Robert B. Reich: Trump’s ‘yuge’ bamboozle
Donald Trump poses as a working-class populist, but his new economic plan would be a gusher for the wealthy, and almost nothing will trickle down to anyone else.
According to the independent Tax Foundation, Trump’s tax plan would give the top 1 percent an average cut of at least $122,400, while the middle class gets a break of less than $500.
Not incidentally, the plan provides a huge windfall for the Trump family. If Trump is worth as much as he says, his heirs would get a tax break of $4 billion to $7 billion.
Moreover, he’d let global corporations pay just a 10 percent tax rate on untaxed offshore profits — another mammoth gift to big shareholders.
Consider: Apple, Pfizer, Microsoft and other global American corporations hold $2.4 trillion in earnings abroad. They owe some $700 billion in taxes on these earnings. Trump’s 10 percent tax rate would raise only about $150 billion. It wouldn’t even generate new investment in America. A tax amnesty was tried in 2004 and it was a dud.
Trump says his tax cuts would cost $4.4 trillion over 10 years. He claims most of it would be paid for by economic growth.
We’ve been here before.
Both Ronald Reagan and George W. Bush tried supply-side “trickle-down” economics. We should have learned two lessons.
First, nothing trickles down. The giant tax cuts on the wealthy enacted by Reagan in the 1980s and Bush in the 2000s enriched those at the top, but the wages of the bottom 60 percent went nowhere.
Second, such tax cuts produce giant budget deficits. Under Reagan and George H.W. Bush, the federal budget deficit exploded. It took Bill Clinton’s administration (of which I was proud to have been a member) to get the budget back in some semblance of balance.
Then, under George W. Bush, what happened? The deficit exploded again.
Trump would do all this on a far grander scale. He’s also proposing a vast expansion of the military, including 90,000 new soldiers for the Army and nearly 75 new ships for the Navy. The tab: an estimated $90 billion a year in additional spending. This would mean big bucks for military contractors.
But it’s hard to see how economic benefits would trickle down to anyone else. Perhaps Trump is banking on an indirect fiscal stimulus — the kind of “military Keynesianism” Ronald Reagan employed to fuel growth in the 1980s. But as we learned then, this sort of growth doesn’t trickle down, either.
Trump also pledges a gigantic infrastructure building program to “build the next generation of roads, bridges, railways, tunnels, sea ports and airports.”
Hillary Clinton has proposed spending $275 billion on infrastructure over five years.
The Donald is thinking much bigger. “Her number is a fraction of what we’re talking about,” says Trump. “We need much more money to rebuild our infrastructure. I would say at least double her numbers, and you’re going to really need a lot more than that.”
OK, so let’s call it $500 billion over five years.
Trump doesn’t stop there. A “foundation” of his economic plan, he says, is to renegotiate NAFTA, bring trade cases against China, and “replace the present policy of globalism — which has moved so many jobs and so much wealth out of our country — with a new policy of Americanism.”
Who would benefit from a retreat from globalism? Maybe giant American corporations that don’t export from the U.S. because they already make things abroad for sale in foreign markets. But not average Americans, who’d have to pay more for just about everything.
Choking off trade won’t result in more good jobs in America. Trump says his trade policy will bring back manufacturing to the United States. But today’s factories are automated. Even in China, numerical-controlled machine tools and robots are replacing humans.
Oh, and Trump also wants to scrap many environmental, health and safety regulations. He says this will further stimulate growth.
It’s another form of trickle-down nonsense. Even if we could get more growth by scrapping such regulations, growth isn’t an end in itself. The goal is a higher standard of living for most Americans.
If our air and water are unhealthy, if we’re subject to more floods and draughts (especially lower-income Americans who can’t afford to protect themselves and their homes from the devastation), if our workplaces and our food are unsafe, what’s the consequence? Our standard of living drops.
Trickle-down economics has proven itself a cruel hoax. It’s cruel because it rewards people at the top who least need it and hurts those below who are in greatest need. It’s a hoax because nothing trickles down.
Trump’s “yuge” trickle-down economics would be an even bigger bamboozle.