Understanding GOP Tax Cut Hypocrisy

There is a simple way to understand the idiotic rhetoric conservatives use to defend their failing and unbalanced tax policies.

We know the history.  Supply side, trickle-down economic policy hasn’t delivered the promised results.  Rather than support a stronger and growing middle class, more people are slipping into poverty and middle classes wages, in real dollars, are mostly flat or falling.  In step with this decline, the public goods that support a high standard of living and strong economic growth remain shamefully underfunded and in disrepair.  In short, our history follows our standards, and right now those standards are rather shallow and weak indeed.

But we seem less and less interested in facts.  So I will try a little common sense instead.

Let’s say you own a restaurant.  It is doing ok, not great, but you’re still business.  Many months have passed, maybe years, since you had a full house; in fact, most nights empty tables out number the customers.  You even mothballed part of your dining room.  It just isn’t needed.  You wonder about your staff, too.  At peak times they’re busy, but too often you’re sending someone home because business is light.

Now let’s say you just won the lottery.  The big one.  Congratulations!  You’re now one of those Job Creators, as Republicans define them.  You are now rich, after all, and everyone knows that the wealthy have nothing to do with their money but create jobs.  The more money they have, the more jobs the rest of us get.  And now you are one of them…a Job Creator.  So let’s get back to the restaurant.  Let’s create some jobs!

What would you do?

You have millions of dollars you didn’t have yesterday.  You’re a business owner.  People need work.  So what would you do?  What should you do?

Everyone, even Republicans, can agree that you shouldn’t hire more workers and open that closed part of your restaurant just because you won a lottery.  Doing so would make no sense for your business.  You’re under capacity.  You’re already sending people home early.  Things are slow.  Sure, you can afford to hire dozens more people for your restaurant, but what would they do?  How would they help the bottom line at your restaurant?

An influx of cash isn’t going to help the business be more profitable and grow.

The real bottom line in this debate about taxes and jobs is all about ignorance.  Conservative macroeconomic fantasies don’t mix well with their microeconomic fallacies.

Republicans, because they have fallen into the habit of fetishizing wealth, don’t seem to be all that smart about practical business matters, at least not in matters of policy.  If their supply side arguments worked, we wouldn’t be quite as bad off as we are today.  Would we?

I am not naive to the point where I think all the blame for the current economic malaise falls on the mistakes of supply-siders.  I don’t think the economic troubles are simply a matter of class struggle.  I’m not even sure you can blame the fortunate who have made the most of opportunity or position.  But I do think the argument that less is more — especially when less is shared mostly by those who already have less — is a flawed argument.

Take another example.  Suppose an average working class family wins a lottery; let’s say it is a more modest winning, $100,000.  What will happen to that money?

Likely there are bills to be paid, maybe a payment on a car or even a house, clothes, educuation…the money will get spent.  It will be spent out of necessity.  And that money then goes back into the economy where it will helps others and in the process builds demand.  It has a multiplying effect.  If a car is purchased, the car dealership is better off, correct?

The winner of the million dollar lottery, on the other hand, might retire or travel the world and who could blame him?  His business is just doing ok.  Adding workers isn’t going to change that.  He needs customers — not money — to make more money.  As long as he is a business owner, he is only a job creator if there is a need to create jobs.  In other words, the benefit of a new worker must exceed the cost.

In my lottery analogy, winnings represent tax cuts.  In the real economic world, tax cuts for the “job creators” is no different than the restaurant owner who just won the lottery.  Although it can be argued that economic windfalls to American business and investors does spur investment, but overseas where economic opportunity is stronger.  Lower costs for business (especially labor), emerging middle class (and therefore rising demand), etc.

What the restaurant needs — and what the American economy needs — is demand, not money.  If you manufacture widgets and no one is buying widgets, you would be foolish to make more widgets just because you had the money to do so.  Likewise you would be foolish to be incentivized by tax policy to build unneeded widgets even if it covered your cost.  Why prolong a bad market by overproducing your product?

But over and over again, Republicans have been dismantling public goods and services by underfunding them, arguing that we need to less government and less taxes so the free market can create jobs.  It hasn’t work, especially in a global economy stimulated by free trade arrangements.

Lower taxes might have helped stimulate growth, but we allocated the cuts in unbalanced ways, giving those who had more a better bargain than those who had less.  Without a vibrant domestic economy, the job creators created jobs elsewhere.  Increasingly our wealth is going overseas and most likely it will continue to do so for decades.  We have huge debts to pay now because as a matter of policy we underfunded government for political gain.  This is bad policy, bad economics.

But Republicans expect the less is more argument to prevail.  So far they have been right.  But cuts are cuts and so far it hard to see the silver lining.  Now we are in a monetary trap, there isn’t a hell of a lot to do (unless you’re a Keynesian), but does it make sense to make matters worse?

Finally, let’s look at the hypocrisy.  Currently the GOP is fighting an extension of the Bush-era tax cuts for the middle class because it will be offset in part by an increase on taxes on people earning more than $1 million annually.  Who thinks they will fight against an extension of tax cuts for the so-called job creators?  As a policy position, Republicans want to make those tax cuts permanent.  For the middle class they want to extend them at the expense of programs like Medicare.  For the middle class the argument is you have to live within your means.  That same standard does not apply to the subsidized rich.  One is a dirty welfare mom, the other a job creator. That’s a disgrace.

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One thought on “Understanding GOP Tax Cut Hypocrisy

  1. V. Lyn

    Fantastic post… The analogy you used is simple and gets directly to the reality of the issue. Hopefully those people who have bought into the hypocrisy of the republican argument in these economic times will read this and perhaps then they would see the fallacy of the republican argument.

    Reply

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