Showing posts with label Trumponomics. Show all posts
Showing posts with label Trumponomics. Show all posts
The Trump Medicine
As for Trump’s medicine? That is not only unlikely to deliver to the “ordinary” American he supposedly champions - it may well make their lives worse. At best his proposed income cuts look like benefiting the rich much more than the poor.
Brookings Institution research suggests that they would lead to the 0.1% of the population who earn over £3 million seeing their taxes fall on average by £88,000 (a cut of 14%). The poorest 20% of households, on the other hand, would see their taxes cut by only £88 (a cut of 0.8%).
Lily Batchelder of NYU and the Tax Policy Center are even more pessimistic.
According to their calculations, those who are just about managing will become in real terms worse off, whilst millionaires will get an average tax cut of £255,000, a single parent earning £60,000 with two school age children will face a tax increase of over £1,900.
Trump’s proposed corporation tax cuts - whilst candy for the stock market - won’t necessarily lead to more jobs and more investment.
History teaches us that such gains do not inevitably trickle down.
A similar tax reform in 2004 which encouraged US companies to bring their funds back into the US by cutting slashing taxes lead to no increase in investment and only a transitory increase in employment.
Companies instead increased their dividend payments and share buybacks.
Trump and Trade
IT MUST seem to Donald Trump that reversing globalisation is easy-peasy. With a couple of weeks still to go before he is even inaugurated, contrite firms are queuing up to invest in America. This week Ford cancelled a $1.6 billion new plant for small cars in Mexico and pledged to create 700 new jobs building electric and hybrid cars at Flat Rock in Michigan—while praising Mr Trump for improving the business climate in America. Other manufacturers, such as Carrier, have changed their plans, too. All it has taken is some harsh words, the odd tax handout and a few casual threats.
Mr Trump has consistently argued that globalisation gives America a poor deal. He reportedly wants to impose a tariff of 5% or more on all imports. To help him, he has assembled advisers with experience in the steel industry, which has a rich history of trade battles. Robert Lighthizer, his proposed trade negotiator, has spent much of his career as a lawyer protecting American steelmakers from foreign competition. Wilbur Ross, would-be commerce secretary, bought loss-making American steel mills just before George W. Bush increased tariffs on imported steel. Daniel DiMicco, an adviser, used to run Nucor, America’s biggest steel firm. Peter Navarro, an economist, author of books such as “Death by China” and now an adviser on trade, sees the decline of America’s steel industry as emblematic of how unfair competition from China has hurt America
What to expect from Trumponomics
While we don't have a clear picture yet of what the Trump Administration will propose to Congress on individual tax policy, we have some ideas. If you run a business or corporation, you'll find much to like. If you're a middle-income taxpayer, there are slim pickings.
Much of the Trump plan -- what he's made public to date -- follows the Republican template: Cut taxes for big business and high-income taxpayers and hope the tax savings will trickle down to create jobs and economic activity.
That premise has never proven to work in real life. After a raft of tax cuts from the George W. Bush years, economic activity is still well under 3% and shows no signs of perking up. Trump's allies have said they can return the GDP growth rate to the 4% level.
Trumponomics
A pack of Nobel Prize-winning economists gave Donald Trump and his policy plans the thumbs-down on Friday, with one saying the president-elect’s programs could lead to a deep recession.
Speaking on a panel during the first day of the annual American Economic Association meeting in Chicago, the Nobel laureates voiced a variety of concerns about the billionaire developer’s stance, from his haranguing of U.S. companies about their outsourcing plans to the risk that his tax and spending proposals could lead to run-away budget deficits.
“There is a broad consensus that the kind of policies that our president-elect has proposed are among the polices that will not work,” said Joseph Stiglitz, summing up the views of the panel that included his fellow Columbia University professor Edmund Phelps and Yale University’s Robert Shiller.
Trumponomics
Donald Trump’s administration will implement large tax cuts and substantial financial deregulation. President Trump may also change U.S. policies on trade, although precisely what he will do is less clear—and the shift may be more rhetorical than real. Trump is also likely to substantially cut or privatize federal spending. To the extent that his policies add up to a coherent economic strategy, they are reminiscent of Ronald Reagan’s, but with an extra dose of cronyism and the wild card of economic nationalism.
Trump himself and several of his key appointees are also poster children for oligarchy and even kleptocracy—government operated to serve the business interests of elites, including top officials. The intermingling of business, family, and government as the Trump administration takes shape unfortunately parallels what I have observed in corrupt developing countries over the past 30 years, including during my time as chief economist for the International Monetary Fund.
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