Unless A Supine GOP Stops Him, Trump Will Do To America What Brownback Did To Kansas

You know how states are supposed to be petri dishes for new ideas? Long before the federal government was looking into protecting consumers from predatory mortgage banksters, Assemblyman (and then state Senator) Ted Lieu was hammering out and passing controversial legislation that did just that in California. Today California Assemblyman Jimmy Gomez's revamped paid family leave plan-- revamped so that the benefits go to working class families, not just the upper middle class-- is a model for state legislatures across the country and will eventually become the foundation for a national law. But this same kind of thing happens when Republicans gain control of states-- or at least the mirror imagine happens. Last week Dominic Rushe, writing for The Guardian from Kansas, wrote about how Trump is using that state as a model for his tax cut plans. The problem, of course, is that, after years as a radical right petri dish under Gov. Sam Brownback, Kansas is a fiscal basket-case.

Details like that seem to escape Trump and he's bringing the widely despised Brownback into his Regime and bringing Brownback's failed ideological point of view into his tax agenda. "Kansas is broke," wrote Rushe, "but you wouldn’t guess it looking at its shining state capitol in Topeka. The imposing limestone monument, crowned by a shiny copper dome and limned with John Steuart Curry’s luminous murals, has just undergone a $325m facelift. What’s happening inside the state house is a lot less pretty, and may well foreshadow the far uglier battle looming over the future of taxation in the United States."

Kansas is one of the reddest states in America. The entire delegation to Washington is Republican, as are the state wide constitutional officers. The state Senate has 32 Republicans and 8 Democrats and the state House contains 97 Republicans and just 28 Democrats. And Kansas hasn't awarded a Democratic presidential candidate its electoral votes since LBJ in 1964. Trump beat Hillary 671,018 (56.6%) to 427,005 (36.0%), winning 103 of Kansas' 105 counties. Nevertheless, the underfunded Democratic candidate for the special election to replace Mike Pompeo in April, James Thompson, stunned Republicans by closing the gap by over 20 points and winning the biggest county in the district despite having been massively outspent by Republican state Treasurer Ron Estes. In the end Estes won with 63,505 votes (52.5%) to Thompson's 55,310 (45.7%). 5 months earlier Trump had won the district 60.2% to 33.0% and in 2014 Pompeo had been re-elected 60.7% to 29.6%. Two years before that Pompeo had taken 67%. Thompson will be running against Estes again in 2018. Democrats sense a change in the air in their battered state. Trump doesn't. Trump's chief economic advisor Gary Cohn and his Treasury Secretary Stephen Mnuchin-- a couple of swamp-dwelling Goldman Sachs banksters-- have used Kansas' failed model for a national model.

The plan’s similarity to the one that has left Kansas in crisis is “unbelievable,” according to Duane Goossen, the former Kansas secretary of administration.

The economic spirit behind Trump’s plan is Arthur Laffer-- the go-to guru of “supply-side economics” since the Reagan era, and one of the architects of Kansas governor Sam Brownback’s original tax plan.

The former member of Reagan’s economic policy advisory board is best known for the “Laffer curve,” an illustration of the theory (not his own) that economic activity is tied to taxation, and that lower taxes, up to a point, mean more revenues.

That curve was famously scribbled by Laffer on a napkin over cocktails with Dick Cheney and Donald Rumsfeld in 1974, and helped underpin Reagan’s so-called trickle-down economics-- as well as launching Laffer’s career as one of the most influential economists in Republican circles.

The curve is his calling card, but he also collects and publishes a vast trove of economic data on state revenues and taxes that seems to-- handily-- point to one conclusion: taxes bad, tax cuts good.

Fairly or not, “Laffernomics” is being blamed for a plan that has left the state in crisis and Brownback’s ratings in the Kansas dust. And Kansas, it seems, is about to act as the model for the biggest US tax cuts since the Gipper was in office.

Thanks to Kansas’s budget woes, Brownback regularly polls as the least popular governor in the union. Nor is there much love for Laffer. “How does he sleep at night?” one parent asked.

“Politics is politics, and I have been the object of political attack and praise. I have gotten both,” Laffer told the Guardian. “What can I tell you? If you climb up the pole, your ass sticks out pretty far, and I climb up. I’m not afraid of taking a position on things.”

Sitting in the capitol’s vaulted lobby, Goossen, now a senior fellow at the Kansas Center for Economic Growth, has little time for Laffer’s arguments, and says that the Trump administration’s recent presentation gave him the shivers.

When Brownback outlined his plan in 2012, he, too, said the tax cuts would pay for themselves. “He too said the tax cuts would benefit everybody, [that] they would be be ‘a shot of adrenaline to the heart’ of the Kansan economy,” said Goossen.

Instead, Goossen claims, the money has gone to a small group of wealthy Kansans while the state’s budget has been left with a roughly $1bn shortfall. Its school system, once its crown jewel, has suffered year after year of cuts, and its savings are gone. The non-partisan Tax Policy Center calculates Trump’s tax plan would cost $6.2tn over the first decade.

“We are a cautionary tale. It sounds great, everybody gets a tax cut and it’ll balance-- but it just doesn’t work,” said Goossen.

Campaigning for re-election in 2014, Brownback pledged his tax plans would add 100,000 new jobs over four years. By March this year, the state had added just 12,400 private-sector jobs. Kansas isn’t even keeping up with its neighbors. Hiring in Kansas increased by 0.3% in the last year; Missouri’s growth rate over that same period was 1.4%, according to the US Bureau of Labor Statistics.

The prop of the Brownback plan, as with Trump’s, was a huge cut to taxes paid by limited liability companies (LLCs)-- and so-called “pass-through” businesses-- which meant independent business owners would pay no state tax on the bulk, if not all, of their income. Those businesses would then go out and invest and create new jobs, or so the argument went.

At the time, Kansas had about 190,000 LLCs. Now it has about 300,000, but so far they have not spurred a new hiring drive in the state. “There is no evidence whatsoever that suggests this plan worked,” said Goossen.

Upstairs, the state senate is arguing over the budget for the 2018 fiscal year. Estimated revenues are $5.7bn for the year; expenses are $6.4bn – and that’s before you add in $500m-$750m the schools are owed. As Charles Dickens once wrote: “Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.”

Goossen said: “The bigger problem is that now all the energy of the state is focused on how we scrape by and make do when we ought to be focused on the future.”

...Brownback has told the Kansas City Star he’s “heartened” by Trump’s tax plans, saying they would spur business growth. Meanwhile, Democrats and Republicans are seeking to kill off his business tax breaks as the state struggles to balance it books.

Yesterday's NY Times reported that congressional Republicans-- at least some of them-- are cautiously distancing themselves from Trump. But only because he's probably going to be impeached over the ballooning Putin-Gate scandals. "Republicans on Sunday inched away from President Trump amid mounting evidence that he may have sought to interfere in the federal investigation into Russian meddling in the 2016 election. In a sign of growing anxiety, several important Republicans expressed discomfort with Mr. Trump’s firing of the F.B.I. director, James B. Comey, who had been leading the agency’s inquiry into whether Mr. Trump’s associates colluded with Russian officials. But the Republicans stopped short of explicitly criticizing Mr. Trump." But when it comes to his deadly tax agenda... that's something they all love and are all complicit in.

But even with something as fundamental to Republicanism-- tax breaks for the rich coupled with big cuts in services to the middle and working class-- there are problems that shouldn't exist for a party that controls the White House and both Houses of Congress. The combination of Paul Ryan + Mike Pence and Señor Trumpanzee and the Goldman Sachs crew are proving deadly to the GOP's efforts. Over the weekend, Fox Business reported that the Republican tax effort "is still in a precarious state, weighed down by internal policy disagreements and external political turbulence... Business groups and Senate Republicans have been pouring buckets of cold water on the ideas that make the House plan add up." The Regime, Fox reports, "has released only a vague, one-page outline of tax goals, leaving it to Congress to work out the details. Optimistic talk of committee votes this spring have given way to discussion of action this year. And if a tax bill emerges, it will land amid a storm of investigations into Russian interference in the 2016 presidential campaign, which have swept up the Trump administration and distracted lawmakers."

"Members will lose their nerve to do controversial things as they instead focus on distancing themselves from the president and scrambling for their own political life," Jon Lieber of the Eurasia Group consulting firm wrote to clients this week. "A tax bill could be completely derailed by this, but either way can't come together until early next year."

...Even with Republicans controlling Congress and the White House, a major tax bill was never certain. Republicans agree on cutting tax rates and lightening the tax burden on U.S. companies' foreign earnings, but they split over whether they want a net reduction in tax revenue and they divide along regional and ideological lines on crucial details.

Still, they entered the year optimistic. House members worked from a detailed outline, the "Better Way" blueprint House Speaker Paul Ryan (R-WI) unveiled in June 2016. And they still sound positive about reshaping the tax system in 2017.

"President Trump is leading the charge for bold tax reform that will unleash the growth of jobs and paychecks nationwide," Rep. Kevin Brady (R-TX), chairman of the House Ways and Means Committee, said Thursday. "Our committee is ready to answer that call."

To lower tax rates without adding to budget deficits, Republicans plan to bank on revenue created by economic growth and three big money-raising ideas: introducing a so-called border-adjustment tax proposal, scrapping deductions for business interest and repealing the state and local tax deduction for individuals.

Each of these measures faces sustained attacks from interest groups and fellow Republicans. None is sure to survive in the final bill, and there are no obvious revenue-raising alternatives in reserve.

Adding a border adjustment to the corporate tax-- taxing imports while exempting exports-- drew fierce blowback from retailers and Koch Industries Inc., the conglomerate run by billionaires influential in GOP politics.

Senate Majority Leader Mitch McConnell (R-KY) said this week the border-adjustment tax plan probably couldn't pass the Senate.

The same could be true for repealing the business interest deduction, an idea opposed by debt-dependent industries such as real estate, private equity and agriculture. Sen. John Thune (R-SD) said this week that the proposal would face an uphill fight in a Senate sensitive to rural interests. He is exploring a cap instead.

The House plan to repeal the individual deduction for state and local taxes has buy-in from the White House. But many House Republicans are objecting and there are enough of them to block the plan.

Such forces would have slowed the GOP tax plan under the best possible circumstances.

"Tax reformers may have to lower their ambitions," J.P. Morgan Chase economist Michael Feroli wrote this week. "Absent a backup plan, the slow demise of Ryan's Better Way program is revealing the tough road ahead to getting anything big done on corporate tax reform."

...Republicans plan to pursue tax legislation after passing a health-care overhaul. While the House has passed a health bill, the Senate is just starting on its version.

Lawmakers also can't complete the tax bill until they adopt a budget, a process that will force them to confront deep divisions within the GOP over spending priorities and deficits.

The Russia investigations-- and related probes into Mr. Trump's campaign and his firing of FBI Director James Comey-- could bog down a tax bill as well. The more time and political capital Republicans spend on Russia, the less they have for tax policy.

"Raising an umbrella in a light rain might keep you dry and not impede your travels," said Sage Eastman, a former GOP Ways and Means aide. "But in a full-fledged tropical storm-- well-- you're going to get a little wet."