Last night at the Republican National Convention, former Senator Fred Thompson gave a crack at economic analogies to attack progressives and defend John McCain’s $300 billion tax cut for corporations and the wealthy. He said:
THOMPSON: They tell you they are not going to tax your family. No, they’re just going to tax “businesses”! So unless you buy something from a “business”, like groceries or clothes or gasoline … or unless you get a paycheck from a big or a small “business”, don’t worry … it’s not going to affect you. They say they are not going to take any water out of your side of the bucket, just the “other” side of the bucket!
Sounds simple enough, right? Wrong. There are some gaping holes in Fred Thompson’s folksy but flawed “bucket” analogy.
–We’re not all in the same bucket: Over the last eight years, rising worker productivity has fueled huge corporate profits and relative economic growth. But this economic growth (the “water” in Thompson’s bucket) didn’t trickle down to American families: real wages have stagnated, rapidly eroded by inflation (the spiraling cost of the “gasoline, clothes and groceries” that Thompson mentions).
–McCain’s tax cuts won’t trickle down: McCain’s $300 billion tax cuts for corporations and the wealthy give almost half their value to the top 1% of all taxpayers. The centerpiece of the program, a $175 billion tax cut for corporations won’t create new or better jobs. As the CBO found in a recent report: “increasing the after-tax income of businesses typically does not create an incentive for them to spend more on labor or to produce more.” In other words: no new jobs, no lower prices, just bigger corporate profits.
–McCain borrows water from our kids: John McCain’s massive tax cuts for corporations and the wealthy will be paid for by either deep and draconian cuts to popular government programs, or, more likely, through borrowing. As the Tax Policy Center says, “the positive effects of lower tax rates will be offset by the costs of increased government debt…[which] eventually translates into higher interest rates, which discourage business investment and consumers’ demand for homes and such durable goods as automobiles, or into increased debt owed to foreigners, which mortgages the nation’s long-term economic future.”
There are some holes in your bucket, dear Freddy.