Reform taxes to be sure, but don’t take eyes off debt
Don’t forget the debt, don’t hang up on free trade, but go ahead and pass tax reform, Congress. What’s most important is lowering the corporate income tax rate to invite new investment that’s going to pick up growth through business expansion and by inviting investment from abroad.
We’ve already got a lot going for us—an innovative spirit from way back and Trumpian deregulation from the regulatory records set by his predecessor, for instance. When our taxes get internationally competitive, watch out for business expansion and foreigners wanting to send their money here so as to participate in happy, health-inducing, education-enhancing wealth production that promises great returns.
Americans are already seeing economic happiness—3 percent growth and better in recent quarters, a quarter with the lowest unemployment rate in 17 years, high corporate profits and record stock prices, for instance.
There are also difficulties especially afflicting low-income workers. Tax reform could help solve them through more growth, meaning more jobs and higher wages. If Republicans in Congress can get their act together, we could also see several thousand dollars more per year in lower taxes for most in the middle class along with more jobs and higher wages. We’re also talking about simplification and higher standard deductions making other missing deductions less important.
A major issue, though, is that some estimates have it that the reform could mean $1.5 trillion in less revenue over the next decade, and even if that is way off base as some contend, a revenue-neutral bill would still leave us in a debt mess. Our public debt at the moment is $20 trillion, and the interest on it is so much that there could come a day when that interest and nothing more than entitlement payments would soak up total federal revenue all by themselves.
The risks are huge, and a good way to address them is to listen to what Wyoming Republican Senator Alan Simpson and Democrat Erskine Bowles, chief of staff under President Bill Clinton, once told us. The two headed a commission on fiscal responsibility set up during the administration of President Barack Obama. These two also wanted pro-growth tax reform, but along with truly serious spending reductions that would include adjustments to entitlements.
Some people keep pretending that entitlements are not in trouble, but there is no way to sustain Social Security, for instance, without such adjustments as extending the retirement age and reducing benefits to people with high incomes.
The thing is, President Donald Trump has said he won’t touch Social Security and Republicans lately seem to have trouble hanging together and maybe locating their political courage.
Another issue is free trade, and globalization, it ought to be known, is one of the best things that ever happened to humanity. It has further democratized the world and increased longevity and cut infant deaths significantly, improved nutrition and made people healthier. It has helped America through lower prices, for instance, and those who say so what should know that lower prices are as much a factor in purchasing power of the poor as higher wages. While it’s true that some specific U.S. operations have been closed down because of trade, the evidence is that employment overall has been helped.
It is simultaneously true that China, for instance, cheats in every way imaginable, and Trump’s wishes to fix this and maybe even make some corrections in NAFTA are not blanket stupidities. Go too far and leave the debt alone, however, and all the advantages of tax reform could be negated to the point of Republicans selling out Americans for political dreams that will never come true.