Posts Tagged ‘Republicans’

tax-plan

All eyes right now are on the U.S. presidential campaign (especially the narrowing gap between Hillary Clinton and Donald Trump).

What that means is Americans’ attention is diverted away from other politics and policies, such as the House GOP’s tax plan—the so-called “Better Way”—which would overwhelmingly benefit the richest 1 percent. It would allow the tiny group at the top to keep, via tax cuts, more of the surplus they manage to capture.

The plan would reduce the top individual income tax rate to 33 percent, reduce the corporate rate to 20 percent, and cap at 25 percent the rate on profits of pass-through businesses (such as sole proprietorships and partnerships) that are taxed under the individual income tax. Individuals could deduct half of their capital gains, dividends, and interest, reducing the top rate on such income to 16.5 percent.

According to the Tax Policy Center,

Overall, the plan would cut the average tax bill in 2017 by $1,810, increasing after-tax income by 2.5 percent. Three-quarters of the tax cuts would benefit the top 1 percent of taxpayers and the highest-income taxpayers (0.1 percent of the population, or those with incomes over $3.7 million in 2015 dollars) would experience an average tax cut of about $1.3 million, 16.9 percent of after-tax income. Households in the middle fifth of the income distribution would receive an average tax cut of almost $260, or 0.5 percent of after-tax income, while the poorest fifth of households would see their taxes go down an average of about $50, or 0.4 percent of their after-tax income. In 2025, the top 1 percent of households would receive nearly 100 percent of the total tax reduction. Households in some upper-middle income groups would have tax increases on average, and households at other income levels would have smaller average cuts, relative to after-tax income, than in 2017.

And, since the plan would reduce total federal revenues (by $3.1 trillion over the first decade of implementation and by an additional $2.2 trillion in the second decade), it implies massive cuts to federal programs, many of which benefit working-class households, thus making the plan even more regressive.

The better way, it turns out, is just another version of conservative trickledown economics.

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Has the policy consensus on economics fundamentally changed in recent years?

To read Mike Konczal it has. I can’t say I’m convinced. While some of the details may have changed, I still think we’re talking about different—liberal and conservative—versions of the same old trickledown economics.

But first Konczal’s argument. He begins with a pretty good summary of the policy consensus before the crash of 2007-08:

Before the crash, complacent Democrats, whatever their disagreements with their Republican peers, tended to agree with them that the economy was largely self-correcting. The Federal Reserve possessed the tools to nudge the economy to full employment, they thought. What’s more, government programs, while sometimes a necessary evil, were likely to be an inefficient drag compared with the private market. Inequality was something to worry about, sure, but hardly a crisis, and policies were correspondingly timid and market-focused.

And it’s true: the debate about the conditions and consequences of the crash—after Occupy Wall Street, in the midst of the Second Great Depression—challenged that consensus, by focusing much more attention on inequality and disrupting the idea that the growing gap between rich and poor is somehow natural and necessary and by calling into question the idea that capitalist markets are self-stabilizing and full employment can be guaranteed by relying on markets.

In all honesty, that’s the least that can be expected, especially on the liberal side of mainstream political and economic thinking in the United States.

But then, when Konczal outlines the policies that make up what he calls the “new liberal economics,” embodied in Hillary Clinton’s campaign and the current Democratic Party, the evidence is very thin. In terms of specific policies—like following the dual mandate for the Fed of stabilizing prices and maximizing employment and supporting paid family and medical leave—the new liberal economics looks a lot like the old liberal economics of the Great Society programs (and, for that matter, of the Nixon administration). And while the policies Democrats support are certainly different from those of current Republicans (which Konczal summarizes as a “mix of Kempism, austerity, and favorable taxes and regulations for businesses that characterizes Paul Ryan’s ideas” and “Trump’s agenda of mercantilism and a chauvinistic welfare state”), they aren’t evidence the existing policy consensus represents a radical change.

That’s because the consensus before the crash, and now seven years into the recovery, has been based on trickledown economics. On both sides of the political and economic aisle.

The overarching idea, shared by liberals and conservatives, is that the existing economic system—with the surplus being appropriated by a small group at the top, who then decide what to do with it—will eventually deliver benefits to everyone, including those at the bottom (through, e.g., more jobs and higher incomes).

There are differences, of course. While the conservative view of trickledown economics emphasizes individual decisions and private markets, the liberal view is based on the idea that individual decisions are constrained by larger institutions and structures and and government programs are necessary to achieve desirable social outcomes. But, in both cases, the benefits created by existing economic arrangements are supposed to start at the top and trickle down to the bottom.

The consensus before the crash was that the liberal and conservative approaches to trickledown economics represented the limits of the relevant debate about economic policy. And now, seven years into the recovery from the crash, the debate that takes place between those limits remains the policy consensus.*

So, to my mind, there’s nothing new about the “new liberal economics.” It’s just a different mix of policies that together make up the latest version of liberal trickledown economics.

 

*If the existing policy consensus has been disrupted, it’s only because Donald Trump has highlighted the fact that trickledown economics, in both its versions, represents an unfair hustle.

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Presidential polling and forecasts (such as those from FiveThirtyEight) in the United States have quite definitively moved in favor of Hillary Clinton. And, by the time this gets posted, the gap between Clinton and Donald Trump will probably have grown even more.

We should remember all such polling presumes voters are “sincere,” that is, they will vote for the candidate they think is the “better” choice.

But what if voters are strategic, that is, they make tactical decisions in their voting? Then polling, and the forecasts that stem from them, are going to be deceptive. And the loser in the polls might be the winner in the election.

The obvious strategic choice, for those who don’t want Trump elected but also dislike (for a whole host of valid reasons) Clinton, is to vote for the Green Party’s Jill Stein. The idea is that, at least in states where Clinton appears to be a “lock,” it’s important to run up the numbers to Clinton’s left, in order to put pressure on her electoral campaign and post-election policies. This is presumably the option that at least some, and perhaps a large number, of Bernie Sanders’s supporters will choose in November.

But there’s another strategic choice, which will also lower Clinton’s final numbers: those who are indifferent between Clinton and Trump (because both have moved “too left,” or at least more populist, on economic policy) but certainly don’t want Clinton to win in a landslide. It’s the argument Holman W. Jenkins, Jr. has recently made in the Wall Street Journal:

let’s also remember that even if Trump defeats himself, it would not be the same as reaccrediting the Depublican and Remocrat leadership class of which Mrs. Clinton is so spectacular an example. Our system of institutions is not designed to find us the “right” person to be our national hero/role model. Its job is to harness and constrain the forces and personalities that democratic populism throws up.

Voters are perfectly entitled to ask themselves if one of our major parties has thrown up a candidate unsuitable purely on grounds of personality and temperament, but we also should have some humility about the historical moment we’re living through. A narrow Hillary victory or Trump victory might not be outcomes all that distinguishable from each other in the end—whereas a Clinton landslide that produces, like the first two Obama years, one-party government fundamentally out of sync with the American electorate and out of sync with the national moment could be the larger misfortune.

This is an argument for continued “gridlock,” which may be precisely what American businesses want at the national level. Presuming Clinton is going to win the presidential election, they want to make sure at least the House, if not the Senate—in other words, the result of the down-ticket races—remains in the opposition’s hands. And that’s the reason they may vote strategically for Trump.

I can well imagine both these strategic voting decisions affecting the presidential vote, especially if the polling and forecast gaps between Clinton and Trump continue to grow.

To be clear, I am not trying to make an argument for or against voting (or, for that matter, for or against strategic voting). Precisely because it raises the possibility that the winner might lose (or, alternatively, the loser might win), the case I’m trying to make is that voting in elections is merely the semblance of democracy and that democracy falls far short of the horizon of the politics we actually need today.

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