At A Minimum

The mood seemed tentatively upbeat as some markets returned from the holiday Monday and US equities appraised jobs data and an unfurling debate over the “right” way to approach infrastructure spending.

The GOP is apparently prepared to get behind a modest proposal with a price tag of around $600 billion (versus Joe Biden’s $2.25 trillion plan). That’s obviously laughable. $600 billion to repair and modernize the infrastructure of the world’s largest economy. Forgive me, but that’s not a serious suggestion.

Republicans also insisted that Biden’s plan to raise corporate taxes is a job-killing non-starter. Donald Trump’s tax cuts were “a plan that worked,” Mississippi Senator Roger Wicker told NBC’s “Meet the Press.”

He’s right. Those tax cuts did work. Specifically, they worked to boost corporate profits, incentivize share buybacks and enrich capital.

That wasn’t lost on Chuck Todd. “This tax cut that you guys put through in 2017, there were various promises that were made — that they would pay for themselves, hasn’t come close to that — that it was going to produce 4%, 5% or 6% growth — we didn’t even get 3% growth,” Todd reminded Wicker.

Then he quoted Trump. “At one point, former President Trump said, ‘This thing’s going to pay off the debt like it’s water. Well, as you know, the debt is way up.”

The chart (below) doesn’t include the pandemic. It shows, in simple terms, that Donald Trump and the GOP materially worsened America’s finances (assuming you believe deficits are inherently nefarious). The tax cuts were a big reason why.

Todd went on lecturing Wicker: “So I guess, you look at this tax cut proposal, when most of the benefits seem to go to stockholders. You know, corporations didn’t do what you thought they were going to do, which is take this savings and invest. They instead did stock buybacks. So, wasn’t this tax cut kind of an economic failure?”

Wicker said it wasn’t a failure, but he seemed to distance himself from some of Larry Kudlow’s dubious budget forecasts. “Now, some of these predictions that you mentioned, I never participated in that,” Wicker told Todd. You can write your own jokes.

This is an (extremely) uncomfortable reality for many in the GOP, but the fact is, Trump’s economy was no better in aggregate than Barack Obama’s economy. The averages in the chart (below) for Trump and Mike Pence don’t include the pandemic, which is clearly marked.

Mitch McConnell told reporters in Kentucky that America doesn’t need “a big, whopping tax increase.” On corporations and the wealthy. He forgot to mention that part.

He also didn’t mention that it’s not a “big, whopping” increase. As Jen Psaki reminded McConnell last week, Biden’s plan would still leave the corporate tax rate “lower than it’s been over the last 70 years and across decades.”

Janet Yellen, meanwhile, is looking to reduce the offshoring incentive for corporates by making the case for a global minimum corporate tax rate.

“Competitiveness is about more than how US-headquartered companies fare against other companies in global merger and acquisition bids,” Yellen told the Chicago Council on Global Affairs. “It’s about making sure that governments have stable tax systems that raise sufficient revenue to invest in essential public goods and respond to crises, and that all citizens fairly share the burden of financing government,” Yellen said, before announcing the administration is “working with G20 nations to agree to a global minimum corporate tax rate that can stop the race to the bottom.”

Early last month, the UK’s Rishi Sunak indicated he was set to become the first Chancellor of the Exchequer to raise corporate taxes since the 70s.

Once again, we’re seeing that the pandemic has forced the issue when it comes to bringing forward an inevitable reckoning with a system that was becoming increasingly untenable over time, and risks a further fraying of developed nation social fabric. Last week, the IMF called for more redistributive tax policies around the globe in part to avert further societal rifts in advanced economies.

As Axios put it, “Yellen’s task is to make the international case [and] her speech was designed to set the tone for the annual spring IMF and World Bank meetings in Washington” which take place this week.

In a rebuke to Trump, Yellen on Monday declared that “America first must never mean America alone.” She also called on other nations “to continue a strong fiscal effort and avoid withdrawing support too early, to promote a strong recovery and help avoid the emergence of global imbalances.”