Before last year’s big tax cuts, the economy was improving nicely. After the tax cuts, the economy is doing the same – for now, anyway. What’s different is the $1.9 trillion the tax cuts have tacked onto deficits.
If President Donald Trump and allied Republicans were so determined to blow a huge hole in the federal budget, they could have more usefully spent the money on roads, communications and other infrastructure. These would have enhanced productivity and put the money into blue-collar pockets, as opposed to rich-investor portfolios.
It’s remarkable how little economic bang the tax cuts are delivering. The short-term stimulus did tweak this year’s growth. The Congressional Budget Office sees the gross national product expanding at 3.3 percent in 2018.
But then things go downhill. The Federal Reserve expects the economy to grow by an average of only 1.8 percent a year over 10 years. Deficits will be a big reason.
During Barack Obama’s last year in office, the economy grew by 1.9 percent. The year before, it expanded by 2.6 percent. And oh, the deficit as a percentage of the economy had fallen three-quarters by his last year.
So let’s drop the baloney about Republicans being stewards of fiscal responsibility. Shortly after approving Trump’s reckless tax cuts, the Republican Congress voted to raise spending by $300 billion. Proving that they have a sense of humor, Republicans then followed with a vote for a balanced budget amendment to the Constitution. It failed to pass.
Balanced budgets are not impossible. All they require are politicians willing to pay for what they spend.
Democrat Bill Clinton left office with a balanced budget – actually, three years of surpluses. Then Republican George W. Bush came along. Wild tax-cutting, big spending and harebrained deregulation ensued, and the economy fell into ruin.
Obama inherited the worst downturn since the Great Depression. Republicans blamed him for the recession-driven deficits, naturally.
No respectable economist ever bought into the argument put forth by Bush – and currently by Trump – that massive tax cuts necessarily pay for themselves in economic growth. Thus, Republicans wanting to look responsible talk a big game about pairing losses in tax revenues with serious cuts in spending. But they never ever do it.
The biggest federal expenditure, accounting for 26 percent of the budget, is health care. Nearly 60 percent of health care spending goes to the immensely popular Medicare program.
House Republicans have just unveiled a budget proposal for 2019 that would chop more than a half-trillion dollars from Medicare. That’ll be the day.
The elderly, who vote heavily for Republicans, don’t cotton much to nips in their health benefits. Recall that Bush didn’t touch a hair on Medicare. On the contrary, he added a very expensive drug benefit – not a penny of which was paid for, of course.
Trump’s relatively modest proposal to claw back $15 billion in spending already approved by Congress – just a drop in the deficit tsunami – was promptly rejected by the Senate, with two Republicans voting no. Almost half the cuts were to come out of the Children’s Health Insurance Program. (Tough year for children.)
To recap, the last Democratic president left us with a growing economy, deficits coming under control and 15 million fewer uninsured Americans. And by the way, more jobs were created in Obama’s last 16 months than in Trump’s first 16 months.
Your writer takes issue with Democrats on several fronts, but on fiscal management, they rock. Responsible leaders can foster a stable, growing economy – and they don’t have to take away your health care to do it. If that’s what you want, put Democrats back in power.
Froma Harrop is a columnist with Creators Syndicate. She can be reached at email@example.com.
Subscribe to the Morning Review newsletter
Get the day’s top headlines delivered to your inbox every morning by subscribing to our newsletter