It's the Economy, Stupid -- Again


Dennis Van Tine/STAR MAX/IPx

Bernie Sanders supporters at a rally in New Brunswick, New Jersey

As you may remember, when Bill Clinton ran for president in 1992 someone put up a sign in his campaign headquarters reading, "It's the economy, stupid," reminding the candidate and everyone working for him to keep the focus on that issue. With the country still recovering from the last recession, Clinton framed much of his campaign that year in terms of a conflict between ordinary people on one side and the wealthy on the other, with slogans like "Fighting for the forgotten middle class" and "Putting people first." That's despite the fact that Clinton was a centrist in many ways.

And of course, it worked. Democrats usually succeed when they wage what Republicans angrily call "class warfare," an objection to both the substance and politics of going after the rich on behalf of the non-rich. It's not surprising, since working so assiduously for the wealthy, as the GOP does, requires some delicate maneuvering. It's best if no one calls too much attention to it. Which makes it all the more extraordinary that Democrats ever run on anything else.

And in 2020, they may never have had a clearer opportunity, even though the economy is not doing nearly as poorly as it was when Clinton was running. Republicans managed to pass a highly unpopular tax cut in late 2017, which you might have thought would be difficult to do. They certainly thought the tax cut would inevitably be popular. But by relentlessly hammering it as a giveaway to the wealthy and corporations, Democrats fixed the idea in the public mind that it was meant to help those at the top.

That argument not only reinforced what voters already believed about Republicans, it had the benefit of being true. We already knew that just as Democrats predicted, corporations primarily used their windfalls not to raise worker pay but for record stock buybacks. And now that corporations are reporting their tax information for 2018, the first year the tax cut was in effect, we're seeing just how much they gained. Here are a few representative examples, courtesy of Axios:

  • GM is claiming a $104 million refund on $11.8 billion in 2018 profit.

  • Goodyear is seeking a $15 million refund on $693 million in profit.

  • Halliburton will pay $19 million in U.S. income taxes on $1.6 billion in profit.

  • Netflix filed for a $22.1 million refund on $845 million in profit.

  • U.S. Steel is claiming a $303 million refund on $957 million in profit.

In the past, companies have used their armies of accountants, tax lawyers, and lobbyists to navigate and shape the complexities of the tax code to make sure they didn't pay anything at all or even got large refunds. But the new law, which both lowered the nominal corporate tax rate from 35 percent to 21 percent and carved out even more pathways for tax avoidance, made it more likely than ever that corporations will get away with paying nothing.

But that's not even the most vivid illustration of what the tax bill did. According to a new FDIC report, bank profits increased by $72.4 billion last year compared to 2017, with $28.8 billion attributable directly to the tax cut. Turning that into a political spear to thrust at Republicans' hearts is easy. Try this: "A decade ago, Wall Street nearly destroyed the American economy, and the taxpayer stepped up and bailed them out. Then Donald Trump and the Republicans came along and gave them a tax cut worth $28.8 billion dollars in just one year. Does that sound fair to you?"  

Democrats are already changing the entire political conversation around the economy even capitalism itself. Not only are they proposing significant tax increases on the wealthy, whether it's higher marginal rates or a wealth tax, they're also arguing for a fundamental reorientation of federal policy to get at the roots of inequality. Their proposals include traditional Democratic ideas like raising the minimum wage, along with a broad expansion of social supports in areas like health care and child care, and even some revision to the nature of the modern corporation to give workers a greater voice.

Every one of those proposals has wide appeal to voters, and every one gives Republicans the vapors. But let's not forget that in 2016, Donald Trump correctly surmised that despite the fact that unemployment was low and the economy was on a steady path of recovery from the Great Recession, something was fundamentally wrong. The fact that nearly anyone can get a job isn't much to celebrate if the only jobs available where you live are at Walmart or in an Amazon fulfilment center. When Trump told voters that the system was rigged against them, he tapped into a genuine and justifiable desire for something different.

Of course, what he delivered was more wealth for the wealthy and more powerful for the powerful. If Democrats can't turn that into an effective argument for change, they ought to be in a different business.

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