Educating Sen . Joe Manchin (and Corporate Democrat Obstructionists) On Economics

The hillbilly coal baron from West Virginia, Sen. Joe Manchin, Joe Manchin’s Dirty Empire, says some of the most infuriatingly stupid things about economics. He and his fellow corporate Democrat obstructionists need to be schooled on economics. No one should be listening to anything these damn ignorant tools for the U.S. Chamber of Commerce and its allies have to say.

Economics Professor Jeffrey Sachs, Director of the Center for Sustainable Development at Columbia University, explains at CNN, What Sen. Joe Manchin doesn’t get:

Because of his concerns over rising debt and inflation, Manchin wrote in a Wall Street Journal op-ed that he will not support the $3.5 trillion Senate reconciliation bill to expand spending on social and infrastructure programs “without greater clarity about why Congress chooses to ignore the serious effects inflation and debt have on existing government programs.”

Here is an answer for Manchin. The legislation should certainly not ignore inflation and debt. It should pay for the increased spending with increased taxes, exactly as is proposed in the budget resolution. Sen. Manchin is right to insist that the bill should be properly financed.

This leads to the real question: Can the $3.5 trillion be fully funded with new tax revenues paid by corporations and America’s rich?

Manchin is bedazzled by trillions of dollars. He speaks about spending “trillions upon trillions.” The word “trillion” appears in his op-ed repeatedly to convey the supposed immensity of the amounts in the Senate bill.

Let me reassure the senator. America can easily raise the needed $3.5 trillion in revenues. That amount is not large relative to the US economy or the immense wealth of America’s elite. Yet it is what the citizens of West Virginia and the US need to overcome hunger, poverty, lack of access to higher education and lack of modern infrastructure to protect them from the floods, droughts, forest fires, hurricanes and heatwaves claiming American lives.

To put this $3.5 trillion in perspective, consider the following. First, it is an amount to be spent over 10 years, not one year. Many have gotten into the habit of quoting budget numbers without context, and this distorts the public’s perceptions about affordability.

Second, the US Gross Domestic Product — the output of goods and services — will be around $23 trillion in 2021. That will grow in the coming years. The Congressional Budget Office forecasts that the GDP from 2022 through 2031 will be $287 trillion.

Thus, $3.5 trillion over 10 years is a mere 1.2% of the national output of goods and service over those 10 years. This is not much money, especially since our current federal tax collections in 2021 are only 16.6% of GDP.

Think of it this way. According to the Congressional Budget Office, the corporate income tax collected in 2016 was 1.6% of GDP. After 2017’s massive corporate tax cut under President Donald Trump, revenues declined to 1.1% of GDP in 2019, and the same is expected this year. Note that corporate income tax revenues as a share of GDP are falling while corporate profits are soaring, and that the corporate tax rate had collected more than 3 % of GDP in the 1960s and more than 2% of GDP in the 1970s.

Back in 2017, the Republican corporate tax cut did not pass Manchin’s fiscal muster. He voted against the tax cut. Yet so far this year he has opposed raising the corporate tax rate and recouping even some of the lost revenues. Manchin should agree to correct the wrong committed in 2017.

Here’s another basic point. According to the US Treasury, the federal government lost $600 billion in revenues to tax evasion in 2019, and will lose an estimated $7 trillion over the coming decade. The rich hide the highest share of their incomes on average, and the Treasury is recommending increased audits on high-income earners with the aim of collecting at least $700 billion more in taxes due over the next ten years. Yet the Republicans are resisting even such tax enforcement measures.

Here is another way to understand the modest magnitude of $3.5 trillion.

As of March, there were 724 billionaires in the US with a collective net worth back of $4.4 trillion. With the soaring stock market, their wealth is even greater today. Those 724 billionaires could each keep $1 billion for themselves and still fund the entire $3.5 trillion for the 1.8 million people of West Virginia and the 330 million people of the United States.

Now here’s the thing about the mega-billionaires. As their wealth has soared to levels never before reached in human history, many have paid next to nothing on their tens of billions of dollars of capital gains. Capital gains are taxed only when shares are sold. But instead of selling their shares, the mega-billionaires fund their lavish consumption by borrowing against their even more lavish wealth, thereby avoiding capital gains taxes. As Manchin’s Democratic colleague Sen. Ron Wyden is proposing, the billionaires’ capital gains should be taxed when they occur, not waiting for the shares to be sold.

Here is the bottom line. $3.5 trillion is affordable, even modest, compared with the vast income and wealth of the US. Yet the rich and the corporations need to be called to account. Manchin represents a state with one of the highest poverty rates in the nation, and the lowest life expectancy in the whole nation. The choice is really this: the citizens of West Virginia versus rich corporations, mega-billionaires, and tax cheats.

That answers the spending side. What about the specter of inflation? Nobel Prize winning economist Paul Krugman explains at the New York Times, Don’t Let Inflation Anxiety Undermine Our Future (excerpt):

Even if inflation is a bigger problem than the Biden administration or like-minded economists think it is, however, what are the implications beyond monetary policy? In particular, is the risk of inflation a reason for Democrats to scale back their plans to invest in America’s future?

No, no, 3.5 trillion times no.

Much of the media coverage of the budget resolution just approved by the Senate on a party-line vote — a resolution that lays the foundation for $3.5 trillion in new spending — suffers from two common problems in fiscal reporting: lack of quantitative context and failure to distinguish clearly between spending increases and fiscal stimulus, which aren’t necessarily the same thing.

On the first point, yes, $3.5 trillion is a lot of money. But this is spending intended to help rebuild the U.S. economy — and the U.S. economy is enormous. Bear in mind that we’re talking about a long-term spending plan, under which the money would be gradually disbursed over a decade. And America’s G.D.P. over that decade is likely to be in the vicinity of $300 trillion — the Congressional Budget Office says $287.7 trillion.

So ignore headlines that describe the plan as “massive” or “enormous.” It’s a plan that could make a big difference to many Americans’ lives and help build a better future. But it’s only a bit over 1 percent of G.D.P. That wouldn’t be enough to cause serious inflation problems even if all of the spending were paid for with borrowed money.

And the budget resolution doesn’t envision pure deficit spending. That is, it isn’t like the American Rescue Plan, earlier this year, which was financed entirely with debt.

On the contrary, Democrats are proposing to pay for most of the new spending with new taxes on the wealthy (plus collecting the taxes the wealthy owe but haven’t been paying). And this means that higher spending on roads and child care would be offset by lower spending on superyachts and helicopters to the Hamptons. In other words, if you’re worried that the Democratic plan would overstimulate the economy, bear in mind that it would provide less stimulus than the headline spending numbers might suggest.

But if the plan isn’t about stimulus, what is it about? Mainly investment — and that reduces the inflationary risks even further. Spending on physical infrastructure, both in the bipartisan bill the Senate has already passed and in the likely future Democrats-only bill, would alleviate the supply bottlenecks that have played a big role in recent inflation, while making workers more productive.

What about spending on “human infrastructure”? There’s strong evidence that aiding families with children will make America richer and more productive in the long run, but to be fair, those benefits would take a long time to materialize. Federal support for child care and universal pre-K would, however, also yield much quicker results, in particular helping more women enter the paid work force. This would expand the economy’s capacity, which is exactly how you want to fight inflation if you can manage it.

So what’s all this about? I don’t know whether people like Joe Manchin expressing anxiety about inflation are truly misinformed or are just trying to signal that they’re to the right of their colleagues.

If they’re sincerely worried about inflation, I’d urge them to have their staffs do the math. Anxiety about the inflationary impact of public investment just doesn’t make sense if you work through the numbers.

If it’s just signaling, well, OK, politics is what it is. But I’d urge them to find a way to send their signals without undermining their party — and their country. [More about this below.]

For the fact is that America desperately needs to invest in its future — both in hard assets like roads and bridges and in its people, especially its children. And there are no good economic reasons not to make those investments. Debt isn’t a problem given low interest rates; inflation wouldn’t be a problem given the economy’s ability to absorb higher government spending.

Build we can, and build we must.

Finally, what about the political costs of Sen. Joe Manchin and his fellow corporate Democrat obstructionists undermining their party — and their country? James Hohmann writes at the Washington Post, Joe Manchin would be foolish to indefinitely hold up the reconciliation bill:

Joe Manchin III has a bad case of the slows.

Abraham Lincoln once diagnosed George McClellan with the same problem. The Army general offered excuse after excuse to justify dawdling at key moments in the Civil War. This allowed Confederate commander Robert E. Lee, with a smaller force, to outmaneuver Union troops.

Manchin’s call last week to “hit a strategic pause on the budget-reconciliation legislation,” with no end in sight, is uncannily McClellanesque. The moderate West Virginia Democrat expressed fear about debt, inflation and the possibility that another coronavirus variant could necessitate more stimulus spending down the road. He said he will never vote for a package as large as the $3.5 trillion being considered.

The senator’s broader concerns are legitimate, but his op-ed last week for the Wall Street Journal argued against straw men. His desire to indefinitely postpone consideration of the primary legislative vehicle for advancing President Biden’s domestic agenda could spell doom for Democrats.

[Unfortunately], Manchin is in the driver’s seat, because Democrats cannot spare a single vote in the 50-50 Senate (with Vice President Harris breaking ties). In other words, he has the power to slim down the bill to his liking and ensure it is fully paid for without accounting gimmicks [or tax increases for his Plutocrat and corporate campaign contributors.]

But Manchin talks about the reconciliation bill as though it’s another economic stimulus, akin to the $1.9 trillion covid-19 relief package that passed this year without being paid for. He knows better.

Because it’s not subject to the filibuster, reconciliation is the only realistic way for Democrats to pass significant changes to the social safety net. The measure includes meaningful policy shifts on climate change, education, health care, immigration and other issues.

No question some of what liberals want goes too far — why should rich kids get free community college? — but Democratic leaders and the White House have signaled a willingness to take out many of the more excessive measures.

Manchin also complained in his op-ed that Republicans used reconciliation to pass tax cuts in 2017 that benefited rich investors more than workers, while adding more than $1 trillion to the national debt. Does the senator think the GOP won’t use reconciliation again when they’re back in charge? [They won’t have to – Republicans will repeal the Senate filibuster on the first day they are back in power. And then won’t the Democratic Senators defending this archaic relic from the Jim Crow era look like the stupid fools they are?]

Moreover, Friday’s [below expectations] jobs report shows that the economy is not overheating, as Manchin fears. The delta variant [“pandemic of the unvaccinated“] has hobbled the recovery. Economists expect September’s employment numbers to be even worse.

And contrary to Manchin’s intimations, this bill can be fully funded. House Speaker Nancy Pelosi (D-Calif.), who can afford no more than three Democratic defections, says the House will only approve something that can get 50 votes in the Senate. A four-page menu of potential ways to raise revenue as part of the package has been circulating among senators.

If it’s the debt Manchin’s genuinely most concerned about, why doesn’t he reconsider his resistance to raising the corporate tax rate as part of the funding mechanism?

In politics, speed wins. Dithering only makes passing even a compromise bill much harder because it gives critics the chance to organize opposition. The U.S. Chamber of Commerce, National Association of Manufacturers, Business Roundtable and other corporate interests are all mobilizing to derail the bill. [And Joe Manchin is their boy.]

Pelosi aims to settle differences between House and Senate Democrats on various topline numbers by Sept. 15, so committees can then hash out specifics. She’s agreed to hold a vote the roughly $1 trillion infrastructure plan by Sept. 27. But liberals say they won’t vote for infrastructure if there’s still no deal on reconciliation.

The window for Democrats to govern is closing fast. The rule of thumb in the Capitol has always been that you govern in odd-numbered years and campaign in even-numbered ones. 2022 begins in four months.

Manchin also complained about artificial deadlines in his op-ed, but when does anything get done in Washington without them? Ultimately, liberals and moderates will have to compromise, and Democrats from deep-blue states need to be sensitive to Manchin’s political plight; in November, President Donald Trump’s margin of victory was larger in West Virginia than in every other state except Wyoming. Conversely, Manchin and Sen. Kyrsten Sinema (D-Ariz.) — who has also said she won’t vote for a $3.5 trillion bill — owe specifics to their colleagues about their bottom lines.

Lincoln tried to get McClellan to advance against Lee. Finally, the president fired the general. “If General McClellan did not want to use the army, I would like to borrow it,” the 16th president told associates.

If Senator Manchin prevents Democrats from using their majority, Republicans will be happy to borrow it next November:

That would be the Neo-Confederate MAGA/QAnon seditious insurrectionists who waged a coup d’etat against the U.S. government on January 6, and are still plotting to do so, and who are currently sabotaging the recovery from the Coronavirus pandemic and the economy with their anti-science, anti-mask and anti-vax conspiracy theories in the Trump death cult. These traitors to their country should never hold any political office ever again.