Over the course of 2017, both in Congress and in the executive branch, we have watched the task of government devolve into the full-scale looting of America.
Politicians are making decisions to enrich their donors — and at times themselves personally — with a reckless disregard for any kind of objective policy analysis or consideration of public opinion.
A businessman president who promised — repeatedly — that he would not personally benefit from his own tax proposals is poised to sign into law a bill that’s full of provisions that benefit him and his family. Congressional Republicans who spent years insisting that “dynamic scoring” would capture the deficit-reducing power of tax cuts are now plowing ahead with a bill so fast that they don’t have time to get one done, because it turns out they can’t be bothered to meet their own targets.
Meanwhile, in the background an incredible flurry of regulatory activity is happening out of public view — much of it contrary to free market principles but all of it lucrative for big business and Trump cronies.
Throughout the 2016 campaign, the political class talked a lot about “norms” and how Donald Trump was violating them all. He brushed off fact-checkers, assailed the media, went on Twitter tirades against his critics, and dabbled in racism. Since taking office, his norm busting has spread. Members of Congress who under other circumstances might be constrained by shame, custom, or the will of their constituents have learned from Trump’s election that you can get away with more than we used to think.
Norm erosion is real, and it matters. Economists Daron Acemoglu and Matthew Jackson of MIT and Stanford have written about how rules are only effective when they are backed up by social norms “because detection relies, at least in part, on whistle-blowing.” Their Spanish colleague Patricia Funk emphasizes that in a variety of contexts, “the strength of the social norm of ‘not committing a crime’ is shaped by social interactions.”
These scholars are all considering deep, long-lasting differences in cultural norms, but we also know from experience that norms can sometimes shift dramatically in unusual circumstances. Sometimes a blackout or other disaster prompts a few people who would ordinarily be too cautious to break store windows in broad daylight to become more brazen. And the normal course of ordinary life flips into reverse, as those with some inclination toward bad acts recognize a moment of impunity and grab what they can, while those who would ordinarily be invested in upholding order are afraid and stay inside. The sheer quantity of bad acts makes it impossible for anyone to hold anyone accountable. Soon, a whole neighborhood can be in ruins.
Or a whole country.
Republicans love bank bailouts now
The tax bill pending in Congress this week is, naturally, front of mind and unquestionably represents the linchpin of the 2017 looting agenda. But in some ways, the clearest example of the difference between a regime of corporate looting and one of free market ideology came on the lower-profile topic of financial regulatory policy, where the Trump administration quietly signaled a major shift last month.
Back in 2009-’10, of course, the Obama administration responded to the financial crisis and the chaotic Bush-era bailouts by passing the Dodd-Frank law to overhaul America’s financial regulations. The goals of the law were twofold, on the one hand hoping to tighten the regulatory screws to make future bailouts less likely and on the other hand trying to bring some order to the question of what to do with large banks that do go bust in a way that risks a crisis.
Republicans opposed this approach, arguing that heavy-handed regulation was stifling the economy. But they said that they, too, deplored bailouts and that the real solution to the problem of banking crises was a need to tie the government’s hands to prevent any possibility of future bailouts.
The Trump administration has taken up the deregulatory baton with gusto, appointing Wall Street lawyers to run key agencies and turning what was intended to be an interagency working group on identifying financial risk into a forum for advancing deregulation.
But the free market fix for financial crisis has gone missing in action. In late November, the Trump Treasury Department quietly announced that it wants to keep the Dodd-Frank Orderly Liquidation Authority fund around after all. That’s an obscure little corner of the government, but it’s conceptually crucial — that’s the thing Republicans used to call a “permanent bailout fund.” They used to argue that eliminating it was the key to establishing a sound financial regulatory framework in which no bailouts would happen, and bankers would be disciplined by markets rather than bureaucrats.
Under Trump, the reality is that neither markets nor bureaucrats are going to be doing any disciplining.
In the short term, of course, lax banking regulation will almost certainly pay off in the form of higher bank profits and stock valuations. The problem is when the crisis hits down the road. But that’s exactly the triumph of short-term thinking that pervades everything Trump does, from debt-financed tax cuts for the rich to disinvestment in education, rollback of environment regulations, and approaches to the telecom sector that prioritize the profitability of today’s incumbent businesses over tomorrow’s regulators.
Across the board, it’s about letting whoever’s powerful now squeeze as much out as they can without worrying too much about the consequences — like enormous, deficit-financed tax cuts passed with no regard for budgetary or economic effects.
The strange death of tax reform
The tax bill is another case in point. It’s poised to pass Congress this week, and the swamp is overflowing with perks.
Somewhere in its murky origins, “tax reform,” as conceived by is Republican authors, was supposed to be a policy-driven bill aimed at creating a simpler and fairer tax code that would generate broadly superior economic outcomes for most people — a normal governing objective even if it was always the case that substantial disagreement would exist over the merits of marginal corporate tax rate cuts as a growth-boosting policy.
But along the way, virtually all of the high-minded aspirations were dropped and all of the normal aspects of congressional process broken — to the point where the bill’s leading architects won’t even mention the policy changes that are at the heart of the bill. In the end, instead of taking on the special interests as promised, it gives away the store to almost every lobby shop in town — with last-minute additions that personally enrich the Trump family and a decent chunk of the members of Congress voting for it.
Once upon a time, Republicans had a set of clear promises about what they called “tax reform.” The idea was to produce a simpler tax code, with fewer brackets and fewer deductions so that a typical individual could fill it out on a postcard.
The goal was to cut tax rates without reducing government revenue because loopholes would be closed. From the beginning, they were counting in part on economic growth to make up the difference, but they said they would rely on serious, third-party analysis of the impacts.
“Not economic growth judged by us,” Rep. Kevin Brady (R-TX), the Chair of the House’s tax-writing committee, told Vox in March, “but by the independent Joint Committee on Taxation.”
And of course it wasn’t going to be a bonanza for the rich. Trump went so far as to promise that the rich wouldn’t benefit “at all” from his plan, and he certainly swore repeatedly that he would not personally benefit.
Neither the House nor the Senate came within a trillion dollars of hitting Brady’s deficit target, so the conference committee charged with reconciling the bills didn’t bother to wait for a dynamic score at all, and both houses are expected to pass the bill before the JCT can finish its analysis. The House bill slashed the top tax rate a little and the Senate bill slashed it a little more, so the conference committee compromised on a bigger rate cut than either had proposed.
Meanwhile, after all the months of work, Republicans ultimately settled on not actually eliminating any significant deductions or loopholes after all.
Something occurs to me: Of the ~250 JCT tax expenditure, I think the #TaxBill will only eliminate ONE of them (199).— Marc Goldwein (@MarcGoldwein) December 15, 2017
Am I missing any @ernietedeschi, @jasonfurman, @RyanLEllis, @lenburman, @ScottElliotG, @Brian_Riedl, @AlexBrill_DC @RichardRubinDC ??
Why? Well it certainly seems to have had something to do with the orgy of lobbying that, according to the New York Times, led more than half of the city’s 11,000 registered lobbyists to report having worked on the tax bill. The swamp is running wild.
The committee also created a big new tax cut for owners of real estate LLCs — i.e., for Donald Trump’s family. Sen. Bob Corker (R-TN) also stands to personally benefit from this provision, leading to early speculation that it’s the reason he flip-flopped and decided to back a bill whose deficit impact he’d earlier deplored. Corker denies this, offering the absurd defense that the new provision can’t possibly have driven the change since he hasn’t even read the bill he’s now decided to support.
Members swapping votes to secure special deals for their constituents is nothing new in the political process, but getting special deals for themselves personally is quite the innovation. And the ultra-rushed process means we have almost no time to kick the tires on how many new loopholes have been created and who stands to gain from them.
The new political dishonesty
Politicians have never been renowned for their honesty and have always liked to spin their policies in the most positive light possible. But not only does Trump lie a lot more than his predecessors — a New York Times analysis found six times as many lies in Trump’s first 10 months in office as across Obama’s eight years — but the Trump-era GOP has grown terrifyingly comfortable with a kind of large-scale misrepresentation of what their legislation says that’s totally unprecedented.
Speaker Paul Ryan’s official list of five policy highlights in the tax bill, for example, includes one point that is merely preserving the status quo on mortgage interest, and totally neglects to mention the corporate tax cut that is its centerpiece.
For individuals and families, the final Tax Cuts & Jobs Act:— Paul Ryan (@SpeakerRyan) December 15, 2017
✔lowers individual taxes
✔nearly doubles the standard deduction
✔expands the Child Tax Credit
✔repeals Obamacare’s individual mandate
✔preserves the mortgage interest deductionhttps://t.co/p3H1EB2UCY
Republicans’ Obamacare repeal bills ultimately didn’t pass, but they also had this characteristic.
Reasonable people can disagree, for example, on whether it’s a good idea to cut Medicaid spending. But the GOP wrote a series of bills that entailed large cuts in Medicaid spending and then sent the secretary of health and human services out on television to say they weren’t proposing to cut Medicaid spending.
Not every member of the party was as brazen as that. But Trump and Ryan have completely dissolved the norm against dishonesty to the point where there are no longer any whistleblowers in the Republican caucus or the world of conservative media. You just say whatever you want, and dole out favors to your friends — moving at such a rapid pace that the country’s ability to process what’s happening gets overwhelmed.
There’s so much happening that we don’t notice
Back in April, Megan Wilson reported that there were 1,500 new lobbying registrations and a huge surge in lobbying revenue as firms moved to snatch up new staff with connections to Trump and key congressional Republicans in order to take advantage of a new bonanza of opportunities.
And it’s paid off enormously. While Americans are fascinated by major legislative drama, endless sexual abuse scandals, endless Trump-Russia scandals, and countless inappropriate presidential Twitter outbursts, key regulators — almost uniformly drawn from the ranks of corporate America — are doling out favors at a pace that boggles the mind.
Most people know about the Federal Communications Commission rescinding network neutrality rules, for example. But they’re also rescinding rules on overconcentration in the broadcast television industry, while Congress has moved to let ISPs sell their users’ private browsing data.
Trump’s Labor Department has been working overtime by making it easier for employers to steal servers’ tips but harder for workers to organize against chain restaurants. They’ve made it easier for employers to get away with not paying overtime, and while stories like Trump’s effort to destroy the Consumer Financial Protection Bureau or his unprecedented shrinkage of protected national monuments at least garnered a couple of days of coverage, most of this labor stuff has passed in the night.
Some of this is dictated by free market ideology, of course. But the coal industry bailout Rick Perry is pushing doesn’t fit that bill, nor does the Transportation Department’s drive to reduce transparency in airline fees.
And while it’s unlikely that the famously detail-averse president is actually paying attention to the nuts and bolts of DOT rulemaking, he is absolutely setting the tone from the top.
It takes a lot more than Donald Trump to orchestrate the kind of feeding frenzy that’s currently playing out in Washington. Nothing about this would work if not for the fact that hundreds of Republican Party members of Congress wake up each morning and decide anew that they are indifferent to the myriad financial conflicts of interest in which Trump and his family are enmeshed. Moral and political responsibility for the looting ultimately rests on the shoulders of the GOP members of Congress who decided that the appropriate reaction to Trump’s inauguration was to start smashing and grabbing as much as possible for themselves and their donors rather than uphold their constitutional obligations.
But it really is true that in this case, the fish rots from the head.
Trump has always operated in businesses in legal and ethical gray areas — during the transition, he had to pay out a $20 million fraud settlement arising from a fake university he used to operate, and the fraudulent part wasn’t even that the university was fake. His all-purpose excuse for shady, greedy behavior was, to quote the man himself, “that makes me smart.”
Yet in his business career he did once undertake solemn obligations to people other than himself, as the chief executive officer of a publicly traded company, Trump Hotels & Casino Resorts.
Trump never turned THCR into a profitable business. But he did profit mightily from running it, bilking shareholders by transferring his personal debts onto the corporate balance sheet, having the public company pay extravagant sums to buy Trump-branded goods from separate companies that he owned personally, and of course paying himself a lavish salary for his troubles.
This is looting on the corporate level, tunneling financial assets out of the company the shareholders control into entities controlled by the CEO. Like many things Trump did over the years, it’s probably illegal, but enforcement of white-collar criminal law is spotty. Trump was fined by the Federal Trade Commission and separately by the Securities and Exchange Commission, and then separately again by the Treasury Department’s financial crimes division, but not in ways that were serious enough to put him out of business.
And in truth, we have no clear picture of the full extent of Trump’s personal corruption, since in violation of decades’ worth of tradition he’s refused to give us a clear sense of his income streams or financial interests. It would be trivially easy for congressional Republicans to force Trump to disclose his tax returns, but instead of holding his feet to the fire, they are taking their cues from him — even though many of them spent the 2016 campaign openly recognizing that he was unfit for office.
If we nominate Trump, we will get destroyed.......and we will deserve it.— Lindsey Graham (@LindseyGrahamSC) May 3, 2016
Trump’s victory, rather than inspiring a bipartisan movement to check the new president’s worst impulses, caused the party to snap, with as many factions as possible reaching to toss a rock and grab what they can as long as the party lasts.
The country is left only to hope that it doesn’t last too long.