This brings us to the impact of the Trump tax cuts. You may recall that the majority of economists across the political spectrum predicted that the tax cuts would not create enough growth to shrink the deficit. The tax cuts would increase the deficit. And just about every economist or political theorist on what's rather broadly defined as the left, argued that that once the increased deficit became obvious Republicans would smartly pivot and without missing a beat argue that programs such as Medicare, Medicaid and Social Security had to be cut in order to bring down the deficit.
Republicans would weep copious crocodile tears as they congratulated themselves on their willingness to cut benefits to people who weren't invited to the tax cut party in the first place. It's classic bait and switch. It's one of the oldest cons in the book. With ever increasing frustration Nobel Prize winning economist Paul Krugman has been warning about the tax-cut/deficit con and predicting the Republican response since before the tax cut became law. This isn't new. It's what Republicans do-or at least what the upper class/business class Republicans do. The middle-class/lower-class Republicans aren't necessarily supporting the party for its dedication to cutting taxes and slashing social programs (at least those used by whites) so much as they are supporting the party for racial and cultural resentments.
Recently Republicans dropped the mask. As more data came out about the drop in revenue and rise in the federal deficit, Republicans did not admit that their latest foray into supply side economics showed that tax cuts did not in fact pay for themselves. No. Their response, as articulated by Senate Majority Leader Mitch McConnell is to (exactly as predicted by Krugman and other honest observers) point to the social safety network to blame for the increased deficit.
Senate Majority Leader Mitch McConnell blamed rising federal deficits and debt on a bipartisan unwillingness to contain spending on Medicare, Medicaid and Social Security, and said he sees little chance of a major deficit reduction deal while Republicans control Congress and the White House.
“It’s disappointing, but it’s not a Republican problem,” McConnell said Tuesday in an interview with Bloomberg News when asked about the rising deficits and debt. “It’s a bipartisan problem: unwillingness to address the real drivers of the debt by doing anything to adjust those programs to the demographics of America in the future.”
McConnell’s remarks came a day after the Treasury Department said the U.S. budget deficit grew to $779 billion in Donald Trump’s first full fiscal year as president, the result of the GOP’s tax cuts, bipartisan spending increases and rising interest payments on the national debt. That’s a 77 percent increase from the $439 billion deficit in fiscal 2015, when McConnell became majority leader.
McConnell said it would be “very difficult to do entitlement reform, and we’re talking about Medicare, Social Security and Medicaid,” with one party in charge of Congress and the White House.“I think it’s pretty safe to say that entitlement changes, which is the real driver of the debt by any objective standard, may well be difficult if not impossible to achieve when you have unified government,” McConnell said.
So just so we're clear McConnell and the Republicans passed a tax cut that was only possible with a Republican majority in the House and Senate. To "fix" this they want to cut Social Security, Medicare and Medicaid, but only if they get Democrats to buy in to their smelly swamp gas. Yeah, that makes sense. If you're extra special stupid.
The Treasury Department released figures on Monday showing the federal budget deficit widened by 17 percent in the 2018 fiscal year, to $779 billion. That’s an unusual jump for a year in which unemployment hit a five-decade low and the economy experienced a significant economic expansion. But the increase demonstrates that the tax cuts President Trump signed into law late last year have reduced federal revenues considerably, even against the backdrop of a booming economy.
Some conservatives don’t see the rising deficit numbers that way. They note that the Treasury reported that federal revenues rose by 0.4 percent from the 2017 fiscal year to the 2018 fiscal year, and view that as a sign that the tax cuts are “paying for themselves,” as Republicans and Mr. Trump promised. That’s not the case.
There are several ways to ask the question, “Are tax cuts paying for themselves?” Based on the data we have right now, they all arrive at the same answer: “No.”
By the Treasury’s numbers, total revenues grew 0.4 percent from the 2017 fiscal year to the 2018 fiscal year. That’s weak, historically speaking, for an economy growing as fast as it is; in the 2015 fiscal year, when growth was comparable to what it is today, revenues grew 7.5 percent from the previous year.
The weak growth brought revenue as a share of gross domestic product down, something that typically happens in — or around — a recession, not deep into a robust expansion that the Fed has described as a “particularly bright” moment. But revenue is definitely growing after the tax cuts, right? Well, no.
From January through September 2017, revenues were $2.57 trillion. For the same period in 2018, they were $2.56 trillion. Which is to say, they’re down by $10 billion, in a direct comparison after the tax cuts started.
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Again, the evidence is in. The Democrats were right. The Republicans were wrong. Tax cuts for the rich, do not, all else equal pay for themselves. Tax cuts do however increase the deficit. Some Republicans are honest about this. They want a much smaller Federal government that doesn't do anything for poor people, for old people, for sick people. Such people arouse not pity but contempt in some Republicans. They don't want to do much to assist them. Much the opposite. These Republicans want to starve the Federal beast of tax dollars. In their view if you don't happen to have at least a few million saved then you can go to hell. After all the world needs ditch diggers too! In a normal political economy this attitude would cause a least a few rational people to reconsider support for the Republican agenda.
But because we are so divided by class and especially race there may be more than a few non-wealthy Republicans who will tolerate cuts to Social Security and Medicare as long as they think THOSE PEOPLE are getting it worse. The recent news that the Trump tax cuts disproportionately help White Americans over everyone else may not be seen as a problem but a benefit. The question for this year's election and the elections in 2020 and beyond is whether enough white voters put their economic class interests over their racial identity resentments. So far Trump has been quite skilled at keeping certain white voters laser focused on THEM.
