Looking Back at the Democratic Hysteria Over Trump's Tax Cuts
It wasn't doomsday and the sky wasn't actually falling.
As all doomsday cults eventually learn, you can predict the end of the world only so many times before everybody stops listening to you.
We were told that repealing net neutrality would bring the "end of the internet as we know it." Pulling out of the Paris Climate Agreement was supposed to kill the final chance to truly combat global warming (or climate change, or whatever it's called this week). The confirmation of Betsy DeVos as Education secretary was going to bring about the end of public education in America.
And yet the internet is not shutting down; the Paris Climate Agreement was exposed as virtually irrelevant to global temperatures; and America's public schools look basically the same as they did back in 2015.
To this list of failed doomsday predictions, we can now add the 2017 Tax Cuts and Jobs Act (TCJA), which modernized the corporate tax code and gave tax relief to the vast majority of families.
The TCJA certainly has its flaws—I gave it only a B-, primarily due to deficit concerns—yet many of the plan's partisan critics exaggerated its potential downside to such a degree as to be genuinely misleading. And now that families are seeing how the new law actually affects them, most of them support the cuts.
During the legislative debate, House Democratic leader Nancy Pelosi called the legislation "the end of the world," "Armageddon," and "stiff competition . . . [for the] the worst bill in the history of the United States Congress." So much for the Fugitive Slave Act.
Pelosi predicted that the tax cut would "install a permanent plutocracy in our country that does violence to the vision of our Founders." California Governor Jerry Brown's comparatively calm critique merely described this tax relief as "evil in the extreme."
That's a pretty hysterical reaction to legislation that trimmed projected tax revenues by 3 percent over a decade while largely preserving current tax progressivity levels.
And it wasn't just professional Democrats. The Washington Post ran a columnpredicting a sequel to the Great Depression (unemployment rate: 25 percent). Former Treasury Secretary Larry Summers predicted the bill's health provisions would kill 10,000 people annually. Bruce Bartlett told MSNBC that tax cuts are "akin to rape." Paul Krugman, with characteristic subtlety and nuance, titled a column, "Republicans' Tax Lies Show the Rot Spreads Wide and Runs Deep."
Upon passage of the House version of the TCJA, Kurt Eichenwald tweeted that "America died tonight . . . Millenials [sic]: move away if you can. USA is over. We killed it." Amazing that after surviving a 241-year run that featured a civil war, two world wars, and a Great Depression, the grand American Experiment was mortally wounded by a reduction in the top marginal tax bracket from 39.6 percent to 37 percent.
Back in reality, the liberal Tax Policy Center calculated that the TCJA would benefit 80 percent of families and raise taxes for just 5 percent—with the higher taxes disproportionately affecting the wealthiest 1 percent. The median family would save $930 per year, while the average family would save $1,610. Bizarrely, this outcome was portrayed as a declaration of war on working families.
Senate Democratic leader Chuck Schumer described the tax cuts as a "cynical one-two gut punch to the middle class—raise their taxes to pay for corporate tax cuts & then decimate their earned benefits as a kicker." Pelosi called it "simply theft—monumental, brazen theft—from the American middle-class and from every person who aspires to reach it."
This false "tax increase" narrative was repeated in headlines such as "Poor Americans Would Lose Billions Under Senate GOP Tax Bill" (CNN), "Meet Some Victims of the Trump Tax Plan" (Yahoo News), and "Apparently Republicans Want to Kick the Middle Class in the Face." (Washington Post opinion columnist Catherine Rampell).
How does a tax cut get twisted into a sadistic assault on families? It is a three-step process:
(1) Simply ignore the first eight years of roughly $930-per-year tax relief and focus only on the $20 tax hike—that's six cents per day—that the median-income family will theoretically face in 2027 if Congress fails to renew the expiring portions of the law (Senate rules effectively limit many tax cuts to the length of the budget resolution, thus requiring renewal votes). Of course, if your best argument is that the expiration of the tax cuts would harm families, then the obvious solution is to renew them. But whatever. I'm sure Democrats will find some way to square that circle when the time comes.
(2) Invent fictional legislative provisions. The New York Times posted a chart titled "Change in after-tax income under tax bill, 2027" showing huge income losses for poor families resulting from deep spending cuts that were never proposed, considered, or incorporated into the bill. They simply did not exist. While the chart title falsely portrayed these cuts as part of the bill, the adjoining article explained that they were simply a prediction of future legislation that, by the way, mirrored nothing that has ever been enacted.
(3) Portray the bill's repeal of ObamaCare's individual mandate penalty as a massive tax hike—even though it created no new tax liability. The provision simply means that families who no longer wish to participate in ObamaCare will no longer need or receive an Obamacare reimbursement payment. If that is a "tax increase," then by the same logic, an employee who happily accepts an offer to stop traveling as part of her job would be suffering from a mean-spirited "pay cut" because she would no longer receive travel-reimbursement payments.
This torrent of propaganda is partly why the tax bill was so unpopular as it was being debated: At the time of passage, just 37 percent of Americans supported the cuts, versus 57 percent opposed. How could a tax cut be less popular than previous tax increases? Because by a 2-to-1 ratio, Americans believed their taxes were going to go up as a result of the bill.
But Republicans enacted the bill anyway and the dishonest spin got steamrolled by reality. Millions of Americans received modest raises and bonuses that were attributed to the TCJA. Online calculators showed families that—surprise!—their taxes were falling, not rising.
Today a slight majority of Americans support the TCJA. And the law enjoys more than 75 percent support from those who expect to personally benefit, which means its overall popularity should grow as the benefits are more broadly realized. (In fairness, new polls were unable to reach any respondents who had been killed by the TCJA, per Larry Summers' prediction.)
But even now, the critics haven't backed down. After their "middle-class tax hike" narrative was exposed as fraudulent, some shifted to mocking the middle-class tax cuts as too small. Nancy Pelosi dismissed $1,000 tax cuts for the middle class as "crumbs," despite how vital that money can be to millions of families who live paycheck-to-paycheck. (There is no record of Pelosi complaining about the Obama White House's 2012 website touting $1,000 tax cuts from the payroll tax holiday.)
When the "crumbs" narrative fell flat, Democrats moved on to their last redoubt: the argument that greedy corporations are diverting too much of their tax cut savings into stock buybacks and putting too little towards worker salaries.
Yes, the purpose of business tax cuts is to encourage business investment, which ultimately drives long-term wage growth. But stock buybacks are a predictable short-term use of tax cut savings while businesses ramp up their investment plans—and most stock buyback dollars will also be rechanneled through the financial system into pro-growth investments. Had lawmakers intended all these business savings to immediately subsidize workers, they would have skipped the corporate middleman and simply enlarged the individual tax relief (which is where most of the tax cuts were going already).
The point is not that the TCJA is perfect—or even that it's a net good. Reasonable people can disagree on the merits of the law. But if the TCJA was truly as destructive as many of its critics suggested, then they wouldn't have needed to lie, misrepresent, and exaggerate its provisions.
And the truth is, these overheated partisan attacks are dangerous in their own right. They make it difficult to have an honest and mature discussion about policy. They're both a symptom and a cause of where we are as a political culture.
In this case, there were no broad-based tax increases or deep spending cuts—and there was no Armageddon. The partisan doomsday clock can hereby shift to whatever congressional Republicans are voting on next week.
This piece originally appeared at The Weekly Standard
Brian M. Riedl is a senior fellow at the Manhattan Institute. Previously, he worked for six years as chief economist to Senator Rob Portman (R-OH) and as staff director of the Senate Finance Subcommittee on Fiscal Responsibility and Economic Growth. Follow him on Twitter here.
This piece originally appeared in The Weekly Standard