Earlier this week, my family received a disturbing piece of junk mail. I’m used to getting simulated checks in the mail, advertisements for personal loans or potential home-equity loans with eye-popping numbers on the front. They’ll say, “This is not a check,” but they’re obviously beckoning you — hoping you’ll submit a loan application so the number becomes real.
This week, however, the envelope was marked “Holiday Cash,” and the amount on the check was lower. It was only $500. Moreover, it said “this is a real check.” All I had to do was endorse the back and cash it at a local bank. There was a catch, of course. I’d be instantly obligated to repay a short-term, high-interest-rate loan. I’d get cash now, and I’d pay much more later. But when a family can’t afford to pay for Christmas presents — or is short on rent — how many will sign that check and worry about the consequences next year?
Let’s put the plight of tens of millions of Americans in concrete context. In a recent Federal Reserve Board survey, 47 percent of respondents said they couldn’t pay for a $400 emergency without borrowing money or selling some of their possessions. Other studies have reached similar results. A majority of Americans — 59 percent — don’t have the resources to cover a $1,000 emergency. More than half don’t have a total of $1,000 in their savings and checking accounts combined.
So, given this reality, can an extra $800 or $1,000 per year make a difference for a working family? That’s roughly the amount of tax relief coming to millions of American households as a result of the GOP tax reform.
But what if you saved that money? What if you have that extra bit of margin that makes life just a little bit less stressful? Writing in The Atlantic, a self-described “middle class” writer described what it was like to be one of those Americans who doesn’t have $400 to spare:
I know what it is like to have to juggle creditors to make it through a week. I know what it is like to have to swallow my pride and constantly dun people to pay me so that I can pay others. I know what it is like to have liens slapped on me and to have my bank account levied by creditors. I know what it is like to be down to my last $5 — literally — while I wait for a paycheck to arrive, and I know what it is like to subsist for days on a diet of eggs. I know what it is like to dread going to the mailbox, because there will always be new bills to pay but seldom a check with which to pay them. I know what it is like to have to tell my daughter that I didn’t know if I would be able to pay for her wedding; it all depended on whether something good happened. And I know what it is like to have to borrow money from my adult daughters because my wife and I ran out of heating oil.
Would keeping an additional $1,000 per year change his life? Doubtful. But mocking the impact of that extra money for the majority of Americans who live on financial margins that most writers and pundits can’t comprehend is absurd.
Consider a counterfactual. Would the same people scoffing at the impact of $18 per week make the same arguments if, say, GOP reforms were shrinking public benefits by the amount? Would they say, “Who cares? It’s only one less trip to McDonald’s”? Of course not. They’d properly see the negative impact of even small-dollar financial changes.
I believe two things at once. The Republican tax relief should have helped working families more, but the help it does give is a meaningful improvement over the status quo. Moreover, the corporate tax-rate reduction is intended to spur additional economic growth that will lead to hiring and wage increases that supplement and improve on the direct economic effects of family tax relief.
No one should exaggerate the effects of tax reform — in either direction.
In fact (though the announcements were a tad gimmicky), since yesterday’s bill signing we’ve seen a wave of corporate announcements of bonuses, pay raises, and capital investments that bring direct benefits to hundreds of thousands of families — and that’s just the fruit of one day of policy change.
No one should exaggerate the effects of tax reform — in either direction. It’s not the bill that cures what ails the struggling American family. Economic stagnation and economic insecurity are grounded in political, cultural, and economic factors that are beyond the reach of any single tax bill or any single legislative reform. But legislation can help or hurt, and a bill that allows American families who typically don’t have $1,000 to spare to keep $1,000 more of their own money every year is a bill that’s likely to help, and if a struggling family uses that money wisely, it can even help a lot.
— David French is a senior writer for National Review, a senior fellow at the National Review Institute, and an attorney.