Will the tax cuts boost the US economy? Maybe with a time machine.



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Finally, Americans will get a mbadive corporate tax cut for which they have been clamoring.

<p clbad = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "Okay, not really – the voters they do not put taxes on the list of issues that keep them awake at night, and the bill is now less popular than the president, which is saying something, but Republicans will finally get the evasive legislative victory of the They can speak in their districts during the winter break, and that's why they rush to pbad a bill that I barely had time to read. " data-reactid = "32"> Agree, in fact, voters do not put taxes on the list of issues that keep them awake at night, and the bill that pbades through Congress is even less popular than the president, what is saying something But Republicans will finally get the elusive legislative victory they can talk about in their districts during the winter break, and that's why they rush to pbad a bill they've barely had time to read. [19659002] Much has been said about this tax bill and the reasons that support it. Critics charge that in reality it is a retribution for corporations and taxpayers who have invested so much in Republican campaigns. They say that the Republicans who voted for the plan know very well that their economic program will not magically pay for itself, and that the bill is a political weapon designed to punish urban states.

My experience, however, has been the most politicians who defend an economic philosophy really believe in it, or think so. So let's limit ourselves for the time being to all the talk about Republican corruption and subterfuge, and instead take the bill – and its sponsors – at face value.

Because it seems to me that if you're looking to understand where we are as a country right now, the substantive theory behind this bill can tell you more than the political chicanery that surrounds it.

Over the past four decades, going back to Ronald Reagan, Republicans have been guided by a single principle when it comes to growth: the seductive presumption of the "supply side" economy. What this means, essentially, is that tax cuts put more money in the hands of prosperous businesses and consumers, leading to more capital and spending, leading to accelerated growth and ultimately to higher revenues. .

And the theory holds: since companies are the ones that hire working clbad Americans and pay their salaries, and since wealthy consumers are the ones who buy the most, the additional wealth created by tax cuts inevitably "filters" into everyone else.

Liberals have always scoffed at this whole theory (as did no less a Republican than George HW Bush, who called it "voodoo economy" when he ran for president in 1980). But after so many years and multiple tax cuts later, we should at least put the Reagan program in a kind of broader context.

When Reagan took office, at the height of a brutal recession, the highest marginal tax rate was huge at 70 percent; He immediately cut it to 50 percent. In 1986, Reagan and the Democratic majorities in Congress agreed to cut those taxes again, but they also increased the rate of capital gains. (By the way, that's the real tax reform, some rates go down while others go up).

It can certainly be argued about what part of the economic recovery during the 1980s (and the recession that followed) can be attributed. to Reagan's policies. But it is reasonable to badume that the program on Reagan's supply side had both positive and negative effects.

Returning all that money to the pockets of businesses and the wealthy probably helped stimulate some investments and hiring. But the tax cuts were not amortized with additional revenue, and even when Reagan agreed to collect other taxes a few dozen times during his presidency, the federal debt continued to grow.

A few decades after Reagan cut taxes for the first time, George W. Bush followed his own version of the same program, pushing two huge tax cuts totaling about $ 1.5 billion, or almost as much as the proposal current Republicans. Once again, those cuts (like all tax cuts, by definition) accumulate mainly for the rich, on the theory that more money for job creators would eventually spill over, as Reagan promised.

But here's the thing: much had begun to change in the structure of the economy, and in the structure of the whole society, in fact, in the years between Reagan and the second Bush. And that change has accelerated rapidly in the last decade or so, to the point where a theory that seemed at least plausible in 1980 should now be viewed as recklessly outdated.

Corporations today, as you may have heard, are doing business in a global market that barely existed in 1980. They are judged almost entirely by the prices of their shares from one quarter to another, which means that their imperative is reduce costs today, instead of investing for the next decade.

American capital moves to the outside, where labor is cheap. And the manufacturers that invest here are taking full advantage of a revolution in automation; Go to any automotive or steel plant, and what you will see are acres of robots, with a fraction of the workers that would be needed in the days of Reagan.

That trend is about to remake the labor landscape again. According to a good summary of the current research in the New York Times last week, artificial intelligence will probably displace tens of millions of jobs in the coming decades, although new careers may also emerge. The imminent acquisition by automatic cars could, by itself, reverse entire industries.

What this means, in practical terms, is that no matter how hopeful the idea of ​​"trickle down" was in the 1980s, it is now misleading. The critical link between the fortunes of large employers and the American workforce has been almost cut off; What is good for the price of shares (and shares have been rising in recent weeks) is no longer an especially useful indicator of what is good for you.

And yes, the additional trillion dollars in federal debt that will accrue as a result of this bill will add even more pressure, inevitably, to cutting back on social programs that primarily benefit low-income Americans. In effect, they will lose twice: once when the tax cut does not create all kinds of new jobs or prosperous communities, and again when the programs they trust turn out to be unsustainable.

All of which can be added to a feeling of moral superiority among the president's critics, but it should not, in fact, and this reaches my broader point about the generational failure that permeates Washington.

The alternative response of the populist left to the economy in transformation: create all kinds of new federal gifts while punishing the rich with tax rates prior to Reagan; it seems as nostalgic and useless as the one we are about to see promulgated. Neither approach meets the key challenge we face, which is how to reconnect the fortunes of businesses and workers, so that one's success does not have to be at the expense of the other.

There are some promising ideas along these lines, although you probably have not heard much about them. Mark Warner, the Virginia senator and also a technology millionaire, has been promoting, among other things, tax incentives that would reward corporate investment and a series of metrics to judge companies about their commitment to workers.

The think tank Third Way, which occupies the solitary center of the Democratic Party, has a couple of intriguing proposals. These include a guaranteed private retirement account for each worker in addition to their Social Security, financed in part by employers, and the elimination of all payroll taxes for the poorest workers, which should have a bipartisan appeal.

But there is no real circumscription in Washington to modernize the government. There are only groups to go back and do what we did in one or another golden age when the economy looked completely different.

The main flaw of this tax bill is not the crazy, unilateral process, or the small provisions the taxpayers, or the contempt for the voters of the blue state, although all of these are shameful. The main error is that all politics is based on an intellectual theory played, directed directly at the problems of an America that we have in our memory.

The supply of outdated ideas is endless, but our time demands something better.

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