Have you heard the latest news? The sun rose in the east this morning. Also, it turns out that cutting corporate taxes diminishes government tax revenue. Pardon us for not being stunned by new data showing that tax revenue from corporations fell off a cliff in the first half of 2018, prompting the government to up its deficit predictions by almost $1 trillion over the next decade.
We have repeatedly warned that the $1.5 trillion tax cut Republicans pushed into law last year wouldnt pay for itself to use the phrase the GOP chants like a religious incantation but instead would become a budget-buster. In fairness, virtually everyone not indoctrinated into the cult of supply-side economics was predicting the same thing. And now, here we are.
Its clear that congressional Republicans most of them former deficit hawks, no less wont take this as the lesson it should be. The fundamental flaws in trickle-down economic theory were apparent during its heyday in the Reagan Era, and have been repeatedly demonstrated in practice since then, and yet the unblinking believers keep chanting.
But the fiscal facts cannot be denied.
The stated purpose of the Republican tax cut was to spur economic growth, and tax cuts can do that, but it never made sense in context. The U.S. economy has grown every year since 2010, when President Barack Obama pulled us out of the economic nosedive he inherited. With growth proceeding uninterrupted under Trump, there was no pressing need for a massive, deficit-funded tax cut.
Ah, but it wont cost anything, chanted the faithful. They recited, chapter and verse, how job creation and higher wages from the tax cuts would be so great that they would offset the lost revenue from the cuts and then some. Not only will this tax plan pay for itself, but it will pay down debt, Treasury Secretary Steve Mnuchin said last fall. But the deficit now soars ever higher.
What of those added jobs and higher wages? They havent materialized. Yes, the U.S. has gained jobs since the bill passed, but at essentially the same rate that it has since 2010. And wages, when adjusted for inflation, have actually gone down this year. Meanwhile, corporations are using their tax windfalls for record-breaking stock buybacks, which help stockholders, not workers.
Trump predictably has boasted about the second-quarter report showing 4.1 percent economic growth, the fastest since 2014. But experts say thats a temporary spike that wont be repeated in subsequent quarters. The growth numbers are not sustainable; the deficit numbers have nowhere to go but up.
Republicans must rethink their faith in the all-healing power of tax cuts. But they made clear long ago that they wont be converted by facts. At this point, the ballot box is Americas only salvation.
The St. Louis
Post-Dispatch
Alarm over federal deficit falls silent
