By Kaleena Fraga
Sometimes, it seems that the lure of tax cuts is all that is keeping the Republican party going. The House Speaker, Paul Ryan, has consistently tuned out the political storm around him–Russia! Collusion! Roy Moore!–holding instead a feverish focus on his goal of cutting taxes, half-joking that it’s what he wanted to do since he was drinking from kegs.
Ryan duly follows the Reagan era wisdom that a tax cut, largely benefitting the richest Americans, will drive economic growth for all. In his plan, 80% of the benefits would go to the top 1%. The average tax cut of the top tenth of the top 1% would be $1 million dollars annually. The plan would additionally slash the corporate tax rate, even though corporate profits are at an all time high. Although there is some feeble insistence from the White House that this is a tax cut for the middle class, it clearly has its roots in ideology from 1980s.
In 1980, Ronald Reagan ran on the idea of a large tax cut in order to spur economic growth after a lagging decade. His opponent in the primaries (and future vice president) George H.W. Bush, labeled this idea “voodoo economics” during a debate at Carnegie Mellon University. As a candidate for vice president, Bush had to backtrack. He later got in trouble himself when, as president, he promised to not raise taxes (the infamous “read my lips” statement), but felt so strongly that they were necessary that he went back on his word.
After the Reagan tax cuts were passed in 1981, the U.S. government developed huge deficits. In fact, one of Reagan’s advisors and an architect on the 1981 tax cut recently wrote an op-ed in the Washington Post to warn that tax cuts do not equal growth.
In addition, the country can look to Kansas as a canary in a coal mine. Similar trickle-down tax cuts in that state slowed growth, produced less than expected revenue, and forced cuts to government programs.
The GOP–desperate for a legislative win–seems determined to push the cuts through. Democrats are united against the plan, but would need Republican support to stop their passage. Until then, it would be prudent for President Trump to look to history, to a living member of his exclusive club, to see just how tricky voodoo economics can be.