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Paul Krugman: GOP Tax Scam Will Benefit Mar-a-Lago, Not America

December 25, 2017 in Blogs

By Ilana Novick, AlterNet

If wages rise, even by pennies, it won't be for years and years.

A Republican-controlled Congress gave Americans the worst Christmas gift of all this year, in the form of a historically unpopular tax bill that will enrich the wealthiest Americans at the expense of the poor. It's an extreme version of the same old trickle-down economics the GOP has been peddling since Reagan, repackaged for our Trumpian times. Just in case anyone was hoping for an economic Christmas miracle, namely that trickle-down economics would magically start working as promised, Paul Krugman has a rude awakening for you. As he writes in his Christmas Eve column, “It’s nonsense, of course.”

Republicans, he continues, are trying to sell this pile of lies with an additional one, that “the corporate tax cut that is the main item in the tax bill is really for the benefit of workers. They will be aided in this claim by some recent corporate announcements of bonuses or wage hikes that they attribute to the tax cut.” Remember Carrier, Krugman asks? It's that same scam all over again: “make a Trump-friendly splash by declaring that he persuaded you to save jobs, then lay off lots of workers after the cameras have moved on.” 

That, however, is just the beginning of a larger structural problem: “[E]ven if you believe economic analyses that suggest corporate tax cuts are good for wages, it shouldn’t happen right away. Any trickle-down should come about because the tax cuts lead to higher investment, which leads over time to a larger capital stock – and it’s the increase in the capital stock, which may take many years, that leads to the wage rise.”

Sure the labor market is tight, and Krugman admits that in the short term, “lots of companies are raising wages at least a bit in the face of tight labor markets; pretending that it’s because of the tax cut is a cheap way to curry favor with an administration that has no hesitation about using regulatory and antitrust decisions to reward friends and punish enemies.” 

Krugman indulges in some economic wonkery with …read more


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