Budget & Taxes

Republican Base Supports Trump’s Views on Economics

Paul Krugman comments on Jeb Bush’s recent attacks on front-runner Donald Trump.

“Mr. Bush has chosen to attack Mr. Trump as a false conservative, a proposition that is supposedly demonstrated by his deviations from current Republican economic orthodoxy: his willingness to raise taxes on the rich, his positive words about universal health care … [These] are precisely the issues on which Mr. Trump happens to be right, and the Republican establishment has been proved utterly wrong.”

“So am I saying that Mr. Trump is better and more serious than he’s given credit for being? Not at all — he is exactly the ignorant blowhard he seems to be. It’s when it comes to his rivals that appearances can be deceiving.”

“Mr. Bush, in particular, may pose as a reasonable, thoughtful type … but his actual economic platform, which relies on the magic of tax cuts to deliver a doubling of America’s growth rate, is pure supply-side voodoo.”

“All indications are that Mr. Bush’s attacks on Mr. Trump are falling flat, because the Republican base doesn’t actually share the Republican establishment’s economic delusions.”

“But Mr. Trump, who is self-financing, didn’t need to genuflect to the big money, and it turns out that the base doesn’t mind his heresies. This is a real revelation, which may have a lasting impact on our politics.”

Conservative Trump is Not Conservative About the Budget

Albert Hunt contends that the biggest budget-buster would be “the self-styled arch-conservative, Donald Trump.”

“The front-running Republican makes lavish promises to boost spending on immigration, the military, veterans and other causes while cutting taxes for the middle class and resisting proposals for offsetting savings.”

“The most detailed Trump plank is on immigration, including plans to deport 11 million undocumented immigrants and to erect a 1,900-mile wall along the Mexican border. Jeb Bush has said those would cost hundreds of billions of dollars. Some analysts say that’s a conservative estimate.”

“Trump has also vowed to build up the U.S. military, charging that enemies know America ‘is getting weaker.’ That’s big-ticket budgeting … The money apparently won’t come from trimming entitlements. ‘I’m not going to cut Social Security like every other Republican, and I’m not going to cut Medicare or Medicaid,’ Trump insists.”

“Trump has threatened to slap tariffs on Chinese and other imports, suggesting that would provide cash and improve American competitiveness. More likely it would raise the cost of products to American consumers without those accompanying benefits.”

 

Trump Takes Populist Stance on Taxes

Jim Tankersley, in the Washington Post, observes that Trump’s views on taxes “will absolutely chill establishment conservatives.”

“Trump isn’t running as a supply-sider. He’s running as a populist. He’s not arguing for lower top marginal tax rates or a flat tax, like most of his Republican rivals. He doesn’t appear to want to eliminate investment taxes, as Rubio proposes. He wants rich people to pay more.”

Asked in an interview if he was proposing to raise taxes on himself, Trump replied: “That’s right. That’s right. I’m okay with it, ready, willing. And you’ve seen my statements. I mean I do very well. I don’t mind paying some tax. The middle class is getting clobbered in this country. The middle class built this country, not the hedge fund guys. But I know people in hedge funds, they pay almost nothing, and it’s ridiculous, okay?”

How America Dominates Defense Spending

Matthew Yglesias: “This map, found in Bank of America’s “Transforming World” atlas, dramatizes exactly how enormous our defense budget is in context:”

“Not only does the US defense budget equal about half the world’s total military spending, but a huge chunk of the rest of the total is spent by close American allies. Russia’s military spending, for example, is dwarfed by the combined commitments of the UK, France, and Germany. North Korea’s military spending looks like a tiny pimple sitting on the top of South Korea’s head.”

A Federal Housing Policy That Favors the Wealthy

Vox: Federal and state “tax deductions tend to be larger for rich people, who tend to have more expensive houses. And rich people are also in higher tax brackets, making every dollar deducted worth more. As a result, these tax breaks provide the biggest financial benefit to the wealthiest taxpayers. The Urban Institute’s John McGinty, Benjamin Chartoff, and Pamela Blumenthal have created a helpful chart showing just how big these tax breaks get.”

Housing tax breaks for rich people are larger than housing subsidies for poor people.

“The blue bars show the value of these tax breaks for different income brackets … As you can see, the tax breaks provided to the richest Americans, on a per-person basis, dwarf the value of housing subsidies provided to those with low incomes.”

“Most households in the middle of the income distribution are too wealthy to qualify for federal housing subsidies. At the same time, they tend to have relatively small houses and be in low tax brackets, so they don’t get much benefit from housing-related tax breaks.”

How Much Does the Government Really Cost You?

Bloomberg: “Shrinking the federal government will be top of mind when Republican candidates meet in Cleveland tonight for the first presidential debate of the 2016 primary. Some have already suggested saving money by closing the Supreme Court, the Department of Education, and the Environmental Protection Agency. But how much do these and other government programs really cost you, and would eliminating them make a dent in the $3.8-trillion budget? We divided the cost of federal departments and programs by the number of U.S. residents—currently 321.4 million—to get an admittedly rough-ready idea of the per-person tab.”

Government Shutdown Now More Likely Than Not

“The chance of a federal government shutdown increased dramatically and precipitously last week from 40 percent to 60 percent. It’s now more likely than not that a shutdown will result from the craziness going on in Washington,” Stan Collender writes.

“With the House already in recess until after Labor Day and the Senate about to leave town this week, all of the components that had led to my previous 40 percent estimate got worse. There’s now even less time – Congress will be in session only a handful of days before the fiscal year begins on October 1 – for the House and Senate to devote to appropriations.”

“The leadership has already admitted that nothing has been decided about how to deal with this situation. In other words, this will be the kind of last minute, ad hoc decision that in the past has repeatedly failed and led to unwanted consequences…like a shutdown. In budget technical terms, the House and Senate leadership will be flying by the seat of its pants.”

Health Costs Projected to Increase

Wall Street Journal: “Growth in national health spending, which had dropped to historic lows in recent years, has snapped back and is set to continue at a faster pace over the next decade, federal actuaries said Tuesday.”

“The return to bigger growth is a result of expanded insurance coverage under the 2010 health law, a revived economy and crunchtime as Medicare’s baby-boom beneficiaries enter their 70s.”

“American spending on all health care grew 5.5% in 2014 from the previous year and will grow 5.3% this year, according to a report from actuaries at the Centers for Medicare and Medicaid Services published in the journal Health Affairs. In the years through 2024, spending growth is expected to average 5.8%, peaking at 6.3% in 2020.”

Sarah Kliff in Vox: “More health spending is, in one way, a good thing: It reflects more Americans gaining health insurance and seeking out needed medical care as the economy recovers.”

Jeb Bush Wants to Dock Lawmakers’ Pay

Philip Bump responds to Jeb Bush’s “crazy idea” that “members of Congress should get paid for how much they actually work.”

“Bush didn’t really articulate how the plan would work. But let’s say that the senators only got the same percentage of their $174,000 salaries as the percentage of votes they made. That would result in Graham and Cruz losing $40,000 a year — and Rubio losing $50,000.”

“Let’s apply the Bush formula more broadly. The government’s Office of Personnel Management says a full-time year is 2,087 hours of work — 261 days, or thereabouts. Here’s how Congress’ number of days in session has compared to that standard since 1985.”

“In 2014, the Senate was in session for 136 days and the House for 135. That’s about 52 percent of the OPM standard for work days. Let’s — generously! — give them another 60 days that they worked doing other things, having meetings in districts, etc. That means that each branch worked about 75 percent of a full year — and that each should get about $130,000 of their $174,000 salaries.”

The Downside to Congressional Budgetary Gimmicks

Jonathan Chait comments on the Republican Congress’ insistence on “paying for” domestic spending only with offsetting measures.

“Obviously, this makes it extremely hard to increase domestic spending. Republicans oppose tax increases for any reason at all, because, as Grover Norquist has taught them, raising taxes even a tiny amount makes the baby Reagan cry. In theory, they like cutting spending, but in practice, the only spending programs they actually specify for reductions are the ones aimed at poor people, which Democrats don’t like to cut, creating a stalemate.”

“The problem for Republicans is that there are some domestic programs they not only don’t want to cut but prefer to expand. The inability to maintain transportation infrastructure has created huge problems for business, which has been lobbying for years to fix it.”

“So the bipartisan solution is to reform the international business tax, create a big onetime tax cut for companies that bring overseas profits home, and then use the windfall to finance roads. This plan would increase revenue in the short-run, then create a permanent long-term drain:”

“But these are the traps Congress finds itself in when it attempts to reconcile practical recognition of the need for government with rules designed to prevent pragmatism in any form. It’s possible to find temporary workarounds rather than confront the irrationality of the Republican anti-tax religion. But there are only so many gimmicks and they only last so long.”

Which States’ Tax Systems Increase Inequality?

Vox: “A new study finds that state and local taxes can have “significant effects on income inequality. Fed researchers Daniel Cooper, Byron Lutz, and Michael Palumbo estimate how major state taxes — sales taxes, income taxes, and motor fuel taxes — have affected inequality from 1984 to 2011. The differences are striking: While in some states, like Oregon, state taxes cut inequality significantly, in many Southern states like Tennessee, they actually exacerbated it.”

 

Obamacare and Labor: A Good Thing

Paul Krugman: The new CBO report on “the consequences of repealing the ACA is definitely not what the Congressional majority wants to hear. Despite including ‘dynamic scoring’, the report finds, unambiguously, that Obamacare reduces the deficit and repealing it would enlarge the deficit.”

“Is there anything in the report that provides fodder for the opponents? I see that the Times report says that there are ‘mixed effects’, because CBO says that GDP would be higher if the ACA were repealed. And maybe the usual suspects will try to spin it that way.”

“But the truth is that this report is much, much closer to what supporters of reform have said than it is to the scare stories of the critics — no death spirals, no job-killing, major gains in coverage at relatively low cost.”

“In fact, in a perfectly competitive economy the gain would fully offset the fall in GDP: if workers are paid their marginal product, the fall in GDP from the ACA is equal to the lost wages, but workers choosing to work less clearly prefer to have the extra time to the extra wages. Or to put it a bit differently, other things equal it’s a good thing if workers, freed from the fear that they won’t be able to get health insurance, respond by voluntarily working less.”

OMB Chief Optimistic on Tax Reform

Maxwell Murphy reports on Office of Management and Budget Director Shaun Donovan’s “optimism that Congress will reform the corporate tax rate and simplify the tax code this year.”

“If done right, he said, a cut will not add to the deficit in the long run, and will actually save money over the first 10 years. He did not specify how this would occur… Earlier in the day, Congressman Paul Ryan (R., Wis.), who is chairman of the House Ways and Means Committee, suggested that sweeping tax reform would need to wait until 2017 when a new president is in office.”

“In addition, the government needs to raise or suspend the nation’s debt ceiling or it will again be faced with sequestration come October, Mr. Donovan said. Another government shutdown this fall can’t be ruled out, he said, but the ‘odds are better than 50/50′ that Congress can agree on measures to avert such a scenario.”

GOP Lawmakers Push Online Sales Tax Reform

“GOP lawmakers reignited the online sales tax debate,” according to The Hill, “rolling out a new bill that they said could assuage previous Republican concerns about the issue.”

“The bill, from House Oversight Chairman Jason Chaffetz (R-UT) and a group of 15 other House members, would give states greater latitude to charge sales taxes on online purchases from out-of-state customers… Chaffetz and Womack both stressed that their bill would finally bring parity to the issue of taxing online sales. The Supreme Court has said that states can only collect sales taxes from companies that have a physical location within their borders.”

“Both Speaker John Boehner (R-Ohio) and Senate Majority Leader Mitch McConnell (R-KY) have shown little interest in the issue, which divides Republicans far more than it does Democrats. Most Democrats back online sales tax legislation, while some of the Marketplace Fairness Act’s loudest critics were GOP presidential contenders like Sens. Ted Cruz (R-TX) and Rand Paul (R-KY).”