Trump’s Health Care Non-Policy

November 4, 2016

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This post was going to be solely focused on Donald Trump’s proposal to “repeal and replace” the Affordable Care Act. Then I heard him assure his supporters yesterday that Hillary Clinton will be indicted for her alleged crimes as Secretary of State. That reminded me that trying to discuss policy issues in this election year is largely an exercise in futility. Trump is not running on policy proposals, but mostly on anger. He is running the most negative presidential campaign in recent memory, mobilizing the anger many Americans feel about the state of the country and channeling it against his opponent. She is to blame for everything that’s wrong with the world, from the loss of manufacturing jobs to the rise of ISIS, including the rigging of this election. Somehow it’s all part of one big criminal conspiracy.

Trump’s personal style, which I described in an earlier post as loud, combative, self-aggrandizing, politically incorrect, and autocratic, makes him the perfect candidate to run such an ugly campaign. His temperament encourages Clinton to base her own case for election largely on his unfitness for office, further turning the campaign into an exchange of insults rather than a discussion of issues.

I will do two things here: first, describe Trump’s health care proposal, but only briefly; and second, comment further on Trump’s mobilization of popular anger.

Repeal and replace Obamacare

Running true to form, Donald Trump seems more interested in blowing up the existing system than replacing it with anything better. His proposals are simplistic, not demonstrating much understanding of the health insurance challenge.

The Affordable Care Act (ACA) was a response to the national embarrassment that millions of Americans were unable to obtain health insurance. Usually that was because they were excluded by some preexisting condition, or because their income was too low to afford the premiums. The ACA was designed to meet a dual goal: on the one hand provide adequate insurance coverage for more people, and on the other hand subsidize premiums in order to make that insurance more affordable. Private insurers had to improve coverage by accepting people with preexisting conditions at no extra charge, observing federal caps on out-of-pocket costs, and providing a standard range of benefits. The law included  a mandate requiring individuals to carry insurance or pay a tax penalty, as well as a mandate on large employers to offer group plans. The mandates are supposed to generate enough premium payments from currently healthy people to cover good benefits for the sick without raising premiums too high. The government helps defray the cost by expanding Medicaid coverage to those slightly above the poverty level (those with incomes between 100% and 133% of the official poverty threshold), and by providing private insurance subsidies for those with incomes up to 400% of the poverty level. The Supreme Court upheld the mandates, but allowed states to opt out of the Medicaid expansion, which many did, even though the federal government would pay almost all of the cost.

Many observers recognized from the beginning that the success of the ACA depended on getting people who are young and healthy but uninsured to sign up. Otherwise, insurers wouldn’t find it profitable to offer health insurance to all without raising premiums too high. This year, premiums for insurance sold on the state exchanges are going up, at least partly for that reason. Many progressives see that as an argument to add a public option for everybody, so that people will not be so dependent on for-profit insurers. (Few countries rely as heavily on private insurers as the United States does.) Conservatives prefer to end Obamacare and rely primarily on the free market to provide coverage.

Donald Trump is in the latter camp. “By following free market principles and working together to create sound public policy that will broaden healthcare access, make healthcare more affordable and improve the quality of the care available to all Americans.” (That’s not a proper sentence, but you get the idea.) We shouldn’t forget, however, that when Obama was elected, the public was clamoring for health care reform precisely because the free market was failing to provide adequate health insurance at an affordable cost for millions of people.

With the Affordable Care Act repealed, Congress would have to go back to square one to figure out how to cover the uninsured at a price they can afford, if legislators were even interested in that goal. Trump’s proposal makes no mention of requiring insurers to cover people with preexisting conditions, or requiring insurers to provide a standard range of benefits. Quite likely, insurers would once again be free to provide little or no coverage to many Americans.

As for making insurance affordable, The ACA’s subsidies would disappear, to be replaced in Trump’s plan by tax deductions for health care premiums. Health care premiums are tax-deductible for businesses now, and they become deductible for individuals too when total medical expenses exceed 7.5% of adjusted gross income. Trump’s plan would make them fully deductible. It would also let individuals put money into tax-sheltered Health Savings Accounts for future medical expenditures. The problem with this is that tax deductions are most valuable to higher-income people who pay the highest rates of income tax. Low-income people wouldn’t get enough back from taxes to offset much of the cost of insurance. The plan helps the people who can already afford insurance more than the ones who can’t.

Obamacare’s expansion of Medicaid, which provides insurance to people with incomes up to 133% of the poverty level, would be replaced by something much vaguer: block grants to the states. Presumably, the federal government would give a sum of money to the states and let them figure out how to finance adequate care for their low-income citizens. Whether states would rise to the occasion and do this very well is anybody’s guess. My guess is that some would and some wouldn’t.

Trump has one more idea for making health insurance more affordable: letting insurers offer health insurance across state lines. Traditionally, insurers have to be licensed in each state where they sell policies. That allows state insurance commissions to set standards, although it can also make policies more expensive in states that set the highest standards. Free-market theory holds that deregulating health insurance would allow more insurers to offer policies in more states, increasing competition and lowering prices. Critics of such deregulation fear a “race to the bottom,” because companies could get their policies approved in states with the weakest consumer protections, but then sell those policies anywhere. Avoiding that would require strong federal standards applying to all states, but free-market conservatives generally oppose those as well. With the widest range of policies to choose from, young healthy people might save money by shopping for the cheapest policy, once again depriving quality insurers of the premium dollars they need to extend coverage to sicker people at a reasonable price.

We already know that for-profit insurers, left to their own devices, can provide health insurance for the wealthy and the healthy. To devise a plan that works for the poor and the sick is the challenge that Donald Trump has hardly begun to tackle. Hillary Clinton and Barack Obama have been working on it for years. Neither of them may have come up with the perfect system, but at least they know what they are doing.

The mobilization of anger

To understand how Donald Trump can generate so much support without being more qualified for the presidency, one needs to understand how much his supporters are driven by anger. One reason is the downward economic mobility of non-college-educated men because of the loss of good manufacturing jobs to automation and globalization. However, downwardly mobile white men are not a large enough group to account for Trump’s popularity, and their preference for the Republican candidate in this race was not at all inevitable. Many of them would have been happy to vote for Bernie Sanders if he had gotten the nomination. While most Republicans have supported free trade, concern for its impact on workers has come more from Democrats like Sanders and Elizabeth Warren. Although Trump boasts about bringing new voters into the G.O.P., he owes his success more to the existing Republican base, most of whom are not downwardly mobile and have other issues than bringing back coal mining jobs.

What Trump has done to be competitive in this race is tap into a much larger source of anger, consisting mainly of conservative resentment that progressive ideas have been gaining traction. From a conservative perspective, the Reagan Revolution should have created a permanent conservative utopia, with free markets, limited government, low taxes, minimal business regulation, and a Christian conservative moral agenda hostile to gay rights and feminism. Public opinion, however, has been shifting on most of these issues, with at least small majorities supporting higher taxes on the wealthy, more financial regulation, campaign finance reform, national health insurance, reproductive choice, same-sex marriage, and a path to citizenship for undocumented immigrants. When conservatives see the country slipping away from their control on many fronts, they get upset.

That helps explain why the Democrats who followed Reagan and Bush into the presidency were unusually vilified. In the 1990s, the Clintons were accused of many forms of wrongdoing, some mildly plausible, others less credible. Bill Clinton was investigated by special prosecutor Kenneth Star, initially for real estate dealings in Arkansas and the death of White House counsel Vince Foster. When Star could not find any crimes there, he turned his attention to Clinton’s sexual relationship with Monica Lewinsky. More recently, Donald Trump led the effort to delegitimize the Obama presidency by questioning his citizenship, and Congressional Republicans investigated Benghazi to death without proving serious wrongdoing by Hillary Clinton. The public never entirely went along with these fishing expeditions. Despite the effort to impeach him, Bill Clinton left office with relatively high approval ratings, as did Hillary Clinton after being Secretary of State. As will Barack Obama.

Under the leadership of Donald Trump, the conservative backlash has become more frenetic. Now we hear talk of endless investigations and possible impeachment before a candidate has even been elected. Trump and his supporters have found Hillary Clinton guilty before she’s even been charged with anything. Their closing argument is that the only way to avoid a constitutional crisis is not to elect her. We have reports of Trump supporters within the FBI trying to use investigations and leaks of investigations to influence the election, whether or not any actual crimes have been committed. I am hardly the first to suggest that these tactics put our democratic institutions at some risk.

Yesterday we had a call for greater civility from, of all people, Melania Trump! (Hopefully civility, like charity, begins at home.) By all means, let’s have more civility, but civility is more than just being nice to one another; it is a matter of allowing the democratic process to work and respecting the results.

 

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Posted by Ed Steffes

Is Donald Trump a Republican?

October 17, 2016

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As I write this, Donald Trump is losing support among women, which will probably cost him the election. Because the country remains rather evenly divided between the two major parties, a very lopsided outcome is unlikely in the popular vote, although more likely in the electoral college. My guess is that Trump will end up with about 40% and Clinton with about 50%, but that difference will be enough to give Clinton a decisive electoral college win.

As Trump has lost support, more Republican leaders have tried to distance themselves from him. They want this to be his defeat alone, not really a defeat for the party. He’s not really a Republican, you see, and so the party can kiss him goodbye and move on.  Democrats are more interested in tying Trump to the party, so if he sinks like a stone he will take other Republicans down with him. Last week, President Obama described Trump as just putting his own brand name on some old Republican ideas, just as he puts his name on buildings built by somebody else.

On most issues, I see a lot of similarity between Trump’s positions and those that Republicans have taken in the past. There are also some differences, but they are often due to Trump’s emphasis on themes that today’s Republican leaders would like to play down, especially white male resistance to the ascendancy of women and minorities. The party got a lot of mileage out of those themes in the past, but that train is running out of steam. Trump and his supporters are keeping it going, and that makes it hard for the G.O.P. to treat his candidacy like a foolish affair that can be quickly forgotten.

To elaborate the similarities and differences between “Trumpism” and Republicanism, consider several different kinds of conservatism: economic, foreign policy, social and cultural.

Economic conservatism

Republican orthodoxy in this area calls for limited government intervention in the economy, reliance on free markets, low corporate and personal taxes, minimal economic regulation, and support for international trade.

Donald Trump supports quite a bit of this. He wants an end to many regulations and a moratorium on new ones. He supports additional tax cuts, especially for corporations and the wealthy, which he expects to boost economic growth for all, in traditional “trickle-down” fashion.  He is more comfortable than most fiscal conservatives with borrowing to support federal spending, especially on infrastructure projects. This departs more from what conservatives say than what they actually do, since Republican economic policies since Reagan have not generated enough tax revenue to avoid deficits anyway.

The biggest difference is on trade. Republicans have been the strongest supporters of the free-trade agreements that Trump now condemns. Traditionally, Republicans have emphasized the advantages of trade for American businesses, such as access to foreign markets and to inexpensive labor, materials and components. Trump would put higher tariffs on foreign goods to protect domestic manufacturers and their workers from foreign competition. This protectionism appeals particularly to vulnerable blue-collar workers, a traditional Democratic constituency.

Foreign policy conservatism

Republican “neocons” generally support strong political and military U.S. engagement with the rest of the world. This is partly a matter of economic self-interest, such as a desire for Middle Eastern oil. But it is also based on the argument that the world’s strongest democracy should be actively engaged in spreading democracy around the world.

Donald Trump has been more critical of foreign wars. He claims to have always been against the Iraq war, although he voiced at least cautious support for it when it started. On the other hand, he claims to have the best plan for defeating ISIS, without saying what it is. While he seems more interested in bombing terrorists than opposing Russian expansionism, he is certainly no foreign policy dove. His support for massive military spending is very Republican. He has also taken a very hard line favoring Israel over the Palestinians, in contrast to President Obama’s more balanced position.

Social conservatism

On hot-button social issues, such as abortion and same-sex marriage, Trump has not taken very clear and consistent positions. He is currently pro-life, although he has been pro-choice in the past. Early in the campaign he even said that women who have abortions should be punished, but he quickly backtracked. He has promised to appoint Supreme Court justices who will overturn Roe v. Wade.

Gay rights have not gotten much attention in this campaign, perhaps because the issue of same-sex marriage has been settled by the Supreme Court. However, Trump has selected as his running mate a Christian conservative known for his hostility to gay rights. As Indiana’s governor, Pence supported a law that would allow businesses to refuse service to gay customers, as a matter of individual conscience.

Trump has the support of most Christian conservatives, although some are now breaking with him over his sexual remarks and alleged sexual aggression.

Cultural conservatism

By cultural conservatism I mean especially white nationalism, or resistance to the ascendancy of African Americans, Latinos and other cultural minorities. I would also include male resistance to the rights claimed by women. Many Trump supporters are women, but they tend to be less educated women who do not identify as strongly with feminism or with career women like Hillary Clinton.

Cultural conservatism is at the core of the Trump phenomenon. His campaign began with a strong “build the wall” anti-immigration stance. Now it appears to be ending with insults against women and allegations of sexual mistreatment of women. After having been recorded boasting about sexual aggression, Trump is in the awkward position of attacking the women who accuse him of doing precisely the things he boasted about.

Trump has also insulted African Americans by stereotyping their neighborhoods as nothing but slums full of poverty, crime and violence. He claims they are worse off than ever before because of Democratic policies (Republicans apparently having no complicity in perpetuating our racial problems). So they have “nothing to lose” by voting for him, although he has put forth no policy program except a vague appeal to “law and order” and a return to “stop and frisk” policies that have been ruled unconstitutional.

How much of this can be called Republican? Well, aside from the sexual aggression, quite a bit. Ever since the Democratic Party became the party of civil rights and women’s rights, the Republican Party has been the refuge for those opposing those movements. It has been the party of the “Southern strategy,” “law and order,” and resistance to the Equal Rights Amendment and affirmative action.

On immigration, the G.O.P. has been divided for some time. The business wing of the party has wanted access to immigrant labor, but the cultural wing of the party has wanted strict limits on immigration and deportation of anyone arriving illegally. Neither wing has been particularly enthusiastic about paths to citizenship, perhaps because immigrants without civil rights are easier for businesses to exploit.

After the last presidential election, the Republican National Committee recognized the need to broaden the party by appealing more to minorities and women. Obviously, Donald Trump has failed to do that, not because his views are so novel, but because they are so depressingly familiar! In many ways, he has just been more outspoken about things that many Republicans have believed for a long time.

Weakening the party

Every candidate is different, and Donald Trump may depart more from the Republican norm than most. But take away the outrageous personality and the disgusting treatment of women, and the policy differences are not so remarkable. Many of them are matters of degree or emphasis: more emphasis on the costs rather than the benefits of trade and immigration, more emphasis on fighting terrorism and less on fighting for democracy around the world, more emphasis on perpetuating old stereotypes and attitudes and less on addressing the concerns of women and minorities.

Most Republican leaders now recognize that the Trump candidacy has been a setback for the party. When they consider what to do about it, however, they face a real dilemma. If they reject too much of what Trump represents, they can alienate a lot of Republican voters. But if they don’t reject enough of what Trump represents, they can damage the Republican brand for a long time. The Party needs to rebrand itself as more than the party of angry white men, while at the same time not alienating too much of their base. This will take a while to sort out, and in the meantime popular support for Republicans will probably suffer.

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Posted by Ed Steffes

Trump’s Taxes: Can the Fox Guard the Henhouse?

October 6, 2016

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David Cay Johnston has come up with a plausible explanation of how Donald Trump used business losses to avoid paying federal income taxes. Johnston is an expert on how the wealthy use the tax code to their advantage. My aim in calling attention to this is not just to criticize Trump for minimizing his tax bills, but to raise the larger question of what kind of tax reform is needed and whether a Trump administration is likely to pursue it.

Turning business failure into personal gain

In the early 1990s, Donald Trump was the owner of failing casinos and other unsuccessful business ventures. He had borrowed and spent so lavishly that his businesses couldn’t make their loan payments and still turn a profit. Trump was like a homeowner living in a flashy mansion but going broke trying to make the payments on it. He reported net operating losses of $916 million in 1995 and was $3 billion in debt.

The operating losses had a silver lining, however. The federal tax code allowed him to use those losses to offset personal income for as many as 18 years, running from two years before the reported loss to 15 years after.

As for the debt, he got the banks to forgive almost $1 billion of it by threatening “endless litigation” if they tried to collect what he owed. Trump has boasted about his habit of paying less than he owes. “I’ve borrowed knowing you can pay back with discounts.” Many borrowers who lost their homes in the real estate meltdown would have liked that deal. Conservatives accused President Obama of “subsidizing losers” when he proposed assisting such homeowners.  Trump also got a tax break on his debt forgiveness, which would normally be considered a form of income. But Congress created an exemption that allows real estate owners to avoid this tax liability if they sacrifice future deductions for depreciation instead. (One of the tax benefits of real estate is the ability to take a deduction each year for property depreciation.) Trump had personally testified on behalf of the exemption.

Trump still had a problem, however. He still owned properties that were losing money, and they were now worth even less as investments because he had forfeited the future tax benefit of depreciation in return for an immediate tax benefit for himself. Nevertheless, he was able to sell the properties to a new stock corporation he created, Trump Hotels and Casino Resorts. The investors must have grossly overestimated the potential return, perhaps as Johnston says because they “saw gold in his brand name.” They bought the shiny image and overlooked the ugly reality. Could there be a lesson here for voters?

As the chairman of Trump Hotels and Casino Resorts, Trump was well paid whether the company succeeded or failed. He also had the company borrow more money in order to pay off his previous loans, thus saddling the corporation with what had been his personal obligations. With him in charge, the company lost over a billion dollars; the stock value plummeted, and the investors were wiped out. He walked away with millions of dollars in tax-free income, but everyone else lost–investors, contractors, and the taxpayers who subsidized his me-first business practices.

Why does it matter?

All of the financial moves I’ve described may have been legal. (Johnston does charge him with tax fraud in other contexts, but that’s another matter.) Trump’s defenders blame his economic failures on economic conditions beyond his control, justify his tax maneuvers as normal efforts to avoid paying more than the tax code requires, and praise his “genius” in achieving personal success in the face of financial adversity.

All of those claims are controversial. Rather than dispute them, I want to emphasize something else, which is tax policy. Donald Trump himself has said something like this: The tax system is rigged, but since I know the tax code so well and have brilliantly used it to my advantage, I’m the best person to fix it! Or to put it a little more whimsically, I’m the smartest fox to guard the henhouse, since I’ve been feasting on chicken for a long time!

This is a clever argument. The problem I have with it is that I see no evidence of Trump’s interest in tax reform. Democrats continue to complain loudly about his failure to release his tax returns. I wish they would call more attention to what he has released, which is at least the main outline of a tax plan. As I described it in an earlier post, it is standard Republican fare. It makes the tax code flatter and less progressive by lowering tax rates for the wealthy, and it includes new goodies like the elimination of the estate taxes that are paid by only the richest one-fifth of one percent. Surprise surprise, Donald Trump and his family stand to make a fortune from his own tax proposals. In contrast, Hillary Clinton wants to increase estate taxes and implement the “Buffet rule,” which would require those with million-dollar incomes to pay at least 30% in income taxes. I see little chance that her plan will get through a Republican-controlled Congress, but at least it’s an authentic proposal for reform.

So Donald Trump, who has cultivated the image of the populist outsider, defender of the working people, is really the protector of the rich and powerful. Hillary Clinton, the Washington insider, is really the progressive reformer. The cunning fox shows no sign of giving up his chicken dinners. If we want someone to guard the henhouse, we’d better elect a hen.

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Posted by Ed Steffes

The Trump “Style” and Its Appeal

September 13, 2016

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A number of political commentators are starting to suggest that Hillary Clinton could win the upcoming political debates on substance, but lose them on style. No one seems to doubt that Clinton is far more knowledgeable on policy issues and has more detailed policy positions. The latest issue of The Week reports that “Donald Trump’s campaign has seven policy proposals listed on his website, totaling 9,000 words. Hillary Clinton’s campaign has 65 policy fact sheets, with detailed proposals totaling 112,735 words.” Clinton and her running mate, Tim Kaine, have also just released a book describing their proposals, Stronger Together: A Blueprint for America’s Future. Nevertheless, although most commentators regard Donald Trump’s ideas as more simplistic, ill-informed and even dangerous, they have to admit that he continues to appeal to a large portion of the electorate. One explanation is that people just like his style, and style trumps substance in U.S. elections.

What is it about this style that is so appealing? A few adjectives come to mind: loud, combative, self-aggrandizing, politically incorrect, and autocratic.

When I say “loud,” I mean more than the volume of Trump’s voice. He has a way of drowning out other voices in the room by seizing the media spotlight for himself. He provides a steady stream of colorful remarks to resonate in the media echo chamber. He commands attention and attracts a following.

Americans love physical and verbal combat, at least as a spectator sport, and Trump’s combative style appeals to those who feel he is fighting for them. He rallies supporters by portraying America as an embattled nation, threatened primarily by foreigners, immigrants and terrorists. His enemies list also includes anyone who criticizes him or sees the world differently, such as political liberals and most journalists.

Trump is probably the most blatantly self-aggrandizing candidate we’ve ever seen. He claims to have the answer for everything, whether it is inner-city poverty or terrorism. On domestic policy, he knows more than the policy experts who’ve worked on the problems for years, and on military policy he “knows more than the generals.” He rarely reveals his policy plans, of course, but trust him, he has them and they are amazing. This oversize confidence appeals to those who would rather put their faith in a strong father-figure rather than deal with the complexities of the issues.

Trump also boasts of his “political incorrectness.” This rather odd term is a product of the debates over racism and sexism since the 1960s. I think it is a respectable way of saying that one is resisting calls from women and minorities to change attitudes and behavior. For example, women have argued that if they are to be equals in workplaces, universities, the military and other spheres of achievement, they cannot be subjected to unwanted sexual attention. This can be confusing to men, who need to develop the sensitivity to discern when sexual advances are welcome and when they are not. Some men just don’t get it, and claim not to know what all the fuss is about. And some disparage the whole attempt to discourage sexist or racist behavior as an exercise in “political correctness,” a needless infringement on their freedom of thought, speech and action. Boasting about one’s political incorrectness is a way of standing up for the privilege to say and do what one pleases, whether it is offensive to others or not. The fact that Donald Trump rushed to defend Roger Ailes when he was accused of sexual harassment, even before the facts were in, and then brought him into his campaign as an informal adviser after he was fired by Fox News, is an indication of what Trump’s political incorrectness can mean. It is a code word for white male resistance to the new assertiveness of women and minorities.

Does that mean that Trump and his followers are sexists and racists? Obviously that is a very contentious and contested notion. They can easily protest: “We’re not racists; we just want to stop Mexicans and other foreigners from taking our jobs. We just want to stop potential terrorists from entering the country. We just support “law and order” and the right of police to defend themselves against dangerous suspects.” Trump’s critics can point out the racial subtext lying just beneath the surface of these positions. “Law and order,” a favorite phrase of racists from Adolf Hitler to George Wallace, can mean defending the white-supremacist social order by keeping minorities in their place. And what is the racial subtext of the “birther” movement previously led by Donald Trump? He no longer talks about it publicly himself. But a recent poll found that 59% of voters who approve of Trump believe that Barack Obama was not born in the United States and is therefore not qualified to be president. Isn’t the real message that Obama cannot be a legitimate American leader because of the color of his skin?

As a practical matter, calling people sexist or racist is usually counterproductive. I believe that the most prejudiced people have defense mechanisms that allow them to deny their own prejudices. The most we can hope for is to get them to question certain positions by calling attention to their prejudicial implications. For example, if you believe, as many of my students have liked to think, that the playing field is already level and blacks have been given every opportunity, then you may conclude that only laziness or stupidity can account for their higher rates of poverty. Some may be willing to question their assumptions, but only if they are questioned respectfully and not just insulted. Besides, Trump and his supporters have gotten very good at answering such accusations by attacking their attackers. “Call us racists? That’s what you Democrats always do, play the race card when you don’t want to discuss ideas.” (That’s almost an exact quote from a Trump surrogate.) So Trump and his supporters claim the moral high ground while accusing Clinton of being the real bigot, prejudiced against the white working class. Her calling his more extreme supporters “deplorable” only plays into that narrative.

Trump’s political incorrectness walks a fine line, flirting enough with sexism and racism to attract a core following of angry white men, but trying not to be so obvious that moderate Republicans are too shocked to vote for him. So he makes a show of reaching out to African Americans, but in a way that demonstrates little racial understanding or even curiosity. By describing black communities as nothing but cesspools of poverty and crime, he insults the group he claims to want to help. (The black poverty rate is higher than the white rate, but most African Americans are not in poverty.)

Donald Trump’s autocratic tendencies have been on display in his admiration of Vladimir Putin. He may be right that Putin is more popular with Russians than Obama is with Americans, although Obama’s approval rating is much higher than Trump’s. Russians, of course, have a long history of autocratic leadership. Putin has sustained his support by projecting military power abroad (especially by taking Crimea and supporting the Assad dictatorship in Syria), by rigidly controlling the media, and apparently by having some of his opponents eliminated. For now, he is maintaining his popularity despite the downturn in the Russian economy. Trump is impressed with Putin’s strength, without considering whether it is the type of strength appropriate for a more democratic leader. Former world chess champion Garry Kasparov says, “Vladimir Putin is a strong leader in the same way that arsenic is a strong drink.” The New York Times described Putin as “a seductive figure for Western politicians and electors, who often pine for decisive action and a more secure world, free from the uncertainties created by immigration, insecurity and economic globalization.”

Personal style or social movement?

I have characterized the Trump style as loud, combative, self-aggrandizing, politically incorrect and autocratic. Others will no doubt want to add their own adjectives, some less polite than mine. But is that really what the Trump phenomenon is about, or is it a lot more than that?

Some media observers have started to use the term “Trumpism” to distinguish the Donald’s brand of politics from mainstream conservatism. Without denying the need to make such a distinction, I’m not sure that’s the best thing to call it. That may give the impression that the Trump phenomenon is nothing but a personal style of politics that will fade from the scene if Trump loses. Although we may never see another Donald Trump, we have seen this kind of belligerent politics before. It is the kind of political stance that appeals to people who feel that somebody is taking something away from them, and they see no alternative but to fight to take it back. It is what we see when social change threatens to leave people behind. They become susceptible to the appeal of some tough-talking strong man who promises to restore them to their former position. That’s the real message of “make America great again.”

In theory, a changing economy has the potential to create as well as destroy, to create new jobs and new skills to replace those that are in decline. How exactly to do that in today’s globalizing, automating economy is a problem that has many experts scratching their heads. People can be forgiven for wanting to hold onto what they have or get back what they have lost. They want to hear that we can bring the coal mining jobs back, not that they are gone forever. We could be having a national conversation about how government could help facilitate postindustrial development. Instead, Trump has us fixated on walling ourselves off from the rest of the world.

People in other countries have their own reasons for supporting reactionary politics. Millions of ordinary Muslims have gotten little or no benefit from the limited modernization of their countries and the development of their oil resources. Angry Muslims who blame America (the largest oil consumer) for their problems are not so different from the anti-Muslim Americans who want to “bomb the hell out of them.” Neither group sees a positive way forward toward peace and prosperity in the world as a whole or the Middle East in particular. Both sides just cling to their traditions, dream of restoring lost greatness, and wish that the other side would disappear.

Today’s global problems call for imagination, creativity and innovation. People need empowerment, to be sure, but they need constructive forms of power like the power of knowledge, organization, and cooperative uses of economic resources. The alternative is a pessimistic, reactionary politics where society is viewed as a zero-sum game and power is used to settle who wins and who loses. That’s where the Trump style fits right in. Don’t create anything new; just take back what seems rightfully yours. Take back manufacturing jobs by erecting trade barriers to foreign goods, but somehow make the rest of the world accept our exports. Take back jobs that have gone to immigrants by kicking them out and building a wall to keep them out. Keep the Middle Eastern oil flowing, and take over foreign oil fields if necessary to keep them out of enemy hands.

Who better to carry out such policies than a loud, combative, self-aggrandizing, politically incorrect autocrat? Donald Trump is that kind of guy, but he is not the only one. If one such leader fails, another will probably emerge, until more people see a better way forward. Reactionary populism is on the ascendancy in many countries, including countries like Germany and Austria that ought to know better. We have seen this before, during the Great Depression and World War II. It is bigger than any one man, and we should not underestimate the danger.

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Posted by Ed Steffes

Clinton and Trump on Fiscal Policy (part 2)

August 17, 2016

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The last post discussed differences between the candidates in their approach to taxing and spending. Both have ambitious spending plans, but Hillary Clinton proposes to raise the revenue to finance hers by increasing taxes on the wealthy. Donald Trump proposes to increase spending and cut taxes at the same time, with the largest reductions for the wealthy.

Estate taxes

The candidates also sharply disagree over estate taxes. As a result of previous tax cuts, estate taxes only apply to individual estates valued at over $5.45 million, or $10.9 million for married couples. Only one estate out of every 500, or 0.2% of estates, are large enough to have to pay any estate taxes at all.

Amounts that exceed these thresholds are taxed at 40%. However,the wealthy are also able to use various legal devices to limit the size of their taxable estates, so that most pay less than half of that.

Consistent with her aim to get the rich to pay “their fair share,” Clinton proposes to raise the estate tax rate to 45% and to apply the tax to more estates. The new, lower thresholds would be $3.5 million for individuals and $7 million for couples.

Trump would abolish the estate tax altogether, creating another big tax break that would benefit only the richest 1/5 of the 1%. For those as rich as himself (or at least, as he claims to be), the tax savings could run into the billions.  Personally, I think that any candidate who claims to care about struggling working families could find a better use for that tax revenue.

I will cheerfully state my own bias here. I think that taxes on large estates are a good idea in a democracy. They help equalize opportunity, rather than letting the children of the rich be born with a gilt-edge guarantee of future prosperity. They also help avoid the formation of  hereditary aristocracies or plutocracies, which tilt power toward the wealthy and away from average citizens. How strange that an alleged populist cannot appreciate that!

Business taxes

In the area of corporate taxes, the Clinton plan is again more moderate than the Trump plan. She proposes some small changes to the tax code in order to discourage businesses from moving abroad. For example, she would crack down on “tax inversions,” where companies avoid US taxes by merging with a foreign company and moving their corporate headquarters to that country.

Donald Trump would reduce the incentive of companies to leave the United States by lowering the corporate tax rate, which at 35% is one of the highest in the world. Many corporations take advantage of the many deductions and loopholes in our tax code, some pretty reasonable and others pretty tricky. In general, Trump proposes to do what many tax critics recommend, lower the rate but close many of the loopholes.

However, the Trump plan is radical in some respects. He proposes a new corporate rate of 15%, which is below even the House Republican recommendation of 20%. He would also apply that rate to all sorts of businesses, including partnerships, limited liability companies and sole proprietorships. As it stands now, those entities “pass through” income to individuals, who pay taxes on it at “ordinary income” rates as high as 39.6% (or 33% after Trump’s other cuts). According to the Center on Budget and Policy Priorities, two-thirds of this pass-through income goes to the top 1% of taxpayers, who are obviously in the top bracket. Taxing those entities at only 15% would be another windfall for the wealthy.

In addition, it would create a new tax loophole for wealthy individuals. Many highly paid employees could lower their taxes to 15% simply by reclassifying themselves as independent contractors and selling their services to their former employers.

The choice

In her tax and spend proposals, Hillary Clinton comes off as the fiscal moderate but social progressive, wanting to finance her new spending plans with modest tax increases on the wealthy. Her tax plan is expected to bring in $1.1 trillion in additional revenue over ten years. Donald Trump comes off as the fiscal risk-taker and plutocrat, willing to increase the deficit in order to give out more tax breaks, primarily for the wealthy. His original plan would have reduced revenue by as much as $9.5 trillion over ten years, although he would hope to offset that by stimulating a higher rate of economic growth. (That’s what tax cutters always hope for but rarely achieve.) The current plan discussed here is just beginning to be analyzed, but I would be surprised if the cost in revenue would come out less than four or five trillion.

As I have said before, the Republican Party has the perennial problem of how to win electoral majorities while pursuing an economic agenda whose top priority is tax relief for rich people. The solution is often some form of cultural conservatism with broad appeal, such as Christian conservatism. Declining enthusiasm for the Religious Right has created an opportunity for a more troubling form of conservatism, more nativist and nationalist, to arise. In Donald Trump we have an odd marriage of nationalist populism and anti-tax plutocracy, the first appealing more to the less educated, and the second more to the rich. But not enough of the educated middle class are buying into this mix to make it the new ideological foundation for the party. Meanwhile, the Democrats are gradually becoming more progressive again, and they should be a formidable political force. For one thing, they are winning the battle for the hearts and minds of the younger generation, at least in this election.

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Posted by Ed Steffes

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