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Opinion Republicans’ inflation plan: Tax cuts that’d make Liz Truss blush

House Minority Leader Kevin McCarthy (R-Calif.) speaks at a news conference on July 29. (Andrew Harnik/AP)

Republicans routinely declare that inflation is their “best” issue in the midterms. But there is no reason to think inflation would shrink under a GOP majority in the House or Senate. Indeed, Republicans are projecting they would make inflation worse.

The Post reports, “Republicans plan to push to extend key parts of President Donald Trump’s tax cuts if they take control of Congress in this fall’s elections, aiming to force President Biden to codify trillions of dollars worth of lower taxes touted by his predecessor.”

Wait, what happened to their hand-wringing over inflation? Do they expect voters to believe that tax cuts primarily for the rich wouldn’t be inflationary?

In fact, when the Trump tax cuts were first passed, Republicans insisted they would pay for themselves by boosting economic growth. (That didn’t happen, but it did spur stock buybacks, contrary to Republican claims.) At a moment when Republicans are hollering about fiscal irresponsibility, it is bewildering that they are doubling down on the same tax cuts.

Jim Kessler, head of the moderate Democratic Third Way think tank, tells me, “Tax cuts like that in the U.S. would contradict everything the Fed is doing and put the U.S. economy in an inflation-driven tailspin.”

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Jason Furman, former chairman of the Council of Economic Advisers, compares the Republican proposals to British Prime Minister Liz Truss’s disastrous tax proposal that sank the British pound, and led to Truss’s resignation, arguing, “At worst they could also cause a U.K.-style market meltdown. Either way they are completely at odds with the argument that deficits have fueled inflation.”

This should end any talk that the election is a choice between addressing inflation or protecting democracy. In reality, it’s about whether Republicans will be granted power to make inflation worse and to threaten democracy.

In a larger sense, this is a reminder that Republicans advance policy arguments (i.e., too much fiscal stimulus caused inflation) not because they believe them, but because they will say whatever can help them attain power. Had Biden resisted spending during the pandemic, they would have attacked him for failing to tame inflation and unemployment. As Maya MacGuineas, president of the bipartisan Committee for a Responsible Federal Budget, put it to me: “Increases in the deficit will push inflation up, not down. This will result both from unpaid-for spending and any tax cuts that aren’t matched with spending cuts as well.”

Republicans’ angst about deficits was always phony given their track record when they controlled the White House. As ProPublica reported in January 2021, “The national debt has risen by almost $7.8 trillion during Trump’s time in office.” Moreover, “The growth in the annual deficit under Trump ranks as the third-biggest increase, relative to the size of the economy, of any U.S. presidential administration. … And unlike George W. Bush and Abraham Lincoln, who oversaw the larger relative increases in deficits, Trump did not launch two foreign conflicts or have to pay for a civil war.”

In other words, deficits become a problem only when Democrats are in charge.

It gets worse. William Gale, co-director of the Urban-Brookings Tax Policy Center, explains to me that the Republican push to extend Trump’s tax cuts could be seen as “cynical.” They were in control of Congress and the White House in 2017; they could have made them permanent. But, Gale notes, they “chose to make the individual provisions temporary, to keep the costs down.”

Moreover, he adds, “What is hypocritical is that they now want to repeal some of the revenue raisers they enacted in 2017 that have not taken effect yet,” such as the provision requiring businesses to amortize research and development expenses, rather than deduct them from taxable income. Republicans added the measure because they knew their tax cuts were a budget-buster.

As Austan Goolsbee, former chairman of the Council of Economic Advisers, tells me, it’s as if Republicans are watching the financial chaos in Britain, and “all it did was convince them to find someone to hold their beer.”

You can make the case that the Biden administration spent too much too quickly. You can even make the argument that the administration isn’t doing enough to tighten the purse strings now (though such arguments ignore that this spending alleviated human suffering during the pandemic and funded productivity-enhancing infrastructure). But you cannot denounce measures that help working- and middle-class people (e.g., college debt relief) as inflationary and then turn around to propose another economic stimulus in the form of an enormous tax cut.

Well, you could, but that would make you a hypocrite and unfit for public office. A Republican leader, in other words.

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