Study Shows that Trump Tax Cuts Didn't Pay for Themselves & the Trickle-Down Economics Myth
In 2017, Sen. Majority Leader Mitch McConnell and President Donald Trump claimed that their tax cut legislation would pay for itself through increased economic activity. It was a lie and pretty much every economist not named Laffer said so at the time. Economists predicted that the cuts wouldn't pay for themselves, and would needlessly balloon the federal budget deficit.
A new study released this month shows that the economists were correct; Trump's tax cut strategy was a pipe dream, a sham [see here] founded on the now thoroughly debunked supply-side theories of Art Laffer, developed back in the 1980s.
The Guardian: A number of economists have already dismissed Laffer’s signature supply-side economics theory as pure nonsense. For his dubious role as the “godfather” of Reaganomics, Slate dubbed him World’s Worst Economist. He’s been called a key part of the “Intellectual Rot of the Republican Party”. Esquire suggested that Laffer’s turn as the architect of disastrous Brownback tax experiment in Kansas should hang “like a dead possum” around his neck for the rest of his days.
Moreover, Republicans knew that supply-side economics [also known as "trickle-down" economics] was flawed from the beginning. But, Laffer's work gave a veneer of respectability to the GOP strategy known as "Starve the Beast" which advocates tax cuts in order to "starve" the federal government of revenue in a deliberate effort to force it to reduce spending on programs such as Food Stamps, Social Security, Medicare, and Medicaid. Economist Paul Krugman explained it in the New York Times back in 2010.
New York Times: "The conservative answer, which evolved in the late 1970s, would be dubbed “starving the beast” during the Reagan years. The idea propounded by many members of the conservative intelligentsia, from Alan Greenspan to Irving Kristol was basically that sympathetic politicians should engage in a game of bait and switch. Rather than proposing unpopular spending cuts, Republicans would push through popular tax cuts, with the deliberate intention of worsening the government’s fiscal position. Spending cuts could then be sold as a necessity rather than a choice, the only way to eliminate an unsustainable budget deficit."
And, as a bonus for the GOP, the tax cuts have made their wealthy donor base happy while allowing Republicans like Mitch McConnell and former House Speaker Paul Ryan to claim they are being "responsible" when they call for reductions to the nation's social safety net. It was and is a cynical and reprehensible strategy that is leading us into an era of never ending trillion dollar deficits.
The problem with "starve the beast" is that Social Security, Food Stamps, Medicare and Medicaid are popular, effective, and necessary so cutting them, especially as baby boomers are retiring en masse, is both unwise and political suicide. So, Republicans are in a bind; they realize that the budget deficit is becoming unsustainable but they can't bring themselves to admit that trickle-down economics is a sham. Moreover, it's about the only economic policy they have. So, even as the deficit grows this year, expect Trump and Congressional Republicans to call for even more tax cuts. They aren't done with trickle-down, and probably won't be until voters realize they are being conned or the nation is facing an economic crisis.
By: Don Lam & Curated Content
Photo Credit: Debangana.mukherjee