Trump Tax Cuts–Dangerous for the Deficit

October 6, 2017

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Here I mention one other problem with the Trump tax proposal, besides its potential to increase economic inequality by favoring the wealthy. The Tax Policy Center estimates that it would “reduce federal revenues by $2.4 trillion over the first ten years and $3.2 trillion over the subsequent decade.” Without offsetting cuts in federal spending, it could add hundreds of billions to annual deficits and trillions to the national debt.

The question of how tax cuts influence deficits and the debt is complicated by their uncertain effects on economic growth. If the rate of growth goes up, incomes should rise, and taxes on those incomes should bring in additional revenue. Back in 1974, University of Chicago economist Arthur Laffer proposed that a tax cut can actually pay for itself by stimulating growth, while a tax increase can actually reduce revenue by inhibiting growth. This has become a popular argument for tax cuts, despite the weakness of the evidence supporting it. The big tax cuts under Ronald Reagan and George W. Bush did not pay for themselves, but contributed instead to soaring budget deficits.

Tax analysts have two different ways of evaluating the impact of tax changes on revenue. Conventional scoring makes no assumptions about the effects of the changes on economic growth. Dynamic scoring tries to incorporate an estimate of those effects (known as “macroeconomic feedback effects”) into the prediction model.  The Tax Policy Center said this in their first evaluation of the Trump plan:

This report uses conventional scoring methods that assume the tax proposals do not affect the overall level of economic activity. TPC will release supplemental estimates that include macroeconomic feedback effects soon. Based on TPC and the Penn Wharton Budget Model’s analyses of the macroeconomic effects of the House Republican leadership tax blueprint of 2016 (which shares many characteristics with the [Trump] unified framework), we would expect the framework to have little macroeconomic feedback effect on revenue over the first decade.

Translation: Revenue losses might be a little offset by economic growth effects eventually, but don’t hold your breath.

The Trump economic team has been vigorously promoting the idea that the tax cuts will pay for themselves. They seem to be reading from a familiar Republican playbook: Dismiss concerns about the deficit when calling for tax cuts. Then when the deficit goes up, blame federal spending rather than tax policy. Issue dire warnings about bankrupting future generations and call for cuts in programs that primarily help the middle class and the poor. According to the Republican Party line, the country can always afford another tax cut aimed mainly at the wealthy. What it can’t afford is programs like Medicaid or Obamacare to help people pay for health care.

That the current administration would play the same game is disappointing, considering how much Donald Trump has marketed himself as a champion of the working class. His positions on immigration, foreign trade and race do appeal especially to less educated voters. But on fiscal policy, his thinking seems very much in line with the Republican establishment, favoring tax cuts for the wealthy and spending cuts for the poor. He is very good at hiding his real aims behind a populist, pro-worker, pro-growth rhetoric. So far, most of his supporters are sticking with him, even as he sticks it to them with his economic policies.


Trump Tax Cuts–Meager for the Middle Class

October 5, 2017

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Whatever else President Trump’s “tax reform” proposal is, it is a big tax cut for the wealthy (see previous post). Adding a higher bracket to the three listed in the proposal (12%, 25% and 35%) would help (and is reportedly under discussion), but other goodies for the rich would still remain, such as the repeal of the estate tax.

How do the benefits for other taxpayers compare to those for the wealthy? The Tax Policy Center combined the President’s “Unified Framework” with the House Republican leaderhip’s “A Better Way” tax plan to estimate how different income groups would fare. The researchers divided the population into five quintiles by income, and then estimated how each group’s after-tax income would be affected. They calculated that in 2018, after-tax income would rise 3.3% for the top quintile, but no more than 1.2% for any of the other quintiles. The big winners would again be the top 1%, whose after-tax income would rise by 8.5%. In 2027, the gains would be 8.7% for the top 1%, 3.0% for the top quintile, and no more than half of one percent for any of the other quintiles.

In dollar terms, the average taxpayer in the middle quintile would save $660 on their taxes in 2018 and $420 in 2027.

Why are the middle-class tax cuts so small?

The Trump tax plan adds some tax breaks, especially for the wealthy, but it also eliminates some tax benefits that go to millions of people, such as the personal exemption and the state income tax deduction.

The most obvious new benefit for the masses is the increase in the standard deduction, which would go from $6,350 to $12,000 for single taxpayers, and from $12,700 to $24,000 for married couples filing jointly. However, the elimination of personal exemptions would increase taxable income by $4,050 for each taxpayer or dependent in the household. A one-person household would gain $5,650 in deductions but lose one $4,050 exemption, coming out a little ahead. A family of four would gain $11,300 in deductions but lose $16,200 in exemptions, coming out behind.

The proposed increase in the child tax credit could offset some of the loss in personal exemptions, but the proposal did not specify the amount of the increase. The Tax Policy Center assumed that it might go from $1,000 to $1,500 per child.

Many taxpayers itemize because their specific deductions exceed the standard deduction. Under the Trump plan, there would be less to itemize. Mortgage interest and charitable donations would still be deductible, but many others would disappear, including deductions for state, local and real estate taxes. Taxpayers whose interest and charitable deductions were greater than or equal to the new standard deduction would get no benefit from it, but they could lose many thousands of dollars in other deductions and exemptions. That’s one reason why about one in every eight taxpayers would get an immediate tax increase.

The promise of growth

The President’s proposal says a lot about lowering the tax burden on the middle class and making the tax code fairer. That’s more than a little disingenuous, given that the benefits go primarily to the wealthy. But the proposal makes brief reference to another rationale, creating a “tax code built for growth.” The assumption is that tax cuts will stimulate economic activity, creating jobs and raising wages for many.

If that’s true, maybe it doesn’t matter as much how much the cuts directly benefit the middle class. Middle-income people would presumably benefit indirectly from the increase in general prosperity. Even benefits focused mainly on the rich could “trickle down” to benefit people of more modest means. The proposal can’t make that argument explicitly, since it is pretending to cut taxes primarily for the middle class. Too obvious an endorsement of trickle-down economics helped defeat Mitt Romney in 2012.  Nevertheless, it is what most Republicans still believe.

Why should tax cuts for corporations and the wealthy accelerate economic growth? Supposedly, because it will give them the means and the motivation to invest more in business expansion. The underlying assumption is that money in private hands will be used productively, while money in the government’s hands is more likely to be wasted.

Many economists have their doubts about this theory. Here are a few that I’ve heard expressed:

  1. Cutting taxes to stimulate the economy may work in times of recession, but it isn’t as likely to help when the economy has been growing for some time. Instead of putting idle resources to work, the extra capital may just feed inflation. That in turn may induce the Federal Reserve to cool the economy by raising interest rates.
  2. As countries go, the United States is not particularly over-taxed. The top personal rate is much lower than it used to be. The official corporate rate is high, but most companies pay far less after deductions.
  3. Companies are not generally suffering from a lack of capital, but are often sitting on piles of money they are not investing productively.
  4. When companies do invest in new plants and equipment, it is often in industrial robots that destroy jobs instead of creating them.
  5. The government will need to pay for the tax cuts either by cutting spending or increasing borrowing. Spending cuts can cost jobs, and increased borrowing can raise interest rates and encourage Treasury bond purchases instead of more productive investments.
  6. The economic data do not support the generalization that countries with lower taxes have greater economic growth.

What is more certain is that tax cuts aimed at the wealthy generate more economic inequality, and we have enough of that already.

Continued


Trump Tax Cuts–Windfall for the Wealthy

October 4, 2017

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Last week, the Trump Administration released its tax proposal, titled “Tax Reform: Unified Framework for Fixing Our Broken Tax Code.” Many observers have characterized it as short on reform but long on tax cuts, especially for the wealthy. I agree with them.

Although it is a little more fleshed out than the vague outline the administration released earlier, the proposal still leaves a lot of specific details up to Congress. Although it would reduce the number of personal income tax brackets from seven to three, it does not specify the thresholds for the new brackets; nor does it specify the size of the increased child credit that will replace the personal exemption for dependents. The White House has used the lack of detail to deflect criticism, claiming that the critics don’t know enough yet to assess the impact on taxpayers at different income levels.

However, that hasn’t stopped the President and his supporters from making some sweeping claims of their own about who will benefit most. The stated goals include “tax relief for middle-class families” and “tax relief for businesses, especially small businesses.” They say nothing about benefits for the wealthy. Trump himself claims that the plan will “put more money into the pockets of everyday hardworking people,” and that “I don’t benefit” from the changes. That may be the biggest falsehood he has ever told, and that’s saying a lot.

The proposal would cut taxes for the wealthy in at least five ways.

Personal income tax rates

The current law taxes personal income in seven income brackets, at rates ranging from 10% to 39.6%. The proposed system would have only three rates: 12%, 25% and 35%. Immediately we can see that top incomes get a reduction, although it is less clear than lower incomes do.

Although the thresholds for the new brackets are not definite, the analysis by the Tax Policy Center made the reasonable assumption that they will resemble the thresholds proposed by House Republicans in their 2016 tax plan, which Donald Trump praised when he was running for President. Based on those thresholds and other features of the proposal, the Center estimated how taxpayers in each of the five quintiles of income would be affected. (Quintiles are not the same as tax brackets, but just divisions of the population into fifths.)

In 2018, when the plan is assumed to go into effect, taxpayers in the top quintile would average a tax cut of $8,470, and they would receive 74.5% of all the tax cuts distributed. Taxpayers in the middle quintile would get an average tax cut of only $660. Even more startling, the richest 1% of taxpayers would get an average tax cut of $129,030, and by themselves get 53.3% of all the tax cuts.

It gets worse over time. By 2027, the average cut for the 1% would reach $207,060 while the average cut for the middle quintile would fall to $420. By then 79.7% of all the cuts would be going to the 1%. (Why one group’s tax cut goes down while another’s goes up has to do with how various features of the tax code are indexed for inflation.)

The Trump plan includes a rather vague remedy for this apparent unfairness: “An additional top rate may apply to the highest-income taxpayers to ensure that the reformed tax code is at least as progressive as the existing tax code and does not shift the tax burden from high-income to lower- and middle-income taxpayers.” Given that almost everything in the plan favors the wealthy, translating this pledge into reality will be a very tall order, and one that Congressional Republicans are unlikely to have any enthusiasm for carrying out. (I have been reading Jane Mayer’s Dark Money, which makes a pretty good case that today’s Republican Party pursues an agenda largely dictated by their richest donors.) The leadership is prepared to pass the bill entirely with Republican votes, using the budget reconciliation process to rule out a filibuster by Senate Democrats.

Corporate tax rates

The proposal would lower the corporate tax rate from 35% to 20%. This is also a benefit mainly for the wealthy, for two reasons.

The Congressional Budget Office, US Treasury, and the Tax Policy Center agree that the owners of capital bear most of the burden of corporate taxes, with only an estimated 19-25% falling on workers.

Although many workers own a small amount of corporate stock in their retirement plans, most stock ownership is in the hands of the richest 10% of the population. Less for Uncle Sam means more for the stockholders.

Pass-through business tax rates

Small businesses such as sole proprietorships, partnerships and S-corporations pass through their income to their owners, who pay taxes on it at individual rates as high as 39.6%.

The proposal would tax such pass-through income at a maximum of 25%. However, the great majority of small business owners already pay 25% or less because their income doesn’t exceed the individual threshold of $91,000 or the married threshold of $153,100. According to the New York Times, the effective tax rate for sole proprietors is only 13.6% now. The benefits of this tax cut would go exclusively to owners with higher incomes.

The Trump framework promises “tax relief for businesses, especially small businesses,” but it would more accurately read “especially large businesses.”

Alternative Minimum Tax repeal

The AMT is an alternative tax calculation that high earners with many deductions must complete in order to keep them from avoiding their fair share of taxes. The little bit we know about Trump’s own taxes reveals that he would have paid $31 million less in taxes in just one year (2005) if it weren’t for the AMT. Repealing it is mostly another gift to folks like him.

One can argue that if the new tax law succeeds in its goal of “providing greater fairness for all Americans by closing special interest tax breaks and loopholes,” then the Alternative Minimum Tax will be less necessary. On the other hand, one could argue that it may be more necessary than ever, given all the other tax breaks for the rich in the plan.

Estate tax repeal

The estate tax has already been “reformed” to the point that it only applies to estates valued over $5.49 million. Abolishing the estate tax would benefit only the wealthy, especially people as wealthy as Trump himself, whose estate has been estimated at several billion dollars. Trump has claimed that the repeal would primarily benefit farms and small business owners, but the Tax Policy Center found that less than 1% of the estate tax revenue comes from that group.

And for the rest of us…?

Even without many of the details worked out, the wealthy appear to be the overwhelming beneficiaries of the tax proposals, which are mostly just tax cuts for them. The benefits for the middle class are smaller and more uncertain. I will elaborate on that in the next post.

Continued


Another Day, Another Deceptive Health Care Bill

September 26, 2017

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Senate Republicans continue to wrestle with their health care dilemma. Having failed for years to develop an alternative to Obamacare, they remain under great political pressure to repeal it anyway, while somehow pretending they will leave people at least as well insured as they are now. The majority of Americans remain to be convinced.

The latest edition of “repeal and replace” uses block grants to the states as a kind of miracle supplement to compensate for all the nutritional deficiencies of the legislation. The Graham-Cassidy bill would repeal almost all of the specific provisions that have made health insurance affordable for millions of people (while admittedly making it more expensive for some). The bill would also cut health insurance spending at the federal level, giving what’s left to the states in the hope that they can devise something better.

As with previous Republican proposals, Graham-Cassidy would immediately repeal the mandates that require individuals to carry health insurance and large employers to offer group coverage. The year 2020 would see the end of federal tax credits to help offset the costs of premiums, subsidies for out-of-pocket costs, and the expanded Medicaid coverage in which thirty states are participating.

In addition, provisions of the Affordable Care Act that were retained in the last two Senate proposals would now be left up to the states. States could decide whether they wanted to require coverage of medical benefits previously designated as essential, to prohibit lifetime caps on benefits, to require equal treatment of people with pre-existing conditions, or to limit the rates charged to older policyholders.

The Congressional Budget Office, which issued a preliminary analysis yesterday, found all this difficult to evaluate. They said that it would take them several weeks to come up with better estimates of federal expenses and insurance coverage rates. But Senate Republicans are determined to pass the bill this week–although that now looks unlikely–before the deadline for passing it under “reconciliation.” After that, they would need more than 51 votes to avoid a filibuster, and that would require some cooperation from Democrats. As of now, most Republicans are determined to avoid any bipartisan process that might improve Obamacare rather than gut it.

Fiscal implications

The CBO’s preliminary estimate is that the bill would reduce federal deficits by $133 billion over ten years. That’s mainly because the government would give the states less in block grants than it is projected to spend on tax credits, subsidies and expanded Medicaid payments under the current law.

Although the average state would lose federal spending under the proposal, spending would rise in some and fall in others. “By 2026, under the legislation, states that have already expanded Medicaid under the ACA would receive about 30 percent less funding…, and other states would receive about 30 percent more….” This shift would occur gradually over ten years, as allocations came to be based less on what states are spending now and more on the demographic characteristics of their populations (“…their share of residents with income between 50 percent and 138 percent of the federal poverty level (FPL), with adjustments for factors related to the health of those residents and for other factors affecting states’ health care costs”). States would be free to spend their block grants in a variety of ways, such as subsidizing insurance for people with high health care costs, arranging with insurers to reduce premiums, paying health care providers, helping pay out-of-pocket costs, or arranging with private insurers to offer coverage previously provided by Medicaid expansion.

New legislation would be required to continue the block grants beyond ten years.

Insurance implications

As President Trump recently learned to his chagrin, health care is hard. Under this plan, every state would now face the same dilemmas that the architects of the Affordable Care Plan faced. How would the states insure the poor and the sick without placing unreasonable burdens on the affluent and the healthy?

With no federal mandates or tax breaks, what would motivate the healthy to buy insurance so that their premiums could help support health care for the sick? Insurers might avoid insuring the sick, charge them more than they can afford, cover fewer conditions, or leave the market altogether. State-run systems would be vulnerable to the same kind of downward spiral that Republicans have predicted for Obamacare–not enough people in the individual market, insurers raising rates, still more people leaving the market. Each state would have to devise its own system of carrots and sticks to make health insurance affordable, but with a little less money for carrots than we spend now.

The thirty states that expanded Medicaid would have the most acute problem, since they would ultimately lose 30% of their funding. They would either have to dramatically reduce support for the near-poor, or else skimp on the subsidies that keep the healthy in the market and keep coverage affordable for the sick. In either case, the number of uninsured would almost certainly rise.

The CBO predicts that millions now covered by Medicaid would lose coverage, and so would millions in the individual insurance market. The analysis did not try to estimate how many millions in each group. Some of the losses could be offset by voluntary expansion of group coverage, although employers would no longer have a federal mandate to offer it.

The CBO was also concerned about the time it would take for states to develop their own health insurance systems and the confusion that might prevail in the meantime. For example:

To establish its own system of subsidies for coverage in the nongroup market related to people’s income, a state would have to enact legislation and create
a new administrative infrastructure. A state would not be able to rely on any existing system for verifying eligibility or making payments. It would need to establish a new system for enrolling people in nongroup insurance, verify
eligibility for tax credits or other subsidies, certify insurance as eligible for subsidies, and ultimately ensure that the payments were correct. Those steps would be challenging, particularly if the state chose to simultaneously
change insurance market regulations. Insurers would also need time to develop plans under the new system.

Many insurers might leave the market for several years while state policy was up in the air.

In short, the Graham-Cassidy bill is Obamacare overkill. It throws away the system we have and trusts that the states can do better–but with less money. President Trump and his friends could then declare victory and move on to their main agenda–tricking us into another tax cut for the wealthy.

 

 


Democracy in Chains (part 3)

July 13, 2017

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Here we turn to some efforts to implement the libertarian views discussed in the last post. Their goal is primarily to protect and expand the freedom of the private sphere by placing limits on collective action in the public sphere. MacLean sees them as potential dangers to democratic governance.

The Chilean connection

The undemocratic potential of this program is best seen in James Buchanan’s support for the Pinochet regime in Chile. In 1973 General Augusto Pinochet overthrew the democratically-elected government of Salvador Allende. Buchanan, along with some other Chicago-trained economists like Milton Friedman, became an advisor to the Pinochet regime. What he had in mind went far beyond narrow economic goals like fighting inflation. He saw an opportunity to enact the kind of broad reforms he wanted for the United States, along the lines of “privatization, deregulation, and the state-induced fragmentation of group power.”

The Pinochet regime banned industry-wide labor unions. It privatized the social insurance system, essentially replacing company contributions and government-guaranteed benefits with the expectation that workers save for their own retirement. It created a school voucher system for primary and secondary education.

The Pinochet plan for higher education sounds exactly like what Buchanan recommended in Academia in Anarchy:

As the nation’s premier public universities were forced to become “self-financing,” and for-profit corporations were freed to launch competitors with little government supervision, the humanities and liberal arts were edged out in favor of utilitarian fields that produced less questioning. Universities with politically troublesome students stood to lose their remaining funding.

Buchanan also advised the regime on how to rewrite the constitution to limit the power of the majority to undo the changes. For example:

A cunning new electoral system, not in use anywhere else in the world and clearly the fruit of Buchanan’s counsel, would permanently overrepresent the right-wing minority party to ensure “a system frozen by elite interests.”…It also barred advocating “class conflict” or “attack[ing] the family.”

The economy did grow rapidly, at least for a time, but economic inequality and poverty got worse. “A nation that once stood out as a middle-class beacon in Latin America now has the worst economic inequality it has seen since the 1930s.” While voices on the right continue to hail Chile as an economic success story, MacLean and other critics see Pinochet’s main accomplishment as greater wealth and freedom for the few at the expense of the many. After being voted out of office, he would go on to be indicted on many counts of human rights abuses (thousands were tortured or killed), embezzlement and tax evasion. (He died before he could be convicted, however.)

As for the new retirement system, it:

proved so disastrous that after the dictatorship ended, a nearly universal consensus emerged on bringing back key elements of social insurance. The system of individual accounts proved a huge boon to the financial corporations that received the automatic deductions from workers’ paychecks. The companies exploited that access mercilessly, achieving an average annual profit rate of more than 50 percent over a five-year period, thanks, not least, to their taking between a quarter and a third of workers’ contributions as fees.

MacLean links these failures directly to the bias in Buchanan’s philosophy. The problem was that “he valued economic liberty so much more than political freedom that he simply did not care about the invitation to abuse inherent in giving nearly unchecked power to an alliance of capital and the armed forces.” To this day, many conservatives regard Chile as a model of freedom for other countries to emulate.

I cannot resist adding that we now have a U.S. president who also professes great admiration for an authoritarian foreign leader associated with a wealthy oligarchy. How few of today’s Republicans have a problem with that is troubling.

Organizing at home

The web of connections that has developed between the Virginia School of Political Economy and a host of far-right organizations is very elaborate, and I can only hit some of the highlights here.

During the 1970s, Buchanan and his close associates began building relationships with conservative politicians, especially then California Governor Ronald Reagan. They worked with Ed Meese, Reagan’s chief of staff and later U.S. Attorney General, to start the Institute for Contemporary Studies to connect academics, politicians and businessmen. The ICS in turn worked closely with Henry G. Manne’s Law and Economics Center at the University of Miami, which conducted summer workshops to train legal experts from all over the country in libertarian legal thought. Private foundation money was available to fund academic positions for right-thinking scholars. Some law schools, the University of Virginia being one of the first, became “bastions of Manne’s approach to the law.”

One of the financial contributors to this effort was Charles Koch. He had inherited a successful business at the age of 32 and grown it into America’s second-largest privately held company. Like his father, who was a cofounder of the John Birch Society, Charles Koch held views far to the right of other conservatives of his time. He regarded thinkers like Milton Friedman and Alan Greenspan as sellouts because they wanted, in his words, “to make government work more efficiently when the true libertarian should be tearing it out at the root.”

Koch set up his own Charles Koch Foundation in 1974, from which came the Cato Institute in 1976. According to MacLean, the arguments put forth by this libertarian think tank followed closely those of James Buchanan and his associates.

Buchanan at George Mason

In 1981, Buchanan moved to George Mason University, where his presence attracted millions of dollars in funding. He created the new Center for the Study of Public Choice, helping the university gain a reputation as “the Pentagon of conservative academia,” in the words of one Wall Street Journal writer. George Mason was in Fairfax County, Virginia, in convenient proximity to Washington, where Ronald Reagan was sworn in as President the same year.

Libertarians had high hopes that the Reagan administration would dismantle the “collective order,” but they were largely disappointed. Reagan did cut taxes and roll back some government regulations, but he did not seriously take on the many constituencies that relied on public programs. Without politically impossible cuts in domestic spending, Reagan’s tax cuts and higher military spending dramatically increased the federal deficit.  Many libertarians concluded that if they wanted to put an end to popular programs like Social Security, they would have to proceed cautiously and quietly, without publicizing their real objectives. They could, for example, undermine support for Social Security by questioning its long-term financial stability and by setting one group against another: tell the young that they are paying in more than they will ever get out, and tell higher earners that their taxes will have to be raised to support lower earners.

In 1985, George Mason University acquired a law school and brought in Henry Manne to serve as its dean. It soon became known for its advocacy of unregulated corporate capitalism and its criticism of environmental and consumer regulations in particular. By 1990, over 40% of federal judges had received Manne’s summer training in how to apply free-market principles to legal decisions.

In 1997, Charles Koch pledged $10 million to support a new James Buchanan Center for Political Economy, formed by merging the Center for the Study of Public Choice with another conservative center, the Center for the Study of Market Processes. The governing board of the new center was co-chaired by Koch and Buchanan. In later years, even Buchanan became concerned about how much partisan political activity the center was engaging in–technically it could lose its status as a non-profit charity if it went too far in that direction–but his complaints to the university administration were to no avail. He eventually lost control of the center that bore his name and retired.

As I write this, the New York Times is reporting that the Senate is considering the nomination of Neomi Rao to head the Office of Information and Regulatory Affairs, “placing her at the heart of President Trump’s politically contentious agenda to overhaul government rules and regulations.” Rao is currently a law professor at George Mason, which recently received another $10 million from the Charles Koch Foundation, one condition being that the university name the law school after Antonin Scalia, which it did. The article mentions that foundations affiliated with Koch have donated at least $50 million to George Mason in the past decade. Many faculty and students are troubled that a rich donor with a political agenda can so strongly shape the curriculum of a public university. Advocates of free markets ought to ask themselves if they want a university to be a free market in ideas, with each set of ideas evaluated on its merits, or whether they want certain ideas to prevail over others because they are better funded. That is just one aspect of the larger question of whether we want an open, democratic society or an oligarchy where might makes right.

The ascendancy of the far right

MacLean ends her book with a number of examples of how radical-right operatives backed by big money are making their mark on American government. All of the organizations mentioned below have been well funded with Koch donations.

The State Policy Network is a collection of state-level think tanks, of which Michigan’s Mackinac Center for Public Policy is the largest. It was the Mackinac Center that pushed for legislation allowing the governor to appoint emergency managers for financial troubled cities like Detroit, Benton Harbor and Flint. “The powers of these unelected managers to impose austerity measures would be vast, including the authority to unilaterally abrogate collective bargaining agreements, outsource services, sell off local resources to private companies, and change suppliers at will.” Flint’s emergency manager made the decision to save money by switching the city’s water supply to a source that was not protected from lead contamination.

The State Policy Network has also pushed for spending cuts for public education. One example is MacLean’s own state and mine. “North Carolina, which during the twentieth century, through wise investments in public education, had climbed from the poorest of southern states to one of the best-off, now ranks beneath Mississippi in per-pupil spending.”

The Cato Institute and other libertarian think tanks carried out a “misinformation campaign” to deny the scientific consensus on climate change, while the Club for Growth funded primary challenges against any Republican who failed to go along. “By 2014, only 8 of 278 Republicans in Congress were willing to acknowledge that man-made climate change is real.”

The American Legislative Exchange Council writes model laws for adoption by the states. Between 2010 and 2012, legislators backed by ALEC introduced over 180 bills putting new restrictions on voting. Republican legislators have also been passing “preemption laws” that stop cities from passing laws that businesses don’t like, such as measures to provide broadband internet access, raise the minimum wage, combat gay or transgender discrimination, or restrict fracking.

The Reason Foundation promotes the privatization of prisons, with funding from both Charles Koch and the Corrections Corporation of America. The CCA stands to profit from the construction of new private prisons and from tough sentencing laws to keep them full.

In The Limits of Liberty, James Buchanan expressed his dismay that public employees like teachers or social workers could benefit from promoting the programs from which they derived their income. Libertarians seem much less bothered by such feedback loops when they involve private enterprises. Once they are unmasked by public choice analysis, public institutions are exposed as sinister schemes for personal gain at public expense. But privatized institutions like for-profit prisons, or for-profit colleges receiving most of their revenue from student loans are okay, even if they are explicitly set up for private gain at public expense. Somehow their freedom to promote their own interest with money is more legitimate than the freedom of a public employee union to promote public services by organizing to influence public opinon. What’s “public” is really just for private good, but what’s “private” is really for the public good. This convoluted reasoning explains why someone like Education Secretary Betsy DeVos can be both unsupportive of public education and complacent about students being ripped off by private, for-profit colleges. She is currently being sued for failing to implement regulations to protect such students.

How fair a description?

In calling attention to the ascendancy of radical views within today’s Republican Party, MacLean does not make subtle distinctions among diverse perspectives. Not everyone in the academic centers or think tanks she mentions thinks the same. There is always the danger of coloring too many people with the same brush and exaggerating the extent of a far-right conspiracy. For example, MacLean has been accused of making Tyler Cowen, “the man who succeeded Buchanan and now directs the cause’s base camp at George Mason, the Mercatus Center,” sound more extreme than he is, by taking quotations from his work out of context.

Nevertheless, I think that the book gives us fair warning about a dangerous combination of great wealth and radical political thought. I agree with MacLean that this combination has moved the Republican Party farther to the right than at any time since the early 1900s. I believe that under conditions of great inequality, one group or institution’s excessive liberty can come at the expense of another’s liberation. And excessive hostility toward government can easily become hostility to the democratic majority who depend on government to protect their fundamental human rights and expand their opportunities.

In the end, MacLean convinces me of her central point. The same core ideas that supported oligarchy in the ante-bellum South and in 1950s Virginia can do so in the nation as a whole:

The United States is now at one of those historic forks in the road whose outcome will prove as fateful as those of the 1860s, the 1930s, and the 1960s. To value liberty for the wealthy minority above all else and enshrine it in the nation’s governing rules, as Calhoun and Buchanan both called for and the Koch network is achieving, play by play, is to consent to an oligarchy in all but the outer husk of representative form.