Trump policies open new robber baron age
Sunday, March 10, 2019
President Trump has nobody to blame but himself for the burgeoning trade deficit and the rise in the budget deficit (up 77 percent in the first four months of fiscal year 2019), which is expected to exceed a trillion dollars by next year.
Trump’s trade policy of imposing tariffs on foreign goods boomeranged when wealthy Americans flush with cash from last year’s tax cut bought even more foreign-made products, creating a record imbalance.
And now with Tax Day, April 15 approaching, U.S. taxpayers are noticing they’re not getting a refund, or it’s much smaller than in the past. The 2017 Trump tax cut was frontloaded, so the benefits kicked in immediately, and now the sugar highs are over.
What we call “Trumpenomics” is taking us back to the days of the Robber Barons, the rich financiers who bought up whole industries in the last part of the 19th century and mercilessly exploited workers.
Trump’s tax cut for the wealthy accelerated the transfer of wealth, and now it’s coming back to bite him. The tax cut didn’t shield the Republicans from massive losses in the 2018 election, and it’s putting Trump on the defensive going into 2020.
He promised to address the imbalance of trade with China and other countries, and now it turns out to be even worse more than two years into Trump’s presidency. The White House is talking up the potential of a grand bargain trade deal with China, but it hasn’t happened yet.
The growing income inequality in the country goes back to the 28 percent flat tax policies initiated under President Reagan which were then advanced by President George W. Bush in two massive tax cuts during his presidency.
Compounding the damage was the U.S. Supreme Court’s 5-4 Citizens United decision in 2010 that undermined campaign finance laws and allow unlimited sums of money to pour into campaigns, often anonymously. Senate Republicans under the leadership of Sen. Mitch McConnell, R-Ky., are adamantly opposed to campaign finance reform, and no wonder, since they are the overwhelming beneficiaries of the current rules.
McConnell used to be for full disclosure of campaign donations, but he’s backed off that. He also used to be for fiscal conservatism, but he doesn’t say much about the rising deficit. He’s all about growing the economy these days, and that’s fine, but not when it just grows for the uppermost earners and wages stay stagnant for the working class.
As we near Tax Day, corporate and personal tax revenue are down 25 and 2 percent, respectively, from October through January, according to the Treasury Department. This is a massive drop for a deficit without a purpose.
There are just two good reasons to drive up the deficit. The first is to pay for a war, as the country did with the deficits incurred by FDR to support World War II. The other is to dig out of a deep economic hole, as FDR understood when he inherited the Great Depression in 1933.
The tax cut that was supposed to encourage corporations to take on more labor and provide more benefits had the reverse effect. It incentivized businesses to “buy back” their stocks, generating higher revenue for their stockholders but contributed nothing to the Treasury, or to job creation, or to the country’s overall social welfare.
Trump’s 2017 tax cut was a giveaway, a way to keep a campaign promise. After the legislation passed, Trump boasted to his friends at Mar-a-Lago, his Florida golf course, that he had just made them much richer.
We have had other wealthy presidents from the Roosevelts to Kennedy, but they had an altruistic sense of noblesse oblige that would be foreign to Trump and his oligarchy of modern Robber Barons.
Douglas Cohn’s latest books are World War 4: Nine Scenarios (endorsed by seven flag officers) and The President’s First Year: The Only School for Presidents Is the Presidency.