Saturday, November 25, 2017

GOP tax bills will benefit the rich and increase the deficit say economists ... and the voters.

It seems like a rare event when ivory tower economists and regular working folks agree. Recent polls indicate that neither group thinks much of the GOP tax cut bills.

Doyle McManus at the LA Times explains how GOP tax plan aims to appease one group: voters in primaries. (The essay was reprinted in Friday’s Daily Star.)

President Trump and his Republicans are still trying to sell their tax bill as a “middle class tax cut.” The middle class isn’t buying it — but that won’t stop Congress from passing some version of their plan.

… A Quinnipiac Poll last week found that 52 percent of voters oppose the GOP plans; only 25 percent support them.

It’s easy to see why. Most voters say they don’t expect their own taxes to go down if either of the bills passes. They expect most of the benefits would go to upper-income taxpayers, not the middle class.

And they’re right.

Trump himself is the perfect example.

Trump has frequently claimed that the bills wouldn’t benefit him or his family, but it’s hard to square that with the actual provisions.

Tax experts have said that the abolition of the estate tax could save Trump’s heirs as much as $1.1 billion.

And even as the bills eliminate middle class tax breaks, they preserve one for golf course owners — including, presumably, the Trump Organization.

A recent Politico poll found that most voters don’t believe Trump’s claim that he won’t come out ahead. (If the president wanted to prove that he’s right, he could simply release … Oh, never mind.)

The Republicans in congress are determined to enact some version of the tax-breaks-for-the-already-rich bill. They do not give a damn about what the voters think. They only care about what their donors are willing to pay them.

I expect that these fat cat feeders also don’t give a sh!t about what economists think. All but one of those recently surveyed think that the tax bills will do nothing good for the economy. All of the economists think that the tax bills proposed will increase the deficit. Ezra Klein at vox.com has this story in Out of 42 top economists, only 1 believes the GOP tax bills would help the economy. “But all of them think it will increase the debt.”

The University of Chicago’s Booth School of Business runs an ongoing survey of top economists spanning a wide number of specialties and political outlooks. The panel includes multiple Nobel Prize winners, White House veterans, and former presidents of the American Economic Association. Recently, they were asked about the Republican tax reform bills. The results weren’t encouraging.

The first question was straightforward. Would they agree that if the US passed a tax bill “similar to those currently moving through the House and Senate,” GDP would be “substantially higher a decade from now”? Of the 42 economists polled, only one thought the Republican bill would boost the economy. The plurality said it wouldn’t, and the remainder were uncertain or didn’t answer.

The survey includes an optional space for respondents to add a comment, and a few of the comments are notable. “Of course not,” wrote the University of Chicago’s Austan Goolsbee, who served as chief economist for President Obama. “Does anyone care about actual evidence anymore?”

A number of the economists argued that tax policy simply isn’t as powerful a lever as Republicans want to believe. “Tax policy appears to have little effect at the margin on GDP growth in OECD countries,” wrote MIT’s David Autor, an eminent trade economist. “Doubt it will substantially change things either way,” wrote the University of Chicago’s Anil Kashyap. “Aside from the redistribution of wealth, hard to see this changing much,” wrote Richard Thaler, who just won the Nobel Prize in economics.

The only economist to say the bill would increase GDP was Stanford’s Darrell Duffie, and he added the concern: “Whether the overall tax plan is distributionally fair is another matter.”

The second question asked whether passage of the Republican tax bills would mean “the US debt-to-GDP ratio will be substantially higher a decade from now than under the status quo.” Here, too, the news was grim from Republicans. In this case, all but one economist agreed that the bills would blow up the deficit, and the outlier, Stanford’s Liran Einav, turned out to have misread the question — he later clarified that he also agrees the bill would add to the debt.

“How could it be otherwise?” asked MIT’s Daron Acemoglu. “Cut taxes. Lose money. Repeat,” said Goolsbee. “This is at least is clear,” said Yale’s William Nordhaus: “No way the growth effects will be strong enough to offset the revenue losses.” Even Darrell Duffie, the sole economist who agreed that the bill would boost GDP, says the plan will pile on debt.

So here, then, is the verdict of the economics profession. The growth benefits of the Republican tax plans are either nonexistent or uncertain. The increase in debt, by contrast, seems certain.

It doesn’t sound like a great trade.

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