Economic Justice When We Are Dividing a Stagnant Pie (and other mixed metaphors)

by Neil H. Buchanan

Having made a complete hash of his much-hyped effort to reach out to African Americans (or, more accurately, to reach out to whites who are repelled by open racism), Donald Trump has spent the last week making an even bigger mess of his immigration policy.  Culminating with a hard-line speech that contradicted his claims to be "softening" on immigration, Trump simply left everyone wondering whether there is anything at all that he cares about other than himself.

It is still true that Trump clearly embraces what amounts to a white supremacist mindset -- which one might naively imagine should have reduced his chances of winning the presidency to zero percent, but amazingly it has not.  Even so, he has now made it impossible to say just how he will act on his bigoted beliefs.  We used to have some idea of which horrible policies he might pursue.  Now we simply have to guess.

This has been true all along for economic policy.  Trump has shown only the most passing interest in economic issues, so much so that his first go at a tax policy proposal last Fall was merely a scaled-up version of Jeb Bush's already ridiculous more-and-bigger-tax-cuts-for-the-rich plan.  Bush promised that his plan would permanently increase the economy's growth rate to levels that have never been sustained for more than a quarter or two during the strongest economic recoveries.  Trump's plan was bigger.

A few week's ago, when Trump's now-fired campaign manager decided to have his volatile boss try to sound like an adult on economic issues, he had Trump read a speech in Detroit that simply adopted the Republican Establishment's wishlist.  Although Trump did continue to deviate on international trade in that speech, no one should be surprised if Trump's next act is to blow up everything that he has said about trade pacts (and then to reiterate them a few minutes later).

In this context, is there anything useful to say about Trump's economic policy that will not be mooted by events down the road?  Perhaps not, but just as Trump's gyrations on race and immigration cannot obscure his fundamental bigotry, there is also a core set of regressive ideas underlying his economic statements.

Moreover, Trump shares that core set of beliefs with the Republican Party and its leadership.  Whatever one thinks about the difference between the dog-whistle racial politics of typical Republicans and the blatant racist appeals from Trump, Trump's commitment to trickle-down tax cuts is indistinguishable from that espoused by the rest of his reluctant elite supporters.

A new New York Times op-ed by one of Trump's economic advisors (yes, he has economic advisors, even though they have no known expertise) makes it clear that Trump continues to believe in the magic of regressive tax cuts:
"To restart growth, Mr. Trump would immediately lower tax rates, including for middle-income voters, and simplify the tax code. Americans would be able to exempt average child-care expenses from taxes, and Mr. Trump’s administration would eliminate the death tax, which falls especially hard on some small businesses and farmers."
After suppressing a laugh about the knee-jerk reference to "the death tax" and the repeatedly debunked claim about harming small businesses and farmers (another staple that Trump shares with both the Republican establishment and the extremists in the Tea Party), we should consider what Trump's approach boils down to.  Tax cuts will make the economy grow, we are told once again.

As far as it is possible to tell from Trump's tax proposals (in their current form), the middle class would receive 0.2% of the benefits of his tax cuts.  This means that Trump continues to believe (or at least he is willing to have someone say that he believes) that the right way to increase economic growth is to make inequality worse in the hope that doing so will eventually make everyone better off.

In other words, trickle-down economics.  And if this were 1980 or even 1992, it might be possible for a person to look at the evidence and say in good faith that trickle-down might work.  To be clear, the better take on theory and evidence even back then was that trickle-down would be a disaster, which it has turned out to be.

But it was at least possible for a person to hope otherwise.  Now, only people who are deliberately obtuse can keep up the con job with a straight face.

The only people who have done well over the last generation or so have been the very rich, while everyone else has struggled while wages stagnated.  The question was whether it would be wise to try to fight the rise in inequality by adopting policies that were explicitly aimed to take from the rich and redistribute to everyone else.

Even economists who are not ideologues often get stuck on redistribution.  Their economic models start with the assumption that taxes discourage whatever is being taxed, so they worry that taxing wealthy people will result in less wealth.  And if there really is any hope that wealth can trickle down, then it is all too easy to think that taxing rich people might have unintended consequences.

Again, however, we have decades of evidence that show that regressive tax cuts do nothing to increase economic prosperity and that progressive tax increases do not reduce growth.  The classic "efficiency versus equity tradeoff," if it ever made sense, is now very much deceased.

A common metaphor supporting trickle-down theory was that it can be better to get a smaller piece of a much larger pie than a larger piece of a shrinking pie.  If we can set aside the corrosive effects of inequality itself (especially on the political process), then it is at least possible to picture a world in which poor people are somewhat better off even as the richest people pull ever further ahead.

But now that we know that the pie's size does not respond to tax or other economic policies in the way that trickle-down theory presumes, we can really start to mix metaphors and ask what to do about a world with a stagnant pie.  Do we keep giving ever larger slices to the wealthiest Americans, continuing to hope that everyone else will finally see some gains?  Or do we conclude that our ability to make the pie grow (or shrink) is severely limited, and we need to turn out attention to reversing decades of growing inequality?

Most importantly, we need to ask what all of this tells us about the continued Trump/Republican embrace of tax cuts for the rich.  If they were forced to admit that trickle-down is a bankrupt theory, what would their fallback position be?

The answer from Republicans has always been that people deserve to keep their money.  If voters can be convinced that the government is intruding on the activities of virtuous businessmen, then the story can be turned into an us-versus-it struggle.  Government, in this telling, has no right to redistribute because rich people deserve what they have.  Who cares that rich people's charmed lives are made possible by the very government that they denigrate?  They won, and everyone else can suffer.

Ultimately, once we stop pretending that redistribution will shrink the pie, we are left with the claim from Republicans that rich people deserve to keep their stuff.  But even people who are able to convince themselves that rich people deserve their station in life, which is a losing argument, should be forced to look at the other side of the story.

If rich people deserve what they have, then that seems to imply that everyone else deserves what they have gotten, too.  Economic policymaking, in this telling, should not even consider distributional issues.  But this means that we have have to believe that people who have landed in a bad spot in life have no one but themselves to blame, and that they are wrong even to hope that different policies could help them.

Most tellingly, this means that one has to believe that all children deserve their fates.  Sure, they did nothing wrong to be born into the 99% or right to be born into the 1%.  Nevertheless, they have to live with the consequences of cruel fate.

Imagine, however, that a person tries to say that rich children deserve their advantages in life, but as a show of compassion, that person also admits that poor children deserve better.  Once we have acknowledged the emptiness of trickle-down promises, that logic no longer works.   In fact, it becomes necessary to believe that, given the opportunity to redistribute from rich to poor, we cannot do so, because poor children deserve their fate even more than rich people deserve theirs.

After all, if we were truly convinced that the kids in Flint, Michigan deserved better than to be poisoned by the penny-pinching decisions of a Republican-dominated state government, we would have to ask: Even if I have some sympathy for the idea that rich people should be allowed to keep their stuff, do I really believe that their claims outweigh the claims of those who, through no fault of their own, are suffering horribly?

Donald Trump started from wealth, and he built a fortune that is smaller than even a passive investor would have built.  Yet, in the Trump/Republican universe, what is his is his (and will soon be his kids'), no matter what.  It takes a herculean effort to ignore the injustice of elevating his wants above those of the victims of fate, but Trump and the Republicans continue to be up to the task.