Taxes, Trump and the Lemmings

Time to talk about the tax cut. While the tax cut remains deeply unpopular, there appears to be about 35% ,or thereabouts, who still supports the cut.  That 35% number also seems to be the ballpark number of the die-hard Trump supporters: they will support him no matter what. They supported him despite his racial comments about Mexicans bringing in crime, despite him calling McCain a loser for being caught during Vietnam War, despite him ridiculing a disabled reporter, despite his fight with a Gold Star family, despite the crude sexual comments story that came out in November 2016. Never mind all of the lies he told, never mind the violence that was at his rallies, never mind his support for neo-Nazis, they still support Trump. And so they support, if in a rather desultory manner, the Republicans’ tax plan.

But the majority of Americans oppose the tax plans: they feel the tax plan is a giveaway to corporations and to the ultra-wealthy. And it feels like some of them are getting really angry.

And here’s an article about the Republicans looting the store.

So people, except for the roughly 35%, are getting angry.

Why are the Republicans doing this?

The Republicans’ stated reason for the tax plan: reducing corporate tax rate from 35% to 21% will produce a wave of economic growth and add jobs. Unfortunately, the Kansas experiment contradicts this. It was reported as a failure: the state’s revenue declined so much that the state had to do some drastic budget cuts, such as education, much to the dismay of the state residents. This past year, the state legislature had to raise taxes in order to balance the budget and fund necessary budgetary items.

Recently, there was an article about North Carolina’s tax cut that, while not a big failure like Kansas, it still was not a rip roaring success from the perspective of the average voter. Read this article to see how wages did not go up because business did not improve sufficiently.

No, tax cuts will not mean more jobs or wage increases. More likely, the tax cuts will go to the shareholders in the form of stock buybacks. A clear illustration of the potential impact of the tax cut occurred when Gary Cohn, Trump’s chief economic advisor who was leading the tax cut effort, asked a group of executives to raise their hands if they were going to add jobs or increase wages. Apparently few raised their hands because he asked “Why aren’t there more hands?”

AT&T is first out of the gate with $1000 bonuses for 200K+ employees “due to the tax cut” but at the same time, AT&T gave layoff notices to hundreds, 1000 or 2000 employees (the numbers being reported are all over the place). So corporate tax cuts are not a safety feature for workers. (I would not be surprised if the bonuses are a one-time event because next year, even though the company will still have a lowered tax rate, they won’t be giving out bonuses again – they just won’t) Lowered tax rates will not not prevent layoffs.

Now the AT&T story is not quite so black and white. My understanding is that the layoffs are occurring in the landline business, which is declining in the face of the mobile market. In addition, AT&T has been undergoing a massive worker training effort since about 2013. This is training to upgrade their employees' skills in preparation for new technology coming online by 2020 and AT&T needs employees with those skills. AT&T found that most current employees did not have the skills, but rather than undergo massive layoffs, AT&T decided to try upskilling. So AT&T is not quite the ogre. But they do provide an example of where tax cuts will not protect the workers from layoffs. It just can’t.

So, why are those 35% still supporting Trump and the tax cut, even if lukewarm?

Here’s where the idea of lemming behavior, or tribal behavior, comes in. These are the perfect followers. They’ve been trained since childhood to follow the rules which is fine in the business world as long as the behavior is ethical. They are responsible and will do what is right. Also, they engage in group behavior: they follow along with what is going on in their community and pretty much say and think the same thing. And they are loyal to a fault. They’ve been loyal to the Republicans and now they are loyal to Trump.

“As a result, they are bending their will to his ways, seeing the world as he does.” Peter Wehner, New York Times, “Going Against the Republican Herd”, October 21, 2017.

This author then goes on to give an example of his followers changing to his way of thinking:

“Take just one example that continues to startle: Russia. It wasn’t long ago that Republicans were nearly unanimous in their critical outlook on Russia. But today, because of Mr. Trump’s repeated praise for President Vladimir Putin, Republican attitudes toward Russia are far more favorable. A Pew Research Center poll found that the share of Republicans expressing confidence in Mr. Putin has doubled in just two years (from 17 to 34 percent).” Ibid.

This is scary. They have no critical thinking; they just change the way they think to match Trump. These are the blind followers of Trump and they are the reason why we are where we are with the tax plan we now have. But realize this, the corporate tax cuts will not increase workers' wages or add jobs. They never have and never will.