Vision as memory: austerity, tax cuts and militarism continue under Trump administration

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BY DANTE DALLAVALLE and MICHAEL PALMIERI | JUNE 17, 2017

Trump’s proposed budget, released in late May, has received a vast amount of criticism from Democrats and Republicans alike. As Senator John McCain (R-AZ) put it, the proposed budget is “dead on arrival.” Others haven’t been as critical, and some less scrupulous figures have even embraced the administration’s plans, such as Congresswoman and chair of the House Budget Committee Diane Black (R-TN), who in reference to the proposed White House budget stated, “...our budget resolution is no longer a vision document, it is a blueprint for building the better America we have promised our constituents for years.” But this ‘vision’ she claims to be fulfilling is better understood as a memory of decades past. The blueprint is not novel- it is a continuation of class warfare and militarism masked as ‘fiscal responsibility’ and public policy.

A cursory review of the budget paints a picture in which working, poor, and marginalized communities face the most severe repercussions. Yet, Mick Mulvaney, the Director of the Office of Management and Budget still had the gall to state on Fox & Friends in late May that, “Republicans care about poor people.” If we were to take Mulvaney’s statement seriously, the budget surely must help the 43.1 million Americans who were listed as living below the poverty line according to the U.S. Census Bureau’s 2015 report. Or, perhaps the GOP’s budget plan takes into consideration the 69% of Americans who have less than $1,000 in their savings accounts. Evaluating the budget through these two basic measures (there are so many more one could use) clearly demonstrates that working and poor people weren’t the top of their priorities this time around, despite claims to the contrary.

 

The Budget: What’s in it

Or the more appropriate question would be what’s being taken out of it. Pundits describe the budget as a “hard power” one. By “hard power” what’s meant is a $54 billion dollar increase for pentagon spending offset by cuts to both domestic and foreign-aid programs. Mulvaney terms it a “taxpayer-first budget.”  This is true if by taxpayers he means defense contractors and weapons-manufacturers along with the wealthy. However, if this budget were to pass along with the proposed tax plan many wealthy individuals and corporations may cease to occupy the role of taxpayer altogether. That’s because under the budget all the top tax rates on businesses and individuals will decline while the estate tax (affecting those estates worth more than $5.5 million) is completely eliminated along with the ACA tax on capital gains.

Some other notable cuts include the  EPA by 31%, State Department/USAID by 28%, Labor and Agricultural Department by 21% each, Justice Department by 20%, Department of Health and Human Services by 16%, Department of Commerce by 15%, Department of Education and Department of Transportation by 13.5% and 13% respectively, Department. of Housing and Urban Development and Dept. of Interior by 12%, Department of Energy by 6%, and the Treasury Department by 4.3%.

But speaking of the budget in this manner, of numbers and percentages, doesn’t do justice to the reality of the consequences that some of these cuts impose on families and our communities. Some of the most detrimental and shameless cuts will be at the Department of Education. What lies behind that 13.5% reduction are cuts to programs that offer teacher training and smaller classroom sizes, elimination of before- and after-school programs which serve some 1.6 million students, and cuts to adult literacy, arts education, foreign language, and college loan forgiveness programs. Pell Grants, the largest federal grant program for low-income undergraduate students, a program that has afforded so many the opportunity to attend college as costs continue to soar, will be reduced by $3.9 billion. All of this is complimented by a $1.4 billion increase for school choice programs, a euphemism for shifting public money to private hands through the creation of charter schools.

On May 21st 2015 Trump stated “I’m not going to cut Social Security like every other Republican. I’m not going to cut Medicare or Medicaid.” So, like any respectable and dignified politician, he has completely disregarded his campaign promises, planning to slash the Children’s Health Insurance Program (CHIP) by 20%, cut medicaid by $800 billion over 10 years, and reduce Social Security Disability Insurance. Both CHIP and medicaid taken together provide 1 in 3 American children with health care coverage. Given the fact that the United States’ infant mortality rate is one of the highest out of industrialized countries, ranking 169 out of 222 (behind Slovakia and Bosnia-Herzegovina), such cuts can only be described as immoral.

 

Trickle-Up Economics

Overall the budget reduces non-defense discretionary spending by $73 billion dollars, non-discretionary spending by $78 billion, and boosts military spending by $100 billion, for a total reduction of $51 billion over fiscal years 2017/18. Administration officials including Mulvaney and Treasury secretary Steve Mnuchin have cited an assumed 3% growth rate in GDP to justify a balanced budget in Mulvaney’s case (he has gone as far as to claim that there will be no deficit in 10 years) and revenue neutral tax cuts in Mnuchin’s case. Simultaneously, other Republican leaders have cited cuts to the budget and taxes as the driver of the same  growth. Putting aside the contradicting explanations of causality, observers have noticed another problem, both Mulvaney and Mnuchin are using the same 3% growth rate to reach each of their rosy conclusions. Plain and simple the administration is double counting in an effort to smooth over the many glaring contradictions. One such example includes the fact that while the administration’s tax plan proposes the elimination of the estate tax the proposed budget assumes revenues upwards of $300 billion over 10 years from the very same, supposedly eliminated, estate tax. Stunning.

Regardless of the questionable math behind claims made by the administration, right wing think tanks still hold that these cuts are necessary to achieve the type of economic growth that will, as nearly every President since Kennedy has said, “Lift all boats.” This, they believe, is attainable through a combination of “pro-growth” policies i.e. deregulation, tax cuts, and austerity. However, unlike some fiscal recommendations which may not have been implemented before and therefore can only be judged by assumed outcomes, we’ve been down this road and we have a history to judge this policy prescription. That history demonstrates clearly that “trickle down” is much better defined as “trickle up.”

Popularized under Reagan, trickle down economics is generally defined as, “the idea that tax cuts and other financial incentives for companies and individuals in the upper tiers of society fuel growth that indirectly benefits everyone.” Closely associated with this idea is the notion that these tax cuts can be revenue neutral. The underlying logic for this notion (including Trump’s most recent tax proposal) is that cutting taxes will generate a substantial amount of jobs, this is achieved, the logic goes, through businesses investing the income which is no longer subject to taxation in job growth, which would in turn grow the taxable income base therefore paying for the tax cuts made.

However the enduring myth of revenue neutral tax-break generated growth that Republicans pedal is pure folklore. Reagan’s tenure is a case in point. In 1981, individual tax rates were as high as 70 percent. Under the Economic Recovery Tax Act of 1981 the top rate was slashed 20 percent from 70 percent to 50 percent.  Then in 1986 another tax cut was implemented bringing the highest individual tax rate down to 28 percent.  The outcomes were as expected: a soaring deficit and heightening of income inequality as the tax cuts were mainly directed at high income earners. If tax cuts to the wealthy truly helped working people, perhaps they could be justified, but by the late 1980s economic realities of a failed policy set it; the federal deficit soared, inequality heightened, middle-class incomes were barely higher than they were 10 years earlier, and the poverty rate increased.

And so it is safe to say that the trickle down fantasy is exactly that. Perhaps this is why a 1996 paper published by the Cato Institute, a deeply conservative think tank, characterized the idea that tax cuts to the wealthy pay for themselves as an “enduring myth.” Though the report was an attempt to vindicate Reagan era economic policy endorsing the myth of tax breaks for the wealthy as revenue neutral was too much, even for the Cato Institute this was, “...nonsense from day one, because the credible evidence overwhelmingly indicates that revenue feedbacks from tax cuts is 35 cents per dollar at most.” In fact, the White House budget released on February 18th 1981 included a table entitled “Direct Revenue Effects of Proposed Tax Reductions” which predicted a $700 billion revenue loss through 1986. And it is safe to say where much of that $700 billion went as with the next case that follows- captured by the wealthy.

As if eight years of Reagan's economic policy was not enough to demonstrate that trickle down economics were bunk, the same story was repeated twenty years later under G.W. Bush. Bush led the effort to decrease the highest marginal income tax from 39.6 (Reagan ended up raising taxes after slashing them) to 35 percent along with cuts for other income groups. Though the cuts did result in a small increase in take-home pay for the middle class, the vast majority of the cuts were captured by the top quintile of income earners. A chart conducted by the Tax Policy Center found that over 70 percent of the cuts flowed to the top quintile of income earners while the bottom 40 percent of income earners received under 5 percent of the cuts. Fiscal conservatives were mute on the fact that Bush’s tax cuts contributed trillions of dollars more to the deficit.  At the end of his term wages lagged behind inflation with barely any growth in productivity and inequality increased as did the deficit. But the legacy of Bush’s tax breaks are still with us. According to The Center on Budget and Policy Priorities, the tax cutswould add $4.2 trillion to deficits between 2009-2019, taking into account the associated debt service costs.

Moreover, the IMF, an institution known more for its austerity policies which have wreaked havoc in developing countries than its progressive agenda, has claimed that trickle-down economics doesn’t, in fact, work. In a 2015 report  they found that increases to the top 20 percent of income earners do not create benefits that trickle down but actually slow GDP growth while increases to the bottom 20 percent does the opposite. Interestingly, they also find that, regardless of a country’s level of development,  “...better access to education and health care and well-targeted social policies, while ensuring that labor market institutions do not excessively penalize the poor, can help raise the income share for the poor and the middle class.” Since the proposed budget slashes funding for the departments responsible for basically all of the above mentioned factors, you can be sure that we’ll see increased inequality in a country where we already have the largest disparities between rich and poor in any developed nation.

And if the ‘inequality as a necessary evil’ argument wasn’t baseless enough, Josh Bivens and Hunter Blair write that the budget, as it stands, would create a job loss, stemming from spending cuts, of 177,000 in 2018, 357,000 in 2019, and 1.4 million in 2020, only getting dramatically worse as time goes on. This is because social programs subsidize living costs which free up income that then circulates through the economy creating aggregate-demand or economy-wide spending. So the conclusion that tax-breaks at the top and austerity for the rest will lead to economic growth runs counter to both history and basic economic analysis.

 

Weaponizing “Wastefulness”

An even more interesting argument that reveals the profound level of cognitive dissonance in the “hard-power” budget is how the term “wasteful” has been weaponized to selectively justify cuts to social programs and related departments. For example, while justifying deep cuts to climate research and the environment Mulvaney recounted in a press briefing that $10,000 was given for the production of a climate change musical. One can argue whether or not the EPA should be investing in theatrical arts (perhaps that funding should have came from another department) but his reasoning for justifying the cut shouldn’t be dismissed outright. If $10,000 for theater arts can be characterized as wasteful spending and this “wastefulness” can justify nearly a third in cuts for a particular department, one could and should point out perhaps the most wasteful portion of our budget, defense spending.

As the Washington Post’s Bob Woodward and Craig Whitlock reported in December of 2016, the Pentagon buried an internal study which exposed $125 billion in administrative waste and business operations over a 5 year period.  Aside from the spending itself, there is the question of how defense spending, specifically arms sales and military aid, are tracked, if at all. Just weeks ago Amnesty International, who obtained a US government audit conducted in September 2016, revealed that the DoD “...did not have accurate, up-to-date records on the quantity and location” of nearly $1 billion dollars worth of equipment in Iraq. This includes tens of thousands of assault rifles, hundreds of mortar rounds, and hundreds of Humvee armoured vehicles. The number is staggering given the fact that $1.6 billion was appropriated for the Iraq Train and Equip Fund by Congress in 2015. Referring to the September 2016 internal audit affair, Arms Control and Human Rights Researcher Patrick Wilcken stated, “It makes for especially sobering reading given the long history of leakage of US arms to multiple armed groups committing atrocities in Iraq, including the armed group calling itself the Islamic State.” So, according to the logic Director Mulvaney, our military budget, already larger than the next seven countries combined, should be the first portion of the budget scrutinized for “wastefulness.”

The Amnesty report is but one particular example of wastefulness. What looms much larger in the background is the United States longest ongoing war in its history, Afghanistan, and the continually escalating fight in Iraq, two wars that, when taken together, amount to nearly 5 trillion dollars according to a working paper written by Linda J. Bilmes at the Harvard Kennedy School. Here, the dividing line between Democrats and Republicans blurs as both parties race to define themselves as the most patriotic, regardless of the human and financial consequences. A quick glance at a chart produced by The Center on Budget and Policy Priorities drives the point home.  According to their analysis both the wars, combined with Bush era tax cuts, will make up nearly one half of the public debt.

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The bipartisan commitment to ever expanding the US military footprint across the globe was evidenced by the knee-jerk reaction to the bombing of a Syrian airfield with nearly 60 Tomahawk missiles.  Republicans and Democrats alike cheered President Trump, citing it as the first time he had looked "presidential," as media pundit Brian Williams felt it necessary to quote Leonard Cohen in regard to the “beauty” behind watching the missiles launch towards the Shyrat airfield. Likewise, very few Democrats venture to be critical at all about the bombardment of Mosul in Iraq and Raqqa in Syria even though Air Wars, a journalistic monitoring group that tracks the US coalition strikes in Syria and Iraq, has recently reported that the United States has killed more civilians than either Russia or ISIS in the month of May. Senator Claire McCaskill (D-Mo.) best summed up the unanimity of both parties toward the war when criticizing the defense budget not for its glut but for what she saw as a lack of sufficient funds. And while the killing continues in both Iraq and Syria, the US is closely supporting the illegal Saudi campaign of bombing and blockading Yemen, the poorest country in the Middle East of which a majority of the population is now at risk of famine. We must remind ourselves that none of these conflicts began under the Trump administration. Moreover, we should take time and ask ourselves why the same scrutiny given to Russian meddling in our elections is not paid to waste produced by decade long wars which have taken hundreds of thousands of lives.

  

Capitalism and the State 

But none of this should be surprising. “The executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie.” We didn’t quote this from Mulvaney’s House budget hearing, but it is clear that Marx’s most basic insight is glaring in this budget. It isn’t the job of the working-class to elect officials who will represent their interests because politicians are a special breed of people who can at once promise everything and at the same time deliver nothing. Many have made the argument that Trump’s cabinet picks have been conspicuously venal. But this misses the larger point. The revolving door between corporations, the elite, and the state has been present since the founding of this country.

From James Madison’s admonishment against excessive democracy for propertied-elites all the way to this administration today, the system itself is shaped to produce the outcomes which benefit a particular class. Therefore, any attempt to understand our current dilemmas without considering the structural apparatus and historical reality within which all choices are made is useless. This point was put rather beautifully by philosopher Henry Giroux when he spoke to the media’s attention on Donald Trump shortly after then presidential-candidate Trump disgustingly compared Mexican immigrants to rapists and criminals. Giroux condemned the media’s spectacle, stating the coverage, “ ...ignores the deep seated contours of systemic racism and xenophobia and the conditions that promote it, instead focusing on the individual who spouts such poisonous racist language.”

The same should be said of the budget proposal and its deplorable allocation of our resources. Instead of constantly focusing on the symptom, i.e. Trump and his cabal, we need to ask ourselves as Giroux does, “What kind of society produces Donald Trump?” or more specifically, ‘What kind of person embraces this kind of budget?’ It is only after examining the system itself and the structural conditions that allow our taxpayer dollars to be siphoned for more war, more death, and more hoarding of wealth to a small fraction of society will we arrive at an analysis that offers us more than superficial conclusions based on the personalities of feckless racists and irredeemable political parties. You may just come to the conclusion that the problem is the the system, stupid.

 


Dante Dallavalle is a d@w contributor and a graduate of Montclair State University. 

Michael Palmieri is a d@w contributor, d@w's former Radio Syndication Manager and a graduate of The Milano School School of Public Engagement. 


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