Now, I realize that facts don’t matter to a growing number of people. Tribal distrust has been nurtured for years. Claims with no evidence are believed, and overwhelming science is questioned. This tribalism cannot be conquered with facts. It needs leaders with a moral and ethical compass. Instead we got the “Lyin’ King.” Trump’s recent claims of middle-class tax relief are not supported by analysis. Even congressional leaders have had to walk back their claims. Before we even consider if a tax cut is necessary, let’s look back at recent tax policy. All figures below are from government sources. They are history — they are facts.
In 1993, President Clinton and the Democrats were excoriated for passing a tax increase (the Balanced Budget Act) to address growing deficits from the Reagan/Bush years. Gingrich and other Republicans were screaming of an imminent collapse of the economy. Right-wing radio went crazy. Tax increases ruin economic growth, they warned. This is all part of history, folks. Look it up.
The economy did not collapse. Far from it. During the Clinton years the economy expanded every year, creating over 22 million jobs, and the final four years of Clinton budgets operated with budget surpluses (1998 - $69 billion; ’99-$126 billion; ’00- $236 billion; ’01-$128 billion … the 2001 budget is set in October 2000 by the previous administration). Over 4 percent annual GDP growth was achieved for 4 straight years (1997-2000). All this happened after a tax increase that was supposed to collapse our economy. In fact, had that economic trend continued, we would be free of debt today with trillions left over for infrastructure investment. That didn’t happen. George W. Bush happened.
Those four years (1998-2001) of budget surpluses and 4 percent GDP growth were followed by a change in administrations and policies. Bush and the Republicans inherited a dream budget of surpluses and decided that could not exist. That money belonged to the people, they claimed. Huge tax cuts were given in 2001 and 2003, mostly to the wealthiest Americans (many workers received a $400 stipend only). The second round of tax cuts came during wartime — perhaps the most irresponsible legislative decision in our country’s history. Tax cuts during wartime were unprecedented. We usually pay for our wars. Not the Republicans. They would have no part of paying for wars.
So here is what happened in the first four years of a new administration. GDP growth was 1 percent in 2001, 1.8 percent in 2002; 2.8 percent in 2003 and 3.8 percent in 2004. Four percent GDP growth has not been achieved since the Bush tax cuts. Budget deficits replaced surpluses [2002-($158 billion); ’03-($378 billion); ’04-($413 billion); ’05-($318 billion)]. In four short years, a projected surplus of nearly $1 trillion was replaced by over $1 trillion in new debt. Dick Cheney famously stated, “Reagan proved deficits don’t matter.” Treasury Secretary O’Neill resigned in protest of further tax cuts and their possible future harm. And that harm did come. A brief housing bubble (2004-06) created by Wall Street mortgage fraud was followed by a near economic collapse. Tax cuts to the wealthy did nothing but run up debt. They were not and are not an economic magic elixir; they are “the drug of the wealthy.”
Folks, we’ve been here before. We’ve heard these claims. We’ve lived through the Great Recession after false promises of tax cut-induced prosperity. We are still paying for the economic chaos caused by the Bush tax cuts. President Obama would have loved to inherit the Clinton economy, where surpluses ruled and infrastructure repairs could have boosted economic growth. But he inherited the deficit-driven Bush economy, mired in unemployment, Wall Street malfeasance, growing deficits, and unpaid wars. He worked with what he was given.
We will never know what may have been had the disastrous Bush tax cuts not been put into law. What we do know is that they did not work and handcuffed the Obama administration with the Great Recession and double-digit unemployment. We don’t need a repeat of history. And that’s the recent history of tax cuts to the wealthy.
There is no reason for this tax cut. None. Unemployment is near “full” (thank you, Obama). Most corporations pay less than 20 percent and are flourishing. Earnings are at record levels (thank you, Obama). Business is awash in capital and buying back stock, increasing dividends. (And people expect that behavior to change?) They could be raising wages and salaries with their record earnings, but aren’t. They could be expanding capacity with their record earnings — but won’t, unless demand increases. Business does not increase capacity based on tax rates; they increase capacity because of increase in demand. There is no reason for this tax cut. And there is no “middle-class miracle,” as Trump declared. Rather, a middle-class nightmare looms.
Oppose this tax cut for the rich.
Straka is a resident of Whitefish.