It’s not every day that Forbes publishes an op-ed, as it did over the weekend, proclaiming a pending congressional tax cut is the “end of all economic sanity.”
Written by veteran congressional budget analyst Stan Collender, the op-ed says Republican leaders are forging ahead on tax-cut legislation “without having any idea of what this policy will actually do to the economy.” Collender says it won’t be pretty.
Collender predicts the tax cuts will provide little economic stimulus to an already thriving economy, increase structural US deficits, raise interest rates and limit the ability of Congress to deal with economic downturns. “They [GOP congressional leaders] have wishes, hopes and prayers, but in reality nothing beyond the economic equivalent of pagan superstition.” Did we mention this op-ed was published in Forbes?
This makes Paul Krugman’s criticism of tax cuts seem timid.
Tax cut zealots may dismiss Collender as a kook. He isn’t. He has been around Congress for years, with his nose stuck under piles of congressional budgets. If you want to criticize Collender, call him a congressional budget nerd, which is what he is.
Collender’s context – the US economy, which may not be groovy for everybody, is humming along with an expanding gross domestic product, unemployment at around 4 percent and corporate profits at record levels. If there is an economic concern, it centers on lagging wage growth relative to inflation and growing income inequality. The tax measures that have passed the House and are pending in the Senate don’t address wage growth or income inequality and, in fact, may exacerbate both.
Republican leaders says Americans want a tax cut, but polling doesn’t bear that out. Even if Americans did want a broad-based tax cut, the GOP plans may not meet the mark. Benefits appear slanted toward corporations and wealthy individuals. That may not be the intent of GOP lawmakers working on the tax cuts, but impartial analysts say that would be the result.
Collender cuts even deeper. He says even though the House tax cut measure is scored as raising the US budget deficit $1.4 trillion over 10 years, the likely impact is even larger, perhaps as much as $2 trillion. That’s a byproduct of modified scoring decisions dictated by GOP political leaders.
Adding $2 trillion to the US deficit when the economy is solid doesn’t leave a lot of room for a President or Congress to stimulate the economy during an inevitable downtown, Collender says.“The federal government will have far less ability to respond to economic downturns unless previously unimaginable and politically intolerable deficits, tax increases or spending cuts suddenly become acceptable,” he predicts.
The ultimate victim, Collender says, will be programs such as Medicare, Medicaid, Social Security and even military spending. American’s ability to invest in infrastructure and research will also be severely limited. Collender labels this “economic insanity.”
If a foreign adversary proposed a strategy to strangulate the US economy, politicians would call it an act of aggression. On Capitol Hill, passing this tax policy is viewed as essential before Christmas.