Lawrence Summers on the fraud that is the GOP tax plan


It is dishearening to read headlines in the New York Times from good reporters like Carl Huse like this: Paul Ryan Puts It All on the Line in Tax Fight:

The new Republican tax proposal is arguably the pinnacle of Paul D. Ryan’s legislative career, the culmination of years spent in the wonky trenches of conservative think tanks and esoteric congressional budget and tax debates.

I’m sorry, but no. Perpetuating this myth of wonkishness is unforgiveably wrong.

Economist and Times columnist Paul Krugman identifed the GOP’s alleged boy genius and Ayn Rand fan boy, Paul Ryan, “the zombie-eyed granny starver from the state of Wisconsin” as an inellectual fraud and the GOP’s flimflam man more than 7 years ago.

Krugman recently wrote, Donald Trump, Paul Ryan and the Con Man Caucus:

It really is amazing to watch this chaotic horror show play out at the highest levels of a great nation’s government. But I guess this is what you have to expect when you hand over the reins of power to a con man, whose whole career has been based on convincing naïve marks that he’s a brilliant deal maker, but turns out to have no idea how to actually govern.

Oh, wait — did you think I was talking about Donald Trump? I’m talking about Paul Ryan, the speaker of the House, an obvious phony who nonetheless convinced the rubes — that is, much of the news media and the political establishment — that he was a brilliant fiscal expert. What we’re witnessing now is the end of the charade, the political equivalent of what happened when graduates of Trump University tried to get some value in return for their money.

On Thursday, House Republicans unveiled a tax “reform” bill with the same good order and careful deliberation with which they unveiled their various attempts to repeal Obamacare. That is, after having had years to prepare, the G.O.P. waited until the last minute to throw something together, without any hearings or serious analysis.

Budget wonks are frantically going through the legislative language, trying to figure out what it means and what it would do — but they can take some comfort in the fact that the bill’s authors are almost equally in the dark.

Today former Treasury Secretary Lawrence Summers, an actual budget wonk, dissects the fraud that is the GOP tax plan. Three (almost) inexplicable parts of the Republican tax plan:

With the release of the Republican tax proposal, the most important tax debate in a generation is in full swing. Most reasonable experts agree that tax reform has the potential to spur investment and raise wages while also simplifying the system and increasing its fairness and legitimacy. The right question for debate is not the desirability of tax reform or even of business tax reform directed at spurring investment. It is the likely economic effect of particular proposals.

Unfortunately, the proposal on offer by House Republicans may well retard growth, reward the wealthy, add complexity to the code and cheat the future, even as it raises burdens on the middle class and the poor. There are three aspects of the proposal that I find almost inexplicable, except as an expression of the power of entrenched interests.

First, what is the rationale for passing tax cuts that increase the deficit by $1.5 trillion in this decade and potentially more in the future, instead of pursuing the kind of revenue-neutral reform adopted in 1986? There is no present need for fiscal stimulus. The national debt is already on an explosive path, even without taking into account large spending needs that are almost certain to arise in areas ranging from national security to infrastructure to addressing those left behind by globalization and technology.

Borrowing to pay for tax cuts is a way to defer pain, not avoid it. Ultimately, the power of compound interest makes necessary tax increases or spending cuts that are even larger than those tax reductions. But in the meantime, debt-financed tax cuts would raise the trade deficit and reduce investment, thereby cheating the future.

Second, what is the case for cutting the corporate tax rate to 20 percent? For at least five years under the GOP proposal, businesses would be able to write off investments in new equipment entirely in the year that those investments are made. So the government would be sharing to an equal extent in the costs of and returns from investment, eliminating any tax-induced disincentive to invest. The effective tax rate on new investment would be reduced to zero, or less, even before considering the corporate rate reduction. A corporate rate reduction serves only to reward monopoly profits, other rents or past investments. Given the trends of the past few years, are shareholders really the most worthy recipients of such a windfall?

Proponents of the House approach defend it by pointing to international considerations. Unfortunately, the “territorial” approach being pushed by the House, which would renounce the objective of taxing the global income of U.S. companies, could easily encourage offshore production. Wouldn’t it be much better for the United States to lead an initiative to prevent a race to the bottom in global corporate taxation than for it to try to win a race to the bottom?
Third, why include new complexities that help the richest taxpayers while taking steps that hurt middle-income families? Why should passive owners of businesses that are already avoiding the corporate tax get a big rate reduction to 25 percent when those who actually operate and work in such businesses pay at a higher rate? What is the rationale for eliminating the estate tax when it is paid by only 0.2 percent of estates?

At a bare minimum, if such provisions are to be adopted, one would assume they would be paid for, to the maximum extent possible, through steps such as eliminating the carried-interest loophole or loopholes that enable real estate tax shelters. Not so. The proposal instead goes after measures such as the adoption tax credit, deductions for major medical expenses and the deductibility of student-loan interest. These seem like far more important benefits to preserve than carried interest.

Congress should instead return to the 1986 approach of revenue-neutral tax reform, while being careful not to adversely affect the progressivity of the tax system. This would enable what is most needed now: strengthening incentives for investment in the United States relative to other countries and raising the legitimacy of the tax code.

It is possible (though I doubt it) that the questions I have raised here have good answers. And there may be reasons that 1986 is an inapplicable model for today.

What is certain, though, is that we have a once-in-a-generation debate underway. Even those who disagree on policy should be able to agree on the importance of not making decisions until all relevant analytical work can be completed.

Yeah, that’s not going to happen. House Tea-Publicans are aiming to advance their tax reform legislation out of committee this week, as they race to pass it on the floor by Thanksgiving. This week: GOP seeks to advance tax overhaul:

After failing to repeal ObamaCare for most of this year, Republicans are hoping to overhaul the tax code for the first time since 1986 in just eight legislative days.

The House Ways and Means Committee will begin its markup of the legislation, which was unveiled last week, on Monday at noon. Chairman Kevin Brady (R-Texas) wants to finish the markup by Thursday. The House is scheduled to adjourn the following Thursday for Thanksgiving.

“Four days of open, full-throated debate, with all these amendments in the tax code, I think will let the American people see something they haven’t seen in a long time, which is real debate on a real tax reform plan,” Brady said at an event hosted by Politico on Friday.

Any amendments to the legislation will have to be offered at the committee level, since GOP leaders are not expected to allow lawmakers to propose changes when it reaches the House floor.

Some sticking points remain as GOP leaders seek to corral the votes to pass the tax overhaul. Assuming no Democrats vote for the bill, GOP leaders can afford up to 22 defections and still pass it on their own.

* * *

In the Senate, Sen. Orrin Hatch (R-Utah), chairman of the Finance Committee, praised House Republicans for introducing a bill while noting he was still working with senators on their own legislation.

“I am working with my Senate colleagues to finalize the policy details of the Senate’s tax reform proposal to produce a mark for consideration in the Finance Committee once the House Ways and Means Committee completes its work, hopefully toward the end of next week,” he said in a video released late last week.

Senate Republicans have a narrow path to pass tax reform. With a 52-seat majority they can only afford to lose two GOP senators, if every Democrat votes no, and still let Vice President Pence break a tie.

* * *

GOP senators, including Sens. Bob Corker (Tenn.), John McCain (Ariz.) and Jeff Flake (Ariz.), are also signaling that they are concerned about the impact any tax deal would have on the deficit.

“We can’t cut, cut, cut today & assume Congress will grow a backbone later. We’ve got to take our $20T debt seriously,” Flake tweeted, appearing to refer to Trump’s suggestion that the bill be called the “Cut Cut Cut Act.”

Democrats, meanwhile, are casting the tax plan as primarily a giveaway to corporations and the ultra-wealthy.

Call your representatives in Congress today and demand that they vote against this fraudulent GOP tax plan.

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AZ BlueMeanie
The Blue Meanie is an Arizona citizen who wishes, for professional reasons, to remain anonymous when blogging about politics. Armed with a deep knowledge of the law, politics and public policy, as well as pen filled with all the colors stolen from Pepperland, the Blue Meanie’s mission is to pursue and prosecute the hypocrites, liars, and fools of politics and the media – which, in practical terms, is nearly all of them. Don’t even try to unmask him or he’ll seal you in a music-proof bubble and rendition you to Pepperland for a good face-stomping. Read blog posts by the infamous and prolific AZ Blue Meanie here.


  1. republicans goal is and has always been tax cuts. democrats are all over the political spectrum with each group pushing their agenda with little in common in many cases.

  2. We have Reganomics again! We can lower taxes, increase defense spending, nibble at tiny, nonsensical cuts in various departments, and voila, with dynamic scoring (aka, Voodoo economics, aka Fairy dust, aka Ryanomics) we will generate MORE revenue! But first of course, Amazon, and Apple, and Google, and most drug companies, and Trump and Kushner have to off shore as much of their revenue as possible.

    • Dynamic scoring = make up a number to make your math work.

      The GOP likes dynamic scoring because they can make outrageous claims to pass nonsensical tax/budget bills, and they count on their aging base to have short memories.

      The entire GOP is a scam.

    • Dynamic scoring may seem like a scam, but I use dynamic scoring all the time in my personal life.

      For example, if I cheat on my wife with a woman I rate as a 4, but I rate myself a solid 9, that’s a deficit of 5, and 4 minus 5 is negative 1, so it’s really like my wife cheated on me.

      Dynamic scoring, where you you get to just make shit up!

      It also helps my golf game.

      • The *idea* of dynamic scoring isn’t inherently a problem. Lower taxes should, at least on the margin, spur some additional economic activity, as workers may choose to spend their time working instead of labor (to a point; labor supply curves are backward bending), investment decisions may make sense at the margin where they didn’t before in the presence of higher tax rates, and so forth.

        The problem is that the numbers are only as valid as the assumptions used in the modeling and calibration, which is to say ‘error-prone at best’. It’s really damn difficult to make good predictions, especially about the future. Just think of all the promises made in the 1950’s for hovercars in the year 2000.

  3. Weird, it’s almost as if the Republicans only care about debt and deficits when the Dems are in power.

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