Trump, tax cuts and a jolly old elf

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April 28, 2017 2:50 PM

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If President Donald Trump’s proposed tax cut package demonstrates anything, it is that our long national fantasy that business people are animated by the same motivations as Santa Claus continues.

Trump’s plan at this stage is about as detailed as a stick figure drawing, but it appears that it offers the wealthiest Americans 50 percent of the tax cuts and devotes only about 7 percent of the trims to the middle class – and those minimal breaks for the less-than-comfortable not only are not guaranteed, but are likely to be the first things sacrificed in the bartering to come.

What’s more, the plan also calls for the elimination of the alternative minimum tax, a part of the code that requires the folks in Trump’s tax bracket to share some portion of the burden, regardless of how many tax shelters and loopholes they use.

Such a change, of course, is likely to put massive amounts of money in the pockets of the president and his heirs, while shifting the costs of running and maintaining the country to those Americans who sweat mortgages and medical bills.

Most reputable economists project that the president’s plan, if implemented, will increase the deficit by at least $4 trillion over the next few years.

Trump’s treasury secretary, Steve Mnuchin, says, though, that we shouldn’t worry. The tax cut, Mnuchin assures us, will spur so much economic growth that the deficits just will disappear.

Like magic.

This is where the fantasy part comes into play.

The premise of the Trump plan is the one that has dominated much of our economic and political thinking since the early 1980s – the belief that tax cuts for corporations and the wealthy are a panacea, a cure for whatever might ail us.

The thinking is that businesses operate from a position of benevolence. Freed from tax burdens, this reasoning goes, business people will invest in building more plants, opening more stores and creating more jobs just because they want to.

The flaw here is easy to spot for those who haven’t drunk the tax-cut Kool-Aid.

Business people don’t invest unless there’s an opportunity. At least, smart business people don’t.

It is demand that creates the opportunity for investment. If people aren’t willing – or don’t have the resources – to buy what the business wants to sell, then the business fails.

It is the folks who will be getting the short end of Trump tax cut plan – middle-class Americans – who create most of the demand. They are the ones who do the buying.

Investment may provide the seeds of economic growth, but a thriving middle-class is both the rain and the harvest.

For the past 35 years or so, the middle-class hasn’t thrived.

Ever since President Ronald Reagan first sold America on the notion that government – good roads, solid schools, a strong military, a decent safety net – is the only thing on earth that doesn’t have a cost, we have seen the rich grow ever richer. In real terms, they have seen their wealth grow by more than 240 percent.

The middle class, on the other hand, has struggled to break out of single digits of growth in good years – and often has lost ground in bad ones.

An economy that isn’t grounded by a strong middle-class is like a house without a foundation. It’s bound to collapse.

When it does, everyone falls, including the people at the top.

Focusing more of our attention on bolstering the Americans who are at the middle or the bottom of economic ladder isn’t altruism. It’s informed self-interest. The more those Americans thrive, the more all of us do.

It’s pleasant to believe in Santa Claus – to think that we can get something for nothing and that businesses really are charities.

But there’s a reason only children believe in Saint Nick.

And it’s time for us to leave childish things behind.

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