Thank God Instead of the End of the World the Tax Cuts Will Only Cause Another Depression!

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Ah, Washington Post, don’t ever change. They have some pretty strong opinions on President Trump’s plan to allow the American people to keep the money they’ve earned. While I’m sure that you won’t be shocked to know that they disapprove, what may surprise you is that the proposed tax cuts will cause another an economic downturn like The Great Depression! We know this because they’ve enlisted an expert on the Depression who somehow knows nothing about the subject, Robert S. McElvane to inform us that:

I’m a Depression historian. The GOP tax bill is straight out of 1929.

While I wanted to focus on a few highlights, the level of stupidity here was too impressive to not post and comment on the entire piece. So let’s jump into this fountain of economic illiteracy!

“There are two ideas of government,” William Jennings Bryan declared in his 1896 “Cross of Gold” speech. “There are those who believe that if you will only legislate to make the well-to-do prosperous their prosperity will leak through on those below. The Democratic idea, however, has been that if you legislate to make the masses prosperous their prosperity will find its way up through every class which rests upon them.”

Ah, President Obama may no longer be in office but this doesn’t mean that intellectually dishonest Leftists still can’t take blow torches to their straw man arguments! And I love the notion that one can “legislate to make the masses prosperous” – why did nobody think to pass these laws sooner?

That was more than three decades before the collapse of the economy in 1929. The crash followed a decade of Republican control of the federal government during which trickle-down policies, including massive tax cuts for the rich, produced the greatest concentration of income in the accounts of the richest 0.01 percent at any time between World War I and 2007 (when trickle-down economics, tax cuts for the hyper-rich, and deregulation again resulted in another economic collapse).

That paragraph alone is enough for an entire post, so for now I’ll just fix a minor spelling error in the parentheses regarding the cause of the 2008 Financial Crisis – McElvane misspelled “and 2008 (when a government generated subprime mortgage collapse, combined with the government forcing mortgage lenders to accept risky mortgage investments resulted in another economic collapse).

Yet the plain fact that the trickle-down approach has never worked leaves Republicans unfazed. The GOP has been singing from the Market-is-God hymnal for well over a century, telling us that deregulation, tax cuts for the rich, and the concentration of ever more wealth in the bloated accounts of the richest people will result in prosperity for the rest of us. The party is now trying to pass a scam that throws a few crumbs to the middle class (temporarily — millions of middle-class Americans will soon see a tax hike if the bill is enacted) while heaping benefits on the super-rich, multiplying the national debt and endangering the American economy.

Actually, that hymnal that McElvane quotes are what Democrats incorrectly smear as helping all taxpayers. Although I love the part at the end of the paragraph where he echoes many other Lefties who pretend to now give a damn about the debt after spending eight years supporting policies that made Dubya look fiscally responsible!

As a historian of the Great Depression, I can say: I’ve seen this show before.

Bold prediction: Key details will be ignored or misrepresented!

In 1926, Calvin Coolidge’s treasury secretary, Andrew Mellon, one of the world’s richest men, pushed through a massive tax cut that would substantially contribute to the causes of the Great Depression. Republican Sen. George Norris of Nebraska said that Mellon himself would reap from the tax bill “a larger personal reduction [in taxes] than the aggregate of practically all the taxpayers in the state of Nebraska.” The same is true now of Donald Trump, the Koch Brothers, Sheldon Adelson and other fabulously rich people.

OK, tax cuts benefitting the people who  pay the most is a crime? But I’ll be most interested to learn more abut those causes of the Depression! We’re getting to that soon, right?

During the 1920s, Republicans almost literally worshiped business. “The business of America,” Coolidge proclaimed, “is business.” Coolidge also remarked that, “The man who builds a factory builds a temple,” and “the man who works there worships there.” That faith in the Market as God has been the Republican religion ever since. A few months after he became president in 1981, Ronald Reagan praised Coolidge for cutting “taxes four times” and said “we had probably the greatest growth in prosperity that we’ve ever known.” Reagan said nothing about what happened to “Coolidge Prosperity” a few months after he left office.

Spolier: McElvane will ignore the impact that Reagan’s policies had on the economy – I wonder why!

In 1932, in the depths of the Great Depression, Franklin D. Roosevelt called for “bold, persistent experimentation” and said: “It is common sense to take a method and try it; if it fails, admit it frankly and try another. But above all, try something.” The contrasting position of Republicans then and now is: Take the method and try it. If it fails, deny its failure and try it again. And again. And again.

Um, actually The New Deal’s extension of Hoover’s failed policies turned what should have been a recession into a decade of misery. And that’s also my problem with the Radical Left – when have you ever heard any of them admit when their policies fail? Like how Keysian policies failed FDR? And Japan in the 90s? And Obama? Rinse, lather, repeat.

When Bill Clinton proposed a modest increase in the top marginal tax rate in his 1993 budget, every Republican voted against it. Trickle-down economists proclaimed that it would lead to economic disaster. But the tax increase on the wealthy was followed by one of the greatest periods of prosperity in American history and resulted in a budget surplus. When the Republicans came back into power in 2001, the administration of George W. Bush pushed the opposite policies, which had invariably produced calamity in the past. Predictably, that happened again in 2008.

“A modest increase in the top marginal tax rate” – when are the Left’s ideas ever anything but “modest” or “reasonable”? And if we’re blaming Bush for 2008 (hey, he finally got the year right!), how about if we blame for Clinton for the dot com bubble burst after he rode the wave of the telecom boom? Nah, I’m not blaming Clinton any more than I’m blaming Bush. Although I’m still interested to see this connection for how tax cuts caused The Great Depression.

Just how disastrous would the proposed reincarnation of the failed Republican trickle-down policies of the past be for the American people and the future of the nation? A few ways:

Before I read this article the first time I predicted substanceless, boilerplate Leftist rhetoric. So how did McElvane fare?

Repealing the estate tax, or, as Republicans have dubbed it, the “death tax.” But the estate tax is not a tax on the dead; it is a tax on their heirs. Repeal would reverse an important aspect of the American Revolution and establish an American hereditary aristocracy. If your estate is not above $11 million, your benefits from this portion of the GOP’s tax cut will be a nice round number: zero.

Exactly how many times does someone’s earned income have to be taxed? But let’s focus on that $11M number – how low does it have to be before the Radical Left buys in? I mean seriously – if I die with $100 left to my name the Radical Left would complain how this law disproportionally favors people who created and responsibly managed their money in their lifetimes.

Eliminating deductions for state and local taxes. The GOP has called these deductions favoritism for people who live in high-tax states. In fact, ending deductibility of state and local taxes would tax income that has already been taxed away from a taxpayer. It is, quite simply, double taxation.

No, I’m not making this up. He literally, in the immediately preceding paragraph, try to argue away double taxation. And no, not forcing people who are fortunate enough to not live in blue states to subsidize our countrymen unfortunate enough to be ruled by Democrats is not the definition of double taxation.

Repealing the Alternative Minimum Tax, which assures that wealthy people who hire accountants to find all the obscure ways to avoid taxes cannot escape taxation altogether. Repealing it would save Trump millions.

Wait, tax avoidance, and using accountants to do so doesn’t already exist? I had no idea! Of course, we already know that tax avoidance is nothing new to the greediest, most horrible people in America.

Extending the “pass-through” provision to noncorporate businesses, including some 500 entities Trump owns. It would allow the owners of these businesses to pay taxes at 25 percent, instead of 39.9 percent. This provision would allow Wall Street fund managers, among other very wealthy people, to pay a lower tax rate than many middle-class Americans pay.

In other words, by lowering the tax rate we’ll see less tax avoidance. Because whatever the amount of tax collected on 25% of $X, I’m guessing it will be more than 39.9% of zero.

Ending the deductibility of large medical expenses.

I could be wrong, but this sounds like part of a larger refer effort, perhaps something like health care reform? Maybe reforming the worst health care legislation since FDR tied health care to one’s employer isn’t such a bad idea?

Taxing waived tuition for college students, ending deductibility for student loan payments, and even disallowing teachers from deducting what they spend on school supplies for their students.

How about we stop market distortions of college tuition as well? Six figure debt to give a cushy job to “Diversity Directors” doesn’t seem like a good idea. This is a good start

Ending the Affordable Care Act’s individual mandate, which would cause 13 million Americans to lose health insurance and result in much higher premiums for those who do get insurance through the exchanges. The Congressional Budget Office has indicated that, if enacted, the Republican tax bill may force deep cuts in Medicare through a generally unknown budget rule that its deficits would trigger.

Um, you misspelled “13 million Americans will no longer be forced to buy crud, expensive health insurance”.

The analysis of the nonpartisan Congressional Budget Office found that people making less than $100,000 a year (approximately 80 percent of American households) will have their taxes increased while the millionaires and billionaires will make off like bandits.

This was the same CBO that told us how great Obamacare would be, right? And yes, I’m being lazy here but when someone makes an equally lazy blanket statement like that nobody making less than $100K will benefit those claims aren’t even worth my time. Next.

In the 1920s, Republicans were in full control of the federal government and used that power to pursue their objective to “make the well-to-do prosperous.” It didn’t “leak through on those below.” In that decade, the mass-production American economy became dependent on mass consumption. For it to work, the masses need a sufficient share of the national income to be able to consume what is being produced.

So why were they called The Roaring 20s? Did we really have a decade where the wealthy laughed as they threw burning 100 dollar bills out the window? I thought that the 20s were a time of prosperity? Misery was what we had under the decade of Hoover/FDR Leftist policies.

Republican policies in the ’20s instead pushed to concentrate more of the income at the top. Nine decades later, Republicans are rushing to do it again — and they are sprinting toward an economic cliff. Another round of Government of the People, by the Republicans, for the super-rich will be catastrophic. The American people must call a halt before it’s too late.

That was the end of the article, and did you notice what wasn’t anywhere in McElvaine’s short story? That smoking gun, what it was that led to whatever it is he thinks that Conservative policies caused. If you want more detail on what actually happened (Spoiler: It doesn’t match Leftist dogma), check out this post from my “Economics for Politicians” series from a few years back. And if you’re wondering if there’s historical precedent for the radical Left’s hysterics, there is. Over at Powerline Steven Haywood recounts similar overreaction to Reagan’s tax cuts back in the day.

Of course, while President Trump’s tax plan is a good start, it would be better if we were ready for serious and politically realistic tax reform – care for some Neutral Tax, anyone?

I came across this McElvane’s gem of a story in the Facebook feed of one of my Lefty pals, and the 25 or so comments were pretty much what you’d expect of any Leftist echo chamber. I was tempted to wade into that Fountain of Misinformation, but instead of joining what could have easily been a week long food fight (I’d have been outnumbered about 6-1, almost a fair fight for them), I decided that my time would be better spent writing a post on the subject. So thank you Robert S. McElvane!

And stay economically illiterate, my friend.

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Cross posted from Brother Bob’s Blog

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millions of middle-class Americans will soon see a tax hike if the bill is enacted) while heaping benefits on the super-rich, multiplying the national debt and endangering the American economy.

Again, I have to ask: if only the .01% is getting a tax break and “millions” will pay even MORE taxes, what is supposed to generate the enormous deficit?

Um, you misspelled “13 million Americans will no longer be forced to buy crud, expensive health insurance”.

A personal anecdote here, I have recently retired but cannot enroll in Medicare yet. So, I continue the insurance I had through work, though I pay for 100% of it. My company pension (after 37 years) just covers it. However, being showered with healthcare.com emails about enrollment, I checked into the miracle of Obamacare. There, for only $1900 a month, I could get the Bronze plan that has only a $30,000 deductible. I feel like a fool for turning it down! (I am far too “wealthy” to qualify for subsidies)

Yes, beyond any doubt, the left merely wants to disparage anything Trump does that will support his reelection.

@Bill… Deplorable Me: The deficit comes from them refusing to cut spending a penny and while they are at it how about a nice raise in pay for themselves. And redecorate all the offices, set up a fund for deviant behavior payoffs. Conventions in Las Vegas are loads of fun.

I had to laugh at this one:
“In fact, ending deductibility of state and local taxes would tax income that has already been taxed away from a taxpayer. It is, quite simply, double taxation.”
You mean like the Estate Tax?
Property taxes?
Sales taxes?
Gasoline taxes?
Mileage taxes?
Corporate taxes?
They’ll probably want a K-Y Jelly tax next, because we’ll need to buy so much more of it.

@Petercat: Does anyone recall the liberal outrage when Obamacare eliminated the before-tax benefit of paying for your employer-provided health care, essentially a huge tax on health care benefits?

Nope.

@Bill… Deplorable Me: Bill, your comment about just retiring, I’ve been retired for a long time and use Medicare. Let me advise that you do a good job of researching which one to sign up with. Plan F and Plan G are the most likely choices but plan F won’t be available after 2020 so they’re raising the price of it to get most off of it. Plan G pays for everything, as F does, but has a small deductible (about $160 a year on Dr paymt). But there are different prices depending on the company you choose. I recently just changed companys and between me and my wife, the cost went down from 590 monthly to 298 monthly, so , just be sure to look into it, it can benefit you greatly.

@Redteam: I’ll be on Medicare next year; just got the information package and my card from them. Thanks for the info.

@Greg: My conclusion is to not waste time reading what the lying propaganda organ WaPo has to say.

@Deplorable Bill: I never read anything from the Wa Po or NYTimes. First they don’t believe in net neutrality, they want me to pay them to read articles that do not usually contain even one grain of truth in them. I wouldn’t read their stuff even if they paid me to read it. Since Greg is able to read it, I guess he thinks it is valuable enough to pay for it.
PS Greg, what is the cost of your subscription to Wa Po? And do you feel as if you’re being ripped off?

@Redteam: Considering that we are STILL being told the Bush tax cuts were “for the rich”, while we all know differently, and the tax cuts generated an additional $750 billion in tax revenues and reduced deficits, very little of what liberals say about THIS tax cut should be considered true.

Never say you weren’t that the tax cuts were a scam. You’re now being warned again. The scam, phase 2:

Budget Estimates Show New Tax Cuts For Wealthiest Americans Threaten Middle-Class Retirement

@Greg: Good thing Obama is taking credit for the economy we can blame him.

Keep asking: Why is your tax cut so small?

Now consider the increase in your take-home pay as a result of December’s $1.5 trillion tax cut. House Speaker Paul Ryan broadcasted the power of the tax cut by tweeting about a high-school secretary’s $1.50 increase per pay period, which would more than cover her Costco membership fee.

Even if your take-home paycheck increases by, say, $25, this amount is tiny in comparison to the rich. The top 0.1% — annually making over $3.6 million — will average an estimated annual $85,640 tax cut. This does not include the billions saved by corporations, whose tax rate is permanently cut roughly in half, along with drastic reductions in overseas earnings tax.

If the rich had not been given such a large tax cut, we estimate your cut would be two or three times larger. For example, if you eliminate the cut for the top 10%, everyone else’s cut would be expected to be over twice as much.

Eliminating the cut for the top 20% could lead to a more than tripling of the average cut. If you did receive a tax cut, instead of proudly saying, “look at the size of my tax cut,” you should ask “why is my tax cut so small?”

Not only tiny, but temporary—unlike those for America’s giant corporations and the wealthiest, on both counts.