December 6, 2017 at 4:11 p.m.
On the brink of a golden era, or another disaster?
On the brink of a golden era, or another disaster?
To say it another way, America is on the verge of being great again.
With just one thing standing in the way, America could see economic growth, job creation, and wage increases unparalleled since the economic boom of the Kennedy years - that one too was fueled by tax cuts - and this boom could even surpass it.
To be sure, there's not much to dislike in the tax bill. It cuts taxes for the middle class by cutting tax rates, doubling the standard deduction, raising the child care tax credit, eliminating the marriage penalty, and killing the alternative minimum tax.
Most important to the middle class, the tax bill will kill the individual mandate that requires Americans to buy health insurance, which has become a steep and unsustainable tax on middle-income earners, not to mention a disincentive to earn income. Critics say Congress did not repeal Obamacare, but, if this Senate provision remains in the final version, as hopefully it will, Congress will have effectively done so.
With Obamacare dead, Barack Obama will have achieved absolutely nothing during his tenure as president, except for an almost-dead economy and increased government dependence. With his actions slashing regulations and reversing Obama-era dictates, such as monumental land grabs and economy-killing climate-change regulations, Trump has in one year effectively zeroed out any Obama legacy, and that's a great achievement in itself.
Without Obamacare, and with Trump's recent health care executive orders kicking in, America is on the threshold of a competitive health care marketplace that will lower costs without taxing the middle class.
But the direct benefits for the middle class don't nearly describe all the good in the tax-reform package. It's great for business, too.
The package will allow temporary expensing of equipment and capital investments, for instance, and U.S.-based multinational corporations would pay only a 12 percent tax on past unrepatriated profits.
Most important, the reform bill would cut the corporate tax rate from 35 percent to 20 percent. That will make American businesses competitive with corporations in other western countries, including Canada and Europe, and it is expected to open a floodgate of investment in manufacturing, a big positive in Wisconsin.
Small business doesn't get left out of the largesse, either, thanks to Wisconsin U.S. Sen. Ron Johnson. Under the Senate version, there's a 23-percent tax deduction for pass-through businesses.
Remember when President Trump said he wanted a trillion-dollar infrastructure investment that would rebuild our crumbling bridges and roads and much of the American inner-city landscape? Well, this bill is exactly what that is, perhaps not worth a trillion dollars, but it's a huge chunk of what is needed to spur significant infrastructure investment.
All in all, this tax bill will pump about $1.4 trillion into the economy that would not have been invested. It will prime the jobs-and-wage pump, boost manufacturing, and increase real economic output by 3 percent or more. It lays the foundation for a golden era.
So, if this is so good, why did every Democrat oppose it in the Senate?
That's a rhetorical question, of course. Democrats oppose the bill precisely because they fear it will actually create jobs and wealth. Jobs and wealth are anathema to Democrats because it removes people from the welfare rolls, where they reliably vote Democratic, to the tax rolls, where they tend to trend Republican.
That said, the bill isn't perfect. The fact is, the tax cuts could have been even higher, and the law could be written in a way to ensure that everybody gets a tax cut, rather than just most people.
In addition, the individual tax cuts are slated to sunset in 2026. That's how Democrats can argue that the bill is a bad deal for the middle class. In the end, the tax cuts won't go away, but why write the sunset into the law in the first place?
Then, too, the tax reductions for pass-through small businesses are not as generous as those for big corporations. That's discriminatory, and the bias will mitigate growth on Main Street, where most of America's jobs are created.
Still, if the bill could have juiced the economy even more, it will still juice it plenty enough.
That leaves the one thing we mentioned way back at the beginning of this Our View that could derail this tax cut's ultimate success. That one thing standing in the way of a golden era is the increase this tax cut will cause in the national debt.
Yes, a $1.4-trillion tax cut will surely get the economy moving, but it will also add about $1 trillion to the national debt, for it simply will not generate enough new tax revenues to offset the costs.
This is always the case. No matter what the tax cutters say, tax cuts never pay for themselves. It's faith-based budgeting without any evidence in the historical base to back it up. In this sense, the deficit hawks have a very valid point.
You can either have pay-as-you-go or debt-driven tax cuts, and Congress is naturally opting for the latter. The problem is, debt-driven tax cuts make future generations pay for today's economic benefits, and it puts a long-term drag on the very standard of living the tax cuts are designed to boost.
Pay-as-you-go is the only responsible way to finance a tax cut, and that means cutting the bloated federal budget by the trillion dollars needed over the next decade. That sounds impossible, but there's so much waste and bloat and special-interest money in the government that it's really not tough at all.
President Donald Trump has already given us a sound, sane blueprint for spending cuts in his proposed 2018 fiscal budget, if congressional Republicans would just read it. We know, they don't want to.
For example, Trump proposed cutting the EPA budget by 31 percent, but Congress reduced it by 1 percent. Thats right, congressional Republicans cut the agency they love to call evil by just 1 percent. So do they really think it is evil?
Trump proposed cuts of 10 percent to the U.S. Forest Service budget, 13 percent to the Bureau of Land Management, 14 percent to the U.S. Fish and Wildlife Service, three agencies that the GOP rightly calls out of control. Trump's budget began to tackle Medicare and Social Security entitlement spending, and he tried to rein in run-away spending on Medicaid and food stamps.
Congress did not embrace any of it. Indeed, on many issues lawmakers went the other way.
The president would have slashed funding for the climate-change obsessed National Weather Service, the Corporation for Public Broadcasting, and the National Endowment for the Arts. Trump wanted to cut one of the most radical agencies, FEMA, by almost a billion dollars, but the House actually voted to increase its budget.
The truth is, the GOP-controlled Congress wants the pass a politically popular tax cut but without the inconvenience of actually cutting the growth of government. They do not want to curtail government growth because their special-interest big-business cronies snort and feed at the taxpayer trough.
A tax cut is certainly a necessary condition for long-term prosperity but it is not a sufficient condition - spending cuts are the other side of the equation.
So Congress can't have it both ways: The amount of government spending determines the amount of revenue the government must have. If the government doesn't cut spending to pay for its revenue cut, it has to borrow to do it, and that's an unacceptable burden on future generations.
Democrats want to sacrifice growth for big government, while Republicans want to sacrifice future generations for a pie-in-the-sky dream of both big government and economic growth.
Neither are rational positions. So right now, the only sane person in Washington seems to be President Donald Trump.
If his budget cuts can prevail, his tax cuts will surely take us to that golden era. They will surely make America great again.
Otherwise, we are just on the brink of another economic disaster, this one fashioned in the image of the GOP establishment.
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