When the Trump administration cut taxes I made the prediction that these cuts would no do what he claimed they would. Since then, I have followed up on the cuts to see what effect they are having.
This is, of course, a basic method in critical thinking: make predictions and then observe the results before asserting that the claims are or are not correct. Naturally one must take into account factors that can also influence the results. For example, the tax cuts might be doing good, yet be offset by some other factors so they appear to not be effective. Claims of offsetting factors must be backed up with evidence of their own, otherwise an ad hoc perpetual defense of anything would be possible. So what have the results been?
While the tax cut was claimed to benefit everyone, 60% of the benefits went to the top 20%. Trump has promised tax cuts for the middle class, but this seems to be eternally a promise made today for a tax cut tomorrow.
The tax cuts did not pay for themselves; corporate tax revenue dropped 31% in the first year of the cuts and general tax revenues have declined.
When a Democrat is President, Republicans rage against the deficit and use it to justify cuts in social spending. Under Trump, the federal deficit was $984 billion this year–unusually high. The tax cuts have a clear and obvious causal link to the deficit since less revenue (plus more spending) will create more debt.
There has been economic growth under Trump, but at 2.9% it is the same as it was under Obama in 2015. Projected growth for 2020 is 2%. As such, the tax cuts did not seem to help. To be fair, Trump’s trade wars are having a negative impact on growth so it is worth considering that growth could be worse without the cuts–but this should not simply be assumed.
On the positive side, the stock market is doing well–which is great for those whose wealth is composed mostly of investment. Unemployment is also extremely low. It is not clear how much impact the tax cuts had on this; to simply infer they caused these results would be to fall into the post hoc fallacy.
These results are utterly unsurprising. Tax cuts never pay for themselves and have consistently resulted in high deficits (especially when paired with increased spending). The possible boost to the stock market and reduced unemployment are certainly important points to consider–but the link must be tested rather than assumed.
In most ways assessing tax cuts does not matter; both parties have long-held talking points on tax cuts that drive the presence or lack of cuts. In general, the Republicans are wrong about more things but this hardly seems to matter to their policy making.
I agree that running trillion dollar deficits during a time of peace and prosperity is totally irresponsible. With their abandonment of fiscal discipline, it is not clear that the GOP stands for anything anymore except to stop the Dems from “fundamentally transforming” the U.S.
Although I would prefer to see the government spend less money, I do believe that if the voters want bigger government then they should have to pay for it with higher taxes.
Mike, what is your view of modern monetary theory? This has been championed by many left-leaning democrats and basically says there is no need to raise taxes in order for the government to go on a spending spree.
Mike, what is your view of modern monetary theory? This has been championed by many left-leaning democrats and basically says there is no need to raise taxes in order for the government to go on a spending spree.
You’re asking a question concerning economics of a man whom you yourself acknowledge is economically ignorant. Curious, is there a there there?
I think Mike’s understanding of economics is more or less Marxist. I base this on some of his comments regarding the labor theory of value.
Do you agree?
I do agree that Mike’s ‘understanding’ of economics passes through the lens of Marxism. I also believe that Labor Theory of Value is as valid a field of study as Flat Earth Theory.
The thing about FET however, is that there are very, very few people espousing it whom I believe take it seriously, most are just as the Brits say, taking the piss. Those who do take it seriously are of little consequence, usually mentally disadvantaged in some minor way, and have no more impact on society than the flea on an elephant’s back. Marxists OTOH, are a very serious threat to the modern world. Yet which do the young people who are educated by people like Mike consider a bold, solid field of study, if not a roadmap for the future and which a threat to the modern world to be concerned about?
Bah..meant to add….Regardless of my feelings about LToV, as I’ve said before time and time again, the much, much greater economic fallacy, the fallacy that does the greatest harm to the world in general, be it via Marxism or even among many so-called ‘conservative’ people, is the idea that for one man to get richer, another man must get poorer. It undermines not just our politics, but our religion, our social welfare, most especially our ability to help the poor, and on down the line. Fix this fallacy and you solve a great number of the world’s problems.
Agree totally. What shall we call this fallacy?
The Fallacy of Economics as a Zero-Sum Game? A bit too wordy but descriptive.
I read an article about a tribe – in Papua New Guinea, I think – who believe that good fortune is evenly distributed. If someone has more success on a hunt than others, or raises a better crop or a fatter pig, that person MUST have done so by sorcery, stealing the naturally equal good fortune of his neighbour, even if the sorcery was not intentional.
I wish I could find the article now. It would provide an appropriate name.
I’d nominate the inability or unwillingness to acknowledge overlapping bell curves as another contender for “most harmful fallacy”. It’s at the root of all group-divisive thinking.
I’d nominate the inability or unwillingness to acknowledge overlapping bell curves as another contender for “most harmful fallacy”. It’s at the root of all group-divisive thinking.
Agree with this one, too.
I don’t know a lot about economics … but then, when I look at Paul Krugman’s supremely confident and completely wrong predictions, I’m not convinced anyone else does either, so I don’t worry about it too much.
I looked at opinions about the US economy, and find them slanted by politics. People who dislike Trump tend to focus on what hasn’t been improved, while omitting or minimising what has, and vice-versa.
For myself, I question the amount of the cuts, but also the distribution of them. But as I said, I don’t know much about economics. It is, however, clear that even if they didn’t achieve what they were talked up to, they weren’t a failure either. Everybody, Left and Right, agrees that the economy is going to be one of the President’s biggest selling points in his re-election, so I figure that’s an admission of sorts.
As for the trade wars, they were costly – but would they be more costly than letting bad trade deals stand? USMCA and the changes with China should more than pay for the temporary losses to achieve them. You really should give Trump credit for improving them.
Ok, back from enjoying Christmas to this…
I don’t know a lot about economics … but then, when I look at Paul Krugman’s supremely confident and completely wrong predictions, I’m not convinced anyone else does either, so I don’t worry about it too much.
Economics is a relatively easy thing to understand once you grasp that the realities of it are quite hard to accept. One big, big thing to understand is that money is only a temporary store of value solely for the purpose of transmitting one form of wealth into another. Philosophically, money is, or should be, outside of economics, yet realistically it is fundamental to the subject. Any attempts to redefine what money is or the value of money is a huge factor in economics and quite often where economies go south. Agree about Krugman. Can’t figure out if he needs to pay less attention to what his cat is telling him or if maybe, just maybe, he’s really not grasping the deep, deep zen of that furry little creature.
The USMCA deal is a significant improvement over NAFTA for all parties. But as Mike cannot grasp the Fallacy of Economics As A Zero-Sum Game (the EAAZ-SG Fallacy?), he cannot possibly give Trump credit for this. Not for the least reason being that he would have to take a credit away from someone else.