They’re not getting it. Recently, Il Trumpe unveiled his tax ‘plan’, which is nothing more than a page of bullet points. Yet, it appears that even this plan* would massively slash taxes for the rich, while offering very little for everyone else–just the same old Republican shit.
This plan would also raise the deficit by somewhere between $5.4 trillion and $7 trillion over the next ten years (the estimates shouldn’t be taken that seriously, since the plan isn’t a real one).
So, of course, the Democrats assailed the massive tax cuts for the wealthy as bad things in and of themselves, and argued instead, that we should deficit spend to fix all the broken stuff, get some new nice stuff, and put people back to work.
HA! WE MAKE THE FUNNY! Of course, they didn’t. They argued this would crank up deficits and the national debt (hell, even Sanders did this, and he probably knows better, what with Stephanie Kelton as a former advisor). As we noted a couple years ago:
Any Democratic candidate who does not see the need in the current economy to engage in deficit spending either doesn’t understand what is needed or is too cowardly to fight for the right policy. Male* employment figures are still circling around the bowl. Keep in mind, the people who are still getting hit the hardest in this downturn are minority men, which should put some of the recent bold rhetoric on race in context: money talks, and, well, cost-free talk walks. As Sawikcy puts it, “I may be some kind of radical crackpot, but the points I make do not rely on any sort of radical economics.”
Jeff Spross picks up the thread (boldface mine):
Fear-mongering about the debt is just wrong on the economic merits. But it also undermines and destroys the very political values liberals seek to advance.
The claim that more debt will hurt the economy goes like this: More debt will lead to higher interest rates sometime in the future, forcing the federal government to hike taxes to pay those obligations. Those interest rates will crowd out private sector investment, and the taxes will slow the economy….
What this story doesn’t tell us is how much borrowing we’d have to do before we start running a real risk of interest rate increases. It just assumed the risk is ever present.
But a quick glance at the data tells us the risk is minuscule: Interest rates on U.S. debt remain at historic lows. You may have heard economists talking about how America is stuck in an enormous savings glut: Huge amounts of money are sloshing around financial markets without enough assets (like U.S. treasuries) to invest in. On top of that, international trade relies on the U.S. dollar as its exchange currency of choice. So other countries are always trying to sock away big reserves of financial assets denominated in American dollars. Add it all up and demand for assets like U.S. debt vastly outstrips supply. Hence, low interest rates.
More borrowing by the U.S. would actually create more of those assets, bringing supply back even with demand. Once we’ve created enough assets to soak up the savings glut, then we’d face a real risk of higher interest rates…
But let’s say you had a Fed with the opposite priorities. Surely, if you monetize enough debt, you’ll cause inflation.
Well, yes, but again the question is, at what point? It’s not always true that paying debt obligations with newly created money will increase inflation. It’s only true when the economy is running at full capacity.
If the additional dollars spur the creation of additional goods and services, then they’ll absorb the new money supplies. Only when everyone already has a good paying job, and all the productive factors in the economy are being put to full use, will the newly created money inevitably chase the same amount of goods and services that existed before. And that’s what causes prices to rise.
The deficit spending due to Il Trumpe’s proposed tax cuts–that is, the amount of money we would send to the wealthy and corporations–is equal to the entire discretionary federal budget (give or take). We could double everything, from the FBI to the NIH. To put this is context, Sen. Sanders’ original campaign proposal for free college tuition was pegged at $120 billion per year. NIH, NASA, and NSF combined is less than $60 billion. Upgrading all of our current mass transit systems doesn’t come close to hundreds of billions of dollars, never mind trillions. Or shit, we could eliminate the worker component of payroll taxes and still have $100 billion (or more) leftover. Whatever floats your boat.
You get the idea. This is the real tragedy here–we could have nice things, but instead, we impose austerity on ourselves. In fact, giving even more money to the wealthy will only make things like they are now, just suckier:
But Trump’s tax cuts would flow overwhelmingly into the pockets of the already wealthy. That’s much more likely to just swell the savings glut still further, and keep interest rates depressed. So Trump’s plan will make inequality much worse, and almost certainly prove useless as far as job creation goes.
The tax cuts are awful policy, but not because of TEH DEFICITZ11!!!11
Someday, Democrats will figure this out and have the courage to talk about it (Republicans probably won’t either*). Until then, we can’t have nice things because of our ignorance.
*Or maybe they have, and they’re just lying through their teeth.