Trickle Downers

The Prospect's ongoing exposé of the folly, dysfunctions, and sheer idiocy of feed-the-rich economic policies.

Tax Cuts for the rich. Deregulation for the powerful. Wage suppression for everyone else. These are the tenets of trickle-down economics, the conservatives’ age-old strategy for advantaging the interests of the rich and powerful over those of the middle class and poor. The articles in Trickle-Downers are devoted, first, to exposing and refuting these lies, but equally, to reminding Americans that these claims aren’t made because they are true. Rather, they are made because they are the most effective way elites have found to bully, confuse and intimidate middle- and working-class voters. Trickle-down claims are not real economics. They are negotiating strategies. Here at the Prospect, we hope to help you win that negotiation.

Trickle Downers

Target Takes the $15 High Road. Where’s Walmart?

Target, one of the largest retail employers in the country, announced Monday that it will raise its minimum wage for employees to $11 an hour starting in October, and gradually increase it to $15 an hour by the end of 2020. The new standard applies to Target’s 323,000 regular employees as well as to the 100,000 seasonal workers it plans to hire for the holiday season.

Clearly, Target realizes that the way to attract workers (and reduce turnover) in a tight labor market is not to gripe and moan about a supposed labor shortage but to bump up pay. As the Federal Reserve of Minneapolis President Neel Kashkari put it, “If you’re not raising wages, then it just sounds like whining.”

Walmart’s decision to raise its pay to $10 an hour last year prompted Target to follow suit. Company officials initially required new employees to complete a six-month “training” period before receiving that wage rate. After intense public criticism, they shortened that period to 90 days. Other employers took to the high road years ago. Costco has for several years now paid a starting wage of $11.50 an hour with average wages reaching $21 an hour. The retailer also offers health care to most employees.

But Walmart has more power than any American company to lift up wage standards across the economy. With nearly 1.5 million employees in the United States, Walmart is the largest employer in the country. Yet, Walmart has thus far resisted calls to go higher than $10 an hour. It is nearly impossible to make a living on that kind of wage, especially if you’re working part-time—as many Walmart employees do.

The retail behemoth’s low wages, which force its employees to rely on public assistance programs, cost taxpayers an estimated $6.2 billion in 2013. Employers who insist on taking the low-wage road act as parasites and end up costing taxpayers $152.8 billion every year, according to a 2015 study by the University of California, Berkeley Labor Center.

Target is taking a step in the right direction by getting on a path to $15 an hour. Walmart should follow suit. It can certainly afford to pay its workers more money. In recent years, the company has bought back about $50 billion of its shares, funneling those profits into the Walton family fortune rather than into workers’ pockets. 

By paying at least $15 an hour, the company would not only be treating its own employees fairly; it would be lifting up wage standards throughout the economy. To focus the minds of company officials at Walmart and elsewhere, a group of House Democrats have kickstarted an idea: levy a fee on companies equivalent to the amount of public assistance its employees are eligible to receive, since their employers can’t be bothered to pay them fairly in the first place. 

Tax Cuts for the rich. Deregulation for the powerful. Wage suppression for everyone else. These are the tenets of trickle-down economics, the conservatives’ age-old strategy for advantaging the interests of the rich and powerful over those of the middle class and poor. The articles in Trickle-Downers are devoted, first, to exposing and refuting these lies, but equally, to reminding Americans that these claims aren’t made because they are true. Rather, they are made because they are the most effective way elites have found to bully, confuse and intimidate middle- and working-class voters. Trickle-down claims are not real economics. They are negotiating strategies. Here at the Prospect, we hope to help you win that negotiation.

Trump Swears He Doesn’t Want to Cut Taxes for Wealthy

The president and GOP leaders would have you believe their tax cuts will help the middle class, not the rich. Reality would suggest otherwise. 

(Photo: AP/Charlie Neibergall) President Donald Trump reacts to supporters after speaking about tax reform at the Andeavor Mandan Refinery, Wednesday, Sept. 6, 2017, in Mandan, N.D. trickle-downers_35.jpg I f it seems as though Republican leaders have been on the verge of unveiling their master plan for securing tax cuts for months, it’s because they have. And next week, those GOP’s tax architects may actually get around to announcing to letting the rest of America in on the details. You can tell they’re getting very close to a deal now because they’re putting the word out to anyone who’ll listen that their plan definitely will provide a big-time tax cut for the middle class and definitely won’t lavish huge tax cuts upon the wealthiest households and most profitable corporations. Trump recently had this to say about taxes, “I think the wealthy will be pretty much where they are,” he told reporters at the White House. “If [their tax rates] have to go higher, they’ll go higher, frankly...

Louise Linton, Conservative Id

This week, Louise Linton, the wife of Treasury Secretary Steve Mnuchin, was forced to apologize for an "insensitive" comment she made on Instagram. While this may seem like nothing more than a silly social media spat, Linton's comment is indicative of a much larger issue present in American conservative thought and public policy.

After posting a photo of herself exiting a government plane after a #daytrip to Kentucky, Linton shot back at jennimiller29, a commenter who’d said, “Glad we could pay for your little getaway. #deplorable.” Linton’s defense invoked the theory of trickle-down economics: “Have you given more to the economy than me and my husband? Either as an individual earner in taxes OR in self sacrifice to your country? I’m pretty sure we paid more taxes toward our day ‘trip’ than you did. Pretty sure the amount we sacrifice per year is a lot more than you’d be willing to sacrifice if the choice was yours.”

According to Linton, the good folks at the top are actually burdened by their wealth, because their massive wealth provides a service to the rest of society. Not only do they “sacrifice” by the taxes they pay, but they're basically public servants of the economy. Never mind that the current tax system bolsters the wealthy through benefits that include the low capital gains tax rate, the mortgage interest deductions, and even a deduction for some expenses related to their yachts. The rich, with lifestyles so luxurious that the incautious among them will hashtag expensive brands on posts about government travel as Linton did (“#rolandmouret pants, #tomford sunnies, #hermesscarf, #valentinorockstudheels,” she wrote), need even more tax breaks because they stimulate the economy for less worthy consumers. How can jennimiller29, and all the other lowly workers, be so ungrateful?!

The American idolization of the rich is threaded throughout society's discourse and policy, birthed from the bootstrap myth that has helped define America, falsely, as a land of economic opportunity. In this storyline, hard work always equals success, and success always comes from hard work. It ignores the systemic problems that make social mobility difficult (racism, classism, inadequate policies to address these phenomena), and provides justification for a tax and welfare system that favors the wealthy. This makes it easy to villainize the poor and venerate the rich. 

Linton, in her response to jennimiller29, uses words like “adorable” and “cute”: “Your life looks cute” and “You’re adorably out of touch.” Such patronizing behavior toward someone less wealthy than her extends well past personal insults and into conservative policy proposals. Just last week, a bill was introduced in the Florida legislature to ban Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamps) recipients from buying soda with their benefits.

But like many uncomfortable social realities, it's essential that this love of class hierarchy remain unspoken. Let us not forget Mitt Romney's 47 percent remark, caught on a hidden camera, in which, as he put it, there are 47 percent of Americans "who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you name it."

Presidential candidates aren’t supposed to talk that way—something that even the otherwise uncensorable Donald Trump understood.

Linton's outburst, complete with emojis, may well have come straight from the egos and ids of the very rich, and comported with actual conservative doctrine, but it violated their rule of omerta: You’re just not supposed to, you know, talk about this stuff if there's a chance of a leaked video—or with your Instagram set to “public.”

Paul Ryan Is Lying About High Corporate Tax Rates

Republicans are taking their corporate tax-cut campaign on the road. House Speaker Paul Ryan visited airplane manufacturer Boeing on Thursday in Washington state, where he lamented how the company is quivering underneath the weight of a 35 percent tax rate. Meanwhile, Ways & Means Chair Kevin Brady sang the same song at telecom giant AT&T’s headquarters in Dallas.

There’s just one problem. Neither of these corporations pays the statutory 35 percent tax rate for corporations. Over the past eight years, Boeing has paid an effective tax rate of just 5.4 percent on its profits while AT&T has paid 8.1 percent, according to a report by the Institute on Taxation and Economic Policy. In fact, it’d be quite hard for Ryan to find a company to visit that actually does pay the full rate. Most corporations pay nowhere near the full rate thanks to a bevy of tax breaks and loopholes—the average is closer to 20 percent, though even that varies tremendously by industry.

Ryan and other GOP leaders want to shave the statutory rate down to 20 percent while President Donald Trump wants it reduced to 15 percent. Neither has given any indication as to whether their idea of corporate tax reform includes closing loopholes. They simply contend that cutting the rates will make American manufacturers more competitive with foreign companies, and will use the money they save to invest domestically in research and development, which will in turn drive economic growth and create jobs.

But through federal and state subsidies and tax breaks, corporations like Boeing and AT&T have for years benefited from a low effective tax rate. As ITEP’s Matthew Gardner explains, Boeing has received a tax refund in five of the past ten years. It saves itself $542 million a year using a special domestic manufacturing tax break, and $1.8 billion in further cuts thanks to a research and development tax credit. Boeing also benefits from the immensely favorable depreciation schedules on capital that has saved it billions of dollars over the past decade.

Boeing also entered into a $9 billion tax incentive deal with Washington state back in 2013—the largest corporate subsidy ever—to “maintain and grow its workforce within the state.” But, as Michael Hiltzik points out in the Los Angeles Times, the company has since cut nearly 13,000 jobs (about 15 percent of its Washington workforce) as it sets up shop in cheaper states that offer incentives of their own.

It still manages to enrich its shareholders though. On the same day that it announced a production slowdown in December, Hiltzik notes, Boeing also announced a 30 percent increase in its quarterly dividend and a new $14 billion share-buyback program.  

The current corporate tax system doesn’t incentivize job creation. Rather, it incentivizes the enrichment of CEOs and shareholders. Simply cutting the rate without closing loopholes or including clear economic-development requirements will only further advance shareholder capitalism, to the detriment of just about everyone else.

Ryan's and Brady’s visits to Boeing and AT&T expose the core lie behind their corporate tax-cut agenda. Corporations are already benefiting from lower rates—and they sure aren’t using the extra money to create jobs. 

Will Centrist Dems Give Trump His Tax Cuts?

There’s a bloc of Democrats who could be tempted to vote with Republicans for tax cuts for the rich. 

(Bill Clark/CQ Roll Call via AP Images)
(Bill Clark/CQ Roll Call via AP Images) Representative Kurt Schrader of Oregon on March 25, 2015 trickle-downers.jpg W hile the Republican Party battled itself during its attempt to roll back Obamacare, Democrats in the House and Senate formed a united and unwavering front of “No” votes. Not one red-state Democrat in the Senate nor a single centrist in the House peeled off. That’s rather impressive, considering that 34 House Democrats voted against the Affordable Care Act in 2010. There are a few reasons for this. Very few of those conservative Democrats have kept their seats, and the remaining congressional Democrats have moved leftward in recent years, to the point that preservation of the ACA has become a unanimous priority for Democrats. Also, the extraordinary levels of grassroots activism from groups like Indivisible, MoveOn, and ADAPT put intense pressure on Democrats in both the House and Senate to resist any sort of bipartisan overtures. Perhaps most important, the visceral...

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