December 26, 2017--Merry Jack

"At the risk of spoiling your holiday, I thought to give you a call to wish you a merry whatever."

"To you as well," I said to Jack, "In fact I was thinking about you last week as your president and a very wimped-out Republican Congress passed that so-called tax reform bill."

I heard Jack trying to suppress a laugh. "'So called?' There are all sorts of reforms in it but not ones you like, so instead of acknowledging that you make fun of it. You don't consider the cut in corporate taxes to be a reform? If not, I don't see what you would you would see as a reform."

"Genuine and permanent cuts in taxes for the middle class, for example. This version is tipped way to the benefit of wealthy people like Trump himself who have large real estate assets and tens and hundreds of millions to pass along to their children when they die."

"I read what you wrote last week about the doubling of the standard deduction and raising the child tax credit," Jack said, "Even you agreed that it could so help lower-income people that it could turn out to be a political benefit to Republicans come the midterm elections next year. And of course 2020."

"It's true that I did speculate about that, but all the independent analyses of the bloated, nearly 1,000-page bill is that it's not only full of loopholes and carve-outs for special interests but whatever cuts middle income people will see, after a few years, will be ratcheted back and they will have to deal with tax increases."

"What did you call this? 'Speculation.' What's that worth? Speculation is another way of referring to your opinion. You love lecturing people about that. You're the one who rails about confusing facts with opinions. But now you don't have facts to back up your case but just opinions. One thing though I'll grant you is that no one knows for sure the full effect of something this huge. Especially what you and your friends mockingly say about the consequences of trickle-down. You know your history--the Reagan tax cuts rescued a very weak economy that he inherited from Jimmy Carter. There was a spurt of growth and a dramatic reduction in inflation."

"And, pay attention to this, a tripling of the national debt. Like the current bill, it wasn't paid for. The Trump tax bill will add up to $2.0 trillion to the debt. Ditto for George W. Bush's tax cut. It led to the Great Recession and a doubling of the debt. You guys call us tax-and-spend liberals. I call you tax-cut and spend conservatives. At least with someone like Bill Clinton and, for that matter, your pariah, Barack Obama--both Democrats by the way--there was growth and in both their cases a lowering of the deficit and debt."

"You call Obama's two percent of annual growth to be a healthy economy? It was during his time that the middle class got creamed. Especially men."

"You're ignoring what he inherited from Bush. The world's economy was about to go over the cliff. You guys are good at glomming over unpleasant facts."

"And you're not? How about the facts of economic growth over the past year? Trump's first year. How come you never want to talk about that? Look at the stock market and employment numbers. You and your friends say it's the result of momentum from Obama policies. That Trump had nothing to do with it. Fess up--if the economy had crashed this past year wouldn't you be blaming Trump? One thing you specialize in is talking out of both sides of your mouth."

"That's the way politics works. We're all guilty of engaging in spinning." That much I granted to Jack.

"And haven't you been a huge beneficiary of the run up in the value of stocks? How's your 401(k) looking these days? I assume pretty good. I don't hear any complaints about that."

I chose not to baited into talking about that with Jack but instead said, "Another thing you're conveniently ignoring is that tax legislation doesn't exist in a vacuum. By severely restricting deductions for state and local taxes and capping how much mortgage interest people can deduct millions of middle class people will not be happy with what they see about the value of their own assets. The value of homes, the major asset of most people, is expected to decline by as much as ten percent. And this will not just be in blue states as Republicans love to chuckle about. Millions in Texas and Florida and Arizona, to mention a few red states, will also see big declines in the value of their homes. I admit that the major hits will be in Democratic states like New Jersey and California and suburban parts of New York. High tax, high inflation states. But Republican home owners in those states will also be hurt."

"And here I thought I was just calling to wish you a merry Christmas and poke you about all the people on TV ads thanking Trump for allowing them to celebrate Christmas. About that you and I are of the same opinion. This is just ridiculousness."

December 21, 2017--4:01 In the Morning

It's 4:01 in the morning and as I do when I wake up so early I turned on the radio to get the news. To see if we're at war with North Korea and how the Knicks did last night. (They didn't play and we're not--yet.)

On all-news WINS, the first thing I heard was Senator Orrin Hatch at the victory-lap celebration President Trump organized yesterday to gather kudos to himself after 100 percent of Republican House members and senators voted for the new tax bill.

Orrin, who needs to retire immediately, said, "You're a heck of a leader [meaning Trump]. You've done everything you promised."

I waited for the list of accomplishments but they were not forthcoming. Just waves of love. Speaking about love I was glad pathetic Lindsay Graham didn't grab the mike. It's not a lot of fun getting nauseous on an empty stomach.

I switched to another station and there was some Democrat leader gushing about how this disgraceful piece of legislation will turn out to be a political blessing in disguise for progressives. Once Trump people see how little their taxes will be cut they will feel betrayed and vote in November to flip both the House and Senate to the Democrats.

Dream on, I thought, which is not an inappropriate way to put it at, now, 4:07 A.M.

I'm not so sure "average" Americans will see their taxes lowered so little. Or actually raised, as some on the left are claiming and hoping. Those of us wishing for this may have a rude awakening. Again, as it's now 4:11, not a bad way to think about this.

Here's how things will play out, noting up front that I see this bill to be a disgrace. Even if some middle-class taxpayers will see some cuts as it plays out it will continue the redistributional process begun during Ronald Reagan time (when Orrin Hatch to that point had never seen such a heck of a leader)--the rich pay less while the bottom half pay more. 

First, as early as February most workers who have taxes withheld will see some increase in their take-home pay. Maybe as much as $50 a week. 

This in part will be because the Trump people who will create the withholding tables will sweeten them by front loading them--these workers will find more in their paychecks than they should in order to trick them into seeing the value of the tax cuts to them. When they file their 2018 taxes in early 2019 they will not get any refunds but likely will have to ante up more. By then, if Trump is still around, he'll blame this on Obama and Hillary. And Robert Mueller, if he's still around.

More ominous for liberals who are looking forward to the Trump tax cuts imploding will be the effect of the doubling of the standard deduction.

For couples that will amount to nearly $25,000 per year. For many of the 31 percent who currently itemize, this bump up will amount to a significant tax cut. And it will be a good deal for many more. Perhaps another 10 to 20 percent will stop itemizing because the standard deduction is better for them. As will be the extended tax credit for children. Using the standard deduction will make it much easier to file and, in many instances, will not require an expensive accountant to do the filing. If the number calculating their taxes this way approaches 50 percent, that's a big political story.

Finally, as with the Reagan and Bush tax cuts, folks like me (professionals, managers  government workers) who are progressives and say we oppose the regressiveness of these previous tax cuts, we were actually great beneficiaries of the lowering of the tax rates and the exemptions and loopholes that were laced into the legislation.

This will be especially true for retired people who vote disproportionately. 

In other words, don't expect a tax revolt. It will not get the political job done either next year during the midterms or two years after that. We need to do what many liberals in Virginia did--get out there and run for school boards and state legislatures. Those of us who can't or won't do that, we need to be consistently activated. We can't sit back and wait for things to get better because, on their own, they won't.

As for me----it's 4:49 and time to try to go back to sleep. No radio, and no more Orrin.

April 27, 2017--Laugher Curve

As I draft this, President Trump has not as yet revealed the details of his "massive" tax cuts.

In spite of this I can speculate what his multi-trillion dollar proposal will contain and how it will be paid for.

When the non-partisan Congressional Budget Office (CBO) finishes its scoring, they will find that most of the cuts go to corporations--where the effective rate will be cut from 35% to 15%.

Also, a large slice of the tax cuts will go to America's highest earners. There will, though, to put a fig leaf on the truth, be some tax savings for middle class people, mainly an increase in the deduction for dependent children. Then in regard to children, thanks to Ivanka Trump's influence, there will be tax credits to offset some of the costs of childcare.

Unless paid for, over the decade, these cuts will add multiple-trillions to the national debt. So there will be some attempt to show how the cuts will be paid for.

Nearly a trillion will be the result of repealing and replacing Obamacare. As noted here last week, the legislation inching its way through the House of Representatives is not a healthcare bill but a tax cut bill. This of course means it has no chance of passing in the Senate and probably not in the House. So chalk that trillion up to the debt.

The real savings to pay for the tax cuts will not be from savings at all but rather from extra tax income that will be the result of a dramatic rise in economic growth.

At the moment, the Gross Domestic Product (GDP) is going up by a tepid annual rate of less than two percent. The Trump proposal will show a growth rate of about twice that. They feel they can project that because tax cuts for wealthy people and corporations are stimulative to the economy. Growth will trickle down to average folks who will in turn use the extra income they derive from tax cuts and increased economic circumstances to buy cars and houses and stuff.

This assumption, this projection is based on bogus economic theory promulgated most prominently during the 70s. and 80s by Arthur Laffer. It is graphically most famously represented by the Laffer Curve which illustrates how tax cuts spur enough economic growth to generate new tax revenue which in turn cuts into the deficit.

Arthur Laffer in 1974

Here's the problem--

There is no historical or empirical evidence whatsoever that it works. When first taken up by Ronald Reagan during the 1980 Republican presidential primaries, George H.W. Bush, who was contesting for the nomination, memorably called it like it is--Voodoo Economics. Telling the truth helped cost him the nomination and the rest is history.

That history includes truly massive tax cuts under Reagan of just the sort of which Laffer would approve. And did approve. But it did not jolt the economy as promised and it was paid for, as Trump's will be, by adding trillions to the national debt. Over time, during the eight years of his presidency, Reagan nearly tripled it.

And if we need further evidence, when 20 years later, George (the son) Bush pushed another round of tax cuts through Congress, the economy collapsed and the debt doubled.

As the French would say, Viola.

On the other side of the ledger, there are other voila moments--the resulting state of the economy after Bill Clinton and Barack Obama raised taxes. Clinton raised them on the highest earners and the GDP increased annually, on average over his eight years, by 3.8%. Obama inherited a prostrate economy from George W. Bush and managed to more than halve the annual debt while the economy grew by about 2% a year.

One might, therefore, conclude that tax cuts of the Laffer kind do not follow the Laffer Curve but in spite of this here we are again with voodoo economics resurrected. Why anyone would believe Treasury Secretary Mnuchin that "The tax plan will pay for itself with economic growth" is beyond my comprehension.

He knows not all of us are economic illiterates and so he confesses that the preposterous 3-4% GDP growth rate is the result of "dynamic scoring." This is when growth rate projections are based not on observable reality but are derived from assumptions about where the economy will be as the result of various hypothetical actions. In other words, rather than projections based on a semblance of reality ("static scoring") economists such as Laffer and government officials such as Mnuchin just make things up. They pick a growth number out of the air that fits their theory and proclaim it to be the empirical truth.

These might be considered economic alternative facts. Let's see if the public and Congress will again take a sip of the Kool-Aid.

April 20, 2017--Tax Scam

I'm dense so it's taken me awhile to figure out why the Republicans so passionately want to
"repeal and replace" Obamacare. Actually, some of the most conservatives want only to do the repealing.

I got swept into believing some of the rhetoric. Obamacare is deeply flawed. True. It does not allow most people to keep their doctors, true; and it is not containing the rise in the cost of either medical care itself or healthcare insurance. Also true.

But, after a little time passed and the Republican talking points were countered, it became clear that the Paul Ryan American Health Care Act is not about healthcare but about taxes--a critical step toward his plan to cut and reform corporate and income taxes.

Here's the math--

In a March 22nd Forbes Magazine posting (not a socialist publication) it was reported that contained in the final version of the proposed bill, after all the deal making with the House of Representatives Freedom Caucus and White House, the nonpartisan Congressional Budget Office concluded that the plan would result in an $600 billion tax cut over the next decade, with at least $274 billion of the cuts going directly to the richest 2%.

Further, Medicaid would be cut, again over the decade, by $880 billion, making it more difficult for low-income taxpayers to secure insurance.

Though from a healthcare perspective it would be a crisis for low- and middle-income people--the CBO also estimated that these cuts would mean that 24 million would lose their current coverage--from a tax-cut perspective it would be a bounty. Again, with the top 5% benefiting the most from the GOP version of tax reform.

Obamacare does include two tax surcharges for high earners--

For couples filing jointly, if their adjusted gross income is $250,000 or higher there is a 0.9% Medicare surcharge and a 3.8% surcharge on net investment income, with the latter being income from certain types of dividends and capital gains.

The Ryan plan calls for the elimination of these two taxes for very high earners.

If this bill were to pass (and although it was set aside last month it is still a glimmer in Paul Ryan's eye and seems to have the support of the president, who feels the need to get at least something, anything done--even something this harsh and regressive) then Congress and the president could move on to what really interests them--massive tax cuts for the wealthy. Paid for largely, and here's the perversely brilliant part, by repealing the two Obamacare tax surcharges. Doing this would yield $1.48 trillion, which would "pay for" most of the additional tax cuts in a manner so as to make then seem "revenue neutral."

Again, this healthcare shell game is not about healthcare but tax cuts.

The claim, of course, is that cutting taxes for the wealthy is really about helping the middle class, because if you cut "job creators'" taxes they will invest in businesses that generate high-wage jobs.

The only problem with this claim is that it's untrue--the massive Reagan tax cuts and the even larger Bush tax cuts did not boost the economy or create jobs.  What was created were massive increases in the national debt--nearly tripling during Reagan's time and doubling under George W. Bush.

In contrast, the debt after Clinton's eight years increased by just 32% and during Obama's two terms, after inheriting a collapsed economy, it went up by 68%.

I am embarrassed to admit that it has taken me this long to finally figure out what is going on and what all the congressional healthcare machinations are about--tax cuts.

December 22, 2016--Liberals Need to Fess Up

If we progressives are to rescue our political souls we need to begin by doing some fessing up.

I'll begin and then maybe you will consider doing the same.

Since 1981, Ronald Reagan's first year as president, most liberals have been big beneficiaries of conservative fiscal policy. Especially tax policy.

Though publicly rueing the dramatic cuts he and Congress pushed through, privately and unconfessedly we have done very well.

The Reagan tax cuts followed years later by the Bush tax cuts (re-upped by Barack Obama) were of benefit primality to upper-middle-income people. Not just the top 1-percent but most who were just upper-middle-class. Millions and millions of Americans with advanced education comfortably slotted into the professional, knowledge-working sectors of the economy.

People like me.

These are approximate numbers that reveal how I have fared thanks to Reagan, Bush, and even Obama--

Since 2001 when the Bush cuts took effect, Rona and I have paid at least $5,000 less a year in taxes. Over the course of these 15 years this totals $75,000.

Not bad, not bad at all.

This savings funds a lot of our lifestyle since it is discretionary income.

And the good times for us in this regard, with Donald Trump about to become president, look as if they will continue to roll. Maybe even accelerate. The stock market is so happy that the Dow is about to top 20,000 and our portfolio of stocks in only six weeks, thanks to the Trump Rally, has gone up more than 6-percent.

No bad, not bad at all.

All the time this has been happening, I have moaned and ranted here and among equally-privledged friends about the unfairness of the economic system, focusing my outrage primarily on how, as the result of right-wing fiscal policy, inequality has grown worse.

While all the time I and we have been thriving, millions are being left behind.

This looks and feels like hypocrisy to me.

And among the hypocrites you will find me.

Then, what else has been going on?

Again, since Reagan's time, white working-class and lower-middle-class Democrats have been drifting rightward. When the media noticed this phenomenon, they called these voters "Reagan Democrats," and a few weeks ago these same Democrats became "Trump Democrats," and their votes are propelling him to the White House.

All the while, what have many of us liberals been up to? Trying to enjoy ourselves, leaving the social policy agenda to Republican conservatives who have delivered more to us than the people whom they claim they represent.

I don't know about you, but I haven't noticed myself sending an additional $5,000 "equity" check to the IRS every April 15th with my tax returns.

Instead, at that time, I'm typically planning my next vacation in Maine and trip to Italy.

If we don't begin by taking an honest look at our own lives we will have no chance of overtaking the political forces at work. We used to be the party of "the working man." Now we are the party of self-indulgence and condescension.

More about that tomorrow.