On December 19, 2017, Matthew Yglesias writes on VOX:
Over the course of 2017, both in Congress and in the executive branch, we have watched the task of government devolve into the full-scale looting of America.
Politicians are making decisions to enrich their donors — and at times themselves personally — with a reckless disregard for any kind of objective policy analysis or consideration of public opinion.
A businessman president who promised — repeatedly — that he would not personally benefit from his own tax proposals is poised to sign into law a bill that’s full of provisions that benefit him and his family. Congressional Republicans who spent years insisting that “dynamic scoring” would capture the deficit-reducing power of tax cuts are now plowing ahead with a bill so fast that they don’t have time to get one done, because it turns out they can’t be bothered to meet their own targets.
Meanwhile, in the background an incredible flurry of regulatory activity is happening out of public view — much of it contrary to free market principles but all of it lucrative for big business and Trump cronies.
Throughout the 2016 campaign, the political class talked a lot about “norms” and how Donald Trump was violating them all. He brushed off fact-checkers, assailed the media, went on Twitter tirades against his critics, and dabbled in racism. Since taking office, his norm busting has spread. Members of Congress who under other circumstances might be constrained by shame, custom, or the will of their constituents have learned from Trump’s election that you can get away with more than we used to think.
Norm erosion is real, and it matters. Economists Daron Acemoglu and Matthew Jackson of MIT and Stanford have written about how rules are only effective when they are backed up by social norms “because detection relies, at least in part, on whistle-blowing.” Their Spanish colleague Patricia Funk emphasizes that in a variety of contexts, “the strength of the social norm of ‘not committing a crime’ is shaped by social interactions.”
These scholars are all considering deep, long-lasting differences in cultural norms, but we also know from experience that norms can sometimes shift dramatically in unusual circumstances. Sometimes a blackout or other disaster prompts a few people who would ordinarily be too cautious to break store windows in broad daylight to become more brazen. And the normal course of ordinary life flips into reverse, as those with some inclination toward bad acts recognize a moment of impunity and grab what they can, while those who would ordinarily be invested in upholding order are afraid and stay inside. The sheer quantityof bad acts makes it impossible for anyone to hold anyone accountable. Soon, a whole neighborhood can be in ruins.
Or a whole country.
Republicans love bank bailouts now
The tax bill pending in Congress this week is, naturally, front of mind and unquestionably represents the linchpin of the 2017 looting agenda. But in some ways, the clearest example of the difference between a regime of corporate looting and one of free market ideology came on the lower-profile topic of financial regulatory policy, where the Trump administration quietly signaled a major shift last month.
Back in 2009-’10, of course, the Obama administration responded to the financial crisis and the chaotic Bush-era bailouts by passing the Dodd-Frank law to overhaul America’s financial regulations. The goals of the law were twofold, on the one hand hoping to tighten the regulatory screws to make future bailouts less likely and on the other hand trying to bring some order to the question of what to do with large banks that do go bust in a way that risks a crisis.
Republicans opposed this approach, arguing that heavy-handed regulation was stifling the economy. But they said that they, too, deplored bailouts and that the real solution to the problem of banking crises was a need to tie the government’s hands to prevent any possibility of future bailouts.
The Trump administration has taken up the deregulatory baton with gusto, appointing Wall Street lawyers to run key agencies and turning what was intended to be an interagency working group on identifying financial risk into a forum for advancing deregulation.
But the free market fix for financial crisis has gone missing in action. In late November, the Trump Treasury Department quietly announced that it wants to keep the Dodd-Frank Orderly Liquidation Authority fund around after all. That’s an obscure little corner of the government, but it’s conceptually crucial — that’s the thing Republicans used to call a “permanent bailout fund.” They used to argue that eliminating it was the key to establishing a sound financial regulatory framework in which no bailouts would happen, and bankers would be disciplined by markets rather than bureaucrats.
Under Trump, the reality is that neither markets nor bureaucrats are going to be doing any disciplining.
In the short term, of course, lax banking regulation will almost certainly pay off in the form of higher bank profits and stock valuations. The problem is when the crisis hits down the road. But that’s exactly the triumph of short-term thinking that pervades everything Trump does, from debt-financed tax cuts for the rich to disinvestment in education, rollback of environment regulations, and approaches to the telecom sector that prioritize the profitability of today’s incumbent businesses over tomorrow’s regulators.
Across the board, it’s about letting whoever’s powerful now squeeze as much out as they can without worrying too much about the consequences — like enormous, deficit-financed tax cuts passed with no regard for budgetary or economic effects.
The strange death of tax reform
The tax bill is another case in point. It’s poised to pass Congress this week, and the swamp is overflowing with perks.
Somewhere in its murky origins, “tax reform,” as conceived by is Republican authors, was supposed to be a policy-driven bill aimed at creating a simpler and fairer tax code that would generate broadly superior economic outcomes for most people — a normal governing objective even if it was always the case that substantial disagreement would exist over the merits of marginal corporate tax rate cuts as a growth-boosting policy.
But along the way, virtually all of the high-minded aspirations were dropped and all of the normal aspects of congressional process broken — to the point where the bill’s leading architects won’t even mention the policy changes that are at the heart of the bill. In the end, instead of taking on the special interests as promised, it gives away the store to almost every lobby shop in town — with last-minute additions that personally enrich the Trump family and a decent chunk of the members of Congress voting for it.
Once upon a time, Republicans had a set of clear promises about what they called “tax reform.” The idea was to produce a simpler tax code, with fewer brackets and fewer deductions so that a typical individual could fill it out on a postcard.
The goal was to cut tax rates without reducing government revenue because loopholes would be closed. From the beginning, they were counting in part on economic growth to make up the difference, but they said they would rely on serious, third-party analysis of the impacts.
“Not economic growth judged by us,” Rep. Kevin Brady (R-TX), the Chair of the House’s tax-writing committee, told Vox in March, “but by the independent Joint Committee on Taxation.”
And of course it wasn’t going to be a bonanza for the rich. Trump went so far as to promise that the rich wouldn’t benefit “at all” from his plan, and he certainly swore repeatedly that he would not personally benefit.
Neither the House nor the Senate came within a trillion dollars of hitting Brady’s deficit target, so the conference committee charged with reconciling the bills didn’t bother to wait for a dynamic score at all, and both houses are expected to pass the bill before the JCT can finish its analysis. The House bill slashed the top tax rate a little and the Senate bill slashed it a little more, so the conference committee compromised on a bigger rate cut than either had proposed.
Meanwhile, after all the months of work, Republicans ultimately settled on not actually eliminating any significant deductions or loopholes after all.
“Politicians are making decisions to enrich their donors — and at times themselves personally — with a reckless disregard for any kind of objective policy analysis or consideration of public opinion.”