Friday, March 22, 2019

Judging success in the age of Trumponomics - an example being Tax Cut Fever

Judd Legum (popular.info) looks at the economy, what Trump promised, and what he did not and cannot deliver. But Trump most likely will pronounce that Failure is the new success.

The only major legislative accomplishment of Trump’s presidency is the tax cut package passed in December 2017. That legislation featured very large cuts for corporations and the wealthy. But Americans were told that it would usher in an age of sustained economic growth – more than 3% each year for a decade or more – that would benefit everyone.

[You might recall that:]… Just before the tax bill became law in 2017, [Trump] predicted runaway growth. “I think we could go to 4, 5 or even 6 %, ultimately. We are back. We are really going to start to rock,” Trump said.

It’s been just over a year and the Trump administration has quietly acknowledged it was wrong.

The economy grew 2.9% last year – when the impact of the tax cut was at its apex. In a report released this week, the Trump administration now predicts economic growth will decline in 2019 and for years to come. …

The Trump administration’s prediction of growth just shy of 3% in 2019, while short of what was promised, is substantially more optimistic than other predictions. Jason Furman, Obama’s chief economic adviser, says growth will be far lower this year:

Given the large amount of fiscal stimulus in 2018 is unlikely to be repeated and the labor market has less room than it did a year ago, [it] is very likely this is a high water mark for the recent period. Growth in 2019 is tracking around 1% and potential growth is around 1.75%.

Other economists are predicting a recession in 2020.

And even that growth was financed by increased debt, an instance of voodoo economics that is not likely to recur.

Trump promised to balance the budget and pay down the national debt within 8 years. Instead, he’s racked up record deficits. It’s rising deficits that are spurring growth. Those deficits, however, won’t keep going up forever. Justin Fox of Bloomberg explains:

Last year’s growth was spurred in part by a federal deficit increase of $190.5 billion, which amounts to 0.9 % of 2018 GDP. While the deficit is expected to keep growing in coming years, it’s not expected to grow nearly that much on an annual basis. That means less stimulus, and presumably less chance of four-quarter growth cracking 3 % again.

Trump’s advisers have a solution to their projections of slow growth: more tax cuts. …

In other words, the failure of the tax cuts to deliver the promised economic growth is proof that more tax cuts are needed.

It looks like the administration has “got a fever and the only prescription is more tax cuts.”

(For this post Scriber rearranged and shortened some quotes.)

Speaking of fever, one of the smash hits of the late 50’s was Peggy Lee singing Fever. I’ve provided lyrics more suited to our economy under Donald Trump.

Never knew how much Trump loves me
Never knew how much he cares
When he wraps the flag around him
I get a fever that’s so hard to bear
He gives me fever from my tax cut
Fever when he promised more
Tax cuts in the offin’
Fever ever more

Everybody wants more money
That is somethin’ Pres’dents know
Tax cuts aren’t such a new thing
That fever started long ago

Reagan cut my taxes
Bush gave me even more
Trump put us all in debt
All to give us fever
Fever in the mornin’
Fever all through the night
Fever!
What a lovely way to burn

I’ll save Saturday Night Fever for another occasion … and there will be one.

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