Trump’s economic “plan” was voodoo economics when first touted, and is even deeper voodoo in the new and unimproved model rolled out recently.
The tax plan in short: big tax cuts on incomes and entities looking suspiciaoulsy similar to Trump’s own with precisely zero intention to commensurately cut spending.
In the Tax Policy Center’s analysis of the Republican candidate’s proposal, the institute said that Trump’s plan would reduce federal revenues by $9.5 trillion over its first decade, and an additional $15.0 trillion over the next 10 years. Including interest costs, the Center said, the proposal would add $11.2 trillion to the national debt by 2026….
Trump’s plan continues to stomp down the road of massive debt accumulation we are already on. It takes us further down this path than we’ve ever gone before and does it for all the foreseeable years to come.
Sure, everyone from the Tax Policy Center to his couldn’t-lie-straight-in-bed opponent has berated the plan for its promises of “tax cuts to the rich” – the very opposite of her own plan which promises to soak them. And though “Mrs. Clinton’s proposal would only affect those in the top income bracket,” acknowledges an economist who does understand how things work, “she may be surprised to learn that those are the only people who can afford to make investments in startups.”
We’ve seen this “soak the rick” schtick before, everywhere; it’s one of the main reasons for the very American rust belt that Trump claims he wants to resurrect and make great again: soaking the industrial rich, depriving the factories of the financial seed corn of reinvestment, was one of the very reasons the former industrial heartland is now so poor.
But we’ve seen Trump’s voodoo economics before too – Reagan, Bush I and Bush II all making voodoo incantations amounting tax cuts without spending cuts, every single one dangerously increasing the debt. This is the main reason America embarked on the journey of indedtedness it is in today, becoming so seriously indebted that the Federal Reserve is now desperately monetising all the debt by “printing” money – and knows of no way out!
To this fiscal calamity Trump would now have another $11.2 trillion poured onto the flames that are already a whopping $19 trillion and threatening to burn down the house.
This is no time for self-serving voodoo. If ever there were a time to talk turkey on the national debt it is now. Yet as Thomas Sowell says so sagely,
When you want to help people, you tell them the truth. When you want to help yourself, you tell them what they want to hear.
Look at that graph and those raw numbers, and you know yourself which game Trump is in.
A game in which a typical politician’s wish-list of promises is floated in order to get elected (a wall, extra military and veterans spending, six months of federally-paid maternity leave, “investment” in infrastructure, “a push” against illegal immigration, and a health-care reform plan that would cost nearly a half-trillion dollars more over the course of a decade — and lead to nearly 21 million people losing their health insurance.)
But if he were to ever tell the truth, or if his ignorant economic advisers were to ever tell him, then the truth about his voodoo economics might sound something like the truth told by former Reagan Budget Director David Stockman, that “the Trump campaign’s stab at a semi-coherent economic plan is …
a dog’s breakfast of some plausible policy ideas, really bad fiscal math and a relapse to the discredited, 35 year-old dogma of sweeping income tax cuts which pay for themselves.
They don’t. As the great Dwight D. Eisenhower proved in the context of the modern welfare and warfare states, politicians have to earn the right to favour the voters with tax reductions by first dispensing the pain of spending cutbacks and without an exemption for the military-industrial complex, either.
Following those precepts, Ike balanced the budget several times; generated an average deficit of less than 1% of GDP during his tenure; shrank the defense budget by 33% in real terms; and presided over the strongest 8-year growth rate (about 3.3%) of any post-war GOP president, including Ronald Reagan.
By contrast, the Reagan White House—me included—-fell for the theory of “dynamic scoring” and that the big cuts in the income tax rates would partially pay for themselves via revenue “flowback”. Back in those days the latter was expressed in an economic forecast known as Rosy Scenario, which assumed that in response to the supply side tax cuts, the US economy would get up on its hind legs and leap forward at a real GDP growth rate of more than 4% per year, and as far as the eye could see.
What happened instead, of course, is that the US economy plunged into the drink of the deep 1982 recession and the Federal deficit soared to 5% of GDP—a truly shocking outcome back in those innocent days when the old-time fiscal religion still had roots inside the beltway. And it would have also caused enormous economic havoc had not the Gipper’s advisors—me included—talked him to signing three tax bills over 1982-1984 that recaptured roughly 40% of the revenue loss from his cherished tax cuts.
Even then, the public debt grew by 250% during Reagan’s eight years—-or by more than under any peacetime President in American history. Yet even to this day the GOP politicians and their economic advisers profess a case of heavy duty amnesia about what happened, claiming that real GDP grew by upwards of 4.5% and that these results were proof positive that “dynamic scoring” of budget of tax cuts is valid.
Worse still, they appear to have convinced Donald Trump of this same fallacious revisionist history because it was embedded at the core of the Thursday speech’s fiscal math.
So, yes, tax cuts stimulate the economy. I would never argue that they don’t [says the Great Recession blog], but they do not stimulate it enough to pay for themselves, as Stockman is willing to honestly admit, but Trump’s advisors are not. Since Trump cannot make the deep cuts that his spending increases and tax cuts require, he simply promises that the economy will be so stimulated that it will automatically make up the difference. (Been there; done that; didn’t work.)
Do you simply want to hear what you want to hear or want the truth? That’s what this comes down to.
One thing is certain to anyone who is capable of learning from thirty-five years of history: the debt under Trump will be great … really great. It’ll be a great debt like you’ve never seen before.
Here’s the American National Debt Clock: