By Dylan Matthews. Published on November 9th on Vox.
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, Vox’s Sarah Kliff explains, 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.
These tax cuts will have to be paid for somehow — probably through cuts that hurt the working class
The extreme budget cuts contemplated by Ryan would go some of the way toward paying for Trump’s tax cuts. But his tax plan would cost $6.2 trillion over 10 years before interest. That’s likely more than Ryan’s cuts alone could pay for.
And when you try to start thinking about how to fill that hole, it becomes clear that genuinely massive and unprecedented cuts would be necessary, as my colleague Alvin Chang has argued. Cutting all funding for transportation only nets you $1 trillion. All criminal justice programs would only net $600 billion. You have to start essentially imagining a government that does nothing but run a military, send (maybe lowered) Social Security checks, and administer Medicare.
The distribution of those cuts is almost certain to be regressive. That’s why even if on paper Ryan and Trump’s tax cuts would leave most lower-income people no worse off, the overall effect of the cuts plus budget cuts to pay for them will be absolutely brutal for the poor and working class.