We’ve Heard This Song And Dance Before…

Treasury Secretary Steven Mnuchin said economic growth resulting from the proposed tax cuts would be so extreme that it would come close to recouping all of the lost revenue from the dramatic rate reductions.

Here they go again. Remember the Reagan era when a rising tide lifts all boats was the sell and trickle down economics,  aka Reaganomics was the official economic policy of the government? Well, we all know today just who really benefitted and how it really worked out for the middle class don’t we? Economic stagnation for most of us with wealth flowing to the very top.

Excerpt from The Washington Post:

The Trump administration plans to rely on controversial assumptions about economic growth to offset steep cuts to business and individual tax rates, a chief architect of the plan said Thursday.

Treasury Secretary Steven Mnuchin said the economic growth that would result from the proposed tax cuts would be so extreme – close to $2 trillion over 10 years – that it would come close to recouping all of the lost revenue from the dramatic rate reductions. Some other new revenue would come from eliminating certain tax breaks, although he would not specify which ones.

“The plan will pay for itself with growth,” Mnuchin said at an event hosted by the Institute of International Finance.

Assuming economic growth based on changes to the tax code is known as “dynamic scoring,” and many conservatives embrace its use when arguing for lower rates. But estimating the future economic impact of tax cuts is very difficult to do, as it requires policy makers to rely on economic forecasts that are often imprecise.

And even if the White House has rosy estimates about the economic impact of the tax cuts, the administration could run into trouble as any plan moves through Congress. That’s because Congress relies on tax analyses performed by the Congressional Budget Office and the Joint Committee on Taxation, which tend to have a more restrained view on the macroeconomic effect of tax cuts.

“We have some evidence about how big these effects can be,” said Donald Marron, a former CBO official who is director of economic policy initiatives at the Urban Institute. “They are not zero, but they are modest.”

President Trump believes the tax code is too complicated and tax rates are too high, and he has made overhauling the tax code one of his top priorities. But simply cutting taxes — lowering the rates that businesses pay and that individuals pay — is difficult for lawmakers because of congressional budget rules. Most Democrats will not support a tax plan that simply cuts tax rates, and Republicans have a narrow 52-to- 48 advantage in the Senate. (continue reading)

While the tax code is arguably too complicated, it is, cutting taxes by lowering rates on business and individuals is simply not going to achieve the long-term results Trump believes it will. Rather history has shown it will result in greater wealth concentration at the pinnacle of the economic pyramid and eventual stagnation for the middle class.

 

Published by

Les Carpenter

Certified Personal Trainer (CPT) and Corrective Exercise Specialist working with those over 50 years of age. Currently work at Prime Fitness located in The Enfield Senior Center, Enfield CT. Semi retired and enjoying life in the semi fast lane with my lovely bride and super grandchildren!

14 thoughts on “We’ve Heard This Song And Dance Before…”

  1. Let us not forget that just as it has in the past, our deficit will in fact grow. And that is the problem every member of the GOP claims they want to resolve.

    The reality is they want to starve the federal government of any revenue to deal with anything other than defense and their salaries.

    You’re right Les… we saw this during the Reagan Admin which was the real spark to the deficit wars in our country. I often wonder why we can’t cut the IKE upper tax rates in half and call it all good.

    Then we could retire the deficit, fix our roads and invest once again in America.

    That would truly make America great again!

    Like

    1. You are right Dave. Budget deficits will continue. And the national debt will balloon more setting new record levels.

      Republicans are not fiscally conservative, they have proven that over the past 35 years. They are real spendthrifts when it comes to their pet issues such as the military. They are willing to spend like drunken sailors while attempting to gut domestic social programs. Their priorities are really screwed up.

      Ike era upper tax rates cut in half makes sense. But republicans would squeal like stuck pigs over an increase in taxes of that magnitude on the wealthiest among us. Help, they want to cut top individual rates and corporate rates.

      Like

  2. Cutting the tax rate, or even raising it, does nothing, absolutely nothing, about the complexities of our existing tax code.

    The fact is that According to the most recent IRS data, for the 2013 tax year, 30.1 percent of households chose to itemize their deductions (44 million returns). 68.5 percent of households chose to take the standard deduction (101 million returns). Perhaps the tax code is not so complex for the vast majority of taxpayers.

    Like

    1. Perhaps Jerry. Certainly a great number pay tax acounats, H&R Block, and use TurboTax to complete returns.

      My view is tax filing could and should be made simpler. Me, I used to do my own. Been having them done the past 20 years. Personally I like the past card Idea. ☺

      Like

  3. The fiscal cons worship the Laffer Curve. That attractive graph has made
    rich people much richer and decimated the middle working class. So while the former continue to believe it’s efficacy, most consider it a Laugher
    Curve, an inversion of the original. The introduction of TrickleDown
    (smoke & mirrors/voodoo economics/reverse Robin Hood) saw the Reagan Administration take the debt from $900 billion all the way up to $ 2.7 trillion.
    Sadly, the legacy of the Teflon President has been the generations of politicians elected soley because “I’ll lower taxes” sounds better than
    “I will represent the voter, rather than Big Business/Banking”. Today,
    our white house is flooded with Big Biz/BigBank types, advising a president not known for thoughtful intellect. We suspect Reaganomics in spades and a doleful ‘It is all Obama’s fault’.

    Like

  4. I know of no real-world case where just cutting taxes has caused a dramatic increase in economic growth. The recent example of Kansas suggests the opposite. Tax cuts have not produced growth, much less “extreme” growth capable of replacing the missing revenue, and the state government is in serious trouble due to collapsing revenues.

    The US had its highest level of economic growth in the fifties and sixties, when tax rates on the wealthy were the highest. As those rates have gradually come down since then, growth has slowed. Obviously many factors influence economic growth, but there’s no evidence that tax cuts (especially on the rich) have any huge stimulative effect.

    No matter how elegant and logical a model or hypothesis may appear to be, the only real test of its validity is the test against actual evidence from the real world. That’s the scientific approach. In economics, the modern right wing is rejecting the scientific approach for what amounts to faith and wishful thinking — as they do in other areas.

    Like

    1. Admittedly it has taken me awhile to sort through all of the opposing data and overblown rhetoric, but, the results of having done so is what is important.

      You are correct Infidel. The real world evidence supports a return to tax policies of the 50’s and 60’s. Or something close. America must support and rebuild a 21st century middle class.

      Thanks for posting.

      Like

      1. Obviously taxes are not the only difference, BUT look at the difference in economic growth between California (raised taxes) and Kansas (lowered taxes).

        Like

  5. Louisiana is another example of how tax cuts do more harm than good.

    When Bobby Jindal became Louisiana’s governor in 2008, his state has a surplus of approx. $1 billion. By the time he left and after cutting taxes (there were other factors — the downturn in oil prices and the drying up of federal relief money) the state budget was $1.6 billion in deficit. He would NOT raise taxes, but instead made deep cuts to education, health care, and other vital areas.

    Here’s a report from The American Conservative 2015:

    “Since I’ve been in Louisiana I’ve never seen a budget cycle as desperate as this one,” said Robert Travis Scott, the president of the Public Affairs Research Council, a nonpartisan group based in Baton Rouge.

    Louisiana’s budget shortfall is projected to reach $1.6 billion next year and to remain in that ballpark for a while.”

    [skip]

    “Republicans say…that Jindal is sacking his own state to preserve his viability as a Republican presidential candidate — specifically, so he can say that he never raised taxes, but rather cut them. Even Quin Hillyer, the conservative columnist for the Advocate, thinks the state’s tax policy, under which the poor pay a greater percentage of their income in taxes than the rich, is a “moral abomination.”

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s