The Deep Dark Republican Hole

Gary Cohn (left) is the poster boy for an out-of-touch advocate for America’s elite. Donald Trump appointed former Goldman Sachs Group Inc. President and Chief Operating Officer Cohn as director of the National Economic Council and charged him – with Treasury Secretary Steve Mnuchin (right with his “born to shop” wife) – with writing the “tax reform act” that is awkwardly pushing its way through Congress. Approved by the House, the bill sits in the US Senate under a rule that allows a simple majority of Senators to pass the bill. The headline is that the bill would permanently reduce the federal corporate tax rate from 35% to 20% and generate a massive $1.5 trillion deficit (more if you take the equation out more than ten years). And watch those health insurance premiums skyrocket even more if eliminating that healthcare mandate gets repealed under this “soak the poor and the middle class” tax package gets passed.

As I have blogged so many times before (most recently, It’s Just Getting So Much Worse, from November 16^th and Understanding Automation, from November 10^th), massive new corporate cash from tax cuts, as evidenced on numerous occasions (e.g., the Reagan era tax cut allowing companies to repatriate foreign earnings or the Kansas dramatic reduction in corporate taxes), will not create new or better-paying jobs. It may foment stock buybacks or mergers/acquisitions, which in turn require new efficiencies (read: massive layoffs) to justify the financial cost. The minimal capital investment – and it is minimal – tends to go into automated equipment that replaces human workers. The rest? Dividends to shareholders.

Doubt me? Let’s ask America’s top corporate CEOs what they intend to do with this windfall for the rich. “Gary Cohn, the top White House economic advisor, was onstage making the Trump administration’s case that a huge cut in corporate taxes would trigger a surge of business investments.

“Then came an off-the-cuff question to business leaders listening to Cohn at the Wall Street Journal CEO Council meeting [in mid-November]: How many will increase investments if the Republican tax plan is enacted?

“TV coverage showed about three dozen executives sitting near the stage. Only three of them appeared to raise their hands. An incredulous Cohn responded: ‘Why aren’t the other hands up?’

“A video clip of that moment, which has become popular viewing in Washington, illustrates what many economists regard as a flaw in the administration’s main selling point for the Republican tax proposal: the argument that a dramatic cut in the U.S. corporate tax rate will be a boon to America’s middle class.

“The White House Council of Economic Advisers promises that the corporate tax cut, to 20% from 35%, would lead to an increase of at least $4,000 a year in average household income… But that calculation depends on an assumption that workers would get a much bigger cut of the corporate tax savings than most economic studies — including those by the Treasury Department and Congressional Budget Office — have shown.” Los Angeles Times, November 25^th.

Here’s the rub. If this corporate boondoggle does pass and get signed into law, the corporate tax breaks are permanent but the questionable “tax breaks” for the middle class have an automatic expiration date. And those middle class breaks slam those living in high income tax states or those who live where real estate values are far above the national average. While corporations could still deduct those local taxes, human beings and small businesses could not.

Further, those who rely on social benefits – like the elderly who are on Medicare or Social Security or those receiving healthcare with federal subsidies – will face benefit reductions to pay for the tax cuts accorded to the richest in the land. Just watch those health insurance premiums skyrocket even more if eliminating that healthcare mandate gets bundled under this “soak the poor and the middle class” tax package gets passed. Oh, and if you are making $30K or less, you can certainly expect a tax increase according to the non-partisan Congressional Budget Office.

To make the situation that much worse, the loophole that allows the Senate to pass this abomination masquerading as “tax reform” by a simple majority – circumventing the cloture rule requiring a 60 vote majority to bring a bill to a vote – will not apply to any attempt to undo this legislation later. It will thus take this 60 vote majority for any future amendment, and unless the Democrats (now a minority in the Senate) have those 60 votes – unlikely in the near-term expected political environment – that tax bill is unamendable any time soon (they would also have to have a majority in the House and the presidency). The GOP – fearing a future in which their vision becomes obviously unsustainable – wants to insure that there is little the Democrats can do to change their legacy.

For the skeptics, even those in the GOP who doubt this tax reform bill can actually pass – and sticking the GOP by itself with any and all consequences – there is this little note from the November 28^th New York Times: “Passage of the tax overhaul, which seemed uncertain on Monday [11/27], strengthened considerably on Tuesday [11/28] after the Senate Budget Committee voted along party lines to advance the plan [towards a full Senate floor vote]. A flurry of last-minute deal making helped garner the support of a few Republican lawmakers who had expressed concerns about the $1.5 trillion package, including its treatment of small businesses and its effect on the deficit.” The last major tax reform bill to pass was bipartisan. This bill will not carry a single Democratic vote. Rush. Rush. Rush. Pass something and make it virtually impossible to reverse.

Between layering in conservative judges to the federal bench and passing this horrific “tax reform” package, the GOP is simply digging the entire United States into a deep dark hole. As the rest of the world adjusts (read: developing a work-around) to the Trump administration’s withdrawal from international treaties, trade as well as environmental, we can expect an “I told you so” response from nations everywhere… as they watch us struggle with decisions based on mythology, opinion, and alternative facts… and as the unforgiving real world goes in an entirely different direction, leaving us in our own dust.

I’m Peter Dekom, and as much damage as we are doing to ourselves now, it pales in comparison with the legacy we are leaving future generations of Americans… as long as there is an America.