Treasury Secretary Steven Mnuchin let on Thursday that the administration’s tax plan, which President Donald Trump was out selling, will arrive in the “next few weeks.” Hmm. The budget expires in a little more than four weeks. Do we really think an actual tax “reform” bill will be introduced, debated and voted upon (as part of budget reconciliation) when there will be nothing in hand for weeks?
Given the need to pass the debt ceiling, keep the government running and fund Harvey hurricane relief and the usual dysfunction we’ve come to expect from the White House and GOP Congress, I wouldn’t bet on tax reform getting done this year. And what about just a straight tax cut? We’ve argued that a big tax for the rich is economically unnecessary and politically untenable. Beyond that, however, is the issue of how to pay for it, a quaint notion in some quarters, but one that should be revisited.
The Committee for a Responsible Federal Budget argues, “It is more important now than ever that tax reform does not add to the debt. This means that every tax cut needs to be replaced with an equivalent offset that ensures that tax reform does not much our unsustainable fiscal situation even worse.” Several of CRFB’s reasons for opposing debt-creating tax legislation deserve consideration.
First, the damage from skyrocketing debt should deter debt-adding tax cuts:
As a share of the economy, debt held by the public is currently 77 percent of Gross Domestic Product (GDP), which is higher than it’s been since the end of World War II and nearly twice the average of the last half-century. On its current path, debt will exceed the size of the economy by 2033 and exceed 150 percent of GDP by 2047. High and rising debt threatens economic and wage growth, the government’s ability to respond to new challenges, and the nation’s fiscal sustainability. Policymakers need to reduce the debt, not add to it.
Moreover, since the economy is humming along and unemployment is low, we’d argue that the harm from the debt increased by unpaid-for tax cuts outweighs any benefit we’d derive from the cuts. Given that this administration has no desire to produce entitlement reform and that we will need to pay for Harvey rebuilding, there’s no reason to ladle on even more debt.
Second, debt-creating tax plans don’t work all that well. (“In fact, the Joint Committee on Taxation estimated in 2011 that tax reform producing $600 billion of net revenue would produce about one-third more growth over the long run than revenue-neutral tax reform with the same structure.”) We would argue further that especially for corporate tax reform the benefit comes from simplification (flatter rates, less loopholes) that discourage unproductive business activity. You don’t need to tax businesses in the aggregate any less to achieve that objective.
Third, whatever you hear from the administration, remember that tax cuts do not pay for themselves:
While well-designed tax cuts can promote economic growth that leads to more revenue, there is no realistic scenario that this “dynamic revenue” will be as large as the initial tax cut. In order for a tax cut to pay for itself, it would need to grow the economy about $4 to $6 for every dollar of revenue loss. There is no historical case of a tax cut achieving this goal. Economic analysis has shown that tax cuts can only pay for themselves when the top federal rate is much higher than it is today—many economists believe the top rate would need to be above 60 percent. At best, the dynamic revenues from growth could pay for a fraction of the tax cut’s cost. Given our fiscal situation, tax cuts should be fully paid for without dynamic revenue so that the gains from economic growth can be used to address our mounting debt.
I’d add two more reasons to avoid a big, unpaid-for tax cut. First, that sort of tax plan entails a big, disproportionate tax cut for the rich. That’s not what Trump ran on, and it will increase all the problems (e.g. wealth inequality, cynicism about government) that fueled the Trump phenomenon to begin with. Second, to pass muster under reconciliation the tax cuts would have to be temporary, which makes no sense in the corporate tax realm and will revisit the sort of political standoff we faced with the George W. Bush tax cuts (on which Republicans relented, allowing tax cuts on upper-income individuals to expire). Aside from the political gridlock it creates this is no way to construct a tax system. Proceeding in this way simply increases what businesses and investors hate most—uncertainty.
This appeared in Wednesday’s Washington Post.
President Donald Trump assured the nation over the weekend that he is “closely monitoring” the disaster in Texas. “We have an all out effort going, and going well!” he tweeted.
No, the president and his administration do not. Since they entered office, they have tried to enhance the risk of the sort of devastation on display in Texas. Anyone watching Houston who fails to worry about how humans are intensifying natural risks, including storm surges, deluges and flooding, is ignoring the warning signs right in front of them.
Scientists are habitually cautious about attributing a single weather event to the long-term increase in global temperature that human beings have begun, and they cannot say with reasonable certainty that climate change caused Hurricane Harvey. In fact, they are still sorting out exactly how global warming affects hurricane formation.
What they can say — and have, emphatically, since this hurricane slammed into Houston — is that “Harvey was almost certainly more intense than it would have been in the absence of human-caused warming,” as climate scientist Michael Mann wrote in the Guardian. The surge of water this storm churned up out of the Gulf of Mexico was half a foot higher than it would have been without the rising sea level, he reckoned.
Warmer surface water temperatures — and they have been very warm in the Gulf of Mexico lately — mean more water vapor in the atmosphere. “This means that when we get the right circumstances for very extreme rainfall to occur, climate change is likely to make these events even worse than they would have been otherwise,” Andrew King, climate extremes research fellow at Australia’s University of Melbourne, explained. “Wetter skies mean more intense rain.”
Houston is an example of what happens when public officials ignore experts and refuse to take natural risks seriously. As the country’s fourth-largest city expanded, replacing prairie with impermeable surfaces such as pavement and concrete, the land was rendered less and less capable of absorbing floodwater. Without proper adaptive measures, this made an already flood-prone place more vulnerable.
Those officials had the fate of only one city in their hands. Trump has the fate of the whole world.
Few remember today the role Gov. Cecil Andrus played in saving the Middle Snake River in the early 1990s, but help save it he did.
Few also remember the condition of the Mid Snake at that time. It was being filled with sediment and nutrients from return flows and was choked with weed growth and algae making boating nearly impossible on many stretches of the river. It was so bad the county commissioners and others from Gooding, Jerome, Lincoln and Twin Falls started meeting as a group to find solutions. The commissioners knew they would need a lot of help from both state and federal agencies if a solution was to be found.
Lew Pence, of the Wood River Resource Area, came up with the idea of hosting a picnic by the river and inviting dignitaries to the event. Several people from the Department of Environmental Quality, and others, gave a briefing on the various causes of the problem. These included the proposal for several new hydropower plants within the reach of the river between Milner Dam and the Idaho Power facility known as the Lower Salmon Falls Dam near Hagerman.
After the briefing, some attendees, including Gov. Andrus, were ushered to boats to view the situation for themselves. Gov. Andrus and I were placed on a Gooding County boat, which shortly after leaving the dock became mired in plant growth. It took the county deputy about 20 minutes to clean the impeller and row us back to open water. During that time, the governor asked a lot of questions and showed his concern.
A few days later, I received a call from the governor’s office asking if I could meet the governor at the Twin Falls airport to fly the Mid Snake. The overview was shocking. Gov. Andrus asked me what the counties needed to help with the task, and I told him we needed the expertise and support from state and federal agencies dealing with our region’s water, and because of him we got it.
The governor and I were at completely opposite ends of the political spectrum and he knew it, but our desire to conserve Idaho’s environment was more important than politics. While there is still much to be done on water quality throughout this region, we got off to a strong start because of Cecil Andrus.
I was very disappointed to read in the Times-News that our state government is sending all our Idaho voting records to Washington.
I can only guess why the federal government wanted these, but what’s the point of a secret ballot if it isn’t secret? I don’t like this one bit. This huge collection of all U.S. citizens voting records (for whom voted and when, name, address, party affiliations) seems too much like Big Brother and altogether too vulnerable to misuse.