Debunking Democrat talking points on the Trump tax cuts

If nothing else, Democrats are persistent.  The U.S. economy is obviously responding to the tax cuts and dramatically reduced regulation brought on by the Trump administration and the Republican Congress.  But Democrats believe that there is room to trivialize our growing prosperity. 

There are three attempts:

1. There are still layoffs.

2. Some companies used the tax benefits to buy back stock.

3. It's trickle-down economics.

1. In an appearance as a panelist on Special Report, Mo Elleithee pointed out that there have been 40,000 people laid off since the passage of the tax cut.  The implication is that the economy can't be that strong if companies feel the need to cut employment. 

There is an easy answer at the macro level.  Even with these layoffs, the number of jobs is increasing, driving unemployment down and labor participation up.  That answer can appear both glib and non responsive.  It's worthwhile to look at actual layoffs.  

Kimberly-Clark is laying off thousands of workers and closing a plant that makes diapers.  Why?  According to the Washington Post, "Executives cited declining fertility rates in the United States and South Korea as factors that have contributed to a decline in diaper sales, long considered one of Kimberly-Clark's bedrock lines of business."

For similar reasons, Proctor and Gamble is closing a plant in Kansas City.  With the fall in enthusiasm for motorcycles  among young people, Harley-Davidson is also closing a plant in Kansas City.  It would be easy to think the people in K.C. would be in panic mode.  They aren't.

However, even with almost 1,500 workers due to hit the job market in the next two years, the groups are confident those people will get placed in new positions.

I never liked being laid off, but it felt a lot better when there were other jobs available.  These lack-of-demand layoffs would have occurred in the Obama economy at the same rate as they are occurring in the Trump economy.  Under Obama, they would have been a tragedy.  Under Trump, they are an annoyance. 

To avoid the tragedy, Obama might well have pushed to subsidize these companies as he subsidized other industries.  We'd all be up to our eyeballs in diapers.  At least they'd be unused. 

2. Stock buybacks.  This has happened and likely will continue to happen.  But what's the problem?  The obligation of a publicly traded corporation is to increase stockholder equity.  A stock buyback is an admission that the corporation's existing business model cannot profitably deploy additional capital.  In that situation, the only way to increase equity is to reduce the number of shares by using found capital to retire some outstanding shares.

For Democrats, the story ends here.  There is no new investment, therefore no new economic growth.  What an amazingly superficial view.  A buyback moves capital from corporations that cannot use it to people who are, by definition, investors.  Investors may put the money under a mattress, but the odds are that they will look for profitable places to invest it.  Investing is what investors do.

Of all the arguments that Democrats make about the economy and human behavior, this one ranks among the silliest.  They don't think things through.

3. It's just crumbs – another way of saying "trickle down."  The mantra is as follows: the big gifts of the tax cut go the big corporations.  The workers get crumbs.  It's all based on the trickle-down theory.

There are a couple of minor problems and one major problem with this Democratic position.  There are no gifts involved.  A tax cut lets corporations and people keep more of their own money.  Contrary to the constant refrain, almost everyone gets to keep more of his money.  Just about the only exceptions are the very high earners in high-tax states.  That's why I no longer live in a high-tax state.  On the other hand, everyone gets to make his own bed.

Here is the major point.  Businesses do get to keep more money because they have more in the first place.  To the income equality crowd, that sounds outrageous and unfair.  It isn't.  If people insist on viewing the world using the trickle-down metaphor, then they need to understand that it's all trickle-down.  Business creates wealth by creating value.  If the government takes wealth away to redistribute it to various people, how is that not trickle-down?  The problem with that method of trickling is that it discourages the creation of wealth.  Sooner or later, there is less wealth to be taxed and less wealth to be shared via salaries and bonuses.  If the Obama years proved anything, they proved that this approach makes us all poorer.

When the government allows the retention of wealth, investments are made that help everyone.  We see that with this tax cut.  The U.S. corporate tax rate was the highest in the world.  It is now in line with the rest of the world.  The results are clear to everyone.  Judging from the outlandish objections they raise, I think it's clear even to Democrats. 

If nothing else, Democrats are persistent.  The U.S. economy is obviously responding to the tax cuts and dramatically reduced regulation brought on by the Trump administration and the Republican Congress.  But Democrats believe that there is room to trivialize our growing prosperity. 

There are three attempts:

1. There are still layoffs.

2. Some companies used the tax benefits to buy back stock.

3. It's trickle-down economics.

1. In an appearance as a panelist on Special Report, Mo Elleithee pointed out that there have been 40,000 people laid off since the passage of the tax cut.  The implication is that the economy can't be that strong if companies feel the need to cut employment. 

There is an easy answer at the macro level.  Even with these layoffs, the number of jobs is increasing, driving unemployment down and labor participation up.  That answer can appear both glib and non responsive.  It's worthwhile to look at actual layoffs.  

Kimberly-Clark is laying off thousands of workers and closing a plant that makes diapers.  Why?  According to the Washington Post, "Executives cited declining fertility rates in the United States and South Korea as factors that have contributed to a decline in diaper sales, long considered one of Kimberly-Clark's bedrock lines of business."

For similar reasons, Proctor and Gamble is closing a plant in Kansas City.  With the fall in enthusiasm for motorcycles  among young people, Harley-Davidson is also closing a plant in Kansas City.  It would be easy to think the people in K.C. would be in panic mode.  They aren't.

However, even with almost 1,500 workers due to hit the job market in the next two years, the groups are confident those people will get placed in new positions.

I never liked being laid off, but it felt a lot better when there were other jobs available.  These lack-of-demand layoffs would have occurred in the Obama economy at the same rate as they are occurring in the Trump economy.  Under Obama, they would have been a tragedy.  Under Trump, they are an annoyance. 

To avoid the tragedy, Obama might well have pushed to subsidize these companies as he subsidized other industries.  We'd all be up to our eyeballs in diapers.  At least they'd be unused. 

2. Stock buybacks.  This has happened and likely will continue to happen.  But what's the problem?  The obligation of a publicly traded corporation is to increase stockholder equity.  A stock buyback is an admission that the corporation's existing business model cannot profitably deploy additional capital.  In that situation, the only way to increase equity is to reduce the number of shares by using found capital to retire some outstanding shares.

For Democrats, the story ends here.  There is no new investment, therefore no new economic growth.  What an amazingly superficial view.  A buyback moves capital from corporations that cannot use it to people who are, by definition, investors.  Investors may put the money under a mattress, but the odds are that they will look for profitable places to invest it.  Investing is what investors do.

Of all the arguments that Democrats make about the economy and human behavior, this one ranks among the silliest.  They don't think things through.

3. It's just crumbs – another way of saying "trickle down."  The mantra is as follows: the big gifts of the tax cut go the big corporations.  The workers get crumbs.  It's all based on the trickle-down theory.

There are a couple of minor problems and one major problem with this Democratic position.  There are no gifts involved.  A tax cut lets corporations and people keep more of their own money.  Contrary to the constant refrain, almost everyone gets to keep more of his money.  Just about the only exceptions are the very high earners in high-tax states.  That's why I no longer live in a high-tax state.  On the other hand, everyone gets to make his own bed.

Here is the major point.  Businesses do get to keep more money because they have more in the first place.  To the income equality crowd, that sounds outrageous and unfair.  It isn't.  If people insist on viewing the world using the trickle-down metaphor, then they need to understand that it's all trickle-down.  Business creates wealth by creating value.  If the government takes wealth away to redistribute it to various people, how is that not trickle-down?  The problem with that method of trickling is that it discourages the creation of wealth.  Sooner or later, there is less wealth to be taxed and less wealth to be shared via salaries and bonuses.  If the Obama years proved anything, they proved that this approach makes us all poorer.

When the government allows the retention of wealth, investments are made that help everyone.  We see that with this tax cut.  The U.S. corporate tax rate was the highest in the world.  It is now in line with the rest of the world.  The results are clear to everyone.  Judging from the outlandish objections they raise, I think it's clear even to Democrats.