The Tax Act and Republican Economic Mythology

(Alex Edelman/picture-alliance/dpa/AP Images)

Paul Ryan and Republicans speak at the White House on December 20, 2017, after the passage of their tax bill.

Why is it that even though the economy has done better under Democrats than Republicans for decades, Americans have long considered the GOP to be the better party when it comes to “the economy and jobs”? The answer is that for decades Republicans have told a consistent story about how the economy works: Businesses are the job creators so government should cut taxes and regulations and let the free market work. That’s the story they are using to sell the 2017 Tax Act, and it’s still believed by a majority of voters.

However, the tax law has given Democrats a tremendous opportunity. They can use the Republican tax cuts as an opportunity to debunk the GOP trickle-down narrative and provide a progressive explanation of how we can grow the economy, create jobs, and raise wages for everyone.

While public opinion toward the new tax law remains divided along partisan lines, the arguments that bolster support for the law are central to the trickle-down view of businesses as the real job creators. Slightly more than half of all Americans falsely believe that companies are using the tax cuts to raise wages and invest in creating more jobs in the United States. And by an 18 percentage-point margin, voters are more likely to say that the tax law is good for the economy and jobs.

Democrats and progressives have effectively criticized the tax bill on the grounds of fairness and its negative impact on working families and the middle class. Seven out of ten voters believe that the new law favors corporations and the wealthy over the middle class, favors special interests and GOP campaign donors, and will hike the deficit causing cuts in Medicare, Medicaid, and Social Security.

But Democrats and progressives haven’t adequately focused on challenging the underlying philosophy behind the tax law. Even in rebutting the GOP’s economic case for the tax law, Democrats and progressives have largely focused on why it’s unfair, explaining that CEOs and wealthy shareholders are reaping the lion’s share of the benefits, dwarfing raises and bonuses to workers.

However, as long as Democrats continue to just base their case on fairness on taxes (as well as on a whole range of other issues), the Republican trickle-down narrative will remain dominant and give the GOP and conservatives a continued advantage on the all-important question of which party and governing theory is better for job creation and economic growth.

Instead, Democrats need to consistently tell the story of inclusive economics: Working families and the middle class, not corporations and the wealthiest Americans, are the engines of the economy; when we expand and include more people in the middle class, we create jobs and broad-based prosperity for everyone—not just the wealthiest.

Connecting the idea of an inclusive economy to the debate on taxes requires both taking on the conservative argument directly and painting our own picture. Rather than just pointing out that businesses are spending their tax cuts on enriching shareholders and CEOs, we should stress that companies raise wages and hire more workers when there’s more demand for what they sell. So if we want to create more jobs, government should act to improve wages and benefits in order to expand the middle class’s spending power, not give tax breaks to corporations.

Similarly, rather than just pointing out the tax cuts to the wealthy and corporations will endanger funding for highly valued programs like Medicare, Medicaid, and education, we should make the case for raising taxes on the wealthy and corporations not as a redistribution scheme but as an investment. It’s our responsibility to make sure that every child has an education to prepare them for a well-paying career, and it’s in everyone’s best interests to create jobs by investing in infrastructure and clean, renewable energy.

In a poll taken this spring for the American Federation of Teachers, Stanley B. Greenberg found one message that was the most effective in moving supporters of the tax bill to oppose the law: “The new tax law costs $2.2 trillion over the next decade, which means even less investments the middle class needs for a better future. Instead of a law that gives 83 percent of the benefits to the top 1 percent, that money should be used to invest in our public schools and infrastructure and bring down health-care costs.”

This message is effective in moving opponents because it demonstrates how policies that promote equity also create economic growth and prosperity. This is the same lesson Topos Partnership found in research on the minimum wage. The best messages to maintain support for the minimum wage when it is attacked as “killing jobs” combine fairness and the economy: “When we raise the minimum wage so families can meet the basics, their spending creates jobs on Main Street and builds thriving communities.”

Republicans have dominated the economic debate for 50 years. They are intent on using the same trickle-down narrative that they’ve always used to their advantage in selling voters their one big legislative victory on taxes. But Democrats have a huge opportunity in 2018 to not only win the debate on taxes, but to finally gain the upper hand on the economy. The story we tell about the economy is inclusive, persuasive—and unlike the trickle-down story, it also happens to be true.

As we prepare for the most important midterm elections in modern history, we have to remember that it is simply not enough for progressives to win. They must also make sure that conservative ideas are discredited and replaced with a progressive idea of how the economy works.

Democrats can win the battle of ideas because inclusive economics explains how the same policies that promote equity and inclusion are the policies that drive economic growth and broad-based prosperity. Our story puts working families and the middle class as the source of, and the beneficiary of, a tremendous wave of economic growth. It’s our job to spread that story far and wide.

If Democrats do so convincingly, and if they back up their ideas with policies once in office, 2018 will be remembered as a sea change moment in American politics—the point when Democrats began to show how government policy can drive economic progress and prosperity in the 21st century. 

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