Are Trump's Tax Cuts Just a Three Card Trick?

I trust you will be relieved to hear I do not intend to write a summary of America’s 2017 political year. First, so much has happened, often depressing, so why do a recap? Second, the political scene has been dominated by one man so he occupies the blog almost exclusively. Without question, Mr. Trump has overturned the way American leaders do politics. In this, he stands comparison with FDR, whose domination of Congress and US politics has yet to be beaten. Even LBJ could not claim such hegemony.

So, to focus. In this past year, I have been and remain confused by Trumponomics. For clarity, here is a glossary of terms:

National Debt: The amount which one nation owes to others, usually through borrowings in the bond market. Reports estimate the American debt exceeds $13 trillion.

Government Deficit: The amount of government expenditure, including interest on borrowings, less taxation earnings. It is estimated that the Trump government deficit in the current fiscal year will be $1.5 trillion.

I freely admit I am no economist and my detailed knowledge of economics would not stand much investigation. However, quite how the $1.5 trillion government deficit can be arrived at defeats me. Currently, observers can only see one side of the balance sheet. The tax cuts are known but the budget expenditure is not decided. Congress has yet to agree a budget for 2018, and the most recent Continuing Resolution, which keeps the federal government open, needs to be renewed before January 19^th, 2018 unless the Budget itself is finalised.

The howls of protest from many Congressional Democrats at the provisions of the Tax Cut and Jobs Bill matched the outrageous statement by Speaker Paul Ryan: “we are giving Americans back their money.” Really, Mr Speaker? How is money borrowed on the bond market to fund a deficit giving money back?

It is a sine qua non that people who do not pay tax will not derive a direct benefit from a tax cut. Employees who pay tax will not necessarily see a benefit from a corporation tax cut, unless they are shareholders or the corporation decides to invest the savings in increased wages. There is a small cut given to the highest income tax level earners. This will benefit the high earners disproportionately.

The key provision is the reduction in corporation tax. Will corporates invest the derived benefit in higher wages and more jobs? If so, it will prove to be a good move. If not, we are back to the failure of former President Reagan’s “trickle down” theories. There is one other oddity. The tax take from corporations may remain constant, despite the tax cut, through higher profits and a reduced tax avoidance stance.

But the bill not only re-defines tax policy. It has barbs. Oil drilling will be allowed in Alaska’s Arctic national wildlife refuge. The Affordable Care Act’s individual mandate, which requires Americans to either buy health insurance or pay a penalty, will be eliminated. American healthcare will revert to the pre-Obamacare dark ages when the poor could not afford insurance and lived their lives on a tightrope, worrying if medical treatment would result in bankruptcy. Republican ideology has overtaken common sense.

The other side of the Trump balance sheet remains uncertain. What will the federal government spend its tax take on? The anticipated deficit shows the tax take will be insufficient to meet current spending. Since a majority of federal government funding is directed to benefit the poor, it is the poor who will suffer most if there are welfare cuts.

No mention has been made of late by the executive branch about The Wall. If expenditure is to be made, which benefit programs will suffer? I consider that the proposed infrastructure program is sensible. It provides work and benefits communities with improved roads, community buildings, bridges and railways. However, I want to see strict provisions for administering the infrastructure programs. Otherwise, they could be an open invitation to corrupt people. America’s state and city governments have a long history of Bossdom and men gouging from the community trough. Trump says, “Clean the swamp”. Will he also make sure he does not create other swamps which resemble gravy trains?

I can see benefits from the tax cuts but only if those who pocket the lion’s share of benefit “play the game” and let many others enjoy more money in their pockets. America’s debt is almost unsustainable. If Trump’s plans send the debt into even higher numbers, who will pay eventually? For sure, not those who have created the economic disaster. That’s another set of questions that need answering.

On that note and before I dash for a cliff to jump off, may I wish you all a very Happy and Peaceful New Year. I would have added Prosperous but this is not in my gift…..until you elect me POTUS.