According to many reports, Donald Trump is getting frantic as his administration nears the 100-day mark. It’s an arbitrary line in the sand, but one he himself touted in many pre-inauguration boasts. And it will be an occasion for numerous articles detailing how little of substance he has actually accomplished.
Yet many of these reports will, I suspect, miss half the story. It’s important to note just how little the tweeter-in-chief has managed to achieve; but we also need to focus on what, exactly, it is that he hasn’t achieved.
For Trump sold himself to voters as unorthodox as well as effective. He was going to be a different kind of president, a consummate dealmaker who would transcend the usual ideological divide. His supporters should therefore be dismayed, not just by his failure to actually close any deals, but by the fact that he evidently has no new ideas to offer, just the same old snake oil the right has been peddling for decades.
We saw that on Trumpcare, where the administration outsourced its policy to Paul Ryan, who produced exactly the kind of plan you might have expected: take insurance away from millions, make it worse for the rest, and use the money to cut taxes on the wealthy. Populism!
And now we’re seeing it on taxes. Trump has promised to unveil a “massive” tax cut plan. This announcement apparently came as a surprise to his own Treasury officials, who obviously don’t have a plan ready. Still, one thing is clear: Whatever the details, Trumptax will be a big exercise in fantasy economics.
How do we know this? Stephen Mnuchin, the Treasury secretary, told a financial industry audience that “the plan will pay for itself with growth.” And we all know what that means.
Back in 1980 George H.W. Bush famously described supply-side economics — the claim that cutting taxes on rich people will conjure up an economic miracle, so much so that revenues will actually rise — as “voodoo economic policy.” Yet it soon became the official doctrine of the Republican Party, and still is. That shows an impressive level of commitment. But what makes this commitment even more impressive is that it’s a doctrine that has been tested again and again — and has failed every time.
Yes, the U.S. economy rebounded quickly from the slump of 1979-82. But was that the result of the Reagan tax cuts, or was it, as most economists think, the result of interest rate cuts by the Federal Reserve? Bill Clinton provided a clear test, by raising taxes on the rich. Republicans predicted disaster, but instead the economy boomed, creating more jobs than under Reagan.
Then George W. Bush cut taxes again, with the usual suspects predicting a “Bush boom”; what we actually got was lackluster growth followed by a severe financial crisis. Barack Obama reversed many of the Bush tax cuts and added new taxes to pay for the Affordable Care Act — and oversaw a far better jobs record, at least in the private sector, than his predecessor.
So history offers not a shred of support for faith in the pro-growth effects of tax cuts.
Oh, and let’s not forget recent experiences at the state level.
Sam Brownback, governor of Kansas, slashed taxes in what he called a “real live experiment” in conservative fiscal policy. But the growth he promised never came, while a fiscal crisis did. At the same time, Jerry Brown’s California raised taxes, leading to proclamations from the right that the state was committing “economic suicide”; in fact, the state has experienced impressive employment and economic growth.
Donald Trump was supposed to be different. Guess what? He isn’t.
In other words, supply-side economics is a classic example of a zombie doctrine: a view that should have been killed by the evidence long ago, but just keeps shambling along, eating politicians’ brains. Why, then, does it persist? Because it offers a rationale for lower taxes on the wealthy — and as Upton Sinclair noted long ago, it’s difficult to get a man to understand something when his salary depends on his not understanding it.
Still, Donald Trump was supposed to be different. Guess what? He isn’t.
To be fair, it’s not clear whether Trump really believes in right-wing economic orthodoxy. He may just be looking for something, anything, he can call a win — and it’s a lot easier to come up with a tax reform plan if you don’t try to make things add up, if you just assume that extra growth and the revenue it brings will materialize out of thin air.
We might also note that a man who insists that he won the popular vote he lost, who insists that crime is at a record high when it’s at a record low, doesn’t need a fancy doctrine to claim that his budget adds up when it doesn’t.
Still, the fact is that the Trump agenda so far is absolutely indistinguishable from what one might have expected from, say, Ted Cruz. It’s just voodoo with extra bad math. Was that what his supporters expected?
Paul Krugman writes for The New York Times.