Tax Cuts Don’t Work

weekly economic updates for December 19

When a mainstream news source like CBS News reports it, you know it’s a big deal: A new report from the London School of Economics and Political Science found that a half-century of tax cuts for the rich has failed to trickle down to everyone else.

Analyzing 50 years of data from 18 countries including the US and Australia, the report finds that “incomes of the rich grew much faster in countries where tax rates were lowered. Instead of trickling down to the middle class, tax cuts for the rich may not accomplish much more than help the rich keep more of their riches and exacerbate income inequality,” CBS reports. You can read the full report here.

These findings should inform the stimulus and other relief programs that we create in 2021. We can add this report to the growing body of evidence which proves providing tax cuts and other stimulus spending to the wealthiest people and corporations won’t create jobs or ensure economic recovery for ordinary Americans. We’ve tried that, over and over, for the majority of our lives. Now it’s time to direct our relief efforts to the people who need it most, so they can spend that money in their communities, creating jobs and rebuilding a stronger economy from the bottom up.

Here’s what we are watching this week:

  • The latest numbers on the scope of the economic crisis
  • The local reaction to the economic crisis
  • The public response as measured by public opinion research

I’ll continue to share what we here at Civic Ventures are thinking, reading, and talking about in short, occasional updates like this.

The regional economic update is from Zach Silk of Civic Ventures, sent regularly each week and posted with permission.  You can find more content by the team at Civic Ventures at their blog, Civic Skunkworks.

The Latest on the Impacts of Covid-19

  • All Washington unemployment insurance claims increased during the week of December 5-12:

    • 19,547 Washington workers filed new regular unemployment insurance claims.
    • 16,836 workers filed new Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation claims.
    • 2,797,961 initial claims have been filed since the start of the pandemic from 1,458,875 unique individuals.
  • Initial regular unemployment claims in Washington remain 168 percent higher than last year’s weekly new claims.

  • Nationally, another 1.39 million Americans filed new unemployment insurance claims last week, up about 100,000 from the week prior. For reference, the peak of weekly jobless claims during the Great Recession was in March of 2009, when numbers topped out at 674,000.

    • This marks 39 consecutive weeks where new single-week jobless claims were higher than any week during the Great Recession.
    • 20.6 million Americans are receiving unemployment insurance as we enter the holidays.
    • About 14 million will lose unemployment from PUA or PEUC programs unless Congress acts immediately.
  • Depending on when you read this, a stimulus package is either about to be passed or has already been passed. As I write this, the compromise bill looks like it will land in the $900 billion range, which isn’t nearly enough to get everyday Americans through the remainder of the pandemic. And as Emily Stewart at Vox points out, whatever Congress does will already be too late for millions of Americans. “Even if a bill passes,” Stewart writes, “millions of workers will likely face a lag in receiving those payments while the regulators and states responsible for distributing them iron out the new process. An estimated 4 million workers have likely already had their benefits run out, some of them for months, after they maxed out the number of weekly payments to them established by the CARES Act, the first stimulus package.”

  • The New York Times takes data visualization to a new level with a chart and article headlined “Here’s a look at the economy Biden will inherit next month.” And, honestly, this scramble chart really does say everything you need to know about what the Biden Administration is walking into (except how to do data visualization right):

  • If that’s too much data viz for your eyes to handle, the Times has helpfully broken out that information into a piece called “How the Economy Is Actually Doing, in 9 Charts.” You should check out the whole thing, but the unemployment infographics are particularly alarming:

  • With so many Americans on the cusp of losing their unemployment benefits, the always-excellent Eduardo Porter explains what happens to the economy, and to the unemployed, when unemployment checks stop coming. Turns out, it’s bad for everyone: “Unemployed workers’ spending on food, clothes and other so-called nondurable goods immediately drops 12 percent, about twice as much as when they lost their job and went on unemployment insurance, University of Chicago researchers have found. Spending at drugstores falls 15 percent. Co-payments for visits to the doctor fall 14 percent. Spending on groceries falls 16 percent, or $46.30 a month, on average.” That dip in spending will likely result in more workers losing their jobs as consumer demand drops, and the vicious cycle will continue.

  • “The poverty rate jumped to 11.7 percent in November, up 2.4 percentage points since June,” writes Heather Long at the Washington Post. That means nearly 8 million Americans have fallen below the poverty line since the summer. To deploy a word that has been unfortunately used way too much this year, that’s an unprecedented rise in American poverty.

  • And there’s more to come: Andrew Stettner published a tweet thread warning that if the Senate allowed CARES Act benefits to expire, nearly five million more people, including nearly a million and a half children, will fall into poverty in January.  A report by the Poverty Center at Columbia spells out the impacts in greater detail. Like so many of the negative economic effects we’ve seen this year, the burden falls greater on people of color: of that 5 million Americans who will fall into poverty, 1.2 million are Latino and 1.4 million are black.

  • While Congressional Republicans keep blocking stimulus support for states, there are ways that states can access federal funds to help people who have suffered during the economic downturn. Our friends at the Center for American Progress explain how states can use TANF funds to bring emergency relief to those who have been hit hardest.

  • There are hundreds of smart people who are working as hard as they can to find ways for states to provide the economic relief that the federal government has failed to muster. The Center on Budget and Policy Priorities offers a wonky explanation of how states can preserve revenue by decoupling from CARES Act tax breaks for business losses. It’s not for general audiences, but state-level elected officials could find this method of retaining revenue to be invaluable.

  • Brand-new Census pulse numbers show that as the holidays approach, more and more Americans are going hungry:

  • And the economic misery created by the pandemic is by no means distributed equally. Job losses are always bad news for American workers, but they don’t necessarily indicate bad economic news for business. The Washington Post published a shocking study finding that “Between April and September, one of the most tumultuous economic stretches in modern history, 45 of the 50 most valuable publicly traded U.S. companies turned a profit… Despite their success, at least 27 of the 50 largest firms held layoffs this year, collectively cutting more than 100,000 workers, The Post found.”

  • Clearly, we need dramatic action to get money back in the pockets of Americans as soon as possible. Noah Smith at Bloomberg offers “Three Big Moves to Improve American Lives ASAP”, including fixing health care, building lots more housing, and raising wages. This is the kind of thinking we need to embrace as we enter 2021—we can only save the economy from a long-term recession by enacting big policies that will hugely improve the lives of the majority of Americans immediately.

  • Some pundits have been promoting the idea that coronavirus will kill American cities once and for all. That idea has slowly been gathering traction on cable news and Twitter. Richard Florida takes on this canard in The Wall Street Journal, instead finding opportunities where others see doom: “Global cities will not only survive but revive—as they did after even deadlier epidemics, economic crises, wars and natural disasters in the past—as their commercial spaces are transformed into mixed-use areas where people live and work. This is because the clustering force—of talent and innovation—is a core characteristic of this new reset. But, smaller cities and suburbs as well as rural areas also have the ability to thrive as people flock to them because of their ability to do far-flung jobs remotely.”

Local Reaction to the Crisis

  • Governor Inslee announced his proposal for the 2021-23 budget cycle, including some great first steps toward rebuilding Washington’s post-pandemic economy. Inslee is calling for a progressive capital gains tax that would raise $1 billion in revenue over the next cycle and is projected to raise $2 billion every two years after that. The proposal also included a call for legislators to approve $200 million in immediate economic relief for Washington’s small businesses and renters facing eviction as soon as they reconvene in January.

  • In her Crosscut column, Katie Wilson takes on some “sloppy economic thinking” that has started to creep into the Seattle media scene. “…be prepared to hear variations on these tales told and retold, blared and blasted — much louder than any activist bullhorn — in the year ahead,” she warns. “These narratives persist not because they’re backed by evidence or sound economics, but because they serve a purpose.”

  • Tens of thousands of out-of-work Washington residents are still having trouble getting their unemployment checks from the state. Some are going months without receiving a check, reports Melissa Santos at Crosscut. And although new unemployment claims dropped 20.5 percent in Washington this week, the state economy added a paltry 100 jobs—that’s right, just one hundred new jobs—in November, a sign that the recovery is slowing and possibly headed to a stall.

  • Paul Roberts at The Seattle Times reports on “a sharply worded statement” from an independent restaurant advocacy group called Seattle Restaurants United which “rebuked the Seattle Metropolitan Chamber of Commerce for a Dec. 8 lawsuit against the so-called JumpStart tax.” SRU argues that “the tax is one of the few sources of future city revenue that will be available to help small businesses and workers hurt by COVID-19.”

  • In lieu of cash bonuses this year, Boeing is offering shares in company stock to nonunion employees. Dominic Gates at The Seattle Times reports that “The stock will vest in three years, on Dec. 14, 2023, provided the employee doesn’t leave the company through that date.”

  • In some good news, Washington state has avoided a post-Thanksgiving surge in coronavirus infections, reports Carolyn Bick at the South Seattle Emerald. But experts warn that “the trends aren’t yet level, and the state must go beyond just flattening the curve.”

Real-time Analysis of the Economic Crisis

We are providing regular commentary on our content channels including analysis of the trickle-down policies that fueled the disastrous federal pandemic response, explorations of the system-wide economic fragility that the downturn has exposed, and explanations of policies that will build a stronger and more inclusive economy.

  • On our Pitchfork Economics podcast, Nick and Goldy talk with New York Times editorial board writer Binyamin Appelbaum about the Times’s recent editorial calling on the Biden administration to significantly raise wages for all Americans.

  • At Business Insider, Paul explains why it’s such a huge deal that The New York Times has done an about face on wages. In 1987, the Times called for a federal minimum wage of $0.00, echoing the trickle-down economics that had captured conventional wisdom at the time. Does this new editorial indicate that conventional wisdom is finally coming around to inclusive economics?

  • On Facebook Live, Jessyn and I discuss the conservative hypocrisy of weaponizing “fiscal responsibility” to fight support programs for everyday Americans while handing enormous tax breaks to the wealthy few. We’ll also be discussing this eye-opening chart which shows that the average American’s wages have remained stagnant for the past twenty years while virtually every other cost has skyrocketed:

Public Opinion

  • We know that COVID and the accompanying economic crisis have driven millions of women out of America’s workforce at rates far exceeding their male counterparts. One reason is that the virus and corresponding shutdowns have impacted industries with workforces that skew towards women, another is because of gender stereotypes both at work and at home that result in women being forced to take on more child care responsibilities. As of October, there were 2.2 million fewer women in the workforce than in February, with Black and Latinx women being pushed out at higher rates than white women. Because of these dynamics, new data from Axios/Ipsos shows that there’s an enormous gap between the household debt women and men have taken on during COVID.

  • Because the effects of this crisis have not been spread equally, unsurprisingly women maintain a far more stark outlook on their economic security and economic outlook than men.

Closing Thoughts

Even though we have to stay apart to stop the spread of coronavirus, our holiday traditions continue. The lights and decorations on our neighbor’s houses feel especially poignant this year, knowing that we’re all making a sacrifice this December so that we can spend many joyous Decembers together in years to come.

As our (socially distanced, remote) office prepares to go dark for the holidays, I know we’ll all be thinking about the year that was and hoping for a better 2021. New Year’s resolutions feel almost frivolous in comparison to the tremendous tasks that we have ahead of us in the next year: vaccinating a majority of the population, building a stronger, more inclusive economy, and getting back on track here in Washington state.

This is the time to dream big and imagine the better world we can build together. When we reconvene in 2021, we can roll up our sleeves and begin the hard work of making those dreams real. I look forward to working with you. Happy holidays.

Be kind. Be brave.

Stay distant. Mask up.

Zach Silk

Civic Ventures

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