Politicians love introducing tax-cuts, because they're reliable vote-getters, even if they're structured to blow up later by giving massive breaks to the super-rich and more modest breaks to middle-class voters, resulting in mounting deficits and eventual service cuts.
But Trump has managed the impossible: he signed trillions of dollars of tax-cuts into law and lost in the polls as a result.
Trump managed this feat by handing middle-class and poor people tax bills instead of refunds, while cutting in a tiny number of super-rich people for unbelievably large breaks (and the 99% will get stiffed even harder in 2027, when their taxes go up again).
Bill Black proposes a tantalizing thought-experiment: what if Trump had spread the tax breaks around, giving, say, $5,000 to every household with a combined income of less than $75,000? What if he tailored the breaks to his base, farmers, old people, blue-collar workers (while stiffing poor people)?
Not only would this have stimulated the everloving fuck out of the US economy -- wage stagnation and austerity has left the US with tons of underutilized labor and plant that could churn out tons of goods for these people to buy without any inflation to speak of -- but the Democratic leadership would have hated it, because Pelosi, Schumer and the rest of the "paygo" crowd are crazy deficit hawks who don't want any unfunded liabilities in federal budgets.
The result would have been a huge PR win for Trump and a massive PR hit for the Democratic establishment. It might have even cost Pelosi the speakership, leaving Trump with a less canny adversary over the next two years.
More importantly, it would have given Trump -- who is much broker than he lets on, and dependent on shady lenders for his funding because no real bank will touch him after all those bankruptcies -- a solid base of his own, separate from the plutocrats who benefited from the tax breaks.
The last sentence understates the scale of political benefits that would have come to Trump had he fulfilled his campaign promise to slash middle-class taxes. It leaves out how much the so-called Democratic centrists’ opposition to such a tax cut would have added to Trump’s popularity while reducing support for Democrats in the 2018 congressional elections. The ‘New Democrats’ and the House Democratic leadership are fervent supporters of “paygo” limitations on budget expenditures. They are far to the right of Republican members of Congress on this issue. More precisely, Republican members of Congress overwhelmingly pretend to care about budget deficits and federal debt only when the President is a Democrat. ‘New Democrats,’ ‘Blue Dog’ Democrats, and Democrats who join “Problem Solvers” and other groups religiously oppose deficits even when increasing the deficit is the best economic action. The result of the ‘centrist’ Democrats’ war against even desirable deficits is that they would have fought and died to oppose a real middle-class Trump tax cut. They would have predicted that it would produce a disaster. Their predictions about the grave and imminent peril of increasing the deficit, as always, would have proven false. Trump would have emerged with his own popularity greatly expanded and enhanced as his greatest rival’s popularity greatly diminished. The Republicans would have held the House, and possibly expanded their majority there and added to their Senate majority.
Trump would have demonstrated that he was the expert on the economy, taxes, and the deficit. Pelosi would have demonstrated her recurrent failure to understand the economy, taxes, and the deficit. She would likely have been defeated in 2018 in the Democratic vote for minority leader. Pelosi is a skilled legislative leader, with terrible, closely related, blindspots on deficits and the urgency of dealing with climate change. She acts as if we cannot afford to save the planet by acting decisively against global climate change now. That view is horrific economics and public policy. Similarly, she would have been at her worst in arguing that Trump was endangering the Nation by creating a real trillion-dollar middle-class tax cut. She would have been the face of the Democratic Party in the 2018 elections – the woman and her Party that tried to keep your middle-class family from receiving a $5,000 tax cut. When the economy reacted positively to the resultant stimulus, her humiliation, and that of her Party, would have been complete.
Given what Trump knows now about Pelosi’s skill in legislative infighting he should be able to weigh the “opportunity cost” of not using a real middle-class tax cut to maintain control of the House and to discredit and ultimately cause the Democrats to remove Pelosi from leadership. Trump’s cowardly and corrupt surrender to his puppet masters on the tax cut and infrastructure allowed the Democrats to gain control of the House. That made it possible for Pelosi to become Speaker again and to rain down the blows on Trump that have made his life miserable.
Why Did Trump Choose to Be Such an Unpopular President? [Bill Black/Naked Capitalism]
