The Tax Reduction Bill

By now you know that Congress passed The Tax Reform and Jobs Act reducing taxes on most Americans and corporations. The bill’s passage led to mass hysteria on both sides of the political aisle with the conservative Wall Street Journal  questioning the bill’s focus on tax breaks for the wealthy and The Federalist, an even more conservative publication, defending it. Forbes, another conservative publication, gave its 2017 “Lump of Coal Award” to the bill! And if conservatives are this conflicted about the law you can imagine the melodramatic Democratic response!

The truth is that  nobody can forecast the law’s ultimate outcome. I highly doubt it will be as great as the Republicans claim or as bad as the Democrats predict.  I obviously hope the new tax law is successful and that all Americans will benefit, but I’m not optimistic.

You probably know that the bill may add at least $1 trillion, possibly $1.5 trillion, to the national debt.  This from conservatives who are, at least in theory, against adding to the debt by running deficits. The reason they voted against their consciences is actually pretty simple; their donors threatened to stop future contributions if Congress didn’t reduce their taxes. At least that is the standard pattern in DC these days.

Since I cannot predict how this law will affect the economy over time I want to instead focus on “trickle down” or “supply side” economics, the theory used by Republicans to defend the law.

I have to admit that the two economics classes I took in college were the absolute worst and I learned less from them than from any other classes. However, grand economic theories such as the ones being used to support the tax bill don’t really require much academic understanding (although understanding the details certainly would). I’ll make this brief because I can already imagine your eyes glazing over and your mind wandering (much as mine did in two semesters of ECON classes).

As I said, the Republican tax reform is based on an economic theory referred to as “supply-side” economics which is closely related to “trickle down” economics (although there are subtle differences I’ll refer to them synonymously).

The argument is very simple; cut taxes on those earning the most (including corporations) and the tax savings will trickle down to those in the middle and lower classes. The wealthy will invest their tax savings in such a way that new products will be developed,  jobs for lower and middle classes will be created, and the economy will prosper, again leading to new jobs, higher wages, and better benefits for workers. So under this notion corporate taxes and capital gains taxes, those most often enjoyed by the wealthy, are reduced and tax credits are increased for investment. Importantly, this theory expects government to reduce regulations on business (this is either good or bad depending on one’s political leanings).

OK. Sorry. That was boring but I hope you will bear with me. I’ll try to get to the good part shortly. You can read much more about supply-side theories here.

By the way, the opposite of supply side economics is “demand side” or Keynesian economics and is based on the idea that the workers should have more money in their pockets to spur economic growth. Under this theory corporations and the wealthy are taxed at higher rates and those tax benefits are redistributed to those at lower economic levels.

I’ll only focus on trickle down theories since that is what we are currently facing. When liberals/Democrats eventually regain control I’ll probably wind up criticizing demand-side economics as well (assuming I live that long).

How does trickle-down economics work in the real world? As my friend and colleague the Economics Professor says, “it doesn’t”.

Those defending trickle-down theories often point to “Reaganomics”, President Reagan’s massive tax cuts and the coincidental economic turnaround. What they ignore, however, is the fact that President Reagan also increased government spending significantly (about 2.5% per year) which is actually a Keynesian or “demand side” policy, tripling the federal debt by increasing government spending. So we cannot really use Reaganomics as an indicator of success. And remember that George Bush called Reaganomics “voodoo” economics and said it was nonsense.

Example #2:

President George W. Bush reduced income taxes early in his presidency and the recession came to an end, but unemployment spiked as well. So the recession ended but more people became dependent on government programs. Research following these tax cuts found that only 17 cents of every dollar in income tax reduction and 50 cents of every corporate tax dollar reduced actually find their way back in to the economy. In other words very little of the amount individuals and corporations save via tax reduction actually does what supply siders say it will.

Another example?

In 2012 the State of Kansas drastically reduced taxes in an attempt to promote economic growth. This attempt at stimulating the economy via supply-side policies didn’t work. The State’s economy lagged behind the economies of other states, growth didn’t occur, and tax revenues dropped to the point that the Republican legislature actually reversed the policy and raised taxes.


There are few foreign examples of what my have been successful trickle-down policies, but those almost always occurred in countries with dismal economic conditions unlike anything comparable to the US. And those policies were much different than those passed by Congress.

Numerous academic studies  also conclude that trickle down policies rarely work. They conclude that those who benefit most from the policies (the wealthy) shelter the saved money in tax havens, the tax breaks are almost never offset by improved economies, and corporate tax cuts favor shareholders and CEOs rather than workers. The U.S. Treasury Department does conclude that a tax reduction almost always provides a temporary boost to the economy IF the economy is weak (and ours isn’t) but long term boosts are rare.

Finally,  trickle down policies lead to increased  income inequality, and increased inequality has a number of consequences other than, you know, inequality! Most important is the fact that if wealth becomes increasingly concentrated in the hands of a few (the 1%) the economy will stagnate because those of us in the working and middle classes have less to spend on stuff we need and want, and spending is what stimulates the economy.

OK. That’s enough. I’ve gone WAY above the level of my college ECON courses.

The bottom line is that the economic theory used to justify the tax reduction law is flawed. In all likelihood the economy will get a short term boost that will not be sustained, over the next ten years the rich will become richer, and the gap between America’s rich and poor will grow. None of these outcomes are good for America.

Again, I obviously hope I’m wrong. To hope otherwise would be unpatriotic.




I’m Perpetually Confused


Here is a partial list of things that I’ll never understand:

  • How any human being can consciously drive into a crowd of other human beings, set a bomb, or fire a weapon with the intent to kill or maim innocent people. I’ll never understand how anyone can celebrate another person’s violent death.
  • Why discussing political issues with civility and respect is so difficult. A good many people find it impossible. Just read comments on news websites.
  • Why people think they are getting accurate information from sources such as Al Sharpton, Rush Limbaugh, George Soros, and the Koch brothers. These people have an agenda. More reliable conservative and liberal political commentators are available.
  • Physics (and most hard sciences).
  • How Kim Jung Un, who was educated in Switzerland, can be such a megalomaniac.
  • How anyone can continue supporting or defending President Trump but cannot offer reasons for doing so.
  • Why a college football coach is the highest paid state employee in most states. Their salaries are as high an $9 million per year. I love sports but this is absurd. I’d prefer making police officers, social workers, and teachers the highest paid state employees.
  • Why there are people who remain unconcerned about climate change although scientists overwhelmingly agree that it is real and that human behavior is largely responsible.
  • Why we think it is OK for Americans to pay more for medications than Canadians and people living in other countries.
  • How Congress can have an approval rating as low as 12% but continue passing unpopular legislation and refusing to find ways to overcome partisan squabbling.

Here are confusing things that take more space:

  • How politics can endanger programs such as the Children Health Insurance Program (CHIP). Because of partisan politics federal funding for CHIP ran out back in September and states are beginning to run out of money to support the program. EVEN THOUGH DEMOCRATS AND REPUBLICANS HISTORICALLY SUPPORT THE PROGRAM! In 2016 CHIP provided medical care to 8.9 million children whose parents could not afford health insurance. Yes, it is highly likely that children will go without healthcare unnecessarily because of Congressional partisan politics. The issue? Members of both parties want to extend CHIP funding until 2022 but can’t agree on how to pay for it. Just fund it!!
  • How conservative Christians can blame liberals for society’s decline when  80% of evangelicals supported a presidential candidate who was on his third wife, had bragged about cheating on the first two, bragged about molesting women, and more? I know he ran against Hillary Clinton, a flawed Democratic candidate, in the final election, but most evangelicals also supported him during the primaries against legitimate conservative candidates (one of whom I supported). How can they explain the fact that Alabama evangelicals  still supported Roy Moore for the vacant U.S. Senate position when evidence overwhelmingly indicates he molested or tried to molest young women when he was in his 30s and a county prosecutor? Exit polling indicated that 80% of white voters identifying themselves as “born again” or “evangelical” voted for Moore. I’m pretty certain their reaction would have been different if Roy Moore and Donald Trump had been Democrats. 

This is a short list but I need to go make a living. Feel free to use the “comment” section to add to the list.

An Unstable Leader

I’ve made my views regarding our current president abundantly clear in two previous  posts.  I asked readers to defend President Trump but nobody was willing to do so although some said they supported him. My previous posts expressed concern over his hypocrisy, flip-flopping on policies, boorish/sexist/racist behavior, possibly unethical and illegal behavior, racism, and essential disdain for American citizens. Now I’m concerned that he is a real danger to our country and to the world.

And I’m not alone. The top editorial in Thursday morning’s New York Daily News was entitled “Donald Trump is a Madman: The President’s Wednesday Twitter spasms confirm what many Americans have long suspected“. The editorial continued: “After his latest spasm of deranged tweets, only those completely under his spell can deny what growing numbers of Americans have long suspected: The President of the United States is profoundly unstable. He is mad. He is, by any honest layman’s definition, mentally unwell and viciously lashing out”.

FYI: The New York Daily news endorsed Mitt Romney (Republican) over Barack Obama (Democrat) in 2008.

Unless you were tuned out on Wednesday you know that President Trump retweeted three anti-Muslim videos (at least one of which has already been debunked) that had been produced by a British alt-right group. It would be similar to a leader of another country re-tweeting videos produced by America’s KKK. Trump’s tweet was racist and was praised by white supremacist David Duke.

When his press secretary was asked about the tweets she said it didn’t matter whether the videos were genuine. And when the leader of our staunchest ally, British Prime Minister Teresa May, rebuked President Trump for the tweets he essentially told her to mind her own business.

Thankfully he stopped there. Right?

When challenged over the videos President Trump resorted to his usual tactic: deflection. He tried to change the focus to someone else by tweeting “And will they terminate low ratings Joe Scarborough based on the ‘unsolved mystery’ that took place in Florida years ago? Investigate!”. This tweet refers to the death of an intern in Scarborough’s Florida office when he was a member of Congress. Yes, ladies and gentlemen, Trump was accusing Scarborough of murder. The death was thoroughly investigated and the coroner determined the intern had been physically ill and fell, hitting her head and ultimately dying. But again, facts don’t matter to our post-truth president.

And, by the way, ratings for Scarborough’s show, “The Morning Joe”, spiked a few months ago when Trump started a Twitter storm about the show because it criticizes him daily. I’m sure Scarborough appreciates the President’s attention. And, by the way, the Morning Joe’s ratings actually reached an all-time high last month. Facts are so bothersome.

More evidence of our President’s instability?

  • At an event honoring the W W II Navajo code talkers earlier this week President Trump referred to Elizabeth Warren as Pocahontas. Yes. This is also a racist remark that insulted Native Americans.
  • Trump ridiculed Senator Al Franken and Matt Lauer for their inappropriate sexual behavior while excusing Alabama Senatorial candidate Roy Moore. This from a man who admitted being unfaithful to his wives. And this from a man who was recorded bragging about grabbing women’s private parts and forcefully kissing them. And this from a man accused of groping, assaulting, sexually harassing, or otherwise mistreating a rather long list of women. Many of these incidents were corroborated by witnesses. His first wife was one accuser. Another accused him of raping her when she was thirteen years old. But he feels comfortable commenting on the inappropriate behavior of others?
  • Our government will shut down next Friday, December 8 unless Congress can pass an appropriations bill that the President can sign. The smart thing to do is for the President to meet with Congressional leaders to plan a course of action, and that is precisely what was scheduled on November 28. However, earlier that morning the President tweeted a deflecting criticism of the Democratic leaders concluding that “I don’t see a deal”. He was sabotaging the discussions before they happened. And when Democratic leaders chose to skip the meeting because of the tweet he pulled a Clint Eastwood moment by leaving their chairs and name cards as props for media opportunities. And then he and Republican leaders said a shutdown will be the fault of Democrats. Nope. The unnecessary tweet and Republicans’ inability to accomplish anything even with control of Congress and the White House will be to blame.
  • Remember President Trump’s terribly inappropriate speech to the Boy Scouts earlier this year in which he bragged about the size of the crowd (they were Boy Scouts there for a jamboree, so a captive audience), called Washington a cesspool, threatened to fire a Cabinet member, and discussed his yacht and real estate dealings? To Boy Scouts?

If you pay attention at all to the news you know I’m just scratching the surface of President Trump’s erratic behavior.

We were warned. In 2016, for example, retired four-star Admiral John B. Nathman said of Trump: “What is required is not just the recognition of Trump’s lack of temperament to serve, but I would add it also takes personal courage to say it out loud.” Nathman continued by stating that “…his unstable temperament and ignorance make it clear he cannot serve as president.”

A recent Fox News poll found that 60% of Americans believe President Trump is unstable. Only 33% (his solid base) disagree. I’m optimistic that at least most Americans can see the obvious problem.

Our President’s stability matters as Congress is unable to pass major legislation, North Korea is becoming a nuclear power, Russia keeps trying to influence American politics, our State Department is constantly undermined and unable to engage in diplomacy, support for Puerto Rico remains woefully inadequate, and countless other world issues go unaddressed.

We need a leader with a real plan rather than one who, in his book The Art of the Deal, said : “Most people are surprised by the way I work. I play it very loose. I try not to schedule too many meetings… I prefer to come to work each day and just see what develops.” He doesn’t believe in planning. That may work when you are building casinos or hotels, but it doesn’t work when running the country.

And he also said “I play to people’s fantasies,” …”people may not always think big themselves, but they can still get very excited by those who do. That’s why a little hyperbole never hurts. People want to believe that something is the biggest and the greatest and the most spectacular.”

We need a president who uses less hyperbole and who resides more in the real world.

I expect to lose readers over this post but my offer to submit opposing views still stands. I will gladly publish any comments based on facts.