What Ever Happened to Fiscally Responsible Tax Reform?

 

“I think this level of national debt is dangerous and unacceptable. My preference on tax reform is that it be revenue neutral.  What I’m hoping we will avoid is a trillion dollar stimulus.  Take you back to 2009.  We borrowed $1 trillion and nobody could find that it did much of anything.  So we need to do this carefully and correctly, and the issue of how to pay for it needs to be dealt with responsibly”

Senator Mitch McConnell (R, KY), 2016

Here is where we are today:

  • The world has seen remarkable human progress over the past 200 years. What has brought this about is specialization and trade, i.e. economic growth.
  • Since the end of the Great Recession in June 2009, economic growth in the U.S. has averaged just 2.1%, a remarkably slow recovery by historical standards. This has led to stagnant wage growth especially for blue collar workers. Finally growth is up over 3% for the past two quarters and wage growth is surging.
  • The U.S. corporate tax rate at 35% is not internationally competitive and encourages multinational corporations to move their operations overseas. A lower rate of 20% or so would encourage U.S. multinationals to bring their profits home and also encourage foreign companies to set up shop in the U.S.
  • What all of this means is that we still need tax reform (i.e. lower tax rates) but not fiscal stimulus.
  • The Republican tax plan now moving through Congress will increase our already outrageously excessive debt by $1 trillion over ten years, according to the Joint Committee on Taxation, the official scorekeeper for the U.S. Senate.
  • The Republican Congress will be making a huge mistake by implementing the current plan which has now passed both the House and the Senate. The GOP will no longer be able to make a credible case that it is the party of fiscal responsibility.

Conclusion. With a (public, on which we pay interest) debt of $15 trillion, and growing rapidly, the U.S. is approaching fiscal insolvency. The Republican tax plan will add an additional $1 trillion to this debt over the next ten years.  This is unconscionable behavior.

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5 thoughts on “What Ever Happened to Fiscally Responsible Tax Reform?

  1. All of this without a whisper from the President about our nation’s level of HEALTH SPENDING. Assuming, reasonably, that the excess level of our national health spending was $1 Trillion last year and that the excess resulted in a $400 Billion expense to our nation’s Federal government, our nation’s highly inefficient healthcare industry will “blow through” $4 Trillion over the next 10 years. This is more than enough to underwrite the tax cut.
    .
    Wringing efficiency out of our nation’s healthcare would by itself serve as an economic stimulus. Unfortunately, the Emperor’s clothes continue to blind our perspective about the importance of social justice for each citizen. The exorbitant level’s of monthly health insurance is unconscionable, especially for all the citizens with marginal levels of disposable income.

    • As you say the cost of healthcare, for both the country as a whole and for many self-employed middle class individuals, is the single biggest fiscal problem facing our country.
      Either we figure out a much more efficient free market system or we’ll soon end up with a single-payer system whether we want it or not.

  2. Excellent points. i would add that this very substation increase in the deficit handicaps our long-term ability to deal with funding for entitlement programs such as Medicare, Medicaid and others. we have a growing number of elders who have apparently not been able to to save for their later years. We will have many fewer options if we commit to this degree of debt. Who wins?

  3. Truly, including its onerous rationing managed by a coercive, bureaucratic, and centralized government. The authors of the FEDERALIST PAPERS would be appalled.

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