Who knew Marco Rubio and Tom Price were joining #TheResistance?
Okay, that’s an exaggeration. But in the past week, both the Republican senator from Florida and the ousted health and human services secretary unexpectedly criticized Republicans’ signature legislative achievements.
In Rubio’s case, he acknowledged — at least initially — that GOP tax cuts have flopped.
“There is still a lot of thinking on the right that if big corporations are happy, they’re going to take the money they’re saving and reinvest it in American workers,” Rubio told the Economist. “In fact, they bought back shares, a few gave out bonuses; there’s no evidence whatsoever that the money’s been massively poured back into the American worker.”
That’s all true, of course.
Apple, for instance, bought back $22.8 billion of its stock in the first quarter, a record for any U.S. company. For context, it’s bigger than the entire market capitalizations of 275 different companies in Standard & Poor’s 500-stock index.
In total, companies are projected to repurchase about $800 billion of their own stock this year, according to JPMorgan Chase analysts, a greater than 50 percent increase from last year. Dividend payouts are likewise expected to rise 10 percent.
This, by the way, was all wholly predictable when Rubio himself voted for the bill.
Companies including Apple were already sitting on mountains of cash. Interest rates were (and are) low. Long-term price-to-earnings ratios are near their highest level since the dot-com bubble, meaning equity financing has been quite cheap. If firms wanted to expand, hire or raise wages, they easily could have done so. If their investment behavior disappointed, it’s not because they needed more cash but because they didn’t see lucrative investment opportunities.
So of course when given a tax windfall, companies determined the best use of the money would be distributing it to shareholders.
If a tiny portion also went to raises or bonuses, that was a PR stunt, puffing up pay hikes that likely would have occurred anyway. Even the economists who believe the supply-side story — that corporate tax cuts will ultimately result in large wage increases — cited a mechanism that takes years if not decades to materialize. It was a mistake for Republicans to promise voters immediate wage bumps that their own economic advisers knew wouldn’t come.
So why has Rubio suddenly becoming a truth-teller on this large-scale “tax scam,” as Democrats have taken to calling the GOP tax overhaul?
Presumably because he’s realizing that the tax cuts were an unfortunate twofer: bad policy and bad politics.
For tax cuts to have been a winning midterm issue for Republicans, the answers to three questions would have to be yes:
1. Are people noticing they got a tax cut?
2. Do Americans care more about their own tax liabilities than they do about the overall fairness of the tax system?
3. Is tax policy the biggest (or even a major) driver for how people cast their votes?
But right now, the answer to all three questions is no, based on multiple polls. In fact, Republican hyping of raises and bonuses that didn’t materialize, or at least vastly outstripped most people’s realities, could actually be antagonizing voters — who might understandably wonder why everyone else seems to be “winning” from the tax cut but them.
Also experiencing buyer’s remorse this week was Price.
At the World Health Care Conference on Tuesday, he committed a Kinsley gaffe (i.e., accidentally telling an inconvenient truth) by acknowledging that killing the individual mandate is likely to raise insurance premiums. That’s because, in Price’s words, “you’ll likely have individuals who are younger and healthier not participating in that market, and consequently that drives up the cost for other folks within that market.”
And, once again, wholly predictable. Any health economist, insurer, actuary or health-care provider could have warned Price last year that eliminating the mandate would raise premiums — and oodles of these people did. Nonetheless, Price insisted the opposite was true back when he was in the Cabinet and had some influence over party policy. Of course, the mandate was unpopular, and instead of trying to convince voters why it ought to be preserved, he chose to exploit public confusion for political gain.
Facing an onslaught of Democratic triumphalism, both Rubio and Price walked back their comments Wednesday. Price said his words had been taken out of context and that, if anything, he believes the GOP hasn’t gone far enough in destroying Obamacare. Rubio said the tax law wasn’t terrible; it just could have been better.
It’s a pity. They came so close to advocating good policy, regardless of the personal political fallout. Instead, they gave in to buyer’s-remorse remorse.