Friday, September 01, 2017

Harvey, Taxes, and Debt

by Michael Dorf

On Tuesday, President Trump and the First Lady went to Texas to survey the damage caused by Hurricane/Tropical Storm Harvey. Although the Trumps were widely mocked for their dubious attire, and Trump's speech said out loud what a savvier politician would only have thought to himself (namely, that his main concern was for how people will perceive his performance), the Texas visit was, unusually for Trump, almost normal. There is no operational reason for a president to visit the site of a natural disaster, but such visits have come to be the norm, as a means by which the federal government expresses support for the people most directly affected. In an administration characterized by chaos, racism, ignorance, incompetence, and petty cruelty, Trump's brief visit to Texas stands out as relatively ho-hum.

Not so his visit to Missouri the next day to tout his tax "plan." The quotation marks recognize that Trump has not proposed anything with sufficient detail to count as a plan. Nonetheless, we can assume--because Trump just said as much and more importantly, because it is the Republican go-to move--that any tax proposal with a chance of garnering majority support in Congress will cut corporate tax rates and cut individual taxes mostly for the rich and especially for the super-rich, but will be sold as a boon to the middle-class. The Reagan-era phrase "trickle-down economics" has fallen out of fashion, but in the wake of Harvey, it is probably a less embarrassing metaphor (even for a kompromised president) than the adage that "a rising tide lifts all boats."

The nautical metaphor is sometimes true but also mostly irrelevant. True, economic policy that promotes general prosperity will usually redound to the benefit of a great many participants in the economy, including those at the bottom. It's even true that when tax rates are extremely high, cutting taxes can stimulate economic growth sufficient to make up for--or even more than make up for--the revenue lost. Arthur Laffer was right about the general shape of the curve that plots government revenues as a function of tax rates. But economic history--including the recent and ongoing misery in Kansas under the yoke of Sam Brownback--shows that Laffer was spectacularly wrong about the location of the curve. Tax rates in the United States are nowhere near as high as they would need to be to make a tax cut produce more rather than less government revenue.

When they're not on the stump, Republican politicians appear to know that tax cuts are not a magic bullet. Lately, attention has focused on hypocritical Republicans who now favor federal Harvey relief but opposed federal Sandy relief. Rather than simply admit that Sandy hit blue states but Harvey has hit red states, they have offered (as they did at the time of Sandy) a fig leaf of a justification for the prior stinginess. For example, Ted Cruz says that the Sandy bill was full of unrelated pork. It wasn't.

But Cruz and other GOP bigwigs accused of hypocrisy (like Paul Ryan and Mick Mulvaney) also say that federal funds for relief for victims of Sandy should have been offset by equal reductions in other federal spending. Never mind the question whether they'll say the same thing about Harvey relief. Even focusing just on Sandy, why impose such pain when, according to Republican dogma, there was a painless solution? If GOP politicians really believed that tax cuts pay for themselves, they would have proposed that Sandy relief be funded by the Lafferian magic of tax cuts for the wealthy. That they did not do so almost speaks well of them.

To summarize, when not selling snake oil, even most Republicans not named Sam Brownback seem to realize that, over the entire range of the plausibly enactable tax-rate range, if the government spends more and taxes less, it will need to borrow more. Thus, in a rational world, they would act quickly and without fanfare to authorize the necessary borrowing. That is, they would raise the debt ceiling, which, in about a month, will be reached. However, anyone who thinks we live in a rational world has not been paying attention.

As readers of my work with Prof. Buchanan on the debt ceiling are likely aware, my clear first choice would be for Congress to permanently repeal the asinine debt ceiling statute. Congress can control the course of debt entirely by calculating the difference between revenues and expenditures. The debt ceiling statute serves only to give hostage takers in Congress (or now, perhaps, in the White House) an opportunity to threaten to crash the global economy in order to obtain what they cannot otherwise get through the ordinary legislative process.

That said, I recognize that given the opportunities for demagoguing to a public (and too often a press corps) that does not understand the difference between deficits and debt or between a government shutdown due to the lack of an appropriations measure and a default due to failure to raise the debt ceiling, there is no short-term prospect of debt ceiling repeal. As a patriot, I want to be helpful. Accordingly, I hereby humbly offer to any member of Congress who would otherwise fear opprobrium or a primary challenge a script to recite to explain voting for a clean debt ceiling increase or, more likely, a bill that "suspends" the debt ceiling. It's certainly not what I believe. It may or may not be what you believe, dear member of Congress. But it might give you some cover. Here is the script:
Hurricane Harvey was an unprecedented 500-year storm that has left devastation in its wake. We cannot stand idly by and allow tens of thousands of  our fellow citizens to suffer through no fault of  their own. Meanwhile, I support the president's efforts to jump-start our economy by lowering the taxes that are stifling our nation's job creators. Taken together, these two absolutely necessary measures require that we prudently increase our borrowing in the short term, while interest rates remain low. That's why--although I am proud to call myself a fiscal conservative--I am voting for this measure that suspends the debt ceiling through the beginning of 2025. That will give President Trump the time he needs to make America Great Again.
You're welcome.

8 comments:

Joseph Simmons said...

"Congress can control the course of debt entirely by calculating the difference between revenues and expenditures. The debt ceiling statute serves only to give hostage takers in Congress (or now, perhaps, in the White House) an opportunity to threaten to crash the global economy in order to obtain what they cannot otherwise get through the ordinary legislative process."

The debt ceiling also fosters public attention and accountability for politicians' begging, borrowing, and stealing. The politicians who supposedly threaten the global economy do it in service of their constituents. You're absolutely right that this process is terrible. The accountability should come in when the money is actually being spent. Yet I'm not sure how we encourage opposition to spending (in a bipartisan way). This presumes that national debt is dangerous. Yet there is disagreement on that point, which I think helps the explain the seeming fondness for the debt ceiling by members of the GOP and opposition by the Democrats.

If inspired, I would appreciate your or Prof Colb's take on this disturbing decision by a court in Oregon ordering the "debarking" of noisy dogs: http://www.oregonlive.com/pacific-northwest-news/index.ssf/2017/08/owners_must_surgically_debark.html

Joe said...

The last point would raise their arguments that non-human animals with the appropriate degree of consciousness [this underlines the usual focus of their writings though "vegans" generally also don't eat let's say honey or mollusks] are "persons" with certain rights. The debarking would likely be a violation of said rights.

To me, it seems in part a zoning issue. At worse, the remedy was to not allow the dogs to be in that location. The barking was according to the article necessary for their livelihood. It would then be a matter if that sort of business (as would be the case with a factory in a residential area, for example) was appropriate for that area.

Joseph Simmons said...

Prof. Colb typically has insightful and unexpected legal arguments in addition to the moral dimension of animal issues. It is easy for us to say "the remedy was to not allow the dogs to be in that location" but I bet there are more interesting legal issues as well as policy concerns that would resonate with those of us who don't share the same view of animals as the bloggers here. I didn't want to sidetrack the topic of this particular blog so this will be my last word.

Shag from Brookline said...

Is Joseph suggesting a metaphor with a "barking president"?

Joe said...

I said it is "in part" a zoning issue.

Shag from Brookline said...

The Trump/Republican tax "plan" primarily for the wealthy lifts all yachts, swamping rowboats.

Joe said...

Mets pitcher Matt Harvey pitching in Houston today as Astros come back.

Shag from Brookline said...

Sen. John McCain has called for Congress to "play ball."