GM layoffs show Congress played Americans with corporate tax cut

Less than 12 months after seeing its corporate tax rate slashed by Congress, General Motors (GM) announced it will lay off 14,000 workers. That doesn’t exactly fit the script some in Congress and the president laid out when pressing for passage of the Tax Cuts and Jobs Act (TCJA) in late 2017.

Either out of embarrassment or to hide their role in the scam of GM receiving massive tax cuts only to make massive job cuts, the president and some members of Congress reacted with swift indignation. Curiously, its chief proponents, House Speaker Paul RyanPaul Davis RyanHouse vote fails to quell storm surrounding Steve King House passes resolution condemning white nationalism Anti-Defamation League calls on House leaders to censure Steve King over white supremacy comments MORE (R-Wis.) and Rep. Kevin BradyKevin Patrick BradyTrump on declaring national emergency: 'Not going to do it so fast' Dems look to chip away at Trump tax reform law House approves new Dem rules package MORE (R-Texas) have been silent.

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How could this happen? Were the president and Congress duped or was the American taxpayer duped, both by GM and our elected officials?

While it is infuriating to see a company receive significant tax cuts only to then fire thousands of Americans, it is critical to remember that those who voted for the TCJA made it possible — they were the enablers.

There are no requirements in the TCJA for companies to create jobs in order to receive a tax cut. Worse still, the TCJA allows companies to fire Americans and receive a tax cut, the same tax cut received by companies creating jobs.

The TCJA is either the most inept financial deal ever negotiated on behalf of the American taxpayer or a scam perpetrated against the American taxpayer by Congress and the president, both knowing very well what they were doing.

Could members of Congress and our president really have been duped this badly? Could they really have signed onto a tax policy that was so blatantly flawed without knowing it?

It stretches the imagination to believe that Congress and the president drafted and signed a bill without knowing that it would allow companies to fire Americans and still receive a drastically reduced tax rate.

What is plausible is that Congress and the president knew very well what they were doing and enabled GM in duping the American taxpayer. To find the truth, we simply have to look at comments by members of Congress and the campaign money trail.

In a previous opinion piece for The Hill, I noted that, in discussing passage of the TCJA, Rep. Chris CollinsChristopher (Chris) Carl CollinsWhat a year it’s been: A month-by-month look back at 2018's biggest stories Trump vents frustration over wall funding, fueling uncertainty over shutdown GOP scrambles to prevent shutdown after right-wing insurrection MORE (R-N.Y.) stated, “My donors are basically saying, get it done or don’t ever call me again." 

In another illustration of the role campaign donations played in pressing for the TCJA, Sen. Lindsey GrahamLindsey Olin GrahamPence on border wall: Trump won't be ‘deterred’ by Dem ‘obstruction’ AG pick Barr emphasizes independence from Trump Leaders nix recess with no shutdown deal in sight MORE (R-S.C.) bluntly stated, “The campaign donations will stop.”

How big were the donations that were at risk? In the 2016 election cycle, GM alone donated more than $100,000 to the House Ways and Means Committee and more than $100,000 to the Senate Finance Committee, both of which oversaw the TCJA process.

Clearly, a lot of campaign donations were at stake. Putting together the campaign donations at risk along with the candid comments by Rep. Collins and Sen. Graham, it is not a stretch to assume that those who voted for the TCJA knew that companies firing Americans would receive the same tax cut as companies hiring Americans.

While Congress and the president are primarily to blame for GM being well within its right under the TCJA to fire 14,000 employees after receiving a tax cut, GM is not shooting straight with the American taxpayer.

GM cited declining sedan sales as the reason for its announced job cuts and its closing of four factories in the U.S. It is reasonable that if a product isn’t selling well you would stop producing it.

Here’s the catch, GM is manufacturing sedans in China and exporting some of them to the U.S. GM isn’t the only American company manufacturing cars outside of the U.S. and then exporting them to the U.S. for sale.

As I noted previously in another op-ed for The Hill, Lincoln assembles a mere 17 percent of its vehicles sold in the U.S. within the U.S., while Chrysler assembles a still meager 33 percent of the vehicles it sells in the U.S. within the U.S.

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Interestingly, some foreign automakers assemble a much higher percentage of the vehicles they sell to U.S. consumers within the United States. For example, Acura assembles an impressive 71 percent of its U.S.-sold vehicles within the U.S.

It is ironic given all the talk of “America First” that the traditional American automotive manufacturers are making a smaller percentage of the cars they sell to U.S. consumers in the U.S. than foreign automotive manufacturers.  

If you want more cars made in America, there is an alternative to tariffs: Tie the TCJA's lower tax rate to increasing jobs in America. This would provide financial incentive for auto manufacturers to make cars in America while avoiding a trade war.

GM’s firing of 14,000 employees sadly shows that the American taxpayer got played by Congress and the president. All those in Congress who voted for the TCJA and the president who signed the bill enabled companies to fire Americans and still receive a massive tax cut.

Please don't let there be hearings in which members of Congress who voted for the TCJA feign indignation — just fix it. It’s time Congress and the president make up for flaws in the TCJA by fixing them.

It is time the president and Congress to revise the TCJA to make the lower corporate tax rates contained in the TCJA contingent on companies increasing their number of full-time employees in the U.S. The American taxpayer deserves nothing less. It is time the American taxpayer is put first. 

Chris Macke is the founder of Solutionomics, which is focused on finding solutions for a more efficient, merit-based corporate tax code, a more successful U.S. trade policy and a stable financial system. He has advised the U.S. Federal Reserve by providing market updates and implications of monetary policy changes on asset valuations and market distortions, and he's a contributor to the Fed Beige Book. Find him onTwitter: @solutionomics.