In a recent report, the nonpartisan Congressional Research Service has confirmed what serious economists had long predicted about the Republican tax cuts of 2017: They have had little effect on wages; average taxpayers saw little benefit; and the cuts aren’t going to “pay for themselves” with growth, as promised.
What America is left with is a ballooning deficit, primarily to fuel record stock buybacks that mostly benefit the well-heeled. From the start, this was an expensive hoodwink to benefit the rich — one that voters must hold GOP lawmakers accountable for in next year’s elections.
Since the Reagan era, Republicans have stubbornly clung to a shaky theory: That in times of high unemployment, cutting taxes on the rich will prompt them to use that extra money to expand their businesses, creating needed jobs. That, in turn (goes the theory), creates more income for everyone, which increases income tax receipts, thus paying for the tax cuts.
This, of course, is supply-side economics, and it has never been borne out. In the real world, business people make their expansion decisions based on market demand, not on how much extra money they might have lying around. This helps explain the dismal real-world record of supply-side policies.
High-end tax cuts don’t even have the benefit of spurring consumer purchasing the way low-end tax cuts do, because lower-income people are more likely to spend that extra money immediately to catch up on unmet needs. “Much of the tax cut was directed at businesses and higher-income individuals who are less likely to spend,” the Congressional Research Service report says.
Fans of supply-side economics have promoted it as an answer to high unemployment and economic stagnation. But the research service — a government entity that answers to both parties in Congress — points out that these tax cuts came while the economy was already humming, with unemployment low and dropping. “Fiscal stimulus is limited in an economy that is at or near full employment,” the report says.
Having rammed through these deficit-funded tax cuts based on a largely discredited theory of how to stimulate employment, GOP lawmakers now wonder why the primary beneficiaries in the business community used the windfall instead to buy back their own stocks.
Republicans also predicted businesses would use the tax cut to raise wages for their existing employees, apparently out of the goodness of their hearts. Unsurprisingly, that didn’t materialize, either. “Ordinary workers had very little growth in wage rates,” the report states.
With even Congress’ own researchers knocking down every rationale for these tax cuts, the question remains: What were the cuts all about? The answer is the same one that consistently emerges on economic issues
— to benefit the rich at the expense of the rest of America. The rest of America should remember that in November 2020.