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Yo, Wharton! Tax Cuts DON’T “Create Jobs” !!!

Photo by mSeatttle via Flickr Creative Commons license

Photo by mSeatttle via Flickr Creative Commons license

Just how bizarre can this election get?

Yesterday, the Wharton School of Business released its predictions about the long-term effects of Donald Trump’s tax plan.  Their report uses something called “dynamic scoring” – which is an economic model that assumes tax cuts will create jobs.  (You remember that old saying about the word “assume.”)

Somebody call the fact-checkers.  That assumption should have been thoroughly debunked by now.

Remember, that assumption was the basis of the 2001 Bush tax cuts.  (Remember how those tax cuts were supposed to be “temporary”?)  That’s when thinktanks started using this “dynamic scoring” model, courtesy of the Heritage Foundation.  Those particular tax cuts were supposed to generate 1.6 million new jobs by 2011.  They were supposed generate enough federal revenue to pay back the entire federal debt.  They were supposed to save Social Security and Medicare.  (You can read the 2001 Heritage Foundation report here.)

Instead, those tax cuts sent the federal deficit soaring – and that’s when Alan Greenspan suggested cutting Social Security to pay for them.  (Remember, most of those tax cuts benefitted rich taxpayers.  But Greenspan wanted to cut our benefits – benefits we have pay for, with each paycheck – to make those tax cuts permanent.)

Now, here comes Trump.  And he wants to give the rich the GREATEST TAX CUT EVER – an average $1.1 million tax cut.  Each.  (Nevermind that he’s going to raise taxes on single mothers and families with lots of children.)

And Wharton says those tax cuts are going to magically “create jobs.”  (Nevermind that tax cuts haven’t ever
“created jobs” in the past.  Wharton’s dynamic scoring model says things will be different, this time.)

Let’s get real.  The folks who have been getting tax cuts haven’t been spending their extra money creating jobs.  They’ve been spending their extra money playing the stock market.  Wall Street keeps hitting record highs, and all that money had to come from somewhere.

It’s really hard to track what individual billionaires spend on the stock market.  But corporations have been getting tax cuts, too – and their spending is easier to find.  I added it all up a few days ago… and in 2015, corporations spent $5.5 trillion on the stock market, buying shares of their own or other companies.

$5.5 trillion, in one year.  It’s hard to wrap your head around that number, so let’s think of it in some other ways…

  • It could have been used to create 70 million jobs, at the median wage
  • It’s more than 25% of the federal debt
  • It’s more than six times what Social Security paid out in benefits last year

And they spent it buying stock from other stockholders.

So… apparently, that’s what happens when we give corporations tax cuts.  They pass the extra money along to “investors.”  They don’t create jobs with it.

The reality is, corporations don’t create jobs out of the goodness of their heart… they create jobs when they need to.  When the workforce they have can’t keep up with the demand for their business.

Notice that word: demand.  Capitalist economies only grow when there is increased demand.

And that means if government keeps taking money out of the pockets of consumers (single mothers, families with lots of children) and giving it to investors (GREATEST TAX CUT EVER), our economy is going to keep shrinking.

Nevermind what Wharton’s fancy-schmantsy dynamic scoring model might imagine.


BTW, it just so happens that Trump is a Wharton alumnus.  But I didn’t see that fact included in any of the press coverage of Wharton’s economic prediction.

“Let Them Eat Cat Food”: The Truth Behind The GOP’s Ten Year Push To Cut Social Security

marie antoinetteAs the latest GOP-caused national crisis begins to coalesce around the Tea Party’s demand for Social Security cuts… here are some facts worth remembering:

  1. Even though President Obama included chained-CPI in his FY14 budget proposal, it wasn’t his ideaChained-CPI – which incrementally reduces Social Security benefits – was first proposed in 2003 by then-Federal Reserve Board Chairman Alan Greenspan as a way of cutting the federal budget deficit.  (Read Greenspan’s testimony to Congress here.)
  2. Almost exactly a year later, Greenspan was back before Congress, arguing that “Congress should make President Bush’s tax cuts permanent and cover the $1 trillion price by trimming future benefits in Social Security and other entitlement programs.”
  3. The American public has never supported the Bush tax cuts. Just months after the first round of tax cuts was passed, in 2001, a Washington Post poll found that 57% of Americans wanted to roll back the tax cuts in order to preserve the federal budget surplus. (Yes, we had a surplus, back then.)
  4. The Bush tax cuts primarily benefited the folks at the top of the food chain.  The top 1% received more tax benefits than the bottom 80% of taxpayers combined.
  5. Even Bush’s own economists disavowed the idea that lower taxes improve the economy.  Back in 2006: “Even under favorable assumptions, making the tax cuts permanent would have a barely perceptible impact on the economy.  Under more realistic assumptions…the tax cuts could even hurt the economy.”

So here we are, 12 years after the public said “repeal the tax cuts”… 10 years after Greenspan suggested using chained-CPI to reduce the budget deficit… nine years after Greenspan explicitly told Congress to choose between tax cuts and Social Security… seven years after Bush economists reported that his tax cuts would likely hurt the economy…

..and there’s a faction of the Congress insisting on even more tax cuts… and Social Security cuts… or they’re going to blow the economy to smithereens.

As you’re watching events unfold in Washington, over the next few weeks, remember this fact, too:

By 2010, even Alan Greenspan thought the Bush tax cuts should go away.

—–

Got the aspirin bottle handy?

In his 2003 testimony to Congress, Greenspan also suggested a third path: increased immigration.  “Short of a major increase in immigration, economic growth cannot be safely counted upon to eliminate deficits and the difficult choices that will be required to restore fiscal discipline.”

(But it turns out that that same small faction in Congress doesn’t like immigrants, either.)

—–

Don’t know what the chained-CPI brouhaha is all about?  Read the latest report from the National Committee for the Preservation of Social Security and Medicare here.

Here’s how I look at it:

Chained-CPI is a vivid example of the “race to the bottom” that unions have been trying to stop for years.  It assumes that when personal finances are tight, consumers will alter their purchasing behavior and buy cheaper products.  Then, since they’re spending less, Congress figures they’ll need less money in Social Security benefits.

It’s the image of a senior citizen, trying to make ends meet, who gives up buying beef because she can only afford chicken… and then her Social Security benefit drops, so she gives up chicken and buys tuna… but with the next benefit drop, she can’t afford tuna anymore.

It’s the cat food thing.

(And BTW… given that about 12% of our nation’s jobs are in retail… I gotta wonder about the idea of “solving” a federal fiscal crisis by slowly strangling consumer spending.)

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