Holy voodoo, Bat­man!

The Fresno Bee (Sunday) - - Opinion - BY PAUL KRUG­MAN The New York Times

The 2019 Eco­nomic Re­port of the Pres­i­dent is out, and ev­ery­one is hav­ing fun with the bit at the end that ac­knowl­edges the help of stu­dent in­terns — a list that in­cludes Peter Parker, Aunt May, Bruce Wayne, and Jabba the Hutt.

The White House is pass­ing this off as a de­lib­er­ate joke. More likely, some­one slipped su­per­heroes in to see whether any­one in charge was ac­tu­ally pay­ing at­ten­tion, and proved that they weren’t.

But the big­ger news from the re­port in­volves the sup­posed eco­nomic pay­offs from the Trump tax cut. Even the White House now ac­knowl­edges that the tax cut won’t do all they said it would — their wildly op­ti­mistic eco­nomic pro­jec­tions de­pend on the claimed pay­off to other eco­nomic poli­cies that they them­selves haven’t spec­i­fied. So tax cuts will do won­ders for growth, as long as you do a bunch of other stuff, de­tails to come later.

This puts me in mind of what Voltaire said about witch­craft: “It is un­ques­tion­able that cer­tain words and cer­e­monies will ef­fec­tu­ally de­stroy a flock of sheep, if ad­min­is­tered with a suf­fi­cient por­tion of ar­senic.”

But be­yond that, even the claimed pos­i­tive ef­fects of the tax cut it­self are things we can al­ready see aren’t hap­pen­ing.

So this re­port is dou­ble voodoo, or voodoo squared: it re­lies on voodoo eco­nomics to make big claims for tax cuts, then adds a whole ad­di­tional layer of magic to get the growth pro­jec­tions the ad­min­is­tra­tion wants to hear.

A chart ev­ery­one is talk­ing about shows a base­line rep­re­sent­ing what growth would sup­pos­edly be un­der preTrump poli­cies, then a higher line show­ing the claimed ef­fect of the tax cut, then still higher lines rep­re­sent­ing the ef­fects of things like the Trump in­fra­struc­ture plan.

The first thing to say, then, is that there is no Trump in­fra­struc­ture plan. He’s well past the mid­point of his term, and there has been not a hint of an ac­tual proposal. In fact, his lat­est budget sig­nif­i­cantly cuts in­fra­struc­ture spend­ing. So his econ­o­mists are claim­ing credit for some­thing he hasn’t en­acted, hasn’t pro­posed, and for that mat­ter hasn’t made the slight­est ges­ture to­ward mak­ing hap­pen.

Ac­tu­ally, my Voltaire quote is un­fair. Trump wants to pre­tend that he can kill sheep with magic while ac­tu­ally us­ing ar­senic, but with­out ac­tu­ally ad­min­is­ter­ing any ar­senic, or even ask­ing where he might get some.

But wait, there’s more. A red line sup­pos­edly rep­re­sent­ing the ef­fects of the TCJA (Tax Cuts and Jobs Act of 2017) shows sub­stan­tially el­e­vated growth for the next few years, even with­out the ar­senic. But that’s not what in­de­pen­dent econ­o­mists are see­ing. For ex­am­ple, the New York Fed’s “now­cast” — early es­ti­mates based on par­tial data — shows only 1.5 per­cent growth for the first half of this year. And the NY Fed is rel­a­tively op­ti­mistic; other now­cast­ers like the At­lanta Fed and Gold­man Sachs are show­ing much lower growth in the first quar­ter, less than half a per­cent.

The White House ex­plains why it’s pre­dict­ing such big growth: the TCJA will cause a surge in busi­ness in­vest­ment by “sub­stan­tially rais­ing the tar­get cap­i­tal stock and at­tract­ing in­creased net cap­i­tal in­flows.” And this rise in the cap­i­tal stock will cause a surge in pro­duc­tiv­ity.

Ex­cept that there’s no sign of a surge in busi­ness in­vest­ment: the re­port cherry-picks a few num­bers, but over­all or­ders for cap­i­tal goods, prob­a­bly the best real-time in­di­ca­tor, are show­ing noth­ing much (that 2015-16 slump, by the way, was about frack­ing, which fell off for a while when world oil prices plunged).

Nor has there been a huge in­crease in cap­i­tal in­flows — if there had been, we would, as a mat­ter of sheer ac­count­ing, be see­ing a huge rise in the trade deficit, not the mod­est in­crease we’ve ac­tu­ally wit­nessed.

In other words, the tax cut is a big fiz­zle — and even the White House is half-ad­mit­ting as much.

Yet the tax-cut zom­bie sham­bles on. Some­how, de­spite decades of prac­ti­cal fail­ure, there’s a pha­lanx of bil­lion­aire-funded think tanks pro­mot­ing trickle-down eco­nomics, and a loyal army of rightwing politi­cians sup­ported by wealthy donors who keep in­sist­ing that they have faith that the next tax cut will do ev­ery­thing it prom­ises. Re­ally.

Why is that? Some­how, I sus­pect we know the an­swer.

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