The Republican Party Is Putting its Reputation for Fiscal Responsibility at Great Risk

 

The final Republican tax bill has now been passed by both the House and the Senate and awaits the President’s signature which is expected soon. It dramatically lowers the federal corporate tax rate from 35% to 21%.  This is highly beneficial as it will provide a big incentive for U.S. multinational companies to bring their foreign profits back home for spending and reinvestment.


The huge problem, of course, is that the tax rate cuts are not paid for by other offsets and will add $1 trillion over ten years to our already exploding national debt. In fact, we are likely to see trillion dollar deficits again as soon as FY 2019.


Here is a cogent analysis of the bill’s weaknesses by the Wall Street Journal’s Greg Ip:

  • Distortionary business tax breaks still remain such as for oil and gas drilling, electric cars and renewable energy. Also the “carried interest” loophole largely remains intact.
  • New breaks are created, most importantly a 20% deduction for businesses which pay taxes as individuals (pass throughs). This introduces “grave complexity” and creates huge incentives for tax avoidance.
  • The challenge of constraining entitlement growth has become much more difficult. The soaring cost of Social Security, Medicare and Medicaid is the main driver of our debt problem. The Democrats, having been excluded from developing the tax plan, will be far less likely to cooperate on entitlement reform.

Conclusion. Corporate tax rate reform, as desirable as it is, as been badly handled by the Republicans. The new tax law not only makes the debt much worse by itself but poisons the atmosphere for actually figuring out a way to effectively address entitlement reform, the key to getting debt under control.

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5 thoughts on “The Republican Party Is Putting its Reputation for Fiscal Responsibility at Great Risk

  1. Jack, any figures as to what chain migration, legal immigration at the current level, and illegal immigration might be adding to entitlement costs.

    • If immigrants are working, which most of them must be, then they are paying taxes and therefore paying for welfare benefits.
      We have a developing labor shortage and we need low cost immigrant labor to overcome it.

  2. Entitlement reform will require a new national effort to redress the level of Social Capital, community by community, to redress the social adversities for any hope of reducing their national cost to government, at all levels. Health spending must begin, ASAP, to decrease as a portion of our national economy (GDP) ANNUALLY by 0.5 – 0.7% of GDP growth. This means that if the economic growth in 2018 was 3.5%, then health spending growth should be 3.0% or less in 2018 compared to 2017. In ten years, our health spending as a portion of the GDP should be = or < 13.0% of the GDP. This will require a gradual change in the level of universal health insurance that improves the availability and accessibility of Primary Healthcare for each citizen, community by community. Simultaneously, a community driven collaborative process, viz., agriculture's Cooperative Extension Service, should be established to improve each community's COMMON GOOD to reduce the adversity's that increasingly interfere with the resilience of each person's survival.
    .
    One strategy to accomplish all of this has already been described. Initial implementation could be 6 months away after its Charter was authorized by Congress, at a fixed Federal expense limited to $1.00 per citizen, annually (an increase of 30 cents for every $4,000.00 of our Federal government's contribution to our nation's total health spending).
    .
    See https://nationalhealthusa.net/home/

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