Guest Post by Michael Bloomberg
Last month a Wall Street Journal editor asked a room full of CEOs to raise their hands if the corporate tax cut being considered in Congress would lead them to invest more. Very few hands went up. Attending was Gary Cohn, President Donald Trump’s economic adviser and a friend of mine. He asked: “Why aren’t the other hands up?”
Allow me to answer that: We don’t need the money.
Corporations are sitting on a record amount of cash reserves: nearly $2.3 trillion. That figure has been climbing steadily since the recession ended in 2009, and it’s now double what it was in 2001. The reason CEOs aren’t investing more of their liquid assets has little to do with the tax rate.
CEOs aren’t waiting on a tax cut to “jump-start the economy” — a favorite phrase of politicians who have never run a company — or to hand out raises. It’s pure fantasy to think that the tax bill will lead to significantly higher wages and growth, as Republicans have promised. Had Congress actually listened to executives, or economists who study these issues carefully, it might have realized that.
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Instead, Congress did what it always does: It put politics first. After spending the first nine months of the year trying to jam through a repeal of Obamacare without holding hearings, heeding independent analysis or seeking Democratic input, Republicans took the same approach to tax “reform” — and it shows.
The Treasury Department claimed to have more than 100 professional staffers “working around the clock” to analyze the tax cut. If true, their hard work must have been suppressed. The flimsy one-page analysis Treasury released — which accepts the White House’s reality-defying economic projections in order to claim that the tax cuts will pay for themselves and then some — is a politically driven document that amounts to economic malpractice. So does the bill itself.
The largest economic challenges we face include a skills crisis that our public schools are not addressing, crumbling infrastructure that imperils our global competitiveness, wage stagnation coupled with growing wealth inequality, and rising deficits that will worsen as more baby boomers retire.
The tax bill does nothing to address these challenges. In fact, it makes each of them worse.
EDUCATION: The bill, by limiting the deduction for state and local taxes, will make it harder for the localities to raise money for education. The burden will fall heaviest on cities with poor students, making it harder for millions of children to escape from poverty — and leaving more and more businesses with fewer qualified job applicants.
INFRASTRUCTURE: Restricting state and local tax deductions will also mean less local investment for infrastructure, and by raising deficits, the bill will constrain federal infrastructure spending. Our airports, railways and roads are in desperate need of modernization, and our energy grids are vulnerable and inefficient. Yet spending on those and other needs, which acts as a catalyst for private investment, will become more difficult.
INEQUALITY: If Congress wanted to raise real wages and reward work, there is a simple and proven way to do it: expand the earned income tax credit. Instead, it seems to believe that lower corporate tax rates will magically lead to higher wages, which fundamentally misunderstands how labor markets work.
In addition, by eliminating the requirement that individuals buy health insurance, many young and healthy people will drop out of the marketplace, causing health insurance premiums to rise for everyone else. This is nothing more than a backdoor tax increase on health care for millions of middle-class families that will leave them with less disposable income for savings, investment and spending.
DEFICITS: The bill’s cost — $1 trillion to $1.5 trillion — makes it more difficult for taxpayers to afford Medicare and Social Security for the baby boom generation, which is now hitting retirement. Republicans didn’t grapple with those costs. Instead, they kicked the can down the road. Ignoring the bill’s price tag, or pretending we needn’t worry about deficits, is like ignoring climate change or pretending we needn’t worry about its effects. I’ll say one thing for Republicans in Congress: They’re consistent.
In effect, the tax bill achieves four main things:
- It takes money away from schools and students.
- It restricts our ability to invest in infrastructure.
- It does nothing to boost real wages while making health insurance more expensive.
- It makes it harder to control the costs of Medicare and Social Security without cutting defense and other spending — or further exploding the deficit.
To what end? To hand corporations big tax cuts they don’t need, while lowering the tax rate paid by those of us in the top bracket, and allowing the wealthy to shelter more of their estates.
To be clear: I’m in favor of reducing the 35 percent corporate tax rate as part of a revenue-neutral tax reform effort. Right now, the corporate code is so convoluted, and rates so high relative to other nations (thereby creating an incentive to keep profits offshore), that the real rates companies pay can be wildly divergent. This is neither fair nor efficient. Eliminating loopholes and reining in the offshoring of profits can and should be done in a revenue-neutral overhaul of the tax code.
Republicans in Congress will have to take responsibility for the bill’s harmful effects, but blame also falls on its cheerleader-in-chief, President Trump. A president’s job is to get the two parties in Congress to work together. Yet Trump is making the same mistake that Barack Obama made in his first two years in office — believing that his party’s congressional majority gives him license to govern without the other side.
The tax bill is an economically indefensible blunder that will harm our future. The Republicans in Congress who must surely know it — and who have bucked party leaders before — should vote no.
Michael R. Bloomberg, the former mayor of New York City, is the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News. He is the UN secretary-general’s special envoy for cities and climate change.
“People have the illusion that “globalism” is good for commerce. It is mainly good for commerce by large crony corporations, creating fragility & winner-take-all effects.”
Nassim Taleb
Looks like they won’t pass it. Little Marco’s holding out for a bigger child tax credit. Corker’s a no. Cochran and McCain are at death’s door (don’t get your hopes up) and Mike Lee may vote no. Not sure Collins is on board, either. It really is a crappy bill.
Michael R. Bloomberg is a certified uber liberal.
I have no idea whether the new tax Bill, passed by the Senate and now being reviewed by House for changes (last I knew), is good or bad.
One thing is eminently clear – a comment on the Bill from a Democrat is just a smear job. I can guarantee that Bloomberg loved the UNaffordable Care Act cuz it was a Democrat Bill.
Can’t we get an unbiased review of the Bill?
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Sums it up pretty well.
I cannot think of a more accurate statement.
This is my first time commenting at the huffington post. Thank you, mr bloomberg, for the wonderful review. Please raise taxes when you are president, so we can pump more money into public schools, public housing, and job training programs.
Nothing I enjoy more than irritating Starfcker first thing in the morning. 🙂
And more money for our heroes in blue, right Star?
I assumed the star comment was /sarc
I started to read this, then I stopped to look who wrote it.
Reading economic articles by Limousine Marxists isn’t good for you.
Bloomberg can suck on my taint any day.
Bloomberg’s essay, where to start?
First let me state that I view the word “tax” as double speak for outright stealing at the point of a gun aka armed robbery.
1. It takes money away from schools and students.
Bullshit right there. If anyone thinks States, Counties & Cities are going to lose property tax revenue due to the rep bill they are insane. As a matter of fact most are dreaming up way to grab more FRNs from the people.
2. It restricts our ability to invest in infrastructure.
More bullshit here. The only infrastructure in question is owned and managed by .gov. .Gov with the current tax plan already uses gas tax revenue for projects other than the intended purpose.
.Gov restricts building new sources of power for the grid with onerous
regulations. So changing the tax code will not change that aspect.
3. It does nothing to boost real wages while making health insurance more expensive.
I will agree that the bill will not change the current situation with wages. It might make them worst possibly. However, the Federal Reserve is the primary reason wages are flat. You cannot inflate the money supply by a estimated (Shadow Stats) 6% a year and expect 2% merit raises to make any gains.
As for O Care? It was written by the Insurance cartel for the Insurance cartel. Cartel members generally work together to increase their rates. When Insurance has to compete for business prices fall. Without O Care, they have to compete to justify to younger healthier people why buying insurance is in their best interest. The mandate is basically a socialist mechanism to subsidize insurance for the chronically ill. Which, btw, is the reason the poisonous food pyramid exist! To create a class of chronically ill individuals.
4. It makes it harder to control the costs of Medicare and Social Security without cutting defense and other spending — or further exploding the deficit.
This is possibly the largest BS statement in the text. MC, SS & MIC spending is out of control and will be unless appropriations change. Fact is UP members have never seen a spending bill they did not like.
I will point out one thing Paul Ryan plans to gut entitlement programs and then immediately resign. He knows once he does that he will be politically dead. He won’t have to worry though, he has millions at his disposal along with that damned congressional pension (a F’n untouchable entitlement) to survive on.
Education:
Our education system is broken, not broke. Awash with administrative costs, it has become a propaganda machine for Global Bolshevism. I teaches nothing of value. Throwing more money will only make it worse.
Infrastructure:
State taxes and cost per mile for highway construction are double the national average in the liberal coastal enclaves. The money gets siphoned off by regulators and unions.
More money will only be grafted away in these areas.
Inequality: Earned income tax credits will only go towards drugs and junk food. A real middle class tax cut does not exist in this bill .
Deficits: Too late, that train has already left the station.
Robert (QSLV)
Bloomberg knows what’s best for the United States and the American people. we should listen to him.
Thanx for the laugh – seriously, I did laugh at your comment.
I keep waiting for congress to pass a simple bill that confiscates half the wealth of billionaires since all we hear from these limousine liberals is that taxes are too low. Put your money where your mouth is, fuckers.
Yeah, honestly I saw Michael Bloomberg and that was as far as I made it. I read alot, fortunately for my sanity I read far less than I used to when it comes to so called news. I’m just unwilling to even listen/read anything that rich pissant has to say. I view him as a traitor to the US and someone who works against nearly everything it stands for. I would rather read 10 rambling pages of Stockman instead at least he makes sense most of the time when it comes to economics.
He spends alot of his wealth attempting to further destroy the 2nd ammendment and he is a joke when it comes to freedom of any sort. He is an example of whats wrong with America, and he seeks to undermine it at every turn b/c he is an elitist technocrat. He will keep you healthy by banning large Sodas and keeps trying to destroy whats left of the 1st/2nd/and 4th. He treats the bill of rights like its toilet paper. I’m sick of all these uber rich fucks.
Rope/Tree/Marxist Mayor of Gotham.
Some assembly required.
“EDUCATION: The bill, by limiting the deduction for state and local taxes, will make it harder for the localities to raise money for education.”
Well, maybe you’re spending too fucking much already and producing little for it.
“In addition, by eliminating the requirement that individuals buy health insurance, many young and healthy people will drop out of the marketplace, causing health insurance premiums to rise for everyone else.”
Ahh. So Obamacare wasn’t to altruistically get uninsured people insured. It was to fuck over young people to pay for older people.
Wrong Dave. It was the fuck over young people to pay for black and brown people.
Let me clarify – O care was created to fuck over EVERYONE for the express benefit of the congressional donor class. Anything else is an unintended consequence.
“EDUCATION: The bill, by limiting the deduction for state and local taxes, will make it harder for the localities to raise money for education. ” —– article
Ummmm …. wrong!! Localities will simply continue to raise taxes, especially Property Taxes, to whatever amount is needed … just as they have been doing for decades.
While I am not a Bloomberg fan, I appreciate him telling the truth about HOW this bill is being sold to the public… a bunch of fucking lies, is how!”
I am sure the average ‘Murican is gonna feel very very blessed cuz they have an extra $25 a week in their wallet!! Hahaha.
—-
Meanwhile, Trump was at the FBI graduation today sucking on LEO dick like there was no tomorrow.
“sucking on LEO dick like there was no tomorrow.” Pissing off the guys with guns is never a good idea if you want to get something done. Like it or not, that’s probably the smartest thing Trump’s done
Just another politician proclaiming that all we need to do is throw more money at systems that are already over funded and underachieving. How the hell did this guy become so rich if he ran his company this way?
Rudolf E. Havenstein @RudyHavenstein
Middle-Class = people not rich or poor enough to get welfare.
Bloomberg is a fuckwit.
Fuck Bloomberg and every POS who voted that scumbag as NYC mayor.
Fuck Bloomberg. Fuck him hard in his commie loving ass. Oh and we the people raised a big enough ruckus here in Crook County Illinois to get his bullshit penny an ounce soda tax repealed. Take that you rich fuck LOSER!
Bloomberg is a douche and scumbag. Don’t believe anything an ultra – liberal never-trumper says. He is genetically too cheap to be concerned about the betterment of the nation. No jingling change in his pocket is coming out.
I am sick of one sided bullshit commentary like this author. Here are his quotes above with a street level real talk explanation of what he is completely avoiding so you are convinced of his biased bullshit.
“After spending the first nine months of the year trying to jam through a repeal of Obamacare without holding hearings, heeding independent analysis or seeking Democrats input”. What he is avoiding is the fact that Nancy pelosi famously stated you must pass the bill to see what’s in it during the dark of night of a holiday Friday night when obummer rammed down the throats of everyone, his agenda
“The largest economic challenges we face include a skills crisis that our public schools are not addressing, crumbling infrastructure that imperils our global competitiveness, wage stagnation coupled with growing wealth inequality, and rising deficits that will worsen as more baby boomers retire”. He is avoiding that the cause is obummer son 8 years of complete failure even with interest rates at a historic level of fucking zero! But all of a sudden wow this shit is Trumps fault. Moron…
“The bill, by limiting the deduction for state and local taxes, will make it harder for the localities to raise money for education”. This is ridiculous. He really is saying make it harder to raise taxes while not being efficient with the money they already get. Govt is wasteful and when you prove you are efficient we can discuss raising taxes until then fuck off.
“INEQUALITY: If Congress wanted to raise real wages and reward work, there is a simple and proven way to do it: expand the earned income tax credit”. You really are a fucktard. So give welfare mom as an increase in a tax credit and somehow it makes them wanna get off their ass get a job and pay taxes and leave welfare. Moron. A tax credit fully allows a non working welfare momma to file a tax return and get an actual cash refund of that said TAX CREDIT! See working people get a tax deduction which means they do not have to pay income tax on the expenditure but the welfare mommy get cold hard cash for not even trying to work. Hence the reason the immigrant senator Rubio fought to raise the tax credit to pass this tax legislation.
“by eliminating the requirement that individuals buy health insurance, many young and healthy people will drop out of the marketplace, causing health insurance premiums to rise for everyone else”. Ok this is an easy one. We are in a constitutional republic with the economy based on capitalism. Sorry to shock you that your dream of a dystopian Obama dictatorship under socialism didn’t occur but young people should not be forced to mow my law either much less buy inflated cost insurance so I can afford mine! Again you are a biased idiot.
“DEFICITS: The bill’s cost — $1 trillion to $1.5 trillion — makes it more difficult for taxpayers to afford Medicare”. Wait while I laugh. So all of a sudden when you and your beloved govt doesn’t get what it wants, my money and we ask you to be diligent and effective with our money you say it becomes a cost. Rather than cutting your cost and working efficiently with what you have and we take away some of our money via a tax cut it become all of a sudden a cost. But when we lose our jobs or our private capital as an entrepreneur we cannot just walk up to your fed window like the banks and say daddy I lost that allowance gambling I need more. Jackass.
“In effect, the tax bill achieves four main things:
* It takes money away from schools and students.
* It restricts our ability to invest in infrastructure.
* It does nothing to boost real wages while making health insurance more expensive.”
Oh boy give us a summary of your snowflake bias so we can all virtue signal to our own demise. Fuck you.