The most likely direct impact of many planned tax cuts will not be a doubling of containers on US tracks and highways. It might end up looking like this:
https://static01.nyt.com/images/2017/11/17/opinion/17fri2/17fri2-master7...
The end result is the Federal government will need to increase the amount it pays for interest on our loans. Nothing unusual here since many Americans have a similar line item on their monthly payment charts. In the long run ordinary folks and importantly federal and state governments could find better use for their revenue by investing in early childhood education. Repeated studies are finding the better prepared and enthused a child is for school the better he/she will do starting out and continuing to the point where costly remedial programs will be less needed.
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the answers are simple. it's the way trump has always done everything. Pay trump first, with other people's money. order everything on a grand scale through some dodge, pay for nothing, agree to what the pigeons want and ignore all contracts and agreements. and sue everyone, or at least threaten to.
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We’re talking about a man, Trump, who is totally fine with not paying his debts. Why would he care how much he increases the deficit as long as he gets what he wants. That’s how he’s always operated.
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Where is your proof?
Arithmetic? Arithmetic is for sissies! It's just more fake news that the corrupt Liberal Socialist are using to destroy America!
Make America Stupid (and Bankrupt) Again!
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He and Ivanka are always bragging about going to Penn's business school, Wharton.
If only they'd paid attention.
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You may as well be talking about "Climate Change" because facts, numbers and figures means absolutely nothing to GOP lawmakers.
Since when Donald, the dotard, worries about reality and consequences of his words?
Why does the NYT continue to naively insist on treating this and other Trump utterances as serious policy ideas, as if there were some substance behind any of the nonsense that comes out of his mouth?
Trump couldn't give a hoot about the trade deficit, economic growth or any other detail that matters to ordinary Americans' lives.
Trump and other Republicans in government care about tax cuts for the rich, which will personally benefit him and their wealthy donors. It's really that simple.
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I think the motto of our country should be changed from E Pluribus Unum to
Reductio Ad Absurdum.
This article is full of Economic falsehoods to give excuse to drive tax policy by the Republican-leaning Tax Policy Institute.
Every economist associated with this should have their doctorate pulled!
Could you expand on this. Some support for your contention would be helpful, less you are classified as 'fake news'.
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Wouldn't it be nice to have a nation leader that has a clue?
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Trump and leadership is oxymoron.
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“This is a White House that does not know economics,” he said.
Is anyone surprised by this?
I'LL SAY IT AGAIN, who are the economists that signed onto this logic and made people (lawmakers) believe it was the truth? They should ALL have their doctorates stripped because a stupid Transportation & Logistics MBA from Tennessee knows better.
First some facts, most lower to middle income people spend most of the money they get as opposed to the wealthy. Given that, if you increase their taxes they will have less to buy stuff (usually a percentage is of importation). The wealthy won't buy as much anyway, just stash it in the market. That is the Import side. The export side is going to be affected by the Tidal Wave of foreign cash washing up on our shores (mostly to go into the stock market, real-estate, and companies that can be moved elsewhere.) With that much cash coming in, the dollar will skyrocket and MAKE our EXPORTS VERY EXPENSIVE. The affect on exports will dwarf the affect on the decrease in Imports (even if they did increase).
This game these idiots are playing will leave us at the mercy of foreign governments to the point we (not the wealthy) are stuck with the bill.
These people are about to sink this country, but they'll be wealthier and above it, in Davos.
I say FIRE these Economists and tell the truth! I've never heard such poo dished out and because it's so complicated people (and eager lawmakers looking for an excuse) are believing it. The audacity of this as well as both house's Bills. We are not stupid, WE'RE JUST REALLY PEEVED NOW!
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Thanks, that is a bit clearer now!
This article makes clear, once again, that there are no "tax cuts" on the table. Government spending continues to rise, so taxes continue to rise. What Republicans are proposing is a huge expansion of the national debt. That is not a tax cut. Taxes may be deferred, but they still come due some day.
The end game of course is that the US will not repay their foreign debt, either through default or dollar devaluation. Why would the next generation of Americans feel responsible for the irresponsible lending of their parents? On top they will still have 6000 nuclear war heads and therefore cannot be pressured to repay.
Instead, they will say that if foreigners were stupid enough to lend money to the US, which was obviously living beyond its possibilities, it is their own fault of having perpetuated an unsustainable economic model in the first place. Or they will put other blame on the borrowers, such as that they have been manipulating their currency. This anticipated rationalization for a future default is actually already starting (China, Germany are blamed for keeping their currencies weak to destroy US jobs).
This future generation actually has a point. Why are we, personally or our governments, still lending money to this bankrupt country?
Mr. Trump does not understand world trade as well as he thinks he does. He is firing or laying off the state department staff that could help him out. We need to export the Republican controlled Congress and state houses.
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The federal budget deficit was $666 billion this year - 666 - that says something about who is running the show in this country. And in response to that absurdly high budget deficit we are planning to give a trillion dollar tax cut to the rich campaign donor class. Also says something about who is running this country.
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OK, who's the economist on this? Because most people from lower to the middle class will have less money aggregate spending for all goods should go down. A Trade Deficit is when Americans import more than export. But with less aggregate spending that leg is kicked out. As to Exports; just what are we going to export military gear and cigarettes?
We're about to get Trade Surpluses! As to the Current Account a ton of overseas money should flow in and mostly go into the stock market. The stock market should probably double. Lots of American companies will be bought out and moved by foreigners and we may even contract out our military to China. That's the thing to do these days (lemmings all).
The wealthy will have a really nice retirement and they can hold all kinds of sheets of hundred dollar bills to rub everyone's nose in trickle down yellow streams.
Trump's experience with international trade has been non existent except for beauty contents and 'loans ' from Russian banks.Raise prices on consumer goods that are imported and marked up in the states, you lessen aggregate demand significantly. Less purchasing power. The plan is recessionary as shown by the intention of corporations to not to invest l their repatriated money. It is a lose lose program. American factories will not replace most consumer goods as show in the first 9 months of this administration. It has not happened and it won't!
It's always interesting to watch the working out of various economic theories.
Except when it's your money that's being used.
Now, we've tried supply side and trickle down with a dose of deregulation thrown in, and okay, well, financial meltdown and massive income inequality resulted.
So it would be interesting - from a detached point of view - to watch the Republican Party double down on these theories.
Except, you know, it's my money, and I don't want to fund it.
What I don't understand is why Congress can't hear me. Do they imagine that people are going to take this lying down?
You don't have to have a Ph.d in economic theory to notice that your taxes just went up.
"President Trump has promised to cut federal taxes and reduce the nation’s trade deficit with the rest of world — two economic priorities that are in direct conflict with each other."
This is obvious to all reasonably informed people. Is anyone out there surprised that the Donald doesn't understand it?
No they won't; we'll get surpluses and a very strong dollar.
These people are purveying falsehoods if not lies.
Economy grew at 4 percent last quarter, unemployment at 17 year low and stock market at all time high. He's doing great...
Things will always look good when you promise to throw $1.5 trillion into the mix. You just have to hope the $1.5T will pay for itself, and history suggests that it won't. If it doesn't then that is another little bit of America that is given away in payment.
One last shot, because the title of this article os completely wrong. Ask real economists if what I say is the truth.
Trump’s Tax Cuts Are Likely to CAUSE Trade SURPLUSES! A strong dollar, low inflation and interest rates, a doubling of real estate and the stock market, and the poverty of millions of Americans with no wage increases with higher taxes.
I agree with a comment I read elsewhere - republicans are all about tax cuts for the rich - which creates deficits - which allows them to say they 'need' to slash spending of things like schools, roads and hospitals - you know - stuff that poor people use.
Kotlikoff says Americans aren't saving enough to fund new investment but the low savings rate of American households is more than made up for by the very high savings rate of the US corporate sector. Cutting corporate taxes is supposed to lead corporations to increase their investments in productivity boosting equipment, in part, because foreign capital inflows will provided them with savings they supposedly dearly need and currently have no access to. But the fact is that corporations already have access to those savings as well as their own savings held overseas but prefer to use them to buy back stock and pay out dividends to shareholders.
First, the profits held overseas can and are used as collateral to borrow against at very low interest rates. That means they already have access to those overseas profits. Secondly, the high stock market valuation means the cost of capital is very low for companies if they chose to issue more stock to raise funds. Yet, many companies chose instead to buy back their own stock. The tax cuts will not change this behavior because corporations already have access to all of the savings they need to fund new investment.
"The connection between tax cuts and trade deficits is not controversial. The mechanics are straightforward....To pay for the tax cuts, the government will need to borrow more dollars.."
No. There is no financial constraint to spending by the Federal Government, because it is the monopoly supplier of our currency, and there is no limit to how much it can spend. The Federal Government doesn't fund deficits by borrowing or by taxing. It funds deficits by creating money. What is called government "borrowing" is the sale of securities, which is a swap of one asset (currency) for another (securities).
The continuing, widespread misunderstanding of how money works in our society cripples our ability to fix our problems. The way it really works is easy to understand - read Warren Mosler.
"To pay for the tax cuts, the government will need to borrow more dollars, some of which will come from foreign investors. Foreigners will get those dollars by selling more goods and services to Americans, which will widen the trade gap."
Their is no logic in this statement. You haven't demonstrated that foreigners must sell goods and services to Americans to buy our debt. If we have more debt it may cause them to invest less in other instruments, but it certainly will not stimulate foreign sales to Americans.
I think it is a bit unfair to refer in the headline to this as 'Trump's Tax Cuts' - as far as I can tell he only signaled to the Republicans in Congress that he would sign anything and they took it from there. I think we can be confident that the President doesn't have now and never had anything like a tax plan - he only had slogans. Even if the President was pre-sold on whatever happened, as usual the lobbyists from the famous swamps found receptive ears (and hands?) on Capitol Hill. While the President appears to be the poster child for benefits from the proposed tax changes, I think he mainly gave cover to the Republicans trying to rush something through that would benefit the usual folks that matter most to them.
"Most economists, by contrast, see the trade deficit as a crude measuring stick that says little about the health of the domestic economy. This includes economists who think trade has imposed significant costs. The disruptions caused by trade are determined by the volume, not the balance. The workers at an Ohio factory that moves to Mexico do not benefit directly if a German company opens a comparable factory in Tennessee."
Sorry Binyamin, no German company will open a "Ersatz" factory in Tennessee in this case. The constant US demand will be met by the factory in Mexico in future so there will be no financial room for an additional plant with additional capacities. No tax cut will help in this case because there will be no earnings but failed investment costs in Tennessee.
The only chance for opening a plant in Tennesse could be a significant growth of demand or - higher likelihood for a German company - the implementation of an advanced technology in US market (bad for the Mexicans if this plant will be built in Tennessee.) But if National depth raises because of the planned tax cuts there will be not enough "reserve volume" for public contracts any more - for all kinds of infrastructure for example - so opportunities for foreign investments might be reduced. I don´t think this could be offset by the consumer behavior of super wealthy except in luxury goods sector perhaps.
So prospects might be even worse than in your "pundit´s example".
This is total nonsense. Budget deficit does not lead to trade deficit. Quite the opposite - it negatively affects the value of US currency and lower USD makes US producers more competitive in international market. As do lower taxes on US companies. So both of those factors work towards decreasing the trade deficit, not increasing it. The argument about foreigners needing to sell more to US to finance US budget is ridiculous on it's face. Firstly, even if they needed to who said that they actually could do it? Secondly, USA does not need foreign funds to finance it's budget deficit in the first place. This whole story is but a politically motivated drivel with no basis in reality.
People wake up! Economics is an ACADEMIC discipline. When applied to foretelling the future economic behavior of people or the future economic results
of some new rule or tax plan, it becomes 'junk science'. NO ONE KNOWS THE FUTURE. Forecasts are made with certain confidence intervals. But what if an earthquake, a hurricane, a volcano, or some other unexpected event occurs? I say GIVE IT UP, economists, and stick to your books and classes. Stay out of advising. You just look like fools when you do so and you're never right.
Republican tax, healthcare, and trade policies are going to cost every American who is not a millionaire lots, and lots of money. Their trade policies and increasing tariffs are going to increase our retail prices. Their healthcare policies are going to steal good health care from millions of us. Their tax bill is going to gut Medicare, Medcaid and, eventually, Social Security, along with increasing taxes on many lower income Americans. If you vote Republican and are not a millionaire, you had better start thinking about your own economic future.
Is tax policy really the driving force in our economy? Do business decision-makers spend most of their time reading the tax code or are they looking for ways to make their products more efficiently, beat the competition on price, quality and service, expand their markets and keep their good employees happy? And how many personal income taxpayers turn down promotions with big raises, refuse an inheritance from rich Aunt Suzy, or decide not to buy a home or go to college because it will kick them into a higher tax bracket or their mortgage and student loan interest won't be deductible? Why can't our governments collect the taxes needed to operate government without trying to manipulate business and personal decisions?
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"This is a White House that does not know economics."
Add that to the list of many things this White House does not know. That famous Isaac Asimov quote applies to so much to American politics today that it might as well be put on a monument in Washington DC.
"The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured by the false notion that democracy means that 'my ignorance is just as good as your knowledge.'"
"My ignorance is as good as your knowledge" can be our new national motto.
Add in the $3 Trillion that will likely come from off-shore back to the US as the tax plan soaks in.
Companies are likely to invest in factories with advanced automation (after stock buy-backs and dividends). This means tools from Germany with the biggest "deficit" being trained locals to manage the machines.
Community Colleges will have to scramble to hire instructors, and then train, a workforce that can work the automated textile mill that suddenly appears. The factory will need roads, better sewage and water - all conditions imposed on the county if they want the factory in their city.
It will become a mad scramble, this trade deficit, as ports fill with robotics from Europe - pressure will build on US start-ups to "get their prototype 3D printers into production so we can build the parts assuming we can find a robotics technician - you were trained on the Siemens CNC?...can you work this American variant...you think you can learn it?...you're hired...starting tomorrow maybe?"
The US has been in the doldrums for decades, and we hate it - Trump is shaking it up - I for one am interesting in seeing where it goes (because we were going nowhere under Obama).
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Trump is gutting this nation like he did his businesses -- the ones that had operations unlike the ones where he just sells his name to be on them for a huge licensing fee. Remember the 900M loss? He got a tax credit then. We get a huge tax bill now for his incompetence. They went BUST. Proof he knows nothing about managing anything close to an empire. Would he care if the US economy collapsed? He boasted about trade and what he would do to improve it during his campaign. Again: NOTHING but a disconnection from the truth. SAD!
NO, absolutely NO!! If we need tarriffs to reduce the trade deficit and this creates a trade war we the customers will win it. Winning it means jobs and economic activities, not cheap stuff and more unequal trade. Foreign corporations that want to sell here will manufacture here.
I knew someone would say "TARIFFS!"... I was going to say it as a joke. This will hit EVERY American who buys foreign goods and will kick up prices (you want a 20% tariff?) by 20% at Walmart... and who's going to get hit hardest... lower income people in rural America. And (a BIG) IF anyone builds factories here to make TVs, plastic utensils, etc they're unlikely to put them in rural areas - factories go up near population centers. Hang on to your hats... things are going to get interesting. I never knew this but if all economists agree, it's going to happen - it sounds like major tax cuts will sell a chunk of America to foreigners.
The deficit was a huge thing. Until it wasn't. Wait until the Democrats are back in power, then suddenly the republicons will be crying about the deficit. That they created.
I guarantee it.
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Ronald Reagan said deficits don't matter. Dick Cheney Tod us.
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Pointing out the science, mathematics and logic has no effect on republicans and their uneducated minions. That's the goal! Make the people dumb and poor; give all the money and luxury to me, my children and their children for ever. Amen.
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There is almost no hard science in economists, nor logic. There is math but that is only associated with assumptions.
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Trump cares no more about trade deficits than he does about true middle class tax relief. A column in the NYT today notes that he has told more than 1500 lies since he became president. We cannot analyze him as if he were a normal president who has policy ideas or objectives. He is his theatrical self and no more.
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The Trump administration doesn't care about the trade deficit. The Trump administration doesn't care about creating jobs. The Trump administration doesn't care about infrastructure, or veterans, or walls along the Mexican border. What the Trump administration cares about is tax cuts for billionaires. All the rest is hot air to con voters.
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And the con has been very successful.
Not getting indicted or impeached, and trying to get re-elected, are pretty much the *only* consistent policies of this impotent administration. Only fools expected anything different.
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The GOP has always held that the Deficit should be decreased. If they give in on this....then I give up on the GOP.
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Which deficit?
IF the Senate, or the House cared about the middle/lower class they have gone right at us, and for the first time in ages, given us an exclusive tax break. Just for us, and ONLY us!
But that would be anathema! Abject apostasy for the GOP.
Its all about the Donor class.
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Most lower class pay no federal income tax, so no way to actually just reduce zero.
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They pay plenty in payroll taxes.
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Sure, but then we can erect punitive tariffs to 'make good' on hollow Trumpian 'America First' promises to his 'base.'
Then trade deficits will become the least of our worries. Does the word 'recession' ring any bells?
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Isn't that obvious?
Who knew there was even a debate about this?
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The last sentence summarized well the current WH occupant. With several bankruptcies in his past, his views of economics is unfounded based on this piece. Trade deficits and health of domestic economy are two separate entities. GOP's tax plan will definitely increase the deficits. To address this deficits is either to cut domestic spending like the ACA or borrow money from foreign investors by selling their products to the US. The flow of foreign capital in this country is a good as long as it translated to increased wages and moving forward to higher level economy. Not to go back to a fossilized 1950's economy of coal and steel productions of Donald as well as profits to him, uber rich GOP donors and corporations.
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The plan in order to pass the senate can not increase the deficit, the recent budget constrains the tax reductions. Just reality.
Only if you believe in unicorns and magic fairy dust
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In the end, the winners are, not the middle-class, not the parties, not China or other foreign countries, but again the American rich.
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This nightmare of a tax cut will not only put us in the red for decades to come but will also enrich those who have more than enough. The republicans are selling the country no more or less than "snake oil."
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The underlying assumption is that United States debt will continue to be an attractive investment. With the weakened reputation being created by Mr. Trump, and the reckless economic policy in the tax plan, one has to examine this assumption. At what point do foreign investors think that we've lost our ability to manage this huge national debt? At what percent of GDP does the accumulated debt become a tipping point in investors' decisions, and suddenly we're not the safest deal around?
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We are far from that point if Japan is a guide. Its debt is more than 200% of GDP. US debt is still below 100%.
"“To get bigger growth effects, you need more foreign capital coming in,” said Kent Smetters, a professor of economics at the University of Pennsylvania and the faculty director of the Penn Wharton Budget Model. “That is the irony — tax cuts have the biggest effects if you’re assuming that trade actually increases over time.”"
hmmm...so if deficits need to be funded with foreign capital and rising interest rates are needed to attract enough foreign capital to make up the difference between domestic investors and foreign investors do you end up with a stronger dollar which in turn reduces exports and increases imports?
if that's so then it certainly doesn't achieve the professed intention of the trump administration.
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To harken back to your ECON 101 course, the increase in disposable income will increase demand for imports (mpm), at least in the short run. On the lower rungs of the income ladder, the additional income will be spent on things like clothes (almost entirely imported) and Kias. On the high rungs, the rich will buy their Mercedes, Maseratis, etc as well as their expensive Bordeauxs. I'm glad this article is bringing some economic reality to the discussion. Our political leaders need a refresher update course on ECON 101 principles.
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Chuck, actually on the lower rungs, the extra money will more likely still be spent on food and/or rent!
On the higher rungs, they will seek new ways to hide their newly found couch cushion coin! Or spend it on niche products.
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And where will this increased disposable income for anyone but the uber-wealthy come from? Where will personal income growth come from when medical care and higher education become more expensive? How will spending by the middle-class, the true drivers of the economy increase when their tax burden increases?
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More jobs, less unemployment, and more participation in the labor markets.
That's why Hatch got so hot on the senate floor.
He was embarrassed,
not by just how ugly his party has gotten,
but by having a mirror held up to the ugliness.
This graft stinks to high heaven.
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He was angry for the same reason I would be ignorant lying disrespect for him and the process. We need more of that and less of polite tolerance of ignorant members of the senate. Both sides do this but since Trump is president Dems do it all the time.
Senator Hatch was the one who lied. The Republican tax plan is absolutely written to give very wealthy people large tax cuts and for the middle class to pay for it. For instance, so much care taken to save the Trump children from estate tax! In the mean time, young couples groaning under student loan debt will no longer be able to deduct the interest on those loans. Lots of struggling young Americans will pay more so Ivanka and Jared can pay less - or maybe none at all! Orrin Hatch is out of touch and deluded.
The "process" since R's took over deserves not one iota of respect.
The entire middle class will rely on the cheapest imports available because we will be facing losing our homes if we don't. We get tax increases all so the lazy rich can...again, what exactly is it that is supposed to be a benefit of taking the money we are owed for retirement, the money that we would use to educate our kids, the money we need to maintain our national infrastructure, and giving it to these hyper wealthy people?
Corporations already told congress - cutting their taxes only results in bigger bonus checks for executives. The economy is doing fine thanks to 8 years of President Obama, employment is nearly as high as it can go. We do not need to stimulate the economy, and the reality is the Republican bill will do the opposite. By taking thousands of dollars a year away from millions of Americans it will push the economy into a tailspin.
It will be a repeat of the thing that has held the country back for a century. Republican greed leading to a recession, which then has to fixed by responsible Democrats.
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Clearly, Donald does not understand trade policy. If he did, he would understand the benefits and advantages of large, regional trade deals.
Just because a guy with no experience in government and no understanding of national economic and trade policy makes a campaign promise... that is no reason for the real government to put it into practice.
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What benefits to US citizens might that be? Less than agreements between countries directly, at least for the US.
The notion that this tax increase is going to be paid for by growth flies in the face of obvious facts.
Currently we have 6 million un filled positions, the available unemployed do not have the skills or are in the wrong location to fill them.
If Employers want to expand they are going to have to tap expertise from other companies which will increase salaries. This is okay but inflationary and will lead to higher interest rates . In addition Employers seeing higher costs may resort to outsourcing or automation which the House tax bill encourages with accelerated depreciation provision . More likely Companies will return cash to their Shareholders.
Under either scenario the middle class, the unemployed will be the loser
The rich will get richer , income inequality will grow and power will be concentrated in the hands of the few who buy influence in the political arena.
Seniors will be losers in terms of inflation and there is a real threat to Medicare and Social Security as Republicans see a growing deficit and try to rein it in ., This is self evident as Defence expenditure will not be cut, taxes will not be increased under Republicans , so they will attack Medicare etc.
Then of course we have a crumbling Infrastucture with no plan or money to pay for its renewal
This tax bill is evil in intent and will harm our Democracy and hand de facto Global leadership to China. Our kids are doomed
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With 6.8 million unemployed and many more not in the job market your argument is not holding water.
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“This is a White House that does not know economics,” [Kotlikoff] said.
Could that be the epitaph for the United States when Trump's ignorant and greedy cronies tip us into depression? I hope we remember this quote - maybe inscribe it on Trump's presidential library when it's built, hopefully sometime before 2021 closes.
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Laurence J. Kotlikoff, a professor of economics at Boston University, said the Trump administration appeared not to understand the mechanics of his analysis, or similar analyses — or the workings of its own tax plan.
“This is a White House that does not know economics,” Kotlikoff said.
It's always reassuring to have Know Nothings in charge.
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I know a little about economics, enough to know that it is basically worthless. perhaps they also don't see the worth, after all if they knew a lot the labor participation rate would be larger as well as the velocity of money and therefore much higher GDP.