Cutting Medicaid To Pay For Low Taxes On The Rich Is A Terrible Trade!

The following is a small part of an excellent article in the Economic Policy Institute:

Keeping taxes low for the richest households and corporations is the clearest legislative priority of the Trump administration and the Republican congressional majority. Many provisions of the 2017 tax law (often called the Tax Cuts and Jobs Act or the TCJA) are expiring this year. Extending these provisions would provide hugely disproportionate benefits to the richest households.

To illustrate the difference in benefits depending on household income, the range would extend between less than $0.35 per day for the poorest households to $860 per day for the top 0.1%. For the bottom 20% of U.S. households, extending these provisions would give them an average of less than $0.35 per day. For households in the second income fifth, the benefits would be $1.20 per day, and for the middle 20% of the income distribution, the benefits would be $1.80 per day. Yet for the richest 1% of households, the benefits would jump to $165 per day, while the top 0.1% would see benefits of $860 per day.

Besides being unfairly distributed, the cost of the overall tax cut is large enough to put huge stress on other parts of the economy, no matter how it’s paid for. The most damaging way to pay for this would be to enact large cuts in spending programs that provide benefits to economically vulnerable families. Last week, House Republicans approved a budget resolution calling exactly for these types of cuts, including $880 billion in cuts that will inevitably fall on Medicaid, the program that provides health insurance for low-income Americans who cannot otherwise afford it.

Medicaid is, by far, the largest program in the federal government aimed predominantly at alleviating poverty. In 2024 it provided health insurance coverage for over 80 million people each month. The juxtaposition of prioritizing lower taxes for the richest families while proposing steep cuts to the nation’s largest program aimed at alleviating poverty could not be more clarifying for the economic debate in front of us.

The benefits of extending expiring provisions to the TCJA are easy to summarize. They will boost incomes trivially for the large majority of families but significantly for the richest households, leading to greater income inequality. The costs of Medicaid cuts are a bit harder to summarize because they are so broad and will cascade far into the future. The summary of what these cuts will do is clear. They will greatly increase hardship and misery for already struggling families, they will reduce opportunities in the future for kids who will grow up less healthy and poorer because their families lack access to Medicaid, and they will put enough strain on the nation’s overall economy that they will make a future recession far more likely.

Conclusion

Low taxes for the rich and for corporations is the highest legislative priority of the Trump administration and congressional Republicans. To get there, they are willing to cut federal programs that are utterly vital to the incomes and security of vulnerable families. These cuts will not just cause harm to individual families, they will cascade, leading to hospital closures in rural counties, higher medical debt, lower earnings from future workers who will suffer from poorer health decades from now, and could even put upward pressure on federal budget deficits in the long run. In the very near term, these cuts will make the United States economy far more vulnerable to any recessionary shock. Nothing about this policy package—tax cuts mostly for the rich and benefit cuts for the vulnerable—is good for the vast majority of families in this country.

House GOP Is Ready To Take Healthcare From The Poor To Give More To The Rich

 

We have been expecting it, but the House has now taken the first steps to an insane budget. They approved (on a party line vote) a proposal to give tax cuts to the rich - and they would partially pay for that by cutting hundreds of millions of dollars from Medicaid.

It just shows they are not listening to the people who elected them.

Poll after poll has shown that huge majorities of Americans (including a small majority of Republicans) don't think the rich need a tax cut. They actually think the rich are not taxed enough! But while the public won't like more tax cuts for the rich, it is the cuts to Medicaid that will cause the most blowback.

Republican officials (and too many in their base) seem to think that Medicaid only goes to nonwhites in the large cities - and since those cities tend to vote blue, they won't be hurt. But they are going to find out that is simply not true.

Medicaid is badly needed by ALL of the poor - including whites and those living in rural areas. And losing Medicaid would not only hurt the rural poor - it would hurt everyone living in rural areas. That's because rural hospitals need it to stay in business.

Many rural hospitals have closed, and many more are in danger of closing. They are barely covering their costs. Losing the money they get from Medicaid patients would push them over the line, and they would have to close. It would mean rural patients would have to go to the nearest city if they needed hospital care, and that could be hundreds of miles from some rural areas.

This wouldn't just hurt the rural poor. It would hurt everyone living in a rural area - even those with private insurance or plenty of resources. 

Rural voters voted for Republicans because they thought it would make their lives better. Congressional Republicans are now showing them they were wrong. Cutting Medicaid to give tax cuts to the rich is just putting a knife in the back of Rural people

Voters Oppose More Tax Cuts For The Rich And Corporations

The chart above is from a Hart Research Poll -- done between February 12th and 16th of a nationwide sample of 1,011  U.S. voters.

The GOP Will Make Health Care Worse To Give Tax Cuts To The Rich

The following is part of an article by Aaron E. Carroll in The New York Times:

The Trump administration faces a dilemma: The president has promised to extend the 2017 tax cuts (nearly half of which will go to the wealthiest 5 percent of Americans) at a hefty cost of $4 trillion over the next decade, but many Republicans are reluctant to add to the federal deficit.

How do they square the math? It appears they are prepared to do so at the expense of the poor and middle class, by yanking health care coverage from children, new mothers, people with disabilities and seniors. Republican leaders in Congress have suggested that one option they are considering to bankroll their tax breaks would be to cut hundreds of billions from Medicaid; another proposal would roll back subsidies that have helped middle-class families pay Affordable Care Act premiums. 

It’s hard to overstate how catastrophic the proposed cuts would be. Medicaid alone covers more than 40 percent of births in the United States. Far from being a handout, it is one of the most cost-effective insurance programs in the country, meaning there is very little fat to cut without immediately harming people. It’s because of Medicaid that children, seniors and people with disabilities — groups that make up more than 75 percent of the program’s spending — can see doctors and fill prescriptions without going bankrupt.

In their menu of options, House Republicans propose adding work requirements to Medicaid, which would cut benefits to some recipients and, they claim, save billions. Proponents of work requirements argue that such measures incentivize employment, but the evidence overwhelmingly shows that they don’t. This is because nearly every adult in Medicaid who can work alreadydoes, or is a student, disabled or a caretaker for someone else. Instead, people lose access to care because of bureaucratic red tape and difficulty proving they qualify. Work requirements bloat the bureaucracy and result in worse care for fewer people.

Republicans are also considering distributing a set amount of money to states, regardless of what care actually costs. But states are already struggling with tight budgets. They don’t have hidden, untapped solutions to magically fund health care. With less money, they must refuse coverage to more people or pay providers even less, which means fewer doctors will see Medicaid patients, which reduces access for everyone. Twelve states have trigger laws on the books that might end Medicaid expansion programs or severely cut them if the federal government reduces funding.

Medicaid isn’t the only potential victim. Congressional Republicans are also eyeing the Affordable Care Act’s premium subsidies — the same subsidies that help working Americans buy private insurance at more affordable rates. Roll back these credits, and families could see their monthly premiums soar by hundreds of dollars. . . .

We should be honest about these trade-offs: Families lose health insurance if we cut Medicaid or slash A.C.A. premium credits. Children go without care. Clinics and hospitals in rural areas close. People suffer. . . .

Gutting Medicaid, or making it impossible for middle-class Americans to afford A.C.A. exchange plans, is callous. No parent should choose between taking a child to the emergency room and paying the grocery bill. 

GOP Is Ready To Punish Most Americans To Subsidize The Rich

The chart above (from Politico.com) is the preliminary list of things the congressional Republicans are considering cutting. Why? So they can give massive tax cuts to millionaires and billionaires (the only people in the country that don't need government help).

Don't let the innocent sounding names fool you - these are cuts! They want to cut billions from Medicare, Medicaid,  Obamacare, assistance for the poor, climate change, student loan bailouts, and other things that currently help ordinary Americans.

If they cut all (or most) of these things, millions of Americans would be hurt. And even added to Trump's proposed tariffs (which would increase inflation), it would not be enough to offset the tax cuts they want for the rich and corporations.

Republicans like to pose as the fiscally responsible party - the party that want to lower the federal debt. But their tax cut for the rich would increase the federal national debt massively. They only oppose spending when it helps ordinary Americans. When it's a giveaway to the rich they don't mind increasing the debt.

There were voters in the last election that voted for Trump and the GOP because they thought it would be better for working people. They were fools. The Republicans (and their orange demagogue) don't care about anyone but the rich. 

The Republican Party is the party of the rich and corporations. THAT IS JUST A FACT!

Five Areas Economists Will Be Watching In 2025

 

The economy is good right now (although it could be fairer). With Trump as president the economy won't get any fairer, but it could get worse. Here are five areas that economists will be watching in 2025:

1. Tariffs

Trump’s plans to impose sweeping tariffs are likely to be one of the biggest threats to the economy, experts say.

The president-elect has vowed to penalize the country’s largest trading partners by levying tariffs — an extra 10 percent on Chinese goods and 25 percent on imports from Mexico and Canada — that economists say could quickly raise prices. The necessities that could soon be getting costlier range from big-ticket items such as cars and appliances to everyday basics like groceries and gas. During his campaign, Trump also discussed sweeping tariffs on all imports, not just from those countries, which would affect even more goods if implemented.

“Tariffs make things more expensive,” Alex Durante, an economist at the Tax Foundation, a right-leaning think tank, told The Washington Post. “They shrink the economy, and they make people poorer.”

2. Deportations

A recent surge in immigration has helped power economic growth and boost the job market. But economists say Trump’s plans to deport millions of undocumented migrants and curb immigration more broadly could hobble the labor market.

3. Tax cuts

The sweeping tax cuts Trump signed into law in his first term are set to expire at the end of 2025. Those will “almost certainly” be extended, according to Howard Gleckman, a senior fellow at the Tax Policy Center.

The gains, though, would be concentrated at the top: The wealthiest Americans would see the largest gains, with families making over $450,000 reaping nearly half the benefits if existing tax cuts are extended, according to an analysis by the Tax Policy Center.

4. Inflation

The Federal Reserve has made strides in bringing down inflation with a series of aggressive interest rate hikes. But lately, progress has stalled, and economists say it could unravel even further next year if Trump moves forward on some of his more draconian tariff and immigration plans.

Deutsche Bank estimates that one measure of inflation — now at 2.8 percent — could rise to as much as 3.9 percent next year if the new tariffs are enacted, up from original estimates of about 2.5 percent.

5. Stocks

During his last term, Trump routinely boasted about the stock market’s performance, which reached new highs under his watch. But economists say a repeat performance may be tough to pull off.

Stocks have continued their ascent under Biden, with all three major indexes — the S&P 500, Dow Jones Industrial Average and Nasdaq composite index — hitting all-time highs in recent weeks. That’s boosted the portfolios of the country’s wealthiest, allowing them to keep spending in a way that’s powering the economy.

But the market’s heyday may soon be coming to an end: Stocks tumbled after the Federal Reserve suggested in mid-December that it is rethinking how often it will cut interest rates next year. And economists warn that any additional curveballs, including government policies that hamper growth, could quickly reverse recent gains.

GOP: Tax Cuts For Rich & Corporations Trumps Infrastructure

Republicans have been saying for years that they support upgrading the nations infrastructure, but one has to doubt if they are really telling the truth.

In the last four years, they were unable to come up with any infrastructure bill they could agree on -- either from the White House or from Congress. 

Now President Biden has come up with an infrastructure bill that would massively improve the nation's infrastructure over several years. But the congressional Republicans oppose his bill.

Why? Because he would pay for the improvements in infrastructure by raising corporate taxes to 28%, and increase taxes on those making over $400,000 a year. 

The Republicans like to say Democrats spend too much without paying for the expenditures -- thus increasing the national debt. They can't say that about this bill, because it has included a way to pay for the improvements. They are now exposed as caring only about keeping corporations and the rich from paying their fair share of taxes.

The following is part of an article in The Washington Post by James Downie:

After President Biden introduced his $2 trillion infrastructure package last week, he said, “I’m going to bring Republicans into the Oval Office, listen to them, what they have to say, and be open to their ideas.” On “Fox News Sunday,” National Economic Council Director Brian Deese added, “There’s a lot of sensible reform we could do … that would also generate revenue across time. If people have different approaches to that, he’s open to doing it.” Biden’s openness may be a “good-faith effort,” as Deese insisted, but Republicans proved again Sunday that when it comes to “sensible reform,” they’re out of ideas. 

When asked whether the country needs an infrastructure upgrade, Republicans were quick to affirm it does. “Absolutely,” Sen. Roy Blunt of Missouri told Fox. “There’s no doubt that Mississippi could use” the money, Gov. Tate Reeves said on CNN. “We need it,” Sen. Roger Wicker of Mississippi agreed on “Meet the Press.”

Bipartisanship ahoy? Not so fast — Republicans don’t like the Biden plan’s corporate tax increase, which would raise rates to 28 percent (a level that preserves half of the rate cut imposed during Donald Trump’s presidency). “What the president proposed this week is not an infrastructure bill. It’s a huge tax increase,” said Wicker. “We don’t have to hike taxes by $2 trillion,” complained Reeves.

So how would Republicans pay for upgrades that they agree are needed? Well, there they sound pretty much stumped. “I’m open to suggestions about that,” said Wicker. “One way you pay for it is by seeing significant improved economic growth,” suggested Reeves — which, as CNN host Jake Tapper pointed out, “doesn’t really answer the question.”. . .

What makes the GOP intransigence particularly silly is that it’s in defense of a corporate tax cut that didn’t work — for most Americans, that is. When Republicans slashed the corporate tax rate as part of a broader tax reduction in 2017, they predicted that a lower rate would boost companies’ return on investment, raise Americans’ wages and help the bill pay for itself. Even before the pandemic, however, none of those promises came to pass. After an initial bonanza, investment fell short of GOP hopes, with most of the money instead used for dividends and stock buybacks. Wages didn’t rise because of the cuts. In 2019, the Congressional Budget Office estimated that the law paid for only one-fifth of its cuts. . . .

Remember, whenever the Trump administration launched one of its many ill-fated “infrastructure weeks,” Republicans rarely balked at the price tags — not because those proposals were always funded but because they didn’t make the wealthy and big business pay more of their fair share. So if Biden does sit down with Republicans to talk about paying for an infrastructure package, everyone in the room should be clear on one thing: Republicans don’t really care if this bill — or any other Democratic bill — is paid for. They just don’t want their friends covering the cost. The good news for Democrats is that view is a loser with voters.

Tax Cuts For The Rich Only Help The Rich - No One Else

For the last 50 years or so in the United States (and many other capitalist countries), the main economic policy pursued was to cut taxes for the rich.

Conservatives assured the people that this would benefit everyone in the country, because much of that extra money given to the rich would "trickle-down" to the rest of the people.

There's only one thing wrong with that policy -- it doesn't work! These tax cuts made the rich much richer, but did not benefit anyone else. Nothing trickled down. And because of that, the policy just made the gap between the rich and the rest of the country much wider -- and it continues to do so.

Common sense should have told us that, especially after decades of failure to work. Unfortunately, it hasn't. Conservatives still are able to con large segments of the people into believing their failed theory.

Now there is a study that exposes the truth. It was done by David Hope (London School of Economics) and Julian Limberg (King's College London). They looked at the tax cut policy in 18 countries (including the U.S. and the U.K.). Here is how Bloomberg Wealth News covers their findings: 

Tax cuts for rich people breed inequality without providing much of a boon to anyone else, according to a study of the advanced world that could add to the case for the wealthy to bear more of the cost of the coronavirus pandemic.

The paper, by David Hope of the London School of Economics and Julian Limberg of King’s College London, found that such measures over the last 50 years only really benefited the individuals who were directly affected, and did little to promote jobs or growth. . . .

The authors applied an analysis amalgamating a range of levies on income, capital and assets in 18 OECD countries, including the U.S. and U.K., over the past half century.

Their findings published Wednesday counter arguments, often made in the U.S., that policies which appear to disproportionately aid richer individuals eventually feed through to the rest of the economy. The timespan of the paper ends in 2015, but Hope says such an analysis would also apply to President Donald Trump’s tax cut enacted in 2017.

“Our research suggests such policies don’t deliver the sort of trickle-down effects that proponents have claimed,” Hope said.

Here is the study for those who would like to read it.

The GOP Tax Cuts Are Not Working As Promised

Donald Trump and the Republicans made a lot of promises when they passed their tax cuts in 2017. It was supposed to cause massive job growth, huge wage growth for workers, and provide tax cuts for the middle and working classes. None of that happened. While the rich and corporations got huge tax cuts, almost none of it was shared with the rest of the population -- and that is unlikely to happen in the future either.

Here is how Hunter Blair of the Economic Policy Institute puts it:

Proponents of the Tax Cuts and Jobs Act (TCJA) made bold claims about the effects that the TCJA’s corporate rate cuts would have on the paychecks of U.S. households. The economic theory rests on corporate rate cuts bringing forth enough additional savings to finance new investment spending. Specifically, higher after-tax corporate profits are passed down to shareholders in the form of higher dividends. These higher dividends attract more savings from abroad and incentivize U.S. households to save more. These extra savings finance new investments in plants and equipment, which boost the productivity of workers, and eventually that increased productivity boosts workers’ wages.

We pointed out at the time that in practice, this theory wasn’t likely to hold. After the TCJA passed, we indicated that by increasing deficits, the specifics of the TCJA didn’t even conform to the economic theory that was supposed to support it.

But that wasn’t enough to stop the TCJA’s proponents from making disingenuous arguments about the effects it was having on the economy. Proponents pointed to corporate claims that they were giving out bonuses or raising wages in the wake of the TCJA. The economic theory above shows clearly how this was nothing but a corporate PR ploy. Even in theory, it takes time for corporate profits to trickle down into worker wages, and we weren’t the only ones pointing this out. Unsurprisingly, data since then show those bonuses didn’t materialize for workers.

Kevin Hassett, then the chair of the Trump administration’s Council of Economic Advisers (CEA), went so far as to bless the truly economically absurd notion that “retroactive tax cuts” are a way to boost long-term growth, claiming that businesses invested more before the TCJA was passedbecause they somehow knew that some of the TCJA’s corporate provisions would be made retroactive.

But if you want to know if the TCJA is working as advertised, investment really is the key economic indicator to watch. If the TCJA’s corporate rate cuts are to even have a chance at reaching your paycheck, first investment has to boom. The results have been abysmal for the TCJA.

Year-over-year real, nonresidential fixed investment growth continues to fall off a cliff. If the TCJA was working, we should have seen an investment boom. Instead, after the passage of the TCJA, investment growth continued along its pre-TCJA trend for a couple quarters before falling all the way to 1.3% in 2019Q3. To be clear, if the TCJA’s corporate rate cuts were working, we would be seeing a permanent rise in investment. Instead, investment growth is cratering.

There is little hope in the data that this will change anytime soon. Capital goods orders were down once again in September. And year-over-year growth of capital goods orders has seen a steady but sharp decline in the wake of the TCJA.

The TCJA’s corporate rate cuts haven’t produced the investment boom proponents promised, but what they have done is exacerbate decades of rising income inequality. They should be repealed.

The GOP's Tax Cut Policy Has Been An Abysmal Failure

(This caricature of the catastrophic failure of the Republican elephant's policies is by DonkeyHotey.)

For decades now, the main emphasis of Republican economic policy has been tax cuts -- especially tax cuts for the rich and corporations.

This policy is known to economists as "supply-side economics", and more commonly known to the general public at "trickle-down economic policy".

The idea is that by giving tax cuts to the rich and corporations, the economy will be boosted and the economic advantages will trickle down to all segments of the economy (through job growth and increased wages for workers). It is also claimed by the GOP that these tax cuts will pay for themselves through economic growth resulting in increased government tax revenues.

This has never happened. While the tax cuts have fattened the bank accounts of the rich and corporations, it has not increased job creation or increased wage growth for workers. And it has never paid for itself through increased government revenues. In other words, this GOP economic policy has been an abysmal failure. In spite of the constant failure of this policy, the Republicans cling to it -- apparently still convinced that giving more to the rich will benefit everyone.

Following is an op-ed by Steven Strauss in USA Today detailing the failure of this Republican policy.

Since the Reagan administration, Republicans have fervently claimed lower taxes will unleash the "makers" — incentivizing them to work harder and invest more, thereby trickling down to benefit ordinary Americans. Moreover, they have consistently claimed that their tax cuts would create such dramatic economic growth that they’d literally pay for themselves. A rising tide lifts all boats! No hard choices to make — just cut taxes!

Instead, the national debt is at a record high, and the gap between the richest and the poorest U.S. households is now the largest it has been in the 52 years the Census Bureau has been tracking it. And that inequality gap started to expand dramatically about the same time the Republican Party started cutting taxes. 

More growth during higher-tax eras 

The American economy since 1950 offers a chance to consider the impact of these tax cuts. From 1950 to 1980, the top federal marginal tax rates (the rates on income above certain levels) were as high as 92% and never below 70%. Republicans have been slashing the top tax bracket for annual earned income since the early 1980s, and it is now 37% on income above $612,350. 

Further, in 2003 the GOP shrank the tax rate on unearned income (such as dividends) to 15%, resulting (for example) in the billionaire Warren Buffett having a lower tax rate than his secretary. With such dramatic tax cuts, GOP dogma predicted a booming U.S. economy.

But it turns out U.S. economic growth was substantially higher during the period of high taxes. From 1950 to 1980, average annual growth in real (inflation-adjusted gross domestic product) was 3.9%, while from 1981 to 2018 the comparable number was 2.7%. 

Similarly, during the high tax period, median household incomes increased on average (in real terms) by a bit over 2.5% per year. During the low income tax period, average real growth in household income declined to 0.7% per year.

Disciples of the Cult of the Magic Tax Cuts will generally respond to these facts by noting that economic growth stems from a number of factors besides tax policy (such as external markets, investment in education and government funding of basic research).  These cultists claim that America’s results from 1980 to the present would have been much worse without the GOP’s obsessive reliance on tax cuts. 

But roughly 40 years of GOP tax cuts have provided opportunities for controlled studies of the American economy, and they don't show that. 

No impact on paychecks or investment

For example, Republican President George W. Bush’s 2003 tax act reduced the top tax rate on dividend income from 38.6% to 15% — a massive reduction that was supposed to trigger an investment boom and a trickle-down of benefits, such as higher compensation, to ordinary Americans. However, in a 2015 study of IRS data from 1996 to 2008, published in the American Economic Review, Berkeley economist Danny Yagan found that "the tax cut had no detectable impact on investment or employee compensation."

Another study, “Do Tax Cuts Produce More Einsteins?”, looked at how government tax incentives influenced individuals’ decisions to pursue careers in innovation (using a dataset of 1.2 million inventors, including their tax information). The study found that “financial incentives, such as top income tax reductions, have limited potential to increase aggregate innovation because they … have no impact on the decisions of star inventors, who matter most for aggregate innovation.”

Tax cuts cost money we don't have

More intuitively, the idea that Mark Zuckerberg was thinking about his tax rate while working in his college dorm room on what became Facebook is ridiculous.

Another (though related) argument the GOP keeps making is that its tax cuts will pay for themselves. The available data, however, show that the 2003 tax cut and an earlier cut in 2001 benefited the richest Americans, and did not pay for themselves (indeed, by some calculations the two tax cuts added $5.6 trillion to the national debt). 

More recently, Republican Treasury Secretary Steven Mnuchin claimed that the GOP’s 2017 tax cut would not only pay for itself, but would actually reduce the federal deficit by $1 trillion. So far (according to the nonpartisan Congressional Budget Office), the 2017 tax cut isn’t paying for itself with higher tax revenue, and it’s projected to add $1.5 trillion to our national debt over the next 10 years.

GOP must stop believing in magic 

I’m not making a plea for larger government — just a plea for economic sanity. If Congress in its all-seeing wisdom wants to spend $700 billion on the military, billions of dollars on farm subsidies and so on, it must either raise enough money in taxes to pay for the programs it authorizes or reduce the size of government. 

Instead, although Republicans controlled the White House, the Senate and the House from 2017 to 2019, they chose not to make (or even seriously debate) any substantial cuts to government programs that would balance the revenue lost by their series of massive unfunded tax cuts.

Unquestioning and unsubstantiated belief in the magical power of tax cuts isn’t a viable economic policy. The GOP is putting America on an unsustainable path that is disastrous both for its fiscal future and for the hopes of people trying to get ahead.