Whither the Fiscal Conservative?
Deficits continue to rise.
Via the NYT: How the Trump Tax Cut Is Helping to Push the Federal Deficit to $1 Trillion.
The amount of corporate taxes collected by the federal government has plunged to historically low levels in the first six months of the year, pushing up the federal budget deficit much faster than economists had predicted.
The reason is President Trump’s tax cuts. The law introduced a standard corporate rate of 21 percent, down from a high of 35 percent, and allowed companies to immediately deduct many new investments. As companies operate with lower taxes and a greater ability to reduce what they owe, the federal government is receiving far less than it would have before the overhaul.
The Trump administration had said that the tax cuts would pay for themselves by generating increased revenue from faster economic growth, but the White House has acknowledged in recent weeks that the deficit is growing faster than it had expected. The Office of Management and Budget said this month that it had revised its forecasts from earlier this year to account for nearly $1 trillion of additional debt over the next decade — on average, almost $100 billion more a year in deficits.
Emphasis mine. And while the administration and its supports may have expected a different outcome, it took magical thinking to do so.
The whole article, which has quite a bit of information, is worth a read in full.
One can have whatever philosophical debate one wishes about whether or not corporations should pay lower taxes on the principle that those who produce should get to keep what they earn (just as one can have arguments about the fact that without the broader support of society, which requires collective expenditure, corporations couldn’t make anything and therefore taxes are necessary). What one cannot argue, however, is that the US government is having to borrow to pay for these tax cuts. Hence, an increase in the deficit and therefore a long-term increase in the national debt.
I am not a deficit hawk, insofar as I do not think that a balanced budget (on a regular basis) is an appropriate policy goal. But, since debt service is a significant portion of the budget there needs to be responsibly in the acquisition of additional debt. Moreover, there is a major political party that has long argued that the annual deficit and long-term debt are of major importance, especially when discussing the cost of social welfare programs. If we are going to rend our garments over the burden we are leaving our grandchildren, etc., then let’s try to be a bit more consistent about theses matters.
Given that we are currently in a good economy, we should be seeing the deficit shrink since the need for stimulative spending by the federal government does not currently exist. And yet, the opposite is happening–the tax cuts are a kind of stimulus. If we start from a baseline of trillion-dollar deficits under healthy economic circumstances, what are they going to look like if the economy takes a downturn? A downturn means less tax revenue and more demands on federal services.
A side-note: Trump has promised 4% GDP growth on an annual basis, which has not yet materialized (and is unlikely to do so). If a good economy with tax cuts can’t generate such growth it calls into question (even more) the wisdom/reality of such goals.
Again: deficits are, in general, a reality. Some level of borrowing, especially at current interest rates, makes a certain amount of sense. Indeed, I think that during the Obama administration should have borrowed more to apply to infrastructure improvements. Having said that, such borrowing needs to be responsible and balanced by the prevailing economic moment.
Further, there is an interesting disjuncture between the parties at the moment. If we assume that neither takes a hawkish view on deficits and the debt, we are at a moment in which one party is willing to explode the deficit for the purpose of corporate income tax cuts, while the other is willing to do so for social welfare spending, especially health care. Even if we take the assumption that both are inadequately responsible about debt growth, the focus of the policy certainly shapes the debate. Put another way: despite the rhetoric, we do not have a debate between a fiscally conservative party and a fiscally liberal party–the debate is over policy goals.
I realize that the rhetorical focus of tax cuts is letting people get more income and that corporations will invest more in the economy and that wages will rise, thus taking care of social needs. The question is: to what degree is this the case? (And to what degree does this predominantly result in profit-taking?). And I do realize that outcomes are not purely dichotomous (e.g., some bonuses paid after the tax cuts were passed). The question becomes the long-term trends.
Meanwhile, speaking of fiscally conservative public policy:
Via the NYT: To Ease Pain of Trump’s Trade War: $12 Billion in Aid for Farmers.
Via Fortune: Trump’s Military Parade Will Cost Taxpayers About $12 Million, Report Says (but, at least we saved the money on the Korean military training exercises).
We’ve been living with this lie…the entire basis for the Republican party…for over 30 years.
It has never worked. Never.
In the meantime we are seeing the largest explosion of the deficit in a non-recession year.
When Paul Ryan took office there was a budget surplus. Today there are trillion dollar deficits.
Fiscal conservatives are a myth.
The fiscal conservatives will return just as soon as a Democrat is POTUS again. Count on it!
Steve
Fiscal conservatives, principled federalists, and “Character Counts” conservatives all seem to have disappeared off the face of the planet.
Charles Murray attempted to provide a reality check in May 2016 as an effort to get Republicans to support Hillary instead of Trump.
So the worst that can be said is that Trump is following trend in spending, although he’s more like Reagan in the regards to cutting regulations.
Our infrastructure is aging and crumbling, we desperately needed more jobs after the W Bush financial collapse, and the Federal Government could borrow as much as it wanted at 0%. Did we do the obvious? No. Why not? Because Mitch McConnell and the fwcking Republicans couldn’t stand that it might make a Democratic President, and a Black man to boot, look good. It might make it look like government could actually function. Now however….
Vote Blue.
Silly Steven! Deficits only matter when a DEM is POTUS !
And, if it’s brought up by a GOP POTUS, it’s simply to cut social services AFTER raising the military budgets.
“Moreover, there is a major political party that has long argued that the annual deficit and long-term debt are of major importance, especially when discussing the cost of social welfare programs.”
No, that party only argued about the importance of debt when the other party has been in power. When they have been in power, they have argued, in the words of Dick Cheney, that deficits don’t matter.
Or, as Grover Norquist has long argued, running deficits by cutting taxes are a good thing, as they will force government to make desired cuts in social programs, effectively transferring monies from the lower income beneficiaries of social programs to the upper income beneficiaries of tax cuts. In other words, waging class warfare on behalf of the upper class.
@Paine:
When I go to the book store I see Ben Sasse’s book, The Vanishing American Adult, on the self and chuckle. The idea of reading a book on character written by a Republican, any Republican, is hilarious.
@JKB:
That’s hardly the worst that can be said…because it’s not true. While all Republicans are profligate spenders, Trump exceeds the rest by far.
25 million jobs promised…not going to happen.
Consistent 4% growth promised…not going to happen.
Eliminate the debt promised…not going to happen.
Largest expansion of the deficit in a non-recession year…happening.
You Trump-a-loons got conned. Someday you will admit it and hang your head in treasonous shame.
What is really a “fiscal conservative”? Is someone who wants small deficits? Or is someone who wants small budgets? In the expenses chapter does not makes difference, but makes if we are talking about taxes.
@JKB: Murray is wrong regarding spending. Three Republican presidents (Reagan, Bush 2, Trump) have made significant differences in the last 50 years. They all cut taxes and did not cut spending, each contributing to a structural deficit that will reach $1 trillion annually in a booming economy. Because each pushed the completely discredited Laffer Curve that said the tax cuts will pay for themselves.
Trump is in a class by himself because he doesn’t even bother with phony analyses, he just lies to your face. Here’s a whopper with respect to the debt:
In a March 31, 2016, interview with the Washington Post, Donald Trump promised to eliminate the United States’ $19 trillion in debt in eight years.
The Dems might be the party of tax and spend, the GOP is party of borrow and spend.
@Paine:
They never existed outside of a few poorly-subscribed magazines and a scattering of beltway think tanks. Conservatism is a theology believed by 1% of Republicans; the rest believe in white supremacy, misogyny and naked greed. ‘Fiscal conservative,’ ‘principled federalists,’ and ‘character counts conservatives’ were inventions of the WSJ editorial page.
@Moosebreath:
A hundred upvotes if I could.
Republicans don’t have an ideology, they have a business plan. Shovel money at the wealthy so the wealthy will generously fund their campaigns.
Also, read Piketty. Accumulated capital has been about six times GDP through most of history. The World Wars and Great Depression drove this down to two or three times(1). The result was the post war recovery, in France Le Trente Glorieuses, the three glorious decades of greater equality and high growth. We are now returning to the historical norm, Gilded Age levels of wealth, with resultant inequality, dominance of politics by the wealthy, and slower growth. In the U. S. the Republican Party is the mechanism by which this is being accomplished.
_____
(1) Numbers are from memory. I’m not thumbing through a 700 page book for a blog comment.
Many people here will argue that the GOP is not a truly fiscally conservative party. I would go one step farther: I avoid even using the phrase “fiscal conservatism,” because just the very fact that the phrase exists helps perpetuate the myth that there’s a connection between being conservative and being fiscally prudent. Maybe that was true in the past (at least 40 years ago at minimum). And maybe it’s still true of conservatives in other developed nations. But it is most definitely not true of modern American conservatives, and hasn’t been in a long time.
The term “fiscal conservative” is typically used as a contrast with “social conservative,” and the implication is that these are the two building blocks of conservatism. You don’t know how many times I have heard people insist “I’m a fiscal conservative but social liberal.” It’s one of these superficial talking points that sounds nice to people who want to maintain bourgeoisie respectability. But it’s a false choice. Grover Norquist, for example, may not be a social conservative, but that doesn’t make him a “fiscal conservative.” He is the polar opposite of a fiscal conservative. Indeed, his idiotic no-tax pledge that he managed to impose on GOP Congressmen over the past generation is probably more responsible than anything for the fiscal hellhole the country entered during the Bush years.
The economic agenda of today’s GOP is in no way “fiscally conservative.” It is a set of policies that by all objective measures lead to rising deficits, but where the party simply claims against all available evidence that it will cause deficits to fall. It has been in place since the Reagan years when the supply-side hoax–the empirically disproven notion that slashing taxes will result in a burst of economic growth causing revenues to soar so that the tax cuts effectively pay for themselves–became GOP dogma. From then on, the GOP’s single most cherished economic goal was reduction in tax rates for rich people. They literally do not care about the objective reality of deficits, but they find it useful to maintain the old rhetoric of fiscal prudence as a propaganda tool to bolster the respectability of their own economic program, to further the old stereotype of Democrats as runaway spenders, and to use as a pretext for cutting social welfare programs.
This is one element of the Trump era that is not in the least bit unique to Trump. It was equally true of Bush, and it would be equally true of Romney, Rubio, Kasich, Ryan, Cruz, or just about any Republican who would happen to win the presidency today. It is, in fact, the single most unifying feature of the party.
@Moosebreath:
You nailed it. For Republicans, deficits are part of a long-term strategy to punish minorities and the poor by undermining social services and confidence in the state, while transfering wealth and power to the rich. In a word, this is a continuation of the Civil War by other means.
@Kit: I don’t know how many times I’ve mentioned in passing that GOPs want to cut or destroy SS and Medicare and someone’s said, ‘No they don’t.’ If asked, GOP pols all want to, ‘Protect SS by ensuring it’s adequately funded.” (They don’t say by cutting now rather than later, or turning it over to Goldman Sachs in some privatization scheme,) Clearly they do want to kill it, but as long as they avoid saying so too clearly in public, it’s hard to convince people they do. And until it becomes obvious, the olds (I get to say that, I am one) will remain their most reliable voting block.
@gVOR08: The Right has been able to cobble together an odd but effective coalition, and the olds certainly play a crucial role. That golden generation has been pulling up the ladder behind them for some time, and Social Security and Medicare are the last bits of the state they care to support. Their motto seems to be: Après nous le déluge !
@Kit:
Is that a fancy French way to say “fuck you, I got mine?”
Republicans have really never cared about deficits. It was always something they argued in bad faith to derail Democrats spending on programs they don’t like. They have no problem blowing up the deficit on military spending and tax cuts. The real problem is why beltway pundits kept buying into the GOP’s bad faith on this issue for years.
@Mikey:
Yeah, pretty much. My translation: After we’ve got ours and we are dead and buried, the shit’s going to hit the fan.
This is called “Starve the Beast” and it’s rubbish. It’s like trying to lose weight by eating a huge slice of cake because you think it will motivate you to go to the gym. What we’ve discovered is that Congress is just fine with unthinkable amounts of debt. Even worse, cutting taxes without cutting spending makes spending go up, not down, because people think government is free or at least cheap. It’s why I’m a big supporter of Paygo. Spending hikes should hurt. Tax cuts should hurt. You should have to give up something to get something. Reagan raised taxes when the debt went up. So did Bush 41. It’s what set the stage for the Clinton surplus. That’s unthinkable to the GOP now.
The Republicans aren’t 100% wrong on taxes. High taxes can hinder an economy. But even the Laffer Curve doesn’t predict tax cuts will “pay for themselves”. It’s as silly as … oh, I don’t know … believing that Keynesian spending will pay for itself.
The GOP did do a good job with Clinton and then Obama in holding down spending. The Clinton+GOP and Obama+GOP eras were the most fiscally responsible in the last fifty years (most fiscally reckless: Bush and Dems from 2006-2008 and Trump now). Like everything else, they’ve sold out to the Cult of Personality on this one.
@Hal_10000:
This is 100% correct.
Arguably the Republicans overdid it in the immediate aftermath of the ’08 Bush contraction…but otherwise you are spot on.
@Mikey: Wikipedia offers the following:
So, no, not quite since the one speaking is, ultimately, the one getting forked in the most meaningful sense (his head in the basket and all that…).
Back on topic–“Fiscal Conservative” is imaginary. There are no fiscal conservatives, only people who don’t want to pay for the services that they want government to provide and/or only want services that are of immediate benefit to themselves. (Some of them want to contextualize that as “government spending should hurt” or other similar nostrums, but really, they only want the spending that’s not about them to hurt.)
So there’ll be some inflation. We can live with that, no big deal. Look at the Weimar Republic, for example.
In other news, the entire Republican ideology is an exercise in bad faith, because they feel they can’t say what they REALLY think.
1. The rich should get richer.
2. Only whites should have power.
3. The poor and minorities should obey or die.
If only Western culture wasn’t so PC!
@Lit3Bolt: that’s a decent start, but you’ve missed a few:
– enemies must be destroyed by any means possible
– friends must toe the line
– logic and evidence are elitist and not to be trusted
– the Constitution might be sacred but democracy is a mistake as it ignores the natural order
– the Bible might be sacred, but the 99.99% of it that does not justify prejudices is to be ignored
I realize that this was meant to be an aside, but…
I really fail to see the connection between ‘corporations’ and “those who produce”. The latter are all human beings; the former are paper abstractions. Marxism is the belief that “those who produce” should benefit therefrom. That’s not what “conservatives” believe.