I am writing from Beijing, China, where forward-looking policies in infrastructure, technology and diplomacy have fueled rapid economic growth and even more remarkable technological advancement. By the mid-2020s, China will most likely lead the world in key technologies for low-carbon energy, robotics and advanced transportation, among other areas targeted in China’s long-term development strategy.
In this context, the vacuity of US economic policy is especially poignant. President Donald Trump and Republican congressional leaders are rushing to spend a trillion dollars or more on unaffordable tax cuts for the richest Americans in a stunning monument to brainlessness.
The analyses by the Congressional Budget Office, the Joint Tax Committee and almost all independent experts come to the same conclusion. The tax cuts will have large effects on the budget deficit and negative effects for low-income Americans. The CBO has found that healthcare measures in the bill would reduce health coverage by 13 million Americans in 2027. The Joint Tax Committee has found that the growth effects are tiny and perhaps negative in the long term, once various short-term tax incentives are phased out and the public debt increases over time.
Does any of this matter to the President, Mitch McConnell, Paul Ryan and most Republican members of Congress? No. The mega-donors of the Republican Party, who pull the strings, will reap vast tax savings whether or not there is growth, huge deficits, soaring public debt or harm to the poor. Trump and family will win big, despite Trump’s absurd claims to the contrary. This is a cabal that long ago gave up any interest for mainstream Americans, much less for the down and out.
What has happened to American democracy? It has gotten poisoned by partisanship and by big money, in both parties. In early 2009, President Barack Obama and House Speaker Nancy Pelosi designed a “stimulus” bill behind closed doors at the cost of almost $1 trillion. They claimed at the time, wrongly in my view, that hundreds of billions of dollars of hastily-designed transfer payments and other public outlays were necessary to save the country from a great depression. They passed that mega-spending bill without a single Republican vote in the House of Representatives. Paul Krugman assured us at the time, and for a long time after, that deficits in a recession don’t matter (despite the fact that the debt would remain well after the downturn was over). Eight years later, the public debt is at 77% of GDP, up from around 39% at the time of the stimulus legislation.
Now the Republicans are doing the same thing — passing a budget-busting bill without a single Democrat on their side, and before anybody has had a moment to read it. They will drive the government debt far higher, perhaps to 100% of GDP, since the current baseline is one of high and rising deficits over the coming decade. Their proposed legislation is far more noxious than the 2009 stimulus, since the tax cuts are designed to flow to the richest Americans, at a direct and immediate cost to poor Americans.
I’m amazed that we even had the last-minute reports by the Congressional Budget Office and the Joint Tax Committee, so determined were Trump and the Republicans to vote without any evidence at all. The President, for his part, has repeatedly smeared the CBO to discredit any honest non-partisan thinking in Washington.
Our political crisis is so dire that we will be lucky to avoid a nuclear war, much less a soaring budget deficit. The world looks on in fear and astonishment, with the overpowering sense that America has become a danger to itself and the world, shortsighted, deeply divided and unwilling to consider the common good.