Cautions about the budget and tax cuts

Published 6:08 pm Wednesday, May 24, 2017

By Jeff Brown
Jeff Brown is a retired Georgia state representative where he served as chairman of the House Health Appropriations Committee.

The two subjects in the title are heavily influencing the news coming out of Washington so I decided to delay my second of three articles on healthcare and comment on these subjects. However in the short space of 24 hours I have written two very different versions of this article.

As an example of why two versions is that on Tuesday 5/2 when I wrote the first version there was $295M in the Omnibus budget (takes us through the end of FY 2017 ending 9/30/17) to help Puerto Rico with its Medicaid deficit. However as of Wednesday morning 5/3 Speaker Ryan said this was no longer in the bill. By the way did you realize over half of Puerto Ricans living there get Medicaid or part of their insurance premium on the ACA Exchange supplemented at a total cost of over $1 billion/year? Ironically they do not pay personal income taxes to the IRS.

While President Trump’s proposed budget was introduced on March 16, 2017, it was for fiscal year 2018 which starts Oct. 1, 2017. His administration did request more money in this Omnibus bill  for defense which was partially done with $21 billion so designated. Interestingly a key victory in that regard is that “parity” which the Democrats put in about 2009 was removed. This required that for every extra dollar put into the military budget a dollar had to be added to the already bloated domestic budget.

Money to start the wall was requested but denied but $1.5 billion was included for border security. Additionally this budget will maintain Obamacare (ACA) until September 30, 2017, which is a commitment Trump made after the first repeal and replace failed. Note no extra funding is in this bill for ACA. Unfortunately $18 billion of cuts including Planned Parenthood were restored. I am disappointed that with a projected deficit of $443 billion already in the 2017 budget that this budget addendum increases that deficit.

However take heart that with 13 Congressional Review Acts, Continuing Resolutions, Reconciliation, legislative riders, Trump people now in charge with fewer regulations and Executive Orders the deficit for FY 2017 could be reduced if tax revenues continue as the Obama administration forecasted.

Generally the Senate must have 60 votes to pass major bills such as spending bills but the Republicans only have 52 of the 100 Senate seats. However in addition to the aforementioned there is the possibility of the “Nuclear Option” (used to approve Supreme Court nominee Neil Gorsuch with a majority versus 60 votes) being used on a budget bill. Most unlikely is a Trump veto of this Omnibus bill.

An option for the 2018 budget (effective October 1, 2017 and voted on in late summer/early fall) is to seriously reduce the deficits recognizing that most Democrat Senators will vote no. This in turn will cause a government shutdown if the Republicans hold their ground. Remember we’ve had 17 shutdowns of government since 1976. There have been no dire consequences since vital functions of government are not shutdown so no need to cave. Further in 2018 23 Democrat senators and two independents who generally vote with the Democrats are up for reelection versus only nine Republicans. Thereforemany of those 25 senators may be very reluctant to be responsible for a government shutdown. This could then result in the passage of our first realistic budget in years versus the continuations we’ve had. The present discussion about tax reductions has some good parts but also some are classically wrong. Let’s start with the wrong. When you are $20 trillion in debt how do you justify the “largest tax cut in history?” The Republican answer is these cuts will stimulate the economy. I agree with that possibility if we are just talking about reducing corporate taxes given they are among the highest in the world.

In summary both the present Omnibus spending bill and tax reform are complex so don’t believe everything you read or hear, become more knowledgeable since both will significantly affect you and  watch the direction in which the many moving parts are heading.

However tax cuts for the rich give me moral as well as economic problems. As far as the moral I firmly believe Luke 12: 48 “Every one to whom much is given; of him will much be required.” Further let’s face facts and recognize that many rich people were born into families with benefits most of us did not have, been lucky, benefitted from insider information, committed other illegal acts, had someone promoting them, inherited it and/or hit it rich with little effort.

Yet another point is the highest tax rate since 1981 has already been reduced from 70% to 39.6%! Additionally income inequality rose dramatically during President Obama’s 8 years and would further increase with a tax deduction for the rich. My final point is rich people will still have a style of living many can only dream of whether or not their taxes are reduced.

My primary economic reason for opposing taxes for the rich being reduced is that during President Reagan’s time in office Trickle-down theory/supply side economics, dubbed Reaganomics, were cited as justifications for reducing taxes on the rich. Ross Perot called it “voodoo economics.” I contend such did not work and offer as one of several reasons that our debt went from $994M when Reagan took office in 1981 to $2.9T when he left office in 1989. This was an almost tripling of our debt in 8 years!

Instead of reducing the taxes on the wealthy I suggest closing unfair loopholes. In that vein let’s concentrate on tax simplification but do so clearly understanding the “law of unintended consequences.”

In summary both the present Omnibus spending bill and tax reform are complex so don’t believe everything you read or hear, become more knowledgeable since both will significantly affect you and  watch the direction in which the many moving parts are heading.