Looking at what projects will be launched in the Trump infrastructure foray can eventually tell us which companies will benefit. But will Americans in general benefit as Steve Bannon claims they will? For, the “great political movement” he envisages to keep Republicans in power for 50 years, as he wants, does require that the country at large benefits. There are two problems to look out for:
Instead of just allocating needed resources in a traditional across the board approach, the Trump team seem to be proposing to offer $137 billion in tax breaks to private investors who want to finance toll roads, toll bridges, or other projects that generate their own revenue streams. Since the plan depends on private investors, it can only fund projects that spin off user fees and are profitable. Rural roads, water systems, and public schools don’t fall into that category. Neither does public transit, which fails on the profitable criterion (it depends on public subsidies). Yet investment in all these things is necessary to keep ‘the great political movement’ on the road.
Trump’s tax giveaway plan delivers about half of its benefits to the top 1 percent of households. The Republicans in Congress have a plan they want Trump to consider which is even more lopsided: 76 percent of its cuts go to the top 1 percent. So the campaign rhetoric about the “forgotten little guy” stuff was that … campaign rhetoric.
The impact of the Bush tax cuts, which were smaller than the Trump tax cuts, were shown to have had no positive effect on the economy. Fiscal economists Gale and Orszag wrote that “…as a result of these design flaws—from the perspective of providing stimulus—the tax cuts had at best a small positive bang for the buck relative to other options. The most comprehensive studies … imply that the tax cuts reduced GDP and employment in 2001 and had virtually no effect … in 2002.”
As Cambridge economist Ha-Joon Chang has shown in Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism and in 23 Things They Don’t Tell You About Capitalism tickle-down economics is pure guff.
So will Trump just be a flash in the pan, create waves, make tons of money, and then leave it to a (hopefully reformed and wiser) Democratic Party to come back? Or Will Steve Bannon’s idea be seen through?