Republican Senator Mitch McConnell Is No Good

Mitch McConnell
Mitch McConnell (Wikipedia)

Republican senators met at the Library of Congress two weeks before Democrat Barack Obama’s 2009 presidential inauguration to discuss their legislative agenda for the new Congress. According to reporter Michael Grunwald, Senate Minority Leader Mitch McConnell, R-KY, used the meeting to unveil his scorched earth strategy for sabotaging the newly elected president.

In his book, The New New Deal: The Hidden Story of Change in the Obama Era, Grunwald says that McConnell told his fellow Republican senators, “There are enough of us to block the Democratic agenda as long as we all march in lockstep. As long as Republicans refuse to follow Obama’s lead, Americans will see partisan food fights and conclude that Obama has failed to produce change.”

As a result of the 2014 mid-term elections, Sen. McConnell assumed the position of Senate Majority Leader in January 2015, and on February 23, 2016, he announced that Senate Republicans had decided to block President Obama’s nominee for the Supreme Court to replace Justice Antonin Scalia, who had died unexpectedly on February 13. McConnell explained that Senate Republicans believed the vacancy “should not be filled by this lame duck president.” Their decision was made before Obama named his nominee.

On April 6, 2017, Sen. McConnell succeeded in getting the Senate to approve the “nuclear option” that eliminated the filibuster rule for the approval of Supreme Court nominees. The change allowed nominees to be approved with a simple majority of the Senate rather than the traditional 60 votes. The change allowed Senate Republicans to approve President Donald Trump’s Supreme Court nominee Judge Neil Gorsuch to replace the late Justice Scalia the following day.

On September 27, 2018, Dr. Christine Blasey Ford testified to the Senate Judiciary Committee that Pres. Donald Trump’s Supreme Court nominee Judge Brett Kavanaugh had sexually assaulted her when she was a teenager. In response to a request from Senator Jeff Flake, R-AZ, Trump ordered the FBI to conduct a limited investigation into her accusation that would take no longer than a week. On October 3 Sen. McConnell scheduled a vote in the Senate on October 5 regarding Kavanaugh’s nomination – before the results of the FBI investigation were available. The investigation was not released to the public and the the Senate voted to confirm Kavanaugh to replace the retired Justice Anthony Kennedy by a 50-48 vote on October 6, 2018.

On November 27, 2018, Sen. McConnell said he would block a vote on a bill in the Senate to protect special counsel Robert Mueller’s investigation of Pres. Donald Trump.

On January 3, 2019, the newly elected members of the 116th U.S. Congress were sworn in, with Democrats taking control of the House of Representatives as a result of the 2018 mid-term elections. They promptly passed a bill to end the partial government shutdown that Pres. Trump had initiated on December 22, 2018. Sen. McConnell refused to allow a vote on the bill in the Senate, even though there were plenty of votes to pass it, because it didn’t include the $5.7 billion that Pres. Trump wanted to build more Mexican border walls. McConnell explained that, “The Senate will not take up any proposal that does not have a real chance of passing this chamber and getting a presidential signature.” In other words, he chose party over nation because he didn’t want to force Republicans in Congress to vote to override a Trump veto in order to reopen the government.

On January 30, 2019, Sen. McConnell gave a speech in the Senate wherein he criticized proposed Democratic legislation that would make federal election days a national holiday by calling it a “power grab.”

On February 19, 2019, former acting FBI Director Andrew McCabe revealed that Congressional leaders were briefed when the agency opened a counterintelligence investigation into President Donald Trump’s connections with Russia after Trump fired then-FBI Director James Comey in 2017. The lawmakers included Sen. McConnell and, “No one objected,” McCabe said.

On March 25, 2019, Sen. McConnell blocked a Senate resolution calling for special counsel Robert Mueller’s report to be released to the public. He explained that Attorney General William Barr was still working with Mueller to determine if there was anything in the report that should not be released to the public. Senate Minority Leader Chuck Schumer, D-NY, pointed out that the resolution didn’t say the report should be released immediately, just that it should be released.

On April 3, 2019, Sen. McConnell implemented another “nuclear option.” He used Senate procedural tactics to allow for the approval of lower-level executive branch nominations, and district court nominations, with a simple 51-vote majority, instead of the traditional 60 vote approval threshold.

Republicans Are Picking Economic Winners and Losers

smokestacks
(Wikipedia)

On April 25, 2018, Arizona’s Republican Gov. Doug Ducey signed a bill passed by the state’s Republican controlled legislature to exempt coal purchases from the state sales tax. It would lower the price of coal produced at the state’s only active coal mine, Peabody Energy’s Kayenta Mine on Black Mesa. The objective of the bill is to help attract a buyer for the mine’s only customer, the coal-fired Navajo Generating Station power plant near Page. The bill was pushed by Peabody Energy’s lobbyist Tom Dorn.

All but one of the Navajo Generating Station’s owners have decided to shut it down in 2019 because they can buy cheaper and cleaner electricity on the open market. And its other owner, the U.S. Bureau of Reclamation, cannot afford to operate the plant by itself, so if it shuts down, so will the Peabody coal mine.

“This bill is essential to the economic success of the Navajo Nation, the Hopi Tribe, and surrounding communities,” Ducey said when he signed it. The two tribes would, indeed, be severely impacted by a shutdown because the power plant and mine are located on their reservations. Both tribes hold leases for the mine, and the Navajos hold one for the power plant. If the plant and mine close, it’s estimated the annual revenue of the Navajo Nation’s government would shrink by about $40 million, or about 23%, while the smaller Hopi Tribe’s revenue could decline by about $12 million, or about 67%. In addition, the power plant and mine employee about 750 workers, nearly all of them Native Americans. (Some people would still be needed to maintain and dismantle the plant and mine if they were closed.)

Continue reading “Republicans Are Picking Economic Winners and Losers”

Will Corporate Tax Cuts Really Reduce the U.S. Budget Deficit?

Mick Mulvaney
Mick Mulvaney (Wikipedia)

President Donald Trump and the Republican-led Congress are trying to pass federal tax reform legislation that could increase the U.S. government’s burgeoning debt by trillions of dollars. The federal government already owes more than $20 trillion, which is about $1 trillion more than the current annual U.S. gross domestic product (GDP). And the $666 billion budget deficit for the federal fiscal year that concluded in October was the sixth highest on record.

Most economists say the best way to reduce the budget deficit without hurting the economy is by gradually implementing a combination of carefully crafted spending cuts and tax increases. But Trump’s Director of the Office of Management and Budget (OMB), former Congressman Mick Mulvaney, says there’s no political will in Congress to make spending cuts, so the only way to reduce the deficit is to increase tax revenue by stimulating annual economic growth to at least 3% through tax cuts.

A reduction in corporate taxes is at the core of the Republican tax reform strategy. They claim that the U.S. economy is at an international competitive disadvantage because the 35% federal corporate tax rate that’s been in effect since 1933 is among the highest in the world. They say that lowering it would increase economic growth because corporations would repatriate some earnings from foreign countries and conduct more business in the U.S.

But there is little evidence that the proposed tax cuts will generate enough compensatory growth to pay for themselves. For example, if 25% of U.S. income goes to towards taxes, every $1 of tax cuts would have to generate more than $5 of increased economic activity. And history shows that previous Republican tax cuts failed to produce promised increases in tax revenue. During the Reagan administration in the 1980s the Republicans gave tax cuts to the wealthy that were supposed to generate growth and income that would “trickle down” to the middle and lower classes. Instead, their supply-side strategy significantly increased the national debt, shrank the middle class, increased unemployment, and accelerated income inequality. In other words, the wealthy people just kept most of the money.

Furthermore, while the statutory U.S. corporate tax rate is high, corporations can take expense deductions that make their effective tax rates lower. According to a 2017 Congressional Budget Office report, the U.S. effective corporate tax rate was only 18.6% in 2012. Also, corporations consider many factors when they make business decisions. A tax rate would be the deciding factor only if all other things were equal. And few corporations are willing to pass up the profitable privilege of doing business in the U.S., the world’s largest economy.

Some corporations, of course, would use the money they’d save from a reduction in corporate tax rates to invest in new production. But many would simply inflate their stock values by buying back stock, increasing dividend payments to their stockholders, or they would pay their executive officers to even more outrageous amounts. These things would contribute little to economic growth, as most stock dividends don’t go to middle or lower income class consumers, and wealthier CEOs would just accelerate growing income inequality.

The primary lesson from the failure of supply-side economics is that not all tax cuts are the same, and that real economic stimulus comes from reducing taxes for the U.S. economy’s primary consumers – the lower and middle income classes. Subsequently, supporters of the Republican tax reform effort, including President Trump, are selling it as a tax cut for the middle class. But the middle class tax cuts included among the various features in their reform proposals are very modest, and in the Senate’s version of the bill they would expire at the end of 2025.

The reason they are set expire is because Senate Republicans passed a budget resolution in October to protect their tax reform bill from a Democratic filibuster. As long as the bill doesn’t add more than $1.5 trillion to the deficit over the next ten years, Republicans will only need 51 votes to pass it in the Senate. In other words, they know that their proposed tax cuts will significantly increase the national debt, and they’d rather eliminate tax cuts to the middle class than corporate tax cuts to avoid exceeding their self-imposed arbitrary limit on the inevitable debt increase.

Another indicator that they don’t really believe their proposed tax cuts will pay for themselves is that Republican Sen. Bob Corker (R-Tenn.) has insisted that the final version of the bill contain a “trigger” that forces reconsideration of the tax cuts if it appears they are creating a big increase in the federal budget deficit.

The truth is that the Republican fixation on implementing tax cuts is a long-held political objective, not a proven economic tool. This if further revealed by House’s version of the bill which includes a provision to eliminate the estate tax, which would cost more than $172 billion in lost tax revenue over the next 10 years in order to benefit a relative handful of ultra rich families.

The proven Keynesian strategies of creating economic stimulus by lowering interest rates and increasing government spending aren’t available because they’re already exhausted. Interest rates have been at historically low levels for years in response to the Great Recession, and the federal debt has already reached historical highs.  So, instead of doing the hard work of compromising with Democrats to make sound budget deals, Republicans are trying to sell this tax reform bill as a magical panacea. They know that if it doesn’t work, their wealthy dark money campaign donors will still be happy with their lower taxes. Also, it will make it easier for them to cut funding for popular programs they don’t like, such as Social Security and Medicare.

In the meantime, the U.S. economy is doing quite well, and an argument can be made that there’s no immediate need for any tax cuts. The minimum economic growth rate that the Trump administration claims is necessary to shrink the budget deficit has already been achieved. The economy grew by 3.1% in the second quarter, and by 3% in the third quarter of this year. At the same time, unemployment was down to 4.1% in October, the lowest its been in more than 10 years. There are still some stubborn pockets of unemployment, but they are mostly the result of technological advances that have rendered some jobs obsolete, and the laid off workers don’t have the necessary skills to succeed in the new economy. And, by the way, recent corporate profits are at all-time historical highs.

The bottom line is that the Republican tax reform proposals look an awful lot like the failed supply-side “voodoo economics” of the Reagan administration. If Republicans really want to improve the economy, they should find a way to focus tax cuts on the middle and lower income classes, while investing in education, healthcare, public transportation, and affordable daycare. This strategy could increase the federal budge deficit too, if it isn’t accompanied by fair spending cuts combined with the elimination of tax loopholes and unnecessary subsidies. But it would have a much better chance of success. It would help Americans work themselves up from the bottom, instead of giving them false hope that some crumbs might trickle down from above.

Updates

On November 30, 2017, the Senate’s parliamentarian declared that the inclusion of the “trigger” provision demanded by Republican Sen. Bob Corker (R-Tenn.) would violate the special budget resolution rules the Republicans want to use to pass the tax bill without any Democratic support.

Late in the evening of December 1, 2017, Senate Republicans finally succeeded in passing their version of a tax reform bill. A conference committee must reconcile it with the version that was previously passed by the House before a final version can be sent to President Trump for his signature.

On December 22, 2017, President Donald Trump signed the $1.5 trillion tax cut bill, named the Tax Cuts and Jobs Act of 2017. It became effective January 1, 2018.

In July, 2018, the U.S. Treasury Department reported that the federal government recorded a $74.9 billion deficit in June, a month when the government often runs a surplus, as corporate taxes dropped sharply compared to a year ago. The government had a budget surplus in June in 52 of the past 64 years.

On September 13, 2018, the U.S. Treasury Department  announced the U.S. budget deficit had widened to $898 billion in the 11 months of the current federal fiscal year, which concludes at the end of September, and revenue from corporate taxes had fallen by $71 billion from a year ago.

On November 12, 2018, The New York Times newspaper reported that the biggest effect of Trump’s tax cut was to increase the federal budget deficit.

On February 13, 2019, the U.S. Treasury Department reported that the U.S. government’s public debt had accumulated to an all time record of $22 trillion. This was an increase of $2 trillion since Donald Trump took office in January 2017.

On March 22, 2019, the U.S. Treasury Department reported that the U.S. budget deficit in February was $234 billion, the biggest one-month deficit in history.

Page 1 of 10
1 2 3 10