Right vs Far Right - How the GOP's economic policy has evolved

Trump admin illustrates divide between new and old GOP with their tax agenda.

The Republicans have finally published their long awaited tax plans, and as expected, only serves as a tax handout for the highest earners. An analysis by the Institute on Taxation and Economic Policy, a well respected left-leaning think tank, finds that the highest-earning one percent of households would receive nearly half the direct benefit of the tax cuts. Specifically, the richest one percent, who earn 22% of all income, and pay 36% of all federal taxes, would get 48% of the Republican tax cuts.

Out of the many changes the GOP tax plan proposes, one seismic shift they plan on introducing is reducing corporation tax from 35% to 20%. Interestingly enough, Trump initially wanted it to be 15% on the campaign trail but then the administration came to the conclusion that it was not feasible.

This tax plan, along with the Republican’s views on military spending and social safety nets further illustrates the divide between moderate Republicans of the post World War II-era and the extreme right of today. Throughout the 50’s to the late 70’s, corporation tax hovered around 50%. Now there is the danger of it dipping below half that rate, and given what we know today about the increasingly elaborate tax avoidance and evasion schemes of the super rich (and some corporations even paying none), America may be converted into a giant tax haven.

The tax agenda of a moderate Republican

From Eisenhower to Nixon, the top rate of income tax for the highest earners went from around 90% to 70%, and dropped gradually under Reagan. By today’s standards it sounded like a tax plan concocted by Stalin himself, when in reality not only did we used to tax the rich at that rate, but more importantly, society prospered during America’s so called Gilded Age.

It’s important to note that income was taxed after a certain amount. So if you earned $400,000, you got taxed 90% whichever extra dollar you worked for after that, instead of the common mistake people make which claim that the government takes 90% of your hard earned $400,000.

So what did this high tax era of personal and corporate taxes produce? rather than economic doom, the government received more money in tax revenue. In the 50’s it counted for a 1/3, nowadays it counts for around 10% of total revenue raised from corporate income tax. Coupled with that, higher taxes tended to correlate with an increase in GDP, whether it was in the 50’s or a more recent example, the tax changes in the Clinton and Bush years. While the EPI concludes there is no evidence between tax hikes and real GDP growth, they still believe it is highly important to society.

The shaky emergence of supply side economics

Then during the later year Reagan years, he brought on tax cuts across the board and ushered in the term ‘Reaganomics’. This was also known as supply side economics, an economics theory arguing that growth can be most effectively created by lowering barriers for people to produce (supply) goods and services, such as lowering income tax and capital gains rates, and by allowing greater flexibility by reducing regulation. Consequently, consumers will then reap the benefits from a greater supply of goods and services at lower prices. In theory. The top marginal rate fell from 70% when he came into office to 28% when he left, and since then (through a mixture of tax cuts and increases throughout the years), economic growth has never been the same as it was between the Roosevelt and Reagan years. Left wing author and talk show host Thom Hartmann explains on Alternet what this so called ‘voodoo economics’ did to the economy:

“When we had heavily regulated and taxed capitalism in the post-war era, the largest employer in America was General Motors, and they paid working people what would be, in today’s dollars, about $50 an hour with benefits. Reagan began deregulating and cutting taxes on capitalism in 1981, and today, with more classical “raw capitalism,” what we call “Reaganomics,” or “supply side economics,” our nation’s largest employer is WalMart and they pay around $10 an hour.”

Nonetheless, while Reagan and his administration created the conditions necessary for our modern day GOP to herald the emergence of supply side economics as mainstream, his reputation for being a tax cutter is somewhat distorted and forgotten. He had to raise taxes 11 times to offset a large deficit, including a 1983 hike in the payroll tax to pay for social security and medicare. He increased spending, hiked taxes and even at one point bailed out social security to a tune of $165 billion, something which todays GOP tends to gloss over and, if he was running as a candidate now, would be blacklisted and vilified by his Republican allies.

“Reagan was certainly a tax cutter legislatively, emotionally and ideologically. But for a variety of political reasons, it was hard for him to ignore the cost of his tax cuts,”

Reaganomics 2.0

Trump’s so called Tax Cuts and Jobs Act legislation according to the Tax Policy Center would result in higher taxes for around 7% of Americans in 2018 and 25% of people in 2027, concluding that much of its benefits would be directed at wealthier Americans. While also attempting to balloon the deficit to $1.7 trillion over 10 years and hamper economic growth, a recent budget resolution adopted by the senate will allow Republicans to pass their $1.5 trillion tax cut agenda with only 51 votes instead of 54.

Included in this plan according to the non-partisan Center on Budget and Policy Priorities is a string of heinous cuts to social welfare programs, including:

• $1.3 trillion cut (or nearly 30%) by 2027 of all non-medicare health programs

• Medicare itself will be cut by $473 billion

• Deep cuts in non-defense discretionary programs

• Plans to cut food stamp program (SNAP), unemployment insurance, earned income and child tax credit and other relief programs

• Deep cuts to education programs such as Pell Grants and student loans of between $100 billion over 10 years in the Trump plan to $200 billion in congressional plans

The new divide between the GOP of today and of old in a way symbolizes the divide between rich and poor, in that todays GOP (especially under Trump) is moving further and further right, with no hope of achieving any kind of moderation old school Republicans such as Teddy Roosevelt or Dwight D. Eisenhower sought out.

Thanks to the influence of big money interests and a toxic supply side theory of thought that has infiltrated the GOP (and the minds of many Americans), we may never see another Republican that vows to protect the social safety net as we have seen before. If Donald Trump genuinely believes in small government, he must tackle the out of control military budget and not the programs 10’s of millions depend on.

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