Wayne O'Leary

Greed Rewarded

The more things change, it’s been said, the more they remain the same. We’re witnessing a validation of that truism at this very moment of New Gilded Age opulence, in the attitudes and behavior of America’s ruling political and economic elite.

Echoes from the past are uncanny. In the 1770s, Queen Marie Antoinette, wife of the French monarch Louis XVI, was reported to have dismissed the chronic hunger of her peasant subjects with the words, “Let them eat cake.” Two centuries later, New York hotel and real-estate mogul Leona Helmsley made this aphorism a watchword of the greedy 1980s: “Only the little people pay taxes.”

Now, it’s the Age of Trump, and the same values of class privilege are being expressed once more. Second-rate actress and high-end fashionista Louise Linton, who is also the wife of multimillionaire Treasury Secretary Steven Mnuchin (widely known as the “foreclosure king” for his predatory banking operations in the financial crisis), offered a bon mot of her own recently. Responding to a criticism of her over-the-top wealth flaunting, Linton defended the grotesquely lavish Mnuchin lifestyle by informing her detractor, “You’re so adorably out of touch.”

Not to be outdone, another multimillionaire member of the extended Trump political family, National Economic Council Director Gary Cohn, shared this bit of crass wisdom during the tax debate: “Only morons pay the estate tax.” The morons are now safe and secure; the GOP tax-cut legislation has gutted that provision of the revenue law.

The scandal of the current situation is that while Marie Antoinette was eventually beheaded and Leona Helmsley imprisoned for tax evasion, their present-day counterparts continue to enjoy unparalleled power and prosperity a decade after helping take the country down in a bacchanalian festival of greed, corruption, and self-interest that left it in a financial hole from which it has yet to fully emerge. In what must be the height of irony, their reward is to be given one of the largest class-based tax cuts in American history, a gift specifically designed to benefit people like themselves.

Passage of the Trump-Ryan-McConnell tax plan has effectively locked the US in an economic time machine and transported it back not to the 1980s, but to the 1920s. Gone are the alternative minimum tax and, for all intents and purposes, the estate tax; nearly gone are the progressive individual and corporate income taxes. The wealthy and the corporations will have their lightest combined tax burden in almost a century. Our newly established revenue structure is one Andrew W. Mellon, secretary of the Treasury under Presidents Harding, Coolidge, and Hoover, would feel completely at home implementing; in fact, he devised it.

“The Government is just a business,” said Mellon in words Donald Trump could have scripted. For a decade, he ran it as such, incurring neither taxes nor deficits, an easy accomplishment because his government didn’t do anything. There was no such thing as Social Security, no unemployment insurance, no Medicare or Medicaid, no global defense establishment, none of the federal agencies and activities we take for granted; the public sector essentially didn’t exist. By contrast, Steve Mnuchin, Mellon’s spiritual successor at Treasury, has programs he must legally (if reluctantly) fund in the face of a looming deficit of historic proportions thanks to the tax cuts. So look for huge future spending reductions to minimize the shortfall.

Mnuchin, along with the rest of the Republican robber barons, insists the revenue lost will magically reappear as a result of the massive GDP (gross domestic product) growth stimulated by feverish “animal spirits” unleashed by the tax cuts, allowing the cuts to pay for themselves through dynamic expansion. Few outside the GOP cocoon of circular reasoning and belief in the economic theories of Ayn Rand agree with this fairy tale.

While the White House, in a self-induced fit of euphoria, visualizes a 3 to 4 percent growth rate (Mnuchin’s Treasury Department predicts at minimum a 2.9% average annual GDP over the next decade), almost all objective economic analysis projects future GDP growth of closer to 2% — e.g. the Congressional Budget Office (1.9), the Federal Reserve (2.0), Moody’s Analytics (2.3 to 2.7), the National Association of Business Economics (2.2 to 2.4). History supports the skeptics. Average GDP growth during the multiyear recovery from the Great Recession was 2.1%, and over the past decade, 2015 produced by far the best annual performance at just 2.6%.

But what about wages and incomes? Speaker Paul Ryan proclaimed in a recent speech that “cutting the corporate tax rate means more jobs here in the United States. It will foster increased competition, which will directly drive up wages for our workers.” Trump’s Council of Economic Advisors provided the numbers: the typical middle-class household’s income, it bragged, would grow by $3,000 to $7,000 a year, perhaps even as much as $9,000. Individual workers would take home an average of $4,000 more annually.

Again, rational analysts are incredulous. The Tax Policy Center of the Urban Institute and the Brookings Institution estimates that by 2027, under the GOP tax cuts (and mandatory deficit-reduction spending cuts to follow), the bottom half of American earners will actually average 2% less in annual after-tax income than now, those in the middle two-fifths (the true middle class) 0.6% less. The top tenth of earners, however, will realize an average 1.5% gain, and the top thousandth will see a 3% surge in their after-tax incomes. Obviously, giving more to those that have does little for those that don’t.

History bears this out. Using the World Wealth and Income Database developed by Emmanuel Saez, Thomas Piketty, and others, Eduardo Porter of the New York Times calculates the following: In 2017 dollars, the bottom half of American incomes hardly budged between 1980 and 1988, despite two rounds of top-heavy Reagan-era tax cuts, while the one percenters increased their take an astounding 6% per year. An identical earnings pattern emerged from George W. Bush’s Reaganesque tax-cut regime of 2001-08: flat income growth (adjusted for inflation) for the bottom half of the population, accelerated growth for the top 1%.

Twice in 30 years, trickle-down tax policies failed to cure what ails the American economy. We’re about to try them again. Maybe the third time will be the charm, but don’t count on it.

Wayne O’Leary is a writer in Orono, Maine, specializing in political economy. He holds a doctorate in American history and is the author of two prizewinning books.

From The Progressive Populist, Febuary 15, 2018


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