From Stephen Colbert …
By Steven R. Maher
When George W. Bush was sworn in as President in 2001, America was in great shape. There was a large federal budget surplus, full employment, and the U.S. was not engaged in any military conflicts. Eight years later Bush left the country in disastrous shape: two wars, an economy hemorrhaging 750,000 jobs a month, the auto industry collapsing, home foreclosures occurring in gigantic numbers, and the financial system imploding.
This happened in large part because the Republican Congressional leadership ignored traditional Republican doctrine (balanced budgets, restraints on spending) and exploding the deficit by rubber stamping Bush’s huge tax cuts for the wealthy, increased social spending on Medicare without financing revenues, and a totally unnecessary war in Iraq.
Deficit
Facing a growing $20 trillion national debt, the Republican leadership has learned from the historical mistakes of the Bush Presidency, and are not doomed to repeat them. In a refreshing change, both Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan have publicly stated tax cuts must “revenue neutral”, i.e., not increase the national debt.
“I think this level of national debt is dangerous and unacceptable,” McConnell was quoted in the December 12, 2016 Huffington Post. “My preference on tax reform is that it be revenue neutral.” McConnell went on to say of Trump’s plan for a trillion dollar investment in infrastructure: “What I hope we will clearly avoid, and I’m confident we will, is a trillion-dollar stimulus. Take you back to 2009. We borrowed $1 trillion and nobody could find that it did much of anything. So we need to do this carefully and correctly and the issue of how to pay for it needs to be dealt with responsibly.”
The same Huffington post article reported: “House Speaker Paul Ryan has also said he wants tax changes to be deficit-neutral, indicating that Republicans will assume positive macroeconomic benefits from tax cuts to ease the projected budgetary hit — a process known as dynamic scoring that is popular on the right.”
Trump wants to lower the corporate tax rate. He has also spoken of lowering the individual tax rate on the wealthy from 33% to 27%.
Corporate inversions
The United States has the highest corporate tax rate in the world, nearly 35%. American companies have engaged in “inversions” to escape such corporate taxes, moving their headquarters to more tax friendly countries such as the Irish Republic. Many of these companies are holding trillions of dollars overseas.
Trump has stated he also wants a “revenue neutral” tax cuts by eliminating tax loopholes and simplifying tax returns to a one page form. If the U.S. were to reduce corporate tax rates to 15%, there would be enormous benefits to the country. Many U.S. corporations have made it clear they would bring home their trillions. Some of this money would be invested domestically, other funds would be available for loans.
The U.S. would have a very competitive environment which would draw in massive foreign investment. With a much lower tax rate American corporations would not be so quick to move their manufacturer facilities overseas. We would also be in the position to refinance our national debt with slightly longer term repayment periods, releasing funds for other usage. Currently, much of the bond notes being issued by the U.S. Treasury are short term notes.
There is a deal to be had here. Democrats should insist that the corporate rate only should change, and the individual tax rates should not be changed to benefit the wealthy. If all sides truly want to do what’s best for the country, this deal would be a decent compromise.
In the meantime, Americans of all political stripes should be glad that McConnell and Ryan are showing fiscal sanity at a time when it is desperately needed.
