The Republican Tax Bill Is a Poison Pill That Kills the New Deal

by Heather Cox Richardson

Heather Cox Richardson teaches American history at Boston College. She is the author of a number of books, most recently, To Make Men Free, a history of the Republican Party that examines the fundamental tensions in American politics from the time of the Northwest Ordinance to the present. She is co-host of the history and politics podcast Freak Out and Carry On. Follow her on Twitter: @HC_Richardson.

Shortly after President Trump took office, House Speaker Paul Ryan could feel just how close he was to finally achieving the goal he and his party colleagues had dreamed about for decades. With Republicans in uncontested power in Washington, he tweeted, they had a “once-in-a-lifetime opportunity to enact real comprehensive tax reform and get our economy moving.” Many Trump supporters thought reform meant relief for the “forgotten Americans” he talked about on the campaign trail. But Republicans had other plans, intending to take a wrecking ball to the system of American government that has been in place since 1933 and replace it with one based in their own ideology. If the “Tax Cuts and Jobs Act” becomes law, they will have succeeded.

It is hard to overstate the significance of this bill. It is a poison pill, killing the New Deal. The series of laws put in place by Franklin Delano Roosevelt and a Democratic Congress in the 1930s regulated business so employers could no longer abuse their workers or destroy the environment. It provided basic social welfare to support the elderly and infirm, and it developed infrastructure to guarantee everyone equal access to economic opportunity. Crucially, Democrats based their system on a distinctive ideology: The government must keep the economic playing field level for all Americans. As people at the bottom prospered, they would fuel economic growth for everyone.

This was indeed a “new deal for the American people,” as FDR put it. When he named it in 1932, government policy was based on the opposite ideology. Republicans who controlled the government in the 1920s insisted that national prosperity depended on government protection of the rich, who they believed would plow their capital back into the economy to provide jobs and higher wages for workers. When they took control of all branches of the federal government in 1921, they used their unchecked power to remake the government along the lines of their ideology. They slashed taxes and regulations and turned government over to businessmen, arguing that their policies would speed up the economy and bring the nation untold wealth.

In fact, the Republican policies did increase worker productivity by about 43 percent, but the profits went to business owners. So did the benefits of the tax cuts. By 1929, 5 percent of the population received one-third of the nation’s income. The structural weaknesses of this economy plunged the nation into the Great Depression. By the time FDR took office, 13 million people — 25 percent of the population — were out of work, the price of wheat had dropped from $1.05 to 39 cents a bushel, mothers went hungry so their children could eat, and people who had lost their homes lived in packing boxes in “Hoovervilles,” named after Herbert Hoover, the Republican president who oversaw the crash. Roosevelt’s call for a government responsive to the general welfare rather than the demands of the very wealthy won him the White House in a landslide, and the popularity of his New Deal committed the federal government to providing for the general welfare for the foreseeable future.

But while a vast majority of Americans — Democrats and Republicans both — liked the New Deal and believed it was a necessary corrective to the unfettered capitalism that had plunged the country into economic ruin, there was always a rump group of Republicans who loathed the idea that they could not run their businesses without check. They insisted that it was not their policies that had created the Depression, but rather that their policies had not been implemented fully enough. Rather than destroying individual liberty with government activism, government must be slashed still further. “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate,” advised Hoover’s treasury secretary. “It will purge the rottenness out of the system. High cost of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less confident people.” ...

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