September 19, 2019

Trump's Economy Is Nothing to Celebrate

“President Trump frequently touts the strong economy as one of his great achievements, and he will likely do so again in his State of the Union address Tuesday. He should take credit while he can. Sure, he inherited an economy moving solidly down the tracks, but he is set to leave one that is headed off the rails.

Nearly a year ago, Trump pushed massive deficit-financed tax cuts through the Republican Congress that temporarily juiced up the economy. But they came at a steep cost. Businesses and wealthy households received a windfall, but the Treasury had to borrow hundreds of billions of dollars from global investors to cut the checks.

Growth now, as the stimulus wears off, has slowed to where it was prior to the tax cut. Trump’s argument that the corporate tax cuts would incent businesses to invest more and support sustainably stronger long-term growth looks more and more like a pipe dream. Corporations’ effective tax rate — the taxes they pay as a percent of their profits — was cut in half to an all-time low but has yet to unleash more investment.

The president also argued that the tax cuts would pay for themselves. Not even close. Tax revenues are plunging, and the nation’s budget deficit is ballooning. According to the Congressional Budget Office, the nonpartisan government agency that does the bean counting, if we don’t take a U-turn on the president’s tax and spending policies, our collective finances will end in a train wreck.

Trump’s trade war is also corrosive on the economy. Higher tariffs have cut into corporate profits — General Motors warned last summer that tariffs on imported cars and parts could force the company to cut jobs. In November it announced plans to close four US plants and cut thousands of jobs.”

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