Alternative Fact of the Week: Supply side edition

One day after visit to Texas, President Donald Trump outlines White House plan for tax reform. Dave Bryan reports.

It didn't take the fact-checkers long to pull out their red pens after President Donald Trump's Wednesday speech on tax reform in Springfield, Mo. The president didn't just massage the numbers to make his case for an overhaul, he folded, spun and mutilated them even when it wasn't necessary. You can make the case for simplifying the U.S. tax code without fibbing, but, alas, Mr. Trump doesn't operate that way. He's more like a hungry customer at the Burger King drive-through — he likes his whoppers with cheese.

President Donald Trump speaks about tax reform Wednesday in Springfield, Mo.
President Donald Trump speaks about tax reform Wednesday in Springfield, Mo. (Alex Brandon / AP)

First, there's the matter of where the U.S. economy is right now. Mr. Trump claimed an economic growth rate of 3 percent and said Barack Obama never achieved that while in office. He was talking about his own quarterly rate, not an annualized rate, and by that standard, the Obama administration hit the mark (and better) multiple times. Second, he observed that the U.S. growth compares unfavorably with other countries, but that's highly misleading, too. Emerging economies like India will, of course, have higher growth rates than more established, more fully developed countries. Then the president claimed the U.S. had as much as $5 trillion in corporate profits parked overseas when the number is most commonly estimated at $2.6 trillion to $2.8 trillion. He also said 90 percent of Americans need "professional help to do their taxes," but that calculation only works if you throw in software like TurboTax, which is like saying 90 percent of Americans need help with writing because they use Microsoft Word's spellcheck function.


Still, by Alternative Fact of The Week standards, these are relatively small prevarications. The more troubling untruth is one of the central premises of President Trump's speech — that the U.S. corporate tax rate is out-of-whack too high and that reducing the rate dramatically would spur economic growth and create jobs. If that premise sounds familiar, that's probably because it's been a mainstream Republican mantra for years. Indeed, it's so old-school and Paul Ryan-esque that Trump faithful like the perpetually caustic Ann Coulter have already expressed their ire: "Bush tax cuts!" She tweeted comparing them to George W. Bush's foray into supply-side economics. "Did it create millions of jobs? Nope. The rich pocketed their tax cut & sent jobs abroad, hired guest workers." Ms. Coulter added two more words, one of which, even when reduced even to a single letter and some dashes, is inappropriate for a general circulation newspaper.

But, amazingly (and uncharacteristically), Ms. Coulter has a point. What Mr. Trump complained about is a corporate tax rate of 35 percent (which pushes 40 percent when state and local taxes are included). In theory, that is high, but in reality, it's only high-ish. Deductions and loopholes make the effective U.S. corporate tax in the range of 18.6 percent, which is pretty close to where Germany, Japan and the United Kingdom stand. But more important, who says reducing it further would translate into more jobs? Right now, U.S. corporations have plenty of cash on hand to fuel expansion, but they are choosing not to spend it. Wall Street is doing great; it's Main Street that could be doing much better. Why should anyone believe extra corporate profits wouldn't simply translate into bigger dividends or stock valuations? That's what has been happening for years.

And then there's the matter of the federal deficit, which is causing its share of economic malaise. Reducing the corporate tax rate to 15 percent would cost the U.S. Treasury $2.4 trillion over the next decade. Does anyone seriously believe Congress will offset such a tax cut with tax increases or spending cuts to keep the deficit in check? The numbers just don't work if you spare Social Security, Medicare or the military. With deficits skyrocketing, the federal government can't address neglected infrastructure either. The adverse impacts from higher interest rates to government cost-shifting go on and on.

It's difficult to evaluate much of President Trump's intent because he's still pretty light about specifics. But given the recent debacle over health care reform and the president's horrid poll numbers (56 percent of Americans believe Mr. Trump is "tearing the country apart," according to a recent Fox News survey, which, as the man in the White House might say, is "not good") and the president's poor relations with Congressional leaders, it's hard to believe that "generational" tax reform is in the offing no matter how many lies are told.

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