Robert F. Jakubowicz: Failed GOP tax policies are back from dead

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PITTSFIELD — President Trump has promised to "give our country the best Christmas present of all: massive tax cuts." But based on what is known at the moment, this appears more likely to be a proverbial lump of coal for most Americans in the guise of a failed Republican tax policy known as "starve the beast."Trump and the GOP congressional majority are in the process of putting a bill for these cuts on a legislative fast track. There is a glaring lack of detail at this point of what will be in such legislation other than massive tax cuts for the small group of very wealthy Americans, seemingly including Trump, and corporations, with some limited benefits for middle class Americans.

In my opinion as of now, the tax cut proposal is nothing more than another try to implement the failed Republican idea of starving the beast. The GOP reference to a beast is its characterization of a too big federal government spending too much money.

Blame Greenspan

According to Bruce Bartlett in an article in Forbes magazine, economist Alan Greenspan articulated this idea in 1978 during congressional hearings on a large tax cut proposal in the Kemp-Roth bill. Greenspan said "the best purpose of any tax cut (is) restraining the amount of revenue available" for the growth of government spending.

This purpose for tax cuts was eventually accepted by the Republicans in their approach to shrinking the federal government. Their main focus changed from trying to directly limit government spending by their opposition to specific spending measures to one of limiting government revenue by massive tax cuts. In other words, to cut government revenue to the point that government officials would be forced to cut spending because tax receipts would become grossly inadequate to pay for many government programs or increased spending for them.

Such a starved beast of a former bloated federal government was the grand vision of Milton Friedman, one of the major GOP economic gurus who had a big influence over Republican leaders like former President Ronald Reagan. Friedman believed that the government should only be involved in funding the military, seeing that contracts were enforced, providing limited financial vouchers for public education and little else.

Republicans later tried to sugarcoat this idea by adding the embellishment that massive tax cuts for the wealthy and corporations would offset the lost revenue by increased investments in business which would lead to more jobs, higher wages and a general economic miracle. Vice-President Mike Pence has been lobbying for congressional and public support for Trump's tax cut by quoting the president that it would result in an economic "middle class miracle."

Over the last 35 years, former Presidents Reagan and George W. Bush, based on such a policy, led Congress into making major tax cuts and there is no evidence that this restrained spending and led to more investment in business. In Reagan's case, according to Bartlett, he resorted to tax increases from 1981 to 1988 to make up the difference in revenue lost by his tax cuts and that took back one half of such revenue from his massive tax cut. of 1981.

Despite the massive tax cut during the George W. Bush administration, which, he called a "fiscal straightjacket for Congress," federal government spending rose, This Republican idea or doctrine of starving the beast has been a failure, but the GOP still clings to it. And Trump is betting on this failed Republican policy to gain enough support from the party's congressional majority to pass it.

Familiar shell game

Trump is touting his proposed tax cut as tax savings that will put more money into the pockets of taxpayers and that it will pay for itself with an economic miracle unleashed by the massive investments prompted by the fiscal savings of wealthy American business. Prior massive tax cuts based on this idea resulted in no such miracle.

Worse, the policy does not bode well for average American taxpayers. Trump is trying to fix their focus on the relatively small savings they would receive by paying less tax which tends to make them overlook the real issue presented by a tax cut as a policy to restrain government spending. This issue is what do Americans want as government services from their tax payments?

Republican politicians complain that the current level of federal tax revenue is not enough to pay for many government programs. Yet these same politicians want to cut this level of revenue more by a massive tax cut. This does not make sense, unless the objective is to force spending cuts and further enrich very wealthy.

The national debate should not be confined to how much the tax cut should be, or how much a taxpayer will save. It should also be about what the majority of Americans want in government services in return for their taxes.

Robert "Frank" Jakubowicz is a regular Eagle contributor




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