Wednesday, March 2, 2022

Political Parties, a Trump Success, and the 2017 Tax Cut



Having voted for presidents for 50 years, I find their platforms are usually limited to about five issues. Pretty simple concepts. National as well as state politicians routinely do as follows.
Salesmen are professionals—they know how to make a sale. Politicians are professionals—they know how to get elected. Politicians are good salesmen who know lots and lots about governing citizens. The average citizen knows very little about political realities. Politicians sell ideas how they can make government work for what we citizens want. They want us to buy into their plan and give them our vote. Politicians always, with some exotic exceptions, try to look honorable, kind, wholesome, and family oriented.
They sell their party (Republican or Democratic) as the best choice for Americans, also adding that the country is at a critical time in history. Very ,very rarely in election campaigns do politicians have enough air time to explain to citizens how they will accomplish what they are promising—legislation is far too complex.
They ask for our contributions and votes. They want us to feel a part of their campaign. But they avoid revealing how much money they have received from special interest groups. Appearances are everything; they don’t want it took look like they were bought out by powerful interest groups. Examples of important interest groups are: labor versus business, old versus young, taxation, the “haves” versus the “have-nots.”
Nowadays, by far the biggest campaign contributions are from the very rich and very powerful who give substantial sums to both candidates-- so whoever wins will be indebted to them.

Trump, throughout the primaries leading up to his 2016 election win, revealed himself to be unusual in disturbing ways that were obvious to almost everyone. He doesn’t apologize for anything but just persists in trying to get his way. Many persons who loyally served him have also written about his problems—most recently his attorney general Bill Barr in the new book, One Damn Thing After Another: Memoirs of An Attorney General.
Ezra Klein in his book Why We’re Polarized tells us that the 2016 voters “treated Trump as if he were just another Republican” and, further, that voters were so “locked into political identities” that nothing could change their minds. Klein believes that American politics has become a “toxic system.” Part of Trump’s uniqueness is how much loyalty he generates despite his unsuitability as a candidate. (2020, page xiv). 
As he campaigned for president, Trump made unrealistic and grandiose statements about what he would accomplish for the American people. He wanted a tax cut and in his publicity proclaimed his tax cut would pay for itself by stimulating the economy (economists thought this outcome unrealistic). The Trump tax cut would subsequently be known as the Tax Cut and Jobs Act (TCJA).

Elections decide winners and losers. Elections are about the wants and unmet needs of citizens. Elections are very much about loving or hating candidates. For all these reasons and more, election night is high drama. We are compelled to care, and therefore, we are nervously concerned about who wins. 
Donald Trump’s win in 2016 made many people shake their heads in disbelief. Even many political commentators thought the election itself was unusual, abnormal; and they began analyzing the causes. 
Remarkably, as detailed in Klein’s book, Why We’re Polarized, the statistical patterns of 2016 voting “mostly looked like 2012 and 2008, and 2004.” It is worth adding here that Hilary Clinton won the popular vote but Trump won the election by the electoral college vote and therefore the presidency; this procedure is correct.
The election was not unusual but the candidate was. (Klein, 2020).
Fortunately, to insure adequate and useful legislation, the political process in the U.S. Congress has numerous checks and balances.
  • Both parties keep a wary eye on each other and protest strongly when any part of the legislation might be bad for their constituency (the loyal voters who voted them into office). 
  • The American Civil Liberties Union (ACLU) was well prepared to sue the Trump administration for anything violating civil rights. (Cose, 2020)
  • Political commentators, including many economists, analyzed in depth the Trump Administration proposals and made public their analyses of the good or faulty parts of TCJA. Before, during, and after passage of TCJA, dynamic models were run to predict the effects of the proposed law. 
The models predicted that the TCJA would not pay for itself but would increase the deficit by one or two trillion dollars. And the models predicted which income levels would get more or less tax benefit. The economists with their models made fairly accurate predictions of what results the TCJA would produce for the various income groups and the amount added to the federal deficit.

The Tax Cut and Jobs Act ((TCJA) passed into law in 2017 at a time when the Republicans were the majority party. 
I attempted to figure out whether Trump’s TCJA was successful or not. I looked at news reports from Bloomberg Tax and Accounting, Brookings Policy, the New York Times, and a few other sites. I definitely had to look at many sources in order to have confidence in my assessment.

Here are my takeaways:
  • The Trump treasury secretary Mnuchin was asserting that the tax cuts would stimulate the economy such that the tax cut would pay for itself. Economists didn’t think this was at all likely and Mnuchin’s claim was widely disputed. 
  • The Congressional Budget Office (CBO) found that the law paid for only about a fifth of itself. And, the law added a trillion dollars to the national debt. I have not heard that the CBO is biased and presume, therefore it's findings are credible.
  • Some experts figured that an average American family would have about $750 more to spend per year due to the tax cuts. But the top 20% of earners got much larger tax savings! It reduced taxes for upper classes more than for the lower. 
  • Businesses benefited the most from the tax cuts. This result is, of course, a very typical Republican goal. 
  • There is plenty of hard data, and the data has led to a clear consensus that most citizens really did get something of a tax cut. However, citizens in the lower fifth of the income groups did not see much in tax savings (of course, a percentage tax cut on a lower wage leads to a smaller dollar savings).

A remarkable fact about the TCJA, is that the tax cuts for citizens expire in 2025. But the tax cuts for business don’t expire! Hmm... Turns out the layers and layers of congressional laws have sections which place undesirable restrictions on future laws; for Congress to pass TCJA they had to reduce the cost of TCJA by having the citizen tax cuts expire within a prescribed time frame. Economist Paul Krugman makes reading about these convoluted politico-economic issues quite entertaining! I highly recommend reading "The Ultimate Zombie" in his book, Arguing With Zombies. (Krugman, 2020)
Only in this week have a learned much about the TCJA. I’m quite pleased to find it has benefited not just businesses, but also the middle class. I also learned that the tax laws were simplified. That’s certainly a benefit to all. 
And I’m pleased for Trump and his supporters that one of his platform planks is something of a success—although an expensive one. 
I plan to do more study on the interaction of economics, government, and politics. The world’s economists seem to agree with each other better than the politicians about the workings of economics. On one best-of lists, the most highly rated political economics writer-commentator is the Nobel Prize winner, Paul Krugman. I’ve been reading his book Arguing With Zombies(2020 copyright). Very readable, lively, and without statistics. The book contains 15 short articles just on the TCJA. He said the TCJA is very complex and he explains some of its convoluted aspects. 
Enjoyable and enlightening reading!
        For references, see the relevant page on the website.
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