We are now two years, 10 months and two weeks away from the next presidential election. As yet, no clear issues coalition has emerged to challenge President Trump. The biggest news in Washington is the tax bill, and although it is much criticized, there has been no alternative tax bill offered by the Democrats. The stock markets have reacted very well by going up and up. Thus, most of the smart men and women in the financial world seem delighted by the bill.
However, I must be out of touch; I think the bill will be a complete, dismal failure because it will balloon the deficit. I usually try to be as positive about Congress and the Trump administration as possible, but my hopes for real tax reform have been dashed by this artificial bill.
For example, I thought from the speech running up to the election that we would do away with the “carried interest.” For several years now, all presidential candidates of both parties (including President Trump) have said they are for repealing the privilege of Wall Street hedge funds paying a capital gains rate (about 20 percent) on income from “carried interest.” Everybody appeared to have agreed that it should be taxed at the individual rate, which has been up to 39 percent and is apparently 37 percent in the new tax bill. However, the hedge fund lobbyists got to the Congress big time on this, and it was silently dropped.
Most of the top-level media companies, ranging from Gannett to Disney to CBS, have quietly favored keeping “carried interest” at a lower rate. These companies have constantly churning investments and thus they benefit from “carried interest.” There seems to have been very little reporting for finally straightening this out in the news media. The national media should have been outraged in their reporting on the dropping of the “carried interest.” I hope my suspicions that the media-business establishment purposefully did not drop the discussion of “carried interest” changes are unfounded. However, I suspect that our national big media was complicit in keeping “carried interest.”
I fear I am locked into thinking like an old-fashioned Republican. In my 22 years in Congress I was a free-trader and was anti-deficit. I kept a “debt-o-meter” in my office, like many other Republicans in those days. That was a core principle of my old-fashioned GOP.
This bill has totally abandoned any concern for the staggeringly high federal deficit. I am one who believes that the huge deficit will eventually bring our economy grinding to a halt. I know that this sounds alarmist, but I was sorry that Republicans and Democrats abandoned their concerns about the deficit. The Democrats blame the Republicans, but the Democrats could have forced roll-call votes on 10 or 12 key issues in the bill. They probably would have lost, but concerns with the deficit could have been raised, which would have slowed the bill down.
This bill does cut the corporate rate of income taxes, but it adds the lost revenue to the deficit. The argument is that a lower corporate rate will improve the economy. That would be true if we cut spending simultaneously or if we found other new revenue. Merely adding it to the deficit will slow the economy in about a year.
On the other hand, as a 75-year-old white male, I am feeling increasingly obsolete. Almost everybody else is in a great chorus saying how good this bill is and the markets are doing spectacularly well.
My wife and I were looking at how this might affect us. We are pensioners and don’t think it will have much of an effect. Yes, I pay taxes on my pension and on Social Security, but it would not affect us much. This tax bill is being heralded as a great victory for the Republicans. I hope the country is stimulated by this corporate tax rate reduction, but because of the deficit I am just not a believer.
As a moderate Republican/independent, I must grit my teeth and admit that the only balanced budget and surplus we have had came from the Clinton/Gingrich tax increase of 1996.
As a traditional Republican economic thinker, I continue to be amazed at how well the markets are doing. Apparently some things are going on that I just do not understand. Hopefully this old man’s economic thinking is out of date!
And I hope that a solid issues-oriented coalition emerges around the tax bill so we have a contested presidential election in less than three years. It’s time for the Democrats to build a real issues-oriented campaign based in part on this tax bill. Otherwise, Donald Trump will be automatically re-elected. The Democrats should stops throwing rocks, stop trying to get Trump impeached, and start developing real issues. Our country needs it.
Sen. Larry Pressler was a U.S. senator for 18 years and congressman for four years. He is a Rhodes Scholar, Harvard Law graduate and a Vietnam veteran.