Domestic Priorities… and Realities

One of my first post-Biden-victory-announcement blogs, And So It Begins – First Huge Challenge, addressed our obvious and most necessary priority: contain COVID-19 despite strong resistance to the measures necessary to achieve that goal. Add gridlock to that mandate, a reluctance to spend money or increase taxes for the wealthy, and you just might see Joe Biden writhing in frustration. Assuming the Senate does not magically move from red-majority to blue, not spending money for much of anything but military allocations will probably trump any social legislation or massive and direct federal investment in job creation.

Even among those Republicans who are merely fiscal conservatives, repelled generally by ranting populism, the Party is hopelessly committed to an economic theory that has failed every time it has been applied. It’s called “supply-side” economics (or “trickle down economics” to the “job creators” – i.e., rich folks), and it holds that if you cut taxes for the rich, they will immediately spend that windfall to create massive numbers of new jobs. Forget that rich folks didn’t get that way by hiring people without a strong business purpose, since a business without customers and an attractive service or product cannot succeed. Rich folks actually know that.

And as we have seen in these pandemic times, there is a bifurcation between a rising stock market and the economic well-being of average Americans. The beauty of the supply-side theory is that it seems to be the only way to convince a majority of taxpayers to vote for a tax cut for rich people with little more than a tiny token cut (if any) for average Americans, because it promises a benefit – more jobs and thus a more robust economy (“a rising tide floats all boats”) – that will never actually happen. Since Republicans have never figured out any other argument to convince middle- and lower-income taxpayers to vote against their own self-interest to give rich folks a tax break they do not need, that inane theory lingers.

Supply-side economics has been failing since it was prioritized in the Reagan era. The Trump 2017 corporate tax cut, a clearly announced supply-side strategy to create high-paying jobs, created massive, trillion-dollar deficits, significant shareholder dividends and tons of corporations using that windfall to buy their own shares. Stock prices soared based on all that buying activity; the creation of new high-paying jobs never materialized. That’s what happens on a federal level. Red states that applied that failed theory have had similar results. Like Kansas:

“The Kansas experiment refers to Kansas Senate Bill Substitute HB 2117, a bill signed into law in May 2012 by Sam Brownback, Governor of the state of Kansas. It was one of the largest income tax cuts in the state's history, which Brownback believed would be a ‘shot of adrenaline into the heart of the Kansas economy.’

The cuts were based on model legislation published by the conservative American Legislative Exchange Council (ALEC), supported by supply-side economist Arthur Laffer, and anti-tax leader Grover Norquist. The law cut taxes by US$231 million in its first year, and cuts were projected to total US$934 million after six years, by eliminating taxes on business income for the owners of almost 200,000 businesses and cutting individual income tax rates. Brownback compared his tax policies with those of Ronald Reagan, but also described them as ‘a real live experiment’, and had predicted that by 2020 they would have created an additional 23,000 jobs. 

“However, by 2017 state revenues had fallen by hundreds of millions of dollars, causing spending on roads, bridges, and education to be slashed. With economic growth remaining consistently below average, the Republican Legislature of Kansas voted to roll back the cuts; although Brownback vetoed the repeal, the legislature succeeded in overriding his veto.” Wikipedia. In the above visual from 2012, then Senate Minority Leader Mitch McConnell (R-KY) speaking for the entire Republican Party (“we”), supported the perpetually failing supply-side theory tax cut, passed in Kansas, as immutable GOP doctrine.

But just about every major policy fostered by Joe Biden during his campaign, including massive and immediate financial aid to average Americans suffering severe economic harm from pandemic-driven losses, involves more spending than probable-continuing-Senate Majority Leader Mitchell McConnell and his GOP-majority Senate would ever approve. Unless the Democrats succeed in the Senate run-off elections in Georgia, unlikely, Joe Biden will face a GOP-Senate with far fewer moderate Republicans than when he last served in the Senate.

The GOP plan to reignite the economy is simple: if you open everything immediately, let people make their own personal decisions about COVID prevention, the economy will rise sharply and quickly (a V-shaped recovery), easily restoring our pre-pandemic levels. The Democratic effort, based on a strategy of direct federal investment in infrastructure, education, healthcare and research – all absolutely job-creators – will die in some Congressional filing cabinet. The numbers scream a very different result from GOP pledges and assumptions.

As my above-noted blog explains, the recent explosion of COVID cases, the saturation past the breaking point for many hospitals, have disproportionately occurred in red states where COVID precautions have been voluntary and minimal. Texas is now the state with the greatest number of total COVID infections since the pandemic began! The plains states are equally exploding with infections. So instead of fixing the economy, these GOP “open wide” assumptions when applied simply make everything else worse. What do you think happens to consumer confidence, earning ability and spending habits if COVID infection rates are not brought under control?

However, with COVID-fatigue and a general American aversion against lockdowns, combined with denial and unjustified medical optimism – especially the over-optimistic belief that an effective vaccine will fix it all in January or February (not possible!) – Republican Senators, state legislatures and governors will never require the same and effective solutions used in other countries and states. The virus says, “thank you.”

Assuming the Supreme Court does not strike down the Affordable Care Act, which will produce a panicked response to “pass something” to prevent millions of Americans who will lose their healthcare from an inability to access required medical treatments, anything that Joe Biden could possibly recommend to support and subsidize healthcare that can be accessed by any American will die in the Senate. These realities do not even address the schism within the Democratic Party itself: progressives who want big changes and moderates willing to wait and make some changes now that are focused on uniting somewhere in the middle. Biden can have significant impact on some policies, in areas like immigration, climate change, the power of federal regulatory agencies, and consumer and environmental protection,  but when it comes to funding, the big wall is not the one that will no longer be built between the US and Mexico.

As Los Angeles Times Columnist, Doyle McManus points out (November 8th): “Before election day turned into election week, Democrats hoped for a landslide — a blue wave that would not only make Joe Biden president but would wrest control of the Senate from Republicans… With majorities in both the Senate and House, their pipe dream went, President Biden could enact an ambitious agenda: $4 trillion in new spending on health insurance, climate change and other domestic priorities, paid for by big tax hikes on the wealthy.

“A Democratic nominee once dismissed as a bland moderate might even become a transformational president in the mold of Franklin D. Roosevelt… But the blue wave didn’t arrive. Biden appears to have won the White House by a healthy margin, but Democrats gained only one seat in the Senate, two less than they needed to take control. They have another chance in Georgia’s runoff elections in January, but the odds don’t look good.

“That’s why some Democrats have been so disconsolate despite their presidential victory. With the implacable Sen. Mitch McConnell (R-Ky.) running the Senate, they see no prospect of passing the major legislation Biden promised… That means the Biden era is unlikely to be transformational after all. At best, it could be a transactional presidency marked by modest hard-won gains but no home runs. At worst, as one Republican strategist put it, it could be remembered merely as ‘a caretaker presidency’ — an interregnum until the next election.

“Republicans have few incentives to compromise with the former vice president. McConnell made his reputation — and won his Senate majority in 2014 — by obstructing the legislative agenda of President Obama.” Even the 2022 mid-terms are unlikely to reverse this impasse. We will only become more polarized, more blaming will define American politics, and our problems will simply persist. Until Americans begin accepting facts, true cause and effect, that which is bad will just amplify as we fail to address even short-term solutions. If we survive, stand back and stand by for a very, very, slow and painful staggering recovery.

I’m Peter Dekom, and I wonder why we insanely continue to repeat the same behavior over and over again… and always expect a different result.