By Robert Reich
For a century the GOP has been bankrolled by big business and
Wall Street. Trump wants to keep the money rolling in. His signature tax cut, two years old last Sunday, has helped U.S. corporations score record profits and the stock market reach all-time highs.
To spur even more corporate generosity for the 2020 election, Trump is suggesting more giveaways. Chief of staff Mick Mulvaney recently told an assemblage of CEOs that Trump wants to “go beyond” his 2017 tax cut.
Trump also wants to expand his working-class base. In rallies
and countless tweets he claims to be restoring the American working class by
holding back immigration and trade. Incumbent Republicans and GOP candidates
are mimicking Trump’s economic nationalism.
As Trump consigliore Stephen Bannon boasted recently, “we’ve turned the Republican party into a working-class party.”
As Trump consigliore Stephen Bannon boasted recently, “we’ve turned the Republican party into a working-class party.”
Keeping the GOP the Party of Big Money while making it over into the Party of the Working Class is a tricky maneuver, especially at a time when capital and labor are engaged in the most intense economic contest in more than a century because so much wealth and power are going to the top.
Armed with deductions and loopholes, America’s largest companies
paid an average federal tax rate of only 11.3 percent on their profits last
year, roughly half the official rate under the new tax law – the lowest
effective corporate tax rate in more than eighty years.
Yet almost nothing has trickled down to ordinary workers.
Corporations have used most of their tax savings to buy back their shares,
giving the stock market a sugar high. The typical American household
remains poorer today than it
was before the financial crisis began in 2007.
Trump’s giant tax cut has also caused the federal budget deficit
to balloon. Even as pretax corporate profits have reached record highs,
corporate tax revenues have dropped about a third under projected levels. This
requires more federal dollars for interest on the debt, leaving fewer for
public services workers need.
The Trump administration has already announced a $4.5 billion
cut in food stamp benefits that would affect an estimated 10,000 families, many
at the lower end of the working class. The administration is also proposing to
reduce Social Security disability benefits, a potential blow to hundreds of
thousands of workers.
The tax cut has also shifted more of the total tax burden to
workers. Payroll taxes made up 7.8 percent of national income last year while
corporate taxes made up just 0.9 percent, the biggest gap in nearly two
decades. All told, taxes on workers were 35 percent of federal tax revenue in
2018; taxes on corporations, only 9 percent.
Trump probably figures he can cover up this massive
redistribution from the working class to the corporate elite by pushing the
same economic nationalism, tinged with xenophobia and racism, he used in 2016.
As Steve Bannon has noted, the formula seems to have worked for Britain’s
Conservative Party.
But it will be difficult this time around because Trump’s
economic nationalism has hurt American workers, particularly in states that
were critical to Trump’s 2016 win.
Manufacturing has suffered as tariffs raised prices for imported
parts and materials. Hiring has slowed sharply in Pennsylvania, Michigan, and
other states Trump won, and in states like Minnesota that he narrowly lost.
The trade wars have also harmed rural America, which also went
for Trump, by reducing demand for American farm produce. Last year China bought
around $8.6 billion of farm goods, down from $20 billion in 2016. (A new
tentative trade deal calls for substantially more Chinese purchases.)
Meanwhile, health care costs continue to soar, college is even
less affordable, and average life expectancy is dropping due to a rise in
deaths from suicide and opioid drugs like fentanyl. Polls show most Americans
remain dissatisfied with the
country’s direction.
The consequences of Trump’s and the Republicans’ excessive
corporate giveaways and their failure to improve the lives of ordinary working
Americans are becoming clearer by the day.
The only tricks left to Trump and the Republicans are stoking
social and racial resentments and claiming to be foes of the establishment. But
bigotry alone won’t win elections, and the detritus of the tax cut makes it
difficult for Trump and the GOP to portray themselves as anti-establishment.
This has created a giant political void, and an opportunity.
Democrats have an historic chance to do what they should have done years ago:
Create a multi-racial coalition of the working class, middle class, and poor,
dedicated to reclaiming the economy for the vast majority and making democracy
work for all.
Robert B. Reich is Chancellor's Professor of
Public Policy at the University of California at Berkeley and Senior Fellow at
the Blum Center for Developing Economies. He served as Secretary of Labor in
the Clinton administration, for which Time Magazine named him one of the ten
most effective cabinet secretaries of the twentieth century. He has written
fifteen books, including the best sellers "Aftershock", "The
Work of Nations," and"Beyond Outrage," and, his most recent,
"The Common Good," which is available in bookstores now. He is also a
founding editor of the American Prospect magazine, chairman of Common Cause, a
member of the American Academy of Arts and Sciences, and co-creator of the
award-winning documentary, "Inequality For All." He's co-creator of
the Netflix original documentary "Saving Capitalism," which is
streaming now.
