WASHINGTON—The economic policies of right-wing Republican President Donald Trump, the congressional Republican majority, and their politicians’ corporate and ideological backers risk both higher inflation and a recession, says Heidi Shierholz, president of the labor-backed Economic Policy Institute.
She called that “a disgrace.”
Shierholz issued that warning at the end of her long written testimony to the ideologically polarized, Republican-run House Education and the Workforce Committee. She was the sole witness its GOP majority allowed Democrats to call at their February 26 hearing on the state of the U.S. workforce.
The panel remained as polarized as ever. Both Shierholz and top Democrat Bobby Scott of Virginia pointed out that only last year we had a growing economy and declining inflation, at least by the official numbers, with officially nearly full employment and substantial job creation.
Scott posted a chart showing Trump’s record in his first term, 2017-21, was so bad that he was the only president during that whole era who presided over declining job numbers while in office.
New committee chair Tim Walberg, R-Mich., alleged the Democratic “stimulus spending” to get the nation out of the coronavirus-caused deep recession—a recession and a cause Trump denied—”hampered job creation and made more Americans dependent on the federal government.”
The Democrats, he charged, also “pursued a radical regulatory agenda which put up barriers to hiring and harmed American workers,” a charge Walberg did not prove, “and businesses.” One rule he slammed made millions more workers eligible for overtime pay. Another mandated both a corporation and its local franchise holders are “joint employers” responsible for obeying, or breaking labor law.
Shierholz, a former Labor Department chief economist, focused, more importantly, on the future, and the Republicans’ planned $4.5 trillion tax cut for corporations and the rich, coupled with its $1.5 trillion-$2 trillion in cuts in domestic spending and its wholesale firing of federal workers. She didn’t like what she saw.
Shierholz saw the Federal Reserve Board would face rising inflation due to the pump-priming of the GOP plans at a time of full employment. It would have to slam on the brakes by raising interest rates—increasing the cost of borrowing for both the federal government and for consumers on their credit cards, home loans, and car loans. That would dampen the growth the consumer-based economy needs.
“Large deficit-financed tax cuts would likely push aggregate demand above the economy’s capacity to produce, which would either manifest as higher inflation or—if the Federal Reserve intervenes quickly and forcefully to forestall upward pressure on inflation—higher interest rates,” Shierholz explained.
Higher interest rates cost the government more money in payments and crowd out private investment which could be used to create more jobs, she added.
“Paying for a large portion of the tax cuts with spending cuts would require the Fed to use the lion’s share of the space they have to cut interest rates, leaving monetary policy with limited tools to counteract any further economic weakness.
Cusp of recession at best
“At best, this would leave the economy at the cusp of recession with all of the Fed’s conventional tools for boosting a recovery nearly exhausted. This would be an extremely unwise policy decision—one made completely for the purpose of keeping taxes on high-income households and corporations historically low.”
It’s all part of the basic problems and crisis connected with capitalism, of course, although Shierholz did not say so.
Shierholz derided Trump’s claims that he is pushing drastic cuts to deal with what he calls a national emergency. Trump and the Republicans don’t “back these draconian cuts in the name of responding to a national emergency or reducing deficits to boost future growth. They back these draconian cuts to provide tax cuts that overwhelmingly favor the extremely wealthy. They take food out of the mouths of poor children to line the pockets of billionaires, while simultaneously weakening our economy.
“It is a disgrace.”
Shierholz concentrated on economic criticisms of the Republican agenda but didn’t neglect the GOP’s slashes to social spending in its budget blueprint passed hours later.
“Cuts to this spending would cause great damage to the most vulnerable households—for example, tens of millions losing their health coverage through Medicaid, tens of millions receiving less help in buying groceries from SNAP, or being cut off completely, and many others seeing the cost of their student loans rising,” she said.
Private health care coverage, Shierholz noted, is so expensive that a family health care plan “cost more than what the bottom 20% of families earn in an entire year.”
Union leaders focused on the practical impact of cuts to government programs, especially the GOP’s planned $880 billion 10-year cut to Medicaid. It serves, they said, 70 million-80 million people, and its general unfairness and huge tilt towards the corporate class.
AFL-CIO President Liz Shuler led the way in the denunciations, demanding—before the House vote, that lawmakers defeat the budget plan. So did a coalition of lawmakers and progressive groups at a press conference outside the Capitol. The GOP turned a deaf ear (see separate story).
“The Republican budget bill…would slash programs like Medicaid and food assistance for children, taking away care from grandparents in nursing homes, premature babies in the neonatal intensive care unit, and leaving kids hungry,” Shuler said.
“It also puts millions of Americans’ jobs at risk, including nursing home and home care workers, substance abuse counselors, midwives, and hospital and community health care center workers, along with jobs across food processing and production.”
“This budget proves anti-union extremists in Congress are more concerned with giving the wealthy trillions in tax cuts than helping working people,” said AFSCME President Lee Saunders. “Voters… are packing town halls to demand no cuts to Medicaid or SNAP. They’re calling representatives asking them to save public services.
Want leaders to act on prices
“They want elected leaders who will lower rising costs on everything from rent to food. But instead of listening to workers, the House moved forward with a budget plan that will cause millions to lose their health care, increase food insecurity for families, and jeopardize Medicare and Social Security in the long term. It’s shameful.”
“Republicans cast their votes to make life harder for working people, backing cuts in healthcare and food assistance for the poor so the wealthy can pay less in taxes,” said Teachers/AFT President Randi Weingarten.
“The budget resolution…lays the groundwork for cutting Medicaid and the Supplemental Nutrition Assistance Program by as much as $880 billion and $230 billion, respectively, while giving wealthy people $4.5 trillion in tax cuts.
“Republicans are endangering nearly 70 million Americans who receive basic healthcare through Medicaid, including cancer patients and seniors who could lose coverage for long-term care services. Children, seniors, veterans, and working parents could lose their food assistance altogether and will go hungry without it.
“Free school meals for children from low-income families will be on the chopping block. Millions of current and future college students and their families will face higher costs to go to college and steeper student loan payments. And what for? To give tax cuts to wealthy Americans, even those with incomes in the top 1% who bring in $743,000 annually.
“At a time when inflation is going up and consumer confidence is going down, how does this help everyday American families?…No wonder Republicans have been met with an outcry from angry crowds at their hometown town hall meetings. Americans did not vote for these kinds of assaults on our seniors, children, and the most vulnerable.”
The Communications Workers spotlighted the crowds at GOP town hall meetings, where union members and non-unionists alike erupted in anger. One Georgia Republican was literally booed and jeered off the stage when he tried to answer with tired rhetoric about “waste, fraud, and abuse.”
The union’s focus was on the GOP budget blueprint’s reported plan to force people to pay more for health care. “Have a heart” and “don’t tax health benefits to give billionaires tax cuts,” CWA members told lawmakers in visits to congressional offices.
Ironically, the Democratic Obama administration tried that brainstorm, taxing “high-value” health care plans, in negotiations over the Affordable Care Act more than a decade ago. Despite strong labor opposition, it passed, but the outrage rose so high that the tax was quickly reduced to zero—though the tax provision still is in the law.
“Project 2025”—Trump’s platform—”The House Republican Study Committee and conservative think tanks are calling for increased taxes on our health benefits in order to provide the wealthy and corporations with tax cuts,” CWA explained. The non-partisan Congressional Budget Office predicted most employers would shift the cost of the tax “to workers by increasing deductibles, co-pays, co-insurance, and maximum out-of-pocket limits. Each worker could lose up to $4800 yearly.
“Let’s be real: Extending ACA tax credits means millions keep their healthcare. But handing the ultra-rich more tax breaks while people lose coverage? That’s not leadership—-that’s straight up cruelty,” the Service Employees tweeted.
“Americans flooded congressional phone lines, rallied at town halls, and lifted their voices to make it clear they do not support massive cuts to the healthcare and public services they depend on,” SEIU President April Verrett elaborated. “Despite that,” Republican House Speaker Mike Johnson “and extremist Republicans passed a budget resolution that puts our nation on a disastrous path of ripping away healthcare for 80 million children, pregnant women, veterans, seniors, and people with disabilities by gutting Medicaid.
“In addition, they are slashing funding for other vital services like SNAP while shifting costs to state and local governments all to pay for massive tax cuts for billionaires and corporations.
“There is still time to turn back from this disastrous path and we will not let today’s vote stop us from our fight to save Medicaid and the other federal services. We will hold elected officials accountable for their votes and demand that they support working peoples’ priorities and the wages, healthcare, and security we all deserve.”
We hope you appreciated this article. At People’s World, we believe news and information should be free and accessible to all, but we need your help. Our journalism is free of corporate influence and paywalls because we are totally reader-supported. Only you, our readers and supporters, make this possible. If you enjoy reading People’s World and the stories we bring you, please support our work by donating or becoming a monthly sustainer today. Thank you!
CONTRIBUTOR
