Budgetary Nonsense Across the Republican Landscape

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Posted in: Politics

In the lead-up to the 2016 Republican presidential primaries, the surprise story has of course been the emergence and staying power (thus far) of Donald Trump. Trump’s remarkable resilience flies in the face of all of the received wisdom in American politics, especially because he seems to take every Republican position and push it to heretofore-unthinkable extremes.

In 2012, for example, Republican presidential nominee Mitt Romney earned jeers for his comment that the people whom Republicans call “illegals” should “self-deport.” This was understandably unpopular with the general electorate, even though it had been an applause line during the Republican primaries, because it was so obviously mean-spirited and at odds with the realities of migration into and out of the United States.

But Donald Trump specializes in mean-spiritedness and ignoring reality, so he was perfectly willing to burst onto the scene earlier this year by staking out a position on immigration that was to the right of everyone in the Republican field. Republican primary voters who wanted immigrants to self-deport apparently are unwilling to wait for that to happen, making them eager to support a man who says that he will forcibly eject the whole group. That this would be a human rights disaster and a logistical impossibility in no way deters Trump or his eager supporters – or, for that matter, his Republican opponents who have been frantically moving rightward on this issue.

At this point, however, the question is whether Trump’s extremism on immigration is all that he has to offer Republican voters. Now that he actually has to say something about issues other than immigration, and especially because his caustic personal insults have lost much of their sting, the world wonders whether Trump is going to be the most extreme candidate across the board, or whether he even cares enough about other issues to bother having a position on them.

At least on economic policy, it turns out that Trump truly is an extremist, but he is not appreciably more extreme than any of his opponents, or for that matter the rest of the Republican Party, especially in Congress.

In this column, I will describe how Donald Trump’s comments about taxes and the national debt do not noticeably distinguish him from his opponents. Indeed, the Republican Party’s full-on embrace of economic ignorance shows up not just in the current presidential race and in the snake pit that is the House of Representatives, but even among former Republican officeholders who attempt to continue to influence policy. Sadly, some Democrats have also embraced this ignorance, similarly misunderstanding deficits and the national debt.

Therefore, even if – as now seems increasingly likely – the Trump phenomenon runs its course, it is important to understand that although the other Republicans might not share Trump’s bombastic style, at least on economic issues they are barely distinguishable from Trump. And that is not a good thing.

Trump Tries to Outdo His Opponents’ Economic Ignorance in His Comments on Taxes

I confess that I was surprised when Donald Trump recently released a description of how he would change the tax system. It would be inaccurate to characterize what he described as an actual “proposal” or even a “plan,” because such labels suggest a level of detail and careful policy coordination that Trump rejects. Even so, he has said enough about taxes to get the pundits talking.

Easily the most enjoyable description of Trump’s tax ideas can be found in an op-ed that appeared in the Business Section of last Sunday’s The New York Times. The author, who does Trump the favor of calling Trump’s ideas a “plan,” nevertheless mocks Trump mercilessly. Essentially, it turns out that Trump took Jeb Bush’s ridiculously bad tax proposal and simply made all the numbers bigger.

So, instead of Bush’s extremely regressive tax cut that would lose three or four trillion dollars over a decade without paying for it, Trump offers the prospect of an extremely regressive tax cut that will lose eleven trillion in tax revenues, also without any hint as to how he would pay for it.

How is that different from immigration, where Trump took bad ideas and made them much, much worse? On taxes, Trump evidently cares so little about the subject that he could not even be bothered to think about any of the details, so he simply cribbed someone else’s ideas. On taxes, the difference is entirely a matter of degree. On immigration, as bad as his opponents’ views have been, Trump’s views are different as a matter of kind.

In short, Trump does not have any new, especially awful ways to make the tax code less fair or to shovel money toward the richest people in the country. He just wants to do more of it. Estimates from Citizens for Tax Justice, for example, show that 68 percent of Trump’s tax cuts would go to the top twenty percent of the population, and half of that would go to the top one percent alone.

Or, to put it more simply, Trump is a mainstream Republican when it comes to taxes. He is extreme in his views and unconcerned about distributive justice, just like the others.

The Republican Orthodoxy on the National Debt

The Republican Party has long railed against government debt. Although they conveniently ignore times when their own party has shown its true colors, cutting taxes on the rich even when doing so clearly resulted in more debt, the party has consistently treated the federal government’s debt as a uniquely evil and dastardly plan by liberals to bankrupt the nation. This has never been even a remotely defensible view, but that has not stopped Republicans from repeating it ad nauseum, and many Democrats have been intimidated by the nonstop nonsense.

Thus we have soon-to-be-withdrawing presidential candidates like Senator Rand Paul decrying deficits by claiming that the government is borrowing “a million dollars a minute,” a claim that was correctly deemed “mostly true” (with the “mostly” qualifier because Paul aggressively rounded up) but that has no particular meaning in an economy that produces $33 million in income every minute.

That particular distortion, however, is only the tip of the iceberg when it comes to debt fear-mongering on the right. And Donald Trump, of course, bows to no one when it comes to extreme fear mongering.

In an appearance on “The Late Show with Stephen Colbert” on September 22, after assuring the host that “I think I can do a great job” as president, Trump immediately added: “We can bring it back. We can bring the country back. We owe right now 19 trillion dollars. There are tremendous problems . . .”

Of course, it turns out that this is not true even with rounding error, because the gross federal debt on that date was $18.15 trillion. But hey, does an $850 billion overstatement really matter to someone like Trump? More to the point, Trump (like all Republicans) insists on using the “gross federal debt” number, which includes debt that the federal government owes to itself. The net debt (often called “debt held by the public) is currently $13.06 trillion.

That number is still meaningless out of context, but the point here is that Trump is simply following the Republican playbook by (1) treating the national debt as a reliable scare tactic, and (2) exaggerating the numbers without giving any sense of why anyone should actually care.

Trump in particular should be aware that debt is not necessarily a bad thing, because he is staking his claim to the presidency on being a successful businessman. And businesses are not scared of going into debt. Being deeply in debt, in fact, is often the best strategy for a successful business, for similar (but not precisely the same) reasons that governments should always be in debt. In particular, when a good investment opportunity presents itself (such as when a business buys a new subsidiary, or when a government spends money on infrastructure or education), borrowing money is the smart way to pay for it.

But Trump is not interested in any of that. He merely knows that it is easy to scare people by making bogus claims about the national debt. In his appearance on Colbert’s show, Trump managed to combine debt hysteria with xenophobia by saying: “We actually owe China 1.5 trillion dollars, which is pretty amazing, ‘cause they take our business and we owe them money, and that’s like a magic act.” That is wrong, but again, it is nothing that any of Trump’s competitors would be uncomfortable saying.

But the icing on the cake was when Trump said, “We have to do something, and we have to do it fairly quickly. You know, when you get up to the 24 trillion . . . 23 . . . 24, that’s like a magic number, where as a country . . .” Incredulous, Colbert tried to interrupt by saying, “Really? There’s a magic number of 23 or 24?” Undaunted, Trump kept going: “They say . . . Can I tell you what? They say it’s the number at which we become a large-scale version of Greece, and that’s not good. And we’re very close to that number. Not good.” Mercifully, Colbert ended the discussion with a joke: “Wow. I don’t like feta cheese.”

Other than Trump’s classic reliance on unnamed sources (“They say . . .”), what is notable about this baseless claim is that it is not all that different from what Republicans have been saying for years. The closest thing to a “magic number” that has ever been suggested by economists was the completely discredited claim that a debt-to-GDP ratio above 90 percent is a tipping point beyond which an economy is severely damaged by additional borrowing. Again, however, that claim turned out to be wrong. I have no doubt that someone, somewhere, has tried to say that $23 trillion or $24 trillion is a magic number, but it is honestly impossible even to begin to guess where such a number would come from.

Again, however, none of this is unique to Trump. Invoking Greece as the ultimate cautionary tale is old news among Republicans, no matter that the analogy does not work in any number of ways. Senate Majority Leader Mitch McConnell and Speaker of the House John Boehner have been making similarly nonsensical claims for years. Trump is doing nothing more than singing from the same old Republican hymnal.

What Are Other Republicans Saying About Debt?

Perhaps the Trump phenomenon will soon pass, and we will be looking only at candidates who are viewed as “serious” by the political commentators. One such purportedly serious candidate is Ohio governor John Kasich. The problem is that Kasich departs from the Republican orthodoxy only very occasionally, and on the national debt, he is leading the pack with bad ideas.

Indeed, Kasich preceded the announcement of his presidential candidacy with a national tour, the sole purpose of which was to push his plan to call a national constitutional convention to pass a balanced-budget amendment. This idea is dangerous for a wide variety of political reasons (which even Supreme Court Justice Antonin Scalia decried), but even on non-political grounds, such an amendment has no place in our constitutional or economic system.

Proponents of balanced budget amendments try to make it seem simple, claiming that the government can be forced to balance its budget annually, and all will be well. But such plans, to have any possibility of being less than disastrous, need safety valves for economic crises and other completely legitimate reasons to accumulate debt. Kasich is remarkably vague about his plans, but such safety valves typically involve super-majority voting thresholds in Congress to override the balanced-budget requirement in any given year. This, however, would dangerously empower a minority of ideologically driven extremists to sacrifice the economy to a meaningless requirement to balance the budget every year. If Kasich is the “serious” guy in the Republican field, things are even worse than they looked.

Finally, there are groups of former politicians scattered across Washington who are constantly pushing for more austerity in fiscal policy. In response to recent good news on fiscal matters, one such group (which has three co-chairs, two Republicans and one Democrat) has said that the sky is still falling, because (as the group put it in a headline) a “CBO Report Shows Return of Trillion-Dollar Deficits.” Yet that scary-sounding number is actually the forecast for the deficit in 2025, not next year, and it would be only four percent of projected GDP.

Although that is a bit higher than the three percent that the more reasonable analysts usually described as a target for the deficit, it is certainly not extreme. (And besides, ten-year budget forecasts are notably imprecise.) Even so, these supposedly sober-minded men who are not even running for office associated themselves with a blog post that treats “trillion dollar deficits” as somehow a meaningful and terrible prospect.

In other words, if Donald Trump wants to out-crazy his opponents, he has already done so on immigration policy. As far as taxes go, he is willing to go further than his opponents in providing tax cuts to the rich. But when it comes to being a demagogue about the national debt, Trump is a piker. He will have to work a lot harder if he wants to say and do more irresponsible things than the rest of the Republican Party says and does about deficits and debt every day.

  • Brett Allen

    Our system of government should require continuing education while serving in our Congress or especially for those filing to run for President; Economics certainly seems the place to start. I do not for the life of me understand how, in this great country, we allow politicians to face the cameras with outright lies or distortions, work to actively subvert our own credit rating, or purposely impede the nation’s economic recovery, without facing any kind of legal consequences. Treason seems a good place to start.

  • Lucinda Halley

    I think the blogger is mistaken in his characterization of Trump’s tax plan. It was the only PROGRESSIVE tax plan proposed by the republicans. Now for the blogger and anyone else who didn’t pay attention in Economics, a progressive tax system taxes the wealthy at a higher rate than the middle class. I remember Huckabee and Carson both set forth a flat tax plan which is a REGRESSIVE tax plan where everybody would pay, for example, 10% of their income! Let me tell you that a lawyer making, say, $500,000 would barely notice $50,000 taken from him (unless he were a true budgetary idiot living “paycheck to paycheck”) while a working class person would be seriously hurt by a tax of $4000 on a $40,000 annual income. And as for the budgetary deficit, I think Trump has been perfectly clear — he will gut or eliminate some cabinet-level departments. Yay!