Thursday, January 04, 2018

Trump, Republicans, Deregulation, and Permanent Tax Cuts

by Neil H. Buchanan

In an apparent effort to prove that they are objective, The New York Times and The Washington Post have recently been assessing Donald Trump's first almost-year in office with feelgood descriptions.  Trump is given a pass because he has worked the refs almost to death, and they are desperate to try to prove that they are not the enemy of the people.

We thus see phrases like "reinventing the presidency" stand in for "tearing down constitutional norms."  Reporters allow "success" to be defined by the people declaring their own successes, like Republicans passing a mess of a stroke-the-rich tax cut bill and putting unqualified ideologues on the bench.  Trump and a party in full control of all branches of government have managed to do a few things that they wanted to do.  These somehow constitute notable accomplishments.

That is mostly a matter of annoyance, although it does contribute to the continuing normalization of that which is and must remain unacceptably abnormal.  I will set those long-term political concerns aside here, however, to focus on a recent article by two Times reporters: "The Trump Effect: Business, Anticipating Less Regulation, Loosens Purse Strings."

The article is a veritable study in dutifully covering all of the bases while making an argument that the writers know is at best speculative (and is actually completely wrong) -- and then packaging that argument not only as a partisan statement but one that gives Trump credit where absolutely none is due.

The major point of The Times's article is that the Trump Administration's deregulatory efforts are causing businesses to make decisions that will be great for the economy.  The opening sentences fairly gush:
"A wave of optimism has swept over American business leaders, and it is beginning to translate into the sort of investment in new plants, equipment and factory upgrades that bolsters economic growth, spurs job creation — and may finally raise wages significantly.
"While business leaders are eager for the tax cuts that take effect this year, the newfound confidence was initially inspired by the Trump administration’s regulatory pullback, not so much because deregulation is saving companies money but because the administration has instilled a faith in business executives that new regulations are not coming."
We find out several paragraphs deep into the article that this is nonsense on several levels, but even though they do explain some of the problems with the argument that they are making, the authors assure their readers that "business executives say the Trump administration deserves credit."  They even give the last word in the article to Trump's chief economist, who concedes that no one really knows why the economy is doing fairly well but is certain that "the most plausible story" is deregulation (or the promise thereof).

In a column next week, I will dive into the many problems with that argument.  For now, however, I will limit myself to making two points, one political and one regarding the Republicans' dishonesty in justifying their permanent tax cuts for corporations.

My political point is that it is essential to realize that any imagined positive effect from the promise of deregulation is not a "Trump Effect" but is rather a "generic Republican anything-businesses-want effect."  That is, it is impossible to imagine any Republican president in the current environment (with majorities in both houses of Congress and leaders who are willing to break all rules and norms to get what they want) not doing what the Trump Administration has done.  Indeed, they probably would have been able to do more, because they would not have had to deal with Trump's many, many faults.

Who would have done anything different?  Ted Cruz?  Marco Rubio?  Bobby Jindal?  Carly Fiorina?  Even the faux-moderate John Kasich would have signed on for all of this craziness, because it defines the modern Republican Party.  The loudest voices (and largest donors) in business do not like what the government does, so Republicans are eager to make the government do what businesses want.

I do realize that business leaders have their own reasons for glorifying Trump.  They lose nothing by saying, "Hey, we're about to build a new assembly line, and Trump is the reason."  The infamous Carrier Corporation deal a year ago in which the company was explicitly bribed to keep a thousand jobs in Indiana (but later broke its promises) is the template.  The man-child loves flattery.  But why does a major newspaper feel the need to invent a "Trump effect"?

Republicans, moreover, are now in a position where they do not need Trump anymore.  (Actually, they never did.)  They have proved that they do not know what to do about health care, and they broke the political system to pass their regressive, incoherent, and mistake-riddled tax cut.  He is not allowing them to do anything that they could not do on their own.  Trump is already a huge drag on them politically, costing them in every election that has been held since November 8, 2016.

Why, then, would Republicans say, "We need to keep this guy -- to the point where we collude in covering up and ignoring his impeachable actions -- because he is doing exactly what Mike Pence would do on economic policy if he were president?"  No matter whether you call it blame or credit, the policies that Trump's administration has pursued are not at all Trump-specific.

Beyond the branding question, however, my second objection to the argument in The Times is that this deregulatory atmosphere is presented as being simply great for business, even though that "atmosphere" could change precipitously.  Where is the argument for "certainty" that we have heard so often from Republicans?

This idea that businesses suddenly want to get started now because things are starting to look good politically flies in the face of the argument that Republicans made when passing their pro-corporate tax cuts last month.  Recall that the crumbs to non-rich taxpayers that Republicans included in the bill were given various expiration dates in order to reduce the long-term revenue cost of the bill.  This in turn allowed the Republicans to make the business tax cuts permanent.

Why was that so important to Republicans?  We were told again and again that businesses need long-term policy certainty in order to carry out their job-producing good deeds, and being told that their tax cuts would expire in six or eight or ten years would supposedly have completely undermined their confidence that they would reap the long-term benefits of the years-to-bring-to-fruition projects that they claim to have been refusing to green-light.

Yet The Times tells us that even before anyone knew whether Republicans would get their act together well enough to pass any tax bill at all, businesses were already unleashing their repressed animal spirits and starting to build things like infrastructure projects because they no longer worry about environmental hurdles.  Similarly, the end of net neutrality supposedly "helped prompt Comcast to announce that it would invest more than $50 billion in infrastructure over the next five years."

Five years is actually quite short for many infrastructure projects, but does anyone remember what is happening in less than three years?  November 3, 2020 is just over one thousand days from now.  A business that was basing its future success on policy certainty might at least consider the possibility that not only Trump but the entire Republican Party will be unceremoniously dumped in a wave election as the public's revulsion to Trump finally is given a chance to manifest itself.

Even so, The Times quotes a consultant who specializes in infrastructure projects:
"We have spent the past dozen years or longer operating in environments that have had an increasing regulatory burden.  That burden has slowed down economic growth, it’s slowed down investment in infrastructure. And what we’ve seen over the last year is a big deregulatory environment.”
Of course, he is wrong that the "burden" has slowed down growth, as I will explain in a future column.  The point here, however, is that this is all rather obviously inconsistent and opportunistic.  Businesses have always known about political risk, but even the businesses that have to plan over time horizons that could include multiple presidential changes are living Janis Joplin's philosophy: get it while you can.

I suppose one could argue that the effect would be even bigger if somehow political risk were erasable, but unless Trump and the Republicans really are on the road to installing Trump as a permanent monarch, political risk will remain.  (Indeed, even an autocrat can be deposed -- and his business enablers often do not fare well in the aftermath.)  The problem is that the people who claim that businesses simply cannot plan in an environment of uncertainty are now cheering while businesses do exactly that.

Even though the authors of the Times piece do point out that all of the good economic trends in the U.S. are mirrored in the rest of the world (where there is no Republican/Trump deregulatory regime taking shape), we are to believe that American businesses needed to hear Trump's happy talk about deregulation to get them to do what their overseas competitors were already doing.  And they somehow also needed the certainty of knowing that their tax cuts would be permanent to get them to do what the deregulation had supposedly already caused them to do.

If you have not already become a cynic, now might be the time.

7 comments:

Shag from Brookline said...

The Trump deregulatory rosy scenario for businesses remains subject to: "Be aware of Greeks ]and Bannon] 'baring' Trump/Russia."

And Trump had little to do with the content of the tax law of 2017. It did not attack Trump's campaign promise to eliminate favored tax treatment for carried interest of hedge funds owners. It did not mainly benefit the middle class as Trump had promised. Trump did get the new corporate tax rate increased from 20% to 21%. Perhaps that then allowed adding pass through benefits that would benefit real estate typhoons [sic] like Trump. Recall Trump claimed the tax law would cost him plenty; the gravity of that lie results in the tip of his nose striking the ground yards away.

Deregulation can hurt people, including Trump's "Forgotten" base in their workplaces. And the new tax law may eliminate millions from Obamacare coverage. The results of deregulation and the new tax law combined are not populist.

David Ricardo said...

As someone who has held several high level management positions in the private section I can say what any manager would say, which is that it is simply impossible for anything the Trump administration has done that affects major investment decisions. It simply takes too long and there is a substantial lag between policy changes and major management decisions and the implementation of those decisions. Everything that is happening so far is overhang from the Obama administration, just as economic activity in the 2009-10 years were the result of actions and the economic environment of the Bush administration.

John Barron said...

The corporate-owned media is pimping the corporate rape of the public fisc? Knock me over with a spoon!

Hate to break it to you, but we've been living under the heavy jackboot of fascism for at least twenty years. George Carlin got it dead-solid perfect: https://www.youtube.com/watch?v=h7yzi1I_Zsk The oligarchs control all the levers of power, and what we see and hear. And you wonder why tax, trade, and labor policy are designed to disadvantage the average man?

We barely pretend to have the illusion of republican democracy any more. The two wings of the Kleptocratic Party fight to see who can service the oligarchs, and this time, the Republicans won. http://www.bbc.com/news/blogs-echochambers-27074746

Professor Carlin appears to know more about law than any of our lawprofs: "Just when these American citizens needed their rights the most, their government took ‘em away. And rights aren’t rights if someone can take ‘em away. They‘re privileges." Discretionary cert (an oxymoron!) means that judges can dispense their own personal brand of ad hoc "justice" without consequences.

And almost without exception, citizens in the rest of the world can force prosecutors to prosecute the crimes of the high-and-mighty. As Canada’s Department of Justice observes, the right (and duty) to initiate a private criminal prosecution is one of those common law safeguards—"a valuable constitutional safeguard against inertia or partiality on the part of authority," Gouriet v. Union of Post Ofc. Workers, [1978] A.C. 435, 477 (H.L.) (Canada)—flourishing a pedigree as old as the common law itself. But this fundamental right was taken away from us by the judiciary, creating a two-tier system of justice.

Dorf and Segall pretend that our system works. Sorry to break it to you, but judges can (and often, do!) slam the courthouse doors in our faces. Well, Segall knows, but trying to find courage in the legal academy is like looking for Negroes in a Republican state convention.

The battle between the Parties is a distraction. Bread and circuses. The new boss is same as the old boss.

Shag from Brookline said...

I miss the late George Carlin. Late night and other comedians learned a lot from him. Carlin described with words rather than the ease of video clips, in long stage performances, sans teleprompter. Carlin would have had a field day with Trump and his Administration. Carlin could take the mundane, like "Stuff," and we'd understand. His "Hippy Dippy Weather Man" actually led to TV delivery of weather reporting that continues to this day. Carlin would have had a lot of fun with AG Jeff Session's weed-whacking "get off the pot" efforts, all with words and body language. Carlin wrote some funny observational books that I would reread portions of from time to time for some hearty laughs. Carlin observed: "Masturbation is not illegal. If it were, people would take the law into their own hands." Words matter. That was a lesson Carlin left us.

Times change. We've had a lot of positive progressivity with the justice system. But we need more. Some strides were being made during the Obama Administration on reforming criminal justice, which the Trump Administration is trying to undo. The legal academy has been at the forefront on reforming the criminal justice system. And keep in mind the Preamble to the Constitution.

John Barron said...

Detroit's Sonny Eliot was the first "Hippy Dippy Weatherman," ten years before Carlin came up with the concept: https://www.youtube.com/watch?v=GcKajrki0bQ

John Barron said...

Shag, we have a two-tiered justice system, wherein our overlords can do whatever they damn well please with utter impunity. Iceland prosecuted more banksters than we did in the wake of the financial collapse. That's Iceland--population, Anchorage, Alaska.

Remember Clarence Thomas's EIGA forms?

According to the DoJ, 18 U.S.C. § 1001(a) as amended in 1996 (after the Ethics in Government Act!) was intended to reach “documents that have most often been the subject of congressional false statement prosecutions, such as vouchers, payroll documents, and Ethics in Government Act (EIGA) financial disclosure forms.” United States Department of Justice, Criminal Resource Manual 902 (1997).

Thomas proclaimed that he “inadvertently omitted” the source of his wife’s earned income as required by the Ethics in Government Act, “due to a misunderstanding of the filing instructions.” Ariane de Vogue and Devin Dwyer, Justice Clarence Thomas Amends 20 Years of Disclosure Forms With Wife's Employers, ABCNews.com, Jan. 24, 2011. This becomes especially problematic in light of Politico’s revelation that Justice Thomas was filling out the forms properly until 1997—ostensibly, about the time that she joined the ultra-right-wing Heritage Foundation. And to not put too fine a spin on it, the reports are almost as incriminating as a pubic hair on a Coke can.

Through his conduct, Justice Thomas clearly demonstrated his knowledge of the difference between earned and investment income--correctly treating advances on his autobiography as non-investment income. The instructions are pellucid, and require him to disclose the source of wife Virginia’s non-investment income, but not the amount. Moreover, every American taxpayer is charged with the ability to distinguish between investment and non-investment income. See, 26 U.S.C. §§ 163(d), 212. It is a simple concept, explained thoroughly in any law school survey course on income taxation. Reading the damned form can’t be that hard.

It would be one thing if Justice Thomas were a day laborer, used to spending his days out in the fields or on construction sites, but Thomas is an Associate Justice of the United States Supreme Court, who has even bragged about his familiarity with tax law. In his autobiography, he boasts that he had earned an honors grade in his class on taxation at Yale Law School, My Grandfather's Son at 75, confessed that he was “interested in tax and corporate law,” Id. at 99, and “had bench trials in a number of tax cases.” Id. at 108. Yet, despite his admission of competence in the area of tax law, see, Mo. Rules of Prof. Conduct 1.1, and his admission by conduct that he understood the difference between investment and non-investment income, he claimed that this serial oversight was “inadvertent?” Maybe he just thought that he was Charlie Rangel. See Isabel Vincent and Melissa Klein, The Case Against Charlie Rangel, N.Y. Post, Oct. 4, 2009 (Chairman of Ways and Means caught committing tax fraud).

To incur criminal liability under Section 1001, all he had to do was knowingly omit a material fact from his annual financial disclosure form. As he amended the forms in question in response to public pressure, he effectively conceded that the omissions were material. But rather than do the honorable thing and resign in disgrace, he invoked the “I am incredibly stupid” defense, which is not only unbecoming of an Associate Justice of the United States Supreme Court, but never seems to work unless you are a federal judge. E.g., United States v. Thomas, No. 91-4061, 1993.C10.41489, ¶¶ 97-98 (10th Cir. Feb. 23, 1993) (VL).

A 2-L could have indicted him. Lesser judges have been impeached for less. But yet, he remains free.

Shag from Brookline said...

Do we have any "pillow talk" on Justice Thomas' deficient filings? Might accurate and timely filings by Thomas during those 20 years have led to requests for his recusals? Were other Justices aware of Virginia's Heritage employment?

By the way, Paul Krugman's NYTimes column of Jan. 5, 2018, "Faust on the Potomac" reflects the central theme of Neil's post on the Republican Party. (Krugman's on vacation but finds the time to comment.)