Monday, November 27, 2017

Of Magic Asterisks, Time Bombs, and Other Republican Deceptions

by Neil H. Buchanan

The Republicans' attempt to sell their damaging and regressive tax plan is proceeding pretty much as one would expect.  They are making unsupportable economic claims while endlessly repeating an up-is-down-freedom-is-slavery-everything-will-be-different-this-time big lie, claiming that their proposals are all about improving the lives of middle class people.  This has become standard operating procedure for Republicans in the twenty-first century.

Although we have long since become accustomed to most of this, we must constantly remind ourselves that it is a very sad state of affairs when we find ourselves saying, "Sure, one of the two major political parties cannot make an honest case even for its most fervently held policy goal, but what are you gonna do?"  Even so, at this point it would barely be worth writing yet another column on this topic if there were not some new aspect to the Republicans' relentless, pathological dishonesty.

And as it happens, there is something new going on in late 2017.  The Republicans have openly embraced not only fantasy economic forecasting but fantasy political forecasting as well.  They have decided to rest their political case on the assertion that the future tax increases for lower- and middle-class people that are necessarily built into their scheme will never happen, because today's Republicans just know that a future Congress will never let them happen.

This is even worse than it sounds.  Indeed, it represents an effort by Republicans to ignore very recent evidence about how the political process can go off the rails.  They are telling non-rich Americans to trust them, even though these same Republicans have shown no ability to predict their own future actions.

Remember the "sequester"?  That was the set of future automatic spending cuts that were included in a 2011 spending bill but that supposedly would never happen, because we all knew (or thought we knew) that everyone would find them so unacceptable that they would be repealed before they ever happened.  And then they happened.

Republicans apparently have conveniently forgotten all about that mess.  To understand why that matters so much today, we first have to expose the latest clumsy sleight of hand that is embedded in the Republicans' current strategy.

The Republicans' basic move works like this: In order to keep the official estimate of the ten-year cost of their regressive tax cuts below the limit that they imposed on themselves (which they decided was necessary, because otherwise they would need to compromise with Democrats), they set up their plan so that taxes would rise for many/most non-rich people before those ten years will end.

These stealth tax increases include putting time limits on various middle-class-friendly provisions and adopting an artificially low official inflation measure.

That latter proposal is deeply ironic for a party that views Ronald Reagan as its spiritual hero.  One of Reagan's most admired moves, after all, was to eliminate "bracket creep," by which inflation automatically pushed people into higher tax brackets even though their wage and salary increases were merely holding their real buying power steady (or, worse, even if they were actually losing ground in real terms).

Now, however, Republicans are proposing to increase many people's taxes by deliberately understating the effects of inflation.  Apparently, they are willing to do anything to give tax cuts to rich people and large corporations, up to and including repudiating their patron saint.

The bottom line is that, unless a future Congress undoes the bracket creep and renews those expiring tax breaks, most non-rich people will see their tax bills rise over time (with big jumps in particular years).  And this is where conveniently naive political prognostication becomes part of the Republicans' sales pitch.

As noted above, Republican leaders are saying quite openly that people should not be worried about those future tax increases, because tax increases are unpopular, which means that future Congresses will never let them happen.  "We're not really doing this bad thing to you," they say, "It's just a gimmick, so don't worry."  (Yes, the Republicans themselves have used words like "gimmick.")

Many commentators have appropriately criticized the Republicans for trying to have it both ways.  Republicans, after all, are saying simultaneously that their bill will cost $1.5 trillion over ten years and that, less than ten years from now, their booby-trapped bill will force a future Congress to admit that the whole thing was much more expensive.

Moreover, these commentators have noted, it is hardly surprising that it is the non-rich, non-corporate population that is being told to trust that the bill will later be changed, whereas the apples of the Republicans' collective eye are guaranteed that their future situation will get worse only if a future Congress actively makes it so.

Republicans wrap this in happy talk about how businesses need "certainty," but might households and small businesses also plan more effectively with a bit less uncertainty about their finances a few years down the road?  Would, say, planning for college not be smoother with less uncertainty about the future?

Prior to last month, Donald Trump and the Republicans were rightly criticized for not having proposed full-fledged tax plans that could be studied and scored.  The analogy to their health care fiasco was obvious.  They had spent the entire Obama era telling everyone that they were ready with principled, conservative plans to fix health care and to reform the tax system.  When it came time to lay their cards on the table, however, they had nothing.

This was also similar to now-House Speaker Paul Ryan's widely hyped plans during the Obama era in which he promised to cut future government spending and reduce borrowing.  Ryan's proposals, it turned out, always relied crucially on "magic asterisks," that is, unspecified cuts and changes that simply amounted to the assertion that -- when push came to shove -- they would find a way to make the numbers add up.

Official economic estimates of those plans even included explicit statements to the effect that Ryan had ordered the government's estimators to include those unspecified savings, even though it was impossible to see where sufficiently large cuts could be made.

It might be tempting, therefore, to say that, at the very least, the Republicans have finally been forced to put forth a real plan.  No more magic asterisks are allowed when you have to pass a real bill.  Specific tax provisions have to be identified.  No more bluffing or bullshitting allowed.

Would that it were so, but the Republicans have used their claim that "it'll all be changed later" as the equivalent of a magic asterisk.  They cannot say that some blanks will be filled in later, but they have decided to try to get away with saying that some unappealing non-blanks can be erased later.  Either way, they are not facing up to what they are doing, because they know that middle-class people still vote.

That is a serious -- one might even say devastating -- criticism, but it does not even include the other essential aspect of the Republicans' snake-oil salesmanship.  Let us momentarily set aside everything above and simply assess the Republicans' prediction that unpopular future tax increases will never happen.  As dishonest and wrong as their economic forecasting is, it turns out that their political forecasting might actually be worse.

In 2011, after the Republicans had regained control of the House, party leaders decided to turn what had been a relatively harmless law, the debt ceiling statute, into a weapon of mass destruction.  In what was surely one of his most fateful mistakes as president, Barack Obama agreed to negotiate further spending cuts outside of the normal budgeting process, effectively capitulating to blackmail, after Republicans threatened to force the U.S. to default on its obligations for the first time in history.

The resulting bill created a so-called Supercommittee, which was supposed to come up with a bipartisan budget plan.  The disciplinary mechanism, the sequester, was a threatened across-the-board spending cut, applying equally to both domestic and military discretionary spending, which would kick in automatically if the Supercommittee failed.

The idea was that Republicans would never allow military spending to be cut, while Democrats would never allow domestic spending to be cut.  With both sides facing threats to their favored political commitments unless the parties acted together, they would be forced to compromise.

The Supercommittee failed, of course, but when it came time to prevent the sequester cuts from taking effect, Congress did not act.  The inevitable harms caused by those cuts manifested themselves immediately, and Congress has spun its wheels ever since trying (in ad hoc ways) to undo the effects of the sequester.

Similarly (and somewhat relatedly), the so-called fiscal cliff at the end of 2012 involved baked-in changes to taxes and spending that were only partly offset by frantic negotiations that lasted into New Year's Day of 2013.  As Sen. Mark R. Warner (D-Va.) recently put it, this new bill "[sets] up a whole new set of 'fiscal cliffs.'"

The only reasonable conclusion to draw from these very recent, highly salient experiences is that we should never assume that an outcome is so bad that it will force a future Congress to act.  Right now, Republicans are saying, "Don't worry, no Congress would ever allow middle-class-friendly tax cuts to expire."  Many of those same people said exactly the same thing in 2011 about the sequester cuts.  It is all too easy to imagine them a few years from now looking the other way while the automatic tax increases take effect, saying that Democrats are somehow to blame.

Especially in an era in which seemingly every political norm and expectation has been brazenly broken -- an unqualified reality TV show host who brags about sexual assault becomes president, Senate Republicans steal a Supreme Court seat and hold open dozens of judgeships, bills are written in secret and voted on without hearings or "regular order" -- why would anyone count on what a future Congress might do?

Republicans have set before us a plan and a promise.  Their plan is terrible and does not do anything that they claim it will do -- but it does help the best off among us.  Their promise is that the few crumbs that they initially would sprinkle among the non-elite citizenry will not really be taken away later, even though their plan says that they will.

Even if the Republicans were not lying, they would be ignoring their own track record.  This is not a good bet for the rest of us.

4 comments:

  1. One of the worst aspects of the tax bill doesn't even involve taxes. The NYT is reporting that in order to get Republican votes the tax bill may include a provision that allows tax exempt churches to use tax exempt contributions for political purposes.

    Imagine a small church in western North Carolina that ejected all members who voted for Obama (yes that actually happened) raising tens of millions to promote a sectarian, ultra religious government.

    "Among the changes in the tax bill that passed the House this month is a provision to roll back the 1954 ban, a move that is championed by the religious right, but opposed by thousands of religious and nonprofit leaders, who warn that it could blur the line between charity and politics.

    The change could turn churches into a well-funded political force, with donors diverting as much as $1.7 billion each year from traditional political committees to churches and other nonprofit groups that could legally engage in partisan politics for the first time, according to an estimate by the nonpartisan congressional Joint Committee on Taxation."

    Yes, it could happen.

    ReplyDelete
  2. The merger of church and state supported by the Revengelicals' Trumpean Hallelujah?

    ReplyDelete
  3. Those interested in following up David's comment might check out Ellen P. Aprill's "Amending the Johnson Amendment in the Age of Cheap Speech." The text runs only 12 pages. It's abstract is available at the Legal Theory Blog with Larry Solum's "Recommended" and a link to SSRN for download.

    ReplyDelete
  4. If the Trump/GOP tax "plan" is enacted with the permanent cut in corporate tax rates, might that revive the dormant accumulated earnings tax adding tax breaks to stockholders for low rates on dividend income?

    Also, is it clear what the "plan" provides for tax basis to recipients on assets received from a decedent with the elimination of the Estate Tax? Would the Code's gift tax provisions remain in place?

    With this tax "plan" the idiom "Nothing is certain but death and taxes" has to be reconsidered. Eventually we all die, but for the really wealthy highly appreciated assets, even those received from a decedent, may escape taxation. It wasn't that long ago that the income/asset inequality gap had become a significant concern. This tax "plan" will expand the gap. Can we expect a populist revolt?

    ReplyDelete