After failing to convince voters that tax cuts were bad, leftwingers, such as the Washington Post's Catherine Rampell, have gone to Plan B. Now such pundits are insisting that the great tax cut of 2017, passed in Congress and signed by President Trump, will be a disaster.
In a recent column, Rampell said that government revenues would fall by $10 billion to $15 billion per month, because the tax cuts will lead to higher deficits.
The financial doomsday clock is ticking, and, thanks to the massive tax cuts passed by Congress in December, the ticks just sped up.
Unless Congress gets its act together, the federal government will default on its debt in a few short weeks. This event would set off a constitutional crisis and a global financial crisis. And it would be not some inevitable catastrophe but wholly man-made, created by an inept White House and a Congress too distracted, disorganized or greedy to act in the nation’s best interest.
With a panicked claim like that, I think I would make her a one-sided friendly bet:
I will bet $1,000 to her favorite charity that government revenues are actually up $150 billion in the fiscal year 2018 vs. 2017, significantly because of the tax cuts.
The reasons for my confidence in my bet:
The economy has almost always grown faster after tax cuts and yielded the government significantly more money, not less.
The raises and bonuses and new investments relating to these tax cuts are kicking in very rapidly and the multiplier effect in the economy will be amazing.
Apple and many other companies are bringing huge amounts of money back to the U.S. Apple alone is going to pay almost $40 billion to the government.
The stock markets had many trillions in gains last year especially in the last quarter. Some portion of those gains will be taxed yielding the government more money this year.
In a previous column, Rampell said that Trump didn't know what he was talking about when he said the economy would grow much faster than the 1.9% the "experts" predicted so I will make you another friendly bet:
I will give another $1,000 to her favorite charity if the economy grows slower than 3.1% in both 2018 and 2019.
The reason for my bet:
Tax cuts, reform and fewer regulations always lead to substantial growth
The GDP grew 2.6% in the fourth quarter but was held down by a rising trade deficit and falling inventories which are both signs of strong demand, not weakness. Business spending was actually up almost 7%.
The announcements by major corporations in the first month after the cuts are phenomenal. More money in consumers' and businesses' pockets will trickle throughout the economy.
Consumer confidence and business confidence are way up.
Other predictions which I will not bet on, but which I am pretty confident of:
- The higher wages will not kick up inflation as much as usual because they come significantly from the tax savings instead of new costs. When government forces the costs up through regulations and mandates, that does cause significant cost push damaging inflation.
- Republicans will hold on to the Senate and House because I have not seen one proposal from Democrats in the last ten years that would lift up economic opportunities for all instead of making the government bigger and more powerful and making more people dependent on government.
- Countries will continue to trade with us and we will get a more balanced situation after Trump renegotiates.
In the future, as the private sector thrives and there are fewer regulations and lower taxes, there will be a need for fewer bureaucrats, and that will hopefully lead to more controlled budgets.
So Ms. .Rampell, let me know if you want the bets.
Part of Rampell's reason for being wrong is that she relies on CBO predictions, which almost always underestimate significantly the cost of government programs and just as significantly, underestimate the dynamic effects of tax cuts and less government. We hear they are unbiased and non-partisan, but the scales always seem to tip in favor of bigger government.
Example one of that is Obamacare: Anyone with an ounce of common sense would have known that a 2,000-page bill with many new taxes and massive mandates would raise costs and premiums and would reduce competition, but somehow CBO didn't understand that? CBO needs to work on its ground game.
As for Rampell, what we have here is the left desperately trying to salvage its failed doomsday call on tax cuts, by now saying the effects of the tax cuts will be bad. Nice try, but this won't work any better for them.