How Joe Biden and the Democrats Can Attract Trump's Base to Their Side
by John Lawrence, November28, 2020
Aside from the entertainment value of the Trump Presidency, his main appeal and the main appeal of Republicans in general is that they stand for reducing taxes. Democrats can co-opt this issue. Here's how: before the next election, they announce that, if elected, they will reduce taxes on everyone making less than $400,000. Joe said he wouldn't raise taxes on that group, but he didn't go far enough. He needs to reduce taxes on everyone making less than $400,000 while raising them on everyone making more than $400,000. Trump's base, I assume, are people making less than $400,000. They are attached party wise to the wealthy Republicans who make up the top 1% with whom they have nothing in common economically. How will Joe pay for this? Simple: the money raised by raising taxes on the rich, making corporations pay their fair share, closing loopholes like the "carried interest" loophole and a financial transactions tax (FTT). And it wouldn't have to balance out equally. In other words the money raised in increased taxes on the rich would not have to equal the money spent on tax breaks for everyone making less than $400,000. It would represent the destruction of the Republican meme: "Democrats will raise your taxes."
The Federal budget need not balance out exactly. It hasn't done that since President Clinton balanced the budget in 2001. He had budget surpluses for fiscal years 1998-2001, the only such years from 1970-2020. Clinton's final four budgets were balanced budgets with surpluses, beginning with the 1997 budget. Since then Republicans, supposedly the guarantors of fiscal conservatism, have deficit spent by means of tax cuts going mainly to the rich. Even before Clinton, Reagan deficit spent with tax cuts in the 1980s. This meme that Republicans represent tax cuts and fiscal conservatism needs to come to an end and be exposed by Democrats for what it is. Evidently, the middle class Republican voters are satisfied with a meager tax cut and don't mind that the rich are getting a more hefty one. That's why Democrats have to take over this meme by giving tax cuts to the middle class and tax raises to the rich. This is the only way finally to get economic inequality under control.
Modern Monetary Theory and the Federal Reserve's own history prove that Deficits Don't Matter. The US dollar is a sovereign currency. The Federal Reserve can just print money and spend it into the economic system without adding it to the national debt. This is exactly what Abraham Lincoln did during the Civil War when he printed greenbacks instead of borrowing the money at interest which would have created huge debts for the United States. So there are two ways that money can be created by the Fed. 1) They can buy US Treasury bonds which would require Congress to deficit spend. 2) They can just print the money and pour it into Federal coffers. This does not add to the national debt but goes on the Fed's balance sheet. The bottom line is what is the money to be used for? If it's for a good cause like building green infrastructure and creating jobs in the process if the economy is less than fully employed, it probably won't create inflation. If it's just a gift to people in an already fully employed economy, it will most definitely create inflation or even hyper inflation.
So in the long run deficits do matter in the sense that, if the money is spent frivolously, inflation and potentially a loss in the value of the dollar on international markets could occur. However, if the money is spent constructively on building and repairing of infrastructure and other useful purposes, deficits won't matter. It boils down to prudent and responsible spending by government. Is Congress up to this task? Is the Fed? At this point a deal between the Executive branch and the Fed would seem more appropriate than running the whole thing through Congress where political ambitions of one party or the other can get in the way. The problem is that there is no consensus in Congress unless one party holds control over both Houses and the Presidency. Barring that, each party will try to limit the other party's spending goals which are tax breaks for the rich (Republicans) or government spending on social programs (Democrats). One way to break this stalemate is for Democrats to be the party of tax breaks for the 99% and tax increases for the 1% while maintaining their commitments to the social safety net.
