Both sides of the political aisle suck. Badly. The political Left has no agenda outside of “Medicare for All”, minimum wage hikes, “free” college, and identity politics, so we can excuse the complete and utter lack of constructive input throughout the tax cut & reform debate. Let’s focus on how badly the GOP sucks, since it currently rules the day.
Amidst the worst global recession since the Great Depression, not a single House Republican voted for the 2009 fiscal stimulus package out of ideological disdain for Obama and foe concern for long-term debt sustainability. Truly, remarkable. The fiscal stimulus package, along with all-hands-on-deck monetary stimulus package by the Federal Reserve, saved the global economy – not just the US economy – from entering a Great Depression 2.0. The GOP sucks.
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The current tax cut & reform package working its way thru Congress is fantastic. While the package goes a long way toward reforming the individual tax code, and provides a modest net tax cut for the Middle Class, albeit temporarily assuming the cuts are not extended in 2027 (?), by far the biggest focus is on the highly necessary task of reshaping the corporate tax code in order to incentivize companies to hire and invest in America, and bring overseas profits back to America.
In today’s highly polarized political climate, the notion that a bunch of old, white businessmen are working to expand America’s economic growth potential via corporate tax cuts & reform is lost on even the smartest, politically moderate Americans, let alone the partisan hacks who spend their evenings gobbling up Rachel Maddow and Sean Hannity. As such, the GOP has attempted to sell the tax cut & reform package as a predominately Middle Class tax cut (President Trump included, though he has done a far better job touting the more broad focus on jobs and growth). WRONG: it is a predominately corporate tax cut & reform package designed to lift America’s economic growth potential. The sales job is horrific. The GOP sucks.
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The biggest sticking point with the bill is the $1.5 trillion net cost over 10 years. The New York Times comparing the GOP signing off on a $1.5 trillion deficit over 10 years to a $900 billion single year deficit in 2009 is a bit disingenuous given the difference in time frame; but the overarching point remains: The GOP suddenly does not care about deficits when it benefits them politically. It is disgusting.
The most egregious part of the GOP’s hypocrisy is signing off on a child tax credit that comprises $640 billion of the projected $1.5 trillion deficit. Setting aside the idiocy of paying people to have children, the child tax credit has no place in a tax policy discussion, unless that discussion looks at the total federal budget (which this tax policy discussion does not). I am 110 percent on board with the government cutting welfare checks for childcare, which directly incentivizes WORK; but this patsy move by Marco Rubio and Mike Lee as a sop to the Bernie Sanders Left is really insane, especially within the context of concern about a $1.5 trillion deficit. The GOP sucks.
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Lastly, the entire discussion around debt sustainability highlights how insanely incompetent politicians are on both sides of the aisle. Not once has it been brought up that the federal government can borrow money for less than 3 percent a year for 30 years, indicating not only a lack of debt unsustainability, but the fact that the financial markets are begging the government to boost its debt/GDP ratio.
I know I have an unfair advantage of working directly in financial markets, but it is tough to overstate how heavily the global economy is begging for fiscal stimulus. In the exact mirror image of when Paul Volcker took over the Federal Reserve with double digit interest rates screaming for inflation to be reduced, a 30 year interest rate of 2.8 percent is screaming for inflation to be increased.
By mathematical definition inflation rises when demand exceeds supply. An increased fiscal deficit, dollar for dollar, adds to the private sector’s net worth, therefore increasing spending capacity. And the federal government has plenty of deficit capacity. Consider:
- US GDP is approximately $19 trillion, of which the 2017 fiscal deficit of $670 Billion is 3.5 percent
- If the economy grows at 5 percent a year, nominally on average, that means the government can run a 5 percent deficit without increasing the debt/GDP ratio
- A 1.5 percent increase in the deficit alone is $285 billion of additional annual spending capacity
Let’s say the government decided to allocate $150 billion of the $285 to new interest expense: $150 / 3% = $5 trillion of CURRENT stimulus capacity.
I would like to see an enormous nationwide all-hands-on-deck infrastructure program, including roads, airports, burying power lines, and the fastest broadband speeds on earth including 5G wireless; a nuclear energy buildout; massive battery technology R&D investment; and a military modernization program to whatever extent necessary.
But none of this will happen, because politics suck, the Left sucks, and the GOP sucks.