GOP economic formula: Wealthy gain as debt soars

by Tom Maertens 

The Republican deficit hawks are back, complaining about Biden’s economy and the deficit. Their goal, according to GOP Senate Minority Leader Mitch McConnell, is to obstruct everything President Joe Biden does.

These are the people who cheered when President Donald Trump cut taxes on the rich and ran up almost $8 trillion more in debt, despite his promise to pay off the national debt during his first term.

Trump exacerbated the deficit by his bungled handling of the pandemic, which resulted in 20 million jobs lost in the spring of 2020 and 400,000 additional dead over his term.

As The New York Times reported, “Republican economic policy since 1980 has revolved around a single policy: large tax cuts, tilted heavily toward the affluent.” It is usually deceptively labeled as “trickle down” economics.

“A London School of Economics report by David Hope and Julian Limberg examined five decades of tax cuts in 18 wealthy nations and found they consistently benefited the wealthy but had no meaningful effect on unemployment or economic growth.” (Washington Post).

The reality is that “trickle down” is a myth; it has never worked. Republicans cite the fable of Saint Ronnie as proof, but Reagan’s first tax cut wildly overshot the mark, requiring him to raise taxes eleven times, including taxing Social Security. What actually stimulated the economy was Reagan’s “military Keynesianism” — throwing a lot of money at the Pentagon — which led to tripling the national debt.

ProPublica reported that the richest 25 Americans have a “true tax rate of almost nothing.” The oligarchs have rigged the game with dark money by paying their sock puppets in Congress to lard the tax code with loopholes for the wealthy; simultaneously they crippled IRS enforcement efforts, beginning with Newt Gingrich’s budget cuts in the ‘90s.

As Nobel Prize winning economist Paul Krugman wrote, “People earning less than $25,000 are at least three times more likely to be audited than partnerships, whose income flows overwhelmingly to the richest 1 percent of Americans.”

Trump’s tax cuts reduced the U.S. corporate-income tax rate from 35% to 21%. Former Labor Secretary Robert Reich wrote in the Guardian that more than 50 of the largest U.S. companies paid no federal income taxes at all last year. Many haven’t paid taxes for years.

In the 1950s, corporations accounted for about 40% of federal revenue. Today, they contribute only 7%, thanks to “campaign contributions” to the Republican Party.

Trump sold his 2017 tax cuts as “rocket fuel” for the economy, but GDP grew at virtually the same rate after his tax cut as before it. Job growth was higher during the last three years of the Obama administration (8.1 million) than the first three years of Trump (6.6 million).

Overall, Trump’s economy rated lowest among the 14 presidents since FDR in annual GDP growth, and annual growth rate of non-farm jobs; his administration also presided over negative growth in non-farm jobs, the only one among the fourteen to preside over a decline in employment.

“The economy has grown significantly faster under Democratic presidents than Republican ones for nearly the last century,” according to the Times: “It’s true about almost any major indicator: gross domestic product, employment, incomes, productivity, even stock prices.”

Since 1933, the economy has grown at an average annual rate of 4.6% under Democratic presidents and 2.4% under Republicans, reported the Times. The six presidents who have presided over the fastest job growth have all been Democrats, and the four presidents who have presided over the slowest growth have all been Republicans.

If the economy had grown at the historic Democratic rate of 4.6% for the past nine decades, the average income of Americans would be more than double its current level. The Fed is projecting 7% economic growth for 2021 after years of 2% growth under Trump. It won’t be a surprise to economists that Republican presidents have all run up large deficits over the last four decades while Democrats such as Clinton and Obama reduced the deficit and paid down the debt.

The Tax Justice Network has estimated that tens of trillions are squirreled away in tax havens, such as the British Virgin Islands, Cayman, Bermuda and others. It judges that governments are losing more than $427 billion in taxes each year to international corporate tax abuse and private tax evasion.

Tom Maertens worked on the National Security Council for both presidents George W. Bush and Bill Clinton.