Trump Tax Bill
U.S. President Donald Trump displays his signature after signing the $1.5 trillion tax overhaul plan in the Oval Office of the White House in Washington, U.S., December 22, 2017. REUTERS/Jonathan Ernst

Would Ronald Reagan approve of the tax bill that President Donald Trump signed this month work? In a podcast interview, Bruce Bartlett, a former economic adviser to the 40th president, tells International Business Times what the Republicans' strategy seems to have been, what the bill's repercussions might be, and what Reagan really thought about tax cuts.

Subscribers can listen to the entire podcast by clicking here.

Bartlett traced the history of Republicans’ views on taxes and budget issues, and argued that the tax legislation is designed not only to deliver big tax cuts to the wealthy, but also to create large budget deficits. Bartlett says that conservative champions of the bill want to create those deficits as a way to manufacture the budget conditions that will justify cutting larger social programs.

What follows is an excerpt of the podcast discussion.

How historic is this tax bill? Is it a watershed moment for the Republican Party?

Oh, I think this is the culmination of everything the right has been trying to do, literally, for decades. I would compare it to, in terms of the right, to the Great Society, in terms of liberalism. It is they have been talking about these things for a long time, and finally had the votes and presidential leadership that they needed to accomplish what they wanted to accomplish. And of course, one could characterize the right’s agenda, since that day, as trying to undo all of that.

The right, a long time ago, figured out that they couldn't assault the welfare state head on. It was too strong. So they've assaulted it through a back door, which is to systematically and consistently drain the government of revenues, and force, even Democratic presidents, such as Obama and Clinton, to do a lot of their dirty work for them by cutting spending, and holding back on new initiatives that are, in many cases, badly needed, and they're simply continuing. The problem is, I think they've gone past the point of sanity. They're simply doing things now that don't even make sense.

House Speaker Paul Ryan has suggested that reducing Medicare spending could be up next on Congress’s agenda. Do you see the tax bill as a deliberate step to create more debt, which can then be used as a justification to cut major social programs?

Absolutely. No question about it. You can date the beginning of this strategy to a particular date in history, which was June 6th, 1978, which is the day [California’s] Proposition 13 passed. And you have to remember that up until that time, it had been a consistent Republican position that you shouldn't cut taxes, unless you also cut spending because they were opposed to the deficit, they believed in the balance budget.

Many Republican presidents were willing to raise taxes if necessary to reduce the deficit. And Proposition 13 changed their philosophy because they could see that there was very large support from the general public for just slashing taxes and not giving a damn about spending. In fact, the authors of Proposition 13, [Howard] Jarvis and [Paul] Gann, said, "Cutting spending's not our problem. We just want taxes cut. If you care about spending, if you care about government, you fix it."

Immediately after that, Republicans glommed on to the idea that we should just cut taxes anytime, anywhere, anyway. And of course, Milton Friedman and other Republican economists agreed with them on that philosophy, but there was still a problem that some reputable Republican economists, such as Herb Stein and Alan Greenspan, had reservations about cutting taxes, increasing the deficit intentionally, at a time when inflation was high. This was one of the main reasons why they thought spending needed to be cut when you cut taxes because the deficit was inflationary.

They rationalized their party’s movement towards rampant tax cutting by inventing this idea that I call starve the beast… When the deficit gets really, really big, then even Democrats have to join in cutting spending to reduce the deficit because of course, Republicans will never support a tax increase.

The last [Republican] president to who supported a tax increase was George H.W. Bush, and his own party destroyed him and intentionally sought to have him defeated in 1992 for that sin. I think this was a very intentional and deliberate strategy on the part of Grover Norquist and Newt Gingrich, in order to purge the last of the responsible Republicans from the party and get total control by what are essentially nihilists.

Newt Gingrich was speaker of the House of Representatives from 1995 to 1999. Reuters

You were an adviser to President Reagan, who is remembered as an ardent tax cutter. Did you shift your political ideology and if so, how did htat happen?

Well, yes, I pivoted, but I've never pivoted away from my belief that the 1981 tax cut, which I had a personal hand in drafting, was useful and necessary legislation for the time. I think too many people are not now old enough to remember how horrible the inflation problem of the 1970's was. And they've grown up and have lived in so many years of essentially zero inflation, they've forgotten how much that frightened people.

One of the consequences of inflation is that when workers got a cost of living pay raises, they got pushed up into higher tax brackets. So, you had a continuing tax increase going on automatically because of inflation. Because there was no indexing of the tax system. So there was need for a big tax cut just to keep the tax burden from rising.

Furthermore, I would point out that Ronald Reagan himself, reversed course on the tax cut almost immediately in 1982, he supported the tax equity and fiscal responsibility act, which was the largest peacetime tax increase in American history. He supported a very large tax increase for social security in 1983, and lesser tax increases almost every other year of his presidency. By the end of his presidency, he had raised taxes by about half the amount that he cut taxes, you see.

So he took back about 50 percent of the 1981 tax cut, and it was half the size, in terms of its impact on the deficit and revenues, as it was when it was first enacted. I think this was an act of responsibility and courage, and leadership. Most Republicans today, either don't know about it, or just pretend it never happened.

Why do you think that part of Reagan’s record is so often forgotten?

I think after a certain number of years, the legend takes the place of reality. And I think very few Republicans care about history, they have no interest in research or analysis, or facts, or data. They live in a fantasy world and in their fantasy world, they have to have some heroes. And so they made Reagan into a hero, and that means that they have to suppress anything about him that runs against their heroic narrative.

I think this is just common in history. It's been done with kings and leaders of the past. I think the further away we get away from the true Reagan, whose remembered by living people, and he becomes just a heroic character. I think of the right term I want to use. It's a myth. That is the myth of Reagan. It's more powerful than the reality of Reagan.

Polls show that right now, this tax cut is very unpopular. Do you believe this could be a turning point in the tax wars — one in which the opponents of this kind of tax cutting are able to use this tax bill to fundamentally change the tax debate in America?

I'm not prepared to say that that's the case. Here's my concern. Once the tax cut is enacted, the Republicans will hold the high ground. It will be very difficult to dislodge them from that position, even if they lose control of Congress. As you know, because of gerrymandering, and the enormous money advantage that Republicans have, it will be extraordinarily difficult for Democrats to even get control of the House next year, and the Senate looks out of reach.

And even if they got control of both, Trump would veto anything, or Pence if that is the case, will veto any effort to raise taxes, and even after 2020, when maybe they'll be a Democratic president, it's highly unlikely that he will have enough, or she, enough votes to really do much except around the edges.

My point is, that they have put fiscal policy to a very large extent, on automatic pilot for many, many years to come, and I think Republicans think long term, in the sense that we're willing to take one step backwards in order to be able to take two steps forward. I think anything Democrats do to fix the fiscal mess, to cut spending, or raise taxes, will be very, very unpopular and help put Republicans back in power. And anything Democrats do to restore a fiscal responsibility, to reduce the deficit, is like putting money into a savings account that Republicans will then use to cut taxes again when they get back in power.

Really, the Clinton years is the perfect example of this. Clinton, to his great credit, had the courage to raise taxes, this led to budget surpluses, which Bush and his party then completely disappointed into ... Completely, economically worthless tax cuts that helped starve the beast and make Obama's life very difficult once he took office.

They know this history. They know that Clinton's 1993 tax increase, led almost directly to the Republican takeover of Congress in 1994. They're thinking, "Fine. Let's have a Democratic Congress and Democratic President in 2021 who will pass big tax increases, and spending cuts, and get the budget under control. We will take control again in 2022 and 2024, and we'll start all over again." Cutting taxes, and doing everything that they're doing right now.

In your opinion, what are the most problematic parts of this tax bill?

There are so many things it's hard to know where to begin. I think getting rid of the personal exemption is pretty terrible, myself. The idea of the personal exemption was that everybody deserved some amount of income, free of tax, that they could live on, as a matter of principle. And Republicans are destroying that principle.

They are basically saying, "All of your income belongs to us, except what we give back to you out of the goodness of our heart. You don't, in principle, have the right to any income that we can't take from you when it suits our purpose." That sounds like a Republican argument, because it's one's Republicans have used, and now they've turned it on its head and are using it to pay for this enormous tax cut for the rich.

I think a lot of people don't understand how much of a tax cut there is in this legislation, because they hear the number $1 trillion, or $1.5 trillion. That's the net number. The gross number is something along the lines of $6 trillion, almost all that going to the wealthy, and to big corporations. Then there is about $4.5 trillion of tax increases of which we just discussed the two biggest ones.

You have described a situation in which Republicans cut taxes, create deficits and Democrats are constantly playing defense. Can the Democrats break that cycle?

Well it will take a long, long time. I mean, Republicans have been working for at least 40 years to get to where they are now. And one of the ways they did this, is by creating a vast number of institutions and outlets for people who think the way they do to create and echo chamber, and really I call itself brainwashing ... Brainwashing among a great many people who vote for them. There's nothing like this on the left. They don't put the resources into long term institutions and programs. They tend to be fireman. We're gonna rush to put out this fire, and once that fire's put out, they sit back and relax.

Meanwhile, the Republicans are setting other fires in lots of other places. I think it's gonna take a long-term mentality, long-term strategy, long-term resources, and if you're lucky you may be able to get something like a replay of the progressive era, where you may have a few decades of time to be able to implement some policies that will undo the harm that is being done, and perhaps do some good. I don't see any beginning of that because the absolute beginning would have to be leadership. And I don't see a leader anywhere on the left, let alone in the Democratic Party, who I think is popular enough to be able to change direction.

I mean, my idea would be somebody like Bobby Kennedy. I don't think people like Bernie Sanders really have the wherewithal to do what needs to be done. It has to be somebody a lot younger, more dynamic, and there have to be resources. There have to be people like the Mercers, and the Kochs, and the Adelsons on the left, who are willing to put serious money, not just into campaigns, but into organizations and institutions that will try to fight the fight on a daily basis.