2017

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."

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.

Today, US News and World Report published Simon's latest column,“Standing Firm.” In the column Simon recommends that in the coming negotiations with President Trump on a wide variety of issues – including the budget, debt ceiling, infrastructure, improving the Affordable Care Act and even matters of war and peace – Democrats should add three more important issues to the agenda:

1. Full presidential cooperation with the various probes into Russian interference in U.S. politics.
2. Commonplace financial transparency - release of tax returns, public audit of Trump's holdings.
3. Cessation of presidential use of his private businesses for matters of state.

To continue reading, please refer to the US News link. You can Simon's previous US News columns here.

Today US News published Simon's latest column,“The End of Innocence: Trump's Fantasy World Crashes Hard Into The Real One.”

An excerpt –

"In the coming days, Trump's willingness to shed his clear admiration for Putin and Russia will be central to our emerging Syria policy, and to Trump's broader foreign policy vision. It is also perhaps the most important indicator of his willingness to shed the childish fantasy world his campaign constructed that is causing his early presidency to fail. Whatever Trump believed about Putin, and whatever transactions have gone down between them, Putin is anathema to the American creed. He is working to weaken America and the West on the global stage, advance autocracy as an alternative to democracy, undermine the global consensus about the need to find a better energy paradigm than one based on fossil fuels and has been Assad's funder and partner and thus is directly responsible for the greatest humanitarian crisis in generations. There is a strong argument to be made that defeating Putinism is the most significant challenge facing our new president. And because of this Trump will have to choose. He can be president of the United States or a friend of Putin's. He cannot be both."

To continue reading, please refer to the US News link. You can Simon's previous US News columns here.
 

A new statement from NDN’s Simon Rosenberg:

“Candidate Donald Trump promised every day Americans his Administration would fight for them. Two months into his Presidency it is clear he has no intention of following through on his promise. These early months of the Trump Presidency could become known as “The Great Betrayal.”

Fair? Let’s take three simple examples:

Health Care – Candidate Trump promised health reform that would cover everybody, lower costs and not cut programs like Medicare and Medicaid. The House GOP health care bill he has endorsed and promoted would dramatically increase the number of uninsured (25m, 7% of US population); would increase costs for everybody, particularly for older people; and would savagely cut Medicaid. His plan would make tens of millions of those people he pledged to fight for sicker and poorer, while giving hundreds of billions of new tax cuts to wealthy people like those he hangs out each weekend at Mar-a-Lago.

Few proposals in American history could do as much harm to working people as the health care plan championed by Donald Trump these past few weeks. It is literally the opposite of what he promised he would do.

His Budget – The partial budget document Trump released last week would make massive cuts in education and job training, transportation and infrastructure, simple environmental protections and many other programs critical for working people to live good and decent lives. Whether working people would get a tax break for all of this is unclear as he hasn’t released a complete budget. But if his budget follows the strategy of his health care plan expect the benefits to flow to those already wealthy with little left for those struggling to get by.

His Staff – Despite his campaign rhetoric, the Trump Administration led by the wealthiest collection of Americans to every lead an American Administration in the modern era of American politics, and perhaps ever. It is full of Wall Streeters, including 5 former executives of Goldman Sachs. Working class champions are as hard to find in the early Trump Administration as those immigration documents of Melania’s he promised back in August.

Based on what he has done in his first months in the White House, it is now clear that Donald Trump lied to the American people about his intentions as President. Rather than championing the working man, Donald Trump has backed proposals that would transfer hundreds of billions of dollars from every day Americans to those already wealthy and well off. It is an astonishing and historic betrayal of the people he promised to serve, leaving tens of millions sicker and poorer and even more with reduced life opportunities. Donald Trump hasn’t shown respect to those he pledged to fight for, he has shown them hostility and contempt. He is far more venal Robber Baron than virtuous populist, far more Calvin Coolidge than Andrew Jackson, far more an oligarch than a man of the people.

I am positing for others to debate that no President in American history as veered as far from the core promises and message of his campaign as Trump has in his first few months. It is Trumpian in its scale, something that I hope becomes known as “The Great Betrayal.”

In his new US News column,“5 Ways Trump Could Stop Obama's Expansion,” Simon warns that Trump’s economic policies are more likely than not to derail the long Obama expansion.

According to Simon, there are 5 steps Trump is taking that are likely to weaken growth and hasten a recession:

• Labor market disruptions
• Loss of tourism
• Making America sicker and poorer
• The weakening of the global trade system
• A reckless budget

An excerpt from "5 Ways Trump Could Stop Obama's Expansion" –

"If the president's plans provide huge tax benefits to those already well off – as Bush's did – and create massive deficits, the net result will harm the U.S. economy and the nation's fiscal integrity. The hugely regressive nature of the Trump-Ryan health care bill is a sign of where the GOP is going, and it should worry everyone concerned about a strong, healthy American economy.

So, growth or recession? If the president just kept current economic policies in place, the U.S. would probably be headed for a few more years of growth, possibly even strong growth. But the president isn't keeping those policies in place, and I worry that what he is trying to do will in aggregate threaten our economy more than help it grow.

Our president has made a good living catering to wealthy Americans and foreigners. While that strategy may have worked as a private business, the American people and their economy can prosper only if the tide is lifting all boats, not just those docked at Mar-a-Lago. And that just isn't where America is headed now. So count me as worried about our economic prospects, and the ability of Trump to sustain a long and durable expansion left for him by his predecessor."

To continue reading, please refer to the US News link. You can Simon's previous US News columns here.

For more of NDN's work on the Democrats and Republicans' stewardship of the US economy, please review our memo, "In A New Global Age, Democrats Have Been Far Better for the US Economy, Deficits, and Incomes."

“The President did not release a budget today. Budgets have income and expenditures, surpluses and deficits. This document had none of that. It only detailed the expenditure side of a small portion of the overall budget, which we will apparently not see for another two months. That it has taken the Trump Administration so long to come up with this partial proposal, and is so far behind in producing the traditional document we use to run our nation, should be a concern for all Americans. Being months late on budget blueprints and attacking the government’s system for tracking the economic impact of budgets and legislation (the CBO) is not something global markets and investors traditionally reward.

One reason it is taking so long for this White House to produce a budget is that it is almost certainly proving impossible to translate the President’s promises into a budget that will pass a fiscal laugh test. President Trump has promised to radically reduce revenue to the federal government, while significantly increasing DOD, DHS and VA spending and not touching Medicare, Medicaid and Social Security. Even with the draconian cuts in domestic programs the Administration offered today it is reasonable to assume that the Administration’s budget, if we are to ever see it, will propose historic increases in the federal deficit and no proven strategy for growth. The last Republican President also significantly reduced revenue and increased defense spending. It brought us a Great Recession, income decline and a ten-fold increase in the annual deficit. Why this strategy will work for President Trump when it didn’t work for President Bush is something that needs some discussion in the days ahead.

Finally, it should be noted that over the last generation of American politics it has been Democrats who have presided over job growth, rising incomes, lower annual deficits and soaring stock markets. During this time two consecutive Republican Presidents brought us recessions, income decline and higher annual deficits. When it comes to the strategy for how to make economies grow and lower deficits the public should be looking to the Democrats and not to the Party of Trump.”

- Simon Rosenberg, President, NDN

For more on the performance of the two parties since the end of the Cold War see this recent memo from NDN.

Overview – With the debate in Washington soon to turn to budget and economic matters, we have updated and are releasing a memo we first produced in 2016. This short memo looks at the economic performance of the two American political parties when in the White House since the end of the Cold War.

We use 1989 as a starting point for comparison because when it comes to the American and global economies, the collapse of Communism and the non-aligned movement ushered in a new, truly global economic era, one very different from the one that came before. It is thus fair to see how the two parties have adapted to the enormous changes this new era has offered, and whether their policies have helped America prosper or struggle as we and the world changed.

As you will see from the following analysis, the contrast between the performance of the Democrats and Republicans in this new economic era is stark: 2 GOP Presidencies brought recessions, job loss, higher annual deficits, and struggle for workers; the 2 Democratic Presidencies brought recovery and growth, job and income gains, and lower annual deficits.

Based on these findings it is fair to assert that over the past generation the Democratic Party has been far more effective at crafting effective responses to a new economic era than the Republican Party. This case is bolstered, of course, when recalling the GOP’s spirited predictions of economic calamity when opposing both the 1993 Clinton economic plan and budget and the 2009/2010 Obama stimulus and “job-killing” Affordable Care Act. The Republicans have gotten it wrong now in four consecutive Presidencies.

While it will not be the subject of this short memo, our findings raise questions about whether the characterizations of the US economy as one not producing income and wage gains either over 40 years or over the past 15 years are accurate. It would appear that a more accurate description of the US economy in recent years is that with smart policies, Americans can prosper even in a more challenging and competitive global age.

We hope that commentators and policy makers keep the findings of this memo in mind as the Republicans roll out their budget and economic plans in the coming weeks. The Party’s track record on economic matters in this new age of globalization is not something that should inspire confidence in voters looking for plans that create jobs, raise wages and lower the annual deficit. It has been the other Party that has done that.

In his new column for US News, "Drawing the Line with Trump," Simon argues that Democrats need to abandon traditional responses to the Trump Presidency, and set new rules of engagement. Trump’s early, repeated trampling of democratic norms must be confronted head on now. Friday’s decision to strip legal residents of the US of their liberties without debate or consultation is the act of an autocrat or dictator, not an American President. No further evidence of his intentions are needed now.

In his piece Simon lays out four conditions for continued Democratic cooperation:

1) Stop the Executive Orders
2) Debate Your Proposals In Congress
3) Divest or Disclose
4) Honor Decorum

Trump has historically low levels of public support; voters already have grave concerns about his secret holdings and the potential for corruption; and regular people are already taking unprecedented steps to protest his early Presidency. Democrats have a great deal of running room to take a dramatic and principled stand not against Trump but in favor of the rule of law and our democratic system itself.

Some of our recent work on this vital topic:

Memo: In A New Global Age, Democrats Have Been Far Better for the US Economy, Deficits, and Incomes.  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. 

A Strategy for Confronting Trump, Restoring Democratic Norms, Simon Rosenberg, US News & World Report, 1/31/17.  To counter Trump Democrats will have to be patriots not partisans.  In his new US News column Simon offers a strategy for how to draw lines and challenge a man acting far more like a dictator than an American President.

Chin Up, Democrats, Simon Rosenberg, US News & World Report, 1/20/17.  In his recent column, Simon argues that Democrats should have pride in their historic accomplishments and optimism about the future of their politics.

Rediscovering the Democrats' North Star, Simon Rosenberg, US News & World Report, 12/9/16.  In his recent column, Simon offers some thoughts on the path forward.

A New Generation of Democrats Will Have to Rise – NDN's Post Election Memo, Simon Rosenberg, NDN.org, 11/9/16.  It is time for a more purposeful handoff from Boomer Democrats to the next generation who will have to lead the party in the years ahead.

Prior to the 2016 Election

Memo: 2016 Through A Millennial Lens – Some Initial Thoughts, Simon Rosenberg, NDN.org, 11/4/16.  One of the more dramatic and potentially disruptive demographic developments in recent American politics has been the explosion of Millennials into the American electorate.

Report: In A New Global Age, Democrats Have Been Far Better for the US Economy, Deficits and Incomes, Simon Rosenberg and Chris Murphy, NDN.org, 9/13/16.  Our report finds that since Communism fell, and the world changed, Democrats have been far better stewards of the economy than Republicans.

Report: Presidential Primary Debates, Simon Rosenberg and Chris Murphy, NDN.org, 5/25/16.  This memo looks at the audiences the Presidential Primary debates received in 2016 and 2008.

A Wake Up Call For Democrats - Simon's 2014 Post-Election Memo, Simon Rosenberg, NDN.org, 11/7/14.  Republicans have made substantial gains in recent years, and are a much stronger national party.  Democrats have a lot of work to do to compete and win against a resurgent GOP.