2017

Trump is right to be worried about Arizona (and Texas too)

When Donald Trump returns to Arizona tomorrow, he is returning to a state that is now among the most important Presidential battlegrounds in the country.

Though it was not heavily contested by the Clinton and Trump campaigns in 2016, a combination of Trump’s structural weaknesses with Hispanic and Millennial voters and the growing share of the vote in Arizona of both these groups have made this state far more competitive than it has been in the past. Some background, and data:

Arizona now a large, core Presidential battleground state. Of the 15 expanded 2016 battleground states (AZ, CO, FL, GA, IA, ME, MI, MN, NC, NH, NV, OH, PA, VA, WI), Arizona was Clinton’s 11th best (losing by a margin 3.5% points). Clinton performed worse in NC (3.7), GA (5.2), OH (8.4) and IA (9.1). Arizona has more Electoral College votes (11) than 6 of these battlegrounds – WI (10), CO (9), IA (6), NV (6), ME (4), NH (4) – and almost as many as VA (13) and NC (15).

Arizona is trending Democratic. In an election that swung 1.8 % points from 2012 towards Trump, the GOP margin slipped in AZ from 9.1% points in 2012 to just 3.5 in 2016. This 5.5 point shift was the 3rd largest shift towards the Democrats of any medium to large state in 2016, only outpaced by CA (7.0) and TX (6.8). According to the 2016 exit polls, 18-29 year olds went 53-35 for Clinton and 18-44 overall went 49-39. Non-white voters, making up a quarter of the electorate, and growing rapidly, went 61-31 for Clinton. This number could clearly get much worse for Trump and Rs given Trump’s embrace of a politics seen as anti-immigrant and anti-Latino.

Arizona a sign of continued Democratic gains in the “Latin Belt.” While much attention has been given in recent months to the Rust Belt, it is important to also pay attention to what I call the “Latin Belt” – AZ, CA, CO, FL, NM, NV and TX – states with large, growing Hispanic/Latino populations. The slow migration of these states from Nixon/Reagan Sunbelt Republican states to more competitive and even now Democratic states have been one of the most important demographic stories in American politics in recent years. This region includes the 3 biggest states in the country and has 29% (153) of all the nation’s Electoral College votes. According to 538, it will add another 7 Electoral Votes in 2024 due to reapportionment.

As recently as 1984, all of these states voted Republican. All but California voted Republican in 1988. Florida remains a contested battleground. New Mexico has moved solidly into the Democratic column. Colorado (4.9) and Nevada (2.4) gave Clinton two of her four biggest margins of victory in the battleground. The remaining two – AZ and TX – moved dramatically towards Democrats in 2016.

As I wrote prior to the election, it is possible that Texas joins Arizona as a new Presidential battleground in 2020. Texas has among the highest Millennial and Hispanic share of population of any state in the US, comparable to the shares of each of these fast growing and Democratic-leaning groups in true blue California. Trump did very poorly with both of these groups in 2016 – losing 18-29s 55-36, 18-44s 49-43 and Hispanics 61-34. In a recent Texas Tribune/UTexas poll Trump’s job approval was 43-51, one of the most dramatic drops of approval he has seen in any state (TT/UT poll has similar findings as the Gallup poll referenced here).

While Trump should be comforted that he won Texas by 9 points in 2016, if Texas sees a shift in 2020 comparable to its 2016 shift of 7 points Texas could indeed join Arizona as a new Presidential battleground.

Trump’s Presidency Has Been Hostile To The Southwest/Border Region In Ways Which Are Already Causing Him Problems – While focused like a laser beam on the industrial north, Trump’s Presidency has been hostile to much of the Latin Belt, the southwestern/border region in particular. The demonization of Mexico, the border wall, the renegotiation of NAFTA, the anti-Hispanic/anti-immigrant /intolerant stances are controversial and difficult positions for him in a region of the country with many recent immigrants and which has deep cultural and economic ties with Mexico.  According to the exit polls, 2016 Presidential voters in Arizona choose legal status over deportation by 76-18 (higher than the nation), and opposed a border wall 51-45.  A new poll just released in Arizona has Trump at a dangerously low 42-55 approval, and a clear majority opposing a possible Arpaio pardon. 

I warned the White House about misunderstanding these politics in a recent US News column, "Steve Bannon Meet Russell Pearce." 

It should be instructive that among the most important opposition to Trump in both parties is coming from this region of the country. Senators Flake and McCain have become perhaps Trump’s most important GOP opponents in the US Senate, and Gov. Jerry Brown, Sen. Kamala Harris and Rep. Ruben Gallego have become nationally recognized leaders of the Democratic opposition.

Whatever Trump does in Arizona tomorrow – pardon Arpaio, endorse Flake’s GOP primary challenger – he returns to a core 2020 battleground state that appears to be slipping away from him and more broadly, the Republican Party. He is right to be concerned.  Whether what he does tomorrow in Arizona helps or hurts him remains to be seen.

Note: Earlier this year Simon did a longish interview with Phoenix's KJZZ 91.5 on Trump, Arizona and immigration.    

A Department of Jobs, Skills and Economic Development

This essay was originally published on Medium.

Much of the structure of the government of the United States was designed and built in the middle part of the last century. The creation of the Department of Homeland Security in the aftermath of 9/11 was the last big structural change. In a time of rising global competition and technological change, it is time to fashion a new government department focused solely on creating good jobs for Americans, and helping American succeed in a new world of work that requires very different skills. Let’s call it the Department of Jobs, Skills and Economic Development.

It is remarkable to consider that the executive branch of our government has no one person or department truly responsible for creating good jobs for the American people, and ensuring our workers have the skills to succeed in a changing world. These responsibilities are scattered throughout the federal government, residing in the Departments of Commerce, Labor, Treasury, Housing and Urban Development, Education and Agriculture, the United States Trade Representative, the Export-Import Bank, the Overseas Private Investment Corporation, the Small Business Administration and throughout the White House itself. A new Department of Jobs, Skills and Economic Development would consolidate these many disparate activities and programs in a single place, allowing for greater efficiency but also far greater strategic focus and coordination. The process of building the Department would force a debate about all the programs it would inherit, and whether they are working or can be improved. Redundant or under-performing programs could be eliminated, freeing up resources for higher priority projects. It would be a powerful department, but also should by design be a modern and skinny one — lean and mean.

 

Congress and the White House would ultimately decide what would end up in this new department and what would remain in other places, but certainly one could imagine some of these other departments and agencies getting subsumed entirely into this new mission. This new department (DJSED) would work closely with the economic development agencies and other agencies of the states, and learn from their best practices. Policymakers can also study how other nations tackle these challenges, and draw from their experience. The balkanization of these responsibilities in Congress would also end, and allow far greater strategic focus from our elected representatives.

One of the things this new Department can focus on is what I call a “safety net of skills and knowledge.” In the industrial age we created a safety net for our people, one that included health care and income support. It is also now time we committed to create a true system of lifetime learning, one that anticipates our citizens will need the acquisition of new skills to become routine and persistent throughout their lives. There are many ways this new 21st century safety net can get constructed and built, many pieces of it already exist, and it will evolve and mature over time. But it is something that our emerging Millennial politicians should put their minds to and help build over the coming decades. Like the Department itself, this new digital age safety net would be about taking things that are already getting done and organizing them in a way that makes them far more focused and effective.

The Department could also expand the small Economic Development Administration currently in the Commerce Department, and give it a more expansive mission that could even include national infrastructure and transportation planning and travel, tourism and trade promotion. It would work closely with the fifty states, supporting their ongoing locally driven initiatives. All fifty states have an economic development agency focused on creating growth and good jobs for their communities for a reason. It works. It is long past time the federal government and the nation had one too.

Perhaps the most important reason to create this new Department is that in my mind the only way we can respond to both the enormity of the task in front of us, and its urgency. We simply have to do more than we are doing today to help the American people succeed. And whatever we do needs to be dramatic, something real and tangible, not something that is nibbling around the edges of what is perhaps the most important challenge America faces today. We need to let the American people know we hear them, and are changing the way we do business here in Washington to make their lives better. There may be other ways of attacking this problem but creating a super-sized but lean and mean Department would be an important first step that will give us a chance of coming up with approaches commensurate to the size of the problem itself.

And the problem is real. With billions of people today contributing to the advancement of knowledge every day, our already fast world will continue to speed up. Skills and knowledge acquired in high and school and college will be far more likely to become obsolete in one’s lifetime in the 21st century, and we need ways to make continuous learning more than a slogan. Additionally, with nations across the world rising and growing modern companies, global competition for our businesses and workers is likely to get more far more intense. The time when America stood like a conquering giant above the economies of the world is long in the past, and a new age of competition and progress is with us. Our government must help its own institutions become as fast and innovative as the global economy itself, and to do far more to effectively support good, deserving Americans who work hard and play by the rules and expect more from all of us.

Perhaps this project is the Kennedy Moonshot of our time, something we know we have to do but are not quite sure how to get there. Creating a new Department with a new mission and lots of capacity and focus is a good way to start. Perhaps it is old Washington think — a reorganization! — but am open to better ideas on how we can get this done in the years ahead. Whatever you think let the debate begin. The good people of the United States deserve more from all of us in Washington as they look to compete and prosper in a far more challenging 21st century global economy.

Thursday Webinars On American Greatness

Please join us for a new presentation I'm road-testing called "On Patriotism, Optimism, and American Greatness – and the need to reject the poisonous pessimism gripping our politics today." The presentation, a lively talk with filled with nerdy charts and graphs, will attempt to make the case that America is not in decline and is in fact doing as well as it has in any point in our history. It is meant to be an implicit rebuttal to the core argument Trump is making about America and its decline, an argument which is malevolently selling America and its people short every day.

You can join us for this new presentation at the following times:

Thursday, September 28th, noon - 1pm EST

Thursday, October 5th, noon - 1pm EST

Thursday, October 12th, noon - 1pm EST

Thursday, October 19th, noon - 1pm EST

Thursday, October 26th, noon - 1pm EST

Use this registration page to reserve your spot and gain instructions for how to participate.

The presentation is an outgrowth of an article I published recently on Medium. Be sure to read it even if you can’t make one of the presentations. For additional writings related to this topic visit this new page we've set up.  It includes my talk at Tufts from a few years back called "The Age of Possibility."  This talk was perhaps the great great grandfather of this current one and still well worth watching. 

And we only have so many spots for each presentation – so sign up early and get your spot. Not sure how many will join but would love you to give me an hour of your time. 20-30 minutes will be feedback/conversation so take notes and join us. It is going to be worth your time – we promise!

Best,

Simon

The Case for Optimism

This essay was originally published on the website Medium.

So, imagine if you lived in America at a time when:

  • Incomes of everyday people are at an all-time high, have been rising for at least four years now and saw their largest annual increase in recorded US history just a year ago.
  • The unemployment rate is 4.3%, about at what economists consider “full employment.” This rate is historically low — over the past 70 years (821 months), the rate has only been lower in 130 of those months or just 16% of this 70 year stretch. A reminder that the unemployment rate never dipped below 5.3% during the entire Reagan Presidency.
  • More people have health insurance and access to quality than any time in American history. A recently implemented health care law has materially improved the lives of tens of millions Americans in a very short period of time.
  • The US stock market is at an all-time high, and 33% percent higher than any sustained high in US history and between 5 and 10 times higher than where it has been most of last 50 years. So really high.
  • The high school graduation rate is the highest ever recorded.
  • Violent crime rates are half of what they were a generation ago, and cities across the US are blossoming, seeing growth, investment and people once again living “downtown.”
  • Teenage pregnancy rates are plummeting, and now are at all-time low.
  • There has not been a foreign fighter terror attack on US soil in 16 years, few American troops are dying overseas and the US faces no true existential threat from a foreign power.
  • Due to smart policies and years of investment, the flow of undocumented immigrants into the US has dramatically slowed, seeing no net increase for a decade now.
  • The US is taking control of its energy future, seeing a sharp decrease in foreign oil imports and sharp, even historic, increases in the production of renewable energy.

Would that America sound like a good America to you? I think so. And of course this list describes the America of today, early June, 2017. America is not without its problems, of course. Despite our economic success, we are still leaving too many behind. Growing levels of inequality are corrosive to the social fabric and bad for the economy too. We have too much public and private debt. Tribalism, racial strife and social coherence remain daunting challenges. Mass incarceration too. The opioid epidemic is tragic, and needs far more attention and action. Too few people vote in America, and our civic life needs renewal on many fronts…..

But it is the premise of this essay that while America has very real challenges, somehow the positive side of the nation’s balance sheet — and there is a lot there — has been recklessly ignored in our national discourse. It is my contention that contrary to the claims of our President, America hasn’t lost its greatness, and that by many historical measures there has never been a better time in all of America history to be alive. Certainly better than the Great Depression, or when we held millions of slaves in cruel bondage, or when kids worked and didn’t go to school, or before there was a minimum wage or a social safety net, or when little black kids and little white kids couldn’t drink from the same water fountain, or when hundreds of thousands were dying in Vietnam, or a Cold War could lead to nuclear annihilation at any moment? Or when sky high interest rates prevented us from buying homes, or women couldn’t vote or work or pursue their dreams, or when OPEC decided to punish America, forcing us to wait in lines for hours just to buy gas? Or especially, my Republican friends, when Ronald Reagan was President and the unemployment rate never dipped below 5.3?

Which brings us to Trump. So much of what he is doing flows from the argument that America isn’t managing this new age of globalization well but being defeated by it. It is the rationale behind stripping health care from tens of millions, dismantling common sense environmental regulations, and getting out of the Paris climate deal and TPP; behind his harsh new immigration enforcement and criminal justice policies; behind his dancing with dictators and distancing himself from democracies. And of course, the data above suggests that this argument — the entire rationale for Trump’s Presidency — just isn’t true. Not even close. Things are far better than he says, or perhaps, understands.

Our new President is the first in our history to be under investigation for treason while in office. Whether he has in fact betrayed our nation to a hostile foreign power (and I think he did) will be determined soon. But to me the greater betrayal of this remarkable nation and its hundreds of millions of decent, hardworking people is the President’s denigration of our collective accomplishments over the past generation. Despite the many headwinds of the modern world America has made true, substantial progress. We are a better and more prosperous nation than we were a generation ago. Our companies lead the world in just about every possible sector, and the innovation and creativity in our private sector remains the envy of the world. Our military has no near peer, and remains the greatest fighting force ever assembled. We are taking control of our energy future, and making great strides against climate change. We are working through our unique challenges with race and tribalism, and while Trump is an obvious setback we just saw a man of color lead our nation successfully for the first time in history. Millions of new Americans are starting businesses, building families and making their mark. Our universities are the best in the world, and our public schools are getting better. I could go on and on and on.

But the bottom line is by selling us short Trump betrays both the greatness of our country and the goodness of the American people every day of his Presidency.

And this is the key. To defeat Trumpism we must be optimists, patriots, pragmatists now. To defeat the man, we must defeat his fallacious arguments about America and what we have become. While he talks down America, we must talk it up. We should be proud stewards of a great nation, but steely-eyed and resolute about tackling the real challenges that remain. In many ways, even in these nasty early days of Trump, I have never been more proud of my country, more in touch with what it means to be an American. For it remains the greatest country on Earth, the inspiration for so many — and it will reclaim that role in the days after Trump if we can together not just defeat the man, but defeat the dark pessimism his brand of politics has unleashed into America and the rest of the world.

Can we do it? In the words of another who came before, there is no doubt in my mind that “Yes, we can.”

 

Our Most Important Battle - Please Support the Good Work of NDN Today

Dear Friends,

For more than a decade now NDN has helped our elected leaders and policy makers better understand the big changes sweeping America and the world. We’ve helped lead ongoing conversations about demography, technology and media, globalization and its related geopolitics for over a decade now. Along the way we’ve had some inspiring victories and accomplished some important things. But no time in our history feels as important as today and these early days of the new era of Trump.

These past few months we’ve been heads down, helping create early understandings about what exactly we and the world are dealing with. We wrote early on about Trump’s worrisome and potentially treasonous relationship with Russia; his unprecedented corruption and willingness to ignore long held Democratic norms; his dramatic reluctance to align himself with the West and its values; his reckless economic policies and betrayal of the voters who elected him; and his inhumane immigration crackdown. In each of these areas NDN has made early and sustained contributions to creating a better understanding of what was indeed happening.

But it has not all been about Trump. We’ve offered a series of pieces about the future of the Democratic Party; about the need for Democrats to embrace their sound economic stewardship over the past generation as the critical first piece of the development of a new and compelling agenda; about the need to let the Democrat’s generational wheel turn and a new wave of promising leaders to step forward; about the need to be patriots now not partisans; and about the urgency of Democrats to assume responsibility for the global order built by previous generations of Americans and work to both modernize and preserve it for our kids and theirs. We can’t beat something with nothing as has been said, and we are also trying to do our part to help ensure what comes next for the center-left is even better than what we’ve had.

So, yes, we’ve been busy. But that’s what we are here for, and why we need your support today. There is a lot of work to be done. And your support is what makes it all possible. I hope you will step up with a contribution of whatever amount makes sense – $25, $50, $100, more. As you know well it is the generosity of our community that makes all this cutting edge and impactful work possible.

So please do give today. We don’t have a grassroots army or compelling television ads. But we do have years of experience, resilient keyboards and powerful insights – and those too have their place in our current and extraordinary struggle. Your support will ensure the good work just keeps on coming at this critical time.

Best,
Simon

On Trump's Meeting w/Lavrov Today: Time To End The Appeasement of Russia

This morning we released the following statement to the media and our community: 

When President Trump meets with Vladimir Putin’s most senior aide at the White House today, it is essential that the President use this time to raise concerns about Russia’s rising ambitions on the global stage. Among the issues that should be on the agenda:

• Russian interference in the elections and internal politics of the United States and Europe
• Russia’s violation of the INF nuclear treaty (link)
• The imperative of returning Crimea to Ukraine, and cessation of its adventurous military operations in the region
• Rising Russian support of the Taliban in Afghanistan (link), and escalation in Libya (link)
• Russia’s establishment of a military installation in Nicaragua (link)
• And of course, the need for Russia to stop propping up Syria’s murderous dictator, and prolonging the Syrian Civil War

“While Americans should be very concerned about Russia’s intervention in our election last year on behalf of Donald Trump, what is far more worrisome is President Trump’s unwillingness to challenge Russia’s rising ambitions on the global stage since becoming President” said NDN President Simon Rosenberg.

“In another age we would call President Trump’s early approach to Russia “appeasement.” Today, President Trump has an opportunity to demonstrate to the American people that he is capable of standing firm against this rising global threat from a newly ambitious Russia. His failure to raise these matters with FM Lavrov and demand a change in Russia’s course would send a signal to the world that America supports Russia’s newly aggressive stance. Such an approach is of course unacceptable, and would give additional fodder to those who have been argued that Trump can be friends with Putin or be President of the United States - but he cannot be both.”

Update: So the meeting happened.  Lavrov brought along Ambassador Kislyak, thought to be the chief Russian spymaster in the US.  These two men helped lead the Russian campaign to elect Trump.  And Our President met with them without any other American in the room - no translator, no press, no national security council staff.  Just Putin's top aide, and the Russian spymaster in the US.  How Kislyak was allowed into the Oval Office is beyond comprehension.  And of course the White House's read out of the meeting was milquetoast, and neglected to mention Kislyak's presence.  And of course did not mention anything about the ongoing Russian interference campaign in the US or in Europe.  Pure, clear, mighty appeasement it is. 

Update: So I took to Twitter and elaborated on this piece a bit.  Well worth your time.  Biggest issue in American politics today. 

"No Normal Time" - A Special Note from Simon

Dear Friends,

Some days it is important to note just how unusual, and pernicious, American politics has become. Sally Yates’ testimony today reminds us that our President and his allies are under an unprecedented investigation for treason and active collusion with a hostile foreign power. The House passed ACHA and its emerging budget strategy is an extraordinary betrayal of everything Donald Trump campaigned on; would do clear, measurable harm to tens of millions of Americans in order to give tax cuts to the wealthiest among us; and as Paul Krugman argues today in the New York Times represents a degree of direct lying about policy that is also unprecedented in modern American history. More stories of rank and unprecedented corruption by the Trump family once again dominate our headlines this morning. And just this morning our President took to Twitter to discuss golf and once again give clumsy cover to the Russian attack on the American homeland (and French, German and many others) last year. These things are not normal, or okay.

While there is good news out of France this morning, we cannot forget just how extraordinary this moment in American politics is. There is no “business as usual” option here, a sense that things will somehow settle down to something resembling “normal politics.” This is why we’ve so aggressively advocated that Democrats start to make these matters – the appeasement of Russia, the corruption, the epic malevolent lying, the denigration of democratic norms – front and center in their negotiations with Trump and the GOP. We cannot segregate off traditional policy considerations from these broader areas of concern as doing so will be in its own way a form of appeasement and acceptance.

We also have recently advocated that the RNC be challenged to take far more aggressive steps in combating the reoccurrence of foreign attempts to influence our elections that FBI Director Comey predicted will come. The RNC and thus the entire Republican Party and all of its members played a significant role in mainstreaming the Russian operation in the US last year, and were thus critical to its success. This shameful legacy needs to be confronted by the current leadership of the RNC, and steps taken to work with willing Democrats to create a united political front against foreign interference in our elections.

These are no ordinary times. History tells us that in times like these many well-intentioned people will fail to understand how extraordinary the moment is, and to allow wishful thinking to overwhelm good sense. We in America don’t have a lot of experience with this kind of politics, so perhaps it is understandable. But let me be as clear as day – this organization will not stop challenging those in power to meet this worrisome moment head on and with force equal to what is coming at us. Creativity, strategic thinking and good old fashioned courage are required now. And we are going to do our part in making sure that America comes out of this time stronger, wiser and more just than before. We hope you will continue to partner with us in these consequential days ahead to assure that it is so.

Best,

Simon

Monday, May 8th 2017 From Washington, DC

Video: Simon joins Fernand Amandi, Roger Stone on Trump's first 100 days

NDN President Simon Rosenberg joined WIOD's Fernand Amandi and Roger Stone to discuss the first 100 days of Trump's Presidency.  It is well worth watching.  

Backgrounder: Budgets, Health Care and Trump's Great Betrayal

With attention returning to budgets and the US economy, NDN has assembled some of our work on these matters over the past few months.  We hope you find these analyses helpful.  

Trump's Tax Plan is Aimed at the 2018 and 2020 Elections, Not U.S. Competitiveness, Rob Shapiro, NDN.org, 4/26/17. Trump's claims that damage from higher deficits will be minor compared to the benefits for US competitiveness, economic efficiency, and tax fairness are nonsense, and the real agenda here is the 2018 and 2020 elections.

Release: Still no 2017 budget from GOP, or proposal from White House, Simon Rosenberg, NDN.org, 4/26/17. While the President’s revenue outline today is a late but welcome development, it cannot be given serious consideration outside the eventual full budget proposal that is usually submitted to Congress in February.

Trump puts foreign investors first by supporting the Republican tax plan, Rob Shapiro, The Hill, 3/28/17. Rob weighs in on the very real problems of the House GOP's proposed border adjustment tax.  

Trump's Great Betrayal, Simon Rosenberg, NDN.org, 3/23/17. President Trump is pursuing policies deeply at odds w/his pledge to help every day Americans. It should become known as "The Great Betrayal."

Column: 5 Ways Trump Could Stop Obama's Expansion, Simon Rosenberg, US News & World Report, 3/23/17. There just isn't a lot of justification for the market's optimism that Trump's economic policies - Maralagonomics - will keep the Obama expansion going.

Memo: In A New Global Age, Democrats Have Been Far Better for the US Economy, Deficits, and Incomes, Chris Murphy and Simon Rosenberg, NDN.org, 2/21/17. In a new memo NDN finds that over the past generation of American politics Democrats have been far better for the economy, deficits and incomes. 

Steve Bannon, Meet Russell Pearce, Simon Rosenberg, US News & World Report, 2/21/17. If history is a guide, Trump's efforts to institutionalize xenophobia and ramp up immigration enforcement could disrupt businesses, hurt the US economy and tear apart families. The blowback could be significant and cause lasting damage to his Presidency.

If you would like to read more of Rob's other recent work, be sure to review our backgrounder, "Rob Shapiro on the Economy."

Trump’s Tax Plan Is Aimed At the 2018 and 2020 Elections, Not U.S. Competitiveness

President Trump wants to cut the tax rate for all American businesses to 15 percent, and damn the deficit. If you believe him, any damage from higher deficits will be minor compared to the benefits for US competitiveness, economic efficiency, and tax fairness. The truth is, those claims are nonsense; and the real agenda here is the 2018 and 2020 elections. Without substantial new stimulus, the GOP will likely face voters in 2018 with a very weak economy – and tax cuts, especially for business, are the only form of stimulus most Republicans will tolerate. Moreover, if everything falls into place, just right, deep tax cuts for businesses could spur enough additional capital spending to help Trump survive the 2020 election.

Let’s review the economic case for major tax relief for American companies. It’s undeniable that the current corporate tax is inefficient – but does it actually make U.S. businesses less competitive? The truth is, there’s no evidence of any such effects. In fact, the post-tax returns on business investments are higher in the United States than in any advanced country except Australia, and the productivity of businesses is also higher here than in any advanced country except Norway and Luxembourg.

The critics are right that the 35 percent marginal tax rate on corporate profits is higher than in most countries. But as the data on comparative post-tax returns suggest, that marginal tax rate has less impact on investment and jobs than the “effective tax rate,” which is the actual percentage of net profits that businesses pay. On that score, the GAO reports that U.S. businesses pay an average effective tax rate of just 14 percent, which tells us that U.S. businesses get to use special provisions that protect 60 percent of their profits from tax (14 percent = 40 percent of 35 percent).

Tax experts are certainly correct that a corporate tax plan that closed special provisions and used the additional revenues to lower the 35 percent tax rate would make the overall economy a little more efficient. But lowering the rate alone while leaving most of those provisions in place would have almost no impact on the economy’s efficiency – and the political point of Trump’s plan depends on not paying to lower the tax rate.

Finally, would a 15 percent tax rate on hundreds of billions of dollars in business profits help most Americans, as the White House insists, since 52 percent of us own stock in U.S. corporations directly or through mutual funds? The data show that most shareholders would gain very little, because with 91 percent of all U.S. stock held by the top 10 percent, most shareholders own very little stock.

Moreover, the proposed 15 percent tax rate would cover not only public corporations but also all privately-held businesses whose profits are currently taxed at the personal tax rate of their owners. So, Trump’s plan would slash taxes not only for public corporations from Goldman Sachs to McDonald’s, but also for every partnership of doctors or lawyers, every hedge fund and private equity fund, and every huge family business from Koch Industries and Bechtel, to the Trump Organization.

There is no doubt that the President’s tax plan would provide enormous windfalls for the richest people in the country. Beyond that, it may or may not sustain growth through the next two elections, since even the best conservative economists commonly overstate the benefits of cutting tax rates. But the truth is, there aren’t many other options that a Republican Congress would accept.

This post was originally published on Dr. Shapiro's blog.

 

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