The end of 2017, Donald Trump signed into law the Republican “Tax Cuts and Jobs Act.”
Basically, it is a tax bill that hands $1.5 trillion in permanent tax breaks to corporations and the wealthy like Trump and his ilk.
It was supposed to stimulate an economy that didn’t need stimulating, put more money into everyone’s pockets (especially those who don’t need it), and create jobs.
Whenever conversations drift toward the Democrats’ plan to provide free tuition at state colleges and universities and Medicare for all, someone is bound to ask, “How are we going to pay for it?”
That question, though, never seemed to be relevant when Republicans concocted the plan for this massive giveaway to their billionaire donors.
So, how are we going to pay for it?
Turns out, the Treasury Department will have to borrow $1 trillion again, the highest level of borrowing in six years–the second year in a row–to pay for the government’s ensuing budget deficit.
The Congressional Budget Office (CBO) predicts this year, as the tax cuts’ stimulative effects weaken and the federal budget deficit climbs to nearly $900 billion, the economy will slow to 2.3 percent from last year’s 3.1 percent.
The shutdown didn’t help either.
According to Reuters:
“The U.S. economy lost at least $6 billion during the partial shutdown of the federal government due to lost productivity from furloughed workers and economic activity lost to outside business, S&P Global Ratings said on Friday.”
A projected downturn in this year’s fourth-quarter federal government purchases will also affect economic growth.
And about those jobs…
That, too, was a ruse.
The National Association of Business Economics’ (NABE) quarterly business conditions poll found that while some companies reported increased investments due to lower corporate taxes, 84 percent of respondents said they did not change hiring or investment plans.
Kevin Swift, NABE President and chief economist at the American Chemistry Council, said:
“Fewer firms increased capital spending compared to the October survey responses, but the cutback appeared to be concentrated more in structures than in information and communication technology investments.”
According to Bloomberg, instead of the higher wages the GOP guaranteed, actual average hourly compensation fell in the first quarter after the tax law was passed.
An indication of how effective the tax breaks are is how much businesses are spending, because, theoretically, when corporations have more money, so do their workers.
But that is not the case.
Instead, stock buybacks appear to be soaring. Since the tax cuts passed, businesses have been using their additional capital to pay off shareholders–not employees–to the tune of more than $700 billion.
CEOs are actually coming right out and admitting they will not increase employee pay.
Troy Taylor, CEO of Florida’s Coca-Cola franchise, for example, said at the Dallas Fed:
“It’s [increasing employees’ salaries] just not going to happen. Absolutely not in my business.”
Not only are CEOs brazen enough to concede their greed; they are overtly working to “reduce their work forces further.”
The tax overhaul will add $1.5 trillion to the national debt over 10 years.
By 2049, consistently high deficits will force public federal debt to 93 percent of the economy, the highest level since just after World War Two.
Former President Barack Obama’s Treasury Secretary Jack Lew argues the tax cuts could “leave us broke,” and he fears how the deep cuts to social safety programs could blight our country for decades.
He said in a Bloomberg interview:
“I fear that the next shoe to drop is going to be an attack on the most vulnerable in our society. How are we going to pay for the deficit caused by the tax cut? You’re going to see proposals to cut health insurance from poor people, to take basic food support away from poor people, to attack Medicare and Social Security. One could not have made up a more cynical strategy.”
Instead of crippling cuts, Lew asserts what the country needs is investment more jobs training, education, and infrastructure.
He stated:
“What we’ve seen is a tax cut that spends money we don’t have, to have very concentrated benefits for global corporations and the top 1 percent, and it’s leaving us broke so that we cannot deal with these fundamental problems.”
We can pay for tax breaks for the rich that are demonstrably deleterious to the economy, but we can’t afford free college tuition or universal healthcare like every other developed nation despite experts proving their feasibility?
Really?
It’s time to bury neo-liberal Reaganomics with Reagan.
Image credit: Flickr
