Tuesday, June 4, 2019

Taxes, tariffs, and trouble for Trump's economy

Trump’s economy? You bet it is. He owns this one. Most of the stimulating effects of the tax break went to the upper class of investors and large corporations; the average worker saw little of that, and what they did get was in the form of one-off bonuses. That piddling amount is going to be more than eliminated by the higher prices due to the tariffs already in place (and more to come). Around 97% of the tax breaks went to the wealthy and the remaining 2–3% went to workers.

Arizona stands to be the 6th hardest hit state in the country by proposed tariffs. (This story appeared on the front page of the Daily Star as “US Chamber: Trump tariffs on Mexico would hurt Ariz.”) But not according to Gov. Doug Ducey. Dismissing the concerns of the Chamber of Commerce, and particularly those of the AZ Chamber’s head, Glenn Hamer, Ducey said “There are no tariffs.” Here is an excerpt that captures that rift.

Arizona stands to be the sixth-hardest-hit state in the country by President Trump’s plan to impose a 5% tariff on goods from Mexico, increasing costs to the state’s consumers by about $452 million, an analysis from the U.S. Chamber of Commerce shows.

The chamber also said if the levy goes to 25% in October, as the president has threatened, that would translate to an additional nearly $2.3 billion paid by Arizonans.

Arizona Gov. Doug Ducey, however, was unimpressed, taking a swat of sorts Monday at businesses concerned about the effects of the president’s threatened tariffs on the state and national economy.

But it isn’t just the concerns of the national chamber that Ducey is minimizing. There also are the comments of Glenn Hamer, president of the Arizona Chamber of Commerce and Industry, who late last week said the president’s announcement of an escalating system of tariffs against Mexico is “baffling and, if carried out, will be terribly damaging.”

“This will only inflict harm on the U.S. consumer,” Hamer told Capitol Media Services. And Hamer pointed out that tariffs are not paid by the foreign country or even the foreign company that is exporting the goods, but are added on to the costs for customers here.

Ducey on Monday brushed aside that threat of tariffs to the state’s Arizona financial situation.

“Our economy is roaring right now,” the governor said. “Our economy is doing terrific. Our economy is going to continue doing terrific.”

And what of the fact that tariffs are paid not by the host country but by U.S. consumers in the form of higher prices?

“There are no tariffs,” the governor said as he got into his vehicle and left.

That’s reminiscent of Mad Magazine’s Alfred Newman - “What Me Worry”. The “roaring” Ducey boasts about could quickly turn into a whimper because of Trump’s tariffs. Here is an analysis from the NY Times, Trump’s Tariffs Could Nullify Tax Cut, Clouding Economic Picture.

President Trump’s tax cuts provided a temporary jolt to the United States economy by putting more money into taxpayers’ pockets. The tariffs that Mr. Trump has grown so fond of may have the opposite effect.

Two new analyses show that the tariffs Mr. Trump is using to punish China, Mexico, Europe and other governments would more than wipe out any gains from his $1.5 trillion tax cut for low- and middle-income earners, leaving them with less money to spend into a consumer-driven economy. Higher earners would fare only slightly better, with their tax gains significantly eroded but not entirely washed away.

The potential for Mr. Trump’s tariffs to nullify his signature tax cut shows how the president’s trade war could undermine his biggest selling point going into his 2020 re-election campaign: a strong economy.

Investors, bond markets and Wall Street analysts appear increasingly alarmed by the potential slowdown in growth that could result from Mr. Trump’s trade escalations, including his plan to impose tariffs of up to 25 percent on Mexican goods and to tax everything that China imports into the United States. He is also mulling tariffs on imported automobiles from Europe and Japan.

AZBlueMeanie has a broad summary of how and why the Trump tax break bill was not the economic “rocket fuel” claimed by Trump: The Trump tax cut bill was as bad as everyone predicted it would be.

Last week the nonpartisan Congressional Research Service (CRS) issued a report that makes it official: the “Trump tax cut bill,” the only legislative achievement of the previous Republican Congress, has not generated any meaningful new economic growth that was not already underway. And the crooks who passed it are laughing all the way to their bank.

Here are some snippets.

From Think Progress: “Large corporations with shiny accounting departments ended up being the largest beneficiaries of the tax bill’s largesse, with the rate of tax they actually pay dropping by half in 2018, according to the CRS analysis. ” “Annual growth hit 2.9% … right in line with what the CBO had predicted the economy would have done without Trump’s corporate-tax munificence.”

From Philip Bump at the Washington Post: “Although the economy did grow, the cuts came nowhere close to paying for themselves … 95 percent of the increase in the deficit wasn’t offset at all.” “Although the repatriation and cuts occurred, “relatively little” went to the worker bonuses that Trump celebrated after the cuts were signed into law. “One organization that tracks these bonuses has reported a total of $4.4 billion,” the report states. “With US employment of 157 million, this amount is $28 per worker. This amount is 2% to 3% of the corporate tax cut, and a smaller share of repatriated funds.” ”Put directly, the CRS report finds no justification for Trump’s dubious claims that the tax cuts served as a significant boost to the economy, much less played a central role in “America’s revival.”"

Now, adding in the negative effects of higher consumer prices, that $28 evaporates quickly.

If you really wanted to stimulate the economy try inverting those percentages: 97% to workers and 3% to corporations. AZBlueMeanie wraps it up.

Republican faith based supply-side “trickle-down” tax policy is and always has been a lie — George H.W. Bush was right when he called it “voodoo economics” — and yet too many Americans keep falling for it, time and again, to their own financial detriment. I guess it’s true that you can’t fix stupid.

And adding insult to injury, as only Trump can do, AZBlueMeanie reports this:

In an insult to economic science and all that is good and holy, Trump is Giving a Medal Of Freedom To ‘Trickle Down’ Economist, ‘Trumponomics’ Co-Author Arthur Laffer, the “father of supply-side economics” and “trickle-down” tax fraud, and the notorious “Laffer Curve.”

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