With apologies to Benjamin Disraeli, there are three kinds of lies Republicans are telling about their tax plan: lies, damned lies, and f**king lies. Constraints of space and time preclude listing them all, but here is a handful of the GOP’s most farfetched falsehoods. For example, earlier this month House Speaker Paul Ryan (R-WI) repeatedly promised “it’s a tax cut for everybody … every single person, every rate payer, every bracket person gets a rate cut.” When the Washington Post Fact Checker published a Four Pinocchio beat-down of this bunk, Ryan and Senate Majority Leader Mitch McConnell (R-KY) beat a hasty retreat. Despite the hemorrhage of red ink produced by the Reagan and Bush tax cuts, Trump White House economic adviser Gary Cohn bragged, We think we can pay for the entire tax cut through growth over the cycle,” a point echoed by Treasury Secretary Steve Mnuchin on November 13.
The 10-year, $1.5 trillion windfall for the wealthy will “not only … pay for itself,” Mnuchin boasted, “but it will pay down debt” as well. Unfortunately, analyses from the Congressional Budget Office (CBO), Joint Committee on Taxation (JCT), the Wharton School, the Tax Policy Center (TPC) and even the conservative friendly Tax Foundation (TF) concluded otherwise. And even without seeing the president’s past tax returns, we know that Donald Trump was lying through his teeth when he said the GOP tax plan was “going to cost me a fortune” and that his own finances were “going to get killed in this bill.”
So, neither the House nor the Senate versions of the GOP’s “Tax Cuts and Jobs Act” (TCJA) does a very good job of actually delivering tax cuts, except to corporations and the wealthiest people in America. But as it turns out, the TCJA doesn’t do much to create jobs, either.
Of course, you’d never know it listening to Paul Ryan. On November 3, the speaker’s website issued this update: “BREAKING: Analysis Finds House Tax Plan Would Create 890,000 New Jobs.” Citing the analysis by the reliably right-leaning Tax Foundation, Team Ryan crowed that over the ensuing decade, the Tax Cuts and Jobs Act would result in “890,000 more full-time equivalent jobs, 3.5 percent increase in size of the U.S. Economy [and] 2.7 percent higher wages for workers. (The Tax Foundation’s assessment of the Senate bill put the employment gain at 925,000 over 10 years.) On November 7, Ryan excitedly tweeted the jobs number again, this time conveniently rounding up:
Nearly 1 million new, full-time jobs will be created by the Tax Cuts & Jobs Act. See how many jobs will be created in your state.
Then on November 16, the same day the House of Representatives narrowly passed his Tax Cuts and Jobs Act, Speaker Ryan took to the floor to declare:
“Let me just break it down in simple numbers. The nonpartisan tax foundation ran the numbers. They said with this bill, we'll get faster growth, about 3.5 percent faster economic growth, 890,000 new jobs. They estimate that in New York state alone, 57,834 new jobs. Wisconsin: 17,999 new jobs. California: 101,422 new jobs. Texas: 74,037 new jobs.”
Now, if you are experiencing a queasy sensation (or feeling, as James Comey might describe it, “mildly nauseous”) because that jobs number seems pathetically low, that’s because it is.
After all, according to the last jobs report from the Bureau of Labor Statistics, total civilian employment in the United States reached almost 154 million in October 2017. During his first six months in office, Donald Trump presided over the creation of 1.07 million new jobs, just a little more than the final six months of President Obama’s second term. Over a 10-year time frame, the 890,000 additional jobs Paul Ryan wants to claim for the Tax Cuts and Jobs Act is little more than a rounding error. And at a decade-long cost of $1.5 trillion or $1.69 million per job, a very expensive rounding error at that.
To help clarify why you shouldn’t be impressed with the size or the performance of Paul Ryan’s package, just take a quick look back at the America’s last big jobs program, the Obama stimulus. Over 40 percent of the stimulus came in the form of tax relief, which benefited 95 percent of working American households in what was the largest two-year tax cut in American history.
As you may recall, at the Republican National Convention in 2012, Paul Ryan—the GOP’s newly minted nominee for vice president—had this to say about the $800 billion American Recovery and Reinvestment Act which Barack Obama signed into law in February 2009:
“What did taxpayers get out of the Obama stimulus? More debt. That money wasn’t just spent and wasted. It was borrowed, spent and wasted.”
Ryan had plenty of company. Mitch McConnell, like Ryan’s running mate Mitt Romney, falsely charged that Obama “made the economy worse.” The National Republican Senatorial Committee (NRSC) claimed the stimulus created “zero jobs.” While Texas Governor Rick Perry asserted the ARRA “did not create a single job,” in 2014 Florida Senator Marco Rubio used the ARRA’s fourth anniversary to peddle the same myth:
"If you recall five years ago, the notion was that if the government spent all this money—that, by the way, was borrowed—that somehow the economy would begin to grow and create jobs. Well, of course, it clearly failed."
As it turned out, the vast majority of American economists concluded otherwise, including those at Capitol Hill’s nonpartisan scorekeeper, the Congressional Budget Office.
As the Washington Post reported in June 2012, the House Budget Committee heard testimony from the CBO chief answering a simple question: did the $787 billion Obama stimulus work? Unfortunately for Republican propagandists, CBO Director Douglas Elmendorf clearly refuted Mitt Romney's claim that the American Recovery and Reinvestment Act (ARRA) was "the largest one-time careless expenditure of government money in American history."
Under questioning from skeptical Republicans, the director of the nonpartisan (and widely respected) Congressional Budget Office was emphatic about the value of the 2009 stimulus. And, he said, the vast majority of economists agree.
In a survey conducted by the University of Chicago Booth School of Business, 80 percent of economic experts agreed that, because of the stimulus, the U.S. unemployment rate was lower at the end of 2010 than it would have been otherwise.
"Only 4 percent disagreed or strongly disagreed," CBO Director Douglas Elmendorf told the House Budget Committee. "That," he added, "is a distinct minority."
Not content with that response, Kansas Republican Rep. Tim Huelskamp tried again. "Where did Washington mess up?" Huelskamp demanded. "Because you're saying most economists think it should've worked. It didn't." As the Post's Lori Montgomery detailed, Elmendorf drove home the point:
Most economists not only think it should have worked; they think it did work, Elmendorf replied. CBO's own analysis found that the package added as many as 3.3 million jobs to the economy during the second quarter of 2010, and may have prevented the nation from lapsing back into recession.
That May, Elmendorf's agency released its latest assessment of the stimulus showing why. At its peak in 2010, the ARRA added up to 3.3 million jobs, cut unemployment by as much as 1.8 percent and boosted GDP by up to 4.1 percent. It's also worth noting that the CBO once again confirmed that aid to the states and purchases by the federal government delivers the biggest bang for the buck, while upper income tax cuts provide the least.
Now, you don't have to take the nonpartisan CBO's word for it. Douglas Holtz-Eakin, a former CBO director who later served as an economic adviser to John McCain in 2008, agreed with his successor. "The argument that the stimulus had zero impact and we shouldn't have done it is intellectually dishonest or wrong," he explained in August 2011. "If you throw a trillion dollars at the economy it has an impact, and we needed to do something." (That "something," by the way, was over 40 percent in tax cuts, making the Obama stimulus the largest two-year tax cut in American history.) Mark Zandi, also an adviser to McCain's 2008 campaign was adamant on the positive role of the stimulus. Federal intervention, he and Princeton economist Alan Blinder argued in August 2010, literally saved the United States from a second Great Depression. In "How the Great Recession Was Brought to an End," Blinder and Zandi's models confirmed the impact of the Obama recovery program and concluded that "laissez faire was not an option:"
The effects of the fiscal stimulus alone appear very substantial, raising 2010 real GDP by about 3.4%, holding the unemployment rate about 1½ percentage points lower, and adding almost 2.7 million jobs to U.S. payrolls. These estimates of the fiscal impact are broadly consistent with those made by the CBO and the Obama administration.
But their modeling also suggests that the totality of federal efforts to rescue the banking system dating back to the fall of 2008 prevented a catastrophic collapse:
We find that its effects on real GDP, jobs, and inflation are huge, and probably averted what could have been called Great Depression 2.0. For example, we estimate that, without the government's response, GDP in 2010 would be about 11.5% lower, payroll employment would be less by some 8½ million jobs, and the nation would now be experiencing deflation.
Now, that’s what a jobs program should do. Even assuming that the $800 billion American Recovery and Reinvestment Act saved or created only 3.3 million additional jobs at its peak, the $242,000 per job figure is one-sixth the cost of what the Trump/McConnell/Ryan “Tax Cuts and Jobs Act” is proposing now. (If anything, the stimulus should have been even bigger. It wasn’t until months after its passage that the federal government had the clear data showing just how massive the late 2008 fiscal contraction had been. Making matters worse still, steep budget reductions by state and local governments more than offset the funding from the stimulus, 40 percent of which took the form of tax cuts.)
In Paul Ryan’s defense, America’s economic situation is no way resembles the near-collapse of late 2008 and early 2009. In the last quarter of 2008, the U.S. shrank by 3.7 percent; in Q1 2009, the contraction reached a staggering 8.9 percent. “In the three months prior to the passage of stimulus, the economy cut loose 2.2m workers, not 1.8m,” The Economist reported in August 2011, “In January, total employment was already 1m workers below the level shown in the official data.” In October 2017, the economy added 261,000 positions and the jobless rate of 4.1 percent neared so-called “full employment. The IMF’s rosier forecast for global economic growth in 2018 and surprisingly strong 3.0 percent expansion in third quarter U.S. gross domestic product (GDP) suggest there’s no need for tax cuts to jumpstart businesses here. “There are no real headwinds to growth for the first time since the expansion began,” said Mark Zandi, Moody Analytics’ chief economist. “We are at full employment and we are in full swing; let the good times roll.” Or, as CBPP economist and former adviser to Vice President Joe Biden, Jared Bernstein put it last month:
“The underlying trend in G.D.P. growth is clearly telling us two things. Keep on rockin’ steady with Yellen at the Fed, and there’s no need for a big, wasteful tax cut.”
Especially when U.S. companies are generating record profits and sitting on oceans of cash. GOP myth-making aside, lowering corporate tax won’t produce big gains for workers, especially when the proposed 20 percent rate is still higher than the effective U.S. corporate tax rate of 18.6 percent. That’s why Trump adviser Gary Cohn got a collective yawn from the corporate titans at the Wall Street Journal CEO Council on November 14:
But when a moderator asked the executives in the room if they would increase their investments in the U.S. if the GOP's tax overhaul plan passes, only a few raised their hands.
The ho-hum response surprised Cohn, who was on stage, prompting him to laughingly ask, "Why aren't the other hands up?"
As Matt O’Brien explained in the Washington Post, this is why:
The answer, of course, is that U.S. companies, with their record-setting profits, are not capital-constrained right now. If they see a good investment opportunity, they're already making it. They'd just use a tax cut, then, to pay out more money to shareholders. That, at least, is what they've been publicly saying the past few months.
Indeed. This summer, Bank of America and Merrill Lynch surveyed 300 executives at U.S. businesses about what they would do with their gains from a “tax holiday” to repatriate their overseas profits. The responses don’t inspire confidence in the GOP tax plan:
The No. 1 response? Pay down debt. The second most popular response was stock buybacks, where companies purchase some of their own shares to drive up the price. The third was mergers. Actual investments in new factories and more research were low on the list of plans for how to spend extra money.
All of which explains why expectations should be so modest for the job gains from Trump/McConnell/Ryan tax scam. But there is one other factor to keep mind. As the historical record shows, job creation was faster, the economy expanded more rapidly and incomes rose more quickly when income, capital gains and business taxes were higher—even much higher—than they are now. (Just ask Bill Clinton about the 22 million jobs added to the American economy during his tax-raising tenure.)
That dismal performance prompted David Leonhardt of the New York Times to ask seven years ago this week, "Why should we believe that extending the Bush tax cuts will provide a big lift to growth?" His answer was unambiguous:
Those tax cuts passed in 2001 amid big promises about what they would do for the economy. What followed? The decade with the slowest average annual growth since World War II. Amazingly, that statement is true even if you forget about the Great Recession and simply look at 2001-7...
Is there good evidence the tax cuts persuaded more people to join the work force (because they would be able to keep more of their income)? Not really. The labor-force participation rate fell in the years after 2001 and has never again approached its record in the year 2000.
Is there evidence that the tax cuts led to a lot of entrepreneurship and innovation? Again, no. The rate at which start-up businesses created jobs fell during the past decade.
It's no wonder Leonhardt followed his first question with another. "I mean this as a serious question, not a rhetorical one," he asked, "Given this history, why should we believe that the Bush tax cuts were pro-growth?" Or as Mark Shields asked in April 2011:
"Do tax cuts help 'job creators' or 'robber barons'?"
As President Trump and his Republican allies in Congress look to pass their latest tax cut windfall for the wealthy, the answer to Shield’s question hasn’t changed. But the horrible math of Paul Ryan’s “Tax Cuts and Jobs Act” has prompted a new question. As Matthew Yglesias asked rhetorically earlier this month:
Is creating 1,000,000 jobs with a $1,500,000,000,000 tax cut impressive?
Of course not. Anyone defending the GOP tax plan by claiming otherwise is telling you a f**king lie.