The white working class turned out, and they struck back.
The morning after, that already appears to be the dominant
media narrative coming out of the 2016 presidential election. Sure, the black
and Latino voters that Hillary Clinton was counting on to deliver her to
victory were there — but white turnout was up, and especially among white
people without college degrees, there was a major swing to Trump.
There’s already furious debate about why this is, and how it
jibes with data suggesting that Trump supporters are richer, not poorer, than
average. But let’s not lose sight of something very important: Donald Trump’s
presidency is going to be an absolute disaster for the white working class, the
white poor, and every other economically struggling person in America. The
people the media is crediting with Trump’s win have a tremendous amount to
lose.
Lower-income whites are not going to suffer from Trump’s
restrictions on Muslims traveling, or from his mass deportations, or from his
cavalier attitude toward police brutality. But Trump has promised an economic
agenda that will increase the ranks of the uninsured by tens of millions, that
will eliminate crucial safety net programs for low- and moderate-income
Americans, that could start a trade war that drives up prices and devastates
the economy, and that will put in place a tax code that exacerbates inequality
and leaves many families with children worse off.
That affects all Americans — and with Republicans retaining
control over the House and Senate, it stands a very good chance of passing.
Trump’s budget cuts
could send millions of children into extreme poverty
For the past decade, Paul Ryan has languished either in the
House minority or under a Democratic president, putting together extreme
proposals for completely overhauling the safety net. Medicare would be
voucherized — either with or without the option for beneficiaries to keep the
traditional program. He offered one of the most extreme Social Security
privatization proposals of the 2005-’06 debate on the issue.
But the worst is saved for means-tested programs, in
particular Medicaid and food stamps. He would move fast to “block-grant” food
stamps and Medicaid, transforming them from guarantees of food and medical care
for the nation’s poorest people into a slush fund for states. This approach was
devastating during welfare reform, and it’s impossible to imagine a way this
would happen that wouldn’t exacerbate extreme poverty and hunger. After the end
of welfare, food stamps were the last cash-like benefit upon which people
without earnings could rely. Ryan will put an end to that.
And then he’d cut all these programs for good measure.
Sixty-nine percent of the cuts in his last budget came from programs for people
with low or moderate incomes, including $137 billion over 10 years from food
stamps (now the block grant), up to $125 billion from Pell Grants, and another
$150 billion or more from other low-income programs like Supplemental Security
Income and the earned income tax credit. Medicaid would be cut by more than a
quarter through the block grant. Ryan has sometimes trolled journalists by
claiming to support boosting the EITC, only to propose paying for it by cutting
other programs for the poor.
These are changes that will dramatically decrease insurance
coverage among the poor, increase hunger, and greatly exacerbate poverty in its
most extreme form. And while Trump has expressed wariness of tampering with
Medicare or Social Security, he has expressed no such hesitation about Ryan’s
proposed cuts to programs for the poor.
The Ryan budget has become the key economic agenda of the
Republican Party over the past six years. By now it wields substantial, likely
majority, support in both houses of Congress, even if Ryan himself does not
survive as speaker. And it’s hard to imagine Trump using a veto to prevent
these kinds of reforms and cuts from becoming law.
As a result, Trump will likely oversee the most vicious cuts
to programs for poor and medium-income people of any president since Reagan —
and could very well go further than Reagan did. The result will almost
certainly be a massive increase in uninsurance for the lower-income working
people currently covered by Medicaid, an increase in poverty and hunger for the
working poor on food stamps, and a large increase in extreme poverty.
This is a chart of extreme poverty — the share of people
living on less than $2 a day in cash income — from 1996 to 2011. It was put
together by the University of Michigan's Luke Shaefer and Johns Hopkins's
Kathryn Edin, America's leading researchers on extreme poverty. The gap you see
between the solid and the dotted black lines is the difference between the
extreme poverty rate not counting food stamps and the rate counting food
stamps. Roughly 2.1 percent of households with children in 2011 were kept
afloat, barely out of the $2-a-day range, if you count food stamps. That's a
little under 800,000 families, representing millions of children.
Paul Ryan’s plan will, with the signature of Donald Trump’s
pen, deny them the one thing keeping them from completely unmitigated extreme
poverty.
Trump will rob at
least 20 million people of their health insurance
With Donald Trump in the presidency,there is now a governing majority capable of repealing Obamacare. All
of it.
Republicans will almost certainly control the Senate, and
definitely control the House, and while the law took a filibuster-proof majority
to pass, House Budget Committee Chair Tom Price has designed a bill that would
repeal it but work through the budget reconciliation process, which requires a
simple majority in the Senate. Price's bill would end the Medicaid expansion
and repeal tax credits for low-income Americans. It would repeal the taxes used
to finance the law and its mandate. This plan would, according to the
Congressional Budget Office, cost 22 million people health insurance.
There’s some reason to suspect the Republicans in Congress
wouldn’t go full steam ahead. It’s hard to deny 22 million people health
insurance without paying an electoral price for it. They could do the
transition gradually, or phase out Medicaid expansion first, since Medicaid
recipients are poor enough that they rarely vote for Republicans anyway. But
after six years of Republican pledges to repeal and replace, it’s hard to
imagine the first part of that equation not happening.
As for replace, Trump’s plan is to make health insurance
costs tax-deductible. This proposal is well to the right of the kind of thing
Paul Ryan, John McCain, and Mitt Romney have championed in the past. Generally
the alternative has been to create a uniform tax credit, most likely a
refundable one. That way, some benefit goes to poor people who don’t have a
positive income tax burden. Trump doesn’t do that. Instead, he limits the
benefit to people rich enough to pay taxes.
All this is before you take into account the block-granting
of Medicaid Ryan has proposed. Medicaid covered about 60 million Americans
before Obamacare passed. Even if states don’t entirely eliminate their
guarantee of health care for the poor, we should expect that number to fall by
millions, probably tens of millions, if the block grants pass, just as the
block-granting of welfare effectively ended that program in most states. Ryan
is also proposing to dramatically cut the scale of Medicaid spending by about a
quarter. If giving states free rein to use the money as a slush fund doesn’t
uninsure millions, the cuts definitely will.
Any way you slice it, Trump’s agenda, and that of
congressional Republicans, will probably increase the ranks of the uninsured.
At this point, everything else is likely a fight over the magnitude of the
reversal.
Trump’s trade war will cost Americans jobs and raise prices
substantially
One of Donald Trump’s most consistent promises is to impose
massive tariffs on goods from other countries, including a tariff of up to 45
percent on goods from China and up to 35 percent on goods from Mexico. He might
face some resistance from Republicans in Congress on this point, but luckily
for him, the president has a surprising amount of authority to unilaterally
impose duties, by bringing "safeguard" or "market
disruption" cases against imports from China or Mexico. He could bring a
trade war upon America, whether Congress wants him to or not.
The Peterson Institute, a pro-trade but widely respected
think tank in Washington, tried to estimate the economic cost of Trump's plans
in a report in September. Peterson, understandably, assumes that China and
Mexico would retaliate with tariffs of their own. So would other countries if
Trump withdraws from the WTO, NAFTA, the South Korea free trade pact, and other
agreements.
Peterson concludes that this would very likely cause a
full-on trade war, and with it a recession by the year 2019. The unemployment
rate would reach 8.6 percent, and more than 4 million jobs could be lost:
Millions of
American jobs that appear unconnected to international trade—disproportionately
lower-skilled and lower-wage jobs—would be at risk.
In a full trade
war scenario, Washington State would be the worst affected, suffering a 5
percent private sector job loss relative to baseline. But employment would fall
by more than 4 percent in a broad swath of states, including California,
Connecticut, Indiana, Illinois, Kentucky, Maryland, Massachusetts, Michigan,
Minnesota, New Hampshire, New Mexico, New York, North Carolina, Ohio,
Pennsylvania, Rhode Island, Texas, Utah, and Wisconsin. Twenty-nine counties
across America would experience employment declines of 7 percent or more. In
absolute terms, Los Angeles county in California would be the worst affected
(176,000 jobs), followed by Cook county, Illinois (Chicago) with 91,000 and
Harris county, Texas (Houston) with 89,000.
Peterson also considers an “aborted trade war” scenario.
That encompasses the chance that Trump will enact tariffs and then back down
quickly when the economic devastation this would cause becomes clear, and the
chance that his threats succeed in cowing other countries somehow. This
scenario would not be nearly as bad as the full trade war, but unemployment
will still shoot up by about a point, costing about 1.3 million jobs.
This is not a good scenario for the white working class.
States that went for Trump like Michigan, Pennsylvania, and Wisconsin will see
massive job losses.
And this is neglecting the fact that prices would rise
substantially due to the new tariffs and the disruption to the global supply
chain. That could dramatically increase the cost of a whole range of consumer
goods, cost increases that would hit poor Americans the hardest.
He’ll dramatically cut taxes for the rich, raise them for
many middle-class people, and increase inequality.
We should also expect Trump to take cues from Ryan on tax
policy. Over the course of his campaign, Trump has gradually adjusted his tax
proposal to match "A Better Way," an economic agenda including a tax
reform proposal that Ryan put out in June. Both Trump and Ryan propose
replacing the current seven-bracket income tax structure with just three: 12
percent, 25 percent, and 33 percent.
Because the current top rate is 39.6 percent — plus a 2.9
percent Medicare surtax from Obamacare that Trump and Ryan promise to repeal —
the plan would reduce the tax rate paid by the richest Americans by nearly 10
points. And while both Trump and Ryan propose increasing the standard deduction
to offset the increase in the bottom rate from 10 to 12 points, at least some
people would fall through the cracks all the same.
NYU Law’s Lily Batchelder conservatively estimates that 25
million individuals and 15 million children would see their taxes go up under
Trump’s plan. That's about 20 percent of households with minor children at
home, and includes more than half of all single parents. The combination of an
increased bottom rate, Trump's total elimination of personal exemptions for
taxpayers and dependents, and his abolishing of "head of household"
filing status, often used by single parents or single caretakers, leaves many
people in the middle class worse off.
Batchelder provides several examples of families that would
see their taxes go up under Trump’s plan. The biggest hikes number in the
thousands of dollars and are concentrated among single parents:
A single parent
with $75,000 in earnings, two children in school, and no child care costs
(because the kids are in school) would pay $2,440 more.
A single parent
with $50,000 in earnings, three children in school, and child care costs of
less than $6,000 would pay $1,188 more.
A married couple
with $50,000 in earnings, two kids in school, and no child care costs would pay
$150 more because of the bottom bracket's increase from 10 to 12 percent.
The Tax Policy Center still finds that Trump would on
average cut taxes for every income segment, though a minority of the middle
class would face hikes. Ryan’s plan offers very modest cuts across the board in
2017 but by 2025 would start increasing them for upper-middle-class people in
the 80th to 95th percentile. Given that it also raises the bottom rate and
repeals personal exemptions — just like Trump’s plan — it’s quite likely that
many families lower down will see tax hikes as well.
Investors and corporations, by contrast, would do extremely
well under both Ryan and Trump’s plans. Ryan's plan would effectively decrease
the top tax rate on capital gains and dividends from 23.8 percent to 16.5
percent, and on interest income from 43.4 percent to 16.5 percent, according to
the Tax Policy Center.
Trump and Ryan both promise to dramatically slash the
corporate tax rate from its current peak at 35 percent; Ryan wants a 20 percent
top rate, and Trump wants 15 percent. Given that the corporate tax is, according
to the Tax Policy Center, even more progressive than individual income taxes,
that change will almost certainly increase income inequality.
What's more, Trump would apply the new 15 percent rate to
pass-through income, which is currently taxed at higher individual rates.
Rather than pay a top rate of 39.6 percent, or even 33 percent after Trump’s
cuts, it would pay a mere 15 percent. Ryan wants a new, lower 25 percent rate
for this income.
It should probably be noted that most of Trump’s own
business efforts are organized as pass-through entities. His losses from those
companies were what let him evade taxes for several years. He and Ryan are essentially
proposing a big tax cut for the Trump Organization. The other beneficiaries
will be rich too; about 69 percent of pass-through income goes to the top 1
percent of earners.
Compiled by Dylan Matthews
dylan@vox.com
Twitter@dylanmatt
www.vox.com
