Trump's Tax Cut Snake Oil Should Be The Story Of The Midterms

Promises of jobs and increased pay have only yielded billions for corporate shareholders.
President Donald Trump shakes hands with JPMorgan Chase CEO Jamie Dimon at the White House in February 2017.
President Donald Trump shakes hands with JPMorgan Chase CEO Jamie Dimon at the White House in February 2017.
Kevin Lamarque / Reuters

By focusing attention on issues such as immigration and North Korea, President Donald Trump has managed to deflect attention from the economic resentments that helped get him elected — namely, outrage that the rules are rigged on behalf of the wealthy and the powerful.

Will he keep getting away with this, as Republican policies make the rich even richer and regular people more economically precarious? That depends on how astutely blue-wave candidates keep pocketbook issues at the forefront.

Exhibits A and B of the GOP doubling down on corrupt plutocracy are the 2017 Tax Act and the coddling of the biggest banks. The Tax Act costs $1.9 trillion dollars in revenue over a decade. Almost all of the breaks went to rich individuals and corporations, but it was supposed to produce trickle-down benefits in the form of more jobs and better pay for workers.

Now the verdict is already in on pay increases. Worker pay has remained flat for the past 12 months, according to the Bureau of Labor Statistics.

And instead of increasing domestic investments that might produce jobs, corporations mainly used the money to buy back shares of their own stock, pumping up the share value in order to further enrich executives and shareholders but doing nothing for the economy.

According to the latest tabulation by Americans for Tax Fairness (ATF), the total value of share buybacks has been $503 billion since the tax act became law late last year. Corporations have spent 72 times as much on share buybacks as they have spent on one-time worker bonuses and raises. About 40 percent of all stocks are held by the top one percent, and most of the rest by the wealthiest 10 percent, so this is a pure gift for the rich.

Meanwhile, the Federal Reserve keeps freeing banks from the consumer protections of the Dodd-Frank Act and other safeguards of the Obama era. Last month, the Fed and other regulators conducted rigged “stress tests,” whose results allowed banks to reduce the capital reserves they are required to keep against losses. With more lenient capital requirements, the big banks are now free to join the parade of stock buybacks and dividend payouts.

The six largest banks will use $125 billion on buybacks and payouts. A lot of this is capital that might have otherwise financed loans.

According to a tabulation by The New York Times, Wells Fargo and Citigroup are spending 100 percent of their projected 2018 profits on buybacks and dividend payouts, and JPMorgan Chase 98 percent.

The tax act’s most important impact will be pressure to cut spending in popular programs such as Social Security and Medicare, to make up the deficit gap. And according to the non-partisan Congressional Budget Office, the act, by pushing the national debt to an unprecedented 152 percent of GDP, increases the odds of a new financial crisis.

Meanwhile, Trump’s trade policy, despite its Make-America-Great-Again bluster, is starting to undermine good American jobs by disrupting supply chains and shrinking markets for U.S. exports. The president even managed to make iconic Harley Davidson the enemy — but without doing anything serious to alter China’s predatory practices.

In sum, Trump’s tax and regulatory policies for banks and corporations mainly allow these institutions to fatten themselves, don’t help the larger economy and his tough trade measures are perverse.

The key political question is whether voters will connect these dots and hold Trump and Republican candidates accountable for the blatant hypocrisy and bait-and-switch. The corporate elite and their GOP allies are counting on voters to be deceived by the sheer complexity of tax, trade and regulatory policy changes, and for polarizing issues like immigration to rev up their own base.

Polling and focus group research shows that pocketbook issues are big winners for Democrats. The question is whether Democrats will make this the big theme of the midterms.

Democrats are right to express outrage about Trump’s immigration policies. What’s tricky is that calls to abolish the controversial Immigration and Customs enforcement agency allow Trump and the GOP to falsely claim that Democrats are for totally open borders. In fact, if you look closely at the statements by candidates like New York’s amazing Alexandria Ocasio-Cortez, the call is to go back to long-established agencies like the Immigration and Naturalization Service that did not smack of a police state. But voters may not read the fine print, and Democrats need to be careful not to play into Trump’s hands.

The Democratic high ground is to remind voters that Trump is no friend of the working person. The more the fall elections stay focused on that core issue, the better Democrats will do.

Robert Kuttner is co-editor of The American Prospect and a professor at Brandeis University’s Heller School. His new book is Can Democracy Survive Global Capitalism? Follow him on Twitter at @rkuttnerwrites.

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