Page 16 - The Economist

16 Leaders The Economist December 9th 2017
2 tance) tax entirely, the Senate would keep it. It is right to do so, the bill through barely a day after the forecast was released.
thoughitwoulddoublethethresholdatwhichthetaxkicksin, Perhaps, after the failure of health-care reform, they were des-
from $22.4m (for couples). Third, the Senate has tacked on a re- perate fora significant legislative achievement.
peal ofObamacare’sindividualmandate,a fineforAmericans A lack of consistency makes Republicans seem unprinci-
who do not buy health insurance even ifthey can afford it. pled.Theyhave spentthe pastdecade claimingthatthe nation-
One test of the final bill is its effect on the economy. On the al debt is among their main concerns. In 2009 they opposed
onehanditwouldlimitdeductionsinfavourofcutstomargin- President Barack Obama’s fiscal stimulus, arguing that it was
al tax rates—a worthwhile reform. On the other it will increase unaffordable. Yet it cost less than today’s tax bill would. It
inequality, largely because business-owners tend to be rich, passed when unemployment was over 8% and interest rates
and it will add a trillion dollars in public borrowing by 2027, were stuck near zero. Today unemployment is 4.1% and rates
accordingto an official projection forthe Senate’s bill. have started rising because the Federal Reserve is worried
But there is another test, which is the effect on governance. about inflation. The Fed will probably raise rates faster after
The Republicans have argued that theirbill is aimed at helping the taxbill, limitingthe boost to economic growth.
middle-class Americans and that it will spark enough eco- The whiff of self-enrichment does not help. President Do-
nomic growth to pay for itself. This is belied by experience— nald Trump assures Americans that the bill will be “not good”
witnesstheriseindeficitsafterthetaxcutsof1981andtheearly for his bankbalance. Without seeing his tax returns, that is im-
2000s (see page 29). Not even economists in sympathetic possible to know. But he holds interests in around 500 “pass-
think-tanks believe that the Republican claims will be borne through” businesses, which are among the main beneficiaries
out. Steve Mnuchin, the treasury secretary, has failed to pro- of the tax bill. As a property developer, he is almost uniquely
duce any analysis justifying his predictions of much higher fortunate in beingallowed to keep most ofhis taxexemptions.
growth (his department’s inspector-general is investigating
why not). The Treasury did, however, delete a study from its Talking is good
website that was unhelpful to the administration’s argument. When Democrats cried foul after the bill passed, Mitch
All politicians exaggerate the benefits of their policies, and McConnell, the Senate leader, retorted that: “You complain
some Republicans have made unconvincing claims about the about process when you are losing.” Nonsense. A robust and
rewardsoftaxcutsfordecades.However,inthe1980stheparty factual debate is essential to good policymaking. The erosion
undertook a robust debate over the merits of supply-side eco- ofstandardswill feed on itself. Already, some voices on the left
nomics, and in the 2000s George W. Bush’s own economists are saying that deficits should never again stop Democrats
cautioned against over-rosy growth forecasts. This time, most from spendingfreely when they are in power. In a country fac-
Republican senators simply brushed offthe official projection ingahugelong-term fiscal shortfall, thatisa worrying thought.
that the bill’s effects would contradict theirsunny promises. In Democracy requires deliberation, and deliberation re-
addition, they attacked the independent forecasters whom quires honesty. After this bill, a great fear of the Founding Fa-
they have previously championed as a valuable restraint on thers—a politics of warring factions and interests, scrapping
self-servingpoliticians. And to minimise scrutiny, they rushed overthe public purse—looks closerthan ever. 7

Peace in the Middle East

This year in Jerusalem

Donald Trump’s recognition ofJerusalem is reckless
ERUSALEM is both heavenly lem.Thisoddityisa productofhistory. After1947, when the UN
Jand earthly, holy and sinful. voted to partition the then-British mandate of Palestine, Jeru-
“Ten measures of beauty God salem wasdeclared an international city, partneither ofthe fu-
gave to the world, nine to Jerusa- ture Jewish state nor of the Arab one. But in the subsequent
lem and one to the rest,” saysthe warIsrael and Jordan divided the cityand two decades later, in
Talmud. Sometimes, however, it the war of 1967, Israel captured and annexed East Jerusalem.
seems as if ten measures of suf- Arab residents were given a special status, but building pro-
fering God gave to the world, jects, population policies and, latterly, the security barrier all
nine to Jerusalem and one to the rest. The medieval Arab geog- served to strengthen the Jews in their “eternal and undivided
rapher, al-Muqaddasi, called the holy city “a golden bowl full capital”. The Oslo accords of 1993, which created an autono-
ofscorpions”. mous Palestinian Authority, left the status ofJerusalem as one
In announcing this week that America recognised Jerusa- of several “final status issues” to be settled in a permanent
lem asthe capital ofIsrael, and would startthe process ofmov- peace between Israel and the Palestinians.
ing the American embassy there from Tel Aviv (see page 47), Congress called for the American embassy to be moved to
President Donald Trump claimed to be honouring Israel’s de- Jerusalem, and presidential candidates often promised to do
mocracy. He was, he said, simply acknowledging reality; he so. In office, though, they always found reasons to delay. Now
still sought peace between the Palestinians and the Israelis. In Mr Trump claims to be bringing “very fresh thinking” to the
fact, his move has the nasty stingofa scorpion. Middle East: “I’ve judged this course ofaction to be in the best
Israel isunusual in havinga capital thatisnotrecognised by interests of the United States of America and the pursuit of
the rest of the world. No country keeps an embassy in Jerusa- peace between Israel and the Palestinians.” Itwill help neither. 1