only temporary; and c) as a result, in later years, about two thirds of middle-class taxpayers will actually see a tax hike. Moreover, as we pointed out in an earlier blog, the Republicans’ elimination of deductions for state and local taxes is a particular blow for all Minnesotans and especially to Paulsen’s constituents in the Third Congressional District, half of whom claimed that deduction in 2016.

Paulsen and his fellow Republicans also claim that corporations are sharing money from their huge windfall tax cuts with workers and point to a list of over 100 corporations that are giving employees more money due to the cut in corporate taxes. Paulsen has made regular social media posts on this topic, As it turns out, some of those bonuses are more PR than substance. Walmart, for example, announced it would be giving bonuses up to $1000 to workers. However, workers only get $1000 if they’ve been working for Walmart for 20 years and the average worker will only receive about $190. More importantly, the amounts corporations are spending on increased employee compensation pales in comparison to what they are giving to corporate executives and well-heeled investors through stock buybacks. The evidence so far, as Democrats expected, is that corporations are spending most of their windfall on buying their own stock rather than on bonuses, wage hikes, or even on capital investment. Stock buybacks are good for shareholders, especially top executives who often own significant shares of their companies’ stock and buybacks increase the price of those shares. In comparison, various corporations have thus far announced about $6 billion in bonuses for employees versus more than $170 billion in stock buybacks.  In other words, to date, the increased compensation corporations are giving to employees as a result of their tax windfall is only about 3.5% of what they’re spending to buy back their stock. The vast majority of the billions of dollars spent on stock buybacks will benefit the richest 10% of American households who own 84% of all stocks and especially the top 1% who own about 40% of all stocks.

Finally, Republicans claim that their trickle-down tax plan will pay for itself because the extra money going to corporations and the wealthy - paid for by increasing the deficit - will be invested and grow the economy. But that premise of supply side/trickle-down economics has failed every time it has been tried since the Reagan administration and there is no reason to believe it is going to work now. The overwhelming consensus of economists is that the tax cuts will not pay for themselves. Now even Steve Mnuchin’s Treasury Department admits that the Republican tax plan will not pay for itself.

So, Erik Paulsen and his fellow erstwhile Republican “deficit hawks” have sacrificed the good of the country and the future of our children and grandchildren to line the pockets of large corporations and the wealthy in yet another misbegotten attempt at trickle-down economics. As Albert Einstein once said, “The definition of insanity is doing the same thing over and over again but expecting different results.”

We need to replace Paulsen and elect a Congressperson who we can trust to represent the majority of voters in Minnesota’s Third District.

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