As commentators and observers, we need to have premises, hypotheses, and rules of thumb. We also need to reconsider these premises, hypotheses, and rules of thumb on a regular basis.
When I look back on 2018, looking for where I went wrong — as I have done every year since 2010 — I don’t see primarily mistakes I made last year as much as old hypotheses of mine that were proven wrong.
Specifically, I must modify two erroneous premises of mine — one big and one small.
The big one involved cronyism and corporate welfare. I have spent more time and energy on these topics than on any other. I have written two books and countless columns about how big business uses big government to profit, to the detriment of consumers, competitors, and taxpayers.
Beginning in the Bush era, I began noting how intimately General Electric CEO Jeff Immelt had bound his company up with government. The bonds became even stronger under former President Barack Obama, and I called GE “the for-profit arm of the Obama administration.” My 2009 book Obamanomics had an entire chapter about GE, titled “Government Electric.”
What 2018 taught me was that I had overestimated the effectiveness of crony capitalism. GE collapsed last year, after spending a decade and a half lining up every subsidy, every contract, every protective regulation, every mandate, every bailout it could.
The company’s least profitable division was its light bulb division. I have written and spoken repeatedly on how GE lobbied for the federal law that effectively banned the traditional incandescent to drive customers to its higher-margin high-tech bulbs. That gambit didn’t pay off. The lobbying and cronyism as a whole didn’t pay off.
It’s not that corporate welfare, subsidy suckling, and cronyism aren’t bad. It’s that they don’t generate as much profit as I had assumed and feared.
My other realization was on a smaller scale.
I had expected the GOP tax cut to become more broadly popular over the course of 2018. My thinking was that the bill was unpopular because it was misunderstood. People like tax cuts. Middle class people mistakenly thought this bill raised their taxes. This bill actually cut middle class people’s taxes. Therefore, I figured, when people saw their paychecks go up because their withholding taxes would go up, people would like the TCJA.
Things didn’t exactly work out that way. Sure, by mid February the law’s approval rating moved into positive territory, but things didn’t keep going up. In the second half of 2018, including election time, the law polled as a wash — about 41 to 42 percent in the RealClearPolitics average. In short, the bill did become more popular when people learned what was in it, but it never became a winning election issue.
So where did I go wrong?
My general and specific premises were well founded. About 70 percent of Americans got a tax cut from the bill, but only 17 percent in one poll during the bill’s debate believed it would cut their taxes.
The bill passed in such a rushed and shady way at the end of 2017 that Americans were rightly skeptical of it. That was a big factor in the negative view that people took of Obamacare for years. Also, a $1,200 tax cut, spread over 24 pay periods, isn’t going to move many votes, as it isn’t going to be noticed by most people. The people who noticed it the most were the folks who saw their goodies disappear.
Arguably, the biggest electoral impact it had was irritating the wealthy suburbanites in high-tax states who lost their special-interest tax breaks. Those were the districts that handed Democrats the House.
The assumption that cutting people’s taxes would make them like you was a false assumption. Similarly, I was wrong to assume that successfully lobbying for subsidies and profitable regulations was a viable business model. I head into 2019 chastened, and wiser.
