The Budget Guy on GOP tax deform - "The End of All Economic Sanity"

As the debate over taxes continues in DC, one of the must-follow writers on the topic is Stan Collender of Forbes - aka TheBudgetGuy on Twitter. And what he wrote this weekend is especially relevant to figuring out where things stand on the tax issue.

While his approach is more fiscally conservative than I prefer, Collender is a must-read when it comes to understanding the Federal Budget and the many different proposals being floated around under the guise of "tax reform." Collender has constantly criticized the Trump/Ryan efforts to give a large tax cut to the rich and to corporations, and his most recent column proclaims "GOP Tax Bill Is The End Of All Economic Sanity In Washington."

There's no economic justification whatsoever for a tax cut at this time. U.S. GDP is growing, unemployment is close to 4 percent (below what is commonly considered "full employment"), corporate profits are at record levels and stock markets are soaring. It makes no sense to add any federal government-induced stimulus to all this private sector-caused economic activity, let alone a tax cut as big as this one.

This is actually the ideal time for Washington to be doing the opposite. But by damning the economic torpedoes and moving full-speed ahead, House and Senate Republicans and the Trump White House are setting up the U.S. for the modern-day analog of the inflation-producing guns-and-butter economic policy of the Vietnam era. The GOP tax bill will increase the federal deficit by $2 trillion or more over the next decade (the official estimates of $1.5 trillion hide the real amount with a witches brew of gimmicks and outright lies) that, unless all the rules have changed, is virtually certain to result in inflation and much higher interest rates than would otherwise occur.

Not sure I buy Collender's inflation argument too much, because unlike 50 years ago, the average worker isn't getting pay raises that match the increases in the deficit or other assets.

But I agree that it is absurd to have a major tax cut package for the rich in a time of full employment and a Bubbly stock market. I'd go further than Collender, and say a deficit-increasing tax cut would make the situation in the 2010s and 2020s worse than what we saw in the 1960s and '70s, because the only thing it'll inflate are assets like housing and gasoline. Those needs become less affordable for the average person until the asset bubbles inevitably pop - which is exactly what we saw with the 2006-2008 US economy and the resulting Great Recession that some parts of this country still haven't recovered from.

Collender adds that passing this deficit-busting tax package would lead to a structural deficit of $1 trillion, which goes along with the projections the Congressional Budget Office gave to the House GOP's bill earlier this month.



And Collender points out that those numbers grow higher into massive fiscal problems once that Bubble does pop and the economy falls into recession.

The tax hikes that will be needed to resolve the structural imbalance between federal spending and revenues will be impossible for political reasons.

Whenever the U.S. economy grows more slowly than expected or there's a downturn, an annual deficit of $2 trillion could easily become the norm.

The federal government will have far less ability to respond to economic downturns unless previously unimaginable and politically intolerable deficits, tax increases or spending cuts suddenly become acceptable.

And guess where spending cuts would have to come from? Medicare, health care, and Social Security, which is just what Paul Ryan is counting on.


As if you needed more reasons to punch this face.

And on top of that, let's not forget that the Joint Committee on Taxation said this week that the Senate bill would raise taxes on low-income workers 3 years after the tax bill takes effect. And then EVERYONE would see their taxes go up in 2027, as part of a budget trick designed to allow the tax scam to pass with 50 votes in the Senate.

There is no honest justification for the type of "tax reform" that the GOP is trying to shove through Congress (and all 5 House GOPs from Wisconsin voted for this crap last week)). But of course, this has nothing to do with good tax policy.

Lindsey Graham says “the financial contributions will stop” if tax reform fails.

— Alan Rappeport (@arappeport) November 9, 2017

And yet these guys being paid with OUR tax dollars to only do the bidding of those oligarchs at the literal expense of the rest of us? They gotta go.