Follow the Money

In 2015, no person on the planet had a hundred billion dollars. Now, according to the reputable business magazine Forbes, at least 15 people have that much and more, with Elon Musk topping the list with an estimated $400+ billion.

Such enormous wealth in private hands poses a real danger to democracies because money buys power. The distinguished journalist, political commentator, and President Lyndon Johnson’s press secretary Bill Moyers saw the danger decades ago: “The rich can buy more yachts than the rest of us, but we can’t allow them to buy more democracy.”

Unfortunately, the Supreme Court allowed them to do just that in the 2010 Citizens United decision permitting unlimited political contributions. Mr. Musk took full advantage by giving a massive $290 million to support Trump’s 2024 presidential campaign and the campaigns of several Congressional supporters. According to Americans for Tax Fairness, billionaires contributed $13 million to political causes in 2004 exploding 200 times to $2.6 billion in 2024.

In 2003, Moyers said, “The corporate right and the political right declared class warfare on working people a quarter of a century ago and they’ve won…. The rich are getting richer, which arguably wouldn’t matter if the rising tide lifted all boats.” But it hasn’t. The middle class and the working poor “are barely keeping their heads above water [and] the inequality gap is the widest it’s been since 1929.” Today, the gap is the widest, by far, in our history.

Now comes the One Big Beautiful Bill Act that passed the House with only Republican votes and showing that Moyers was right. The Act is now in the Senate, which will almost certainly make major changes before sending it back to the House for a final vote. 

The House Act extends the Republican tax cuts of 2017, mostly benefitting the richest 20 percent, and will add at least $2.6 trillion to our national debt over ten years on top of the $2.2 trillion added by the 2017 tax cuts. The Act also includes large cuts to SNAP (Supplemental Nutrition Assistance Program) and Medicaid, both of which provide crucial financial support to help people with limited incomes. The Congressional Budget Office estimates that 8.6 million Americans will lose Medicaid coverage in the next few years. The money saved will cover part of the cost of tax cuts—at the expense of healthcare and food, especially children’s food. The Act is the largest transfer of wealth from the poor to the rich in U.S. history.

As presently written, the Act makes it more difficult for needy students to receive Pell Grants for college, gives an extra $150 billion to the Defense Department, funds $155 billion for border security (five times this year’s funding), cuts back many clean-energy tax credits vital to minimizing climate change, defunds Planned Parenthood, and other provisions. Perhaps the most curious are prohibitions on courts holding federal officials in contempt for ignoring court orders and a 10-year prohibition of any state legislation or regulation of artificial intelligence (AI), apparently included to please prosperous technocrats who foresee enormous profits and influence as AI matures.

When the Act passed the House, all three major credit rating agencies downgraded U.S. debt from AAA, with Moody’s calling the Act fiscally irresponsible. Unless the Senate amends the Act to benefit middle- and low-income people, who need it most, instead of those who need it least, the gaping gap between the rich and the rest will widen even more. The GOP is waging war on the common good.

 

                                Tariff Turmoil

In the popular 1986 comedy film Ferris Buehller’s Day Off, Buehller skips high school to spend a day in Chicago with his girlfriend and a pal. One of the funniest parts of the film is an economics teacher’s memorably monotonous lecture about the 1930 Smoot-Hawley Tariff Act.

There was nothing funny about the Smoot-Hawley tariffs. The economy was sinking into depression, and Senators Reed Smoot (pictured) and Willis Hawley, both Republicans, thought 15-18 percent tariffs on a select third of imports would protect U.S. industries from foreign competition. President Hoover signed the bill despite warnings from senior economists. 

The Smoot-Hawley tariffs didn’t cause the Great Depression but certainly made it worse. Within two years, U.S. imports fell by about 40 percent partly because unemployment meant many people didn’t have money to buy much but partly because tariffs made foreign goods more expensive. 

According to Douglas Irwin, perhaps America’s leading expert on trade policy during the Great Depression, the tariff was seen by other countries as a hostile decision that led to resentment and retaliatory tariffs on American goods. Trade with America declined, which seriously delayed a global economic recovery. Tariffs also made domestic goods more expensive because of reduced foreign competition. Generally, tariffs are taxes on consumers regardless of where goods are produced. 

Because the Smoot-Hawley tariffs were such a disaster, the U.S. has preferred free trade and rarely raised tariffs since 1930 until this year. While Smoot-Hawley was passed by Congress, this year’s tariffs were simply proclaimed by the president in response to an ill-defined “national emergency”—a power delegated to presidents by Congress in 1977 but never used until now. They have been repeatedly raised and lowered and even targeted at an Antarctic island inhabited only by penguins. 

Businesses here and abroad require economic stability to make long-term plans, but instability rules the White House. Two federal courts blocked most of Trump’s tariffs last week, followed shortly by another court which temporarily allowed them. Clearly, the future of those tariffs is unclear.

What is clear is the low opinion of tariffs by Warren Buffett, perhaps the most successful American investor of modern times: “Trade should not be a weapon…. I do think that the more prosperous the rest of the world becomes … the more prosperous we’ll become, and the safer we’ll feel, and your children will feel someday.” “[We should] trade with the rest of the world, and we should do what we do best, and they should do what they do best.”

Tariffs turn others, even loyal allies like the EU, Canada, and Mexico, against us. Because we’re the world’s richest country, others wonder if there’s no end to American greed. The obvious play is to retaliate by levying tariffs on U.S. goods; trade becomes a game where everyone loses. 

The president seems to believe that tariffs will bring revenue to the government to cover at least part of the cost of his $3.7 trillion “big, beautiful bill” to cut taxes, nearly all of it for the rich. Here’s a better idea: raise taxes significantly on incomes above half a million and even more on incomes in the top one percent.

A creative idea to raise revenue has been suggested by Joseph Ginocchio of Santa Fe, N.M., in a letter in the April 28 New Yorker. “Why not have corporations that benefit from government intellectual property [including university research funded by federal grants] pay royalties for using it? This would dramatically lighten the tax burden for individuals and small businesses.” Of course, corporations must be prohibited from passing on the cost of royalties to taxpayers, who already paid for the original research.