Archive for September, 2017
By now we’ve experienced enough slight of hand by the Republican Congress to know that every proposal needs to be seriously questioned. Since going 0-fer-2 on ACA Repeal, Republicans are now keen on rolling out their fantastical new Tax Reform package that’s reportedly going to make everyone rich! Tax cuts around the horn! But the devil is in the details. Just because a party would like to see 4% GDP growth doesn’t make it possible. Leading experts say that tax cuts do in fact spurn growth, but what gets returned to the economy is about 1/3 of what was lost in revenue. That leads to the concern that the tax cuts around the horn strategy is going to lead us down the path of insolvency sooner rather than later, but it’s worse than that.
Nobel prize winning economist Paul Krugman goes into pretty good detail in a New York Times article Trump’s Rosy Scenario breaks it down pretty well – detailing why Trump’s 4% goal is a lot of wishful thinking. Below are the highlights.
Real GDP grew 3-4% annually under Reagan; it grew 3.7% annually under Clinton. But there are fundamental reasons to believe that such growth is unlikely to happen now.
First, demography: Reagan took office with baby boomers — and women – still entering the workforce; these days baby boomers are leaving. Here’s the UN data on a 5-year growth rate of the population aged 20-64, a rough proxy for those likely to seek work:
Just on demography alone then, you’d expect growth to be around a percentage point lower than it was under Reagan.
Furthermore, while Trump did not in fact, inherit a mess, both Reagan and Clinton did — in the narrow sense that both came into office amid depressed economies, with unemployment above 7 percent.
So even if you (wrongly) give Reagan policies credit for the business cycle recovery after 1982, and believe (wrongly) that Trumponomics is going to do wonderful things for incentives a la Reagan, you should still be expecting growth of 2 percent or under.
Cut taxes, grow the economy! Sounds good but the data doesn’t support it. As George Bush #41 aptly stated, this is “voodoo economics” at its best.
There’s an ancient proverb that says “The enemy of my enemy is my friend”
Hot off the press, #45 (can’t bring myself to call him President yet) just announced bipartisan work efforts on tax reform and infrastructure. This is akin to throwing the freedom caucus under the bus. I’m starting to like this guy.
Desperate for a win of any kind, I think #45 had an epiphany of sorts and realized a divided republican caucus is of no use to him whatsoever in this goal.
The biggest enemies of the people are the leaders beholden to monied interests. Chief among these is Paul Ryan and Mitch McConnell. Both are pounding sand right now and I couldn’t be happier about it. When they hear #45 talk about “dinner tonight with Chuck and Nancy”, you can be sure their blood is boiling. They thought control of the House, the Senate, and the White House was a free pass at making their donors happy. Didn’t work out that way. If you’re looking for who to blame, look no further than the freedom caucus led by Mike Lee and Ted Cruz. Their obstinance led to their own demise.
Steve Bannon, fresh off his 60 minutes interview declared war on the Republican establishment who he claims is “.. trying to nullify the election results”. #45 clearly ran on a populist agenda — which is 180 degrees out of sync with the Freedom Caucus.
What I heard #45 say is that his wishes on tax reform were for it to go to the middle class only. The top-tier were not going to get a tax break, and worse, their taxes may even go up. He’ll get a lot of democratic support for this idea and if voted on as a bipartisan bill, moderate republicans and democrats will pass it with no issue. Additionally he wants to work with “Chuck and Nancy” to get some infrastructure wins. Of all the ideas on his agenda I’ve always felt this one has the best chance of getting any kind of bipartisan support.
Last but not least, he specifically called out wanting congress to “do something about DACA” but I took it to mean some sort of compromise solution that did not involve deportation. I truly believe he wants to do the right thing here, but he needs the specifics to be someone else’s idea for political reasons. Ann Coulter is hotter than the fire of 1000 suns right now.
I have no predictions about where this will lead, but right now I’m happy as a clam that #45 just flipped Grover Norquist, Ted Cruz, Mike Lee, Mitch McConnell, and Paul Ryan the bird.
It would not surprise me if #45, seeing his entire presidency about to be neutered by the midterm elections, switched parties.