There were many polls leading up to the 2016 U.S. presidential election and in the vast majority of them, the American people expressed their beliefs that the Republican Party was a better choice to deal with the economy. As an example, participants in the George Washington University Battleground Poll conducted April 17 – 20 of last year chose the Republican Party over the Democratic Party by 53% to 42%. This doesn’t really surprise me because Republicans and right leaning media sources proclaim loudly and often that the democrats are bad for the economy, and Americans seem to be easily swayed by fake news, especially when expressed loudly. I call it Reality TV journalism. If you make the news feel the same as entertainment, people will accept it without verification.
History tells us, however, that the economy does considerably better under Democratic administrations than under Republican ones. Forbes put out an article in September which compared economic performance under different administrations (“Trump Vs. Clinton: Which Party is Better For The Economy?” from September 16, 2016). Here are some interesting findings:
- If you had $10,000 in an IRA, during the 16 years of Democratic administrations (Clinton, Obama) it would have grown to $72,539. During 16 years of Republican administrations (2nd half Reagan, H.W. Bush, G.W. Bush) it would have grown to $14,986.
- All six of the major market crashes happened under Republicans – Hoover, Nixon (twice), Reagan, G.W. Bush (twice).
- Corporate profits grew 26.8% during Reagan’s eight years (best performance of last three Republican presidents), but grew by more than double that during Obama’s eight years (55.8%).
- During G.W. Bush’s two terms, 1,348,000 jobs were created while during Obama’s two terms, 10,545,000 jobs were created including the 3,681,000 jobs lost during the last two years of the Great Recession which was began before he took office.
- At the end of G.W. Bush’s presidency, the budget deficit was 9.8% of the country’s gross domestic product (GDP), while it is now only 2.8% of GDP at the end of Obama’s term.
Those macroeconomic numbers paint quite a picture, but there is a microeconomic situation that has me more concerned and prompted this post.
Most of you likely heard how the Republicans in the House of Representatives attempted to change the rules that govern the next two years in order to eliminate independent oversight of the ethical behavior of lack thereof for members of the House. There was a backlash from the media and public, and Mr. Trump tweeted his rebuke, and House Republicans backed down. The Office of Congressional Ethics retained its independence.
There’s another rules change which was approved this week that breaks from tradition, and the tradition broken is one of fiscal responsibility. The rules change passed with a vote in which all 193 Democrats and three Republicans voted “No.”
As a result of that lopsided vote, any transfers of federal lands to local governments will be considered “cost-free” for the federal government, even if that is not the case.
This is big. Since 2010, the Republican controlled House required that any action that increased costs to the federal government or reduced federal revenue had to be offset by some other action. The goal was to keep the federal budget deficit in check by making sure changes could be fiscally justified. For example, if a new spending program was expected to cost an additional $2 billion, the proponents would have to find cuts to other programs totaling at least $2 billion. Similarly, if a change were to reduce federal revenue by $3 billion, spending cuts were required that reduced spending by a similar number. This was a budget-neutral rule which most of us have to deal with everyday in our personal lives – credit cards excepted.
The recent rule change making transfers of federal land “cost-free” blows that fiscal responsibility out of the water. Transfers are not generally cost-free. The federal government collects money from mining and grazing rights, and other sources, and that is lost revenue. Because the House will now treat these transfers as cost-free, it means that House Republicans are willing to add to the national debt in order to provide favors to their friends and supporters.
Is anyone else worried about this? The primary issue that Republicans have tried to hammer in for years – that they are better for the economy that Democrats – is discarded as soon as Republicans have gained control of both the executive and legislative branches of government.
I think we are in for a rough ride over the next two years. There appears to be no desire on the part of the Congressional leadership to work across the aisle on programs that benefit all Americans. It seems as if Republican ideals – much more conservative ideals than when Republicans last held both non-judicial branches of government – will be shoved through because they can do it.
And one thing that may be pushed through could be tax cuts for the wealthy. If the Republicans are willing to call federal land transfers cost-free, we may use similar “magical thinking” when it comes to tax cuts. For example, you can call a tax cut revenue neutral as long as your projected growth rate for the economy is high enough. Economic experts and the Congressional Research Service may disagree with a high growth rate number, but that will not matter if Congress decides to choose a number that meets the “pay-as-you-go” rule.
They don’t have to believe in the growth number; that’s not the point. The point is simply to reward their friends and the Republicans have wealthier friends than Democrats, so a tax cut for the rich is the goal. The magical thinking growth rate is just the means to the goal.
It is time for the public to get involved. There was quite an outcry over House Republicans’ attempt to eliminate the independence of the Office of Congressional Ethics, and they backed down. We need to be vigil and make noise when shady deals come to light. Remember that Congress is supposed to work for us, the American people, not just the Americans who give them the most money.