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.