Rep. Erik Paulsen has, of course, voted for the Republican tax plan and, despite all the evidence to the contrary, falsely claimed it“is geared absolutely toward middle-income folks”. Most economists believe that the Republican tax plan is in fact skewed in favor of the wealthy and polling shows that the voters likewise believe it disproportionately benefits the rich. The GOP bill is one of the least popular tax plans since the Reagan administration. Its passage will likely harm the U.S. economy in the long run and may well be the downfall for Republicans like Paulsen who supported it come November 2018.
The majority of American voters are absolutely right to be very concerned about the Republican tax plan. By 2027, people making $40,000 to $50,000 would pay a combined $5.3 billion more in taxes, while the group earning $1 million or more would get a $5.8 billion cut, according to the Joint Committee on Taxation and the Congressional Budget Office. That only increases the already abysmal economic inequality in this country. Such a sacrifice by the lower and middle class might be tolerable if, in the long run, the plan produced the economic growth Republicans claim it will. But in a recent survey of thirty-eight economists by the University of Chicago, only one said the proposed tax cuts would yield substantial economic growth and all said the cuts would add to the long-term federal debt burden. Edward D. Kleinbard, a former chief of staff at the Congressional Joint Committee on Taxation who now teaches law at the University of Southern California was recently quoted in the New York Times as stating: “It’s not aimed at growth. It is not aimed at the middle class. It is at every turn carefully engineered to deliver a kiss to the donor class.” Indeed, before the vote, Republican Rep. Chris Collins of New York told reporters, “My donors are basically saying get it done or don’t ever call me again.”
Tax cuts that will balloon the federal deficit is only the first step of what the Republicans have in mind. Republican’s will now say that the increased federal deficit—which they increased with this tax bill favoring the wealthy—will require cuts in federal spending. And where will they make those cuts? In social safety net programs, of course. Even before the vote on the tax bill Senator Marco Rubio called for offsetting tax cuts by reducing Social Security and Medicare benefits, something Republicans have been dreaming about for decades. They’re like an evil Robin Hood in reverse—steal money from the poor and the middle class to give to the rich—and then take away Social Security and Medicare benefits to pay for the shortfall in the deficit.
The Republican tax and budget plans mirror what was tried (and failed) in Kansas under Republican governor Sam Brownback. In 2012, Republican majorities in Kansas embarked on a “march to zero” for the state’s income tax, eliminated taxes on businesses whose owners filed their taxes as individuals rather than corporations (the so-called “pass through” tax break). This was supposed to spark economic growth and trickle-down benefits for everyone but the growth never materialized, the legislature did not cut spending to match the lower revenue, Kansas ran up hundreds of millions in annual deficits and the state has been in a continuous budget crisis. Republican Kansas state legislators warned Washington it should heed what happened in their state. But Washington Republicans, including our own Rep. Erik Paulsen, were blinded by their trickle-down ideology and went ahead to satisfy their donors.
An interesting article in the Washington Post by Robert McElvaine, a historian who studies the Great Depression should have given Republicans pause before they voted their plan into law. McElvaine believes that the present GOP Tax Bill is straight out of 1929 and will push the economy off a cliff. What are the similarities between the politics and economy of the 1920’s and today?
Then, as now, we have Republican control of government with trickle-down policies providing massive tax cuts for the already rich, a push for de-regulation of business in general and Wall Street in particular and an already over-priced stock market. Below is a graph of Robert Schiller’s "cyclically adjusted price-to-earnings ratio" (CAPE ratio) for the U.S. Stock market. Note that there are only two times in history when the CAPE ratio has been this high—in October 1929 and at the height of stock market in 2000 just before the tech bubble burst.
History doesn’t repeat itself, but it rhymes. And business cycles are real. If there is an economic downturn in our near future, can you imagine what it would be like under the leadership of Donald Trump and our present Republican-controlled House and Senate?
We need to change the direction of our country and our politics. We can help do that here in the Third Congressional District by replacing Erik Paulsen who whole-heartedly supports trickle-down economics.
Minnesotans for Real Representation is a grassroots organization in Minnesota's Third District with the goal of replacing Erik Paulsen in 2018.