Voodoo Revival

Trickle down, turn around, truck a trail of bluster.

   Pundits, reporters and analysts have been having a field day parsing the tax reform plans put forth by Jeb Bush and Donald Trump this week, noting that the plans really favor the ultra rich even as the candidates tout supposed benefits to everyone else.
   To claim that the new plans would mean low and moderate income folks would pay no income tax at all ignores the reality that many of them don't pay any now, because their wages are so low and their standard deductions are so high.
   As for favoring the wealthy, consider this: One part of the Trump plan, for example, would increase the tax rate on one source of income by 5 percentage points, but would decrease another by 15 points. The candidate insists that he will make sure all taxpayers pay their fair share, and his plan would cut taxes for everyone. But look at the numbers. By raising the tax on one income source by 5 percentage points and cutting another tax rate by 15 points, that's a net benefit to high income earners of 10 points.
   And according to one analysis, low income households would save $250 in a tax year, while the one-percenters would keep $185,000.
   That's supply-side, trickle-down, voodoo economics on steroids. It didn't work during the Reagan Era, and it won't work now. The rationale at the time was provided by economist Arthur Laffer, who sketched his famous Laffer Curve to "prove" that as tax rates go down, economic activity goes up, generating more revenue and thus more tax payments to replace the money "lost" through tax reductions. Moreover, as wealthy families and corporations increase their income, they therefore spend more, and the net benefits trickle down, over time, eventually, in the long run, to the rest of the population.
   We should live so long. Even Jeb's father, George H.W. Bush, called it "voodoo economics" during the nomination battle with Ronald Reagan.
   Now son Jeb is trotting out a plan that is nearly identical to that offered by Trump, except for some different numbers.
   The candidates claim that the net result will be more savings for households plus an increase in economic activity nationwide to compensate for lost tax revenue, so the changes would be "revenue neutral," and could actually enable the federal government to reduce its deficit.
   Despite his criticism of "voodoo economics," George H.W. Bush accepted the nomination as vice president under Ronald Reagan, both Republicans, and federal spending over that 12-year period ended January, 1993, left their successor, Democrat Bill Clinton, with a struggling economy and a national debt of $6.9 trillion. Even so, Clinton managed a revived economy and engineered a budget in surplus for four consecutive years.
   Clinton's successor, Republican George W. Bush, cut taxes and increased spending, which more than doubled the national debt. In less than one year after Bush took office, his administration squandered a budget surplus and the national debt plummeted to $1.4 trillion.

   So if past history is any indication of future performance, tax reductions that favor the already wealthy, while reducing spending that helps the needy, do not lead to economic health for the nation.
   Moreover, as noted in this space September 15 in a post titled Political Economics, and an earlier posting August 28 titled Zombie Economics, national crises, downturns and depressions are far more likely to happen during Republican terms than when a Democrat occupies the White House.
   Be careful what you wish for. You may get it.