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[Jonathan Bernstein] GOP tax bill needn’t be popular to be successful

By Bloomberg

Published : Dec. 22, 2017 - 17:17

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With the passage of the Republican tax bill, we’re now getting a debate over whether it will become more popular in time for the 2018 midterm elections. The answer? All that matters is its effect on the economy.

The bill is incredibly unpopular right now. Indeed, it‘s rare for Congress to pass anything this unpopular. Harry Enten documents it: This tax cut is more unpopular than tax hikes were during the presidencies of Bill Clinton and George H. W. Bush.

It’s not likely that will change a lot. The bill does give tax cuts to most people, at least for a few years. And conservative groups say they will spend millions to alert taxpayers to that. However, to the extent that people notice it -- and it’s unclear how many will -- for most people the change will be small.

Polling suggests that taxpayers are fairly cynical about all of this, and believe (with good reason, in this case) that the wealthy and corporations will benefit most. That perception won’t change even if they realize that they, too, have received some benefit. Meantime, after experts have fully absorbed what‘s in the bill, we can expect another round of reporting about all the goodies for rich folks and Republican-aligned interest groups.

Republicans have been selling this as a tax simplification to ease the burden of filing taxes. Remember when we were going to be able to file taxes on a postcard? That didn’t happen. Don’t forget, too, that people generally care more about losses than gains. Many households will be able to take a larger standard deduction, and fewer will itemize deductions. But I strongly suspect that quite a few taxpayers will be more upset about losing deductions even if they wind up doing slightly better. It sounds bizarre, but people can be irrationally loss-averse.

However, the tax bill may be polling badly for reasons that have little to do with the details of the bill. This is a tax bill being pushed by Donald Trump, who is very unpopular, and Republican congressional leaders, who are also very unpopular.

The good news for Republicans is that none of that matters much. Right now, they plan to run on these tax cuts, and Democrats plan to run against them. But the midterm elections are almost a year away, and there’s no way to predict what will be on voters’ minds then. There’s a very good chance that after the tax bill fades from the headlines, it will be mostly forgotten.

Obamacare was the major issue raised by Republicans in 2010, 2012, 2014 and 2016, long after the original bill had passed. That attests in part to unusual discipline among Republican politicians and the Republican-aligned media. It was also probably a consequence of a Republican Party that wasn‘t generating a lot of policy ideas to run on. Also, the Affordable Care Act turned out to be very good at generating news: court cases, state battles over Medicaid expansion, the botched roll-out of marketplaces and yearly reports on premiums and enrollments. None of those conditions is likely to apply here.

But even the extraordinarily contentious Obamacare probably didn’t drive that many votes. People aren‘t single-issue voters, for the most part. They typically choose who to vote for, and then find reasons to justify their decisions. So, yes, it’s possible that partisan Republicans will say that they‘re voting for Republican congressional candidates in 2018 because of the tax bill, and partisan Democrats will say the opposite. But those voters would vote the same way, tax cuts or no tax cuts. There is some evidence that Obamacare directly influenced the 2010 election (although I remain skeptical), but most of the time, most congressional action doesn’t produce a direct effect in the voting booth.

The economic effects of the tax bill could still be very important, however. Economic performance isn’t the only factor that matters in elections. We can see that in the GOP’s poor 2017 outcomes, in which Trump’s unpopularity took precedence over a fairly strong economy.

That doesn’t mean the economy no longer matters. If Republicans are correct and the economy booms as a result of slashing corporate tax rates, that can overcome much of what‘s making Trump unpopular. Their party could emerge relatively unscathed in 2018 and be on solid ground in 2020. If, however, mainstream economists are correct and the tax bill has marginal effects at best, then Republicans will probably continue to suffer at the polls, just as they did in Virginia, New Jersey, Alabama and pretty much everywhere else people voted this year.

That’s a lot more important than whether people tell pollsters they like the tax bill or not. 


By Jonathan Bernstein


Jonathan Bernstein is a Bloomberg View columnist. -- Ed.


(Bloomberg)