Paul Ryan and his minions in the House like Erik Paulsen have held their noses against the stench of Donald Trump to blindly pursue their supply-side trickle-down economics ideology. If Trump was willing to sign their legislation cutting taxes for corporations and the wealthy, they were willing to put up with Trump’s most egregious behavior and policies. Even leaving aside the obscene immorality of furthering economic inequality, such tax cuts were always a bad idea. Democrats and the clear majority of economists noted that the Republican tax plan would not “pay for itself” with increased growth as Republicans claimed, that corporations would most likely use their tax breaks for stock buy-backs rather than investing to modernize and increase productivity or by paying more to employees whose wages have been mostly stagnant for years. They argued that both deficits and economic inequality would increase because of the trickle-down tax bill.
But Republicans rejected those arguments and shot down a provision that would have triggered an automatic tax increase if their outlandish economic growth predictions did not materialize. That refusal to implement a fail-safe mechanism tells us they really didn’t care whether their plan was based in reality - they just wanted their tax cuts, come what may.
Well, the data is starting to come in and guess what? Critics of the Republican tax plan were right.
On April 9th, the Congressional Budget Office released a report which concluded that the deficit is rising sharply and will surpass $1 trillion per year by 2020. The CBO Budget Director said “federal debt is projected to be on a steadily rising trajectory throughout the decade.” The loss of revenue due to the Republican tax bill will be $1.3 trillion from 2018 to 2028 and when the costs of paying interest on that debt are included, the total addition to the deficit due to the Republican tax bill comes to $1.9 trillion. The increase in the interest payments just on the increased debt from the tax bill is about what we currently spend on the military. Republicans had claimed their proposal would spark massive growth that would limit or even eliminate growth in the deficit. However, the CBO projected that the bill would boost economic growth by only 0.7% over a decade - not nearly enough to keep it from adding to the debt. After the report came out, Republican Senator Bob Corker said, “If it ends up costing what has been laid out here, it could well be one of the worst votes I’ve made”. Other countries are using the comparative calm we are in now after the 2008 financial storm to pare back their deficits. The International Monetary Fund has projected that the United States is the only advanced economy in the world expected to have its debt burden get worse over the next five years.
And what about the critics’ claims that corporations would most likely use their windfall tax breaks for stock buy-backs that further enrich executives and investors rather than for productive investments? Buy-backs have been increasing since the tax cut was passed in December and in February reached a monthly record of over $150 billion. Analysts expect buy-backs this year to exceed a high mark of $589 billion per year set in 2007, just before the crash of the Great Recession. To the extent those buy-backs benefit any one, they will benefit those already wealthy and thus further increase economic inequality which is at record levels now.
Deficits are not necessarily bad and in fact under some circumstances are necessary to finance national priorities like waging a necessary war or pulling the country out of an economic recession. Our largest deficits as a percentage of GDP were for military spending during World War II and after 2008 to pull us out of the ditch of the recession. But to pile on national debt now, at a time when it is not necessary, to hand out tax breaks that primarily benefit the wealthy and corporations is a very bad policy and the height of hypocrisy for politicians like Erik Paulsen who claimed to be so concerned about increasing the deficit when they opposed Obama’s policies that brought us out of the Great Recession. We need a Representative who will do what’s right for the country and all of us, not just hand out goodies to the well-heeled and corporations based on flawed trickle-down economics ideology which has failed every time it has been tried before.
Replace Erik Paulsen.
Minnesotans for Real Representation is a grassroots organization in Minnesota's Third District with the goal of replacing Erik Paulsen in 2018.