Blog No 163. The Oozlum’s Tax Bill

Regular readers will recall that from time to time RINOcracy.com has referred to the Freedom Caucus in the House of Representatives, and other self-styled “conservatives” on Capitol Hill, as Oozlums. For the benefit of new readers, the term is a reference to the mythical bird that flies in ever decreasing concentric circles until it disappears into its own fundament. That appeared to be the flight plan the right-wing was charting for the Republican Party as it appealed to a noisy but diminishing base. (According to a Gallup poll comparing November 2016 with November 2017, the percentage of people who identify as or lean Republican has fallen 5 points from 42 percent of the population to 37 percent.)

The Oozlums, it had been hoped, were only a minority of the Congressional Republicans, but with the tax bills passed by the Senate and House and now apparently headed for reconciliation, it seems that the Oozlums are now in charge. The strongest argument for the current tax bills has been “Well, we have to do something.” They have now indeed done, or are about to do, “something.” Whether that something  will benefit the political fortunes of the Republican Party, let alone the economy of the country, is greatly to be doubted.

The tax bills have been decidedly unpopular in polling. For example, as summarized in the Huffington Post:

In poll after poll, more voters say they oppose this tax proposal than support it. According to FiveThirtyEight, of the nine largest tax bills over the last 36 years ― two of which were strictly tax increases ― this Republican measure ranks dead last, with its approval rating underwater by an average of 14 points.

When questioned about the bill’s unpopularity on the eve of the bill’s passage, Republican Senators were essentially in denial, dismissing the accuracy and importance of the polls. For example, among the polls they ignored was a Quinnipiac survey of November 15 reporting that “American voters disapprove 52 – 25 percent of the Republican tax plan.” That 25 percent consisted almost entirely of Republicans who may be said to represent the Oozlum wing of the Party. Another survey, reported in the Hill on December 4, showed voter rejection of the GOP tax plan in six key House districts. The fact is, however, that there is no convincing reason why the bill should be popular with any but the wealthiest Americans.

There are questions or objections that can be raised with respect to many specific provisions of the bill, but comment on those will again be  deferred until we see the exact sausage that emerges from the Senate-House conference. In the meantime, it is clear that whatever emerges will add at least $1 trillion to the federal deficit, and almost certainly a great deal more. At one time, Republicans justifiably referred to Democrats as the party of “tax and spend.” The Republicans have now done the Democrats one worse by becoming the party of “tax cut and spend.” Arguably, the Republican claim to being the party of fiscal responsibility did not survive the administration of George W. Bush, but whatever was left of it has now been extinguished.

The score by the Joint Committee on Taxation (JCT) projects that the Senate bill would increase the deficit by $1 trillion even after “dynamic scoring” that allows for revenue generated by growth in the economy. And that figure is significantly understated in that it assumes the expiration of tax cuts to individuals that Republicans have assured one and all will not in fact be allowed to expire. Republicans, of course, claim that the tax cuts will be offset by economic  growth far greater than that projected by the JCT. Those of us who lack the expertise to make an independent judgment are free to pick and choose, but the weight of economic opinion clearly seems consistent with the JCT assessment.

As President Trump enjoys pointing out when not speaking of the tax bill, the economy is currently performing at a high level in terms of GDP growth, the stock market, unemployment and consumer confidence. Put another way, there is simply not much of a case for our needing an economic stimulus.  A December 8 analysis in the New York Times observed:

The economy’s vital signs are stronger than they have been in years. Companies are posting jobs faster than they can find workers to fill them. Incomes are rising. The stock market sets records seemingly every month.

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That strength could also pose challenges, particularly in light of the $1.5 trillion tax cut that Congress could pass as early as this month. Economists expect the tax bill to provide at least a modest lift to the economy — but they are not sure that’s a good idea. With unemployment so low and the economy fundamentally healthy, a tax cut could lead the economy to grow too quickly, pushing up inflation and forcing the Federal Reserve to raise interest rates faster than planned. It’s a very poorly timed fiscal stimulus,” said Joseph Song, an economist at Bank of America. “It kind of raises the risk of a boom-bust cycle.”

The impact on the deficit is hardly the Senate bill’s only major downside. The temporary nature of the individual tax cut points up the extent to which the bill is weighted toward providing benefits to the wealthiest taxpayers–and not the middle class. The corporate tax cuts, unlike the individual cuts, are permanent. That may of course be changed by a future Congress, but it would not be an easy task even if Democrats were to regain control of Congress. Senator Corker had sponsored an amendment that would have “triggered” tax increases if revenue fell short of projections, but that amendment was ruled out of order by the Senate Parliamentarian. (In the end, Senator Corker was the only one of the supposed deficit hawks in the Senate to vote against the bill.) The bill, in its initial years, does provide a modest tax cut for a majority of taxpayers, but not all. In fact, according to the JCT, 9.1% of American taxpayers would see their bills go up in 2019 under the Senate bill.

The most misleading portrayal of the impact of the bill was provided, not surprisingly, by the President, who audaciously asserted, “This thing is going to cost me a fortune, this thing, believe me. This is not good for me. . . . I think my accountants are going crazy right now.” As the Washington Post Fact Checker put it. “If anyone believes this line, we have a bridge in Brooklyn available for them.” Trump, of course, has refused to release any of his tax returns, but based on his leaked return from 2005, it has been estimated that he will save approximately $40 million in income taxes and over $1 billion in estate taxes.

The Republicans also outdid the Democrats in a negative way by the procedure they followed. When the Affordable Care Act was passed, Nancy Pelosi was roundly criticized for remarking that “we have to pass the bill so that you can find out what is in it.” But the Affordable Care Act was subject to far more scrutiny and debate than the tax bill in the Senate. Tony Nitti in Forbes described the process in telling detail:

Regardless of your political affiliation or opinion of the proposed tax plan, you should be mortified by what took place over the past two weeks in the Senate. First, Senate Finance Committee Leader Orin Hatch neglected to publish legislative text of his proposal until November 21st. At 515 pages, this was no light read, but yet the Finance Committee was somehow familiar enough with its contents to vote to move the bill forward a mere seven days later.

On the Senate floor, things went from shady to sham rather quickly. First, a list of possible amendments was handed out around Capitol Hill, but only to lobbyists, rather than journalists. Then, after a flurry of 11th-hour bargains were made to nail down the final few wavering Republican Senators, the final version of the bill – now reduced to a lithe 479 pages — was made available in the dead of night, and was voted on before you awoke. Even more embarrassing was the state the text of a bill that will shape our economy for the next decade was in, as it was complete with — and I’m not making this up — key amendments and alterations hand-written into the margins of the page, with large swaths of text simply crossed out. One enterprising twitter personality offered a $25 gift card to anyone who could decipher a critical piece of chicken scratch located on page 187.

If you’re wondering how 51 Republican Senators can confidently vote for a piece of text so lengthy it would make Tolkien blush, well, they simply can’t. Call me a cynic, but there is no chance any of the Senators fully grasp the impact of the sweeping tax changes they passed last night. I make my living in the Code, and 12 hours later, I’m still grappling with the intent and impact of certain provisions in the bill, as are other tax wonks.

It was a sad day in the annals of the chamber that used to pride itself on being “the world’s greatest deliberative body.” Welcome to the world of the Oozlums.