What could be better for the nation than a Democratic sweep of the November elections? That would give a President Joe Biden the control of Congress he will need to enact his program next year. Democrats may have to eliminate the Senate filibuster in the process but I believe they are willing to do that.
With former Vice President Biden ahead in the polls, economists are giving a lot of thought to a total Democratic victory this year and the economic outlook is encouraging according to a September study by Moody’s Analytics. Their report – The Macroeconomic Consequences: Trump vs. Biden – modeled several scenarios for November, including a Democratic sweep and a Republican sweep. Turns out – which shouldn’t be surprising – that between these two, the economy would be weaker if President Trump wins and a Republican-controlled Congress fully adopts his economic policies next year.
So, what would the GOP likely do?
Actually, Republicans didn’t draft a platform this year; their agenda is — well, whatever Trump wants. So, Moody’s researchers mainly used the proposals in the president’s fiscal year 2021 budget for their analysis. These include another tax cut costing $1.9 trillion and over $700 billion in spending cuts during the coming decade. Yep! Same old, same old.
No doubt, Trump’s first priority would be to make permanent the individual income tax provisions of the 2017 Tax Cuts and Jobs Act (TCJA) that are scheduled to expire at the end of 2025. That would further benefit the wealthy, of course, and add hundreds of billions to the federal deficits.
Republicans have long wanted to benefit their rich donors by reducing the capital gains taxes that apply to sales of stock and other assets. They’ll do that by indexing the purchase price of an asset to inflation. Capital gains tax is assessed on the difference between the sales price of an asset and the original purchase price. Increasing the purchase price by inflation would reduce this difference, which would decrease the capital gain and the resulting tax. Regarding stocks, only around 52% of Americans own them and reportedly the richest 10% of Americans hold over 80% of the shares.
The president has also long supported a reduction in payroll taxes. Arguably this would benefit working Americans but it would certainly enrich Trump businesses that must match employee contributions. This summer he actually seemed to support eliminating that tax completely, which according to experts would cause the Social Security Trust fund to run dry in 2023. Heads up, poor seniors who intend to vote Republican, you may have to stock up on some tasty canned dog food.
Trump’s spending reductions would mostly affect health care programs but he would also cut food stamps and other programs in the social safety net. One thing’s for sure, Republicans in Congress will try to eliminate President Franklin Roosevelt’s New Deal achievements and Medicare/Medicaid if they get the chance.
But here’s the thing. The GOP policies of tax cuts for the wealthy and austerity for everyone else just don’t do enough to boost the economy. That’s why Moody’s analysts believe the Democrats’ fiscal policies will do more to increase the gross domestic product (GDP) and result in better job creation.
Biden is proposing over $4 trillion in tax increases and over $7 trillion in additional spending. He would increase taxes on corporations and the wealthy by moving the top corporate rate from 21% to 28% and rolling back much of the Republican’s 2017 tax cuts. Plus, Biden would tax capital gains and dividends earned by individuals making over $1 million a year as ordinary income, i.e., 39.6% instead of 20%.
In order to bolster the Social Security trust fund, Biden would increase earnings subject to payroll taxes from almost $138,000 to $400,000. This extra revenue would significantly extend the ability of Social Security to pay benefits, which are reportedly the primary source of income for 40% of retired Americans.
Although it wasn’t covered by Moody’s, I’m sure Democrats would quickly increase the IRS audit and enforcement budgets that Republicans in Congress have been slashing since 2011. Over the past decade, Republicans helped tax evaders rob the U.S. treasury of hundreds of billions of tax dollars.
A University of Pennsylvania Carey Law School study found that “Over the next decade, $7.5 trillion, or nearly 15 percent of owed taxes, will go uncollected.” The authors concluded that “a commitment to restoring tax compliance efforts to historical levels could generate over $1 trillion in the next decade.”
Additional IRS tax collections from wealthy tax cheats, along with tax increases, would nicely supplement Biden’s plan to spend $2.4 trillion on infrastructure and greatly increase government spending on education, the social safety net and health care. Investments like these have the potential to create millions of good-paying jobs and give Americans hope for better times.
For I believe that Donald Trump and the Republican Party have caused the future of the United States to look the darkest it has since before the Civil War. Yet, it doesn’t have to stay that way. The past four years are history but the coming four years are in the voter’s hands.
That’s why my Blue Wave political contributions have been greater than ever this year. And like tens of millions of other concerned Americans, I intend to keep opposing the current anti-democratic Republican menace until its threat is eliminated.