In a speech in Missouri later today, President Trump will attempt to relaunch his administration's tax-reform crusade. If you believe what he says, his plan will be the bestest, biggest, boldest tax reform ever devised in the whole history of man.
It will be beautiful; it will be huge, that I can tell you.
However, once you peer inside that nicely wrapped giftbox -- when you peel off the gilt-edged rhetoric and the beautifully tied bow -- what do you find inside?
You find nothing. The box is empty.
Despite months of promises that it would deliver its tax-reform package in two weeks, or next month, or by the Fourth of July or certainly by Labor Day, the Trump administration has now conceded that it is not capable of producing an actual plan or an actual bill. Instead, as with the health care debacle, it will punt the drafting of a bill to the sure hands of congressional leaders.
We do, however, have some guidance as to how the White House will attempt to sell this nonexistent plan. It will be described in populist terms, as an effort to "derig" or "unrig" the economy on behalf of the little guy and gal, the American worker, and as an effort to punish the special interests that for too long have held sway in Washington.
One of the administration's two point men in that effort will be top economics adviser Gary Cohn, who left his job as president and COO of Goldman Sachs, along with a $285 million severance package, to join the Trump administration. The other will be Treasury Secretary Steve Mnuchin, also formerly of Goldman Sachs and currently husband of America's own Marie Antoinette, the lovely Louise Linton.
I'm sure that both Cohen and Mnuchin -- populists through and through -- will have the best interests of America's working people foremost in their minds.
We also have some idea of the basic premises behind this tax-reform effort, thanks to a "senior White House official" who may or may not have been Mnuchin or Cohn.
“The president is going to lay out his vision to bring back Main Street by reducing the crushing tax burden on our companies and our workers and also to restore our competitive advantage by repairing and reforming our badly broken tax code,” this person told the press this week under the cover of anonymity.
So let's explore the two basic premises underlying that mission statement.
PREMISE No. 1: American companies are suffering under a "crushing tax burden" that makes it impossible to turn a profit and compete internationally.
Is that true?
Gee, look at that. Contrary to the rhetoric, corporate profits AFTER TAXES are actually at all-time record highs. In the past 15 years, while median household incomes have declined, corporate profits AFTER TAXES have more than tripled. The assertion of the Trump administration and the Republican Party is that tripling isn't nearly good enough, that corporate AFTER TAX profits will have to rise even farther and faster to help the working people of this country.
Me, I ain't buying it.
Now, some might argue that the chart above is somehow misleading. So let's look at it another way, at corporate income taxes as a share of the overall national economy. If corporate tax burdens have indeed soared so high as to become crippling, as the rhetoric would have you believe, then that ought to show in the data, right?
Hmmm. Corporate taxes have bounced around between 2 and 3 percent of the national economy for almost 40 years now -- basically since the Reagan era. And as a share of the national economy, today they are roughly half what they were during the post-World War II boom years. Again, Premise No. 1 seems to have no basis in truth. Life has seldom if ever been better for corporate America and Wall Street.
PREMISE No. 2: Because of these allegedly crippling tax burdens, American companies have been unwilling or unable to hire. Lifting that burden will lead to more investment and the creation of millions more jobs, and higher-paying jobs as well.
Right off, we face a basic math problem. The current unemployment rate is 4.3 percent, near the historic low for the past 45 years, and we've now recorded 82 consecutive months of job growth, the longest such streak on record. The raw numbers of unemployed today are comparable to the booming late 1990s, when the U.S. population was 50 million smaller. In short, we can't create millions of new jobs if we don't have people able to take them.
Then there's the premise hidden within the premise: If corporate after-tax profits increase still further, will those additional profits be invested into job creation and higher pay, as Trump and others claim, or will those billions be used to further benefit the investing class, compounding the problem of income inequity?
Based on history, they will be used to further benefit the already wealthy.
As we've seen above, corporate after-tax profits have more than tripled since 2000. The Dow Jones Industrial Average has doubled in that time frame. Meanwhile, median household income has fallen, and the share of the economy that ends up in the paychecks of workers has declined significantly. Repeat after me: Trickle down does not work.
Writing in the New York Times, Sarah Anderson of the Institute for Policy Studies uses AT&T as an example. Between 2008 and 2015, AT&T paid an effective corporate income tax of 8 percent, far below the draconian rates cited by Republicans. The company did not use its after-tax profits to hire more people; indeed, it produced those profits in part by cutting its payroll by almost 80,000 over that time frame. It also took $134 billion in profits and invested it not in job-creating growth or expansion, but in buying up its own stock, driving its price higher and higher.
And because the stock price rose, AT&T CEO Randall Stephenson was able to collect $124 million in stock options and grants over that time frame.
When President Trump stands before his Missouri audience today and talks of "derigging" the economy, when millions of Americans hear him talk about fighting for the little people, for the hard-working Americans who just want a fair shake, many Americans will hear in those words an implied promise that he has no intention whatsoever of keeping.
Like any good salesman, Trump will be selling them the sizzle, but not the steak. They'll be able to smell that steak, they'll be able to hear it cracking and popping in the grill. But the steak itself -- think of it as a huge, beautiful well-done Porterhouse, slathered in ketchup as Trump likes it -- is being reserved for someone else.