The Republic Will Survive the Tax Bill
Reasonable perspective...? If you can read on the website you can access many links embedded in the piece.
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My view of the tax bill in Congress is probably clear to you by now. I think it’s bad for the economy and, in particular, for the middle class and poor. A small number of Republicans can still prevent the bill from becoming law, and I hope they do.
But I also think that some of the commentary about the bill is exaggerating its impact. The goal of today’s newsletter is to put the bill in perspective.
It does not fundamentally alter American politics. Its passage would not be as big of a deal as Obamacare repeal would have been (and, no, the bill does not stealthily repeal Obamacare). The tax bill doesn’t threaten democratic values in the ways that President Trump, Roy Moore and their various enablers are otherwise doing.
The tax bill, to be clear, is a dreadful piece of policy. It’s also a dreadful piece of policy that is unlikely to endure — so long as people avoid becoming despondent. “Of all the horrors Donald Trump has (and has yet to) inflict upon the republic, a huge tax cut for the rich was the most inevitable,” Jonathan Chait of New York magazine wrote. “But it is also the most easily reversible.”
Here’s my attempt at perspective:
Tax policy swings back and forth with partisan control. Ronald Reagan cut taxes for the rich, and Bill Clinton raised them. George W. Bush cut taxes on the rich, and Barack Obama raised them. Now Trump is on the verge of cutting them again. Changes to the tax code are often ephemeral.
As Chait wrote: “Indeed, the passage of the Trump tax cuts will help lay the groundwork for their undoing by increasing the chances Democrats regain control of Congress.” Already, polls show the tax bill to be deeply unpopular, which is why Republican leaders are rushing it through Congress. They know it’s a political loser.
This bill doesn’t change the rules. Obamacare repeal would have. I’ve previously asked historians for modern parallels to Obamacare repeal — that is, huge social programs that were established and then eliminated — and the historians struggled to come up with an answer. The reversal of Reconstruction, and of basic rights for Southern blacks, is probably the closest.
The repeal of Obamacare would have haunted any future effort to improve life for middle-class and poor Americans. The passage of a big tax cut for the rich will not.
(All of which is a good reminder not to ignore the possibility that Republican leaders will try again to repeal Obamacare.)
The tax bill is not a backdoor repeal of Obamacare. Yes, the bill would damage the quality of health insurance. And, yes, several Republican senators — starting with Susan Collins — would be violating their own stated principles if they vote for the tax bill.
But damage to Obamacare isn’t the same thing as a slippery slope toward the program’s demise.
The two core pieces of Obamacare are the subsidies that help middle-class families afford private insurance and the expansion of Medicaid for working-class families. The tax bill doesn’t get rid of either. Instead, it will likely repeal the individual mandate — the requirement that people buy health insurance. As a result, health-insurance markets will suffer some turmoil, and costs for some families will rise.
Most people who want health insurance will still be able to get it, though. And health care advocates can reduce the impact of the mandate’s repeal through public-information campaigns that encourage people to sign up. The elimination of the insurance subsidies and Medicaid expansion would be qualitatively worse.
Many big fights remain. The tax bill’s supporters have a clear vision, and they’ve been surprisingly up front about that vision. The first step is to cut taxes. The second is to cut government programs like Medicare, Social Security, Medicaid and much else.
But this tax bill itself doesn’t accomplish the second step (with the exception of some modest automatic cuts). Republicans will have to pass other bills to shrink programs that benefit the middle class. Democrats are already gearing up to have those debates, as they should be. A McClatchy news headline yesterday: “Dems warn GOP: We’re prepared for class war.” Debates over spending cuts are easier for Democrats to win than debates over tax policy.
Also, the middle-class tax increases that are lurking in the bill don’t take effect for years. There is time to reverse them, and to raise taxes on the rich too.
Meanwhile, the deficit increases won’t ruin the economy. The self-proclaimed deficit hawks voting for the Senate version of the bill, like Jeff Flake, are certainly being hypocritical. But the attention to their hypocrisy, deserved as it is, has obscured another problem: The (empty) rhetoric of those deficit hawks is wrongheaded, too.
“The tax bill is bad, the debt is fine,” as a Vox piece by Matthew Yglesias put it, arguing for the end of “a senseless state of debt panic.” Interest rates are low. The bond market doesn’t seem worried about the tax bill, just as it wasn’t worried about the deficit increases early in the Obama administration.
Eventually, the deficit and debt will be a problem, because the federal government still hasn’t figured out how to pay for baby boomer retirement. But the deficit is not our most urgent economic problem. (What is? Stagnant living standards for the majority of the population.) The tax bill is bad because of how it spends its money, not how much it spends.
Again, as I said at the outset, this tax bill is dreadful. It’s a huge handout to those Americans who least need one. I hope the bill doesn’t become law. If it does, I hope it is reversed as quickly as possible. I just don’t think the bill should be confused with some of the larger threats of the Trump era. And despite the rushed process, lies and hypocrisies that got it this far, I don’t think the bill should cause anyone to give up on politics...
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