GOP Tax Cuts Won’t Pass This Year — Or Maybe Even Next
On Sunday’s edition of CNN’s Reliable Sources, guest Bruce Bartlett referred to the right-wing hosts of Fox & Friends as “those three idiots.”
This gave show host Brian Stelter the vapors, but it was simply Bartlett being Bartlett: blunt, astute, opinionated and — to our minds at least — accurate. His knowledge of government and the attendant industries of money, media and manipulation that swirl around it are second to none.
Bruce Bartlett has his own conservative bona fides: A veteran staffer on Capitol Hill, he was staff director of the Joint Economic Committee of Congress, then senior policy analyst in the Reagan White House and deputy assistant secretary for economic policy at the Treasury Department during the George H.W. Bush administration. But as Bill Moyers noted in late June, Bartlett is “a man of fierce intellectual independence — and courage, too. Telling the truth about Republican economic policies during the George W. Bush presidency got him fired as a senior fellow at a conservative think tank and brought to an end his long career as an esteemed GOP ‘insider.’”
Nonetheless, today, Bartlett is a sought-after writer and commentator who, among his other outlets for speaking out, keeps current a smart and often acerbic Twitter feed: @BruceBartlett. A quick scan of it quickly reveals no love lost for the current administration.
We set out to interview him about his new book, The Truth Matters: A Citizen’s Guide to Separating Facts from Lies and Stopping Fake News in Its Tracks, a timely subject given the constant hammering of the press from Trump and the proliferation of disinformation and conspiracy theories from Fox News, talk radio and the internet.
In the second half of this interview we’ll focus on The Truth Matters, but first we took advantage of his expertise in economics and tax policy to get his thoughts on the next big legislative battle: Trump and the Republican Party’s crusade for tax cuts.
Michael Winship: The Republicans are proposing $1.5 trillion in tax cuts. Do you think it makes sense?
Bruce Bartlett: Let me put it this way: I don’t believe that our economy needs this sort of tax cut at this time, and certainly not one that is grossly, overwhelmingly, [weighed] toward the ultrawealthy. I think there are policies that the economy does need, and $1.5 trillion will go a long way toward meeting those needs. So if we’re going to raise the debt by at least $1.5 trillion, I think we should do it in a way that is much more likely to raise growth and improve the lives of the people.
MW: In fact, on Monday morning, you tweeted that our major cities are dangerously vulnerable to flooding, but there’s no money proposed for infrastructure, only tax cuts.
BB: That’s correct. And I think it’s sad that Donald Trump, who said he wanted to have a big infrastructure program, has apparently abandoned that in favor of a tax giveaway to the wealthiest people in the United States.
My feeling is that the economy is suffering from a lack of aggregate demand — that is to say, spending. And we need to be doing something to get that going. One way is to get people who don’t have jobs to get jobs. Then they have money to spend. Or to raise wages — then people who are working will have more money to spend. So I think that that is what the economy needs, but if you cut taxes for the ultrawealthy, this does not lead to any increase in spending at all, because the ultrawealthy already have everything they could possibly want. They have no unmet needs. They’re not going to go out and buy second and third yachts just because they’ve gotten a tax cut. All they’re going to do is save the money.
On the surface, that sounds like a good thing, but the fact is, interest rates are so ridiculously low, this is pretty strong evidence that we don’t really need additional saving. We need spending. And therefore, I think to the extent that there’s any potential growth effects of this tax cut, it’s correctly characterized as trickle down and I just don’t think that is going to work or have any meaningful effect on the economy.
MW: Trump has said, “There’s no way that the middle class doesn’t greatly benefit” from the proposed tax cuts.
BB: Well, that’s just a lie… the middle class really isn’t going to get any kind of tax cut and in fact it’s going to get screwed in lots of ways. For example, he’s talked on many occasions about getting rid of the deduction for state and local taxes. He’s talked about reducing the ability of people to save in 401(k)s. These are tax increases, really, that are going to hurt the middle class.
So what his economic advisers have done is come up with this ridiculous rationalization that workers will see a huge increase in their wages if we cut the corporate tax rate. The fact is that we have experience with this. We don’t need to look to some esoteric mathematical model to know what’s going to happen. You can very easily go to bls.gov, which is the website of the Bureau of Labor Statistics, and look up real median wages and you can see what happened after the Tax Reform Act of 1986, which lowered the tax rate on corporations from 46 percent to 34 percent. And if you look at what happened to wages in the 10 years after 1986, wages fell. They did not go up. They fell. Workers were worse off.
Now I’m not saying there’s a cause-and-effect relationship. I’m not saying that cutting the tax caused workers’ wages to fall. All I’m saying is that we have a real-world experience in which the results were the exact opposite of what the administration is asserting.
MW: And yet there are Republicans who claim that these proposed cuts are in the fine tradition of Ronald Reagan.
BB: Well, that’s just a lie, too. And I know because I drafted the 1981 tax cut.
MW: That’s why I mentioned it. [laughs]
BB: Oh, OK. [laughs] Well, in 1977, while working for [New York Republican congressman] Jack Kemp, I drafted what came to be called the Kemp-Roth tax cut. It was endorsed by Ronald Reagan in 1980 during the campaign, and he sent the same exact piece of legislation that I developed to Congress in February of 1981 — and it was signed into law in August of 1981.
So this makes another interesting point, by the way, which is that the Republicans are convinced that they can just ram this tax reform package through. Really, it’s just a tax-cut package — I mean, Trump himself has said it’s not really tax reform, it’s just tax cuts. They think they can enact this in the next couple of weeks, before the end of the year.
But here you had Ronald Reagan, who had vastly greater powers of persuasion and had vastly more competent staff than Trump has, proposing legislation that was bipartisan, was very popular, and was in fact needed very badly in 1981 because inflation was pushing people into higher tax brackets. You had a legitimate need for a big tax cut, and yet it still took him from February to August to get this legislation enacted.
So I think the idea that they’re going to get this done in the next couple of weeks, when they have absolutely no clue as to what the hell they’re doing, is just rank nonsense.
MW: You wrote that you think the ultimate goal of the GOP is to create a deficit so large that Medicare and Medicaid can be decimated.
BB: That’s correct. The Republicans don’t advertise this, but in fact they all believe in a theory that I call “starve the beast,” which says that the purpose of cutting taxes is to create a deficit which will then justify spending cuts. Under normal circumstances, you’re not going to be able to cut popular programs like Medicare, Medicaid, Social Security, but if the deficit gets really, really big, people may be frightened of it and be willing to accept as necessary spending cuts that would not otherwise be politically plausible.
We saw an excellent example of this strategy just recently in the state of Kansas. Republican Gov. Sam Brownback and his party rammed through huge tax cuts relative to the size of the state, equivalent to what Trump and the Republicans in Washington are proposing, and they even hired economist Arthur Laffer of Laffer curve fame, paid him $75,000 [but] he didn’t even do a real study. He just lied and said this tax cut is going to be so powerful, it’s going to lead to so much additional growth and jobs that revenues will not decline, so we won’t have any increase in the state’s debt.
Well, what happened is, of course, revenues collapsed. The state — states have to operate under a hard balanced-budget requirement — was hemorrhaging revenues. They were desperate to balance the budget. But did they say, “Okay, these tax cuts apparently are not working, let’s just go back and restore the taxes that previously existed”? They did not do that. What they said was, “We must slash spending for the poor, we must slash spending for education, we must slash spending for police and fire and roads and bridges” and all kinds of popular programs that would have been impossible to cut except under the circumstances of an extreme fiscal disaster.
So this is very much in the Republican playbook. They cut taxes, they lie and say they will not lose revenue. When the revenues collapse, they say, “Let’s slash spending for the poor. That is what’s causing the deficit, not huge tax cuts to the rich.”
MW: Is there any evidence at all, as Treasury Secretary Steve Mnuchin claims, that the stock market would fall if there’s not a corporate tax cut?
BB: I think it’s highly unlikely, but I can’t say for sure. But I think to the extent that the stock market embodies any Trump policies, they’re not tax policies, they’re deregulation policies. I think the stock market likes that. But I also think they like low interest rates that the Federal Reserve has given us and I think that they like the fact that the fundamentals of the economy are pretty strong. And of course, the stock market has been rising pretty much continuously for quite a few years and it’s kind of stupid to look at one part of that general trend and say, oh, this is because of Trump. He’s really just benefitting from policies that were already in place on Election Day.
MW: What do you think would be appropriate for us to do as far as tax reform goes?
BB: Well, look, I think the tax code could certainly be cleaned up and improved in lots of different ways. But I think unless they follow the same three principles that underlay the 1986 tax reform, we’re unlikely to get anything that is worth doing. And those three principles were revenue neutrality — that is, you’ve gotten rid of tax loopholes and things of that sort to pay for any reduction in rates. So you’re not depending on growth effects. You’re just saying I’m going to raise taxes by a dollar and I’ll cut taxes by a dollar so we’re held even.
The second principle of the Tax Reform Act of ’86 was distributional neutrality. That is, the tax cuts were about the same in percentage terms regardless of your income. So the rich did not benefit disproportionately, the middle class and working classes got something meaningful out of this legislation.
And the third provision, that this administration has completely ignored, was bipartisanship. The 1986 Tax Reform Act was genuinely and popularly bipartisan, had the support of the Democratic leadership and the Republican leadership, and this is one reason why it was well-designed legislation.
And so Trump has abandoned the three critical principles that underlay the Tax Reform Act of 1986 and that’s why he’s come up with something that bears absolutely no similarity to that legislation. No matter how many times he lies about it, it’s just not true.
MW: So to reiterate, you think there’s little or no chance that this will get through by the end of the year?
BB: Well, let’s just say I would be shocked beyond belief. In fact, I’m not sure whether they can pass this before the end of next year. I just think that making the sausage — you know, it’s one thing to talk about the theory of making sausage and it may be rather tasty at the end of the day, but the making of the sausage is kind of disgusting and we’ve just now begun the process of sausage making. I think they’re going to have a lot of problems, especially in the Senate.
Coming: Bruce Bartlett on his book, The Truth Matters.
Michael Winship is the Emmy Award-winning senior writer of Moyers & Company and BillMoyers.com, and a former senior writing fellow at the policy and advocacy group Demos. Follow him on Twitter: @MichaelWinship. This article is reprinted from BillMoyers.com