It’s a great interview, please go to the link to read the whole thing.
Michael Winship: The Republicans are proposing $1.5 trillion in tax cuts. Do you think it makes sense?
Bruce Bartlett: Let me put it this way: I don’t believe that our economy needs this sort of tax cut at this time, and certainly not one that is grossly, overwhelmingly, [weighed] toward the ultrawealthy. I think there are policies that the economy does need, and $1.5 trillion will go a long way toward meeting those needs. So if we’re going to raise the debt by at least $1.5 trillion, I think we should do it in a way that is much more likely to raise growth and improve the lives of the people.
MW: In fact, on Monday morning, you tweeted that our major cities are dangerously vulnerable to flooding, but there’s no money proposed for infrastructure, only tax cuts.
BB: That’s correct. And I think it’s sad that Donald Trump, who said he wanted to have a big infrastructure program, has apparently abandoned that in favor of a tax giveaway to the wealthiest people in the United States.
My feeling is that the economy is suffering from a lack of aggregate demand — that is to say, spending. And we need to be doing something to get that going. One way is to get people who don’t have jobs to get jobs. Then they have money to spend. Or to raise wages — then people who are working will have more money to spend. So I think that that is what the economy needs, but if you cut taxes for the ultrawealthy, this does not lead to any increase in spending at all, because the ultrawealthy already have everything they could possibly want. They have no unmet needs. They’re not going to go out and buy second and third yachts just because they’ve gotten a tax cut. All they’re going to do is save the money.
On the surface, that sounds like a good thing, but the fact is, interest rates are so ridiculously low, this is pretty strong evidence that we don’t really need additional saving. We need spending. And therefore, I think to the extent that there’s any potential growth effects of this tax cut, it’s correctly characterized as trickle down and I just don’t think that is going to work or have any meaningful effect on the economy.
MW: Trump has said, “There’s no way that the middle class doesn’t greatly benefit” from the proposed tax cuts.
BB: Well, that’s just a lie… the middle class really isn’t going to get any kind of tax cut and in fact it’s going to get screwed in lots of ways. For example, he’s talked on many occasions about getting rid of the deduction for state and local taxes. He’s talked about reducing the ability of people to save in 401(k)s. These are tax increases, really, that are going to hurt the middle class.
So what his economic advisers have done is come up with this ridiculous rationalization that workers will see a huge increase in their wages if we cut the corporate tax rate. The fact is that we have experience with this. We don’t need to look to some esoteric mathematical model to know what’s going to happen. You can very easily go to bls.gov, which is the website of the Bureau of Labor Statistics, and look up real median wages and you can see what happened after the Tax Reform Act of 1986, which lowered the tax rate on corporations from 46 percent to 34 percent. And if you look at what happened to wages in the 10 years after 1986, wages fell. They did not go up. They fell. Workers were worse off.
Now I’m not saying there’s a cause-and-effect relationship. I’m not saying that cutting the tax caused workers’ wages to > fall. All I’m saying is that we have a real-world experience in which the results were the exact opposite of what the administration is asserting.
MW: You wrote that you think the ultimate goal of the GOP is to create a deficit so large that Medicare and Medicaid can be decimated.
BB: That’s correct. The Republicans don’t advertise this, but in fact they all believe in a theory that I call “starve the beast,” which says that the purpose of cutting taxes is to create a deficit which will then justify spending cuts. Under normal circumstances, you’re not going to be able to cut popular programs like Medicare, Medicaid, Social Security, but if the deficit gets really, really big, people may be frightened of it and be willing to accept as necessary spending cuts that would not otherwise be politically plausible.
We saw an excellent example of this strategy just recently in the state of Kansas. Republican Gov. Sam Brownback and his party rammed through huge tax cuts relative to the size of the state, equivalent to what Trump and the Republicans in Washington are proposing, and they even hired economist Arthur Laffer of Laffer curve fame, paid him $75,000 [but] he didn’t even do a real study. He just lied and said this tax cut is going to be so powerful, it’s going to lead to so much additional growth and jobs that revenues will not decline, so we won’t have any increase in the state’s debt.
Well, what happened is, of course, revenues collapsed. The state — states have to operate under a hard balanced-budget requirement — was hemorrhaging revenues. They were desperate to balance the budget. But did they say, “Okay, these tax cuts apparently are not working, let’s just go back and restore the taxes that previously existed”? They did not do that. What they said was, “We must slash spending for the poor, we must slash spending for education, we must slash spending for police and fire and roads and bridges” and all kinds of popular programs that would have been impossible to cut except under the circumstances of an extreme fiscal disaster.
So this is very much in the Republican playbook. They cut taxes, they lie and say they will not lose revenue. When the revenues collapse, they say, “Let’s slash spending for the poor. That is what’s causing the deficit, not huge tax cuts to the rich.”