The Sugar High from the 2017 Tax Cut Bill

The Sugar High in Children

Few would deny the relatively immediate satisfaction of finishing a piece of sugar-laden cheesecake or dish of chocolate ice cream. But many parents share the common belief that providing too much sugar causes their children to become hyperactive. Yet numerous studies have demonstrated there is no scientific basis for that conclusion. So should mothers simply accept the science and let their children gorge ahead? Not so fast. Though such a “sugar high” may not result in hyperactivity, there are other potentially serious negative consequences.

The dangers of a sugar high are not immediately apparent. They tend to develop over a long period of time, increasing the risk of several adverse medical conditions. Some of the more significant include: obesity, heart disease, diabetes, certain cancers and depression. Clearly, the immediate joy of the sugar high promises unhappiness when the long-term consequences arrive.

The 2017 Tax Cuts and the Sugar High

Much like a child enjoying the afterglow of eating ice cream, so did the Republicans react to passage of their 2017 tax bill. They reveled in their accomplishment.  Richard Reeves synthesized their feelings at the time in the December 18, 2017 edition of the Guardian.

“But for Republican lawmakers, the bill hits some very sweet political spots. Corporations? Check. The wealthy? Check. Obamacare haters? Check? When the deficit balloons, as it must, Republicans will then use that to justify cutting spending, especially on pensions and healthcare.”

Republicans had finally delivered on the promise to their major campaign contributors. What’s not to be happy about giving money to the rich? Despite the failure to repeal and replace Obamacare, this bill laid waste to some significant provisions (e.g., the individual mandate). Republicans were in the midst of a sugar high.

Evidence of the Sugar High

Republicans had initially sold this bill as a middle-class tax cut, from which the wealthy would not benefit. The significant cut in corporate tax rates would fuel investment, create jobs and increase workers’ pay. And all of this would eventually pay for itself with greater economic growth. Details of the final bill were different than what had been initially promised, but that was of minor consideration. Republicans were jubilant. They gathered with the President to praise him for a year of extraordinary accomplishment and exquisite presidential leadership.

As anticipated, corporate profits soared in 2018 powered by lower tax requirements. Job growth continued, unemployment declined and wages advanced. Republicans were confident that once the public realized the benefits of this tax bill, its initial unpopularity would dissipate. This would bode well for the upcoming midterm elections.

Reality Appears

Just as with a child, a sugar high eventually wears off. The sugar high emanating from the 2017 tax bill began to dissipate even before its long-term consequences were apparent. It was soon clear that the tax bill was not as promised.

This bill was not the middle-class tax cut advertised. Corporations and the wealthiest 1% will receive the lion’s share of its benefits. There will actually be a tax increase for many millions of middle-class families. Millions of households will receive little or no benefit. Repealing the individual mandate will cause millions of people to lose insurance coverage. Perhaps most significantly, the bill will add $1.5 trillion to the deficit in its first ten years as there will be insufficient revenue to cover the bill’s cost.

Of course, not everyone agreed that this bill would be responsible for such a deficit. Senate Majority Leader, Mitch McConnell attributed increasing federal deficits to spending on entitlement programs of Medicare, Medicaid and Social Security. His solution is to contain spending on these programs. If McConnell was to have his way, the middle class would not only not receive any significant tax benefits from this bill but would also lose benefits from these entitlement programs.

The Sugar Dissipates

Based on some early results there is growing belief that the immediate impact of the tax bill could be even less than expected. For example, some major companies have indicated that the tax benefits provided by this bill will be primarily used to increase dividends and stock buy-backs.

Fortunately, Republicans were unable to convince the American electorate that this scam of middle-class tax reform was to its benefit. The bill was unpopular before it was passed and became more so as its details became public. Even Republicans recognized the bill’s unpopularity by not promoting its passage in the run up to midterm elections.

So, the Republicans, jubilant a year ago, are no longer experiencing that sugar high. Loss of control of the House of Representatives certainly added to the sour taste in their mouths. Like children who have gorged themselves on too much candy, they can now look forward to the negative longer-term consequences of their actions. Regrettably, so must the rest of the country.

 

 

 

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