When he’s not using Twitter to call a Gold Star widow a liar or to attack NFL players as traitors, Donald Trump likes to tweet about the rise in the stock market, for which he takes enormous credit.
Of course, that steady rise in the Dow is a continuation of an economic recovery that began eight years ago now, under the presidency of He Who Must Not Be Named. However, rather than get distracted into a Trumpian contest of whose Dow is bigger, I thought it might be nice to hearken back to the days of yore and attempt to discuss actual policy choices, using these outmoded things once called “facts.” Wanna give it a try?
For example, here’s a fact:
While Trump brags about the record-high stock market and low jobless rate, he is simultaneously attempting to make the case that corporate taxes are so high that they are crippling economic growth, making it impossible for U.S. companies to compete and costing us jobs. Both things cannot be true at the same time.
If U.S. corporations are finding it impossible to compete internationally and impossible to make a decent profit because of high taxes, then it cannot also be true that corporate after-tax profits and the stock market are at all-time record highs. Yet as Trump himself reminds us, there they are.
Here’s another fact: Thirty years ago, corporate after-tax profits accounted for 4.1 percent of the nation’s gross domestic product. This year, corporate profit — again, AFTER taxes — accounts for 9.2 percent of GDP, more than twice as high as in 1987. Yet the poor, underfunded, unrewarded corporate sector still insists that it is being treated and taxed unfairly.
Here’s yet another fact: The Republican “tax reform” plan, which is being sold as a “huge” middle-class tax cut, is instead a huge tax cut for the top 1 percent of U.S. households, leaving everyone else fighting over the crumbs. Every single nonpartisan analysis of the plan reports that same finding, over and over again.
So how do you sell that proposal to a public that is strongly opposed to tax breaks for the wealthy and for corporations? How do you sweeten the pot? Well, you make up facts. In this case, the Trump administration has fabricated a claim that reducing the corporate income tax will somehow result in an income increase of $4,000 to $9,000 for the average U.S. household. And they’re already inviting the American public to fantasize about how they’ll spend all that extra cash:
In truth, Sanders might as well be asking what Americans would do with the new unicorn that they’ll also be getting, because that’s just as likely to happen as that magical increase in income.
The White House argument is the familiar trickle-down argument: By making the rich much richer, the wealthy will have more money to invest, and more investment will produce more jobs, and more jobs will produce higher pay. That theory has been tested a number of times in a number of places, with repeated failure. It was tried in Kansas, with completely disastrous results. It was tried under President George W. Bush, who pushed through two major tax cuts early in his term, but by the end was presiding over the greatest economic collapse in 80 years.
Another example also occurred under President Bush, with passage of the Homeland Investment Act in 2004. That law gave corporations the one-time chance to take hundreds of billions of dollars in profits that they had stashed overseas and bring them back here to the United States, where they would be taxed at the very low rate of 5.2 percent. The corporations lobbying for that bill promised that they would use the money to create some 500,000 new jobs and to invest heavily in research and development. They also promised that they would not use the bonanza to simply reward their own shareholders.
In fact, the law expressly forbid companies from using the repatriated profits to pay dividends to their stockholders or to buy back shares in their own company. And you know what? They did it anyway.
According to one later study published by the National Bureau of Economic Research, corporations did not “boost domestic investment, employment, or R&D,” as promised. Instead, “every extra dollar of repatriated cash was associated with an increase of $0.92 in payouts to shareholders, largely in the form of share repurchases.”
Eight cents for thee, 92 for me. Trickle trickle trickle….