Laughing at Laffer


Image from R&G Brenner Income Tax Blog


Apparently, Republicans share one belief. That belief is that math does not matter. Only in the fantasy world they inhabit can they believe the failed mathematics of the Laffer curve, where reductions in tax rates magically foster geysers of growth in the economy, thus generating more income for the government than was present before the tax rates were cut. Despite the history of the last 36 years, where this experiment was carried out multiple times and failed to deliver each time, this commandment of the Republicans to cut taxes has surfaced its head once more out of the murky swamp of Washington. Donald Trump’s desire to make his mark on the presidency as the “Greatest of Them All” has led him to sound the processional trumpets announcing the Greatest Tax Cut of All Time.

And so, the political party that decries deficit spending appears poised to partake in an orgy of increased deficits for as long as the eye can see, all in the name of what? To reduce the taxes on the haves of the nation. Ayn Rand has truly taken over the philosophy of the Republican party nowadays. According to her philosophy, not only should each of us be selfish, but it is immoral to compel us to engage in a process to provide support for anyone other than ourselves and our immediate family. Indeed, it is only through unfettered capitalism that mankind can achieve its highest capability.

Well, the supremacy of selfishness has sure stuck, and with it, the philosophy of “I got mine, you must get your own” is omnipresent within the Republican party. There seems to be a lack of recognition within the Republican officials that we live in a society with a wide range of capabilities and limitations. Let this quote from Rep. Roger Marshall (R-KAN) speak for itself: “There is a group of people that just don’t want health care and aren’t going to take care of themselves. He added that “morally, spiritually, socially,” the poor, including the homeless, “just don’t want health care.”” And the comment from Rep. Jason Chaffetz about the poor giving up the latest I-phone to invest in health care, as if the costs were comparable, is as tone deaf as I’ve ever heard.

When you hear over and over that the only reason why people cannot afford health care is because of their own moral failings, and those words are coming from elected representatives, you realize what a gaping gulf there is between the reality facing millions of hard-working Americans who cannot afford this irrational health care system, and the plutocratic class they’ve elected to represent them. So the first pass of the tax reform plan reported this week does provide limited relief to those in the bottom two quintiles of the income distribution. But it delivers major income gains to those who have already won the economic lottery in this nation. And it further exacerbates the income inequality within this nation, without addressing the fundamental problems of the economy.

Those problems include the decades long deficit in infrastructure investment. Back in the 1950’s and 1960’s (you know, the time when America was great), Federal grants for infrastructure averaged about 0.5% of GDP. That has declined over time to about 0.3% of GDP. And with the decline in the spending on infrastructure has paralleled the decline in the condition of the national investment. I do not know what spending rate is correct for a nation, but 0.5% should serve as a starting point for Federal investment in infrastructure commitment.

So if we have a deficit in spending that grows at a rate of about $40 billion a year, and the deficit is now decades old, you quickly come up to the trillion dollars that is being bandied about as a fix. So far the plans for infrastructure investment have not been released, but the information that has seen the light of day indicates that private/public partnerships with significant tax credits will work to leverage the minimal amount of Federal money that would be spent. I would agree that there are some large-scale projects that could use this approach, and that the public would be willing to support being charged through tolls or other cost recovery methods. But the bulk of our deferred maintenance involves fixing rusting bridges, repaving existing roads, safeguarding and modernizing the electric grid, replacing leaky water mains and sewer lines, and making sure our dams are not ready to collapse and flood us. Very little of that lends itself to a private/public partnership. No, what is needed is a true commitment to a long-term increase in spending and grants to local and state governments to tackle the backlog of deferred maintenance. I for one do not enjoy worrying whether the bridge I drive across will pull an I-35 and collapse on me.

This is what is truly worrying about the political divide and the non-functioning of our legislative institutions. No one is thinking strategically. No one is coming up with a proposal that will work to restore this country to what it should be, and get people back to work in the heartland of the nation doing honest labor fixing these problems. No, what we get is proposals that will widen the deficit and enrich those investing in private/public partnerships, but will barely scratch the surface of the needs we have.

We built the infrastructure of this country. It catapulted us up into the status of the wealthiest nation on earth. But for most of the last 40 years, we have coasted on past achievements. Meanwhile, entropy keeps attacking our achievements in the form of rust, erosion, and potholes. Let’s use the opportunity of tax reform to include securing funding for a significant increase in funding for infrastructure repair. This is not something that you can throw an unlimited amount of money at, because the capability in the private sector is limited to do the work. That is why we must insist on a logical long-term plan and carry it out over a decade or more in order to fix our problems with the infrastructure, and just maybe solve some of our problems of providing jobs outside of the urban centers where much of the work needs to be done.

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