Now that President Trump and Republican leaders in Congress have announced their tax-reform plan, the usual dividing lines are being drawn. Democrats and their allies in the media are whining about tax cuts for the rich and, to some degree, how tax cuts would reduce the government’s income and increase the deficit. I’m yawning. By being so predictable, so lazy and so dishonest, Democrats are thinking they can stifle any real debate over the merits of tax reform that features economy-boosting tax cuts.
They would rather revert to whining about tax cuts for the rich and accuse the GOP of wanting to coddle corporations. And by the way, in their heart of hearts, many Democrats do not want the economy to improve out of fear that a little prosperity for the middle class will hurt their chances at the ballot box in 2018 and 2020. This is the political reality in which tax reform must now be considered.
The obvious benefits of tax reform and reduced rates are too many to discuss in this piece, but suffice it to say, as Aparna Mathur of the American Enterprise Institute makes clear, “a good starting point for tax reform would be to move toward a simpler tax code, one that is easier for individuals and businesses to comply with and easier for the IRS to administer.” And that is exactly what the GOP reform package does. According to Treasury Secretary Steven Mnuchin, “Not only will this tax plan pay for itself, but it will pay down debt.” The Democrats will say they support these things and the compliant, gullible media will demand a bipartisan approach. But on almost every issue, bipartisanship is dead in Washington. Democrats will never do anything to help Trump rev the economy or cut taxes.
Reasonable people can differ over how much growth and revenue tax cuts are likely to generate, but I don’t consider liberal activists, most elected Democrats or their allies in the media to be reasonable people when it comes to economic growth and taxes. After all, the Obama years showed us that the Democratic Party’s idea for economic growth is all about higher taxes, more borrowing and increased spending with tons of regulation thrown on top.
Under President Barack Obama, the national debt grew from $10.63 trillion to $19.95 trillion in just eight years. And according to a June 2016 report from the Congressional Research Service, his policies led to “the slowest recovery seen in the post-WWII period era. Real GDP ha[d] grown at an average pace of 2.0% per year during the [Obama-era] recovery, compared with an average rate of 4.3% during the previous 10 expansions.” Is there any reason to call such policies anything other than a failure?
The Democrats and their allies in the media are quick to go to the old cliche that Republicans are only in favor of tax cuts for the rich. Well, the current tax policy is so warped that in America, so few taxpayers pay such a large share of our taxes that it is impossible to have meaningful, stimulative tax reform that does not cut taxes for the people that actually pay them.
The Democrats have lost track of the idea that our tax code is not supposed to be punitive. It is designed — or rather should be designed — to allow the government to fund itself without being so oppressive that the economy stalls. And while we are at it, liberals know that when things cost more, less will be made available. They are supply-siders when it comes to things like environmental regulation and behavior they don’t like. Hence their firm commitment to raising the cost of fossil fuels, sugary drinks, etc. (Disclosure: My firm represents oil and gas companies.) Yet they don’t see how the same principle of supply and demand applies to their plans for increased taxes, a higher minimum wage and more burdensome regulation that increases the cost of business.
Remember, liberals’ support for debt increases under Obama was steadfast. They pushed year after year for a failed economic vision that resulted only in slow growth and hundreds of billions of dollars of missing economic activity that has left a generation of Americans discouraged and poorer than they should be. So, any criticism Democrats may have of the GOP plan should be accompanied by a laugh track.
The significance of this conversation cannot be overstated. It’s time to try the opposite of what we endured under Obama. The consequences of perpetuating the status quo are much bigger than just the inside-the-swamp political dynamics of a tax bill’s passage or defeat. If we don’t quickly restore robust economic growth, the divisions that produced Trump will only get worse. We will move even further into unstable territory. Who knows what might come next?