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It's the Prosperity Stupid

William McGurn
May 2, 2017
WSJ

Guess it depends on what you mean by a “multitrillion-dollar shift.”

On Friday the New York Times used it this way in the lead of a front-page story about Donald Trump’s new tax bid: “President Trump’s proposal to slash individual and business taxes and erase a surtax that funds the Affordable Care Act would amount to a multitrillion-dollar shift from federal coffers to America’s richest families and their heirs . . .”

This is a curious way to put it, as if the country’s millionaires and billionaires are readying to raid the American people of their money. Because before there can be any multitrillion dollar shift out of U.S. coffers, there has to be a multitrillion dollar shift into those coffers. Wouldn’t it have been more accurate to explain that if the federal coffers won’t be as full in the Trump years, it will be because people will get to keep more of their own money?

In the sour dynamic of the modern Beltway, alas, any bid aimed at allowing more Americans to keep more of what they earn will inevitably be presented through the Chuck Schumer filter of the rich robbing the poor. As if on cue, the Senate minority leader emerged on Sunday to characterize the Trump plan as “massive tax cuts for the very wealthy, crumbs, at best, for everyone else.”

Which leads to a temptation the Trump administration would be wise to resist. The impulse will be to make the argument that theirs is a tax cut for populists and not plutocrats on the basis of provisions such as the doubling of the standard deduction.

True, Republicans start out with a rhetorical handicap here. The English language has few phrases as boring as “economic growth.” Even so, the economic reality is that nothing delivers the extraordinary punch—especially for ordinary Americans—that sustained economic growth does. Let us stipulate that any time Americans get to keep more of what they’ve worked for, and in a way that makes filing taxes easier, this columnist cheers.

But if the only benefit to middle- and working-class Americans from the proposed Trump cuts is a lower tax bill, the White House loses the argument. Because the promise here is something much larger than just a lower tax burden. It’s a return to a booming American economy, the best way to fatten employee paychecks and open new opportunities for upward mobility

When Treasury Secretary Steven Mnuchin presented the administration’s tax plan, he argued that its primary purpose is to get the economy growing again. He’s right, and that’s how he should sell it.

John Cochrane, an economist at Stanford’s Hoover Institution, calls sclerotic growth “the overriding economic issue of our time.” For the last half of the 20th century, he notes, the U.S. economy grew at an average rate of 3.5%. This translated into real income per person in the U.S. rising from $16,000 to $50,000—a yuge improvement for ordinary Americans.

 

Since 2009, unfortunately, the economy has been averaging about 2% growth per year, which some call the new normal. In a back-of-the-envelope calculation last year made at this columnist’s request, Mr. Cochrane reckoned that for a worker making $50,000, 2% growth means his income would rise to $54,400 eight years from now. But if we could get the economy growing at 3%, his income would rise to $58,675. Remember, too, these gains are compounded every year.

Still, the case for growth is not primarily about numbers. It’s about the American Dream and the next generation doing better than the one before: a new home in a good neighborhood, college, paychecks that go further, maybe even the wherewithal for some wage slave to make a go of starting up her own business.

Democrats never talk about economic growth because their model is the “Life of Julia,” the Obama-era cartoon showing a woman who at every stage in her life requires government to get ahead. The advantage of making the tax fight an argument about growth (as opposed to focusing on the tax relief) is that it dovetails with other Republican initiatives, especially the liberation of American know-how and possibility through deregulation.

Here’s something else. A prosperity-based argument would also help Mr. Trump appeal beyond his white working-class base. In his book “Coming Apart,” political scientist Charles Murray notes that the dysfunctions associated with poor black populations in inner cities—bad schools, broken families, government dependency, lack of economic opportunity—also characterize many poor white communities.

The flip side of the Murray argument is this: Measures that would open opportunities for the white working class would likely help lift others in the same economic boat. Is it any coincidence, for example, that when Joel Kotkin’s Center for Opportunity Urbanism looked to the cities where African-Americans are doing best economically, it’s not the progressive North that dominates. It’s the growing South.

So let the Times and Mr. Schumer holler about emptying federal coffers and giveaways to the rich. If the Trump White House hopes to win this argument, it starts with making this debate all about dreams—and the economic growth that can turn them into reality.

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