Our collective experience as a people is once again being inundated with more destructive political talk: today it is tax reform. In truth the “tax reform” being discussed by the Republican leadership and the President is yet another gigantic giveaway to the rich with a false promise that such giveaways will stimulate growth, jobs, etc. It is the 2017 version of trickle-down economics, a completely failed theory debunked by its own supporters of the past, such as David Stockman, Ronald Reagan’s budget director who became famous for “trickle-down”.
“David Stockman, former Budget Director under President Ronald Reagan and chief architect of Reagan’s supply-side, or “trickle-down,” economic policies, says today’s Republicans have taken their anti-tax campaign too far.
“Taxes are the price we pay for civilization,” Stockman says, borrowing a quotation from Supreme Court Justice Oliver Wendell Holmes. “What they’re saying today is foolish, it’s irresponsible. How can anyone believe with the kind of deficit that we have — a trillion dollars, year after year after year — that we can keep taxes as low as they are?” (Moyers and Co., February 10, 2012).
While it may seem simple to turn the tide against this failed theory, I suggest that it will be far more difficult than we think
I’d suggest that what is needed to debunk it is more of a clear “worldview” or “framing context”.
The Republican Party, while varied and not homogenous has a big tent of supporters who believe in a consistent worldview: lower taxes, smaller government, and individual choice are what make for a healthy society. This is fundamentally an economic worldview, and while specious and unproven, is clear and simple. The Trump/populist evolution of the Republican Party can easily stay united because at its core, nearly all Republicans believe in these things today more than they believe in anything else.
The Democratic Party has no such clear worldview. The Democratic Party has evolved into a coalition of interest groups without a clear economic policy. The only thing that remotely resembles an economic worldview is a kind of amorphous post-Keynesian view that government spending and stimulus will bring back “the good old days of the middle class”.
So, if you ask the average bystander: do you think the economy will be better off with more or less government spending, the latter easily wins, because most people believe that in today’s world, they are worse off, and it is easy to blame government. Common sense, sadly is out the window.
So, I’d suggest an amendment to the “common sense” argument:
Call it: “we are not getting what we pay for”.
Waste is our enemy. We pay enormous taxes and have for many decades. What do we have in return?: War with no end, a hollowed out manufacturing sector, a crumbled infrastructure, poor population health, poor educational performance, and the largest inequality in both income and wealth in history.
We need to be clear about this…but we must also not fall into the trap of just saying that we can fix all this with more government spending!
This “post-Keynesian fantasy” is a real problem for at least three reasons:
1.) In today’s world, natural resources actually cost real money. Prior to the War in Vietnam, the U.S. paid very little for natural resources, especially oil. In the post-colonial world, resources actually cost a lot of money as the newly independent states have learned how to capture the resources for themselves or negotiate for higher prices. In the “good old days”, U.S. corporations did not have this issue to contend with. Today, natural resources are a big cost and must be factored into our future economic planning. Furthermore, goods and services are produced on a global and globally integrated scale. That is not going to change.
2.) Technology has not thus far created jobs, but eliminated them, by the millions. This is a deepening crisis that will go on for some time, until a new worldview on the value of labor begins to fundamentally change. The rapid development and deployment of “labor-saving technology” also did not exist in the “good old days”. Technology created far more jobs than eliminated them prior to 1970.
3.) Because of the first two post-1970 fundamental shifts in economic reality, the third problem emerges: worldwide financial integration. Monied interests have learned that, since it is hard to make money the old-fashioned way, it is possible to make enormous profit through finance, including the financing of huge debt. Of course, enormous debt leads to crisis after crisis, but the bankers and investors who have created these deadly financial schemes have gone unpunished, so while odious, the Republican Party and others continue to support their benefactors and funding sources without attention to their crimes. How else could we have a billionaire real estate magnate in the White House, with a Cabinet of like-minded and self-serving billionaires?
So, we need a counter to these three crises to be able to debunk “trickle-down”, which as everyone knows is a joke! But it may win out, again…
Presidents Carter, Clinton, and Obama all missed the ball. They never confronted economic reality. They never declared what economics stands for. The Republicans are clear about it, by contrast as shown above.
We must have the courage to declare that the economy is about solidarity, and incentivize healthy economic growth through what I will call solidarity economic sectors, defined as follows:
1.). Save the planet
2.) Affordable housing
3.). Affordable and universal healthcare
4.). Quality education for all
5.). Build and rebuild a safe, green physical infrastructure (the new manufacturing sector)
6.). High wages with broad benefits, including pension, childcare, and substantial parental and family paid leaves. We must value the worker!
All of these investments could be incentivized by research and development public monies and direct subsidies. Taxation would have clear purpose. But all such investments would provide a growth pattern that would be unstoppable. We will never rid ourselves of the $21 trillion debt we have accumulated. But through the kind of investments described herein, those deficits would be reduced over time through real growth and the ability of people to afford and feel good about taxation. After all, we’d be getting what we are paying for!
What still is missing from this picture? At least two things: 1.) the voice of the worker, and 2.) regulating or legislating an end to financial fraud of ALL kinds, including reclaiming all offshore untaxed profits, and severe penalties and criminal prosecution of any fraud in lending, investments, or financial trading.
A worldview of progressive investment is part of what is needed. But we also need the courage to invest in people at the frontline of work and enable them to help decide what is produced and how; and 2.). we must have the courage to deal with corruption.
We must create VALUE defined as “quality/cost”.