In 1988, then Vice President George H.W. Bush uttered his most infamous words, “Read my lips. No new taxes.”
Following his election to the presidency that year, President Bush broke his pledge and raised taxes. The Omnibus Budget Reconciliation Act of 1990 was passed by Congress on Oct. 27, 1990, weeks before the 1990 midterms.
Democrats won the popular vote by over seven percentage points and gained seven seats in the House and one in the Senate.
The National Republican Congressional Committee in 1990 was co-chaired by a young Ed Rollins. With Georgia Congressman Newt Gingrich’s backing, Rollins encouraged House Republicans to run against Bush and the tax increase. Those who did so were spared the wrath of the voters.
Historians argue Bush’s compromise with Democrats, which also included spending cuts, paved the way for Bill Clinton’s surpluses. Republicans, to this day, view Bush’s presidency as a disappointment and a betrayal of Reaganomics.
Ronald Reagan is still lionized by the GOP, but the Trump Republicans have largely twisted Reagan’s legacy. Contrary to currently held orthodoxies, Reagan was an opponent of tariffs, only selectively deploying them and lamented doing so. Trump, on the other hand, loves tariffs. He credits tariffs with every good in the economy. The problem, however, is that there is not much truly good.
If the economy is up, why are so many employers slashing jobs?
Credit: Erick Erickson
Credit: Erick Erickson
Recently, the Federal Reserve Bank of San Francisco released a study that looked at 150 years of tariffs impacting economies.
Much heralded by the White House, the study found that tariffs reduce inflation. Ignored by the White House, the same study found tariffs reduce inflation by causing an economic slowdown and an increase in unemployment.
Stated very simply in the report’s page one abstract, the bank found, “that a tariff hike raises unemployment (lowers economic activity) and lowers inflation.”
For those keeping score at home, Verizon just announced a 15,000-person layoff. Amazon is cutting 14,000 employees. UPS is cutting 48,000 positions. Intel is reducing its workforce. Nestle will cut 16,000 jobs globally. Target is reducing employees. IBM, American Airlines, General Motors, Meta, Accenture, Bosch, Starbucks, Ford, and others also have all announced layoffs in the past few months.
Some are related to AI efficiencies. Others are directly related to reductions in demand, particularly in the automotive and airline industries.
The best Republicans in Washington can do is claim Thanksgiving will be cheaper this year than last year. Jared Bernstein, President Biden’s Council of Economic Advisers chair, made the same claim in 2023, compared to 2022.
This year, President Trump is touting Walmart’s claim that a Thanksgiving meal costs 25% less than last year. There’s just one problem. It really is not true.
Last year’s cornucopia of goods at Walmart contained 21 items. This year’s contains just 15 products. Counting individual cans of goods, last year’s contained 29 items and this year’s contains 22. This year, Walmart included more of its “Great Value” generic items as well.
Tariffs really are having an impact. Coffee prices are up. Banana prices are up. As we move from fall harvests into winter, imported fruit and vegetable prices are higher. Car prices have gone up. Wages are stagnant as inflation is still outpacing the Federal Reserve’s 2% goal.
All Republicans have are lies and excuses. They claim everything is fine, like Joe Biden did, then say it is taking longer and it is harder than expected to make changes. But adding those tariffs was very easy. The Trump White House can declare Thanksgiving is cheaper this year, but Joe Biden did the same thing in 2023.
Will Republicans remain silent as the economy goes into freefall?
In November of 2024, Americans went to the polls, and Republicans not only won the popular vote for the presidency for the first time since 2004, but they also won the national popular vote for Congress.
Republicans promised to fix what Joe Biden broke, but instead, they made it worse. Small businesses are absorbing the costs of tariffs and cannot raise wages. Big businesses are in the same boat. Exporters to the United States have reduced prices, but even the reductions get tariffed when entering the United States. Businesses are spending resources on tariff compliance. Every dollar spent on compliance or absorbed to avoid price increases is a dollar not spent on investment or raising wages or hiring new people.
In 1990, Republicans ran against George H.W. Bush for his tax increase. Republicans have largely acquiesced to President Trump’s massive tax increase on Americans. How much longer will they?
He is a lame duck. Economic policy matters. The left offers more government. If Democrats win the midterms, they will bog down President Trump in investigations and possibly impeachment.
Republicans seem to be doing their best to lose, undoubtedly hoping the Supreme Court saves them from themselves by tossing the tariffs.
Of course, by late spring of next year, when a decision might come down, it will be too late to revive the economy.
Home Depot now says the middle class is slowing its spending. A Southern Business & Development report claims “that economic development project activity in the American South, the world’s third largest economy, is at the lowest mid-year point of any year since … 1994.”
The only major economic policy change has been tariffs. Perhaps it is time for Republicans to either convince the President to reverse course or, like in 1990, separate themselves from his bad economic policies.
Erick Erickson is host of the nationally syndicated “Erick Erickson Show,” heard weekdays from noon to 3 p.m. on WSB Radio. He is also now a contributor to the AJC.
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