What are you going to believe: Republicans’ claims about inflation or the party’s record?
As right-wing politicians around the country holler about inflation, they conveniently ignore the long-term impact of former President Donald Trump’s 2017 tax cuts. Trump’s cuts, geared to help the wealthy, bloated the federal budget deficit, which left the government less leeway when it needed it to rescue the economy from COVID-19.
Now, some Republicans want to extend parts of Trump’s tax cuts that are scheduled to sunset over the next three years and add new ones. That, in the judgment of many economists, could help drive up inflation and make rich people richer while everyone else takes it on the chin.
To pay for the tax cuts, Republicans are talking about cutting Medicare, Social Security and Medicaid, limiting aid to Ukraine and raising drug prices.
Such a deal. Don’t like it? You are out of step with today’s Republican Party.
Back when the Trump tax cuts were being debated, economists warned the cuts could eventually lead to out-of-control inflation. And, economists said, the cuts would force the government to borrow to deal with emergencies. In 2021, ProPublica reported the national debt rose by almost $7.8 trillion during Trump’s time in office. That didn’t help the government’s ability to borrow. Ouch.
Back in 2017, no one knew the COVID-19 pandemic would strike. But it did, along with a war in Ukraine. More emergencies are inevitable. That’s why it was smart that President Joe Biden in August signed a minimum corporate tax of 15% into law. If that’s repealed, as some Republicans want, it would allow many corporations to return to paying 0%.
In September, House Minority Leader Kevin McCarthy, R-Calif., said he wants to give businesses more tax breaks while reducing the tax rate paid by the highest-earning taxpayers to 37% from 39.6%. That’s a gift to the wealthy at the expense of people who live paycheck to paycheck, and is wrong-headed.
To confront inflation, corporate profits — which are the highest in decades — should be the target, not working people. Higher corporate profits reportedly account for more than half of today’s price increases.
Inflation is pernicious. Those who remember the double-digit inflation of the 1970s recall how it devastated people on fixed incomes and reduced the real wages of workers.
Carefully timed and thoughtfully directed tax cuts can in theory boost the economy enough to pay for themselves. But too often in recent years, ill-advised cuts have led to more government borrowing. They have driven up the government deficit. Republicans have laid out no credible plan now to bring down inflation.
When tax cuts pump more money into the economy, it increases demand, which drives up prices, makes inflation worse and prompts the Federal Reserve to raise interest rates to combat inflation. Under the Republican plan, some working people will get modest tax cuts, but they will pay for them with higher prices and interest. They also will pay through those cuts to Social Security and Medicare, programs into which they have long paid.
Politically, refusing to cut taxes might put Democrats on the spot. If they don’t go along, Republicans can use the issue in the 2024 elections. But if Democrats cave, that won’t help the economy. Biden might find himself in another session of brinkmanship if Republicans refuse to raise the federal borrowing cap, as they have in the past, to get their way.
Democrats aren’t always particularly responsible at budgeting time. But they have often been better fiscal stewards than their opposition.
The claim of irresponsible Republicans that they would do a better job than Democrats of containing inflation is just not believable. So far, they have shown no interest in doing so, just as they have proved time and again they don’t care about the national debt when they hold the reins of power.
The Sun-Times welcomes letters to the editor and op-eds. See our guidelines.
