Alongside the immigration issue, the topic of the GOP tax overhaul is likely to be a prevailing theme leading up to the 2018 midterm elections in November. Republican candidates will be looking to tout its successes, and possibly the Trump White House’s political and economic agenda. Democrats will be looking to hammer their Republican counterparts over the idea the tax cut is intended to primarily benefit the wealthiest of the wealthiest Americans, not to mention corporations, which—and this seemingly can’t be stressed enough—are not people. In both cases, talk about our skyrocketing national debt will apparently be sparing as far as the national consciousness is concerned.
Before we get too ahead of ourselves, let’s talk about the more immediate tangible benefits that American families might experience, and in doing so, not be as dismissive as some Democratic leaders might be. Numerous companies have cited the GOP tax cut as the impetus for bonuses allotted for their employees, and one-time giveaways aside, many workers may have noticed appreciable increases in their take-home pay related to the tax law changes. Even when accounting for context, however, the public comments made by key Democrats don’t seem to assuage the contention coming from conservative circles that the Democratic Party is out of touch with the rank-and-file of the country. Nancy Pelosi, in particular, has been assailed for likening the $1,000 bonuses some people have received to “crumbs” relative to the gains wealthy individuals and large businesses will expect to receive as a result of this policy shift. My girl Debbie Wasserman Schultz (sarcasm intended) also caught flak for her comments as the same event that she wasn’t sure $1,000 goes far for almost anyone. Maybe, ahem, not to the likes of the Democratic National Committee, Rep. Wasserman Schultz, but $1,000 isn’t exactly chump change.
So, yeah, the positive aspects of the tax cut are not something to merely brush aside with a wave of the hand. Like crumbs. Or “deplorables,” recalling Hillary Clinton’s epic-fail gaffe. That said, if and how these bonuses apply for the average worker in the short term, and some real global economic concerns over the long term, serve to place the boasts of Donald Trump and Republican Party congressional leadership in a bit of a different light. According to a report by David Goldman and Jeanne Sahadi for CNN and citing a recent survey by Morgan Stanley analysts, only 13% of businesses’ tax cuts will go to bonuses, employee benefits, and pay raises, while 43% of the cuts will go to investors in the form of dividends and stock buybacks, which undoubtedly will involve some executives who are compensated in terms of stock incentives. That’s not nothing, but it’s also not to say that the American worker is a priority in this respect. The CNN report also cites statistics indicating that while companies have announced tax-cut-related bonuses and raises affecting some 3.5 million U.S. workers, that’s less than 3% of the 125.5 million U.S. workers in the employ of a company. Again, not nothing, but it imaginably might seem more like winning the lottery to those who don’t receive such rewards. And God forbid if you are underemployed, unemployed, or “work in the home” and don’t receive a traditional wage.
The obvious rebuttal to this criticism is that the tax cut was just recently put into effect, so it will take time for the economy to grow in proportion to its benefits, and for businesses to hire more and invest within the United States. Based on the way the law was written, however, there are plenty of red flags to be had. The Tax Cuts and Jobs Act of 2017 paves the way for permanent tax cuts for corporations, but on the individual taxation side of things, the modified rates are set to sunset by 2026. This means an extension of the Act’s provisions will need to be ratified by then, and seeing as Congress can’t seem to agree on anything these days except throwing ungodly sums of money at the military, this seems all but certain. In other words, the benefits of the tax cut—if they are to be enjoyed by as many members of the general public as the White House avers they will—are temporary, much like the one-time bonuses that companies are awarding to their employees.
And then there is the matter of our ever-escalating national debt. Annie Lowrey, writing for The Atlantic, probes the intersection of U.S. deficit spending with the GOP tax cut in relation to conservative Republican ideologies. In the onset, Lowrey speaks to the seeming strangeness of Donald Trump to make America’s debt a glaring omission from his State of the Union speech. She writes:
ISIS, tax cuts, public trust. Race, immigration, the Empire State Building. Civil-service reform, North Korea, manufacturing. President Donald Trump’s State of the Union speech addressed a broad sweep of issues. But one central economic topic went notably missing: the country’s growing annual deficits and its increasing burden of debt. The omission was a sign of the remarkable volte-face the Republican Party has taken on the country’s fiscal situation in just a few years. Republicans spent the early years of the recovery obsessed with the national debt, castigating Democrats for their supposed irresponsibility, warning about the dangers of the almighty bond market, and helping to construct complicated mechanisms to slash federal outlays. They are now spending what might very well be the late years of the recovery ignoring it, having passed a tax plan that will add more to the debt than President Obama’s stimulus package did and having forgotten their once-urgent plans to make cuts to Social Security and Medicare.
While this trend may prompt deficit hawks like Rand Paul to sob gently to themselves, Lowrey seeks not to be abjectly critical of Republicans in this regard, but rather to underscore just how much of a 180 this position is from the Tea Party fever which ushered so many Republicans into office and paved the way for a decade of legislative defeats for the Democratic Party. While Trump is not your average Republican and all politicians are liable to break their campaign promises—Trump, despite not being a lifelong politician, is a salesman and pathological liar, so somehow even more liable to do so—even he ran on a campaign of reducing our annual deficits and balancing the budget. If there is criticism to be leveled on Lowrey’s part, it is more so on the side of the Republicans’ past obsession with spending that sent the federal government into shutdown mode at least once and gave GOP members of Congress ample opportunity to rail against the Obama administration’s supposed largesse.
Now with Donald Trump as President and Commander-in-Chief on top of Republican control of both the House of Representatives and the Senate, the shoe is on the other foot, and with the change has come the aforementioned commensurate reversal on the topic of deficit spending. While a minority of American workers are presently receiving one-time gains or improvements to the benefits they receive from their employers, as a result of the Tax Cuts and Jobs Act, according to figures from the Congressional Budget Office and the Joint Committee on Taxation cited by Annie Lowrey in the article, the tax cut would add $1.8 trillion to the national debt over the 2018 to 2027 span. Not million. Not billion. Trillion. While the magnitude of the addition to the debt might be vaguely surprising, though, the mechanism should not. By effecting a tax cut, it’s a direct drain on revenue paid directly to the government. At the same time, meanwhile, Republicans have more recently shied away from the entitlement reform and domestic program cuts that have previously been a rallying cry for the party, and have further turned the dial up on this trend with calls for more military spending. Mentions of deficits and debt during congressional proceedings, too, have largely decreased since peaking in 2011, and the Trump administration, ever the depiction of tumult, is even more loath to broach the subject, and when it does, as Lowrey notes, its officials do so “with little sense of outrage or concern.”
Is this attitudinal change with respect to the national debt indicative of a seemingly inherent hypocrisy in major-party politics—i.e. when we’re in office/the majority, the same rules need not apply—or simply reflective of a sea change regarding how all of us have come to regard deficit spending? To be honest, it’s probably a little from Column A and a little from Column B. As one Obama-era economic adviser quoted in Lowrey’s piece believes, Republicans’ prior importance placed upon the debt was merely a tactic to garner short-term political capital. To boot, retrospective thinking from experts on the trouble the United States might face in relation to its debt suggests worries based on European credit crises like the one notably faced by Greece may have been overstated, not to mention concerns about how deeply the American public is invested in this topic.
On the latter count, and citing a study by the Pew Research Center, Lowrey notes that whereas 72% of respondents named reducing federal deficits a top priority in 2013, today, fewer than half of those surveyed do. That the U.S. economy is performing well overall at the moment is an important factor herein, but also playing a role is growing attention other political and social issues, namely drug addiction/the opioid crisis, the environment, and improving the nation’s infrastructure and transportation. From our perspective, then, it may not be a case so much of not caring about economic issues like the national debt as much having a lot on our plates. Besides a majority of Americans still viewing the economy as a pivotal priority, fears about terrorism and preoccupations of the state of education in the United States weigh heavily on people’s minds.
Again, though, this isn’t solely a knock on Republicans. If Democrats were in power, there is every indication they’d be running up the country’s debt and not expressing outward reservations about doing so. This is not to say that all deficit spending is inherently bad; investments made which can lead to future growth or prevent future calamity come with a cost. That said, as with personal debt—a subject with which a seemingly increasing number of Americans have become familiar—the national debt is a “drag on the economy,” as a representative of the Committee for a Responsible Federal Budget, quoted in Lowrey’s piece, highlights. Meanwhile, even if GOP leaders have temporarily put aside talk of dismantling core components of the U.S. social safety net, this is not to say that these programs do not need improving. With next year’s annual budget deficit set to top $1 trillion and concern for the sustainability of this arrangement seemingly on the decline, if what Annie Lowrey and other observers say is true, things are likely to get worse before they get better on the debt front. Just how bad, and whether or not a bursting of this bubble might produce a credit catastrophe, unfortunately remains to be seen.
Now that the Tax Cuts and Jobs Act has been signed into law and we have ample time to actually stop and think and wax philosophical about it, the Republican Party’s strategy is not altogether unsound from the perspective of manipulating public opinion. By the time the individual provisions of the tax cut are to sunset, we’ll be at least two more presidential election cycles down the road. Thus, the GOP can likely reap the rewards of the short-term political gains they’ve helped foster presently, and by the time Donald Trump is out of office (hopefully long before 2024, but these days, given the political atmosphere, I don’t like to get my hopes up) and Democrats have gained a majority in one or more wings of Congress or control the White House, they can defray any ill will they might have incurred related to the tax cut by pointing to the disastrous economic and social policies of the liberal left. In a 24-hour news cycle where viewers are already primed to quickly forget what just happened, it’s a fair bet that many of us will forget who the architects of this concession to corporate executives and wealthy benefactors even were.
This, to those of us insistent on documenting this chapter in American history, is rather obviously a long con. And I do mean con. In effect, it’s part of an even longer-term confidence trick that conservatives and neo-liberals have been imposing on the American public. Though officially titled the Tax Cuts and Jobs Act of 2017, the GOP tax cut is dyed-in-the-wool trickle-down economic theory. The primary beneficiaries of its amendments to tax law are corporations and business owners, under the idea that fewer taxes paid means more money to be invested in creating jobs and improving conditions for workers. The reality is that numerous corporations, financial experts and firms making use of the carried interest loophole, and pass-through entities have been taking advantage of favorable aspects of the tax code for years, and that the insistence from critics on the right that regulation and taxation is killing American industry tends to be overstated. There are a number of complex factors that go into why businesses succeed or fail, including changing social norms and advances in computer/automated technology, but consumer demand and discretionary spending are a crucial part of this mix. As for the employment side of the equation specifically, if firms are offering bonuses and other incentives to their workers, it is most likely not a sign of their generosity, but rather a competitive strategic move. In a tight job market, when companies like Walmart are raising wages, it’s an indication they’re doing so because they feel they have to survive.
Moreover, with the lowering of the top individual tax rate and the permanent slashing of the top corporate rate, the Tax Cuts and Jobs Act, given its signaled priorities, is very clearly class warfare. The GOP tax cut, ostensibly a boon for the middle class, working class, retired Americans, and the poor, is visibly skewed toward the most profitable companies and wealthiest individuals, and with caps on deductions for state and local taxes and property taxes, as well as the elimination of the personal exemption, the emphasis is not only on limiting the ability of the rank-and-file to alleviate their tax burdens, but to punish states like California, Connecticut, New Jersey, and New York—states that all went blue in the 2016 election, it should be noted—that feature higher-than-average tax rates and were more liable to take advantage of superior SALT deduction policies. As alluded to before, too, Republicans’ success in passing tax “reform” legislation greases the wheels of attempts at entitlement “reform.” Which essentially means cuts to programs like Social Security, Medicare, and Medicaid, because all that lost tax revenue is going to have to be made up somewhere else, and in all probability, it will not be coming from the untold sums stashed by the wealthy in offshore banking accounts and other tax havens.
The national debt is a real concern. However, it’s not a politically sexy topic right now, and with the stock market seeing record highs (when it’s not seeing dips related to fears about rising interest rates), it is seemingly of less interest to many of us as well. As yearly deficits continue to mount, and as questions of sustainability persist, it begs the question: how much longer can we continue to ignore that $20+ trillion elephant in the room?