Edward Harrison is the founder of the blog Credit Writedowns and is a finance specialist at Global Macro Advisors. Previously, Edward was a strategy and finance executive at Deutsche Bank, Bain, and Yahoo. He started his career as a diplomat and speaks German, Dutch, Swedish, Spanish and French. Edward holds an MBA from Columbia University and a BA in Economics from Dartmouth College.
If you recall, after Trump won the Presidency in November 2016, I wrote about what I thought were Trump’s chances to help working class Americans. Here’s how I put it:
With the Republicans taking both houses of Congress as well as the Presidency, the potential for Trump to reshape the party in his image is immense. The question now regarding the Trump economic platform is how much he will bend to the will of the Republican establishment and how much will Trump remain focused on his blue-collar and middle class base of support.
I also wrote:
A successful Trump who keeps his campaign promises would work… to get an infrastructure bill through Congress. And finally, a successful Trump would cut the FICA tax that supposedly ‘funds’ social security, something that is both a cost for employers and for employees and therefore a highly regressive tax. Cutting business taxes or lowering the top tax bracket won’t get that job done. But those kinds of tax cuts will increase income inequality. Remember, the longer this economic cycle expands, the higher quality the jobs that are on offer will be. And that will be good for the middle class.
A failed Trump who bought lock, stock and barrel into Republican orthodoxy would go back on his pledge to leave social security and medicare alone and focus on privatizing or cutting social security as a way of lowering the deficit. And he would focus on killing TTIP and TPP or extracting the US from NAFTA…
What I heard in Trump’s acceptance speech was that he understands this. He talked of having as little as two years before he was judged by the people. He steered away from divisive issues like immigration and trade and focused on the one issue that can get bipartisan support, infrastructure spending. He didn’t talk about tax cuts or deficits either. Instead he asked for help and guidance from his Republican brethren, suggesting he will take a wait and see attitude, judging his course of action based on their response to his overtures.
Now, a year after he was elected, we can safely say that he has not lived up to his promises. So I think he has failed. The respected Project Syndicate wrote about this today. Here’s their view:
The Tax Cuts and Jobs Act of 2017, signed in December, similarly backloads the pain. In the near term, American workers will see modest bumps in their paychecks. But within the next decade, Nobel laureate economist Joseph E. Stiglitz notes, the law “will increase taxes on a majority of Americans in the middle (the second, third, and fourth quintiles),” and add at least $1-1.5 trillion to the deficit by 2027, all so that tax cuts for corporations can remain permanent.
That timing, says Nouriel Roubini of New York University, is no coincidence. The tax plan was designed with the 2018 midterm congressional election firmly in mind. Until then, Roubini explains, Trump and the Republicans “can brag about cutting taxes on most households.” And after that, “they can expect to see the economic-stimulus effects of tax cuts peak in 2019, just before the next presidential election – and long before the bill comes due.”
But both Stiglitz and Roubini are skeptical that the GOP’s ruse will work. After all, Stiglitz writes, “voters are not so easily manipulated,” and there is much in the Trump tax package that workers, in particular, should regard skeptically.
I’m not so sure. I think the Walmart pay hike announcement – while likely politically motivated – points to positive things for the economy.
The question: When November comes, will voters shun the GOP because they now dislike Trump or will they look at the economy — which might still be booming — like what they see and return the GOP back to two more years of total control?
To be continued… Do read the full Project Syndicate post below.
Source: Trump’s Abominable Snow Job, PS Editors, Project Syndicate